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tv   Bloomberg Best  Bloomberg  March 5, 2016 3:00pm-4:01pm EST

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francine: coming up on "bloomberg best," the stories that shaped the week in business around the world. market watchers parse the latest u.s. jobs report. >> this report under the headline is actually disappointing. francine: the debate over digital privacy intensifies. >> it really is about how do we access evidence everywhere? ted: there is not a middle ground but i know of that requires apple to go to work for the government. francine: plus, exclusive insight from alan greenspan and ray dalia on the u.s. economy and global markets.
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ray: you are probably going to lose. francine: and the world's top automaker at the geneva auto show. all this, plus the week's most revealing charts coming up on "bloomberg best." ♪ hello, i am francine lacqua. welcome to "bloomberg best," a weekly review of the most important business news, analysis, and interviews from bloomberg television around the world. let's take a day by day look at the top headlines, starting at a bold policy step on monday from the people's bank of china. jonathan: the big story is the chinese central bank cutting the reserve requirement ratio by 50 basis points to 17%, reducing the amount of capital that banks need to hold in reserve.
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this hot on the heels of one of the biggest months of new credit growth in china. is that a story here? enda: you are completely correct. this is both a significant surprise and a significant move, especially when you consider the amount of liquidity they have already pumped into the system. in the near terms, it will add to credit growth in china, and i guess that will help the economy grow in the short term at least, i think the bigger picture, you have got to wonder what signal will ascend about policy maker'' confidence in china right now, and it comes at a time when they are suffering from record capital outflows largely because of downward pressure on exchange rates. this will not help that cause, and if anything, they will prefer the pressure on china's foreign exchange, to help spend money to prop up the oil. it is a real bounty to what is going on here. in the near term, this is a bit of a sugar hit for the economy, sure, but the bigger picture, this might cause bigger problems going down the line. that is a bounty act that the
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pboc has going on. david: what signal are they sending? enda: we do not have the picture because data is always distorted early in the year because of the lunar new year holiday, so we do not have a good read. we have not had the big indicators on the key parts of the economy yet. they will come out in the coming weeks. what we have had are some private readings on the business conditions and business confidence. they have all disappointed. so the mood music is china's economy has not gotten off to a good start this year, and when you see policymakers take a move like this, and perhaps suggests that they are not especially confident either. emily: apple and the fbi have been testifying on capitol hill. dir. comey: we see it on isil's efforts to reach into this country and using mobile messaging apps that are end-to-end encrypted, task
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people to kill innocent people in the united states. that is a huge feature of our national security work in a major impediment to our counterterrorism work because even with a court order, what we get is unreadable. emily: we're joined now from d.c. by new york county district attorney, cyrus vance. what is your thought on the proceedings as they happened today? mr. vance: the inability of law enforcement to access devices where a judge has determined that there is evidence in those devices that may relate to a crime, whether it is murder or a sex crime, is having a big impact on our ability to do our job, to protect our constituents, and is having an overall negative impact on public safety. we really ought to push rapidly for a federal legislative solution to this issue. i believe that the twin interests of privacy in public safety can be balanced. i do not think it is acceptable to have these devices, knowing that they contain information that is so valuable to protect the rights of victims to simply be off-limits because of the technology companies deciding they wanted them to be
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off-limits. i think congress needs to step in, provide the balance that has now been taken away with the recent moves by apple and google, and that is where i think we need help. vonnie: let's turn to the race for the white house and the results of super tuesday, which was yesterday. it is still yesterday for megan murphy, who has not slept all night -- literally. on the democratic side, hillary clinton jumped out to a big lead in the delegate count. donald trump winning seven states and taking a considerable lead. the question is -- how to the -- how do the strategies change now? we are now heading into a winner take all zone. megan: the strategies change ready radically and this is why. -- changed really radically and this is why. we expected donald trump to do
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well last night, and he did. we did not expect ted cruz to do as well as he did. we expected him to take texas but he also got oklahoma and alaska. and marco rubio really had a tough night, so the establishment eying him, thinking he would have a stronger night, they are now left with this option of -- do we start to think about getting behind donald trump, or do we have sitting senators, sitting lawmakers, sitting governors saying, hold on a second, we need to put all of our money, all of our firepower behind a marco rubio or even a ted cruz. the problem is -- marco rubio has not shown he can win a state. he won one state last night. minnesota. mark: how beneficial is it that hillary clinton probably now can sit back and start to plan ahead to november? is that to her advantage? megan: it is beneficial to her that she can try out different strategies. make no mistake, bernie sanders
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has a lot of money and is going to stay in this race to keep making his message. jonathan: because the former ceo of chesapeake energy has been indicted on a conspiracy charge, the u.s. government says they orchestrated a scheme between two large oil and gas companies to not bid. we have got the personal story and the company story. stephanie: they are intertwined, which is how aubrey got himself in a pickle to begin with. tina: he built his company from nothing to the second largest producer of natural gas in the united states, all behind exxon. he has been really the public face of this gas for so long, that to see him face these charges now is an interesting turn of events. vonnie: breaking news now, former chesapeake energy ceo aubrey mcclendon dead, killed in a car crash in oklahoma city. the man was indicted yesterday and u.s. prosecutors said he was allegedly involved in bid rigging. he had issued a statement that the charges were wrong. the oklahoma police are saying the car he was in a loan, a chevy tahoe, was going faster
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than the speed limit and was engulfed in flames. we will continue to monitor this story. roger: he was one of the real leaders in what has become the shale revolution, and we all know that the degree to which -- the degree of turnaround in u.s. production, driven by technology, not by government or anything else, but by technology in the private sector, has been one of the most remarkable economic developments in 100 years. vonnie: a tribute this morning, a longtime friend of aubrey mcclendon, and i quote -- "this is not only a heartbreaking day for me but a sad day for all oklahoma. i had the privilege of being his partner for 23 years." he is now ceo and president of sand ridge. what happens with tom ward and
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sandridge energy now? david: the case against mcclendon will be dropped because he has passed away. the doj has made clear that the investigation into this matter continues. sandridge was not named in the indictment the other day specifically, but bloomberg reported they were the other company that mcclendon conspired with, allegedly, so we can expect that the investigation will continue. we will have to see whether there are other indictments that come from this. erik: 242,000 -- that is the number for the month of february. you have to see a 40,000 increase over at least a beat. the unemployment rate is at a steady eight-year low of 4.9%. if you include revisions for the month of february and january,
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job creation is on a 228,000 average monthly pace, matching what we saw in the year 2015. tom: are these good jobs we are creating? bill: that is the question, i suspect some of them are not great jobs, some of them are minimum wage and a little bit higher. the average income of american workers is proceeding higher but not at a very rapid pace. i noticed that the hours worked didn't increased. yes, the participation rate went up, and i think the argument would be hardened by that because it keeps going up, and that means more and more people are going back, and reinforcement takes pressure off of their phillips curve and their taylor model, so it is not exactly a robust model from the standpoint of a hike. it may be a robust model from the standpoint of increasing economic growth, which i expect in this quarter to be about 2%. alan: this report under the headline is actually
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disappointing. one of the numbers i look at is total number of hours worked, aggregate numbers, so despite a big drop at the top level, the 242,000 increase, the workweek declined, so we saw more people come into the labor force and more people working fewer hours. that could be an interesting development, whether it be more worksharing, whether people's work hours declined. unless we see wages data, that up, that means their incomes also will not be keeping pace. francine: we will have much more on the apple privacy case a little later in the program. exclusive interview with u.s. attorney general loretta lynch and apple's lawyer ted olson. coming up on "bloomberg best," a look back at some of the week's most important company news. ♪
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francine: welcome back to "bloomberg best." i am francine lacqua. we learned this week that barclays bank will be closing up shop in africa, and we heard the ceo say the monetary markets have finally hit bottom. let's begin our roundup of the week's company news with one of asia's largest automakers. rishaad: nissan shares are up the most in seven years. this is news of the biggest share of buyback and it is worth $3.5 billion. craig: this is as big a buyback as you have seen among japanese automakers, and it is also for nissan a little bit of a departure from what it has been up to these past few years. this is the first time the company has bought back share since 2011.
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this is a bet by carlos ghosn's board that these are the fears of the company sort of hitting a peak are maybe overdone, so you are seeing a vigorous wants to date from shareholders bidding up the shares that have really been battered up to this point this year. anna: barclays has said it will sell down to 62.3% interest in its african operations. at the same time, the adjusted profit before tax is 5.4 billion pounds. manus: that compares to analyst estimates of 5.6 billion pounds, let's get straight to the ceo. this decision to sell the african business, the 62% stake that you have there, can you talk us through the reasoning behind that because i can hear the clamors from the market saying this is a fire sale, you'll to do it over it period of time. have you had any conversations, any interest shown in your assets? jes: it is a very difficult decision.
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barclays has been in africa over 50 years. barclays africa is a great business. we have enthusiastic colleagues. we are across the continent, so it is a difficult decision. as you noted, we own 62.3% of barclays asset shares. on the other hand, in terms of how the regulators think about it, we own 100% in terms of the liability. look at the capital charges we have come of funding charges, etc. it is very hard to own a 62% of a business where you have 100% of the liability. guy: glencore ceo ivan glasenberg striking an upbeat note, saying prices have bought in. why does he think the bottoming out is now happening? why does he think it will get better from here? john: through the whole of last
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year, we saw manufacturers de-stocking. they could feel metal prices going down. no one wants to hold metal as they are then going into products, so they destock as fast as they can. when that cycle ends, and we think it is ending now, pricing starts to lift. we have seen evidence of restocking in china, maybe not as fast as has happened in past cycles, but it is still happening from what we can see. guy: how much more juice is there in the tank do you think on the upside? john: they say never sell a bull market. it is really easy to sell this stuff too early. looking at glasenberg's results today, glencore has done really well. it has managed the downturn exceptionally, in my view. we see them pulling the levers left and right at times. so it is not that bad. it is a slightly different kind of growth, consumer, oriented growth rather than industrial growth, but it is still there. stephanie: sports authority filing for chapter 11. their issue has been the have no online presence, they do not
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have a growth strategy in a category that has seen the biggest success story among apparel. joe: there is no excuse. when you think about sports authority, it has to be a failure of execution. david: as stephanie suggests, it is remarkable, in 2006, it was bought by private equity. dix and sport authority have the same number of stores, they are about even. since then, dick's has hundreds more stores. they've got twice the revenue. what happened to sports authority, and can it be saved? joe: management and execution. dick's has done a phenomenal job. as stephanie said, it is an incredible.
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if you are in the sporting goods area or the fashion sports areas, you have to hit a home run at this point, so it is not just not fathomable that these guys would have such a hard time. rishaad: this week, alibaba announcing plans to purchase caixin, a south china post, eyes on another media outlet. in the beijing business publisher, tell us about this magazine, and tell us about how it is perceived in beijing, first of all. tim: it has got quite a good reputation. the founder comes from another magazine, which is still publishing. she left about five years ago to start up "financial news." it does have a weekly magazine that is well-regarded in the publishing house with all the publications. what is interesting is in the last year or so, they have been moving into areas of financial data. rishaad: this is not unusual for alibaba. they have previews when they needed it before. the question is, why would you add another publisher? tim: with this publication going after a media empire in china,
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they are actually trying to tap into more than just publishing, but the financial data. in recent times, they have announced that they are moving into deals with other organizations. they bought basically a credit rating agency. they have done a deal with a company that does financial database and financial resource, so caixin ish, moving much more beyond simply straight text news and adding data and functionality into the offering to their clients. vonnie: herbalife shares tumbling today after the company said it overstated the growth of its customer and distributor base. bloomberg news contributor craig giammona, what are the main takeaways? craig: they made a mistake. they put bad numbers on their conference call. they are saying it was a database error. it is embarrassing. i think it is a psychological narrative. -- negative. the shares really took a hit when it first came out. people are telling us is not a gaffe issue.
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they are not restating earnings, and it does not appear that this feeds into the bigger accusation, which is it is a pyramid scheme. not good, it is a bad mistake, but not a major problem as far as numbers are concerned. mark: what is bill ackman thinking today? he of course has been shorting the stock. he says it is a pyramid scheme. what are his thoughts? craig: we have not heard from ackman himself today. obviously the stock is down. what we are hearing is this does not feed into the idea that this is a pyramid scheme. it is a mistake. some were saying 70% when it was 30%, 16% when it was actually 3%, so not good. it is certainly bad for perception, but this does not seem to be feeding into ackman's main accusation. ♪ francine: you are watching
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"bloomberg best."
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i am francine lacqua. warren buffett released his warren buffett released his annual letter to berkshire hathaway shareholders this week. we analyzed has letter on bloomberg tv and spoke with several other sages about coping with unsettling levels of uncertainty. matt: warren buffett's annual letter went beyond berkshire's nuts and bolts and into the state of presidential politics. he said the rhetoric on the campaign trail has been negative. "as a result of this negative drumbeat, many americans now believe their children were not live as they themselves do. that view is dead wrong. the babies being born in america today are the luckiest crop in history." that is a strong statement. noah: it was quite forceful. we have seen this kind of language from buffett in the past, but he went above and beyond in this year's letter to
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discuss why he thinks america is so great, and it really boils down to the fact that we have a capitalist system that keeps marching towards more and more productivity. for buffett, that is just the key factor. he said basically to shareholders, but he is speaking to a wider audience here, that we should put aside what politicians are telling us about the state of the economy right now because over a much longer time period, america really has worked out for society. betty: so he avoided, though, endorsing anybody in the letter. noah: yeah. i think there's a chance that people would have been quite mad if he did. the letter really was not the place to do that, but you are exactly right. he has been wading into politics. he has made it clear that he supports hillary clinton and expects her to win the campaign. but the subtext for the letter, and i spoke with several investors over the weekend, the
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subtext really was that he was making some political statements here. francine: given the volatility we saw in chinese markets, are you still a buyer of chinese stocks? do you think you understand what the exact end game from china authorities is? mark: we are a buyer very selectively. this is a time in china and in fact, all emerging markets where you have to be very selective, so we are a buyer of select chinese stocks, yes. francine: what is your take on emerging markets? they are going through such a tough time. you have people saying look, but they are cheap, but there is no growth coming in from anywhere. mark: it depends on where you are looking for. i just came back from brazil, for example, and people are really just down and out. they are very sad. that is a wonderful time to be buying when everyone is very negative on the country. brazil is not going away. they are going through a lot of reforms so i think that is something to look at. francine: what exactly do you want to buy in china, around the world?
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you are the ever optimist. there is a point where you must think, "this is going to turn badly." mark: we love this time of the markets because things look so bad. it is usually the time to be looking at these bargains. the things we are looking at are those strong consumer-oriented companies, companies that have a good market share, are growing their market share as a result of services in the industry. they are buying their competitors. their competitors are going out of business. those of the kind of companies we are looking at. david: i am curious as to how you're making your capital allocation decisions at this point, given all the turbulence in the market. david h.: the turbulence has been good for us because prices have been moving a lot more erratically, so as the financial sector, you just breathe the
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words "negative interest rates," and that itself causes a decline in a lot of these financial service companies. and it is true that in the short term, especially if you are a commercial bank, low rates and negative rate do not help lending spreads. however, that is not the whole story. you have increases in loan expansion, lower costs, lower loan losses, and combine this with the way the prices have been slammed since the beginning of the year, we think there is great opportunity, especially when you consider that most of these large banks are in a stronger capital position than they have been in a long, long time. so you have a much safer balance sheet, lower loan losses, lower costs, better credit expansion, and yet you have a collapse of these prices, mostly due to this fear of negative interest rates, which we would see as more of a transitory factor. stephanie: where is the opportunity to make any money?
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david h.: through cost cuts, and through credit expansion. yes, the profits and fees as well. on the loan spread itself, which is one major channel albeit where banks make money, that is david h: through cost cuts, and through credit expansion. yes, the profits and fees as well. on the loan spread itself, which is one major channel albeit where banks make money, that is going to be narrower, but it is not going to be narrower forever, into perpetuity, that the market seems to believe, it will be narrower until the central banks keep the momentum going and jumpstart some of these economies. francine: are we going to see consolidation in the banking sector in europe because there has been so much pressure on some of your rivals? sergio: i think in general, the european banking system has a huge overcapacity. the problem is really to create an environment in which we learn from the mistakes of the past, that not every bank should try to copy the other but rather,
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every bank has to find his own way to live through the next phase. but that means focusing on what you stand for, what you are good at, being by geography or by client segments. tom: your competitors are costs for the knowledge segment and costs for the knowledge segment and for investment banking, i would particularly note mr. cryan at deutsche bank, very strong language. what everyone wants to know is how are you going to retain your intellectual and your trading and your banking firepower? what are you going to do in the next six months to keep that talent? sergio: the investment banking, because this idea of one-stop shop is dead, i cannot really buy by the story that people are commenting on competitors exiting. you're are going to cap the pick up the market
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share. actually, i think there is very little to gain if you do not have the full capacity, and also in certain businesses, the reality is that capital requirements make certain businesses structurally unprofitable. therefore, i think you can retain an investment banking franchise and expertise, but you need to pick up which segments you want to be good at. francine: coming up, more expert insight on financial markets and economic policies from alan greenspan. plus, critical issues of cyber security that have apple at odds with the u.s. government. that is all straight ahead on "bloomberg best." ♪
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francine: welcome back to "bloomberg best." i am francine lacqua. among this week's top interviews on bloomberg tv, an exclusive conversation with alan greenspan, who led the u.s. federal reserve for 20 years. my colleagues tom keene and michael mckee sat down with him
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in washington this week and discussed a growing trend in monetary policy. that is negative interest rates. alan: up to a point, negative interest rates have no effect. why? because people are willing to accept, essentially, a negative interest rate to hold the claims of these particular countries. that is going to change if we go on indefinitely. somebody is going to start to move. we do not know what happens when that happens. michael: is it dangerous, do you think, a dangerous experiment first so many central banks to be doing this? does it call to mind the currency policies of the 1930's? alan: i do not know if the word "dangerous," but it is clearly nonproductive. to have this type of situation is a distortion. the big argument about excessive low interest rates for a very long period of time warps real
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investment. clearly, if you have negative interest rates, people who can raise funds with negative interest rates, their capital investment projects are going to be warped. tom: the corporations you follow with your data analysis, are they acting in an unhealthy or improper manner because they have a free lunch from low interest rates? alan: the problem basically is, and i'm sure they're doing it because you can tell what happened as the qe's opened up and the price-earnings ratios rose, we are getting signals, which are distorted because interest rates are too low. people are investing in long-term assets when they do invest in long-term assets under the mistaken view as to what the rates of return have to be.
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and that means you are going to get misuse of capital. michael: the markets these days seem to be telling us that we are in trouble. are we? alan: yep. we are in trouble basically because productivity is dead in the water. francine: in another bloomberg television exclusive this week, bridgewater associates founder ray dalio shares his thoughts on the fate of the global economy with erik schatzker. ray: you asked me about investors, so i'm trying to back to what investors should do. erik: what you think is appropriate, and what they should do. ray: i think of the average investor, most everybody, do not compete against pros like ourselves or other people. they are not making tactical asset allegations on the market around in the markets because you are probably going to lose. you have to have a balanced portfolio. in other words, think about how you will get a balanced
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portfolio. what you know is that asset class as a whole over a period of time will outperform cash. that is the thing you can be most comfortable with. if they do not, then you have a depression. the only time that has not happened. to know how to achieve a balanced portfolio -- and that is a whole other subject i do not know if you want to go through. if you are talking about tactical debt, in other words, i could come on the show and say, "i think this is good," but if i come on a month later and change my mind because something is -- has happened, i am going to mislead people. so the tactical bets i do not think are going to be helpful. i would say that we are in an environment in which it is very important to have a well diversified -- and that will include assets like, to some extent, maybe a little bit of gold in your portfolio. what can i tell investors? try to achieve balance in various ways -- -- that is a whole subject on how to do it -- and also, i think gold at 5% of
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your portfolio, 5% or 10% of your portfolio under the circumstances would be also a prudent thing to do. prudence is the important thing to do. the reason i am also referring to that is we have a situation where debt is money. we have a fiat monetary system. so we are having problems as the central banks operate. think of it as another form of cash. when cash has 0% interest rates for less, think of it as one of those possibilities in terms of, how do you create diversification? francine: this week, the house judiciary committee question representatives from apple and the fbi over their dispute of digital privacy and national security, and we were out looking for answers as well. "bloomberg west" anchor emily chang doug deep into the debate -- dug deep into the debate with
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the former nsa director, apple's lawyer, and the attorney general of the united states. keith: in my opinion, the question is not "who is right" but "how do we solve this so we have both?" protection of civil liberties and privacy, and how do we ensure our security as a country. emily: is it possible to have both? keith: all things are possible. what i would say, get the greatest minds in industry to work with the government. it could be laid out to the american people. emily: do you think apple is being arrogant? keith: i think there is a lot at stake. i can see apple's concern saying if you do one, it is a gateway to many. i can see the fbi's concern, if you do not do this, we will have a problem in the future. that goes back to the beginning. emily: if apple does this for the u.s. government, who is to say they will not do it for the chinese government or the russian government? keith: if we come up that we
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-- come up with a solution in the united states, a balanced solution perhaps that is the , solution that we can help apple, facebook, and google in europe, asia, and other places. we have had too big a disconnect between industry and government. i am not for a backdoor. i am for a transparent front door that tells the american people first how to solve this problem and then second, take it to our allies and say, is this an international solution that we can work with? emily: you say there is a middle ground between apple and the fbi, and i would love some specifics. if there is a middle ground, where is it? ag lynch: the middle ground between apple and the fbi, or law enforcement and any company, is the court. that is who we go to to arbitrate these disputes. there is a difference of the opinions for what the law means, we go to court, and that is what we think is the current state of affairs. that is where we think this dispute is going to play out.
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however, as we discussed, there is the middle ground of discussing this in the larger forum of ideas in our country. having a discussion about what it means to have both privacy and security. we do it all the time. people expect it of us. we can do it in this case also. emily: but facebook says there is no middle ground that does not put everybody at risk. it is not just about one phone -- it is about every phone, and it is about the future. how do you respond to that? ag lynch: in the present, we see how we do in fact balance privacy and security every day. until recently, apple was able to comply with our requests, and they have some of the strongest security out there, and we have not seen that in those cases, either. i think we have seen it done. we have our finance companies, our health care companies, all important sectors of the economy depend upon security to protect all of us, every single one of us, but they need to manage that data to also keep us safe and
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secure. emily: what does a compromise look like to you? how does this play out? ag lynch: it is about -- how do we access evidence anywhere? we are applying the same principles as if we are trying to go into a home and look at certain kinds of papers. we go to a court and say there is a narrow set of evidence that we need, and here is where it is located. in this case, it is important to note that the customer, the actual customer of the phone is the one who has requested apple's help. so one way to simply resolve this is for apple to work with its own customer and work out a way to resolve this issue. ted: the government does not have the authority to require apple to redesign its iphone to disable the characteristics that it put into the system, which is what its customers wanted. there is no legal authority for that now, and one judge has only -- already held that. so there has to be some discussion about how to solve this problem, if there is, but you cannot conscript a private company such as apple to do something to change its products.
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we have civil rights to prevent that sort of thing. emily: i spoke with attorney general loretta lynch yesterday, who said the middle ground is the courts. let this be decided on a case-by-case basis, as it already is, in the judicial system. under any circumstance, will that satisfy apple? ted: i am amazed that she would say that. it would not solve anybody's problem. you might have one court going one way and another court going another way. fbi director comey himself yesterday said this is a problem. he said this is one of the most difficult problems, or the most difficult problem i have ever faced as fbi director, before that, he was deputy attorney general. this is something congress needs to debate one way or the other. if you do on a case-by-case basis, you are going to have different outcomes in different
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cases in different parts of the country. director comey says they have 12 or 13 other cases in which they are trying to do this in federal courts. the manhattan district attorney said he had 205 iphones he wanted into. you can imagine, multiply that by every jurisdiction in the country, a case-by-case solution is no way to go about this at all, and i am amazed that the attorney general would say that. emily: is there a middle ground? because it sounds like apple is saying there is not. ted: well, there is not a middle ground that i know of that requires apple to go to work for the government. we have a constitution. the constitution does not allow the government to conscript private citizens to invent products or to change the products that they have invented in order for the government to look into the product or to cause the product to do what it wants. ♪
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francine: you are watching "bloomberg best." i am francine lacqua. the annual geneva motor show is usually a selling platform for manufacturers to introduce new car models and talk up the hottest auto concepts. but this year, the shadow of the vw emissions scandal also hung over the event. ryan chilcote spoke with many top auto executives in geneva, starting with volkswagen's ceo. matthias: the investigations are going on, and we are in contact with all of the authorities, especially in the united states, so we're looking forward to have results as soon as possible. ryan: there is an idea that you will come up with a plan by march 24. are you confident you can come up with a plan that will satisfy u.s. authorities in a month's time?
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matthias: the dialogue makes some progress, so we will see what happens during the next weeks and months. ryan: where are you going to find the money to pay for this scandal? you have already said that some of the money that you have set aside will not be enough. you talked about the need to reduce some of the models that vw produces, cost-cutting efficiencies. where are you going to find all the money? matthias: a very interesting question, but you can suppose that volkswagen is a company which is able to handle the money, and one of the most important things will be to set priorities to the things for the
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future, kind of product program and kind of autonomous driving, so we will do that and that will be a progressive issue. ryan: does what we have seen with vw and the whole admissions -- the whole diesel emissions scandal add more urgency into the push for electric cars? carlos: we attract attention on the fact that -- even though the regulators are trying to do the best in order to say what is acceptable and what is not acceptable in terms of emissions, there will always be conditions that the regulators cannot regulate. also, if you really worry about emissions, the only solution is the electric car. you have zero emissions and nothing to measure. on top of this, as you know prop 21 has come to the conclusion that we cannot afford to have more than two degrees of the heating of the planet, and this means more and more cars.
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ryan: i am not suggesting you are predatorial, but does this present you with an opportunity? carlos: without any doubt. ryan: what is that? they will be strapped for cash if they worry about the fines that they may have to pay. carlos: i do not want to mention the competitors themselves, but what i am saying is the emissions have become a concern of many people, and a lot of people do not understand what is going on. this creates a space for electric cars. here you have zero emissions. karl-thomas: of course is all of the discussion about diesel and emissions is helping to think more and is moving toward electric cars. nevertheless, the majority of the market is still combustion engines, and that is why it is important that we also invest in combustion engines. and the gt has a three-cylinder very efficient turbo engine. ryan: to what extent is this an advantage for a company like
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like yours? karl-thomas: i do not intend to see the discussion and scandal as an advantage. ryan: not that you are predatorial. karl-thomas: it is an issue for the industry because it looks as if we were all cheating, which is not the case. we have invested tremendous amounts of money to do clean diesel and clean gas engines, and they are important for the future. and that is why i think it is not a good thing for the industry, not for anyone. ♪
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francine: as we wrap up this edition of "bloomberg best," let's take a look at some of the charts that tell the story of
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the week in business. mark: leonardo dicaprio is one to win an oscar. well done. i was thinking, "how can we make money out of mr. dicaprio? " how about this -- if you bought the s&p 500 in these years, you would have made money because the first year he was nominated was 1993, when the s&p rose 7%. and he was nominated for "the aviator," rising 3%. "blood diamond," up 3.5%. "wolf of wall street," up nearly -- up by 11%. if you buy the s&p on years that leo was nominated, you sat on gains. if you bought the scu -- s&p the year leo was gone, you lost. by the way, the year he won an oscar, it is down. long story short, buy when he is nominated.
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>> so for a long time it looked like the bank of england might hike imminently. the employment data is good, the economy has been approving, but things have really changed the last few months. this chart i saw from asset management, this is morgan stanley's measure of market-implied months to first hike. so for a long time last summer, the market was implying about 10 months to the first boe hike. the ecb was more around 30 months. since the start of the year, it has absolutely surged at the boe, so the market does not see a hike for about 50 months, more than the ecb with brexit concerns about the economy, people have really push back their timing for a hike. scarlet: costco posted second-quarter earnings that trailed analysts' estimates. the stock falling as much as 3.5%. let's see what the numbers say. costco is the largest warehouse club with more than $116 billion in annual revenue, but the strength of the u.s. dollar as
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well as falling gasoline prices are hurting costco's comparable sales growth. the white line shows gasoline, and all sales, which dipped into the red but has recovered to about a 1% pace. despite these headwinds, costco is expanding and has almost 700 stores. they are targeting new store expansion as the primary source of revenue growth. where is it all happening? costco has about half the market share on the west coast, so it is clearly dominant there. it has room to grow the south, midwest, and especially the northeast. expansion, of course, costs a lot of money, and costco's plan is to add about 20 new stores a year. here is how much it has increased capital expenditures spending. it is more than double the $1.3 billion five years ago. warehouse clubs like costco can rely on recurring revenue stream and that is members, because at
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the end of the fourth quarter, they had 26,000 new members each week. executive members pay the highest fees, and they make up more than 1/3 of costco's member base. investors are worried that these investors may not be showing a slowdown in spending. francine: that is all for this edition of "bloomberg best." remember, you can always find the latest business news around the world at i'm francine lacqua. thanks for watching bloomberg television. ♪
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