tv Bloomberg Bottom Line Bloomberg February 25, 2015 2:00pm-3:01pm EST
mark: from bloomberg world headquarters in new york, i am crumpton. this is "bottom line" the intersection of business and economics with a mainstream perspective. to our viewers in the united states and those of you joining us from around the world welcome. we have full coverage of the stocks in tories making headlines today. on capitol hill, republicans on the house committee turned up the heat on fed chair janet yellen. they had sharp questions for her
that monetary policy, whether she should brief congress more often, and whether she is showing partisanship by meeting with treasury secretary jack lew. chair yellen also discussed income inequality. chair yellen: what we can do is ensure a generally strong labor market where it is possible for those who want to work to find jobs in a reasonable amount of time. we can't determine the wages associated with those jobs or what sectors those jobs will appear in, of the policies that we follow and the general state of the economy have an important influence on the overall strength of the job market. mark: a promising report for the u.s. housing industry. sold last month -- new homes sold us month and a faster pace than expected. weather may have skewed the results.
sales -- new home sales in the northeast phil to an all-time low. in the south, they climb to the highest level in more than six years. three men have been arrested on terrorism charges for allegedly running to travel to syria to join the islamic state and wage war against the united states. two of the men were arrested in new york and the other in florida. if convicted, they face a maximum sentence of 15 years in prison. as we mentioned, said share yellen wrapping up her second day of testimony before congress. tony crescenzi is an executive vice president and market strategist at folio manager at pimco. she joins me in studio with his analysis. welcome back to "bottom line." the era of forward guidance, is it over or just set for an overhaul? tony: it is important to the fed it to provide some type of
clarity with respect to future policy actions. effective communications have pushed down market interest rates because investors say we don't need as much compensation for uncertainty because the fed it these days private something called a summary of economic projections every quarter that kind of outlines where the fed thinks the policy rate will go. it doesn't seem to be that there is a bit of give it --does seem to be that there's a bit of give pivoting here. the second message would be to focus markets not on when they move -- it might be june, july, september, we don't know. but focus on the path and that is the most important thing that the fed wants markets to understand. mark: tony, all eyes are on that march 18 fomc meeting. chair yellen was careful not to give indication of where the fed would move during her days of testimony on the hill. she did not say if they are prepared to remove that patient language from the statement.
have markets made it too much of the language? tony: probably not, because it is the fed's on doing. they said they wouldn't move on rates until a certain amount of time. interestingly, in share yellen's testimony, 800 47 words, about 300 of those were devoted to the word "patient," a single work, because it wants to soothe markets in terms of what it might do on march 18. one could look to the testimony for verbatim excerpts for perhaps what will be in the march 18 statement or whenever it is. if the fed says don't worry, we are not going to move now but we want you to understand that it is on a meeting to meeting basis, every meeting is live in terms of what and when we might move -- mark: the anticipation of a rate
hike absent the patient language, is that giving the markets and artificial lift? tony: in the sense that janet yellen and the fed have very effectively communicated that matters that is what markets seem to be thinking about, and in combination pimco's view is important to investors globally investors believe that rates will stay low at the policy level in major parts of the world, including europe. keeping the policy rate under 1% for the rest of the decade. that story on interest rates and policy rates globally is very supportive of equities and credit instruments and it is part of the reason they stay afloat. mark: tony, labor market of elements as compared to below target inflation, is that going
to be the catalyst for when the fed moves on interest rates, and how does that square with pimco's new neutral concept? tony: janet put the emphasis on employment and that the fed has emphasized the lower level with a falling inflation rate, the transitory inflation story, and the fact it's finding different ways to do this. the diminishing slack story is what is key. it is a cyclical thing, though. yes, the jobs rate is flowing but we believe that inflation rates stay low for some time even as they creep up, as janet yellen says, towards the 2% target. it is the diminishing slack that these investors to decide let's get off of zero. mark: if policymakers might be behind the curve on this one, how high could the drive yield?
this is a key reason to think of moving sooner rather than later. it is ratios the hawks -- it assuages the hawks. those who say that the fed is behind won't be able to say that and push up interest rates. that is a strong argument for the hawks, and even the dumbes the ones who want -- even the doves the ones who want the low interest rates, say that it will keep people from looking behind it the german 10-year bund is only 3%, versus 2% for the u.s. bond. that is widespread. it will limit the degree of move up in yield even if the fed's behind, and the fed can catch up by moving on rates more aggressively if it needs to. mark: tony crescenzi, executive
vice president and portfolio manager at pimco, good to see you here. tony: thank you so much. mark: now a bloomberg exclusive as returned to the greek bailout deal. erik schatzker had an exclusive sitdown with the finance minister yianis varoufakis. erik joins us from athens. what is the latest? erik: well, we need to talk about the banking system mark because anytime a country's economy is in jeopardy, the banks become a pressure point. we saw that in the united states after the financial crisis, we saw it in spain and ireland. he does most definitely been the case in greece over the past month. since syriza swept to power in january, it has been an open question of what happens to greece's banks. depositors have been voting with their feet. they have withdrawn by some estimates 20 billion euros from greece is thanks. and before that agreement with
the eurozone, the future of the banking system was an open question. i sat down with mr. varoufakis the finance minister late this afternoon and i asked him how long it would take to stem the outflow to reverse the tide. here is yianis varoufakis on great bank deposits. yianis: yesterday we had a flight back into the banking sector, 700 million. mark: 700 million euros -- yanis as a result of this bridge agreement. i checked the numbers today but i'm sure that will continue. erik: still down by billions. yanis: it is a question of direction. once you turn the tide you hope. erik: how long will this last and whether they make up the tens of millions that have flown out remains to be seen but this is a positive sign. mark: there is no new money in
the bailout extension for greece. is that going to be a problem? erik: it could very well be a problem, because greece is running out of money and doesn't have enough money to pay its bills. it needs to pay government salaries and pensions and it needs to make a payment to the imf in march. i said it to mr. varoufakis aren't you at risk of running out of money? you aren't going to be in a position to ask the imac or eurozone partners for some kind of new bailout until at least june, when the four-month extension is over. mr. varoufakis said there are several ways in which greece's partners, as he puts them, or the institutions -- ecb imf -- might be willing to work with greece from now and then to help them pay bills. here is yanis varoufakis explaining what he means by that. yanis: the ecb goods and we this
money to the imf -- could simply hand over this money to the imf as partial payment. this is money that we are wrote, and this is -- we are owed, and not borrowed money, but our money. why not have the two institutions find it amongst themselves a way of transferring the funding? erik: mark, it is still a question. will greece run out of money, will it not run out of money? i asked mr. varoufakis how confident is he that it will not run out of money and his response, "pretty confident." i will have to leave it there mark. back to you in new york city. mark: erik schatzker with that exclusive interview with the greek finance minister. up next, president obama traveled to miami for a town hall today on immigration. chief washington correspondent peter cook is there. you want to preview went that he
mark: let's get you some of the top stories we are following this one's a wednesday. shares of hewlett and packard are falling after earnings missed estimates. hp says its upcoming split into two companies will cost $2 billion. one company will sell corporate equipment and services, the other will focus on personal computers and printers. more than one million american express cardholders will start paying higher interest rates. amex is raising rates of an average of 2.5 percentage points to almost 13%. the company says it is making
the change after looking at rivals' interest rates for borrowers with similar credit profiles. another retailers following walmart's lead in raising wages. the parent of t.j. maxx and marshalls says that lower paid store employees in the u.s. will get a raise to nine dollars and hour in june. beginning next year's, those employees with six month six prints will get $10 an hour. last week walmart announced plans to give 500,000 of its u.s. employees a similar pay raise. walmart has been trying to reduce turnover. it is a happy holiday for target. the discount retailer posted better-than-expected profits. what are the reason -- part of the reason stronger christmas sales. ceo brian cornell is focusing on the u.s. he got rid of the money-losing unit in canada in january. target is trying to regain customer trust after the devastating computer data breach in 2013. that is a look at the top stories we are following.
while congress and the courts battle over president obama's executive action on immigration, the president will try to rally public support for those at a town hall today in miami. chief washington correspondent peter cook is on the ground there. good afternoon. peter: good afternoon, mark. the president is escaping the gridlock and chill of washington to come to sunny miami for this townhall to talk about immigration and do his best to put republicans on the defensive for not doing more on immigration front in congress. he will be here shortly miami and head to florida international university for this townhall that will be hosted by msnbc and telemundo. in the audience, a host of business leaders, the mayor of miami as well as, mark, some of the 5 million or so undocumented immigrants in this country right now who would have been shielded by the immigration executive action had they not been blocked by the federal judge in texas. one of them an activist who has
been one of the dreamers here came to the country when he was five years old from mexico. he is protected by the president's earlier immigration actions but his mother and other relatives would have been protected as well from deportation. he talked to us about the difficulty he has had dealing with the judge's decision on the legal limbo they are in. >> i was definitely sad telling my mother that she couldn't apply that my sister couldn't apply for extension. but at the same time we know this is going to be continuous fight, that the republicans are going to continue to attack this policy in court and in congress. but at the same time, for us we're going to continue to push and be resilient and fighting for our families. mark: peter, the president is also making an economic argument today. peter: he is making an economic argument.
the white house is said that immigration reform will help the u.s. economy could he says is likely that the immigration actions, were they to become finalized 1.1% of gdp over the next 10 years, the deficit would be reduced as a result, and u.s. workers would see their own wages, up, not just the immigrants coming to the country. they're making the economic argument, but the legal argument right now is going against the president although the white house feels confident that at the end of the day these actions will go forward. for now the judge has them on hold and i will be a big focus of the conversation in miami. mark: peter cook joining us from miami, where peter told us during the break that it is in the 80's and he is bragging about it. peter, thank you so much. janet yellen signals a shift in policy makers' medication strategies. ♪
mark: more on fed chair janet yellen's second day on capitol hill. josh wright joins me in studio. chairman yellen's testimony, what did you tell us about how she wants to shape and communicate that policy going forward? josh: janet yellen is signaling that this is the death knell for forward guidance. we are leaving the world where the fed will broadcast what it does to her three meetings in advance. we are going meeting by meeting where the fed will read the data and we have to read the data too, that is getting much of the world we saw before the financial crisis. mark: meeting to meeting as opposed to what they are doing now. what is wrong with the current strategy? josh: the economy is doing much better and it doesn't require the same amount of extraordinary
stimulus we have had all this time. the fed is sought new ways to provide similar to the economy. one of those is we are not going to raise rates for considerable time until recently. now they say they will be patient raising rates. that wouldn't -- they wouldn't raise rates for two meetings. it now janet yellen says that once that is gone and they take the word "patient" out, that is not necessarily mean they will be raising rates. she said we have all gone to sharpen our pencils and return to looking at the data. mark: was this all about softening the blow for the markets not to get them to overheated in anticipation of a rate hike? josh: that was but it also reflects the fact that the fed is straining to get to something that looks like their old normal. most people use that as shorthand for normalizing the level of monetary policy rates, getting rates above the zero again. part of what is going on here is that the fed wants to normalize
the process, the process by which they make decisions and communicate them to the market. mark: her assessment of the economy was relatively upbeat. is that her way of telling congress to look at the data and leave the noise where it belongs in the background? josh: absolutely. she didn't want to front run the committee. she said that but she is doing is reflecting the views of the market committee as they express them in january. but he did look like relative to that january statement and the minutes from the january meeting , there were a few more rays of daylight coming out in her assessment. she really stressed progress in the labor market as opposed to the weakness that is still there. mark: tomorrow we will get the consumer price index and next week, nonfarm payrolls. what with the fed like to see this in? josh: they were would like to see the court rates the study or turn around -- hold steady or
turn around again. the interesting thing is that while prices have bounced back. in another mother to we could see those numbers turn up and if they do, that would vindicate what janet yellen is saying and we could raise rates after all. mark: more voices raised during today's congressional testimony about oversight of the fed. you are an economist, not a political analyst, but that having been said, what do you make of all this? josh: it struck me as a lot of political theater. it wasn't clear how serious these things are in terms of their likelihood of passing. senator shelby was saying to peter cook that he would do hearings of the oversight bills and maybe propose legislation, but even the things that he mentioned he was contemplating sounded a little bit more moderate than some of the other proposals we have heard. he was talking about decentralizing power at the fed. more modest proposals. mark: josh, always good to see
mark: welcome back to the second half-hour of "bottom line" on bloomberg television. i am mark crumpton in new york. let's check the price of crude oil and the close of floor trading in new york. new york crude is up about 3.4% this afternoon, trading at 50.94. southwest airlines says it will resume flying planes that have found it because of inspections. the federal aviation administration gave southwest five days to conduct inspections
and gave it the ok to fly. southwest was forced to cancel 90 flights on tuesday because the hydraulic systems on the rudder hadn't been checked. in chicago, mayor rahm emanuel hit a speed bump on the way to reelection. he has been forced into a runoff facing cook county commissioner chuy garcia on april 7. the former white house chief of staff under president obama got 35% of the votes, garcia got 34%. under the mayor, chicago has been plagued by consistent violence and faces insolvency because of $20 billion in unfunded pension liabilities. u.s. department of homeland security will run out of money by the end of the week. senate majority leader mitch mcconnell and the obama administration are calling for legislation funding dhs without immigration-related add-ons but house speaker john boehner declined to say what he would recommend to his conservative
rank-and-file if funding bill clears the senate. rep. boehner: the house has done its job defunded the department of homeland security and to stop the president's overreach on integration and we are waiting for the senate to do their jobs. senate democrats have stood in the way for three weeks over a bill that should have been debated and passed. until the senate does something, we are in a wait-and-see mode. mark: missouri democrat senator claire mccaskill says her colleagues would back clean bill even without a flight from speaker to hear. that could -- a pledge from speaker boehner. tonight on "charlie rose," susan rice for the hour. she is the national security advisor. the white house released its second and final national securities strategy this month. here's what she had to say about the fight against isil. susan: we are in the process of
training and advising and equipping security forces in four different locations across iraq and we have supported them in their ongoing operations as they have sought to take back territory taken by isil. we have supported the kurds as well in their campaign in areas that they have sought to retake. mark: you can see the entire interview with susan rice tonight at 7:00 and 10:00 p.m. new york time right here on bloomberg. we turn our focus to the keystone xl pipeline. while supporters in car was try to override president obama lost -- and congress try to override president obama's veto, another threat has emerged. our guest follows the commodities markets for bloomberg news he joins me in studio. great story on bloomberg.com and the terminal. bloomberg through an open records request has obtained information that outlines how extreme and in some cases how ugly the fight over this pipeline has become. when do we know about how
keystone opponents and transcanada have handled themselves through the holding? >> that's right. a lot of people are probably familiar with what the environmental activist have done . they have organized marches and a mistreated in cities and were also in texas and oklahoma when transcanada was building the southern part of the pipeline basically trying to block construction. what we didn't know was how transcanada responded to that, that is what the documents show. transcanada met with law enforcement officials both local and fbi, to share intelligence about who the protesters were and what they might be up to and see about ways to charge them with antiterrorist laws. mark: what attacks have there been on the oil industry? isaac: there really haven't been many. since 1970 there were five reported attacks, arson and sabotage. the most recent was in 2001 and no one was injured. obviously, is want to put safety
first. -- companies want to put safety first and they know about the threats to their own businesses. but in terms of actual attacks teraflop in many. mark: some of the threats we are hearing even with keystone some of the workers have been threatened and property as well, is that correct? isaac: that's right. the other thing to remember is that even when it is peaceful protest, when there is heavy machinery involved that can still be dangerous. tony: transcanada does point out instances where the people and property were threatened. mark: this fight over the stove as it blurt -- over keystone, has it blurred the line between peaceful protest and domestic terrorism? isaac: that is the activists' concern, though they are being treated as if they pose a much more serious, violent threat than actually do. a number of them say they have been contacted by the fbi in
recent months and are confused about why that is. mark: what is the fbi's role h ere. isaac: the fbi is the nexus for sharing information about domestic terrorism threats. they have been contacting people in the pacific northwest region in recent months and also i spoke with a professor who says he was contacted in texas and another in pennsylvania in recent years having to do with opposition to fracking. mark: so contacted but in the sense that we not necessarily putting you under investigation you are not necessarily a person of interest, but we want to know what was going on at these meetings we want to know what was going on at these protests. isaac: that is the question. i spoke to someone who represents a lot of these people and wanted to find out if there is an active investigation and the answer he got is no, so his question is why is the fbi involved? mark: in your story you write
that transcanada has a contract with the public relations firm edelman. are there other companies using a similar tactic? isaac: yes, there are. transcanada and itended its contract with edelman after slice of the strategy were leaked. other companies have used these to try to dig up information on opponents. there were other instances where information the industry thought was private has ended up online. mark: "on alert for tha terrorism." thank you for your time. still ahead, more of alix steel's wide-ranging interview with ceo of the american petroleum institute. that went "bottom line" continues in a moment. ♪
mark: we want to let you know that bloomberg tv plus is now available on roku players streaming for free. it is time now for today's latin america report. petrobras bonds decline the most of this month in europe and shares fell after the moody's investors service cut the most indebted publicly traded welcome any to junk -- most indebted publicly traded oil company to
junk. the downgrade marks the second reduction by moody's in less than a month. fitch ratings and standard & poor's ranks the company at their lowest levels of investment grade. that is your latin america report for this wednesday. when we return the tv show " modern family" features products made by apple in a whole new way. we will bring in shelby holliday with the details. "bottom line" continues in just a moment. ♪
mark: let's get you some of the top stories we are following this hour. the french political magazine "charlie hebdo" is under heavy police protection as it publishes its latest edition. it looks at recent terror attacks in denmark. two islamic extremists attacked the offices in paris last month, killing nine journalists. police spotted at least five
drones that buzz the eiffel tower and the u.s. embassy, among other sites. it is the second night of such sightings. police on the ground could not follow them or determine how they were being controlled. royal bank of scotland is cutting back its footprint. a persons in the year with the matter tells bloomberg at rbs will reduce the number of countries it operates in by two thirds, meeting rbs in 13 countries. it will sell its u.s. loan commitments and related derivatives to mizuho financial group. rbs is owned by british taxpayers and has been cutting jobs and assets to improve earnings. that is a look at the top stories we are following. oil's priceline over the last month in some ways is reminiscent of the 1980's, when the industry saw a slew of bankruptcies and defaults and consolidation could alix steel sat down with jack gerard ceo of the american petroleum institute. alix: he is so good at answering
these questions. he has kind of blood the fifth. my point is that the sector has borrowed $8 billion in on some loans. the high energy companies are ok for now but in 2018, 2019, debt maturities are going to be significant, and barclays is looking at a 4.5% default rate at $60 oil. i asked jack if we will see the same kinds of accuracies and layoffs and pain that was in the 1980's. jack: difficult to predict that. it is a question of how long we stay at the current price. those are all factors we can't predict. alix: what if it does remain here? jack: you will see much of what we have seen now, that they will move to be more efficient and cut costs, and it they choose time to make other plays for consolidate other activities, it is difficult or us to predict where the industry might end up.
alix: when you talk to your producers and the companies you speak to are they scared of oil prices at this level or do they feel ok about it? jack: they are working to be competitive on a global scale, and like i say, they are situated differently, and each one of them has to be focused on what their individual situation is, and how they project the future. some focus on different parts of the world, some focus on different developments. at one point there was a swing to natural gas. i think they make decisions every day. many of these are long-term -- these are seasoned professionals running these companies. they have been through some of these cycles before. they know how to cut costs and improve their position. eventually, as we come through this, we want to make sure the u.s. as a whole is still a superpower, still a dominant player in the oil and natural gas markets. alix: so, mark, it was a very
measured, call response, but my tradition is that this will have to bring out consolidation in the industry. mark: what did he say about keystone and president obama's veto? alix: hopeful that we will get this done. the truth is that we actually do need this oil and if we don't get it from the u.s. we will have to buy it somewhere. more oil is entering the u.s. market even without keystone. the question of do we need the pipeline, i put pressure to mr. gerard on that as well, that we are seeing a lot of stuff come by train. he said sure but it is more expensive. if they totally redo all the trucks it will be even more. mark: alix steel joining me. thank you so much. later on "street smart," judd gregg former new hampshire senator, will be speaking with
my colleague trish regan. stay tuned for that interview. smartphones and tablets have changed the way television's watch and now they're changing the way tv is made. tonight's episode of the popular tv show "modern family" was filmed entirely on apple devices. shelby holliday caught up with the show's executive producer via facetime. how did modern family bliss off? -- how did "modern family" bliss pull this off? shelby: they used tricks behind the scenes to boost production value. they had cameramen holding the phones instead of the actors holding the phone's just so that things wouldn't get off frame. they did a lot of editing sometimes using features we can't quite use in the mac world yet. multiple facetimes at a time is an example. when i talked to creator and executive producer steve levtianitan
about what inspires such an episode, take a listen. steve: this just came from my life. i was talking to my daughter at college and they were e-mails and i could see her and myself and my wife standing behind me and some webpages open and i thought that this pays an amazing picture of my life. you can tell a lot about me from this one screen and that is how the idea started. shelby: they felt abyssal i -- they filmed this whole episode using the devices but on the episode tonight you will see a computer screen. the entire episode plays out on the desktop of claire, the mom. the concept is that you can learn a lot about somebody by watching their computer screen for a few minutes. mark: is this an episode of "modern family" or a half hour commercial for apple? shelby: i asked steve that
because these are all apple devices being used. he said that the relationship with apple is more personal. he is a fan of apple and apple is a fan of the show, that was it. it was not a business partnership. apple supplied the devices but they did not pay for product placement, nor did they pay for any sort of advertisement. here is steve again talking about how technology is really transforming television. steve: how we shoot things is going to change, and i think that how we distribute things will change. but stories have been around the beginning of man -- since the beginning of man, and those won't change. at the end of the day people still want to be told amazing stories and brought in and made to forget life for a while and go on this journey with a storyteller. i think that will never change. shelby: and mark, so far tonight's stories generating a lot of buzz and critics are excited about it. mark: all right, thank you
played along, at least in the past year. julie hyman joins me with today's "off the charts." the nasdaq has managed this -- has and manage this. julie: what have we heard time after time after time when the s&p has reached records and the dow has made similar moves, and yet the mastec hasn't made it there. -- nasdaq has admittedhasn't made it there. you see the longer-term returns as well. even on a percentage basis the nasdaq has gained more over the past five- and 10-year periods when he does not made records like the others have. part of that has to do with the dot-com bubble. it had more to call back from. if you look at what we have seen recently, the internet stocks within the nasdaq, would you
think of as being so integral to the nasdaq, the internet stocks have lagged behind what we have seen in the overall average. we have seen that in index down almost 2% at the same time that the overall nasdaq composite is up 18% put another way, only 34 of the 93 stocks move higher in that period. 21 of them were down more than 50%. the worst performer is a company called rocket fuel, a digital had company. so much for rocket fuel. it was rocketing in the wrong direction. mark: so ironic that it is called "off the charts" is in a previous chart it was all over the place. is there a chance for a rebound? julie: depends on who you talk to. a senior equity projects strategist at the invesco products your unit is looking at things through the etf perspective. in particular he is looking at the powershares nasdaq is no
internet portfolio. he says that the index has broken a pattern of lower peaks, but he is looking at the fundamentals, too. he says we will see more dealmaking in the industry, more growth, and says that sales growth within internet companies should be better than the s&p 500 as a whole. these might be different things that support a rebound. mark: if you look at those two charts it is a steady climb aboard. seems to bear out what he is saying. julie: potentially. if you look at the past year there has been a lot of nervousness among investors around so-called internet stocks. they have been more volatile than the broader market. mark: nasdaq, is it going to reach a new record? julie: i mean, it doesn't seem like there is anything that will
stop it from reaching a new record. you look at the finals right now -- fundamentals right now, including very importantly the job market, you look at what we have heard from janet yellen the past couple of days, that she will still be very patient, it seems, when it comes to raising interest rates. might happen in june, might not. seems like we will make it 5048, the number to watch. mark: julie hyman. get the latest headlines of the top of the hour on bloomberg radio, streaming under tablet, and on bloomberg.com. i am mark renton for "bottom line." thank you joining us.