tv Lunch Money Bloomberg April 2, 2014 12:00pm-1:01pm EDT
welcome to "lunch money" where we tie together the best stories, interviews, and news.ss in motors, the new gm. the barra drives away from past on capitol hill. one eye patch per child. l.a. school district taking education to the new digital age. strike, lufthansa pilots walk a picket line. says it is all or nothing for arielle, this is a
bloomberg exclusive. innovating the road race. i am serious. everyone is talking about the changing times on wall street. >> goldman sachs looking to sell its new york stock exchange market making unit. such investment firm imc financial markets is in talks to buy the business. bought the operations into thousands as part of a purchase. 5.4 billion dollars, goldman paid for that trading unit in 2000. goldman is now selling it for as much as $30 million. do you get that? five point $4 billion, $30 million. to be fair, goldman made money off that investment over the last 14 years. earning over those 14 years, at that price you are looking at a 99.4% long-term capital loss.
this points to a bigger story, this is what the new york stock exchange floor looks like today. there are humans, but there are a lot more computers. it was not always this way. this is back in the 1920's. almost one hundred years ago, that is old school. fast-forward to the 1950's, kind of new school. >> today there are more than .5 million miles of telephone wires and telegraph wires linking trading on the floor of the exchange with more than 3000 offices of exchange firms here and abroad. essentially, the stock market is people. american shareholders buying and selling securities. >> people. thousands of people worked on the stock exchange floor each day, i used to trade with those guys. execute take minutes to a trade. today, a few hundred people on the floor. volume has fallen and trades take milliseconds.
it is that evolution that is at the heart of the investigation of high-frequency trading. the fbi and the new york attorney general are looking into manipulation by traders who use computers at these fractions of a second, adding a little bit of fuel to the fire is the snap. -- is this man. has eliminated a role wall street used apply. you use to need a human being to bring a buyer and seller together. you can hit a button on your computer and you can go into a box with everyone else's order. >> you don't feel good about that? >> that is what i am saying. some guy is still jacking you, all thistraders, unnecessary financial intermediation happening. has inserted itself where it is no longer necessary. hishat is michael lewis, book goes inside the world of high frequency trading,
declaring that the u.s. equity market is raked. he joined "market makers" this morning. regard not high-frequency traders as villains. it is like blaming the lien for eating the antelope, they are wired that way. the system is screwed up. they exploit glitches in the system. are not wired to say is this good for the world, they do not think that way. trading can becy difficult to understand that you do not have to go to wikipedia. sam grobart says just watch a bad movie. lewis' latest book sets its sights on the world of high frequency trading. performedx practice by the most sophisticated investors with the most powerful computers. i set that is not that complex. it was a major plot point of "superman three." one with richard
pryor. his character engages in salami slicing. >> why would you do that? >> i don't know, i just did it. >> an employee's paycheck is always rounded down to the nearest whole cent, raising the question where do they go? what pryor's character does is take all those fractional cents leftover and deposits them into his own secret account. in each case, each individual effect is very strong. in the aggregate it nets him a ton of cash. in many ways, this is a lot like what high-frequency traders do. stocks just before other people do and then resell them at a small increase, pocketing the tiny profit. s scheme, each transaction is so microsc
opic, no one would know. over millions of trades it adds up. all you need is a high-speed data connection and a computer. just like richard pryor. >> i am a genius. lewis again onl "charlie rose" tonight 8:00 and 10 :00 p.m. eastern. from our morning on "surveillance," with me at 6:00 a.m. barra gives a mea culpa in washington. hard to get into the details, we will tell you why. gm is not the biggest offender when it comes to recalls. we have the list and our top five. papi and-- big commander-in-chief, david ortiz presented president obama with a jersey. get a selfie with the president -- samsung confirms it was a
>> this is "lunch money" on bloomberg television. also streaming live on bloomberg.com, your tablet, and your smartphone. i am adam johnson. in motors, gm's ceo mary barra in washington for a second day of testimony. answering questions on the ignition switch recalls linked to 13 deaths, mainly regarding how long gm knew about the faulty material. wewhy not come here and say are going to do the right thing and compensate the victims. money cannot erase the pain but it is the right thing to do.
>> our first step in evaluating this is to hire mr. feinberg, we plan to work with him and understand his expertise. there are civic and legal responsibilities and we want to make sure we are thoughtful and what we do. 2.5 hours ofd questioning yesterday. several things resonated. the difference between old gm and new gm. is presumably new gm. >> i cannot turn back the clock. as soon as i learned, we acted without hesitation. we told the world we had a problem that needed to be fixed. whatever mistakes were made in the past, we will not shirk from our responsibilities now or in the future. today's gm will do the right thing. of congressembers are convinced. >> you responded to a question and told us that you were going to run gm differently than it
has been run in the past. before this hearing, an iowa family harmed by another defective gm vehicle gave me this promotional screwdriver set. has a slogan., it "safety comes first at gm." question for you and i think the question these families want to know is what has changed at gm? isn't it true that throughout its corporate history, gm has represented to the driving public that safety has always been their number one priority? >> i cannot speak to the statements that were made in the past. all i can tell you is the way we are working now, the training we have done, we have changed our core values. we are leading by example. changes weprocess have also made is in addition to
win the technical community makes their decisions about a safety recall, we are going to be reviewing at. we have the head of global product development and myself to see if there is more we want to do. >> have the core values of general motors always been that safety comes first? seen that part before. today's general motors is focused on safety. we have over 18 vehicles that have a five-star crash rating. our entire buick lineup meets that. >> do you agree with the author that this is a grave safety crisis? >> this incident took way too long, it is not acceptable, that is why we are making radical changes to the process. adding more recessed -- adding more resources and adding a vice president of global safety. we will continue to make continue towe will
make process changes and people changes as we get the results of the investigation. >> this brings us to the second key aspect of mary barra's testimony. she failed to answer a lot of questions, admittedly because of the ongoing investigation. >> part of our investigation to get the complete timeline, i do not know the answer. that is why we are doing the investigation. i cannot answer specific questions, that is why we are doing a full investigation. that is part of the investigation. that is part of the investigation we are doing. that is part of the investigation. as part of our investigation. i want to know that just as much as you. >> there is an investigation and you cannot comment, are you getting updates from anybody regarding these proceedings? >>, yes. >> well, the mechanics of the recall are complex. we break down the way this whole thing works. >> a couple kinds of recalls.
one kind comes about from an investigation known as an influence recall. then you have voluntarily initiated recalls. it is the second type i want to focus on. each company has its own methods, here is generally how it all works. once a potential safety defect is noticed, a team of engineers will investigate the issue. they will do a series of simulations and test runs to determine whether the defect creates an unreasonable safety risk. if they identify such risk, they then have five days to notify safety regulators. panel ofny's defect engineers gathers to make a recommendation on how to fix the problem. what needs to be replaced, what it will cost, the ramifications for consumers and their own dealers. that goes onto the c suite and the ceo makes a call. once a recall mandate is made, they then give a heads-up to the
>> this is "lunch money" on bloomberg television. also streaming live on bloomberg.com, your tablet, and your smartphone. i am adam johnson. how do you take america's second largest school district into the digital age? the ipad. we go inside los angeles' new classrooms. be herem excited to with you. you will receive your ipad.
is a bold, billion-dollar initiative. give every public school student in los angeles and ipad. them to have technology. we want that fundamental civil right for every student to have what the wealthy have. >> each come with a digital curriculum designed by pearson, the text but company, and aligned with the national common core standards. hands the kids got their on tablets, teachers got a look through a series of training sessions. >> any questions? >> in september 2013, the ipad rollout began and 47 schools. >> we are going to learn. >> what are you going to learn? , we're going to learn to write our names. >> put the ipads in your backpack? >> no. >> are you going to put them in your desk or on the floor? >> no! >> do use it on them?
-- do you sit on them? >> no. >> kindergartners followed the rules that the older students got creative. -- high schoolers likeey wanted things facebook and itunes. >> now students can no longer take the tablets home, a quick fix for one of the hurdles plaguing the rollout. the superintendent insists they are manageable bonds in a high-stakes transition. >> we need a transition to books and paper. those items are static. the notion of students being able to have current contact versus static content is what they're going to face when they go to university and college, and the world of work. >> another step forward with ipads 438 more schools this
year. when the plan is completed, it will be the largest district in the country to equip each student with an ipad. for more on our wiring the world series, tune into "bloomberg west" at 1:00, 6:00, at 11:00 eastern. the challenges of designing digital content for the classroom. kids k-12 are not the only ones learning online. websites like treehouse, which has over 70,000 adult students, they are opening all sorts of new doors. >> most of them are adults. folks that are electricians or arebers or buries those who learning how to code and they are actually making good money or doing it full-time. >> talk about some of the companies you are working with now. you work with twitter, air bnb. what do those companies get? >> people who are developers and
designers need a very wide breadth of skills. getting a consumer science -- giving a -- gimme a cons -- getting a coo mputer science degree does not work. doesn't require learning about eight particular process. dowe presume our students not know anything. and then we take them all the way to job ready. once you get a job in tech, you have to keep adding to that. we do see ourselves as the trade school of the future. i really hope that the educational model in america and the world moves back to the model of coming out of high school and choosing a trade. school for that trade. if you can afford university, that is great.
i do not think that should be the default for people in the future. >> workers in high-tech jobs are paying 17% to 20% more than employees and other fields. go high-tech. theabout working at aereo, streaming service dukes it out at the supreme court. we talk about the future with investor barry diller. what is harder? running 10 miles through electric shocks and barb wire or running the tough mudder business? all the tough blood, sweat, and tears coming up in sports. >> 26 minutes after the hour, bloomberg is "on the markets." i am alix steel, another record day for the s&p, extending its rally from yesterday. global stocks at their highest levels of the financial crisis. helping the markets are the
>> this is "lunch money" on bloomberg television. also streaming live on bloomberg.com, your tablet, and your smartphone. i am adam johnson. today's moving pictures -- the video is the story. and 8.2 magnitude earthquake in chile forced the evacuation of cities and towns on the northern coast, left six people dead and triggered a tsunami warning in areas as far away as hawaii. chile's president has ordered the military to help maintain order and hardest hit areas. a barricade erected by venezuela's antigovernment
protesters has been blamed for deaths. the obstacle is to keep government forces out, but their usefulness is being questioned. the president says they just cause hours of long traffic jams. a&e corp. has been hit with criminal charge tied to its 2010 natural gas explosion. the blast tore through a neighborhood in the san francisco bay area and killed eight people. prosecutors say the company knowingly wrote federal safety rules. pg&e corp. is charged with 12 felony violations of pipeline safety laws and could face a fine of $6 million. lufthansa pilots are on strike. this has halted thousands of flights, 112 planes and 5000 crewmembers are stuck abroad. lufthansa pilots are in a dispute over pilot benefits. we talked to the lufthansa spokesperson this morning. >> we have made offers that are good enough to start
negotiations, serious negotiations with goodwill from both sides. see that there are no compromises possible. we hope we are going to pick up the conversations pretty soon. upset they cannot get higher wages and retirement benefits. lufthansa is offering a dividend. profits are falling, here is the airline's response. cuts,re not talking about we are talking about-are the increases are the salaries. then we are talking about at what point and time and with what conditions can pilots stop flying in the future. we do not talk about cutting things, but we talk about keeping the system running for the next decade so that lufthansa can still afford it for the next generation of pilots as well. and we talk about how much do pilots contribute on their own. i think we should have good
opportunities for compromise. comes as one of the busiest airports in the world is going through an overhaul, heathrow is months away from opening a new terminal. it has learned from past mistakes, maybe, maybe not. angus that reports. >> heathrow's latest terminal is three months from its grand opening. it will be fully operational, it handling 25,000 passengers a day. the 2008 nightmare terminal five launch are fresh in the airport's mind. lost, six hundred flights were delayed, it was embarrassing. it cost $26 million in expenses and damages. >> a very poor day for british airways. responsiblehe man for making sure that does not happen again. >> opening a new airport terminal is the most challenging thing any airport can take on. you can count the number of
successful airport openings on one hand. one of the advantages we have is the experience of terminal five. >> the plan is to open terminal two in slow motion. united airlines is the only carrier that will fly in first, then a new carrier will join every three weeks. the opening comes as heathrow's future is under review. the u.k.'s only hub airport is fighting to expand. some argue this strengthens their case. angus bennett, bloomberg. our interview, with billionaire investor barry diller. all oracking aereo in an nothing fight going on the way to the supreme court. that is coming up next in media. talk about cutting it close, this pennsylvania man was on the job with a tree servicing in company with a chainsaw kicked back into his neck. coworkers saved the day, detaching them over and leaving the blade and james valentine'
>> this is "lunch money" on bloomberg television. also streaming live on bloomberg.com, your tablet, and your smartphone. i am adam johnson. media, aereo is tunneling broadcasters all the way to the supreme court. broadcasters want aereo to pay for content they are retransmitted. not have tot should pay and it legally. barry diller is backing the start up and plans to expand it into every major city. but, this is a big but, only if aereo wins the case in the supreme court.
down withzker sat barry diller. this is exclusive. >> there is some salvage but aereo would probably, i cannot see any path for it. it probably would not be able to continue in business. >> why is that? you have a platform, you would be ruled, a multi-video programming distributor. you would be like a cable company. could you not compete for content? >> we could probably pay retransmission consent. a deal withmake broadcasters, we probably could. but the value proposition would go out of the game. is a low-cost method of receiving over the air broadcasting. that is the platform. >> what if the supreme court grants you life? what happens then? >> we compete, we go on to build
our business. we expand to the rest of the u.s. that we are not currently in. the west coast, we are only in 14 or 15 cities. we would be in every urban city, any urban city, certainly the top 30 or 40 markets. >> this is an effort to reach what you believe the adjustable market of one third -- >> at the most, a third. many people who sat in that cable programming and satellite programming is becoming much too expensive. and that they would prefer an alternative. a much less cost alternative. that is, by definition the younger rather than boulder -- t han the older. to me, i don't think we will reach a third come about that is the addressable. >> what about the threats from ves, and the like, they
will turn their broadcast networks into cable channels and render your low-cost alternative neutered? >> it is very unlikely that a broadcaster who built their business on spectrum that they got for free. spectrum by definition blocks of the american people. they got it for free in return for investing in and building a direct system. if you could get the signal directly, you could receive it without anyone in the middle. it is very unlikely that they would be able to take that broadcasting away from that distribution of that signal. and put it in a solely paid system. it, it is aves says 90 threat? >>-- it is an empty threat? >> it is a nice threat to
convince anyone like the court or congress that this would be a terrible thing, to disenfranchise 60 million people right away who do not subscribe to cable or satellite and who do get over the air. it is inconceivable to me that it could actually happen, but i can understand people saying -- the is to me -- it is like least realistic alternative. want to bes aereo when it grows up? what is there beyond? >> i think the service standing a veryown platform is good thing. it is a very good service to offer. it is an alternative to a closed system. it is an alternative for a lot of people who would like to receive programming, their god-given right given the quid receivethat the public
free spectrum. it is a good, prosocial, positive business with good characteristics. 's future --o aereo has it or has it not broken the copyright law? we debated on "surveillance" with professor scott galloway. >> broadcast tv is made available engine by advertising. if aereo legally works, aereo helps ratings. if you talk to anyone at the networks that are suing, aereo is a notable positive for ratings. this is not a threat to copyright holders, aereo only has broadcasting vm bloomberg. the amount of time you will spend watching broadcast tv is far higher than in a 400 channel universe of cable. the threat is about retransmission fees. let's not confuse this -- retransmission fees are paid
like cable operators. by satellite operators like directv and comcast. >> that is what is under threat right now. hold on one second, i want to bring in scott galloway, professor of marketing at nyu stern school of business. do you talk about this? is it a case study? >> aereo is going to be put out of business. way.u go the other >> they are taking on a $57 billion industry. you have got to pay for content. one of the ways content is shifting is from advertising to such reaction to paid model. >> what does mr. greenfield get wrong? >> he is talking about -- this guy will -- my stance is when you talk about technology, enabling consumer behavior makes it legitimate. you can use technology to steal. that is what the industry is going to say these guys are doing. tofrom battling broadcasters
>> this is "lunch money" on bloomberg television. also streaming live on bloomberg.com, your tablet, and your smartphone. i am adam johnson. so you think you are tough? maybe you should try that tough mudder, the 10 mile also go course complete with fire ice, and mud. millioncts over one participants around the world every year. will dean joined us on "surveillance" about how he grew this from an idea in his business school dorm to a
multimillion dollar business. >> people are working out in different ways and looking to challenge themselves. it is not a race, it is a challenge. the second part it is social and team-based. it is about working together to get over the also close. very different from your typical marathon or triathlon. >> something else that is different, corporate sponsorships. you have been out in front, maybe this is from harvard business school. how were you able to sell the concept o to companies? >> we have a demographic of men in their 20's and 30's. >> thank you, keep going. ree thousandad th with tough mudder tattooed on them. that shows engagement. this is a tough dynamic to reach. wanted access to
overachievers? >> it is people from all walks of life. >> you have a lot of competitors. your smaller competitors are picking up share by picking up women. there are targeting kids. are you adjusting your one-size-fits-all approach? oryou tend to find that one two tend to rise to the top in this space. if you look at triathlons, iron man the dominant player. theake sure to have w best obstacles, we have signature obstacles. >> there is electricity going through those wires. >> we do that before "surveillance." jim chanos, a noted short seller, they do the paleo thing. tehey lift one thing. are you as sad as that?
>> we are not a fitness business. we are not saying that doing tough mudder will get you in shape, we are something you do if you are in shape. with me,me headbands we launched our repeater program. this is what you get when you do your first event. >> tom, put it on. >> he has not earned it but i will let it go. >> i have not earned this. >> fireproof? >> weak old fart? [laughter] >> this is for people who have done two. >> shameless plug! >> we have our 10 time tough mudder. this one here. a response tos as market demand. so many people coming back time and time again. >> one person at bloomberg who
crisis. factory orders in february rising more than estimated and private companies adding almost 200,000 jobs in march. some economists saying they are optimistic that this might represent an expansion phase of the labor market, something we have not heard in a while. the optimism is tuesday markets. treasury markets are kind of the opposite. prices falling and yields on the 10 year pushing to a three-year high on that economic data. will the fed have enough good data points to raise rates next year? the treasury market taking that in stride. joining me for insight and action with a look at the tie-in between stocks and bonds is adam johnson. >> looks like investors are changing their tune. will they get it right? time for insight and action. i want to show you the etf money flows for the first two months of the year versus the past month. in january, money going into bonds and coming out of stocks.
fast forward to march it is opposite. money going out of bonds and into stocks. looks like the fed will be raising rates sooner rather than later. that would mean the price of bonds falls, you do not want to be and bonds. put that money to work in stocks. of analyst pointed out that the various etf that attracted money, there were three that attracted the most. financials, 1.5 billion dollars over the past month. technology and the materials. he says what you are seeing is investors betting on cyclical recovery. these are cyclical sectors. the question is whether investors are getting it right. is this where you want to put your money? we looked at the bloomberg forecast is. bloomberg tracks estimates from all the different analysts across the sectors on the companies. we found the energy is actually growing fastest in 2014. 14.8% forecasted earnings growth. that is the fastest.
betting on materials, that comes in at number four. tech comes in at number six. and financials. even though that is where the money is going, that is not necessarily where it should be going. energy is growing fastest. it is creeping -- it is trading at the lowest forward pe multiple. growing fastest and trading cheapest, and opportunity especially since energy over the past year has lagged the rest of the market. there it is, the energy etf iye is growing fastest and trading cheapest. it has lagged, there is your liking opportunity. >> thank you, adam. continuing the conversation with commodities and looking at oil. oil prices continuing to grind lower. technically the prices should have been higher. crude stocks in the u.s. fell for the first time in 11 weeks. that was not necessarily because more oil got used. it was because of a closure of a houston ship channel. basically, the oil has been
sitting in tankers and not being used. that is what oil is falling. there is speculation there could ,e supports reopening in libya that could add six times the amount of oil coming out of the company, waiting on brent and particular more than wti. moving alongoday, with stocks. hopes that physical buying out of china and the wish that that would stabilize prices. a check on copper, rising slightly. have a bigger pot during the day. the earthquake in chile. chile is a huge copper producer. back in 30 minutes. ♪
>> live from pier three in san francisco, welcome to "bloomberg west." special edition today. amazon's primetime play. ofhave complete analysis amazon's big announcement tv,aling amazon fire stepping up the competition with google and netflix and more. first, a check on your top headlines. blackberry