tv Bloomberg Surveillance Bloomberg February 12, 2014 6:00am-8:01am EST
the president and first lady hold a state dinner for president hollande of france. john to reports as industrial america considers them because economic data out of china. good morning, this is "bloomberg surveillance." is wednesday, february 12, lincoln birthday. adam johnson, three days in a row, i can't stand it. adam johnson is with us with an eclectic morning brief. what a market yesterday. >> that's right. we are riproaring. everybody loved what janet yellen had to say. overnight mixed data from around the world. china export and import growth inxpectedly accelerated january. overseas shipment rose about 10.6% worse is a year earlier. different story in japan. orders fell in december the most since 1998. yen.have cheap and that
economic data in the u.s. mba mortgage applications data. we also have the monthly budget statement that comes out at 2:00 p.m. earnings, john deere. i had a tractor. i sold in six years ago when i sold my place in connecticut. >> i had a push mower. miniature john deere tractor in our house that i stepped on it all the time. you think it is in bony and do the ice in your backyard. they make one with that thing on nie back will stop -- zambo and you can do the ice in your backyard. they make one that has a thing on the back. >> cvs, whole foods and are you
ready for this deco the 2016 election is 1000 days from today. >> there are 999 republican candidates. >> we don't know who they are. >> i read an article the other day, there are just a few republican candidates for 2016. secretary clinton, way out front and the democrat sweepstakes. check.a let's do the data check. thank you, janet yellen. you can see it with the vix driving. what a remarkable recovery after days orence of gloom 10
so ago. the yen doesn't move. bill,crude, your heating of course, gold drives higher. a lot of research notes yesterday beginning to talk about a gold bear market may be turning around. i'm sure we will look at that here in the coming days. alix steel no doubt will give us perspective there. we scour the paper, webpages. >> let's start with the fact there is no government default looming anymore. a be the government is actually functional now. >> scarlet, no. voted toican-led house raise the debt ceiling without any conditions until march 2015. the senate is expected to approve it. john boehner relied almost entirely on democratic votes. you wonder what the payback will be on that one.
>> i thought it was curious he said, i needed 218 votes and didn't have them and "if you don't have 218 votes, you got nothing." >> it is a victory for the president. it is a loss for more conservative republicans who once again see their speaker walk away. >> are deeper fractions and the party as a result. the other front page where following, fed chair janet yellen and her testimony before the house. she gets a one-day break before she resumes testifying this time before the senate tomorrow. what happened yesterday was she said she was surprised of reports of weaker job growth. what was interesting, if you go into her actual testimony and look at the word count comparison, she mentioned taper once, quantitative easing two times, and inflation 20 times. >> i thought michael mckee did a great job on this.
there was the panel afterwards i got very little play with more conservative republican types. coronado was blistering and her criticism of the timing of the panel. >> because it undermines janet yellen. >> but there didn't yellen was standing tall at what i thought was a terrific non-news moment, handling the q&a. boy, did you see it in the market. >> showing leadership and not giving anything new to worry about. the widget that never seems to end. in the south, there may be a storm for the record books. ice could code georgia for the second time in weeks. remember the last one? >> only three inches of snow, but it was covered with rain so that three inches of snow turned to ice. >> the basic story here is some confusion, as there can be in any storm, about rain or snow
wherever the geography is. >> the georgia government says it is ready this time. here in the northeast, we could get anywhere from four to eight inches of snow later today before changes to rain. >> how late? i've got to go 20 blocks north. >> you won't have to stay at the office overnight. >> you've got four-wheel drive with chains on it. >> those are the front page stories for the morning. we want to get back to the top story, and that is the debt ceiling. >> they agreed on it. speaker boehner and democrats, he found 27 other republicans to find compromise and a confrontation. world doesis why the is wide awake -- is wide awake. does the city just stop for a state dinner? >> not really. it is a good event if you can get into it. goodest news for me is my
friends to make cheese in the small place of greensboro, vermont, they were on the menu last night. they didn't even know about it. that was the big news for me in the state dinner. washington does not shut down. the french flags are still flying all over the city. a good event and a rare one. boehnerevent of john walking away from his own party. let me cut to the chase. is speaker boehner's job threatened? as he once again abandoned his core constituency? >> i think the exact opposite. he is probably strengthened by this. the fact even brought this bill to the floor gives you a sense of how confident he feels in his own position right now and he basically has gone the conservatives, the tea party folks, he has given them a break, if you will. they will not be blamed for another crisis situation. foreans the prospects
republicans doing better in this midterm election just improved. there is no crisis they will be blamed for. they get to focus on things like obama and the midterm elections. >> they can go back to being on the offensive with obamacare, but now that they are fixated on 24 midterm elections or 2014 midterm elections and 2016 elections, what is at the top of their to do list that is different from the past couple of years? >> it is going to be more of the same. they want to let the health care law play out and talk about that. they want to talk about how the president hasn't done enough in terms of deficit reduction. basically, the health care law. you'll hear about it over and over. irs as well.e these are the campaign themes republicans will be running on between now and november. now that this is out of the way, immigration put on the back runner, there is not a lot out there except post offices that will be talking about on the house floor. >> senator cruz i with regard to the debt ceiling limit, when it
goes to the senate, he'll insist on 60 votes instead of a simple majority. do you get the sense that ted cruzes of the republican party are just digging in deeper even though boehner effectively was giving them a get out of jail free card? >> it allows ted cruz to stand up there and sound like the you know, brand, if you will, the republican party. it means a small number of republican senator's today, perhaps a few days later this weekend by friday, they will have to join democrats in the senate to pass -- going to happen. conservative republicans can vote no insight, i held my ground and still are not blamed for a crisis. it is probably the best of both worlds for ted cruz as well. >> peter cook, thank you. oure thrilled to bring you guest this morning, writing
thoughtful pieces on the american economy, widely distribute it on wall street on inside baseball economics, the debt ceiling is there, the hasal stance of the nation improved so much. there is no fiscal drag right now, is there? >> there's a lot less fiscal drag. we will see an increase in spending at the state and local level. we will get a good experiment in the fiscal multiplier this year. benefit of the government? >> that's right. this is the first time in a long time we will have real support. i think the increase in the debt level is critical for two reasons. first, we're not going to get hit on consumer confidence, which has been looking a little shaky the past few weeks. we will not get the big hit on business. if we want to see growth above 3% on a sustained basis, we need is an increase in capital expenditures. that is first and foremost. >> quickly, are you over 3% on
real gdp? >> not this year, no. >> joe brusuelas with us through the hour. we look at the debris of the yellen testimony yesterday. >> massive recall of the prius by toyota, recalling more than half of all those ever sold to fix a software glitch. the malfunction could slow the car down or even bring it to a halt. the recall involves 1.9 million vehicles. goldman sachs beating up top management, promoting five management. it is the largest group added since 2008. all 5 are veterans of goldman, having joined before it went public in 1999. getting a boost from the french and russian units. the french bank posted a fourth-quarter profit, almost double what analysts estimated. and the banks deputy ceo downplays the risk that socgen
place in some emerging markets. societe generale in my view, the risk is low. consumero said the banking business was strong last quarter with earnings rising 11% at that unit. >> you see french bank in there with the french president coming to washington, huge impact in north america. >> they certainly have beefed up their businesses here. concerned, at least in talking to friends of mine who are bankers, as to what the next 12 months hold. it is always labor issues. we saw the reductions over a barclays yesterday. 12,000 people. on wall street, always looking over your shoulder. >> and world claimed expertise and derivative appomattox as well. >> coming up, we will talk about adam johnson's favorite vehicle, deere.
here. hadnd honor of adam johnson to what was it? >> john deere from the largest noncommercial tractor. >> just what he needs in manhattan. >> that was in connecticut. >> do you most central park? >> you move stuff. he moved the seeds from the barn to the ground -- that's what you do on a farm. you move the stuff. >> john deere is moving with earnings coming out. farm profits are set to fall from record levels of recent years. the company faces some short-term headwinds. flat demand for corn to make ethanol, fewer exports to china, farmland values are slowing down as well. all of this is seen as hurting demand for john deere another farm equipment. the interesting thing, as farms get bigger, deere as an opportunity to sell it, that services larger farms and the margin on those pieces of
equipping are higher as well. >> all in all, it is rolling over. >> when you look at the five-your chart, it peaked in 2011 and has held steady since then. >> it is a great debate as we look at american industry this morning through the lens of john deere. senior analyst at bloomberg industries and working with paul and rt looking at 140 industries applied, karen, i get more controversy over john deere than any other blue-chip. why is that? >> there's been up tremendously run.terrific -- terrific in particular, grain. down 35%,s are pulling down cash receipts, which is a large driver of farm equipment. people are concerned. >> we have a perception of our auto industry being worn out. cars are 10, 11 years. >> the fleet is close to 12 years old.
a record. >> do we have old farm equipment? >> we have had five up years in for me, to man. you can't use replacement demand as a reason to keep the cycle going. >> the earnings are forecast this year if you look at consensus estimates, to drop about 9% this year and another 2% next year. isn't that tough for john deere right now? largest america, the part of their business, down five percent to 10%. these companies are very leveraged. if the top one is down 5 present the 10%, the 9% may not be enough. ofif you look at a pie chart the market share, 36% in 2012 for john deere. a pretty big gap between number one and number two. what does john due to -- john deere due to diversify? where does it go from here? >> they are growing their
construction equip the business. it is only about 16% of sales, but in the last three or four years they've been focusing on growing that market. construction equipment could be up this year. the problem is, it's all a 60%, 17% of sales for them. it will not carry the ball. >> house the chairman and ceo doing? >> excellent. not just double the share, their margins are significantly higher than anyone else. >> thank you so much. we will have those revenues in earnings and opening the earnings data. scarlet fu here in a bit. >> the results come out at 7:00 a.m. and we will have details. coming up, 12. that is how many variety of potatoes were available at last night's state dinner. we will talk about the big event in washington, next. ♪
>> good morning, "bloomberg surveillance." scarlet fuene with and adam johnson. >> ongoing overseas, surprising surge in china's exports and imports. 10.6% and imports were up two percent. both were predicted to be flat. it back on, donations to america's colleges and universities set a record last year thanks to the run-up in the stock market. on the $34 billion donated to
america's colleges, 9% increase over 2012. the previous record was set in 2009 before the market tanked. stanford let all the universities, $931 million in donations. >> 929 dollars of that was given by marissa mayer. >> no doubt. five-year-old wire fox terrier wins top honors last night at the westminster dog show. sky was among the six finalists chosen from a field of 2800 when the show began. no prize, begets a trophy, large ribbon, and a steak lunch today. he's cute. >> i read the wikipedia and it is hilarious. i recommend it. these dogs don't like boredom. it perfectly describes having a terrier ages you. >> a terrier is a miniature beast.
they call them a fox terrier because at the end of the fox hunt, they throw the carrier into the hole to pull out the fox. >> always exciting. maybe sky will be with charlie rose. scarlet fu. >> by morning must-read is the menu from last night's white house state dinner with french president hollande. basically, the menu boils down to meet and potatoes. you can call at any which way you want, but there is -- meat and potatoes, guys. that is what they served. >> colorado beef? >> yes. the deserved -- the desert was cake with butter sweet chocolate from hawaii.
hydrocarbons doing better. you see that with stronger australia and stronger canada after a number of weeks of great commodity challenges. have heard of drive through drying -- drive through dining, and sears holdings up 8.4% yesterday in a report saying they may begin offering drive-through shopping. >> you are serious? >> it was the most to move the stock up since 2013. groupon sales fell the most yesterday. it is likely embarking on a reorganization. we will see how that plays out. >> say that again? >> reorganization.
>> walgreens? >> rose almost 16%. 6%.ose almost >> i spoke to one hedge fund manager and he told me the key to walgreens is a transition in which cbs is doing, to these in-store clinics. they purchased rights to any machine that will effectively draw blood and can analyze all kinds of things about your health. x i can go into a drugstore to draw blood? i'm not there yet. >> you can do it at cvs, too. hedge fund managers are now congregating online at a social media website, basically social media for finance. investors are using this new platform to publicize their big bats. harvest exchange they can share and post latest topics and news stories in the hopes of moving
markets hopefully in their direction. joining us now is the cofounder who founded harvest after working on wall street for 14 years. talk about this being a social network for hedge fund managers, but they often use it to publicize trade. how to prevent it from becoming as i were investors of the talk up their book? >> we are creating a financial technology platform and a community for investors of all types to share their thoughts, perspectives, ideas. if you look on the site, it is not just hedge fund managers but mutual fund advisors, family offices -- anyone who wants to communicate with each other and next-generation investors just because of the evolution of the way the world is moving. >> talk about the compliance issues you must face. -- as easy says they can't the sec says they can use facebook and twitter to announce corporate changes the way they with your regular services. what have they said you about disclosures? >> we spent a lot of time,
resources, on the compliance angle. it was the first thing we did given the majority of our early users, especially those sharing interesting content, are going to be sec regulated entities. we built an actual model to allow firms to comply with their internal policies. you came out of college at vanderbilt and do the more institutional thing. how are you going to compare and contrast with stocktwits? >> they use a lot of the twitter infrastructure, 140 characters. the get more control -- i think -- to the brands and managers and allow them to post whatever they want to post. >> so they're managing their message. >> yes. is it so i can get clarity or is this more of a managed message by activist investors tried to control the message? >> i don't think it necessarily
has anything to do with activist investors, but anyone who wants to control their brand. brand matters and finance, just like any other industry. look at this, it is like the 21st-century version of the old -- instead of meeting every third tuesday night at 10 guys, now doing it online. and second, an opportunity to effectively corral support and share ideas back and forth. do you think give it as a chat room? >> we are a financial technology company, so i like to think of as more as a chat room. >> but at the end of the day, that is what they're doing. they have an idea, put it up and everyone chats about it. tool.is a communication i think a lot of people use it for different ways. you said at the beginning, wall street historically is closed network. i think the next generation is to take that and make it open. >> speaking of the
next-generation, we are seeing one of the greatest wealth transfer start to take place. $2 trillion and will have $20 trillion by 2018. >> we have done a lot of research. alone, 74% actually change investment decisions based on what they learn online. 86% say they would fire their parents's financial advisor. >> how did you get someone like loeb to use your system? how do you get a jim chenos to user system? >> we used our network. we spoke to a lot of people. some people got it right away, and some people didn't.
is anally, i think it evolution people will move toward and there'll be an adoption curve. >> joe brusuelas, please. >> what is the single way you add value compared to more traditional methods of investing? >> of investing? >> you are using the asymmetric -- if you are person like jim chanos, wiry going to go in and give away secrets that you may want to keep if you're going to short the market? >> you wouldn't give away a secret you necessarily want to keep or your proprietary information. but talking about brand mattering, you will do something you ultimately feel is creative to your brand. if jim chanos is the world's greatest short investor, it is always more effective to show people why as opposed to telling them why. --who are most of the people who is the meat and potatoes of what you're doing? >> we are between 500 and 700 firms and it is growing every day.
some are reading, some are posting. it really depends. there are large mutual funds on there, we'd incised hedge funds, medium-sizeds -- hedge funds, family offices. >> do you push people away? >> no, but we do mainly verify every-- manually verify one. >> coming up, if you thought 2013 was packed with activism from investors, 2014 already on track to outpace that. ♪
>> good morning, "bloomberg surveillance." the storm from atlanta to new york. right now in washington, besides a gorgeous sunrise, when did they go to the bed does go to bed after the state dinner last night? >> they had a french guy there, they could go hard. >> might get a government shutdown with a foot of snow expected by friday. morning, everyone. >> the latest winter storm
forecast to leave thick sheets of ice in ollanta as a barrels through the southeast. governors in seven southern states have already stated state of emergency. heavy snow predicted from virginia to as far as maine overnight tonight and through tomorrow. record, just 36 days until the first day of spring, march 20. hang in there we will get there. >> what a way to celebrate valentine's day. >> it keeps you inside and cozy by the fire. candy sales are forecast to rise 1.9% to just over $1 billion, the best day since 2009. about $1 billion will go to chocolate. valentine's day gifts estimated to rise more than 2%. >> i'm getting the six pound
frozen let it go chocolate sampler. >> let it go? >> is the theme song from "frozen." >> i was singing at the other day. time for the single best chart. >> it has nothing to do with "frozen." are single best chart is from hedge fund association and shows how asset management act to missed funds have risen over the past five years. -- activist funds have risen over the past five years, nearly tripling. they have more money to play with and are busier as well, these activists. 14% increase from 2011 and the amount they targeted. >> harvest.com, provides information for global wall street.
you see the surgeon activism through the harvest prism, what does it look like? >> one element of what we're seeing within the information that is exchanged, but it is certainly interesting. it has been successful and working and money continues to flow. >> does the media reported correctly? as i can tell. i don't know whether i can, 20 or another -- i don't know whether i can comment on it one way or another. >> is a cyclical or structural? is cyclical, but there is a structural element. -- companies and funds working harmoniously and i would hope there's better communication tools like harvest exchange the deck and continue to happen. you got that shameless plug right in there. >> by the way, the number of activist deals, i read this in
one of the bloomberg top stories buried in about the seventh paragraph, the number of activist deals last month, 31. not deals. you know what a man, activist investors. 31 times last month. last year it was like 238, which is double 2010. people are involved. >> you are better attuned. give us an update on herbal life. who is winning? >> the longs are winning. just look at the stock chart. carl icahn won. ackman has been on the record saying i will ride this thing into the ground, but he has been dead wrong. sales are going up. >> i would say the ceo of herbalife is winning. >> just an example of what we saw last year in activism. top three photos of the day.
mr. johnson has that. >> are you ready? starting with last night's state dinner, number three mary j. bl ige performing a president obama's seventh state dinner. only seven state dinner, we should point out. he welcomed guests by saying " soire." >> this is a huge deal. sheltered african-americans when nobody else would. cooper and aley british model and actress talking with secretary john kerry last night. >> i know he speaks french fluently, but beyond that, what is his link? >> he is a worldly guy. anyone who speaks french
fluently -- >> should be invited to the white house? >> thomas jefferson spoke french. julia louis dreyfus parading through. there were a lot of people. our number one photo -- drumroll. sitting between the first lady and the president himself. he came stag. all the brouhaha over which woman -- no onehe end he decided because it would cause such an uproar. they had reconfigured the seating. you know who is on the other side of obama? a comedian stephen colbert. carolineelan american herrera. >> what do you make of that?
why not make the clothing of an american designer? >> close enough. >> we all can from someplace. >> a nation of immigrants. >> thank you so much, peter, harvest.com. >> coming up, we got to get to janet yellen. she was surprised by the weak jobs report for january, so what is the real unemployment rate? we will break down the numbers behind the testimony. ♪
>> good morning, it is "bloomberg surveillance." our twitter question of the day -- steve miller will join us with aig, the turnaround kid. yourll talk about organization, my organization, which organization needs a turnaround the most. >> tweet us. this is "bloomberg surveillance." let's get you some company news.
twitter is taking a page out of facebook for testing a redesign of the profile pages that mimics the look of facebook's timeline. they're trying to boost engagement as the user growth slows. softbankprofit, posting 910 lane dollars in profit last quarter, topping analyst estimates but lower than one year ago. it by integration costs tied to a recent string of integration -- acquisitions. carlos slim, american mobile has cut a stake for reducing the stake from 30% to 27%. slim last year failed in efforts to fully take over the dutch phone carrier. that is today's company news. european telecom is supposed to be the area that will get a lot of m&a this year. selleryone keeps trying to
t-mobile. doj in u.s. said no to spring. >> great interview on bloomberg radio with craig moffett yesterday on sprint and their survivability. janet yellen participated in the q&a, back and forth with congress. boy, did she do you well. the con is participated in heated debates over the labor for dissipation rate. -- the economy participated in heated debates over the labor participation rate. for youjoe brusuelas from a bloomberg senior economist with smart modes -- notes. and michael mckee with this as well. participation rate. this is the angst people have. here is the boomer. everybody is working and then we just rolled over.
joe brusuelas, state the bear case. >> is a break in the u.s. labor market which is not repaired will lead to lower savings, lower growth, lower standard of living. policyll be the targeted over the next couple of business cycles. economy, america back to work. many really push against the gloom, don't they? >> why is the labor participation rate going down? go back and look at when it started. it was well before the recession. it is not just a question of people getting discouraged because they can't find work. there's the believe what is happening is that baby boomers reaching retirement age and a lot of people are leaving the workforce permanently and no amount of fed policy can entice them back. what is the percentage leaving because they're retiring and those who are discouraged? >> it could actually be worse.
it is a structural change. who is going to pay for these retirees? >> janet yellen has had is front and center. historyaid, we've got a problem. if you look at that chart -- which is beautiful, by the way. >> thank you. >> can i just make clear, the scale here -- here is where we are at 63%. you go back to 1980. >> this is the last time the french had a state dinner at the white house. michael, there's a raging debate. explain to our worldwide audience why there is a raging debate on this. i thought economics was easy. >> if you are over stimulating doingonomy -- if you're too much in a structural situation that you can't affect, they have the wrong policy in
place. nobody quite knows where the dividing line is. janet yellen seems to be paring down on the side of there is more that we can do to get people back to work. >> julia coronado with a cautious view like you on the economy said the challenges the fed have, there is a mystery to it out 12 months. what will be the number one challenge? >> janet yellen was widening the field in terms of looking at weber market indicators, clearly indicating we will move beyond the unemployment rate. if you're going to implement forward guidance policy, that is exactly what you do. >> but the fed was recognizing the six point five percent unemployment rate, what else are they late on? >> well, they better not be late on inflation. because we don't have wage power, they don't have to worry about it in the median term. >> has inflation replaced unemployment?
>> if you look at the core inflation rate, it has paused for a little bit, but could go lower. >> what is different about the house testimony and the senate testimony? >> very little. the samerepeat testimony. by the way, this is one of the shortest statements given. she will repeat that and questions from the senators. she was there salon yesterday, it is a must inconceivable they could come up -- she was there so long yesterday, it is almost inconceivable they could come up with anything new. mckee with the president of st. louis fed. joe brusuelas, smart on economics. >> let's get the report. let's to the traditional pairs. a little bit stronger euro, weaker yen. the commodities do better here.
surveillance." >> boehner abandons republicans. as the speaker raises the debt ceiling, the republican base is demoralized. the president and first lady was to party on the south lawn. the president of france attends. and we speak to the turnaround kid on not detroit, but puerto rico. good morning. this is "bloomberg surveillance ." we are live from our headquarters in new york. it is lincoln's birthday. i am tom keene. joining me, scarlet fu and adam johnson. our guest this hour, we are honored to bring you steve aig chairman, which hardly describes his role for american industry. steve miller this entire hour on one american industry and our economy needs as well. let's get briefed on the morning. here is adam johnson. >> overnight, mixed data.
exports and imports growth unexpectedly accelerated in january. that is the good news. here is the bad news. core machinery orders fell the most since 1998, at sign i could weigh on the country posco very. -- that could weigh on the country's recovery. we are getting at any second, applications.ge it is weekly data, very volatile. minuteas earnings, and a john deere earnings -- any minute john deere earnings will be coming up. cisco, whole foods, monthlies, and something else to note -- 1000 days from now -- >> i would suggest that cisco is a bigger earnings report. my conversation with john chambers was fascinating in davos. it is an important time for them in terms of technology. >> everything is going from
local up to the cloud. they are the server guys. >> he was the usual chambers optimistic. it is a good -- lots of good company news. >> we start with a massive recall of the prius by toyota. the japanese automakers recalling half of the priuses ever sold due to a software glitch. it could even bring it to a halt. goldman sachs is beefing up its top management. the firm is promoting 5 senior executives including the heads of equity and credit-rating. it is the largest group at it since 2000 and. goldman, veterans of having joined the firm before it went public in 1999. and the japanese wireless carrier posted 900 $10 million in profit last quarter, topping analyst estimates. but that was lower than a year ago. are tied to asts string of recent acquisitions
including an investment in sprint last year. john deere has just reported earnings. , $1.81,arter earnings higher than what analysts were what looking for, $1.53. almost $500 million more than what was anticipated. however, the outlook, agreement sales dropping three percent for the full year. agreement sales are dropping by six percent. that is what earnings-per-share beats, but for the rest of the year -- >> the analyst to join us earlier said that five percent -- if you lower the top line 5%, you heard the earnings a lot. >> we will see with phenomenal cheat you, the single-digit revenue numbers as well. she did not wear dior. perhaps madame lagarde did. the first lady and the president
greeted the president of the republic of france at the state dinner last evening, held on the south lawn of the white house. the vice president attended. some celebrities. in the "surveillance" control room, we noted julia louis-drey fus and brad cooper -- excuse me, bradley. >> formal guy. >> julianna goldman attended --t night's soirée at and is now with a hangover after taking seven american wines. from the chair that you sat in, what was the view? >> it was really all choreographed beautifully. you walk in, tom, and there is a receiving line where you are introduced. that is the video you are just yfusing of julia louis-dre and bradley cooper walking through. your little paparazzi, red carpet moment.
then some mingling, or durst, drinks, and another receiving line to ms. -- mainly, hors d'oeuvres, drinks, another receiving line to meet president obama the first lady. then they took a pretty short walk -- pretty short drive over to that beautiful tent, which was monet-inspired. you fall -- beautiful pastels. >> has this event been a success for the white house and a success for the president of france? >> it certainly seemed like it was successful last night. at the end of the night, everyone was saying goodbye, and hollande came out and said, "i thought i was coming here for a serious meeting and intense discussions and i found a dance club." he seemed to have a nice time. everyone but there haired down -- everyone let their hair down. blige was awesome entertainment. >> these stated is can cost
$500,000 good -- these status can cost $500,000. most expenses was for the prime minister of india in 2009. julianna, we know for it included redeye the main course and caviar as a starter. what did you think of the meal? >> i thinking was delicious could i did not taste the ribeye because i'm not a mediator, but there was delicious soup as the starter, and it was kind of funny, scarlet, because they served a bowl with a much of potatoes and caviar. senior diplomats and every one starts eating it, saying, "delicious, and then they poured the soup. everybody made the faux pas of eating the soup before we realized. say.el horror, as they
>> you can't take us anywhere. this was only, the seventh state dinner that president obama has hosted. president reagan hosted 35. so -- why isn't he doing more? what is the issue here? >> if you also look, as you can see in that full-screen, george w. bush also posted closer to the number of state dinners that president obama has hosted. i think also some of this for president obama has to do with the fact that this has been the last several years, it has been tough economic times, budget constraints. it is kind of unseemly to be hosting these grand, lavish kinds of affairs. it is interesting to note that they did for the first time in several state dinners last night they wereines serving, and they were all
american wines and relatively inexpensive. i think the highest bottle was $40, $50. in the past they have been much more expensive and why has did not want to disclose the cost that -- the white house did not want to disclose the cost of those. >> julianna goldman, thank you so much on a lovely evening in washington. we will see her through the day i'm sure on bloomberg television and radio. we are having a state occasion. steve miller is with us. he is the turnaround kid. what a wonderful book. "what i learned rescuing america's most troubled companies." how would you rescue washington right now? you do industrial america and this and that. >> former ceo of hawker beechcraft, which makes some of the finest turbo -- >> cool airplanes. how do you resurrect the turboprop known as our nation's capital? >> well, the nation's capital, that is a tough one. it starts with getting people back in working together.
would you were mentioning nerlier about gentlemen boeh leaving -- >> republicans behind. >> and getting over the fact that we have to raise the debt limit, that is an inevitable. let's not fight about that. let's fight over things we can work on in common. that is a good sign of maybe a change in attitude, that the bitterness has gone on too long. >> the republicans are leaving that behind you focus on the affordable care act. is that a way to move ahead? >> it depends on whether you think he affordable care act as it is currently written is the right thing for america. president obama has unilaterally moved out the deadlines for when things are supposed to happen. mistake he has put it past the next election so that he does not get in the way of the election -- some would say that he has put it past the next election so it does not get in the way to the election. the preparation wasn't right.
let's draw a deep breath and decide whether we want to do it this way or maybe tweak it so that it can be better for america. >> very quickly, an update on detroit. >> detroit is in the middle of a big fight with a lot of legal maneuvers having to do with the fact that this is the biggest ever -- the first time a major city has gone through this whole process, and you have the bondholders, the pension -- >> is it moving forward? >> yes, it is moving forward. kevyn orr is doing a fabless job. >> steve miller with us the entire hour. >> now for the twitter question of the day. this is "bloomberg surveillance" on television and radio. ♪
>> good morning, everyone. "bloomberg surveillance." i am tom keene. steve miller is the aig chairman, author of the must-read "the turnaround kid." strategy, the tactics, the process of chrysler among others. we asked him about the turnaround of the moment, is microsoft turnaroundable? it is a fascinating exercise.
how, through the miller prism, does microsoft look? >> i think they have come to a wonderful conclusion as to the leadership makes going forward. it took way too long to get there. ballmerounced steve stepping down in august and now we are in february and just getting started with the new team. that is a very long time, particularly in the technology world, do not know who the leader or strategy is going to be. >> did you ever have a delegates -- have a bill gates? did you ever walk as the hatchet guy and have to work with a bill gates? >> all the way back to my chrysler days when i worked with a guy named -- >> lee iacocca. that is pretty good. >> and bob benmosche, was also become iconic status for what he has done -- >> what do you do with these egos? [laughter] >> well, you work with them and help them.
i provide lubrication between the board and the management at aig. that is a very important function. it has worked out very well. morning byading this passing in "the new york post" about several members of the new york police department being a collegially shown the door. how does steve miller show someone the door? how do you fire someone? >> actually, firing people is the most difficult part and the most distasteful part of having to do a turnaround. but if you have got too many people on the payroll for the job ahead of you, you have to do it. as long as you are honest and forthright and 10 point in the direction that the company is going, people can accept it. it is never easy, not anything i ever look forward to doing them and i try to find ways to grow the business so that you don't have to do that. >> how is american industry doing right now? do you believe in the manufacturing renaissance? >> the manufacturing renaissance is very much a mixed bag.
there's an awful lot of the old industrial america that is never going to come back the way it was. if you have a labor-intensive, easy to ship product, it will be made in a low-cost country. used to be inthat the u.s. i have got to mexico and other places to take advantage of labor arbitrage. on the other hand, higher tech jobs are coming back to america and for that we need to educate -- education reform. >> steve miller with us on education. good morning. ♪
>> good morning. "bloomberg surveillance." i'm tom keene. with me, scarlet fu and adam johnson. steve miller, aig chairman, the author of "the turnaround kid." first, adam johnson has our top headlines this morning. >> surprising surge in china's exports and imports. the report has economists puzzled. jumped six percent,
imports jumped 10%. at his supposed to be good. -- that is supposed to be good. the sheets of ice in the atlanta area traveling through the southeast. governors and se -- governors in seven southern states have declared emergencies. the storm will move north with heavy snow in virginia through today and tomorrow. make sure you know how to get to your office. 36 days left until the first day of spring. five-year-old wire fox terrier wins top honors at .he westminster kennel club he was among the six finalists chosen from a field of 2800. he gets a trophy, a large ribbon, and in keeping with tradition he gets a state lunch -- >> and a busy bee.
you see that movie "best in show"? >> you are more up to speed on this than we are. worthch of these dogs ? >> this dog will go to stud. >> that's what you do. [laughter] >> that's what i try to do. i'm working on it, ok? >> not working these hours. >> what is the dog worth? this show will kill -- >> kill my ability to move into the race of stud. anywhere from $50,000 to $100,000. >> adam johnson, what do we have here? >> mba mortgage applications just came out at 7:00 a.m. backess wants to scale fannie and freddie, which underwrite three quarters of the mortgages. where is the growth going to come from? the ceo of the mortgage bankers association, and prior to that,
he ran the federal housing administration. great having you on the set. where is the growth going to come from? >> great question. we are seeing household formations come back to at least the million mark on an annualized basis but we're not seeing buyers, on the low-end. first-time homebuyers are well below the normalized market levels, about 40% of the market. a lot of this stew to overlying credit can -- a lot of this is due to overlying credit conditions, lack of wealth in the marketplace. we know that there's great demand of the multifamily area. how do we get first-time home buyers back into the marketplace? >> so many mortgages are underwater. we have some data showing how bad it is around the country. there are still a lot of people who are underwater, mortgages underwater. what is the carrot for them? what is going to make it better for them? >> jobs is the story behind all
of this. we look at housing is three legs of the stool. interest rates, housing stock, housing supply. then we look at jobs. if you look in negative equity in terms of where we were just a few years ago, it is better. we are about halfway back from the peaks prerecession in terms of overall home prices. still about nine percent below. if you go into nevada used 11 backs -- if you go into nevada you still have impacts. they're down to about half of all homes underwater. and then empire, california, those markets are hurting. it is pretty uneven, but the idea that households with negative equity of falling, halfway back -- will banks be more willing to lend when positive equity increases or has too much changed structurally? thatthink the answer is the regular joy framework we are in today makes it difficult for banks to take the kind of credit risks that they did in times past.
i think -- i actually believe that the depressionary impact for banks to extend and lend credit will last a lot longer in his recovery then we may have seen in previous markets. the regulatory regime makes it difficult to go -- >> what is important about you, besides the fact that we shared coors lights in boulder a few years ago, you work for wells fargo, work at fannie mae, for the administration. you have had every hat on the rack. in america, do we have a socialized housing market because of fannie and freddie? is it a normal market? >> it is not a normal market. the government subsidizes between fannie mae, freddie mac, ginnie mae, an extraordinary amount of housing in this country. >> i want to bring in steve miller. a question, please them over dave stevens. oh, well, the question to me
is do you think the private sector can replace fannie and there will discreetly diminished? i happen -- if their role is greatly diminished? i happen to be an optimist about that because real estate is a place where the risk of inflation -- >> ok, but which institution replaces the truck and i like fannie and freddie? that replaces a juggernaut like fannie and freddie -- replaces a juggernaut like fannie and freddie? >> will the new capital requirements on banks suppress their natural appetite passionately > - -- some andrked for john wells fargo. who takes over for fannie and freddie? >> one of the things that affect capital of the countries that disproportionately it affects banks versus nonbanks. wells fargo is in the process right now of trying to supposedly offload some servers into an on-deck circle is in company. a big issue regulation. >> i was talking to adam earlier
profit, almost double what analysts had been looking for. the consumer banking business was strong last quarter, with earnings climbing 11%. heineken said that sales should pick up this year after a drop in 2013.2013. the critic that volume will increase as the markets credit -- they predict that volume will increase at the markets gradually recover. it was hurt by what they called delayed economic recoveries in mexico and nigeria. this came out earlier in the our -- deere says that earnings would be better than forecast because of sales of forrester equipment. -- forestry equipment. i was just looking through how deere had moved the past couple of weeks. john deere authorizes $8 million buyback of shares. >> even not all that much cash flow. e apple. not lik deere, comcast, even steve miller's aig.
mr. miller is with us this morning. he is the turnaround kid. every viewer and listener we have, the raging debate over the use of cash. is it here to stay? >> i think it is actually almost a problem. so many countries are engaged in share repurchases. why are they investing in a business? in part, the -- why aren't they investing in a business? in part, the answer to the over the u.s. -- the uncertainty over the u.s. economy. maybe i will just hold back and meanwhile, my share price looks pretty attractive. >> of the 3 ideas, dividend growth, share buyback, or pay down debt, which is the most common sensical? >> i would not do great dividend increases because once you do that, it is hard to get back off that.
i don't feel that confident about it -- >> you don't get swap. >> you don't that's waters for. paying down debt, that the leverages the company and the shareholders would rather you carry an appropriate leverage. >> given where rates are and that they will eventually go back up, shouldn't every company at cfo who is under leopard go out and just borrow because it is so cheap? >> every company i personally familiar with has done very much out the curb, longer and longer -- >> like microsoft. >> with their debt structures of that they don't have a near-term growth to deal with. was in the apple store yesterday. what a success. it was jammed and they were moving product. we perceive the generation of cast and the use of cash. it is almost a mystery to the machinations of an insurance company.
do you generate cash and will you buy back shares? >> aig has been generating cash very strongly. it has allowed us to pay back the government. our stock is still trading at a discount to our book value. when we look at the different options we have, buying back shares seems like an attractive investment for our shareholders. e regulators being too punitive when they've figure out who can buy back shares and you can't? >> the role of the regulators is to ensure the safety and soundness of our system so whenever dan have something like 2008. anything like 2008 cannot happen again with the regulatory controls around the world that we now have looking at capital as the first test before allowing anyone to do buybacks. >> are they now suppressing economic activity as a result? >> i don't know about other cases. in the case of aig, the fed has
been out global regulator and they have been very helpful to us. it is a second set of eyes, and assurance to us that we're doing the right thing and an assurance to our investors. are out tomorrow for aig so you can't talk about the numbers. as you look at the next year, where is the growth likely to be strongest? we will have normal growth in the u.s. and be expanding internationally. a lot of markets penetrate more strongly and that is where we are focused. >> i look at the use of cash flow. boy, have things changed. things have changed over the last 10 years. steve miller with us. he is the chairman of aig. >> our twitter question of the day. @bsurveillance. >> we will get steve miller's answer, too. >> bingo. he is the turnaround kid. >> let's get the data check as we head into the open.
futures are pretty much makes. s&p futures bouncing around the unchanged line. the 10 year yield at 2.735%. billion of the 10 year notes sold later today. no real economic data, but chinese exports rose more than forecast in january. >> good morning, everyone, "bloomberg surveillance" on bloomberg tell shouldn't -- on bloomberg television and bloomberg radio. bloomberg android, bloombergtv plus on the ipad. our guest host this hour, steve ofler, aig chairman, author industrial turnarounds, and his book him "the turnaround kid." >> we are monitoring the effect of janet yellen could she is staying the course in her first public testament as fed chair. she made clear that she will continue with the feds tapering. we are no closer any indication on when the economy will be sign up to start raising i interest rates. the newly appointed deputy chief
pimco -- did she say anything that surprised you? >> no. she is basically established as bernanke, if not more so. it is very clear that she wants to create more employment and in doing so, she will for this more on -- focus more on low inflation and that will allow the fed to stay on hold for quite some time in terms of raising rates. terms of the market reaction, the dow recorded its first four-day winning streak of 2014. does this reflect the view that we have recovery and low rates and low inflation, or is this just a pause in what a lot of people have called for, a correction? >> you basically have a goldilocks scenario. you have the government out of the way in terms of tail risk, you have the fed being supportive and the private sector and those combinations are supportive for markets. >> janet yellen really. -- really pivoted yesterday.
inflation, 2.5% -- >> she mentioned it several times. >> 23 times by your account. what does that mean for bond investors? >> what it means for bond investors is that the front end is going to be anchored. it is very unlikely that the fed will continue raising short rates. they will taper but not raise the policy rate anytime soon. the front of the yield curve is very attractive. in terms of investing in companies, you have to focus on companies that have the ability to raise prices, and as we were talking about earlier, very few companies can do that right now. >> what are some names? do you have names that are front and center? >> in terms of company second raise prices, airlines, hotels, rental car companies, cable companies. delta air lines, united airlines -- >> alaska air, which has been leading the industry. >> you're paying more of the
same to stay in a hotel or travel on an alliance as well as your cable bill. the pricing power companies are doing quite well. a bill gross is finally had good 3 months. he is feeling more optimistic and feeling better after a challenging and volatile year. when you are in your morning meeting at pimco, is 2014 greater volatility where pimco needs to be more supple and, i will call it vibrant, or is it three yards and a cloud of dust? credit is differentiation. the slowdown in emerging markets will create more economic volatility but ironically that allows policymakers to stay on hold for longer and allow the private sector to recover. that creates a great investment opportunity to find those companies with rising power, with good asset quality, and with growth, and there is many companies out there that are doing quite well. >> speaking of investment opportunities, you did pretty well timing housing market with your own home purchases.
we know that you sold your newport beach home in california back in 2006 when you said housing was in a bubble. you've rented for a couple of years and then you bought again in 2012. you recently remodeled their home. looking ahead, what do you see next/ >> we actually like housing. the inventories are at 13-year lows, with equity has improved significantly. the fed came out yesterday and said one and only quarter homes -- excuseater versus me, one in eight versus 1.25. you are only building one million housing units. long-term demands 1.5. there is a significant recovery there. >> i love the independence of voices at pimco. how long will financial repression last? >> i think financial repression will last a long time. basically, the returns offered in financial markets today are going to be mid-single digits,
"bloomberg surveillance." she did triple lutz is at cornell. scarlet fu is with us. and adam, led to the luge with us. steve miller with us as well. no, not the steve miller of rock 'n roll acclaim years ago. it's the miller our. ofo joining us, matt miller miller time. shaun white grounded. >> unbelievable. he said he was skipping his first event because it was too dangerous but everyone wanted to focus on the half pipe. >> bob costas as well. >> i have an issue with him going on television with pink eye. >> he tried to be a trooper. >> put on the glasses -- >> not something i want to watch. "bloomberg businessweek" took a look, how we are doing as far as medal standing and gdp.
this is the kind of thing you see a lot. it points to the fact that you don't miss is that we need a huge gdp to win medals. norway is doing the best and their gdp is -- >> only bloomberg would do this. >> but the u.s. come we only have a total of 7 medals there. and we have $16.2 trillion. what you look back at all the metals throughout history, we still don't top the charts. >> i don't like this analysis. >> we don't have the snow. >> have you flown over norway recently? >> i guess they have an alpine setting there. austria, which have the actual alpine mountains, the alps, don't win. york, the home of the utica club. fourth of july in winter. they have winter. there is fine, but
only 64 people who live in norway. has won the olympic gold medal 4 times. >> when you went down the luge were you scared? >> scared to death. >> do i get to tease our program at all? on "in the loop," we are talking with sallie krawcheck good the unspoken truth of gender equality, or lack thereof. it is going to be a great program. we got our makeup done together. you know, women can lose 60 hours a year getting their makeup done? >> i spent too much time there. >> that is a full work week. >> lost productivity. >> lost time that guys don't have to do. >> we go to make up together, uni. you are done in 2 minutes. >> an hour of hr violations with
me at stephanie ruhle and sallie krawcheck. >> thank you so much. on the olympics, i have to admit , i complain every time and i love watching them. it's great. >> let's look at what is coming up on "surveillance." we will discuss how you turn -- turnaround puerto rico. that is without guest host, steve miller. ♪
>> this is "bloomberg surveillance." i am here with tom keene and adam johnson. our guest host, steve miller, chairman of aig and author of "the turnaround kid." twitter is taking a page from facebook. the microblog or is testing a redesign of its profile page that may make -- mimics the use of facebook's timelines. softbank is seeing a dip in profit. they topped analyst estimates but it was lower than a year ago. softbank was hit by integration costs tied to a string of recent acquisitions, including the $22
billion investment in sprint last year. islionaire carlos slim cutting a stake in royal kpn. he is reducing the stake to 27%, according to kpn. he failed in his efforts to take over the dutch phone carrier. that is today's company news from the files of "bloomberg west." >> we are honored to bring on steve miller, chairman of aig, he is the turnaround kid. that may be true -- delphi, etc. puerto rico is decidedly not detroit. he survived a tour of duty making cap positions at delphi, a follow-on from the general motors automotive components group. san juan is decidedly not delphi. they must make tough decisions. after chrysler, after delphi, now after proper beechcraft, what would steve miller do about rodrigo -- about puerto rico?
>> it is a fascinating issue. crypto ricoh is drowning in $70 billion of debt. their tax revenues have gone downhill because they start collecting from a lot of the people who ordinarily would owe taxes. you cannot go too far down that road or you will further depress the economy. you have terrible unemployment in puerto rico. it is 15.5%. >> you think it is higher than that. >> it is really higher than that because fewer than half of the adult population is registered in the labor pool. the unemployment is just awful there. one other biggest action between --rto rico and, say, detroit at least in detroit you have the option of a bankruptcy to get a court supervised process. state, not is not a a municipality. it is a territory and the chapter nine process does not even apply. >> does the conversation start not in san juan, but
washington? >> i think that's right. you have one good advantage in puerto rico, a new governor general who came in just a year ago. he is passionate, enthusiastic, young, trying to get the right answers. he is trying to reform the tax regime so that you can get better revenues coming in and some confidence that you have a plan to go forward. >> a lot of people complain that the taxes are too high and the professional class cannot make a living there. the brain drain from puerto rico is staggering. what does the new government need to do to keep people in puerto rico? >> he needs to articulate a vision for how we get out of this mess and gets up and people can believe in. the tax revenue side, it is not raising the rates of taxes. it is more equitably spreading the burden, so fewer people are skipping out on paying taxes. >> if they can't go through the bankruptcy process, you can't do a negotiation through all the bondholders at once. how do you reach all of these thousands of people?
>> why now they are trying to raise another billion dollars just to keep paying the interest on the old that. -- the old debt. it'll be expensive for them because they had been downgraded to junk status. if he can't get this turned around right away, it may have to go for restructuring the more the bondholders don't get the interest payments and everybody comes to the table and work it out. it won't have for supervision like you would have in a chapter nine case. but you still have the economic necessity to do something about it. >> is effectively like general motors, where steve wagner said -- steve ratner said i'm the cars are and this is ho it is going to be? >> there we had a chapter 11 case to make it all legal in the end, but elected president of the united states driving that. rico, like it or not, is a territory of the united states and it is our problem collectively and we have to deal with it on a national level. >> would you own san juan double
or triple tax-free bonds? >> no, sir. >> that about sums it up for porto rico. mike mckee and i have seen this -- we get angry e-mails -- >> something that is going to play out over months and potentially a year. let's stick to our agenda. tom, what is on your agenda? the pageantry in washington. our julianna goldman at the state dinner for president all on. -- president hollande. this is about much, much more than colorado beef and -- >> and ribeye. >> your french is worse than mine. i don't think i would ever say that. -- not troubled nation, but the compex heritage coming out of world war ii, and the challenges as a major trading partner and a major force in europe. france and the next
10 years and the domestic politics that mr. hollande faces? >> especially complicated given that several of the largest banks in the world are in france. you think of germany, the u.s., you think of japan. but actually, france. >> you think of the challenges of the auto industry, steve miller. they are not clearing the market as you and others did in detroit. >> exactly right. they have a very high labor costs in france due to their labor laws and it has made it much more difficult for french producers to build up their capacity. >> it was interesting to see madame lagarde there last night. >> as we wrap things up and think about tomorrow, retail sales are coming out tomorrow. retail counts for about 56% of gdp. consumption, that is, a lot of which is retail. this is on my agenda. >> before valentines -- >> the number is expected to be flat. that is not good.
we need growth in the economy. that is why janet was sounding a bit of caution. >> amazon shares of following in the premarket after ubs downgraded it, saying that in a survey they found that a lot of people won't renew their amazon prime service if the price does increase. rick and mortar retailers is an industry that is most vulnerable and in need of a timeout, and a lot of it is because of amazon. which brick-and-mortar retailers doing the best job of surviving and planning ahead for the next level? >> to pick a good example would be cvs pharmacies. they have decided to move into health care. they're getting out of cigarettes, for example, so there is no conflict with what their objectives are. to thewill always go local drugstore to pick things up. every other brick-and-mortar retailer is in very deep, long-term trouble from the power of the internet, which is growing by leaps and bounds.
>> you saw that during the holiday season. >> what about companies like toys "r" us? buy, are 81 ways you can integrating the web with the stores. >> the stores have an attractive web offering and are able to keep the revenues flowing. but the investment they have any brick-and-mortar is very exposed. shopping malls are going to be in big trouble going forward a less there is a very high-end -- >> there is a big storm coming as well. atlanta and georgia are going to get hit today and then of course tomorrow, new york and washington. let's get to our twitter question of the day. perfect, since we have steve miller here. the first answer, the federal reserve. no lover for janet yellen there. >> the federal reserve has made a lot of people very rich the last few years. >> this didn't come through
yesterday. the polarization of jeb hens arling and the republicans on the financial services committee and chairman yellen will be something to watch. >> how about this one? cisco. the company needs new management and a new ceo or suffer more does a voting results. >> i talked to john chambers in davos. mr. chambers has been rally criticized him but recently, they are doing better. this call today -- earnings this afternoon -- you can see this on bloomberg television and radio after the bell. cisco earnings will be key. >> finally, the government could that brings us back to steve miller on aig chairman. the government needs a turnaround. where do they start? >> despite the fact that janet is going to keep the rates low ol'sa while, it is a fo paradise. you cannot sustain that forever. we are printing money to keep everyone happy in the short term. you cannot keep going forever. we need to get real on
of the most successful women on wall street -- the most successful -- she is the former cfo of citigroup. no holdsving an barred conversation about women on wall street. not changed this morning. in the middle of our biggest four-day game, --gain in a year, jenna yellen delivered her first public remarks that the economy is strong enough to weather further stimulus. >> more bad weather is making its way to the southeast in the northeast, potentially mr. winter storm -- a potentially historic winter storm.
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