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tv   In the Loop With Betty Liu  Bloomberg  April 8, 2015 8:00am-10:01am EDT

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-- in four betty liu. we have a great show for you today. a lot of news. also, ed conard joins me to discuss income inequality and whether a 26-year-old m.i.t. grad student just took town thomas piketty's theory. oil prices could tumble next year if sanctions are lifted following a final nuclear deal with iran. we will take into the oil markets. why more automakers are moving their headquarters to the big apple. ed niedermayer joins in the next hour to talk about my favorite subject, cars. a new deal creates an oil and gas mega giant. royal dutch shell is brining -- is buying the bg group. the deal is worth $70 billion.
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the new company will be the second biggest in the global oil and gas industry. the sale price represents a 50% premium above bg's closing price. >> the way we would look at that is if you look at the carbonation of the companies what we could do with the assets that bg has, we saw a lot more value in that combination. matt: it is the industry's egg is to deal in at least a decade -- biggest deal in at least a decade. some traffic controllers are not showing up for work. about 40% of french flights are being canceled. air france says most of its long-haul flights will take off as scheduled. saddam -- chicago voters are giving their mayor another four years. at rahm emanuel one a second
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term. he says the battle will make you more effective. -- will make him more effective. >> to all the voters i want to thank you for putting me through my paces. i will be a better mayor because of that. matt: the challenge from a fellow democrat was a rarity in chicago politics. rahm emanuel must tackle crime in education problems as well as its $20 billion pension gap. u.s. officials concede that a computer system was hacked by russians but they say no sensitive information was taken. the incident forced the shutdown of the system for several days. the system is used for scheduling and other nonclassified matters. friday is a big day for apple watch enthusiasts. that is one watches will be available for in-store try on's. you still have to make an appointment. josh depaul ski got to take one
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of the watches for an early where. he will join us with his take. you will want one but you do not need one. you can check out the full article online now. had to bloomberg.com for his review. those are your top headlines. the mega in oil. shell snaps up bg group. the acquisition is the most significant response to the slump in oil prices and could set in motion a series of mergers as energy companies aim to cut costs. at hammond joins us now. -- ed hammond joins us now. does this mean we will see a huge wave of consolidation? ed: that is the big question being asked. if your exxon, do you react? this was the big trade to do.
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they ramped up their exposure by doing this. the super majors will be looking at this thinking they need to react. matt: will they react by putting in a higher bid for bg group? will we see more people get into this? ed: it is possible. we have seen companies come in and this is across any sector with what looks like a very full price and then we see people come in over the top. it is possible someone comes in. for now, it looks like a full price. it is hard to see anyone coming in much higher. matt: our companies being crippled by the depressed oil price? ed: there is an element in oil and gas right now -- the depressed oil price is having an effect. it is forcing companies to consider selling.
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we saw it with petroleum. of a put themselves up for sale. a lot of noise. they actually took themselves off the block and said, we do not need to do it. i think in bg's case, this is by no means them being forced to sell. it is actually shell who struggled with production and has been hit hard by falling prices. they buy a company going in the opposite direction. bg has huge lng reserves. if you are shell and you are struggling you go in the opposite direction, by someone who is doing well. matt: have you got your eyes on other targets or buyers? ed: exxon would be a logical buyer. they will i'm sure do a meaningful deal.
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it is a question of when. ted powell of france is another one involved in the super major circle and may react. the question that is difficult to answer is what does bp do. bp is getting over the legacy of its disaster here. and is still getting over representation issues. do they have to do something to react? matt: you look at the u.s. majors as having a significant advantage because of the dollar strength. ed: the currency stuff plays more in favor of the oil companies. if you are a u.s. oil company particularly someone like exxon who has this unbelievable firepower, they do great rates very quickly. it is the opposite. you can raise capital very
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cheaply. a great time to buy. matt: at hammond, bloomberg m&a reporter. more casualties from the crash in oil price. earning season getting underway today. we know energy is to blame for the first profit drop as the great recession that is far from the whole story. scarlet fu is here with a breakdown of analyst estimates. yesterday, we were talking about this, trying to look past the energy problem collapse. scarlet: it does look a little bit better. let's say at energy what during look like. you'll notice that sectors with less of an international focus are slated to perform better. health care, one of the better performing. 7% earnings. consumer discretionary. technology and telecom as well
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all slated to earn earnings-per-share growth. the pace at which analysts are revising estimates. every sector has seen the bar lowered. we talked about the collapse with energy companies 63% plunge in first-quarter earnings. there is a great article which says that there is a lot of money going into etf's that track energy companies because they have anticipated that profits will drop so much that if they do beat lowered estimates you might get a pop in shares or arise. matt: it is not only energy companies that have seen falling profits? scarlet: half of the 10 sectors in the s&p 500 sought earnings retract. the earnings weakness is concentrated in energy. that's 53% plunge coming you do not see it across different sectors.
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materials, utilities, consumer staples we're looking at single-digit earnings decline. nothing in the vicinity of energy. alcoa will be reporting earnings tonight. we look at it as the start of earning season. things slow down this week. we get bed bath & beyond walgreens tomorrow. it gets into gear next week. on monday, we have the big banks. matt: look forward to your market coverage through the day. rahm emanuel will run america' third-largest city for another four years. peter cook is in chicago with more on a manual's win. it looks like he got through but had bumps and scrapes along the way. peter: that is pretty much an understatement.
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rahm emanuel will be chicago for the next -- will be merit chicago for the next four years. he won with 56% of the vote last night. emmanuel was helped by strong support in the african-american community and the $22 million in his war chest that allowed him to blanket the airwaves. in his speech, he thinks supporters for their help in did say that this experience has changed him. he told the voters, i heard you. >> i am humbled at the opportunity to continue to serve you, the greatest city with the greatest people for the next four years. peter: in his own speech, chuy garcia was gracious in defeat.
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the teachers union that is done battle with mayor emanuel, there is more to come. matt: what does this race show us about the national political theme? a lot of people are looking at chicago as a microcosm of a bigger picture. peter: a microcosm of the picture for democrats. what you saw here were progressive democrats largely backing julie garcia -- largely backing chuy garcia. it is a fight that hillary clinton and others could face as well. this organization is strong support from the business community. the money he raised helped him win here that may be a roadmap for hillary clinton and others. hard to say that this does paint the national picture. matt: thank you very much. our chief washington correspondent, peter cook.
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thank you very much. thomas piketty's ideas have been getting kind of wet. the french economist still has explained to do. ed conard joins us to fill a gap in the intense debate on income inequality. what is the impact of an iran deal on the oil market? could it mean prices will be $15 lower than expected next year? stay with us. ♪
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matt: we begin in moscow where vladimir putin is not ruling out loans or gas deals for greece. alexis tsipras met with the russian president. both men say they want to restore the relationship between their countries and revive trade.
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greece must pay the imf more than 500 million by tomorrow. officials feel sippers will promise great assets to bruton -- to put in. investors are betting that beijing will increase stimulus to keep the economy growing. in japan, the central bank will keep its stimulus in place. inflation sicking to zero. mick donald is beefing up its menu -- mcdonald's will offer third pound sirloin burgers. it is a limited time offer but could become a staple if they catch on. connecticut is the ncaa women's basketball champion. the huskies beat notre dame for
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their third straight title and their 10th overall. really impressive string of victories. coming up iran's returned to the oil market risks delaying recovery in prices. how allman farmers are faring with the drought in california. are they using all of that state's water? thomas piketty's book cap into a global debate about inequality that rages on. the issue was raised by janet yellen just last week when she questioned the disparities of wealth in income growth. a 26-year-old m.i.t. graduate student has stepped up to undercut the thomas piketty's thesis.
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ed conard joins us with some answers. he is the author of unintended consequences. thank you for joining us. i am one of the billions of people who is not read thomas piketty's "capital p or c." what does this 26-year-old economist actually refute? ed: he shows the rising capital relative to gdp is relative to residential real estate. we know residential real estate is not substitute for labor. matt:piketty wants to make the argument that the rich are getting richer off the backs of everyone else.
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ed: they take the capital and reinvested and drive down the cost of labor. a more technical issue about the substitutability of capital for labor. he often hear about robots which of the substitutable for labor. he shows a variety of different rates of substitution and shows you the right that piketty has is higher. i think it does include depreciation. it requires a lot of substitutability between capital and labor to get to the conclusion. this is a topic that is been debated for a long time. piketty is out of the range. larry summers called it reading of the literature. matt: harsh for an economist to
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say to another economist. ed: everyone has praised him for his research and data. they have been very leery about actually endorsing his core theory. matt: this kid put out a blog post and the brookings asked to write a paper on him. ed: other issues have been raised as well about the getty -- about piketty. the form of his equations would cause the savings rate to go to a hundred percent gdp. it is pretty much the opposite of what we have found. another economist looked at the data he used for what comprises the income of the top .1%. piketty said it was 60% to 70%. when you really go back and look at his data sources, 60% of the income is really entrepreneurs.
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matt: his argument is that superrich are taking money away the could be used as wages for the lower and middle classes. you talk about a negative feedback loop that develops from the political prescriptions try to fix that problem. you would think all we need to do is tax the superrich and redistribute the wealth to the middle and lower classes but you are saying the rich really get rich because have access to all this great new i.t. and innovation and that if we tax them too much, that would retard growth. ed: i make the argument that what is making the 1% successful is a set of forces that are independent of what is holding down the wages of the middle class. i argue that was holding down wages of the middle class is the near infinite supply of cost labor in the world. a very large amount of immigration in the united states.
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close to 20 million adult born children. matt: i want to come back and talk about this after the commercial. ♪
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matt: you are watching "in the loop." i am matt miller, in for betty liu. back with ed conard. i wanted to let you finish your thought on income inequality. if the rich are not making all of their extra money -- we actually have a graphic that shows how much wealthier the top quintile is getting as the lesser quintiles are losing income. how come they are losing this much income? ed: if you look at the two
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theories of income inequality. one is that the halves are negotiating with the have-nots. a classic managers against labor. a second way is that the 1% are earning their success by coming up with innovations and things like apple and google that are valuable. that is putting upward pressure on wages. there is independent set of forces that are pushing downward on wages. if you conflate the two and blame the success of the 1% for what is happening to the stagnant wages of the middle class, you want to tax them and redistribute the money but you are slowing down the thing that is putting upward pressure on wages. if you don't solve the other problem, you're left with the thing that is putting downward pressure. you could get negative wages under that circumstance. conflating the two but making very little argument why the two
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would be conflated other than the piketty argument. matt: i believe that debate to viewers at home. i recommend that they read your book "unintended consequences. ." chicago mayor rahm emanuel fought very hard to win a second term and now he is fired up to take a new approach to steer in the third most populous u.s. city away from collapse. >> being mayor of the city of chicago is the greatest job in the world. matt: this election was about more than chicago. it has also been about the fight for the soul of the democratic party. here to explain is frances berry. ed is going to stay with us. he was also mitt romney's former bain partner.
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how does this represent what is happening at large for democrats in america? francis: it was really a battle between two wings of the democratic party. you had a moderate mayor and a liberal challenger. to the extent that this represents the debate that will play out in 2016 in the party, this was important. 56% of the vote. that denies the liberal wing of the party momentum going into the primary season. matt: what was he running on? francis: he was running on his record. it is been a tough four years in chicago. matt: they still have all kinds of fixable problems -- fiscal problems. francis: he cut spending reduced pensions took on a lot of unpopular fights in his first term.
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that created a lot of resentment and created an opening for someone to challenge him from the left. matt: what do you think about the state of chicago? normally we do not pay his close attention to mayoral races unless they are in new york. ed: i think we all know pension benefits are going to eat us alive. this is the shape of things to come. matt: chicago has $20 billion in unfunded pensions. ed: what we need are democrats who have credibility with the people who will be affected most of these cuts to step up and take the lead for managing this. they are going to be thought by people further on the left that are looking for the free lunch that think there could be an infinite amount of spending and we are not going to have any problems. as people step up, you're just seeing what is coming. it will be a fight in the democratic party over this.
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the baby boomers are going to eat us alive if we do not make adjustments. matt: in some sense as it is more than a microcosm of what is going on in the u.s.. it reminds me of what is going on in europe. the idea that you can vote yourself rich as the voters for tsipras apparently thought they could do in greece, that doesn't pan out. francis: 70% of voters who were concerned about the city's finances but that was the most important issue and voted for rahm. the election proved you can make these tough decisions and get reelected. if rahm had lost, it would've made it more difficult for politicians in general to make these kinds of decisions around pensions as well as around education reform. 84% of voters in exit polls show
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that they supported rahm's decision to close schools in chicago. ed: we have grown 50% since 1980. germany and france grew less than half as much. when you turn to what is happened to risk-taking and business success, you get less of it and end up with less growth. you're talented people go to the beach and take vacation rather than trying to earn that incremental dollar. it happens very slowly over decades of gradual change and compounding. this is where the fight is going to head. matt: thank you very much for joining us, frances berry -- francis barry and ed conard. i'm going to give you your top stories for the morning. a new deal creates an oil and
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gas giant. the cash and stock deal is worth $70 billion. that will form the second-biggest oil and gas company in the world. the sale price represents a 50% premium above bg's closing price yesterday. shell's ceo says it is a bargain. >> if you look at the combination of the two companies, what we could do with the assets that bg has with our capability supplied to them we saw a lot more value in the combination than the market. matt: the industry's biggest deal in at least a decade. u.s. officials concede that a white house computer system was hacked by russians. they say no sensitive information was taken. the incident or the shutdown of the system for several days.
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the system is used for scheduling and other apparently nonclassified matters. a white police officer in south carolina is facing a murder charge accused of shooting a black man in the back after a routine traffic stop in north charleston. video captured shows michael slager shooting walter scott in the back as he was running apparently unarmed. the but roman can be seen firing eight shots -- the patrolman can be seen firing eight shots. the person who shot the video is not being identified but the video was given to the dead man's family and his family's lawyer. jpmorgan traders have something new to worry about. software that tracks their worth. the bank wants to spot rogue employees. legal bills have cost jpmorgan more than $36 billion since the
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financial crisis. bill gross and his new fund appeal to be -- appear to be hitting their stride. his bond fund reported 2.4% growth. gross was ousted last fall from the firm he cofounded, pimco. coming up, the biggest deal since the oil price plunge. shell is to buy bg group for $70 billion. are there more megadeals to come? stay with us. ♪
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matt: welcome back to "in the loop." scarlet fu is ticking look at some of the action this morning. scarlet: family dollar is down in the early training so far.
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quarterly sales rose half of 1%. adjusted earnings -- the trajectory is down falling for a sixth straight caller -- quarter. let's stick with more and and day. -- m&a. companies have contacted twitter with serious interest. this chatter has circulated for years. according to briefing.com twitter has hired advisers to fend off this takeover offer. yesterday it closed up 4% even as the broader market fell victim to late selling. let's show you a tesla is doing, trading at its highest since february. about you with about $53 million of shares changing hands. wall street value best wall
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street journal says tesla is upgrading its slowest selling model. the price will go up to $75,000 from the previous $71,000. matt: it is an exciting product. getting more exciting with every improvement. thank you very much. the price of oil could be $15 lower than expected next year as a nuclear do with iran goes ahead. iranian oil production fell by almost one million barrels a day when export sanctions were imposed in 2011. with sanctions sure to be lifted, production is set to soar but iran will need significant foreign investment to reboot its oil industry and may face competition from other nations. joining me is brad olson who has
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been looking into this. thank you for coming in. when we see a deal go through are we going to see a drop in oil prices? brad: there are two ways it will happen. the first is about tens of millions of barrels of storage. it is waiting to be sold. a soon as there is a deal there could be near-term impact. as far as iran increasing production, becca take longer. they need foreign investment. -- that could take longer. they need foreign investment. matt: how much have they got in storage? brad: it is like 30 million barrels i think. it is a big amount that can be dumped on the market very quickly. matt: what kind of oil and is this? a lot of lehman do not
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understand there's a difference between wti and brent. brad: it is nothing like the sour kinds of barrels you will see in a lot of places. it is not ultra light but it is along the lighter end of the spectrum. kind of sweet crude. matt: that will still have an effect on the wti we look at here which is currently trading at about $50 a barrel. actually $52.91. brad: wti is moving a great deal on storage based on the amount of oil that is in storage in the united states. it will impact both in many ways. matt: what are you hearing from your buddies in houston about the price of oil? as we were dropping down to $40 people were saying, we could go to $20. we see the price continue to rise. brad: a number of people called
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$40 as the floor. andy hall was one of those who said it would not go below $40. there are a lot of people who are seeing $60 to $70 as a ceiling. no one is seeing a huge recovery anywhere between $80 and $100 for number of years. matt: we talked with a private equity manager the other day who has put billions of dollars into oil. this morning, you make up to a $70 billion acquisition of bg. brad: a year ago, these assets were 30% more expensive. everything is on sale. it is like jcpenney for oil. matt: i was talking to at hammond earlier who said exxon is in a sweet addition. the dollar so strong. brad: exxon has been cleared they have sent a lot of signals to the market. there are people we have talked to who say that everyone is talking to everyone. this is one of the big dominoes
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that have fallen recently. matt: thank you for joining us. brad olson, number reporter from houston. the sure to catch a big interview on "market makers." coming up, four years of drought in california almond farmers are getting a bad rap for how much water they use. is playing the blame game fair? chipotle struggles to keep certain foods on the menu. is the fast casual chain a victim of its own success? stay "in the loop." ♪
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matt: a look at top stories this morning. later today, the federal reserve will release minutes from last month's fomc meeting. they might reveal if policymakers think the economy's
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weakness is a short pause or a persistent slowdown. members lowered forecast for economic growth and inflation. one piece of data policymakers did not have at their meeting was the jobs report showing employers added just 126,000 positions last month. a banner month for mercedes-benz . highest monthly sales ever in march. the brand got a boost from a recovering auto market in europe and an increase in china. a luxury maker sold more than 183,000 vehicles last month worldwide. a strike is slowing down travelers in france. some traffic and troller's are not showing up for work. they are on strike over retirement ages and other issues. air france says most of its long-haul flights will take off as scheduled.
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if french air controllers go on strike, that could foul up travel for all of europe since almost every flight has to fly over french airspace. coming up a full review of the new apple smart watch. a look at what automakers are moving from the motor city to the big apple. a developing story on the west coast, california's drought has entered its fourth year. residents produced water use by the lowest amount since tracking began. since the state's governor issued an executive order seeking a mandatory 25% cut in water usage, it's farmers who been blamed for excess water use. many are now struggling to stay afloat. reporter: joe dell busty --
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>> you can see the tops of the trucks. reporter: success has stemmed from a particular kind of nuts. >>const -- demand from and's have soared. it now constitutes one of california's most profitable crops bringing in 6.5 billion dollars last year. it is also among the thirsty is requiring 10% of the state's irrigation water. water here is priced at premiums. >> when i planted these orchards, water was $80 an acre foot. now it is $900 and up. reporter: this growing season -- the cost of water to irrigate
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it would exceed any revenues he might turn. >> we are seeing hundreds of thousands of acres that are going on planted. -- unplanted. there is not the ability to move areas from waters -- areas where water exists to areas that needed. reporter: at times like this just ensuring the farms survive may be the nut's greatest source of value. matt: why have farmers in california central valley expanded into almond's and other crops that are water intensive? >> when you are looking at the value of these crops there has been a soaring demand. going back 20 or 30 years
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farmers have decided that the amount of money they can make per acre foot of water is so much higher for things like almonds senate ins -- than it is for crops the traditionally grow . they have moved into that area with advice from agricultural advisors and yet they are now being left high and dry. matt: they started their decades ago and now lack the funds to move. i would think if you're going to farm something water intensive you would want to go someplace wetter than central california. willem: it is one of five so-called mediterranean climates around the world. we were in the western san joaquin part of the valley. it is jampacked, filled with every kind of crop. apricots peaches, asparagus, everything you can imagine. it is a fertile soil and has an
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incredible sunshine and the right temperature. water is something that is not been a problem so much until now. this is the worst drought according to every person i spoke to. matt: the worst and a millennia. we showed a heat map if you will , pointing out there is a hell of a lot more water in the southeast. what you are saying is there are other considerations beyond water that are important for farmers. i think people do not understand it is a more complex issue than just water. willem: this small patch of land is around 2% of u.s. agricultural land. it produces about 8% of agricultural value across the united states. matt: think you very much. willem marks. mcdonald's is beefing up its menu with better burgers.
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it has not worked in the past. what is new now? ♪
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matt: the apple watch. you will want it but you will not need it. the full review of that is coming up. franklin templeton investment manager mark mobius says chinese stocks have risen too fast. you are watching "in the loop." ♪
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matt: welcome back to "in the loop." i matt miller in for betty liu. here are our top stories. stocks will be relatively -- wall street looking ahead to two -- looking ahead to 2:00 eastern time this afternoon. maybe we'll see markets move after that. royal dutch shell is buying a british oil producer, the bg group. the deal is worth $70 billion. the deal extends -- shell's
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ceo thinks he got a bargain. >> if you look at the combination of the two companies, we could do with the assets that bg has with our capability supplies to them we saw a lot more value in that combination than the market. matt: the sale price represents a 15% premium above bg's closing price yesterday. the industry's biggest deal in at least a decade. alexis tsipras met for a second day with rush upon president. -- with russia tossed president. 's president. european officials fear sippers will promise great assets to putin in exchange for aid. rahm emanuel won a second term
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in yesterday's runoff. the challenge from a fellow democrat was a rarity in chicago politics and some voters were turned off by emmanuel's brash style. he said he is moved by their show of confidence. >> i am humbled at the opportunity to continue to serve you, the greatest city with the greatest people for the next four years. matt: emmanuel must face chicago's pressing issues, failing schools and a $20 billion pension gap. the incident last year forced a shutdown of the system for several days but the system is only used for scheduling and other nonclassified matters. those are your top headlines. we are under 30 weight -- thunder30 minutes away from the
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start of trading. olivia sterns and alex barinka joining the onset today. chipotle is a victim of its own growth. the food chain is struggling to keep popular items from disappearing. it stopped selling kearny test burritos at hundreds of its restaurants because it dropped one of its vendors. as we all know, there are no alternatives to beef, pork and chicken. alex: i guess you could go for tofu. they've dug themselves into a hole. people like chipotle because it is hormone free. now they are saying they like it so much there's an -- later do not have enough to feed their loyal customers. olivia: they're not the only
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change try to find more humanely brought up livestock. but the donuts is trying to do that. matt: dunkin' donuts? olivia: they say it takes four times as long to care for the pigs in the barn to be twice as expensive to run. you can get home style pork fixings now. matt: i will support them. mcdonald's is looking to beef up its menu. the fast food company is trying its hand with upscale burgers. it will be adding "premium sirloin burgers" to its u.s. menu. the upscale one third pound patties joined the menu two years after mcdonald's bought previous burgers to its lineup. alex: juicier fattier kind.
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i feel like mcdonald's forgets who its customers are. olivia: it reminds me of when mcdonald said you could buy your punk and spice latte with amex points. alex: they are drawing to this identity crisis of who are they going for? this berger did not work last time because it was too expensive. mcdonald's is now trying to figure out, do they compete with the chipotle's of the world or go for the folks who like the dollar menu. matt: i would rather have humanely raised organic beef. i will be turning the other way on 3rd avenue. mercedes-benz sales set a record for the best first-quarter in the company's history. carmaker sold nearly 15 -- 15% more cars. mercedes, audi and bmw are in a tight race for the number one spot. who is going to win? olivia: you are the expert. matt: i do not know.
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mercedes is building cars that appeal designwise to a lot more people than they had before. they have kind of gotten the lead as far as technological advances in things like lane assist automated cruse control. i am test driving a gl 63 right now. it is a beast with a twin turbo the eight. alex: the ceo came out and said we are looking to grow more than 20% in china yesterday -- next year. it can be a finicky market in terms of what luxury consumers want. matt: you do not have to charger mercedes-benz at an outlet. bill gross is getting his groove back. his one point $5 billion janis global unconstrained bond fund
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has returned about 2.4% in the past month. alex: he is beating the comparable fund at pimco. olivia: the unconstrained fund is up a whopping 1.1%. with a fund manager like this you want a look at five year track record. we had them on "bloomberg surveillance." what he is trying to do is sell volatility. he does not think the dollar is going to appreciate so quickly. alex: two to five years is what he has said. you have to give him the benefit of this short-term return. people were selling out of his fund in february, the first exits out of those funds. for him it is still the optics, proving he's still in the game.
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do you know that he did not make the duke basketball team? matt: jpmorgan is looking to curb its litigation and legal costs. it is rolling out and out through the program to identify rogue employees before they go a straight. dozens of incidents will be fed into the software. it is so minority report. they need to get triplets and put them in a pool of water and connect something to their brains to forecast. alex: i have seen the movie. they do have 36 billion reasons why. matt: let's pause for a minute to point out that jpmorgan's legal costs since the recession are $36 billion. that is a lot. olivia: $730 million in the past
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three years on compliance. matt: if you want a job, go to compliance. olivia: what this software will do is listen to the transcripts of phone calls and decide whether or not. matt: josh depaul ski got hold of an apple watch. a look at the most highly anticipated smart watch in all of history. ♪
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matt: we continue to count down to the opening bell. it is time for the deep dive. the apple watch. friday is the big day for apple watch enthusiasts. that is one watches will be available for store try ons. josh topolsky spent the entire
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week with the new watch and he can tell you if it is worth your while. josh: the apple watch is a huge release for the company. the first new product may have made since the ipad and the death of steve jobs. the watch is gorgeous in a sci-fi kind of way. just like any apple product, it is not about good looks alone. this thing is packed of advanced technology. the display has a pressure sensitivity which responds to not just where you press on the display but how hard you press. and you get a notification on the watch, you feel a buzzing almost like a tapping of a bell. that is thanks to the tactic engine which controls migrations on the watch. -- vibrations on the watch. a new navigation at that mimics the crown on a regular watch. you use it for moving through
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lists and zooming in and out of photos and maps. the apple watch is also a watch and it does the job of telling you the time sometimes not when you want it to. there are sensors in the watch that tell it when to turn on the screen and turn off the screen. sometimes when you bring it up to your face it worked perfectly . every once in a while, it does not turn on. that can be maddening when you just want to know what time it is. it is a well-designed, beautiful, affective apple product. if you love apple products, this is a great companion. it is not going to make you a better person or change the way you look at the world. it is a great accessory. maybe that is enough. matt: joining me now is josh topolsky. it is a great-looking watch. i did not get that from the presentation.
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i guess your video is even better than tim cook's. what surprised you most? josh: one of the most surprising things was that it does a lot of what your phone does. you can make calls send text messages, check e-mail. it is kind of like a little phone on your wrist. matt: the incident concern after tim cook's presentation was battery life. how did you experience the battery life? josh: i thought battery life was ac excellent. i charged it every night and did not think about it during the day. matt: what about the fitness suite? does it measure heartbeat, how long you sleep, steps? josh: it does not do sleep but it does all that other stuff. it does it in a way that is frictionless. it will track all of that stuff and can check in on it that it does not force you to engage in some sort of activity.
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matt: i'm sure you tried out other fitness devices, how does this compare to the beginning level of peers? josh: this blows away other smart watches. i think for a fitness band, they will be in trouble because this is a more attractive pase package. matt: if you have $359 of disposable income, would you buy it? josh: i would because i spend a lot of money on stuff that i do not necessarily need. it will be a tougher sell for people who are convinced -- were not convinced they need this. matt: my initial thought was for adults, most people have a nice watch already. an automatic timepiece, maybe something your father gave you or something you got at work. does this replace a rolex or
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really nice seiko? josh: in terms of looks, a traditional watch is still more attractive than this. the apple watch does a lot more than those watches so it is a big trade-off. do you want a beautiful timepiece that is going to last for a hundred years or do you want cutting edge technology that does a thousand different things on your wrist? you have to be able to make that distinction and decide based on those factors. matt: bloomberg digital editor josh topolsky in london. you can head to the website and check out josh's full review. fascinating whether you want one or not. you can get one for up to $17,000. coming up, are we in for another oil price plunge? oil could fall a further $15 a barrel next year if the iran deal goes through.
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matt: let's get back to bringing you the most important stories you need to know before the bell. olivia sterns and alex barinka joining me. chinese stocks are set for a fall according to mark mobius who says chinese stocks have risen too far too fast and that a 20% retreat is possible. the shanghai composite index has rallied 90% in 12 months. olivia: that sounds crazy. the shanghai composite, a lot of investors in china and chinese stocks are retail investors. a lot of this is speculation and the big concern that a lot of analysts are raising is that too many of the stocks were
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bought on margin. alex: $251 billion in borrowed currency. when you look at the valuations tech companies alone price-earnings to 20. that compares at the peak of the tech bubble in 2000 two u.s. tech companies, 156. your price higher p/e ratio than u.s. stocks. matt: on the other hand they have one billion people who are getting into the middle class covenant --, a government that commands their economy with military force -- olivia: but they are levered up. matt: alexis tsipras met with the russian president. both men say they want to restore the relationship between their countries and revive trade. tsipras needs cash quickly. greece has to pay the imf more
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than $500 million tomorrow. european officials fear tsipras will promise greek assets to putin in return for aid. if they fear it that much, maybe they will give him a. maybe that is why he is there. olivia: they do have historical ties. they're both christian orthodox. hans nichols told us earlier maybe what putin will do is lift food bans on greece and maybe greece will start sending some peaches, some strawberries maybe even some natural gas. the question is, what putin gets in return. alex: you also have to question, is this a sideshow move. how much is this going to even peeve the eu? matt: the tsipras government
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would not create a sideshow move. they still want more reparations -- war r reparations. the cash and stock deal worth $70 billion. this new oil giant will hope oil prices do not tumble further. the eia has said that oil prices could still tumble $15 a barrel next year if sanctions are lifted following a final nuclear deal with iran which is a huge if. olivia: re: listening to forecast anymore? -- are we listening to forecast anymore? the shell/bg deal is enormous. is it going to be 1998 again? is it going to trigger another round of mergers like the exxon mobil? alex: if the forecast a right we could see more of that because profits are being pinched.
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matt: if an iranian deal goes through, it means barack obama is successful in his fight against republicans. olivia: why do you have to make this political? matt: let's get a check of where futures have settled. little changes. stay with us. ♪
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[office phone chatter] [frogs croaking] you know what, let me call you back. what are you doing?! [scream] [frogs croaking] [yelling and screaming] it's back! xfinity watchathon week. the biggest week in television history. it's your all-access binge-watching pass to tv's hottest shows, free with xfinity on demand. xfinity watchathon week. now through april 12th. perfect for people who really love tv.
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matt: welcome back to "in the loop." olivia sterns and alex barinka joining me. number one story at 2:00 p.m. this afternoon, the federal reserve releases minutes from the fomc's meeting. a temporary pause or a slowdown? when will janet yellen raise interest rates and by how much will she do it? i think it is anti-climactic in the sense that they have not seen the 126,000 jobs created in
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march during the time that these minutes were made. olivia: if you look at the bloomberg economic surprise index, it is the most negative it has been since 2009. a lot of things in this disappointing. there was a fair amount of negative data coming in. the big headwind for the fed, what impact will the stronger dollar have? will that make the path of rate hikes more shallow? the impact of cheap oil. alex: i think dollar might be -- the strong dollar's effect on inflation which has been yellen's key point when looking at when they will raise these rates. matt: i just had to look at the economic surprise index. olivia: it is very impressive. why don't you show the camera. ? matt: it would require a lot of movement.
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i want to bring in david miller no relation. the author of the dollar track which explores how the greenback has tightened its grip on global finance. your bullish on stocks as long as they are immune to the stronger dollar? is the stronger dollar going to hurt corporate profits and bring down the u.s. stock market? david: it all depends how much the dollar strengthens and which companies you're talking about. if they are cutting exports, the strong dollar hurts them. they are importing, to benefit. matt: we already expect three quarters of declining profits. that is not good news. the most correct forecaster of the dollar strength says the dollar will continue rising and strength. that does not seem to bode well. david: a lot of the reason the
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dollar is strengthening hiis because money is flooding into the u.s. that is not a net negative for us. if the dollar strengthens to dramatically, that will have an equilibrium effect and that will weaken the economy. olivia: the question is whether dx why goes to 100 -- whether or not -- look at the percentage of gdp, maybe a strong dollar is not that big a deal. david: recent jobs report was relatively mediocre. unless the fed gets aggressive and raises rates dramatically, i think the dollar strengthening gradually is a net positive. matt: the fed raising rates dramatically is less likely than in iran deal. alex: how much of a concern is
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there that we are tightening as europe is easing? what is the market situation at that ends up being what plays out? david: generally, that is a concern. they do anything significant, it could be a problem. if the japanese central bank and ecb go out and try to weaken their currencies while we go out and raise rates, that could be a real problem. i think the fed is a little too smart to do that. matt: there are some smart people -- we were talking to bill gross earlier. he is still making that that. do you think he is right? david: i think he probably is right to a certain extent. matt: what is your dollar forecast? olivia: no pressure. david: i think the dollar will strengthen against the euro but somewhere in the 3-5% range in the coming years. we could get somewhere close to parity but nitrate -- not right out the gate.
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olivia: alcoa kicking off earnings seasons after the bell. what is your forecast burning season? david: we have some pretty good expectations. a lot of companies we've been investing in have had a lot of insider buying. like sprint had a $25 million purchase -- archie dunham bought $14 million worth of that stock. those are some pretty bullish signals when top executives are taking eight figures out of their own pockets to buy more stock. matt: earnings etc. fall -- set to fall three quarters in a row. david: it depends which segment of the market you're looking at. where we are seeing big insider buying is in parts of the economy that are considered the backbone of the economy. consumer stables, industrials --
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the dow jones is only trading 16 times earnings whereas the nasdaq is trading 24. we are somewhat bearish on nasdaq companies and bullish on the backbone of the u.s. economy. olivia: we are in the seventh year of the bull run. what is the risk for your clients? are they ready to head to the hills and cash out? david: there is no good place to cash out. you see was a banks are doing. you go into cash, you get nothing on your money nowadays. the banks are turned to devalue their currencies and make it worth less. in some of these european countries, you're getting negative interest rates. it doesn't make sense to go to cash. alex: are you telling your customers or clients to shy away from the companies that have take insider selling -- big insider selling? david: exactly. we want to shy away from those
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companies and dive deep into the companies where they are taking cash out of their own pockets and by more stocks. alex: the executives at ibm are spending millions on buybacks but still selling the shares. i much of a concern is that kind of situation for a corporate -- olivia: piercing the executives are personally -- alex: they are shutting their positions to buy stocks. david: exactly. it is a problem. the situation is essentially that a lot of these companies like ibm are paying their employees in large proportion with stock options. when they do that, you devalue your shareholder base. they have to do a buyback. the corporate executives realize things are not as great as the numbers appear on the net earnings when you have to include the stock dilution so
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that's why they are doing these buybacks. olivia: executive cashing out is a pretty strong -- matt: a bad sign. everyone needs for our recent lamborghinis -- forerraris and lamborghinis. still ahead, what you think of u.s. autos -- you probably don't think of new york city. is that all about to change? yeah. stay with us for that story. you don't want to miss transcanada president to discuss the keystone pipeline. and the price of oil and much much more. stay "in the loop." ♪
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matt: trading just getting
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underway. let's go to scarlet fu for a look at the early action. scarlet: i begin with lulu lemon , trading at a 16 month high. the cfo has been meeting with analysts and the verdict from two of them is confidence. sam opposer upgrading his rating to a biasing 2015 investments will pay off by early next year even by the fourth quarter. the company can achieve short-term cop numbers. let's get to casinos. they're getting a lift because the situation in macau is not as bad as feared. mgm resorts getting two thirds of their revenue from the chinese city. for wynn 70%. it will take drop in april. still declining, just not as much as anticipated. lions gate's chairman reducing
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his stake. the stock is down 6% under pressure. if you come inside the bloomberg terminal, you can see he is the biggest shareholder of the company. they just sold 10 million shares. he still has a 41.2 million share stake in the company. that's equivalent to 30% of the company overall. capital group is the second-biggest with a 12% stake. benjamin says the secondary offering is negative, not because of the size of the shares sold but because it signals and inability to sell to the strategic buyer. they're having to get rid of it through the open market. that is something people are looking at. matt: thanks very much for that. detroit may be where cars are made, but manhattan is becoming
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the town to show them off. cadillac and lincoln introduced their brand-new look recent sedan at the new york international auto show last week. all in hopes to rebuild of their once lost roles in high-end auto markets. it points out in a recent piece "the shift in focus to the bright lights of new york is partly a reflection of the declining status of the industrial midwest." do these two brands have a shot at capturing the luxury r market? ed it was interesting, i was at the show last week and i thought it was the best new york auto show i've seen yet and it looks like we are finally getting some clout here and taking it from l.a. and detroit where they have flash your auto shows. ed: you see new york becoming a much more important show. in part because automakers are trying to defeat -- overcome
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their midwestern legacy and heritage. it's also about the global market. in order to sell the concept of american luxury, it can be midwest luxury, it has to be in places like new york city and los angeles. matt: not only the show -- when he took over at cadillac, he moved their headquarters from detroit to new york. although lincoln has not been that move, they showed their new flagship right here in new york and have always had hudson as their marketing firm here in manhattan. ed: especially in the case of lincoln this has a lot to do with china. to chinese consumers, the idea of a midwestern-based brand is not as appealing as something
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that is deeply associated with the most well-known cities in america like new york city. matt: is chrysler playing this the other way? they came out with these eminem ads. they have this collaboration with designers like john barbato's -- varvatos. ed: i don't think that is working out for them. they tried to make chrysler -- they are trying to take it back to mass-market. that company is focusing on italy italian brands like maserati and alpha marino -- out the row mayo -- alfano wrote romeo. it was popular in the midwest but they were already doing ok there. matt: is lincoln as serious about being a true luxury player as cadillac?
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the new ct6 has features i have never even seen on german automobiles. a 360 degree camera that records everything you are doing, massaging seats, its own platform and a real rearwheel drive. is the lincoln continental going to be that serious? ed: it is tough to say because we've only seen a concept version at this point. clearly, gm is spending a lot more on cadillac that lincoln. their investment will be something like $12 billion and 40 has not allocated the same level of resources to lincoln. on a certain level cadillac has a better shot at breaking out. on the other hand, $12 billion is a huge risk.
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if that does not pan out, for its smaller but only can will look smart. no matter how much money cadillac spends, it will never be able to break through the stranglehold the german premium brands have on the market. matt: thank you for joining us . you can see all of his interesting thoughts on the car market on twitter. a quick break and we are back in two minutes on "in the loop." ♪
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matt: headlines breaking out of russia where alexis tsipras is meeting with vladimir putin. scarlet: let's start with the fact that vladimir putin is having open talks. alexis tsipras says he's held substantive discussions with potent.
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-- vladimir putin. the relationship has been hurt by sanctions and the embargo referring to the european union and united states. they have come together to reach an agreement to boost investment ties and cooperate on energy. these are the latest headlines between vladimir putin and alexis tsipras as he visits moscow and meets with vladimir putin. the two making some commemorative comments like today is an important day for greek-russian relations given it is the 70th anniversary of victory day. these agreements relate to trade cooperation and boosting investments in each other's countries. matt: thanks for that. if there is any organization that can combat climate change and extreme poverty, it is the world bank. stephanie ruhle will be sitting
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down with the bank's president in the next few minutes to discuss their strategies were both -- for both. stephanie: so good to see you. we have heard from the world bank that they have a new plan they sent out to eradicate extreme poverty by 2030. there are still over a billion people in the world living on one dollar and $.25 a day -- $1.25 a day. part of the plan is for them to be working with a world bank rival in china -- what larry summers has come out and said is the worst idea. a rifle world bank and china will only make china more of a superpower, more of a threat. we will be talking to the president about that and talking about climate change. he thinks the only way to address poverty across the world is if you factor in the impact of climate change. for me, it's hard to get my head around that.
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i spent some time in haiti last year. they needed to get the rubble out of the streets. they need infrastructure running water and power. i'm not sure a place like that should be thinking about carbon footprint. we will find out. matt: you will also talk to the heads of transcanada oil. what was that like when we talked about for years and years? stephanie: the keystone? matt: it will be interesting to see if it -- if we take land from american farmers so a canadian oil company can make profits. stephanie: we will discuss that and a whole lot more. matt: useless cynicism. jpmorgan has racked up more than $36 billion in legal bills. now it's looking to bring computers and to help patch and
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stop these problems before they happen. minority report style. ♪
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matt: this is "in the loop." jpmorgan is the biggest bank on wall street by assets and also has the biggest legal bills since the recession. $36 billion is how much it has paid out for his legal woes. now, it's looking to stop this blood loss by bringing in machines to help prevent rigging
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and rogue traders. will machines be enough to curb stray employees? a new algorithm that companies come up with. what is the story? >> companies have tons and tons of data. everything from your e-mail to your chats to whether or not you do your compliance classes. before today they did not have a way to look at everything holistically. there is a ton of data. you have no way of figuring out whether or not a specific trade will be a problem for you. this correlates all that data creates a profile of you and can possibly tell in advance whether or not you're going to be a problem for them. matt: they've hired 2500 compliance officers.
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it is this new algorithm something they announced that they are super excited about? >> part of this thing is the chilling effect of knowing, if you're an employee, you know every keystroke you do on a computer could be monitored and used against you. you are less likely to do something bad. everyone knows right now you don't put stupid things in e-mails. this level of technology is far more advanced than that. they want people to be scared to a certain extent. matt: i would be more likely to look at a job at another firm. >> jpmorgan is spending $750 million for this. if they prevent a $1 billion scandal, it pays for itself. matt: when does this go into effect? it is starting this week? >> happening as we speak.
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it will roll out everywhere in investment banks and will be an asset management. -- in asset management. matt: this is the kind of thing jpmorgan could make money if their algorithm works, they could sell it to other banks or smaller trading firms. >> they would have a special secret sauce they could sell to other people. it is proprietary and they would not want to do that, but they are out front talking about this. matt: a very cool story. can check it out online at bloomberg.com or on your mobile device or even your apple watch. you can see the apple watch review on bloomberg.com or your mobile device. that does it for "in the loop" today. tracking every move you make? what he has learned from measuring consumer behavior for more than three decades.
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roger crandall on how insurers are investing among these current superlow rates. that is tomorrow on "in the loop ." "market makers" is up next. ♪
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>> live from bloomberg headquarters in new york, this is "market makers." erik: an oil deal for the record books. we have not seen one this big in at least a decade. shell agrees to buy bg group for $70 billion. stephanie: will the obama administration push off a decision on the controversial keystone project? we will be speaking with the ceo of transcanada. erik: manischewitz rolled out a of products in time for passover. good morning, everybody. you are watching "market makers." i'm erik schatzker. stephanie: you like manischewitz? i'm stephanie ruhle. i don't like manischewitz wine, but i do like matzoh.

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