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tv   Bloomberg  Bloomberg  December 19, 2013 7:00pm-8:01pm EST

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>> from bloomberg world headquarters in new york, i am mark crumpton. this is "bottom line," the intersection of business and economics with a main street respective. president obama promises to veto a senate proposal that could hit iran with new sanctions. we will tell you which cars earned the top safety ratings for 2014. we will meet the computer executive who likes fireworks so much he built his own homemade factory. to our viewers here in the united states and those of you joining us from around the world, welcome. we have full coverage of the stocks and stories making headlines tonight. su keenan with the fed the day
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after as investors take a breather and equities but not cold. josh following the moves on capitol hill for the following confirmation of janet yellen. we will get to josh in just a moment. first, the white house says it will veto new congressional legislation that would toughen sanctions against iran. senators from both parties introduced the bill earlier today despite appeals run the white house and secretary of state john kerry. bloomberg international correspondent just landed in washington after traveling overseas with secretary kerry and she joins us on the phone. good evening. >> good evening. >> the white house has threatened to veto this new iran sanctions bill. dumping the president has not done before. why is this such a sensitive issue? >> this is a very big deal. his administration has worked with congress in the past to try to adapt previous sanctions legislation to the something
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that the administration could live with. to come out and threatened to veto the bill, remember this is a president who has only vetoed two pieces of legislation. never a sanctions bill. this means that the administration is really worried that putting new sanctions on at a time when there is the delicate six-month preliminary deal in place in which the administration has promised not to put a new sanctions while a final accord on iran's nuclear program is being negotiated, they are worried that new sanctions could derail the deal and really move the united states closer to having to exercise a military option. >> the senate action, does it complicate or does it undermine diplomatic efforts? >> it depends on who you side with. one quarter of the senators, 26 senators today cosponsored this legislation. half of them are democrats. says something about
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the ineffectiveness of the white house's outreach to the legislative body where it is supposed to convince them that sanctions were going to hurt their case. the argument made by the senate is that sanctions and economic pain through the loss of crude oil exports is what brought i ran to the table in the first place. naturally, wouldn't the argument extend that if you put more sanctions on them, you could get a better deal? what the white house says is, no, that is not right. we brought them to the table, now we have to negotiate. it shows bad faith on our part if we slap on new sanctions on the verge of making some progress that would bring their nuclear program in check and make sure that it doesn't go bomb program.ar >> the u.s. and the european union already have sanctions in place that, iran's access to the international banking system. they have slashed its oil exports in half and severely
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restricted its trade with bans on shipping insurance and the like. what more could this legislation do? >> you make an excellent point. they have already sanctioned virtually every part of the iranian economy. the idea of this bill is that it would add new petroleum sanctions on. essentially it would -- at this point, the senate sanctions that exist already force the country to import iranian oil -- there are only six of them left -- it forces them to reduce their imports. what this new bill would do is force them to eventually take it to zero. that would cost iran over $3 billion a month in lost exports. >> if sanctions brought iran to the negotiating table, why wouldn't more sanctions allow the international community to get a better deal? is, if youom line put yourself in the other iraniansosition, if
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have said that their bottom line is they are going to keep a nuclear energy program and they are going to continue domestic enrichment. the question is, can a deal begotten at allows them some level of safe enrichment that is constrained but doesn't allow a nuclear program? the whole idea of new sanctions at a time when they have finally agreed to negotiate is the argument the white house is making, that at this point it shows bad faith. we will see whether this bill can make it to the floor. at the same time, it has got strong support of a quarter of the senate. other senators expressed opposition to it. it is not clear that harry reid will let it come to the floor next month. >> thank you. the roof or ceiling of a london theater partially collapsed tonight. the packed audience of about 700 people were showered with
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plaster, wood and dust. more than 80 audience numbers were injured including at least seven seriously and several people were trapped and had to be rescued. that collapse happened at the apollo theater at 8:15 p.m. london time. that is 3:15 p.m. here in new york. the collapse happened during a performance of the curious incident of the dog in the nighttime. investigators are on the scene and they noted london was hit by an extremely heavy thunderstorm about an hour before that collapse. let's show you have the equity markets finished this session. the s&p 500 retreated from the record set after the federal reserve cut stimulus. investors wait economic data that included higher jobless claims and lower home sales. the broader market s&p was down one point at 1809. the dow jones industrial average ,179. points to 16
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the nasdaq was down 12 points. let's get you the story behind the numbers. su keenan is in the newsroom with details. >> good evening. the latest economic data did put pressure on some stocks today. we saw a big pressure on gold which closed at the lowest price in three years. continuing declines in gold through the next year. calls this profit- taking in stocks after yesterday's emotional spike on the fed's move. james grant notes the extensive nature of the fed stimulus thus far. materializesl bank $80 billion or has been materializing $80 billion a month from thin air. that didn't exist until the fed tapped it into the computer screen. it will henceforth materialize $10 billion fewer a month. it will continue making new dollars at the rate of 70
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billion dollars a month. that is unheard of. >> magic. among the big movers today, write a plunging after cutting its full-year earnings outlook. oracle rose to a 13 year high. a new share offering worth millions is offered by facebook. target says a breach of security and credit card data could impact millions of users. the company says the breach occurred when a computer virus infected its point-of-sale terminals. shares fell more than two percent. the timing is a concern, only a couple of days before the holiday. >> we heard from nike after the bell. what is the story there? >> nike beat the streak, the world's largest sporting goods company has been stepping up its sneaker strategy and has 11 new
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basketball shoes. we are seeing shares lower on disappointing sales themselves. come out with a lot of new shoe offerings including three signature christmas additions. they beat the average analyst estimate by a penny. new products such as a $160 running shoe have been driving sales up until now. su, thank you. coming up, european finance ministers agree to a landmark bank deal. what is next on the agenda? that story when "bottom line" continues in a moment. ♪
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>> welcome back. let's turn to the fed. the central bank is taking the first steps in unwinding stimulus. josh joins us now from washington for more on that. the latest on the janet yellen nomination. with the fed tapering, have we finally reached the end of the
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stimulus campaign? are we getting back to normal? >> i think it is probably a little too soon to say we are getting back to normal. they are not buying $85 billion a month, but they are still buying $75 billion a month even as they taper throughout the course of this year lower and lower. we are still probably looking at maybe another $400 billion or $500 billion of purchases below -- he for they are done. they have their target interest rate near zero for that entire period. we are quite a long ways for even something that resembles normal. >> german bernanke, did he answer all the questions we have about fed policy? >> no. one of the day questions that he is leaving to his successor, janet yellen, is what the fed is going to do with that target interest rate. they have said they will hold it near zero until unemployment is at 6.5%. yesterday they said they will
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probably hold it there well past that point. they haven't provided any definition. do they mean years or months? it is going to be up to janet yellen to define what the actual raising of interest rates, what that might look like. >> what is her status in the senate? if confirmed, is she likely to change the course of policy? >> the senate is trying to get home for christmas. they all want to get back to their states and they are trying to get out this weekend. it is looking like her vote is likely to occur on saturday. she is likely to get confirmed. only one democrat voted against her in the senate banking committee. there is no sign that any of the rest of the democratic caucus is opposed to her. he should get cleared pretty easily. will she change policy -- probably not right away. bernanke came out of the press conference yesterday and said that janet yellen fully supports this policy. she has been a key architect of the current policies. we are unlikely to see dramatic
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shifts when she comes into office. >> josh joining us from washington, thank you so much. a landmark banking deal could mean closer ties for members of the european union. years of debilitating economic crises, finance ministers meeting in brussels have agreed on a new mechanism to handle ailing banks. is it enough? john makin is an economist at the american enterprise institute. he is a former consultant to the treasury department. he joins me from our washington bureau. welcome back to "bottom line." >> good to be here. >> the goal of the new institution is to save or shut down troubled banks across the 17 nation euro zone. will it help prevent another financial crisis? struggle tos to define the relationship between governments and banks. it is the same problem they have had all along. they have one central bank and
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17 finance ministries. normally, finance ministries would handle some of the issues dealing with bank difficulties and their balance sheets. i think the underlying issue here all along has been that the german government wants to design a system that doesn't mean that the german government ends up holding the bag for dealing with problems in european banks anywhere. they want a collective responsibility. >> the new mechanism, is it enough to spare sovereign governments from having to save failing banks? will taxpayers now be spared that expense? >> probably not entirely. opaque but there is a pretty big hole in european bank balance sheets. a big surge in inflation that would devalue some of their
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liabilities, i think the taxpayers of europe and probably do a larger extent, the taxpayers of germany are still going to be bearing some of these cost. the idea of disagreement is to spread the cost -- this agreement is to spread the cost. >> you mentioned that some see it as being opaque. one of the criticisms of the new mechanism is that it is just too cumbersome. our too many people in institutions involved in the decision-making process? >> it certainly looks like that. it is almost an intrinsic problem here. you have got at least 17 nations directly involved with very different situations economically. they have a single central bank and the european central bank's policies aren't appropriate for all of the countries. some of them are still in dire straits whereas some prosper in
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-- some are prospering. every separate country has their own interests to protect. when they try to come up with a collective deal to deal with -- to manage the problems the banks are probably going to face as they unwind some of their bed positions, it is very complicated. you have got way too many people involved. withhave -- when you deal monetary issues, you have the european central bank, a single institution with representatives from every place else. 17 finance ministers are much more difficult to corral. >> european union leaders also sought to tie nations to economic improvements. the plans discussed today improved -- included allowing countries that agree to implement improvements in areas such as education to receive loans or grants in return. could this type of financial enticement undermine national sovereignty? extent.ps to some
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i think the idea here is to say, if you undertake structural reforms, we are going to reward you. for thesets the terms structural reforms? if it is a collective european group as it probably will be as opposed to nations, men countries will have to band somewhat to give up some of their sovereignty. >> what does it say that these types of plans are even being considered as part of an effort to press for reforms in the european union? again, the degree of freedom they have is often structural reform. in order to try to say, how are we going to get spain and greece and italy which are in considerably weaker condition than germany to solve their problems? one is to say, they have got to increase productivity and efficiency of their labor markets. those are called structural reforms.
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in a way, they all have to kind adoptllective -- kind of collective standards that are higher than those in some of the weaker countries and may be lower than those in some of the stronger countries. everybody has to compromise. >> we have about 30 seconds. on wednesday, the fed decided to begin winding down its monthly asset purchases. what impact do you think that might have on global markets? >> quite limited. people say, the fed is actually tightening -- i think they are not really tightening very much. a very limited a fact because what the fed is doing is very tentative and very limited. there are offsetting it with other policy like lower interest rates. i think the unifying problem they face is central banks globally. the fed mentioned this and it is
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true in europe as well. it is the risk of disinflation turning into deflation. to the extent that that is a and the fed is committed to work against it, i think it provides support for other central banks. >> john makin joining us tonight from washington. it is always a pleasure to have you on the broadcast. thanks for your time tonight. >> good to be here, thanks. >> when "bottom line" continues, congress was able to reach a deal on the budget but another fiscal fight is on the horizon. we will talk debt ceiling when we return. ♪
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>> let's return to washington matters. we are waiting for word on when president obama will sign the budget bill into law. there is another battle looming and it may seem familiar.
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,teve -- peter cook tells us don't put your countdown clock away just yet. here comes the debt ceiling debate. >> just a day after the congress completed the first bipartisan budget deal in years, the grim reality of what didn't make it into that agreement is rearing its ugly head. jack lew sending congressional leaders a letter letting them know that the country will again face the risk of default if the debt ceiling is not raised by late february. right now the debt ceiling is not being enforced. that suspension goes away on february 7. tells new letter, lew lawmakers he could use extraordinary measures to create some breathing room but only until late february or early march of next year. he can create more caution because it is tax season and the government is sending out refunds. lew says congress needs to act before then. he is reiterating, the president will not be negotiating. the american public expects its leaders to put a end to
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a senior treasury official says this letter is going out now to give lawmakers as much time as possible to come up with a solution after the holidays area the clock is already taking. republicans are gearing up for a fight, insisting they want something in return for debt ceiling increase. here is mitch mcconnell earlier this week. >> i doubt if the house or the senate is willing to give the president a clean debt ceiling increase every time the president asks us to raise the debt ceiling. early in 2014, expect washington to be back in crisis mode. still ahead, new auto safety rankings out today. we will tell you about some new technology that is a major game changer in the auto industry.
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we will break down the numbers when "bottom line" on bloomberg television continues in just a moment. ♪
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>> welcome back to the second half-hour of "bottom line." i am mark crumpton in new york. thanks for staying with us. let's check where the markets finished this session and we hit the bottom of the hour. up. stock indexes ended ready much where they started after a powerful surge on wednesday following the fed news that it would begin reducing its bond buying programs. broader market s&p 500 was down one point at 1809. the dow jones industrial average falling -- excuse me, rising 11 points. the nasdaq composite index, it
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felt almost a third of a percent at 4058. let's check some of the top stories we're following at this hour. the sales of previously owned u.s. homes dropped for the third straight month. the national association of realtors says sales dropped 4.3% in november come the lowest level of the year. rising mortgage rates and a tight supply cap some buyers on the sidelines. an existingrice for home rose more than nine percent. we will have more on home sales coming out and about 15 minutes. officials are hopeful a wildfire in california's big sur region can be contained by friday. estimates it has destroyed more than a dozen homes and 850 acres. the fire is unusually late in the season but the land has been especially dry. this year, the big sur region has only gotten seven inches of rain. usually it gets about 45 inches.
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russian president vladimir putin says jailed oil tycoon gronkowski will be pardoned. letsurprise decision will russia's formerly richest man out of prison after more than a decade. the decision along with amnesty for two jailed members of the riot and members of the greenpeace protest ship appears designed to quiet international criticism of russia's record ahead of the sochi winter games in february. let's take a look at the top stories in asia. the governor of tokyo has resigned in the wake of a financial investigation. mia saini joins me from hong kong with those details. good day. >> hi there, mark. a year after becoming to you as governor and successfully campaigning to host the 2020 olympic games he is stepping down amid these allegations of inappropriate financial dealings with japan's largest hospital chain.
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he has admitted to borrowing close to half an million dollars interest-free from the hospital for "personal reasons." this is before he was elected. he says he returned the money a couple months ago after prosecutors opened a probe. candidates for japanese public office are a legally bound -- legally bound to report all funds excepted as campaign contributions. of mcdonald'sd making some cutbacks in japan. what is behind that? mcdonald's japan is actually a listed stock that trades in the japanese session. it is off by about close to two percent. they are announcing the closure of 74 outlets after cutting its full-year profit forecast by more than half. this comes as sales are falling for the fifth straight month. is 50% owned by
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the u.s. operation. say, will probably be $48 million for the year. the question, what went wrong? fewer customers dining on burgers and fries. they have to deal with costs that are piling up the company looks to improve the customer experience. it is very expensive to handle the closing down stores. that is factoring into the expenditures as well. let's chill you have that stock is doing. stock has gained 20% this year. it looks solid but still underperforming. the 47% gain you are seeing in the broader topix market. wax mia saini joining us from hong kong. thank you. released theirrs top safety picks for 2014 models. it is a rating covered by automakers because it helps sell cars. minicar madend one the list. it was shorter than last year. megan hughes joins us with the breakdown.
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>> there were fewer winners this year. 130 in 2013 and just 39 this year. the reason, tougher new tests. the top prize is called top safety pick plus. it went to 22 models. these had to be equipped with crash avoidance technology. automatic braking or warning systems. the one below it, top safety pick went to 17 models. that is a sign more and more models are becoming equipped with this avoidance technology. at the testing facility in virginia, we tried out a subaru which has an isight system and it did make that top list. the automatic braking system is an optional add-on for about a thousand dollars. it does come standard on a handful of models. 29% of models had crashed warning systems in 2013. of those, 12% have the automatic braking system. thecar company that had technology and was a big winner,
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honda. it had six of those top category models. there were also two models from u.s. automakers. both from ford. tell you to prius and the mazda cx five also made some tweaks and are now in that category. the honda odyssey was the only minivan on the list. as for that second category, the top safety pick, it was also a new test in that category. it shows what happens when the front drivers side hits something small like a tree at 40 miles per hour. two notable cars on that list, the only minicar to make the cut, the chevy spark and toyota made some tweaks from last year's camry model. it passed the test this year. back to you. up, a slump in existing home sales in november. what is keeping buyers from signing on the dotted line? that story is next. ♪
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>> be sure to check out the latest addition of bloomberg businessweek. it hits newsstands and your tablet today. you can read it on the go with our new business week at. welcome back. this is "bottom line" on bloomberg television. i am mark crumpton in new york. thanks for staying with us. rising mortgage rates and a limited supply of properties may be discouraging homebuyers. existing home sales in the u.s. dropped for the third month in a row. november sales fell 4.3%. the annual rate is now 4.9 million, the lowest level of the year. j brinkman is the chief economist at the mortgage bankers association. he joins us now from our washington bureau. welcome back. >> thank you. >> first-time buyers accounted for just 28% of sales in november, a year ago that number was 30%. what happened? >> first-time homebuyers were
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having a harder time putting together the down payments. we are seeing higher costs for fha loans and generally tighter credit commissions across the board. all leading up to the new federal rules going into effect january 10. we definitely hit a soft patch in housing. our applications indices have been down. i am not too worried about the drop in existing home sales. year-over-year, this is really the first month that we have been down from last year. it is only about 3%. i think the number in january is going to be a little worse. i think the new sales number that comes out christmas eve will probably be down about 18%. >> is this a question of the regulatory environment? is that why would the homebuyers are still having a hard time qualifying? it is also uncertainty about where interest rates are going.
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think about what the environment was during the spring and summer. we had record low rates. every realtor was out talking to a potential buyer. i think we pulled some of that demand forward. rates have gone up a little bit, this time of year is really when we have discretionary buyers. no particular reason to go out and buy a home right now because a shortage of inventory, rates have gone up a little bit. i think that is what we are seeing. we're still expecting sales to the up next year. sales, maybe about 10%, existing home sales, maybe about 5%. fed winds me, how the its way into this. yesterday we did hear from the federal reserve that is is going to start tapering. it is going to wind down asset
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purchases beginning in january. what does that mean for the average american looking for a home? >> the affect of the tapering will be some degree of increase in interest rates. the good news is that it is going to be relieving a certain amount of uncertainty in the market. other investors were being driven out of the market for purchasing mortgage-backed securities. i think with the fed backing out, there is certainty on their part that it is time for us to get back in. i think the rate effect is going to be more moderate. look at what fannie and freddie are doing. the regulator their specified the interest rate charged on fannie and freddie loans is going to go up about 14 basis points next year plus a whole new set of risk-based pricing for people with credit scores 700w -- i think it is about -- 740 or so. i am not quite sure on that.
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if they don't have a down payment, they are looking at a much higher rate. it is going to be a double whammy when they go into the spring buying season. >> what about that partial shutdown of the u.s. government in october? did that have any impact on the drop in existing sales? >> i don't think so. some effect for government contractors. we hadn't really seen them in the washington area except to the extent that it added to uncertainty over the economy. if people are uncertain about where they are going, they are not going to be buying a house. that is one of the biggest overhangs right now. declined in all four regions of the united states. they were led by a slump in the west. slide, there are still on pace for their best showing in seven years. what is driving sales in a job
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environment where we have stubbornly high unemployment at 7%? >> keep in mind that we have been creating jobs at a pace of roughly 2 million a year. as these people work into the market, a number of them are converting from renting single- family to buying single-family homes. even with the unemployment rate still stubbornly high, that is not as important really as the number of jobs being created, particularly jobs that are not part-time. people with real paychecks that go out and can't afford to either buy a house -- can afford to either buy a house for themselves or read a house that someone else has bought. >> does the data you're seeing point to a stronger housing market in 2014? >> yes. uptickxpecting a slight in overall development, overall
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economic behavior. we are not seeing that interest rates are going to be high enough normally to cut back on home purchases. is if theseern higher interest rates that are being put on lower down payment freddie, by fannie and that is going to throw off all of our forecasts. >> jay brinkman is the chief economist at the muggeridge bankers association. thanks so much for your time tonight. continues inline" a moment, the marriage of two passions. go off the clock with an oracle executive when "bottom line" continues in just a moment. ♪
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>> the white house says the president obama has announced his intention to nominate the next commissioner of the commodities futures trading commission. she is currently a partner at latham and watkins. her nomination would need senate confirmation. vice presidentr of hardware and software development at oracle. he has two loves in his life, coding and setting off fireworks. nexthe is in making the project for oracle, he is in his homemade fireworks factory in the middle of the arizona desert testing his latest creations. he has created some of the biggest fireworks displays in the country and designed a special show for larry ellison in 2003 over san francisco bay. this is another episode in our series, "off the clock." i am senior vice president of hardware, software development at oracle. when i am not there, you can find me out here in the desert making fireworks, blowing things up.
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i started making fireworks when i was just a kid. when you're 12, you can't be serious about making fireworks. as i got older, i could afford better equipment and chemicals. the raw ingredients to make fireworks. parallela lot of between developing product and developing something that people like to see in the sky. audiences expect particular things. they liked loud noises, different kinds of textures, colors and sometimes different intensity. they like a lot of things going on at one time. ien i explain to people that make fireworks, they immediately assume that i am not. nuts. that is partly true. one of the things that is fascinating about fireworks to me is that it is a blend of art, chemistry, engineering, physics -- it is that energy that you're able to control long enough for
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a short period of time to make something very pretty out of something that is very powerful. i think most people like watching fireworks. it is kind of universal. some people actually get emotional. if you take really good music and ry art displays w something.olors, it doe i like to see what i built and what i do in the sky have the same effect on others. io," theht on "sportfol national hockey league struck a deal in canada. john collins tells rick horrow what the money means for the league. "sportfolio" tonight only on bloomberg. over ahead, what weighs one ton and is made purely of sugar? we will show you. "hotshots" is next. ♪
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>> today could mark a change in the way we look at the universe. the european space agency has launched the gaia mission from french piano. .- guyana it is mapping the stars with the largest camera ever made for space exploration. on gibson has details. >> if you have been shopping for a new camera or phone lately, you know your megapixels. check this out. this is a one billion pixel camera at the heart of this giant telescope. this will be able to spot celestial objects 400,000 times
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fainter than the human eye can see. >> if you were to put one euro on the moon, from the earth we could see it. it is the eye of the universe. >> the structure was built using silicon carbines, a light and solid ceramic material able to resist high temperatures. it is all part of the gaia mission to create 3-d mapping of the stars even beyond our galaxy. in 1989, the european space agency launched a mission, the first experiment to map around 100,000 stars. making,ven years in the this base unit astrium wants to go further. data will have plenty of about their distance, their age andheir heat, their maybe even some of the planets
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which are revolving around them. cost isission's estimated to be close to one billion euros. for astrium, it is clearly worth it. hoping to capture one billion stars. one euro per star. >> gaia will monitor the stars for the next five years and promises to change the way we look into the night sky forever. tom gibson, bloomberg. >> it is time now for "hotshots ," a look at the most compelling images of the day. 26,000 rays of light illuminated a cathedral in sydney, australia. in its fourth year of the christmas themed light show, it included 12 projections shunting
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on the 245 foot high wall of the church. last year, more than 350,000 people came to view the display. the archbishop of sydney says it is fast becoming a tradition. to end the night, how about a walk down gingerbread lane at the end of which, you will find a 1.5 ton kandi village? it is comprised of over 91 varieties of candy including 1300 candy canes and 25 pounds of icing. the completely edible buildings took the chef one year to create and include 152 buildings, a fire station and an underground subway station and an ice skating rink. no doubt, some place to lie down. you can get the latest headlines at the top of the hour on bloomberg radio and streaming on your tablet and on bloomberg.com. that does it for this edition of "bottom line" on bloomberg
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television. i am mark crumpton reporting from new york. thanks so much for joining us. i was see you tomorrow. ♪

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