tv Bloomberg Surveillance Bloomberg May 29, 2014 6:00am-8:01am EDT
and a new asian society. china looks outward. good morning everyone. this is "bloomberg surveillance." it is thursday, may 29. i am tom keene. joining me, scarlet fu and adam johnson. we have a terrific morning for you. first, let's get to our brief. let's start with japan. >> retail sales fell for the first time in years. you raise taxes on people and they will not spend as much. spain, different story. households spending up. they say they will postpone interest raises until after the presidential election in october. here in the u.s., gdp annualized. that will betive, the first negative print we have seen. people say lot of
"but." >> initial jobless claims. 9:45, consumer comfort. a lot of home stuff. here is one for scarlet -- do you let your voice shop at abercrombie & fitch? >> they are too young for that. but now they can go in because the music has been turned down. >> you have to wear a shirt now? thesgate -- they did "hunger games" franchise. >> let's do a data check. bonds, front and center. the 10 year yield is a recurring theme. meeting is june 5. vix, better than good.
11.68, showing complacency out there. 30 year bond yield is john dropping. but do you do if you are running a long-term portfolio? gold continues south. from the bloomberg terminal, a lot of lines. yield, back german 20 years. here is the trend. the red line is the trend. these are the standard deviations. this is logarithmic june. here is draghi. we came back, this is the new rollover. fivetwo, three, four, standard deviations off a long-term trend. this is game changing. >> when you are five standard
deviations away, that is like 99.9% of the time you should be above that. >> it is like george clooney on "er" 20 years ago. . >> this is all because of the comment, "whatever it takes." >> it is from the data that reconfirmed this inflation if not deflation across europe. we have to move on --we scoured the papers this mornings. >> to deals. apple is buying beats. the price tag is $3 billion. that is bigger than the number that was floated around. billion, which is insignificant. hashe amount of cash apple --what is that in percentage terms? .0007%.
>> drop in the bucket here. it means the cofounders -- else, they everyone will join apple's senior management. >> these are guys out of the music industry. >> they're buying heritage. he was one of the first people to see itunes. they are buying history. snoop dogg.o >> this is working with john munden and bruce springsteen -- john lennon and bruce springsteen. they made that sparkle in music. >> we're going to talk more
about this and what apple gets out of this deal later on with david kirkpatrick. it is certainly one to watch. the second story -- president obama spells out his vision for foreign policy. he gave a commencement speech at west point yesterday. it was a rebuttal over his policy. onsays the u.s. must lead the world stage, but the military should not be the primary compound. -- component. >> there was no passion, no force. >> it was here, it was there. in the end, it was all about nothing. haass will be joining us the next hour. he said he walks the mid-line. he did not say here's what we need to do, or here is a we should not do. >> our last front-page story --
a new report says iran stopped u.s. officials in a three-year hack. facebook and social networks to strike up friendships with lawmakers, defense contractors, and even a four-star general. this comes from a company that would send links and videos that would allow hackers access to e-mail. >> i don't know why any of us would be surprised by this. everyone is doing this. why wouldn't you? >> the important interview is mr. snowden as well. >> you wonder what response you will get from washington on this. those are the front-page stories. >> our guest host is jonathan golub.
much focus on bond markets. joins us, senior fellow at the asian society. john, let's start with bonds. how unusual are the yields? >> first, the story is not a new one. one year ago, they were in the same place. everybody was convinced that yields would go back to 3-4%. a lot of this debate, people said this was impossible. massively pushed against the bond market. i think of david rosenberg saying no, bonds wrong, stocks right. tell us why they are so disconnected from the bond market. >> there is a host of things.
most equity guys look at a yield like this and they say growth is dead. inflation is dead. i think you have to look at what is in the bond market. you rightly pointed out, it is a lack of european inflation. that is probably the most important story. the ecb may be those important thing. >> is the equity market priced to perfection? >> i don't think so. you have had a good valuation for 6-24. we are at 15, kind of right in the middle. >> have you ever seen this dynamic? >> know, and i traded for over 20 years. >> you were on the trading floor when you were 12? >> almost. >> botox click then. >> thank you, mom, for giving me
good genes. golub, you say that capital requirements increase, banks have to hold more paper. they turn to government paper. >> i think there are a half-dozen things. you have pension plans. last year, interest rates rose. that knocked down my abilities. these plans got in the money. big mutual fund flow. so, everyone was asking -- who would be the crazy person who would buy bonds? a lot of folks. >> let's bring in jamie as well. what did youch,
make of president obama's speech? >> it was a goldilocks speech. you get overexposed in places and that you roads national power. we will not do too little. the words that he used were indispensable nation. it was uninspiring, but imp ortant. follow this exciting rhetoric of george w. bush got us in a lot of trouble. we are now facing major challenges in europe, asia, and the middle east. he was very realistic that we cannot do everything. >> we have a lot to talk about. our twitter question of the day haass, is al and qaeda the biggest threat to america? we have already gotten some
smart responses on that. witter.board, get on tiwtte is al qaeda the biggest threat to america? >> let's get you some breaking news. answer is going to buy heritage health care. the price tag is $2.35 billion. $2.ridan forg 35 billion. costco missed analyst estimates. a number of u.s. retailers suffered in the first art of the year. same-store sales rose. microsoft and salesforce.com have their head in the clouds. they are close to a deal that would allow customers to use salesforce management programs. this is according to people
familiar with the talks. that report indicates congress is stepping up its probe into the general motors recall. they spoke to an engineer about his role in faulty ignition switches. that is according to the wall street journal. lawmakers want to know why gm did not recall cars until almost eight decade after learning about the problem. adam? >> when we come back, why is apple spending so much money on beats? we will discuss. you are watching bloomberg tv. we are streaming live on your phone, tablet, and bloomberg.com. ♪
tonight, do not miss inside pepsi co. exclusive interviews with the company's gatorade developing facilities tonight on bloomberg tv. all of that is also on bloomberg.com. good morning everyone. this is "bloomberg surveillance." scarlet looks at apple. final price tag, $3 billion. this is apple's largest acquisition ever. it had been telegraphed. the stock is up 4/10 of 1%. with this purchase, they will gain control of beats head pho nes. let's check in with david kirk patrick, who joins us with his reaction. this deal was weeks in the making.
the price tag is lower than originally reported. >> it is funny. even though music is really what got apple on the trajectory it has taken, it has gone to this extraordinary scale and success. they have never done headphones well, which is interesting. they even have a policy that if you go in and have a broken headphone, they replace it for free. they know their headphones are so bad. ironically, that is not being discussed. they need better headphones. they also need a broader market positioning among young people. many of them perceive apple as an old person's product. a smartit is probably move to broaden their market share and get into an area that is critical for a heavily music oriented company. bring in some intellectual creativity.
also, it is chump change for them. >> they are only laying out $2.6 billion. you mentioned they are buying hardware. what about the fact that this is a talent play? what can that mean for apple in the next six months? >> i was just thinking about getting on to talk to you and i was reading about jimmy and all of the records he has produced. one of the pretenders' great a lbums. a classic by meatloaf. he has an incredible sense of what people want. i don't think he is a steve jobs, but from an intuition point of view, he is somebody who gets how people think. he can make classic products. he is going full-time to apple. is a music producer and executive, but i think somebody like that could add a lot to the
culture of apple. dr. dre is also a great artist. he is not is clearly going full-time, but i'm sure he will add a lot as well. >> i understand what apple is getting. i think about the artists. 1/7 will make 1/5, 1/6, the amount of money that they would have gone from downloads. is that sustainable long-term? >> that is a debated qu estion. now you're getting into the music service. i do think it has to be. frankly, this is the way we are all getting our music. we're not going back to buying cds. if we cannot figure out a way for the artist to make money, the music industry is doomed. i do not think it will be doomed.
music is too big a part of culture for that to happen. prices might go up. that would be good for apple. i don't think we will keep buying songs. by the song on itunes. >> the strength of the facebook effect was being able to look forward to where we go. our member the first time i heard stereo crystal clear. reach forward -- where will this transaction be in five years? >> is a great way to ask question. i think quality of music is going to be affected by this and a number of other trends. we have gotten used to getting our music with convenience. in the process, we have sacrificed the quality of the audio. for someone like you, i am sure it has been acutely painful. i think the chances are good that this will lead apple to concentrate more on the quality.
>> thank you so much. crete.joining us from what he is talking about is tone. they own tone. you're going to bring bauers and wilkins to apple. you will say fidelity that these kids today do not even know. >> i'm getting my head around the fact that you were excited about stereo. >> i remember standing there and hearing it for the first time. >> we're are going to tell you what is coming up in the next half hour. richard haass will tell us about the president's foreign policy cap. is it clear, is it unclear? ♪
>> good morning everyone. i'm tom keene. let's get right to top headlines. >> search or say they have been looking in the wrong place for the missing malaysia airlines jetliner. investigators say it is not in the area where they have been searching for almost two months now. they will take a three-month break and try to figure out where to look next. edward snowden says he still considers himself to be a patriot. news,interview with nbc he defended leaking thousands of classified documents. he is also frustrated to be struck in russia criticized the government for not protecting his rights.
should have thought of that in advance. and hockey, the playoffs -- angeles.eat los they lead the series 3-2. the rangers tried to defeat montreal. >> in the garden tonight. i am hopeful. >> those are your top headlines. you go from hockey to football. >> i do. this comes to us from the wall street journal. creepy effort is underway to shut people up for a broad swath. this is the first amendment formal protections and a fahrenheit 451 regime. the time for pushback is overdue. concern about the pushback on the redskins name. n>> i defer to albert hunt o
this. this is cocktail conversation in washington. >> yes. we had all of these commencements baker's who were effectively told you're not welcome to speak here, just because the view was different from their own. that is his concern. >> a new level of political correctness. coming up, tension in the east china sea. any body of water that surrounds china. . we will discuss next.
the city. this is looking east toward long island. that is manhattan, our world headquarters, dead center in the screen.\ off of see the terrace my master bedroom. you can see were different hedge fund people live. this is "bloomberg surveillance." let me do a quick data check. it is all about bonds. grinding lower after yesterday's historic move. we will continue our discussion on this through the morning. in the equity markets, scarlett had some numbers. >> some big gainers. twitter up almost 11%. they have upgraded to a buy. all of that attention and concern over the slowdown is overdone. -- can can't tweak
tweak its product. designer shoe warehouse. don't you buy or she was there? >> maybe you should. >> they actually went into decline. >> and abercrombie & fitch sometime today. >> they have finally taken a step back and acknowledged missteps. >> to china, it is the asia society. it is called china against anyone else. desiresship in beijing a more assertive regional policy. america pivots into change. jamie is a senior fellow at the asia society and one of the most acute voices. what do you hear now? >> a big shift in their
interaction with original members and also the united states and the world. they're undergoing a fundamental change. very firmly in control with china focused on internal reforms, which are destabilizing. they're being very aggressive in tehe region. they're really trying to push the united states out of the say i'm acific to what are you going to support your allies? they're picking points of contention where they know that we will not rush in militarily. how poor our, intelligence was on russia. do we really know the chinese military might -- any idea of whtat the military is? >> we could learn more.
we know a lot about with their capabilities are. they're building a military designed to counter us. and they are moving aggressively, knowing that we have a lot to lose. we will not ramp-up our response militarily. we will try all of these other tools. hard power ising, important. >> this china want to be a superpower? >> for now, a regional power. we have all of these global responsibilities and asia, and europe come in the middle east. what china is betting on -- we will not be able to go all the way in in asia. when they challenge us, we will not be able to counter them. they have all of this military they are building up and preparing to put a lot of pressure on in their
neighborhood. in the medium term, they will have no choice but to become a global power. >> how much is there foreign policy a response to what we're seeing from our own administration? >> well, a little bit. china was pushing aggressively in the south and east china sea. before, we have the issue of red lines that were announced. china has watched what has happened in the ukraine and crimea very carefully. the u.s. was not willing to do what many thought it would be. they signed an agreement in budapest in 1984 saying we would respect the borders of ukraine. now they are saying they're going to push into the south china sea and what are you going to do? the answer has been not so much. >> the best example i can think
of is what is happening with vietnam. china put in offshore oil platform in the vietnamese waters. over night, they ram a fishing vessel. >> same issue. china is challenging vietnam. they are not an ally of the united states, but a friend of the united dates. china is asserting its rights in the south china sea, letting vietnam now --and everyone else know, it isn't going to do much to help you. there are enormous natural resources underneath the sea. what china is doing is putting everybody in the region on notice. deal with us. forget the united states coming to the rescue. >> did we see the president speak to a nation?
those cadets know better than everyone the sacrifice. to the chinese leadership see us as an exhaustive military nation? >> they are making a bet over the medium term that we will not be able to rally our resources. haass is coming on. richard haasl and s back to back? >> his excellent book -- his argument is that you need domestic strength. >> was that a shameless plug for our next hour? >> it was. >> shameless plug for both hours. >> talk about the role that the chinese people play in this as they move aggressively to force the borders. the government took a specific tact to emphasize its humiliation and pushing
nationalism. >> that is exactly right. in 1989, the chinese government realize that they have lost the narrative with the public. they shifted ideologically from tousing on class struggle to focusing on national humili ation, as champions of nationalism. in china itself, it is totally fine. you cannot talk about tibet or other things. you can talk about nationalism. the government has created the space were nationalism is wood of the few except in forms of speech. this whole generation has been raised on chinese national amelioration. -- humiliation. it becomesnarrative, very difficult for china to
compromise. the more outlandish claims that they make, particularly in the south china sea. the more that they are saying we cannot compromise because we, the communist party, are champions of this nationalism that can never become revised -- that would bring back memories. >> they have backed themselves into a corner. >> it is very dangerous. they're moving very aggressively , with a zero-sum mentality. the united states is sup porting. there is a real opportunity for miscalculation. >> is there also an economic argument here? china has gone from an infrastructure based economy to a service one. that is tricky. this is a way of increasing gdp. >> i would not say that is a key driver.
it is relatively small compared to the overall size of the economy. the military is an important voice. by making these claims, they also have access to national resources. >> we're talking about vietnam. is there a red line? where the united states would get involved? visit japan, korea? >> there are red lines. as i mentioned earlier, there are questions about what the u.s. is willing to do. traditionally, the red line is japan. we're seeing repeated violations of japanese air space. the u.s. is not able to say. it is unclear what this means. >> the red line is the cost of breakfast in shanghai. >> that is one way of looking at it. jamie metzl, thank you for
>> good morning everyone. on foreign policy, is al qaeda still the biggest threat to america? @bsurveillance. a busy day on the markets. adam gets started. >> more problems at the veterans affairs medical centers. needing that veterans care were kept on the waiting list. was a rare, nighttime hearing that ended just before midnight last night. this is a trendsetter for everyone. brush is calling for emergency steps to stop the fighting in ukraine. rebels have suffered their first -- biggest loss was. g togroup is willin spend money to buy the clippers.
oaktreeup includes capital and grant hill. steve ballmer has also made an offer. >> time for a single head bashing chart. >> single best map. this is an economic indicator. what we have here is, the fact that some european countries and north america, and other parts of the world, are home to a lot of heavy metal bands. maybe that is a symptom of the universe. heavy metal bands as a global wealth indicator. pay attention to the areas with red and yellow, that is where most of them hail from. not a lot from africa. correlation is not causation,
necessarily. heavy metal is music of despair, dissolution. >> that is on. dd. clearly, people would say capitalism is all bad. people are angry, they are acting out. no. >> this is a sign of liberal societies, they end up being open societies that allow protest. capitalism create enough wealth that you can afford to do something that is arguably superfluous and unproductive? this is a crazy thing. >> or do you need continuous electricity to practice? to the uproar -- this goes, as you say, to the
idea of lousy economic analysis. it is a great idea that they did this. but this correlation and causation thing, where you try to link kiss with the better gdp. >> we might as well look -- >> this reminds me of the super bowl indicator. wins, the market is going down. >> maybe he can give apple some indications. >> you are too young to remember rare earth. >> what is your favorite heavy metal band? >> what i think is heavy metal is now classic rock. i don't know. i love led zeppelin. is that heavy metal? >> punk rock. >> i remember when it was seminal. my favorite band was black
>> this is "bloomberg surveillance." let's get you some company news now from the files of "bloomberg west." motors executive says that google could be a threat to the auto industry. they have come out with a prototype for a self driving vehicle. they say that if google sets their mind to it, they could become a serious competitive threat. amazon and a book publisher agree on one thing -- there is no settlement to their
dispute over digital book pricing. any deal would have to compensate the publisher. amazon is blocking orders. and the snapchat ceo probably wishes his app had been around when he was in college. he is now apologizing for e-mails that he sent during fraternity days. they celebrate getting drunk and convincing women to have sex. that is today's company news. >> they did not have e-mails back then. >> speak for yourself. >> every idiot in college -- i'm sorry. >> send an e-mail suggesting that we get drunk tonight. >> here is an exclusive -- good morning, golden, colorado. >> the bond market cannot agree why markets are so low.
what do the stock eyes think is driving me 10-year? is it consistent with the stock market making new highs? lub is our guest host. what do you think? guy's know, the stock view on the 10 year bond -- i have never been flooded with so many responses. there are a whole bunch of reasons that you have. there are pension plans, moving money to bonds. you have banks. you have yield differences. the whole lot of people said no, it is none of these things. people are focused on that. >> is a cacophony. on junegoing to happen 6? ecb has really given the
syndication that there is something that is going to go on that will matter. i think it will be very important to stock. you will not get yields up unless you take action that is convincing. >> what will rbc -- here's the chart again. here is the structural trend. here is draghi one and draghi two. now what? >> now that he has said what he needs to say, what influence does this have on equity markets? >> if you look at what stocks have been doing on days when yields are up, they are not getting all of the return for your. s on're getting 1.5 time days when yields are rising. on down days, they are selling off. if you have yields continue to drift lower, hard to have a good year. this is all about disinflation.
that is the big story. >> i am looking now at my terminal. the tenure is trading at 2.43. meanwhile, in france, 1.72. 70 french yield is like basis points lower. >> if you look at the seven year spain, it is the same as the seven year treasury. it was not that long ago we were talking about them being out of business. >> hawaii to bring this back to our viewers worldwide. they do not care about five standard deviations. they just want to know what to do with their retirement account. if the pros like you are stammering over this, what will the average person do, given this great distortion that we have? >> i think what it is doing is forcing you to choose stocks
were you have some growth. >> what kind? >> you do not have to do speculative names. it could be across the market. if you're conservative, you can do it in dividends. a lot of these names in biotech are exciting. >> the other thing we saw was the zero -- i cannot remember where they cut the report. use of cash continues. everybody bought back shares in the first quarter. in your research, do you see any change in that trend? companies will continue to be reluctant and slow in convincing the economy -- until the economy has steam to it. it is really not compelling that the economy is accelerating. >> people talk about this a month bull market. give us a sense of how much money is sitting on the
sidelines. how much will move? >> once or twice a quarter, we put out a piece on fund flows. money moved into stocks and bonds from money funds that are making nothing. >> i want to measure how long. where will we be in 12 months? her. think we are 10-15% hig >> you have a double digit view? >> in the next 2-5 years, you will see this rally continue. >> i cannot tell the distinction. thank you so much. andgolub, with rbs, jamie, come back. here's the forex report this point. bonds have taken over the view. the stronger u.s. dollar in gold continues. >> coming up in the next hour, richard haass talks about the
acquires jamie iovine and dr. dre. the bond market is priced to perfection. congrats listed as the president speaks of foreign policy of collective action. this is "bloomberg surveillance, live from new york. thursday, may 29, i am tom keene. joining me, scarlet fu and adam johnson. our guest host, richard haass, president of the council on foreign relations. a busy hour. retail sales job at the fastest pace in 14 years. this is after the first consumption tax increase in 1997. in spain, first-quarter growth gained as household and government spending increased. in brazil, the central bank might resume rate increases after the presidential elections in october. in the u.s., we have a ton of
data. gdp0, quarter over quarter -- looking for a decrease of .5%. that would be the first decrease in three years. , but the weather was keeping people from spending. arsenal comes -- personal .onsumption at 10:00, pending home sales. abercrombie & fitch before the bell and lions gate after the bell. scarlet, what do you have posted amark >> cosco third-quarter profit that missed estimates. a number of u.s. retailers suffer the first three months of the year because of the harsh weather. costco's same-store sales rose 6%. microsoft and salesforce.com are close to a deal that would let microsoft customers use salesforce customer management programs. indicates that
congress is stepping up its probe of a general motors recalls. investigators have met with a gm engineer about his role in faulty ignition switch is blamed on fatal crashes. this is according to "the wall street journal." lawmakers want to go wide gm did not recall the cars until almost a decade after learning of the problem. >> let's talk apple and beats. apple has made no bones about it, they have acquired james .ovine and andre young, dr. dre $3 billion. 23 days of free cash flows. that's how long it took for mr. iovine to mix down bruce springsteen's record. adam klein, former chief executive office of emuusic. "the new york times"
did with looking back at the two giants. mr. iovine, who is he? the industryn in 40 years now. he started serving coffee but he has really -- he has been a taste maker. andt out in front identified trends. he has captured of them at an early stage, he is a marketer, a promoter. >> i love the promoter part. here's my morning must read. i went back 13 years to a special interview, i can't say enough about this, from "frontline." the merchants of cool. "i asked lenin, why does the president want to throw you out of the country?" john lennon look at jamie iovine like i had three heads. a whisper of a heritage he brings. be fascinating to see that culture and the apple
culture. why did apple get so far behind on the streaming conversation? what delay them getting into this business, they have been growing like a rocket for the last couple years. they are praying -- they are paying a premium to get in. this is a rapid acceleration to try to get in there. apple is been tough on the industry, my way or the highway. jimmyl generate -- will iovine and dr. dre said my way or the highway in negotiations? >> i think part of the jimmy moonve iovine mistake is that hs very respected. he can soften the edges. >> apple has been defensive when it comes to music after upending the industry with downloaded music. and -- does jimmy iovine theyre coming in, what do
need to do to make sure apple stays on the offense? it will make this successful because they spent a lot of money. the culture and apple is quite restraining. they announced they will keep it as a separate unit. they have got to claim their primary presence as the next music experience for apple. that is going to require a lot of internal political support for them to get that done. >> how do spotify and pandora compete? a radio, primarily a radio situation. spotify is very dominant in europe. they have done well in the u.s. not that dominant in the u.s. there's a lot of room for beats to get a strong u.s. position. they will struggle in europe. spotify started as an advertising-based service. apple will package this and sell it as part of its total package of experience. what you have brought to
"surveillance" is the tapestry theeijer across -- tapestry of music across 40 years and 50 years. we used to live and die to get the new record, that is g one. can they bring that back? >> one of a comments was how little new music has come out for itunes this year so far. iovine does not operate anymore at the level of the emerging artists. that is a space that is suffering a little bit. looking at how we can regenerate. there are rail possibilities. to the festival culture, which is not a big-ticket item culture. a lot of what these guys operate now is very high ticket space. >> thank you for coming. adam klein, helping us out with respect to apple and beats. >> it is a culture change. cutting always on the edge and moving forward.
>> let's switch gears. president obama pushing the reset button on u.s. foreign policy. at west point, he outlined his strategy. leadership and initiative but not always with boots on the ground. >> when issues of global concern do not pose a direct threat to u.s. when crises arise that star our conscience or push the world in do notrous direction but threaten mass, the threshold for military action must be higher. in such circumstances, we should not go it alone. instead, we must mobilize allies and partners to take collective action. >> with us is richard haass, president of the council on foreign relations and author of "foreign policy begins at home." clearly what the president is trying to do is achieve a balance between interventionism and a hands-off approach.
did his speech convince you? >> the short answer is no, i do not think it convinced a lot of people. a lot of the mistake critics of his foreign policy feel he has not done enough to defend u.s. interests around the world. there is a growing tide towards isolationism. there is doubt about american reliability and i do not think this speech solved this problem. want tout out if you get informed, go to the council on foreign relations and see the entire interview with ambassador haass. whatever you agree on foreign policy, it is a wonderful read. i love how you ended it on collective action. >> collective action and higher threshold, the two buzz phrases. as i listened to that, i wonder if the president is stepping back. it is like a lack of leadership. collective action and higher we're going to get everybody involved and not leave. likes a lot of the speech was
the attempt to thread needles. we want to stay involved in the world and do it collectively, sometimes we have to do it unilaterally. we do not want to use too much or too little military force. you have got to get down to specifics. before hours before the president gave another speech saying all forces will be out of afghanistan in two years. this comes after taking all forces out of iraq, that did not work so well. it is not clear in afghanistan is going to work either. >> would this have been a different speech with president hillary clinton? is this unique to president obama or is this a democratic party thrust? >> in both parties -- >> this is obama policy. >> tied to obama's legacy will be the fact that he brought these two large wars to a close. when secretary clinton, if she runs for president, she will be looking more towards the future. >> when you look at this, i thought this was stunning yesterday. he response was how can we say
-- tepid? they relationship of our president to our three academies is unique and special. what should he have done yesterday? >> speaking at the military academy saying you guys have living,p for for a there's going to be less of it. >> yeah! >> what the president had to do was make the case for what he was going to do, why had he and had he not done certain things in the past and what was he doing for the future? s. richard haass waith u >> is al qaeda still the biggest threat to america? is that still the biggest threat? ♪
>> good morning, "bloomberg surveillance." i am tom keene. this matters now to richard haass, president of council on foreign relations. foreign policy should not be calendar driven but conditions based. you have written about afghanistan, discuss. >> the u.s. has made a commitment to afghanistan and we have interests in the country moving forward. what the president announced was decision to bring
american forces down to 9800 at the end of this year and zero by the end of 2016, just before he leaves office. why? why don't we keep open-minded. if those forces are achieving good things and keeping stability and helping to train the afghans, why is not worth at? why should we say no matter what we are taking them out yet t? >> what is your optimism about a better afghanistan with the new administration? >> you have a new government that will be easier to work with. my hunch is it will be the former foreign minister who is from an ethnic minority in afghanistan. that shows that people are seeing the country not simply in terms of what ethnic group they are a part of. if we were to put together old neighbors in a type of diplomatic effort to help afghanistan, that could make a difference. we have accomplished some things
over the last decade plus. 10,000 people in afghanistan. some people would equate that to us having 10,000 people in germany. most americans would say i am sorry they are in harms way in afghanistan. can we be there safely with a residual element? >> yes, they are not there for combat purposes. they are there to train and advise the local forces. i can imagine on occasion they would do counterterrorism action but that would be true even if they were not based there. we will be doing our terrorism action in more than two dozen countries around the world, whether we have residual forces or not. >> quickly on the president's speech yesterday. what does he need to do now to be more prescriptive? >> he asked to make the case about why americans need to stay involved and what that will mean. i am worried after a decade of overreach and doing too much, to me the biggest problem is under reach. americans after iraq and
afghanistan, given our domestic problems, they want to withdraw from the world. the president needs to spend time educating americans and selling them on international involvement. that is the real challenge. >> ambassador haass with us for the hour. coming up, too much to talk about on "bloomberg surveillance." ,e will look at economics bonds, and europe as well. "bloomberg surveillance," good morning. ♪
>> good morning, "bloomberg surveillance." our twitter question of the day, at @bsurveillance. big response already -- is al qaeda still the biggest threat to america? talking about obama yesterday. the biggestand threat? this is "bloomberg surveillance," i am tom keene. is with us as well. our guest host is richard haass, president of council on foreign
relations. adam, top headlines. >> searchers say they have been looking in the wrong place for the missing malaysia and jetliner. investigators say the plane is not in the indian ocean where they have been searching. they will take a three-month break and try to figure out where to resume. former nsa contractor edward snowden says he considers himself to be a patriot. he defended leaking thousands of documents and said he is frustrated to be stuck in russia. he criticized the russian government for not protecting his individual rights. in the hockey playoffs, the chicago blackhawks beat the los angeles kings 5-4 in double overtime. kings lead 3-2. fuight in new york, scarlet will be watching. the rangers are going to try to win their series. >> the canadiens -- can we get over this? >> he got to sit out half the
game last game and he is rested. >> a giant los angeles kings fan came in on two hours of sleep. >> it is 7:30 in the morning. untilwill be sleepless june. debate -- why are treasury yields so low? the rally in bond prices has the wilderness on berries, especially since the fed's next move is like the -- the rally in bond holdersas confuse, especially since the fed's next move is likely -- >> one thing i find extraordinary, a dynamic that has been in the markets for a long time. you are getting an incredible
amount of liquidity. the fed is going to be gradual, the data is ok and you have the ominous ukraine-russia story. the big one i think people are not putting enough weight on is when you look at where u.s. treasuries are, you see the 10 year treasury at 250 and then or youu look at germany look at some of the high-yield markets or spread markets in portugal and how much it is compressed, u.s. treasuries do not look that bad relative to the rest of the world. >> they might look good. >> given the liquidity, the size of the markets, owning some duration is viewed by many as ok. >> how long will relative value persist? >> you have a dan and that that is extraordinary and historic. dynamic that is extraordinary and historic. mario draghi is driving bonds forward. you have the bank of japan aggressive and more aggressive
going forward. as long as that is in place. do i think treasuries could drift higher in yield? yes, but the backdrop -- >> draghi is going to stare down the bundesbank? this time is different? >> this time the bundesbank, from everything day described publicly, they understand there is more firepower. ecb iso draghi from the going to stare down the german central bank. we are not doing this the germanic way. i want to know what professionals do. you talk to the professionals, what are their actions given your sense of history here? >> in terms of the bond markets? >> what are they doing with my money in the bond markets? >> draghi will go down the road of a negative deposit rate. he will talk about other forms of lose qualitative easing, asset-backed purchases. it will continue to drive yields down.
some peripheral debt still makes sense. bank capital is also an interesting place to play the markets. >> before i go to richard haass, i want to make some news. what is your call on the u.s. 10 year yield? >> i think the 10 years going to drift higher as growth and proves. i think we will get to a 3% 10 year and be well contained. you can say i loan rate -- you can stay in a low range for a long time. >> this goes to your book which links distortion to financial markets. >> is no one worried about inflation? think monetary policy around the world, they are more worried about deflation. that is not a say that longer term you cannot see inflationary conditions. if you look at inflationary conditions in europe and what is happening in china and japan, including what is happening near term in japan. the near-term risk is that we continue to decelerate
inflation. in the back of peoples minds down the road there is no doubt you can create more inflation and you are creating some wage pressure. in the short term unemployment area. >> if the u.s. is trading 243 and germany is 140 or whatever, should we be buying portuguese tenure bonds at -- ten year bonds at 383. >> they are going to hold really well, risk and reward is why we have shifted out of some of those peripheral names. they were great value. italy was great value at numeral wasrset, fortune -- italy great value at 7%, portugal was not bad. >> this interview will be on bloomberg tv plus. >> we need another 10 minutes america's cohead of fixed income at blackrock. 10 year yield continuing to
>> three months ago. >> the daffodils have come and gone. this is summer. >> we have been waking up at 3:00 a.m. for far too long, it is june. teamloomberg surveillance" has no life. >> i'm here with tom and adam. let's get some company news. cofounder of beats electronics says he approached apple about buying the company. jimmy iovine and dr. dre have agreed to work for apple, who is paying $3 billion before beats and their streaming music service. targetser says shareholders should vote, saying the directors did not do enough to prevent the hack attack during the holidays. target has hired a new chief information officer. another milestone four bitcoin,
subscribers will be able to pay bills in decline. -- bills in bitcoin. >> i will believe it when i see it. some wonderful photos. >> we will start with our number three photo of the day. if you think your commute is bad. a line to enter the subway station in beijing. increased security following a terrorist attack. help for a mass trial people who were suspected guilty, they found 55 guilty. look at that. >> richard haass, i thought of the butterfly effect when i saw this. here it is. >> it is a reminder of two things -- china has an enormous denominator. anything you say about china, you have to think about 1.3 billion people. when chinese leaders wake up in the morning, they do not take the country's current season --
they do not take their country's cohesion and unity for granted. >> you are alluding to the attack in a far western region. zinzhang >> people were hacked with machetes. the latest sore years spacecraft spacecraftst soyuz took off from kazakhstan. .he crew will spend 5.5 months that is pretty awesome. what is russia's budget for space? >> i am not sure we will ever know, will we ever noted out of russia the cap? -- i am not sure we will ever know. will we ever noted out of russia? >> they are competitive in it and we are not. number one photo.
this year's "goat" at west point. it is the lowest rank graduate in the class and per tradition he gets $1000. $1 from each cadet. president obama delivering the speech. greatemy gave me a article on this, "last in the class." he joins custer. pickett of pickett's charge did not. dwight eisenhower was 61st in his class. how do you hire smart people at cfr? you just go for valedictorians? how do you know who to pick and a class? clear correlation between class ranking, it depends on what courses they take. you want to put them in an office and ask them questions and see how they think and speak. you want to get have a critical facility works.
a great stew not matter a whole lot. >> i don't think they are beholden to straight a's. west point is not curving. imagineering, i don't think so. it is a quality c. >> by first semester at princeton in fall 1984, i got an a, a.b., ac, nad -- i got an a, a b, a c and a d. >> i wonder if west point cadets are allowed to tweak opinions of the president's speech. >> i am not sure i would be treating anything. >> breaking news. >> abercrombie & fitch coming out with results. first-quarter loss when you adjust it for different items. a loss of $.17 per share, less than what analysts had been looking for. they have been looking for a loss of $.19 per share. mike jeffries had to take a
couple hard steps backwards because his vision for the company has not really paid off the last couple years with the advent of fast fashion like h&m, forever 21 -- is that the name? h&m, zara. we"bloomberg surveillance," are on bloomberg television, bloomberg radio. look for our interviews on our digital platforms including bloombergtv + i am tom keene with scarlet fu and adam johnson. our guest host is richard haass, president of the council on foreign relations. thingial media means one to investors -- social monetization. david hershel was google's second employee in new york and he figured out how to turn search into a $15 billion machine. twitter barely breaks even. the stock is up this morning but is still down near the lows since the ipo.
what is dick costolo not doing that you were able to do at google? the don't think google or web or digital platforms is winner take all. google has proven they have a very relevant advertising solution. they made advertisements relative -- they made advertisements relevant. the jury is out where the ad product evolves with twitter. they are doing great things and harboring communication globally. >> you think about social media and connecting the dots, google was able to get paid for clicks risk. you see an advertisement, you click through. that where it is going, you have got to get paid for click through's? >> that is the front and metric of relevancy in today's online advertising landscape. if the user clicks, they are saying this is relevant. google rewards marketers by sharing higher relevant ads.
twitter has some of that and they need to connect the dots and they will. they are a young company doing amazing things globally. back talk is pushing against the slowdown in user growth by focusing efforts on the global audience, what it can do in the emerging markets. said that global growth might be better in indonesia but monetization depends on growth in countries with robust media markets like the u.s. and u.k. does it the needle financially for twitter to be touting growth in indonesia? global andt to think act local. putter head is proven they are the new barometer for breaking news. they arer has proven the new barometer for breaking news. you need to dominate in media centric markets. twitter needs to go deep in north america but they are providing a big solution globally for communication.
>> your company, metamorphic ventures, the focus is on transactional media, my sensation -- monetization. who is doing it best? >> we are investing in smaller companies building great solutions around monetization. he talked about commerce earlier and the intersection between off-line commerce and online commerce. we like to work at all the web platforms. based show -- they show distribution for smaller companies. the next version of the web is about commercialization of the internet. that is why new york city is so special. digitalonclusion, advertising can in no way replace traditional advertising. where is that money going? to tv, google, facebook and content creators are not going to be successful with digital revenue stream? digital has become
more of a nucleus and content creation. as well as monetization. the reason tv is still a powerful medium because they have a critical mass of audience and users. as screens and mobile are becoming more prolific, it is not going to matter if it is tv, digital, mobile, college kids today do not even have cable. it is all about productivity and mobile and digital. one piece of that. >> i agree but i do not see where the money comes from. >> in other words, we only have about 30 seconds. in the future, a toll booth where if you want to watch something you pay a toll? >> i don't know about the future, the future is opinion. as marketers get more comfortable with the web, they will be spending more. it is happening in certain categories and we will see more and more. metamorphic
surveillance." i am tom keene. scarlet fu, we have a special guest. >> betty liu is here. you are doing double duty today. have a pepsi special tonight. we were inside pepsico a few weeks ago and i got a taste of not just their soft rains but also their snacks. i had a jury note named after me. name ai had ate doritos fter me. liu-mitos. have the special tonight, the half-hour inside pepsico special. more about the power one concept pepsico has had. is an analysterg at state full who recently met with nelson peltz, the activist investor who wants to split up pepsico. >> snack and beverage? >> he says they are costing the
company more than they should. just met with mark and he will give us his take on his position. >> indra nooyi has held firm to the idea that they belong together. "in the loop" starts at 8:00 a.m. and the special airs tonight. >> looking forward to that. do you drink pepsi or coke? >> i don't drink soda anymore. >> i don't either. richard haass, do you drink soda? >> too much -- pepsi, coke, diet dr. pepper. >> is it free at the cfr? >> no. tom's dues pay for it. is back from metamorphic ventures, the second ever employee for the new york office at google. and a lot of talk about jobless cars google is coming up with. take us inside google, you know what the zeitgeist is inside the place. is this a pipe dream? >> i have been out of the google
for six plus years and i still say "we." there've been talking about the javelin scars and is beginning of time. the idea of -- they have been talking about driverless cars since the beginning of time. the idea of big projects leads to big projects. eric schwartz said he should see things that are relevant to him. aroundw people walking texting and then out came google glass. the driverless car is great. i think human striving -- i think humans driving is a bug. it will reduce accidents, we will see if it reduces texting. bad joke. it is not a pipe dream, i am
excited. stock?ou still in google you are still a believer. >> thanks again for your perspective. >> i love the insight about how the founders would look at things and say we need to fix that. ukrainep, eastern descends into chaos. we discussed with richard haass of the council on foreign relations. ♪
morning, "bloomberg surveillance." in their own little bear market, down 24% from last year. tomorrow on "bloomberg surveillance." john milligan will join us. the inner president at target -- the interim president at target. really looking forward to it. tomorrow on "bloomberg surveillance." it will be more than the average bland, boring ceo interview. this, seriously. 7:00 a.m., television and radio. >> "bloomberg surveillance," i am scarlet fu. richard haass is our guest host, president of the council on
foreign relations. some company news from the files of "bloomberg west." as general motors executive says google could be a threat to the auto industry. out with a prototype for a self driving car. the company could become a competitive threat. agree and book publisher on one thing, no settlement in the dispute over internet publishing. amazon is blocking pre-orders for some of the company's releases. snapchat's ceo probably wishes during has been around college days. apologizing for e-mails he sent during his fraternity days. they celebrate getting drunk and convincing women to have sex. they have been published by a silicon valley blog. >> i sent messages by carrier pigeon. smoke signals in colorado.
>> owls. >> hogwarts. >> harry potter, sure. >> ravens, game of thrones. back to the serious foreign-policy and geopolitics. russian foreign minister sergei lavrov says russia needs to stop bloodshed in eastern ukraine as the new president vows to wipe out separatist insurgents. richard haass, president of the council on foreign relations. what will russia do and how will they respond jacob we are seeing a percolation overnight at the beginning of a response. what is the set of options mr. putin has? >> i do not think mr. putin wants a failed ukraine on his doorstep. the costs of absorbing crimea are extraordinary, three .lympics, $150 billion he wants ukraine to be
"sensitive," to russia. he does not want to own all of ukraine. pullinge succeeded in ukraine away from a needle attachment? toi think what you are going see from the new government are assurances to their own citizens about the rights of minorities, the language, and to their neighbors that ukraine will keep some distance from nato and the eu, a welcome message and moscow. >> my morning must read is from john bolton, now at the american enterprise institute and he was the ambassador to the u.n. he wrote that the president is doubling down on a muddled foreign policy. does russia have a clear-cut objective in its foreign-policy? >> mr. putin has a clear objective, his own position at home. he wants to expand russian
power. of 143 millionry people. it does not have global reach or an ideology that appeals to non-russians. it is not a new cold war. russia is significant but still regional. >> what should be the response of germany? especially after the elections. ukraineny needs to make viable. work with the eu and the imf, get the new ukrainian government up and running and make it viable. >> you just said germany needs to make it viable. the burden falls on germany again because germany has money. europe,e powerhouse in ukrainians have demonstrated they are not up to it themselves. they will need economic help, above the amount that has been pledged. >> let's take a broad sphere that the cfr looks at. the news of the moment is india, an extraordinary election. at least back to 1984 and the gandhi assassination. your thoughts on how successful
mr. modi can immediately be back e? degree ofa concentrated power almost without precedent in india. he has a majority in the lower house and support for him to do what he did in gujarat nationally. it is still india, there's a tension between a federal and state level. and terribleuption infrastructure. the interesting thing to watch is how well mr. modi can translate his local success to the national level. >> i remember the day you had muammar gaddafi on stage at cfr. cfr, what isat your first question? >> i want to know what he can do to change the dna of india? this country has all this potential but never realizes it. what can he do to change the culture? >> this goes to the obama
administration and visa issues. this is the issue, you would go away from hindu-muslim domestic, pakistani, politics more than economic issues. you mentioned my book, "foreign policy begins at home," that is mr. modi's idea. do that given the scale of that country. >> help me understand -- is that education, is that the cutest thing? >> infrastructure and doing something about corruption. >> let's get to the agenda, we focus on the stories that are going to dominate the headlines. you are going to get us started. >> i will rip up the script. usk at rick's interview with . giving us a historic perspective. we have never seen --
>> it could -- >> this is extraordinary. full focus of "bloomberg surveillance" is on the june 5 ecb meeting. >> mario draghi there. tom, you are heading to the radio. will hold court here. adam, what are you focused on? >> gdp. gdp, this is the second look we're going to get on first-quarter gdp. apparently it is going to be revised down according to forecasts to a -.5%. that is the first negative quarterly gdp we have seen in three years. i know it is backward looking, is that a concern for you? the fact that this will be negative? >> absolutely. even when it bounces back, it will not bounce back as high as it could or should. we should be growing at 4% were
more. there are things we are not politicalause of reasons that we should be doing. we are underachievers. >> we are behind. stalked says iran socialficials using media. they struck up a friendship with leaders and 84-star general. how does washington respond? what are they going to say? just as weoint out, saw on the speech yesterday at west point, obama is threading the needle. you cannot go too far to one side or the other if you are president obama and that is what he's trying to do. >> with around? if someone wants to friend you in persian you should say no thanks. it is going to be a foreign-policy test of the next six months, what happens if and when these negotiations with iran do not succeed. that will be issue number one. andeware of friend requests
tweets in persian. our twitter question of the day. is al qaeda still the biggest threat to america? these are the answers. "resounding yes. "no, economic problems are bigger." your point about gdp. >> a shrinking economy, people vote with their check books. rate, theoyment official rate plus people working part-time -- it is like 12.2%. >> the final answer. this is a midterm election year as well. richard haass, what do you think? >> al qaeda, if they were to get a hold of weapons of mass destruction. our domestic underperformance. watch china and japan.
percent in the market. loss wasst-quarter less than expected. plus, sales beat estimates. also, a report shows how social media may have helped iranian hackers obtain secret information. you will want to tune into this report. a big takeover in the health care industry. another one. agreed to by sheridan. in cash and stock. back to the consumer retailer. costco reporting earnings this morning. digging into the numbers at costco, julie? trend we have s