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tv   In the Loop With Betty Liu  Bloomberg  August 14, 2014 8:00am-10:01am EDT

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good for the consumer. staples,he founder of tom stemberg. we will bring it to atlantic city where a rebel casino just announced it is closing down, so what is next for ac? we will hear from the mayor of atlantic city, and also tom borgota hotel.vado o companies excepting bitcoin, we will seek with the coo in just a few moments. dish now, you can pay your dish bill with bitcoin. here's a look at our top headlines. here is walmart dropping in the premarket, the world's largest retailer cutting its forecast for 2015. the company is forecasting little to no sales growth,
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cisco just posting its worst revenue decline in five years. and gdp in the second quarter did not go at all. the compass -- the economies of both germany and france actually shrank. u.s. markets are waking up. you are with that european news. we are joined by bloomberg economist david howell. the numbers for germany, france, both worse than excited. it'd take the markets by surprise? >> yeah. both of those numbers were less than expected, so they took the markets by surprise. the moral of the story is the drag on growth came from weakness because of the unusually mild winter in europe having advanced construction activity, which kind of stole away from the second quarter. the other is the drag from that
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export, which is partially linked to the situation in eastern europe with russia being a very large trading partner of germany. that meanid, does things will get worse, or was this just a one-off? >> unfortunately, it looks like things are set to -- it looks like the growth picture is set to stay week. we have had a number of leading indicators over the past couple of days. they include the bank of franc'' -- businessndicator sentiment indicator. their growth picture does not really looks set to brighten in the months ahead. >> just quickly, david, what does this all mean for monetary policy, the ecb? >> essentially what it means for ecb is it will -- the pressure will increase on them to ease, and it will certainly give the governing council some strength to push for that. >> ok, david, thank you so much,
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david powell, our economist in london on all the news out in europe. back in the u.s., a lot of news on the retail front. i want to start the biggest of sales walmart saying that growth was stagnant and cut its sales growth for the year. senior markets correspondent julie hyman have gone through all of this. what are doing better than the ones we have heard of yesterday. >> on a sort of incremental basis, things got better after five quarters of declining sales , but that is probably the best of the news because walmart cut ll-yearecast for fu earnings. before it had looked for as much per share. the company is 22 not things going on in its core business -- it actually set health care costs are rising. the same reason so many companies have been fighting both health care costs,
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inflation, as well as an enrollment, higher than expected by the company increasing in rome at and the higher tax rate, so it is pointing sort of to that. it is investing more in e-commerce. by the way, saying today that e-commerce, which has been a strength for walmart, that it is going to grow less than anticipated, more like the range instead of the mid-30% range. >> what is the buzz on the new ceo? >> it seemed like he is well regarded, but it is just a matter, the big challenges he has ahead of them. there are things that are not .nder walmart's control low income consumers are still struggling. we are not seeing a lot of wage inflation. at the same time, we are seeing things and things like meat, dairy, produce. this is challenging for many
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walmart customers. it is trying to increase the number of products it sells, sort of lower price points, which might cater to those consumers. inasmuch as he has control over trying to get those people into the store and spending more, he has a big challenge ahead of him. >> ok, julie, just to stay with me on walmart and retailers. we just heard from her, new u.s. has a tough road ahead. stemberg is the founder of staples. he is the chairman of d.c. firm hyman capital partners. he is investing in other retail oriented companies. as i mentioned, julie staying with us for this conversation, what is going on here? we have some sort of inflection
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point here for retailers? sort of more of the same. things are not horrible, but they're not getting better nearly as fast as the president might suggest. >> ok, why is that? >> i think the consumer lacks confidence. with whateir tax their credit card balances are and so forth. they look at the news every night, whether you look at ukraine, middle east, what is going on with the health care in the united states, regulation in the united states. small are a businessperson, entrepreneur, you are worried, and when you are worried, you do not spend. >> tom, it is julie here. at the same time, your cost may be going higher. as i just mentioned, beef prices, dairy prices, food prices, that is not count as core inflation. they are still going up, and so maybe -- >> if you are a retailer, they're getting racked by
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regulation in multiple ways. as soon as you get somebody to 35 hours a week, you have got to pay for their health care that, therefore you have to cut back your very best employees, under 30 hours a week, i should have said. a 35 hour employee has now become a 28 hour employee. the assistant manager, if he is $50,000, you have to begin to pay him by the hour and begin paying him over time. which again is another hassle if you are running a business. ,ou have got obamacare itself these things are very difficult for the retail operator. >> on those labor costs, what do you think retailers should be doing? >> welcome i hate to get political, but a new administration is a place to start with a different set of regulatory approaches because i think right now this has become very, very difficult in this business unfriendly world to
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now.ed, particularly >> as a former ceo yourself, isn't it also good policy, especially of a retailer who has employees,cing doesn't it make sense to pay them more, to cover their health care costs? >> absolutely. >> look at a place like costco or the container store. >> absolutely. i would retch rather have an associate working -- i would much rather have an associate working 35 hours a week or more because they're more dedicated, spending more time, better trained, etc. environment has adjusted from a cost perspective, you absorb that the 30th hour, you will absorb $7,000 of cost. it becomes very difficult. i will say to you these retailers are succeeding, are the ones who take very good care of their associates. for example, j mclaughlin you mentioned earlier, j mclaughlin
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is thriving with the high single low double-digit sales, and their associates are extremely well compensated. that is an important point as well. headm trying to wrap my around this argument because what other unions are saying is you need to pay the workers better, which is what you are saying ultimately. you are saying we should be paying better, and remember, tom, this is an industry where you have the biggest asperity between the lowest paid worker and the highest-paid employee, which is the ceo. that gap i believe is among the widest in any industry. >> actually, i agree with you, and it should not be that way. i think if you find, though, some of the most successful retailers, cosco and whole foods as prime endeavors, are the ones where the spread is the lowest. >> those retailers have a little more pricing power.
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i think that is how you differentiate whole foods or cosco, for example. the case of j mclaughlin, for example, that you are citing, how do they manage, then, the higher health care costs and having the happy employees? how do you sort of balance that with being able to have healthy margins? >> well, i think one of the things that covers a lot of ills is increasingly growing sales. when you grow your comparable-store sales by 10% a year and you are a very high gross margin business because you're a vertical retailer, that covers a lot of these costs, and you can afford to absorb them. on the other hand, if you're selling commodities like walmart were the margin is much tighter, it becomes much more difficult. >> tom, i mentioned you are on the board of many companies, including lululemon, so you know a lot of the inside players in retail, and there are certainly retailers who are looking for good leaders, so who are some of
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the rising stars in leadership that you see are doing the right things and who could move onto bigger jobs? there is a woman named anna baxter at michael kors who i think is absolutely sensational of running the footwear business and doing a terrific job. there is a gentleman named david mccreight who is joining the board of one of our companies, he is the star performer for urban outfitters. i think that is a name to watch as well. >> all right, tom, thank you so much for joining us. tom stemberg, the founder and former ceo of staples. our julie hyman, senior markets correspondent. walmart is also in the news for a different reason. workers at a texas walmart a huge surprise when a trail of trash led them to the hiding place of a 14-year-old boy living in the storr.
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e. for more than two days, he ate, slept, and changed his close in two places inside the 24-our store. one in a display of baby products and the other behind a stack of paper towels and toilet papers. the scene reminiscent of that movie "where the heart is" where natalie portman is forced to live in a walmart after being abandoned by her boyfriend. the boy is back with heis parents. i read that he wore diapers and so he would not be seen going to the afro. >> that is so sad. if you're going to run away, walmart is a pretty good spot, right? it is huge them easy to hide, and they have everything you need. but you think he would use the bathroom at some point. >> i know. >> poor kid. >> thanks, julie. moving and shaking this hour -- hedge fund manager bill ackman
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wants more firepower to invest any plans to raise money through an ipo of his purging square fun. ackman has been considering an ipo for many years. investors withdrew more than a quarter of the firm's capital. in the meantime, he is prepared to double down on billion-dollar debt against herbalife, which he a pyramid game. ackman that has not paid up and he says he is willing to extend his short position if necessary. coming up, we will look at his plan for an ipo. what do they have to gain by taking his funds public? in gaza isighting causing disarray in the local economy. damage to israel's most lucrative industry. ♪
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whacked activist hedge fund manager bill ackman is willing to sell a piece of his power. the founder and ceo of pershing square capital management says he offers new shares in an ipo. the sound like a daring step for him whose activism against management like herbalife recently lead to nasty and very public battles, but are there some hidden advantages to going public? greg is joining a, is an activist investor. nice to see this morning. you know ackman, right? >> i knew him for a while. >> what do you make of this news?
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>> i think he clearly understands that now is the moment for activism. activist are making a big difference in the world and generating big the returns. institutional investors are capable of investing and allowed to invest in hedge fund structures but also interest on investorsf individual and smaller institutions to get in on the game, and this is the allow allow that and to for that. >> what about the tiny echtimin? >> over 10 years -- >>, on, greg, what about recently? >> actors are generally doing well. one thing that is clear is that it is a volatile strategy. it is not one of the things where you want to put your last dollar and hope that next month it will be up at little bit. >> that is precisely why would mom-and-pop want to invest in bill ackman? >> i think activists are the policeman of the capital market,
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and i think there is a lot of interest on the part of individual investors who are otherwise investing in index funds and passive managers to get in on the policing of these capital markets and the returns that they offer for those who take the extra step and do the elbow grease and work hard to make changes as a company. >> right, but greg, hedge funds by their nature are very volatile, and you can see billions of dollars of capital wiped out on a couple of at-bats. he saw that during the financial crisis. being that it is a very volatile vehicle, why would any public investor, why would any investor want to invest in his public entity? >> you've got to separate volatility from risk-adjusted returns, so in a concentrated portfolio like the one that activists run, there certainly becauseolatility you own a few stocks and they can make a difference. over a long square time, as pershing square has certainly
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mistreated, you can generate outsized returns, so it is a matter of stomaching along the way and being a long-term investor in activism is a great place to be because it generates alpha, as we collect, longform outperformance relative to the index. you do have to have some stomach for the volatility potentially along the way. of course, other hedge fund strategies actually have reduced volatility, so i would be careful about saying that hedge funds are always more volatile. many of them are actually much less follicle. >> we certainly see the headlines when they are more volatile. itit is the only time that is fun to report on them. >> what does bill ackman get out of it? >> he bets long-term, essentially permanent capital. the hardest part of being an activist is you do go through volatility. you go through periods of doubt. it is hard sometimes to convince your investors to stay with you and that your long-term vision is correct and it may take some
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time to workout. this is a way for him to have permanent capital. >> that can happen if you are a public company, too. you can have your investors bail out on you as well. >> you certainly can. public companies face this problem all the time, but hedge fund managers can have a particularly volatile investor base, and doing activism where you really do need to look at time rises of 3, 4, and five years, and i think pershing square's average investment is four years or more, you need to have the investor stay with you through the whole cycle and to the extent that they're pulling their money out, they are pulling the rug out from underneath your investment. >> by the way, greg, would you go public? >> i think it is very attractive. >> ok, greg, thank you so much, greg taxin, the president of the clinton group. coming up, feeling the squeeze of sanctions is starting to hurt russia's state-run oil producer. sections are also hurting russia and other ways as well.
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we will be back. ♪
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>> you are watching "in the loop " live on bloomberg television, streaming on your phone, and on good morning. i am betty liu. he world's largest mobilephone carrier is getting even bigger. china mobile added more subscribers than its competitors last quarter. profits beat analysts' estimates. the nearly month old sanctions against russia are taking a, toll on the country's largest countries. sneft is looking looking for -- is
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internal financing. next of those engines, rest of have a newfound love of swiss cheese. food the government banned imports from nations supported the sanctions, russians have turned to switzerland for everything from a thrill it to gouda. the swiss have warned that they will not be able to make all of russia's cheese demand. you'd better watch out. and it is 26 past the hour, so that means bloomberg is "on the markets." we are holding steady on some of these games. wal-mart disappointed with their outlook and also jobs will be out in a few moments. again, another measure, another read on the economy. ofer more than five weeks peace negotiations at a seeming standstill, visitors are avoiding israel in the thousands. it comes at the peak of tourist season, dev singh would've israel's most devast -- devastating israel. >> in the alleyways and markets
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of jerusalem, one consequence of the gaza conflict remains beyond dispute. tourism here has been devastated . how many customers do you have at the moment? >> at the moment -- zero. >> none. my guide to the city runs a small touring company to those visiting jerusalem from near and far. during better times, his clientele ranges from day tripping israeli couples to those visiting from china. the latest round of conflict in gaza have invited the entire tourism trade, one of israel's largest economic drivers. >> we talk about close to 4 million people coming to israel, $6 billion a year, which is very important for countries like us. >> this year, said of the 4 million visitors to israel, it is predicted that number will fall to 2.8 million with far-reaching effects. >> airlines will be affected,
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hotels being affected, transportation, buses, guides, restaurants, taxi drivers, travel agents. i'll most everybody will be affected somehow. historicusalem's center, the bells toll for businesses that belong to both israelis and palestinians. normally this time of year, you would have people everywhere. >> everywhere, especially in the market. >> while israeli citizens demand answers from their political leaders, many israeli workers require assurances from their bosses. >> i have to show my employees that they are working in a good place and i can provide them and i do notjobs, tell them to go home. >> israel's government has promised to compensate businesses that have suffered losses because of the conflict, but for many here, any loss of income is nothing compared to any loss of life.
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>> there is people suffering a lot more than us. ofwe just have a few months quiet, we can reach a stable atmosphere. we can manage. we can manage. have you met any in your travels, willem marx, or have they gone completely from the street? >> ready, i was having a coffee around the corner, and on the table next to me was a family of french tourist, so i have encountered quite a few of them. the beaches of tel aviv have forest tourists there. million two maybe 3 million tourists in a country of 7 million, that is obviously very significant. >> obviously it is significant. the people who are working that whatsm industry, willem, do they tell you is their biggest overall worry other than
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the fact that their numbers are coming down? >> i think everyone will hear will tell you what they want is peace. more than that, the focus is uncertainty. not just in the short-term. they are talking about their tourism numbers moving into 2015, 2016, worried that they negative impacts of this current conflict is going to last through to that period as well. >> all right, thank you so much, in tel avivthere for us. we're getting breaking jobless claims numbers. 311 thousand jobless claims were filed in the week ending august 9. jobless claims were filed in the week ending august 9. our chief markets correspondent scarlet fu watching these numbers. >> you mentioned it. 311,000. that seems to be the highest reading since late june. we had heard an increase, but
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only from the previous week of advised which has been of slightly. he number of people continuing to get these jobless benefits is now at 2.5 million. 2.5 4 million to be exact, slightly higher than what economists had been looking for as well. one thing you want to give in betty, is a lot of economists say jobless claims have dropped as much as they pretty much will and have nowhere to go but up. claims reach an average of, average low i should say of 40,000, and over the last years, claims have never fallen below 295,000. 8-year lows. we did see a tech higher to 31
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1,000, the highest since late june. >> thank you so much, scarlet. we are keeping our eagle eye on the numbers every week. scarlet fu, our chief markets correspondent. coming up, it was once considered america's most popular tourist destination. a special series, atlantic city, lights out. find out how it went from boom to bust. plus, we will hear from the coo and president of borgata, one of eight casinos less operating on the boardwalk. before you brush your teeth this morning, you need to hear this. new developments in the controversy serenity use of triclosan, links to cancer. stay "in the loop ergo ♪
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♪ >> hey, there you go. it is a beautiful day to stay at the beach.
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even atlantic city, the boardwalk, some people are gathering there. atlantic city does have a beach, but also supports a once thriving casino business. closures lot about the in atlantic city. in the next month, three more of them will be shutting their doors in the city. leaving just eight to fight over, dreaming of revenue while delivering yet another blow to the city's economy, and it's already high 15% unemployment rate. bloomberg's trish regan has all of this in a special report, atlantic city -- lights out. >> greetings from atlantic city. like the dwindling number of gamblers who visit this seaside resort, this is a place familiar with both boom and bust. the company shall see, sand, and railroads turned atlantic city into one of the most popular resorts on the east coast.
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glamorous only hbo's "boardwalk empire." don't forget the miss america pageant, showcasing beauty since 1921. but the 1950's marked the start of atlantic city's downward spiral. cheap air flares make play for like miami beach a lot closer. crime and corruption moved in, and the population plunged. the democratic party tried to boost the local economy by holding its 1964 convention in atlantic city. instead, all it did was spotlight the city's decline. in 1936, new jersey voters through atlantic city a lifeline, approving casino gambling. within two years, the biggest names in gaming were setting up shop. evenrs, harrah's, donald trump build a casino. informers like -- and boxer like cher
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mike tyson drew crowds. it was the most popular taurus destination in the united states. casinos sprung up in pennsylvania, delaware, and maryland, and the original simcity, las vegas, began its own redevelopment. vegas wanted to attract more than just gamblers. today, 66% of casino revenue in las vegas comes from activity other than gambling. that is three times what atlantic city sees. fight for aasinos shrinking pot of what used to be called america's favorite playground. sad seeing thel decline of the industry in atlantic city. trish regan is there on the boardwalk in ac. she joins us now. we know new jersey governor chris christie announced yesterday he will commission a group to examine and address the challenges and try to turn around the industry and the city, right?
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>> it is indeed a challenge. he announced that late yesterday, betty. it you know, you have so many casinos now closing, tens of thousands of jobs atlantic city is losing, and what the row problem is, betty, as that this is an economy that never really grew beyond the gambling. i mean, you look at vegas, for example, and you have a better situation when it comes to the overall infrastructure of the city, and that is important because they have been able to diversify away from just gambling revenue. atlantic city has really stuck to the casinos, and that is a challenge, especially when we are in an environment right now where you can pretty much gamble wherever you want. bloomberg television didn't catch up with the mayor of atlantic city, don guardian, just yesterday afternoon, and he emphasized the importance of diversifying the economic landscape. >> right now, we put all of our eggs in one basket, and so we are no different then the town that relies only on a single coal mine or a factory or an
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auto plant. now it is time for us to extend beyond that. people from 25 million to dirty million people, we have got to give them a taste of a good time, we have got to get back to letting them know that our forefathers built this place. we are just redefining what fun is for 2014. >> clearly the city has its challenges ahead. there is a big question as to whether or not it can reinvent itself as a convention town. you have caesars making a big investment here in a convention center. if they can attract people for conventions, that will bring more tourists and hopefully improve the economy. >> all right, trish, just to stay with me for a moment. can atlantic city reinvent itself and become more of a convention hotspot? i want to bring in the coo and president of the top grossing casino in atlantic city. he is tom ballance, president and ceoo of borgata.
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what did you make of it? is close. atlantic city, you have to realize, the gaming supply that has developed in atlantic city was developed in order to support a monopoly. that were casinos originally developed there were there to be able to service all of the gaming east of the mississippi. that is obviously not the case anymore. there is gaming competition all over the place. >> but then the problem is that catch up, need to they did not keep up. >> some did not. there are places that are overleveraged and were not able to reinvest in their business. that is why you saw atlantic club go the way they did at some of the ones that are closing up now. if you have a place where you can really offer something different to the customer, and it has got to be substantial. it has to be a big value gap for a customer. >> what about for you, then?
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what is the big value, premium that you are going to offer? >> well, it is a lot of little things. we develop our business 11 years ago specifically as a place that would draw people from a wider distance. broad based a very of offerings. we have spots, great hotels, fabulous restaurants. we developed a casino that really leverages all of the activities that are in it. so the restaurants at energy, the front desk at the energy to the casino, and we have the 5500 best trained and best engaged employees in the business. it is easy to say you offer some the better -- it is hard to do. >> that is av the to say. it is easy to say you had this huge value. >> betty, let me jump in because i want to ask tom whether he thinks he can really do this alone. tom, it is wonderful for you to be able to offer all of these andcements for consumers travelers, but if you are just doing it alone, how do you
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attract a bigger crowd? you look at vegas. adelson,got winn, caesars, do you need more players investing in atlantic city right now? >> well, we are not doing it alone. if you look at the most recent result, you will see the resorts that have reinvented themselves, the golden nugget, the tropicana an investment and change their business model. all of our revenues are up this year. if you invest in your property, and if you invest in your people and you create an experience that is worth people driving a next or 60 miles and spending an extra -- >> i look at the numbers, and i see last vegas -- $6.5 billion in annual revenue, and i look at atlantic city, and we're only talking now about 2.5 billion dollars, maybe almost $3 billion, but those numbers have gone down every year for the last seven years.
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appears, tom, it goes to zero. >> well, it is not going to get to zero. you had over the last seven years increasing supplies. you have pennsylvania, then you had new york, then you had maryland, all of which put pressure on the regional gaming market. we are pretty well saturated out now. to the extent that there is more gaming developed south of maryland or north of the empire. i think they're going to start really affecting casinos that are closer to them. they will not really affect atlantic city as for medically as would have happened so far. on top of that, we have changed certain assets that have not been reinvested in, and that is going to drive people away. biddingdea who might be for revel? >> no, i'm sorry. quite how important is it to you that someone big that cares about the city, that cares about that investment takes over that hotel? to thatirst answer
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question is i have no idea. i do not know anymore than what has been reported in the paper. the second is, every property in atlantic city is important that the operator is an operator and that they operate it as an ongoing concern and try to reinvent it and move the business. at borgata, about 40% of our business is not gaming. that is the way the rest of the business has to shift. >> all right, tom, thank you so much. tom ballance, the president and coo of borgata. and trish regan, thank you, special interview with donald trump coming up later. coming up, a major u.s. company is going to start accepting virtual currency and payment. the ceo of dish joins me in a few moments to show why he is making this move. ♪
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>> add another name to the short but growing list of made in u.s. companies that's except the digital currency bitcoin. dish will join the likes of dell, expedia, and others. with me on the phone to discuss this movie is bernie han, the chief operating officer at dish network. great to talk with you on the phone. >> good morning. >> you made waves when you announced earlier this year you will be accepting bitcoin. what drove this? you could not have had massive amounts of customers asking you for this. >> no, as a company, we are big at listening to our to employees, just like our general population, we have some employees here who are bitcoin enthusiasts. they brought it up at a meeting we had. we looked into it, thought it would be a big idea. we are all about providing choice and convenience for our
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customers, and whether it is features or programming and making payments. we thought it would be a good idea to do. >> and some of the cynics out there, bernie, might say hey, this is just a marketing ploy to get dished some free headlines here. >> not really. we did recognize that bitcoin users out there tend to be on the tech savvy site, and we have always been a leader in technology, so we thought that by doing this, it would bring more awareness to the technology that dish offers in the industry, our latest receiver, the hopper, has won more awards than i can count. we thought there were synergies between offering bitcoin and making people aware of our technology. >> that is interesting you mention that. do you find that you are getting new customers based on this? >> well, we just launched this morning. we had our first use of bitcoin to pay a customer bill this morning, so we do not know what it is going to be exactly. ofknow there is a universe bitcoin enthusiasts out there
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who we have heard from who are excited about it. we do not know as of now how broadly it will be used. on bitcoin, issue bernie, is just to this idea that this virtual currency is not viable. you have the consumer finance bureau, richard cordray, the director, saying "virtual currencies are not backed by any government or central banks, and at this point, consumers are stepping into the wild west when a gauge in this market." why would dish want to engage in the wild west? users, we believe, that are going to use bitcoin to pay their dish bills are already users of bitcoin and understand those risks. as a company because we go we are not base, going to be taking any risk initially. they will exchange the currency into normal payments for us, so from a dish standpoint, we will not be dealing with repatriation or any kind of accounting
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issues. we will be just taking payment as we normally do. we have arrangement like this with companies like western union and money gramm, and we have been used to doing these types of transactions for a long time. >> right. i would be remiss being you are a coo of a public company, there has been a lot of speculation about regulation and consolidation in your own industry. and how this latest move fits in it to where dish wants to be in the telecom industry. is dish interested in acquiring, for instance, t-mobile now that sprint has backed out? >> i am sorry, but we are not going to go there today. >> no comment on that at all? >> no. we had an earnings call last week, and analysts call. we talked about all we will say at this point. quite the right, bernie, thank you so much. han, the dish chief operating officer on bitcoin. ♪
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>> it is 56 past the hour, which means bloomberg is "on the markets." mixed.futures are remember, we got jobless claims just about half an hour ago. claims like a little bit above that 300,000 level that has been key for investors. we are on the markets again in 30 minutes. coming up, cisco has cut more since now it will eliminate a whopping 8% of its current workforce. how does the company move forward? ceo john chambers is nearing retirement. low-fat french fries kind of an oxymoron, right? burger king introduced him less ago.a year now they are taking them off the menu. nobody is buying the healthier french fries. we want the grief and the fat. you are watching "in the loop" live on bloomberg television. ♪
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>> we're about 30 minutes away from the opening bell. you are "in the loop." i am betty liu. the s&p coming up a two-week high. china's lenovo says more negotiations are needed with u.s. regulators to close a few deals. itswalmart cutting four-year forecast and reporting that sales forecast have stalled . the world largest retailer claiming slow traffic. more trouble in the retail industry, guys. after the bell yesterday, trouble for cisco. the networks equipment maker,
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cisco systems, conceded it was still struggling to restructure. people,lay off 6000 meeting total layoffs since 2009 25,000 people. product offerings have not worked. last quarter, sales of cisco fell for the first time in five years. with me to look at what is going wrong is bloomberg contributor ie paul kedrosky. erik schatzker of "market makers will be joining me. he will be speaking with cisco's ceo john chambers. the company has been in turnaround mode for 2, 3 years already. >> more than two or three years. it has cut more than 25,000 jobs in 2009. it cap hiring and buying other companies as well, betty, so you need to point out that this goes head count is up about -- cisco's headcount is up about 8000 people over that period of
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time, but they're cutting another 6000 jobs because cisco cannot figure out where the growth is coming from. they know that there is opportunity in the cloud, for example. they know there is opportunity in software. they just do not have the products to meet that demand. >> paul, i pointed this out because i think it was about a year ago that you were on our took johnou chambers to task. they were not really happy about it. you said this really poses the question, the turnaround , took john chambers strategy into question, now you have even more questions here. >> yeah. i mean, you know, this has been a remarkable problem for them in the sense that people inside the company are beginning to call chambers teflon john. all of this is just bouncing off theim, meaning that company's legacy business, you think about what cisco has always been historically.
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for more than a decade now leading back to the late 1990's, it is kind of like a ramecomputer or mainf company, running for proprietary software that they can sell for a quarter million dollars well up to $1 million, and those come and lockessay dollars customers in. the market is changing drastically away from that using networking, which is kind of like apps. networking apps, running on commodity hardware, and as much as they might try to embrace this business, and they say they are, they hate it in many ways because it will cause their margins to collapse. >> that does not mean a switch role is going to change that dynamic. >> not necessarily, but the problem he has is the classic innovator's dilemma problem where the things that made him successful and got him to where he is, selling big pieces of expensive, legacy proprietary hardware are things that in the long run can doom the company. in a sense, he has to usurp
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himself and tear out an awful lot of the sales and marketing infrastructure that made the company successful. that is very hard for any ceo. >> part of the problem is the analyst community for what it is worth seems to be a little too quick to make excuses on cisco's behalf. cisco is subject to these macroeconomic headwinds, and there is no question that that is true. and the emerging markets, for reasonable, it is really tough for cisco. resilient revenue down 13% in the quarter. russian president down 37% and in the quarter. that has to do with ukraine, of course. the company could be buying more things. perhaps that is a challenge because it does not trade at the to, multiple as it used but it is a big battleship turnaround. that is why it is taking so long. the question i think it really should be asking is this -- all the trends fundamentally are favorable. there is more video traffic than ever before, mobile traffic is
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growing at an ordinary rate, business is going to the cloud, all of this should be in cisco's favor. apple is growing, qualcomm is growing, facebook is growing, why isn't the cisco growing? >> and you're going to ask this? >> absolutely. >> i hope you do. >> the question you have to ask yourself is why, and the answer in the large part is -- you've seen this in the recent battle between cisco and facebook. cisco wants people to buy million-dollar nexus for 800 boxes that they can then high margins. new retailers do not want that stuff at all. we want the commodity hardware that we can swap in and out at lower margins when we want to rather than when cisco wants to put us on an upgrade path. so it really does not matter what the economic tailwinds are anymore. the markets in but does not want an awful lot of what cisco is
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selling. you, right, paul, thank our bloomberg contributing erik schatzker, who will be interviewing john chambers on this program in just about an hours time. something else is having a tough time. pro golfer tiger woods got a little bit worse. what has removed himself for consideration on the wildcard spot on the u.s. ryder cup. his back was giving him trouble that last week's pga champions tour. tigers back problems forced him to move in the u.s. open and he missed the cut at the pga. what's a says he plans to return to competition sometime in december when he gets his back sorted out. meantime, peta is taking on seaworld with ads like this one, discouraging people from visiting the amusement park. what, if anything, can be company due to save its brand?
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and hot diggity dog, i am excited about the new words added to the oxford dictionary this year. i am not sure that i have ever said that. we have got a look at the popular words and phrases that made the cut. i will see if i know what they all meet. in my head, am i with a? stay "in the loop." ♪ on bloomberg television, streaming on your tablet, your phone, and
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>> you are watching "in the loop " live on bloomberg television, streaming on your tablet, your phone, and rld shares seawo plummeted to record lows, down 33% after the company reported number is way shorter than estimates. basically falling off a cliff. it also admitted that for the first time, controversy surrounding the captive whales did hurt attendance. for answers, we are joined by somebody with a lot of experience on this subject, the author of the book "the
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edge," -- >> not that much anymore. >> allen adamson. allen, great to have you with us. >> thanks for having me. >> it seems as if this blackfish finally heard the bottom line. >> the power of social media. people talking, and the more people talk, the more difficult it is to turn an issue around. >> what are they need to do? need to turn around, treat their vets and animal spectacularly. >> they say they do. >> then they need to tell their story and get out there. they need to get a little bit of time. "blackfish" is headed out to sea. let's hope there is not a "blackfish 2." they have to provide their guest with a great experience. >> jim atchison, the ceo, said he will hire an advisor, start looking at cutting costs, and
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they will start discounting their tickets and other incentives. what would really work? >> they will not wait to work their way out of it by discuss. they have to put on a better show come invest in the products come and stay on their point, talk about what they offer, talk what they experience it creates for families and for audiences. and if they send a message, i think they will be ok. n't this the kind of problem that a mcdonald's faces or a coca-cola where it is really hard to tell the story , let say down inside at mcdonald's, you know the food can be bad for you, you know that drinking soda is going to hurt you eventually if you drink too much. two trainees animals for entertainment might not always be the prettiest thing to see. >> they may have to make a call and say debates or want to keep huge whales in the show, or do they want to make it more -- >> do they need to get rid of them? >> change the product, take the pain away, because when you go
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to sea world, it is more than just shampoo and the date well, there is a lot to see, experience, it is educational. they've got a good product. >> would you recommend that? >> i think they should take a hard loop look at it. isis their big show, but it a lightning rod right now. and what you want to do is take socialunition away from media. >> i want to get your thoughts on the comments from ceo jim atchison. they took him directly at cnn because some of this started when cnn bought the rights to the documentary and they aired it across their platform. he said "it formally crosses the line from what you would expect from a news organization. they are leveraging the information from a news agency from what is another business venture of theirs, which is buying and marketing films." ceo togerous is it for a comment on a specific news organization? >> you can always try to point your finger at one thing, but the bigger challenge is it is not just cnn or one person, it
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is social media. people talking to people, sharing information. they have got to deal with the total audience, not worry about -- >> my point is, you have a ceo -- isn't he above taking shots? i'm just curious because then you have back -- then this fight. >> alternately, consumers are don't spat with anyone news organization or anyone problem guardians. it will not -- anyone problem audience. it will not win the brand awards. if they make the right moves this month, year, very doable. thank you so much. allen adamson, the landor associates north american chairman. and colgate digs in its heels. these are brands in the hotspot. markets open in 15 minutes.
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jobless claims, we will find out when we come back. ♪
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revel casino is cashing out, shutting its doors in the coming weeks. all day today, we will be looking at what the future has in store for what was once known as america's favorite labor. detailsgan has all the in our special "lights out." tell us what you have in store on your show later this afternoon. >> we have a great show coming 3:00."street smart" at this is a city that is clearly facing huge challenges right now, eddie. it relies so heavily on casinos and gambling for all of its
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revenue. you can track that with las vegas, a city that while it is still relating on the casino industry has much more to offer tourists that are coming to that area. it is something that atlantic city needs to address, wants to address, and we will see whether or not it is able to address. coming up on "street smart" today, we do have a packed show. we will be sitting down with donald trump. do not forget, donald wants his name off the buildings here. donald trump's casino plaza and casino will be closing. he actually does not have ownership in that hotel anymore. but his name is still on the building. about that. to him sam haskell, the chairman of the miss america pageant. you will recall miss america has muchtory that is pretty synonymous with atlantic city. the methoiss america patrick -- then miss america pageant was a way to keep tourists in the city
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beyond labor day. it has a history very much tied to atlantic city. we will talk to sam about that. thefinally, who is by far best female poker player in the world, she is going to be joining me as well to talk about atlantic city's future. >> it sounds like good times there, trish. trish regan of "street smart." stay with bloomberg television because trish will be reporting special interviews and insight from atlantic city all day today. atlantic city -- light out. it is a or e that continues to be one of the most read on bloomberg. the chemical triclosan, which is used in soap and colgate-palmolive's total toothpaste, no retailers like walmart are considering whether to carry these products at all. use in has stood by the total fighting rigorous fda approval. spiraling into a bigger and bigger issue here. what do they retailers need to know before they decide you know
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what, we will pull the toothpaste off the shelf? decisions a very big for them. the science is unclear, so no one wants to jump to any conclusions. >> what does the science tell us right now? >> there is a lot of science right now. it is a very complicated topic. there are reasons for concern. there are a lot of studies showing as well showing that the two bases to be effective at fighting plaque and gingivitis. needites, ok, i think we to be very clear. let's be very clear, tiffany, what do the scientific studies are now say about triclosan used in those amounts in colgate? studies are no specific on that. i think it's my story shows, what we know is that there were some studies in 17 years ago when this was first approved that never really came to light. those bring up a lot of questions about the fda approval
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process. there were toxicology studies showing that mice and rats who were exposed to triclosan had delayed bone formation. when scientists look at it, that is a clear sign this is a destructive chemical and these chemicals can operate in very small amounts. i think this is why this has become such an issue of concern, especially now that things are now cumulative. we are not just seeing tackle sent into space, it is in soaps, perfume, cosmetics that you and i are probably wearing -- we are not just seeing triclosan in toothpaste, it is an insult, perfume, cosmetic that you and i are probably wearing right now. >> have they made any comments? >> there will be a rolling in 2016 on whether this is safe in hand soaps. they said they are not reviewing the toothpaste at this time. they are akin to that message. obviously if they find there is reason for concern in hand soaps, they will have to revisit
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toothpaste and other places, too. >> tiffany, thank you so much. people are worried, which is why they are reading your story quite a bit. tiffany kary of bloomberg news a few minutes away from the opening bell. ♪
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>> welcome back. you are "in the loop." i am betty liu. it is 26 past the hour, which means bloomberg is "on the markets." here is the latest on futures. right before the opening bell, equityal modments, futures were up earlier, even though there was lots of turmoil in europe. of the economic reports out of germany and france, also jobless claims came in worse than excited. bloomberg is back "on the markets" in 30 minutes. let's count down to the open with the top 10. the only stories you need to know about today. olivia sterns and julie hyman join in. number 10, amazon, the retail
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giant announcing this morning it is opening a fulfillment center in hell for you. the company opened its first center in the state less than 10 years ago. amazon shares are down nearly 20% so far this year, olivia. >> number nine, mark, the second-largest u.s. drugmaker won u.s. approval for a new insomnia drugs. the sleeping pills would have fewer side effects than review spells like ambien. i am also hoping they have fewer side effects. >> a lot of people do. >> number eight is kohl's. second-quarter earnings beat analysts' estimates. lower incentives make up for decline in sales. ceo kevin marshall said sales improve as the quarter progressed. fax number seven, -- >> at number seven, the fuel cell company sales more than doubled.
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plug was better than a year earlier. >> and the bio jet firm announcing disappointing results for a late stage trial that the blood cancer treatment. the recall involves lots of -- lots that were distributed in 14 countries. plunging five, noodles more than 20% after the restaurant chain had sales forecast -- it went public last year and also reported lower than estimated second-quarter earnings. that stock as you saw still continues to slide. >> number four is te, guys. the company looking to sell its appliances. electrolux and consumer product someone to, ge wants buy the unit. the ge could get about $2 billion in sales.
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remember, we had the air-conditioning guy and how that impacted the market. >> obviously they are trying to focus on the industries, the financial services arm, now they are getting into this. number three, shares her of .ollowing the company's results net sales rising 18%. rigo surged 18% during the quarter. >> number two is walmart. reported sales growth continues to be weak, although it is now unchanged versus actually declining. the world's largest retailer blames higher health-care costs and slow traffic at its supercenters. almart has not seen same-store cell gain in six quarters now. its customers continue to be under pressure. >> cisco systems, the networking giant, reported their results yesterday. they said they will eliminate
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6000 jobs in a new round of cuts. stay with bloomberg tv for an interview with john chambers, ceo, on "market makers." the stock is not done as much as you would think given those job cuts. there goes the opening bell. i want to bring in our guest for the open. the chief market strategist of a group who is bullish on stocks. nick has had a price target on the s&p at 2000. so rice bullis, neck, you are on equities. -- so pricerecent onlish, nick, you are equities. the after-tax earnings of s&p companies, they found the ratio was just at 1.3, which was a pretty low amount compared to other bull markets. that chart shows there is room to run here.
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>> that is true. if you think of how well corporations have done compared to be very weak recovery we have had the past five years, it is very impressive we can get back to very strong levels. if and when the economy can improve here and in europe, that earnings power should increase as well. >> don't you think the point where coming up to pretty soon where earnings of sort of maxed out? quarter after quarter, profits are up, sales are weak. historicallye at very high levels. there is always a very strong concern over the me into profit margins. however, i do believe we can get better revenue growth in q3 and you -- and q4. if i have a worry, it is the euro. it is weaker than expected. >> look at what happened over night or this morning. >> right, economic news has not been good out of europe for several weeks, so my thought process is we will have better than expected results here in u.s. in a little bit worse in europe. it will all watch out -- it will
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wash out. revenue growth north of 5%. we have to wait until next year. >> i keep bringing you back to consumer spending. i got to do it again. weaker than estimated. today we have walmart. to me it all comes back to consumer spending because how are you going to see sales growth if the consumer is not increasing the outlay? youou think -- i mean, do think that is going to happen next year? what is going to be the trigger for consumers to increase? >> unfortunately, not all consumer spending is created equally. we have had good news from the auto sales. things are going well there. hopefully that will have the effect of increasing employment in the midwest as we get into 2015, and that will improve consumer spending otherwise. you are absolutely right. consumer has probably been the most disappointing part of this year's recovery. >> some people are worrying that what we are actually seeing is a new subprime bubble and auto
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lending. >> i covered the autos for a decade in the 1990's, and it is the same is that ever was. this is the way auto cycles work. it wasot even as high as may 19 90's. subprime is always an important component to that market. credit available to subprime are worse. a car is a collateralized loan, so it is not quite as risky as the housing bubble we had in 2007 and 2000 eight. >> where you stand on inflation? is that something that you think is going to be a black swan here? in the sense that yes, we all talk about it, but couldn't actually be the opposite where the pressures do not really come up the way people believe them to be. >> i am still worried about deflation, especially considering where europe is and all the treasury curves around the world tell us what we should worry about, and that is deflation. i am more worried about prices continuing to be under pressure and us following under a withese type mentality
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persistent deflation rather than inflation. i know there is a lot of money out there, but the reality is, it is tough to gain any traction on the inflation front. mentioned, whats mentioned do you think will lead us there? groups i mean which would you be investing in an particular? sales growth is so rare, technology have it, so you have to be there. i would substitute consumer staples for utility. utilities had a great run this year, but i think that run is largely over. staples of a little yo lower yields, while i am concerned about deflation, i think the market will give more concerned about inflation as we get into 2015. it is important to have a hedge against that. i would love to root for the financials. i would love to tell you financials are going to work. sadly, it is probably not the case this year. >> one-story we are all waiting
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ipo.s the alibaba we are looking at the trading debut of september 16. your firm part out an interesting survey of investors that said only 43% are actually planning to buy shares, but 88% think shares will rise in the first month and 64% think it is a long-term investment. explain to us the disconnect between everybody thinking this is a good investment but not actually wanting to buy in. >> a fascinating study to see the results from because what we found out as people uniformly or almost uniformly agree it is a very good company, well-run margins,great profit checks all of the boxes. yet have to not want to buy it. in order to make that ipo successful, to make the tent as big as possible, you have to pull in a lot of people who have not historically bought chinese companies, who may be looking at that and say yes, i understand why it is a good investment. they would be comfortable with the business strategy, with the veryh ross fax, it was -- with the growth prospects.
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it was very wise for them to push back. it will be critical to the ipo. >> we're talking about a serious topic here, guys. let's liven this up a little bit. nick, you might appreciate a story like this. the oxford american dictionary, with new words that they added to their lexicon because we are just creating new words every day with social media, things zeballs -- ama >> i say amazeballass. >> what does that mean? >> that means amazing. >> why not just say amazing? what is smh? >> i don't know. >> oh, shaking my head! >> the lot on twitter. >> do you talk like that, nick. >> i try not to. note that't put out a
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was about 500 words this morning on ufo's that i was thinking what on earth is nick thinking? >> i became intrigued from when ng, andegan to be a thi it was right after world war ii during the cold war. you have to think about bubbles and things all the time in the market, so it is not exactly engender -- imagine what it would do now? >> you know what the response to that is? omg. >> or omfg. i did not say anything! i did not say anything! [laughter] ourng up, we will continue coverage by speaking with a franchisee who is going toe to toe with the corporations. plus, remember last year we asked mcdonald's and ceo don thompson defeats fries? now his rival says they are
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getting rid of its healthier satisfries. so icannot give up fries, will go extra on the treadmill. ♪
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>> burger king is dropping its lower fat fries, those satis satisfries.ose but sl wong joins me. i know you have been on a fast benefit wong, i know you have been on the fast food beat. >> i have tried them, they do taste different from burger king's regular fries. it is not have as much oil, which is how you get a lower fat, lower calorie product. >> did you like them?>> consumers would stick with the traditional -- >>. fries. working at said they would only keep this on the menu so long as people would buy them.
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they knew this was not going to be permanent no matter what. >> right. so this is actually burger king's attempt to meet consumers halfway. the fast food chain for some time now has been trying to improve their image by offering healthier options. vegetables.i, rather than making kale, we will offer a healthier fry. and they took two years to develop the product. earlier,as saying look, good on burger king to try to offer this healthy alternative, just like mcdonald's is trying to wither salad, but the fact of the matter is consumers are not buying them. salads are only like, 3% of sales for mcdonald's. >> indeed. burger king has said about 100 million guests have ordered satisfries, but franchisees have
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been able to decide whether they wanted to keep order them. there will be about 200,000 in north america that will still sell them, but they are mostly gone. they will be phased out. >> it sounds like who knows where the last one third of those are going to go. vanessa, thank you so much for joining us on the disappearance, slow disappearance on satisfries from burger king. staying with fast food on a very different issue. mcdonald's franchise fight continues to heat up, particularly in california where new legislation is being pushed in front of the state a family that will give rights to franchisees. as its owners and franchise groups are speaking out against this bill. in a statement issued yesterday, the international franchise associations as the california legislation is "a trial lawyer's fantasy that will result in countless frivolous lawsuits that will only add costs to consumers. at the same time, and have the potential to lower the value of our small businesses, a earnedise owner's hard o
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equity at risk." catherine slater of carter, thank you so much for joining us this morning. what is your response to this statement? >> good morning. it is nonsense. we are using almost word for word a law that was applied to the auto dealer franchises in 1973. this law has been tried and tested and has been on the books for decades. ok. basically found like what you're saying is you are harking back to what has been in place before for other industries, but when you talk to other franchisees, disagreemany of them with what you are pushing through. i want to play for you what robert wicca has to say about this on the program yesterday.
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-- thisis in all rb nrlb ruling is about getting members. if they were able to unionize ar industry, it would be over hundred million dollars that they do not have now, so it is about the money. it is about the business model, and i am not saying that the union is good or bad. if you are a coal miner, you probably need a union. whether or not one shop as opposed to another shop is to be unionize because of working conditions, i don't know. >> that, is of course in relation to the nlrb decision, but we are all talking about the same issue, which is franchisees and the ownership and relationship with the franchisors. what did you make about his comment about the union? >> i think he is mixing apples and bananas. the nlrb ruling really has nothing to do with sb610.
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it came out of a bill we started ab2305, and it, started out-- 610 asking for good faith and about treatment for franchisees because currently under current law in california, the franchisors are the judge, jury, and thattioner of everything happened to a franchisee. nlrb ruling assembly -- interim process. we will see what happens, but 610 is about being able to have the rights to assemble and meet with other franchisees without having a corporation there.
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>> and you say the corporation purposely, and in your dealings with mcdonald's, have purposely sort of controlled your operation so much to the point that they leave you with small margins. that is what has been going on with greater and greater frequency in the industry. i started in this industry about 35 years ago, and now it is completely different, so as the corporations turn their attention more to wall street , theyay from main street have forgotten about what it takes to run a business and to be able to get margins for your own business. franchisees are told this is their own business. >> kathryn, it sounded like when we were reading through your post you recently wrote, it sounded like you were in support of the nlrb ruling, which would
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in fact consider the franchisee and the franchisor as one joint company. wouldn't you be against something like that? >> you know, what i was attempting, perhaps clumsily, to say is that as appropriations have gotten more and more -- as corporations have gotten more and more involved in the minute to minute operations of the franchisees' business, this is a logical, evolutionary outcome. i do not really have a position on it. time will tell. thank right, kathryn, you so much, kathryn slater-carter, mcdonald's franchise owner, thank you for joining us. we will be back in two minutes. ♪
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>> time now for global outlook. situation in iraq. estimatedon says
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20,000 refugees stranded on a mountain near iraqis border with syria, a team of marines and special operations forces went there and found only about 4000 remained. the pentagon says u.s. airstrikes helped into the siege.the another night of violence in a st. louis suburb. demonstrators were protesting a shooting of an unarmed black teenager. police responded with tear gas and smoke bombs. protesters have demanded that police released the name of the officer involved in the shooting. that does it for today on "in the loop." tomorrow, economist and harvard law professor feinstein joins us. that is tomorrow at 8:00 a.m. eastern time right here on bloomberg television. ♪
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>> it is 56 past the hour, which means bloomberg is "on the markets." i am scarlet fu. we are 30 minutes into the start of the trading day, and u.s. stocks may continue to build on recent gains. since last week when the s&p 500 closed at a two-month low. points,als gaining 15 points and present. -- .1%. economic data shows jobless claims rose more than economists anticipated. above 300,000 since late june.
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atman bonds also rallying one point. the yield fell below 1% for the first time ever. certainly putting pressure on the european central banks to perhaps add stimulus. i'm xgrid is also lower, bringing its losses since june 20 two almost -- nymex crude is also lower. we have got so many geopolitical issues to sort through. iraq, the middle east, of course russia and ukraine. none of that seems to really have much of an impact on crude oil. why is that? >> it is important to remember that we did have a bump and oil back in june. even then, we're looking at $1.07 in the u.s. the difference is in the past several years, we have had this huge surge in reduction here in the u.s.. that is about 3 million barrels a day. >> shale fracking.
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>> exactly. that is about 3 million barrels. >> what about the demand picture? the u.s. is doing well. >> china is not the global sponge that it used to be. , the international agency has been cutting its forecast for global oil demand growth, so you have got this extra capacity on the supply-side. you have got less than spectacular on the demand side. you have got a stable, muted market. >> on top of that, i cannot help but think it has been a quiet summer in terms of the weather. there have been no significant hurricanes that i can recall, and that tends to be in it around this time of year. >> it could come a little later. >> so let's not get too ahead of ourselves. >> exactly. >> gotcha. when do people say there will be a noticeable increase in
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demand? >> demand is tricky. i have not heard too much excitation on demand. you do hear more people talking about well, what is going on with supply because it is the u.s. going to be able to sustain this pace of growth, is the off-line goingg to last to start a comeback as these tensions ease? then you can start to see prices go down. on the other hand, u.s. production peters out, you can see prices go up. >> what about opec? are they pretty happy with the way things stand? >> opec countries, saudi arabia needs about $90 per barrel to balance their budget. opec doesn't have as much market power as it used to. the world needs it less than it used to because u.s. and canada has a lot more. >> all right, keeping and i out
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for us on why the world is awash in oil. you so much. we are back on the markets went to begin -- once again in 30 minutes. "market makers" is up next. >> sales are stalled in 6000 workers are losing their jobs with cisco. you'll hear from the ceo john chambers. >> lights out in atlantic city. how the resort town has gone from gambling mecca to mess. -gen, thehem the post generation after the millenials. likely to change the way retail and tech do business. it is "market makers." i am erik schatzker. >>


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