Before july 7. All 12 districts reported Economic Activity continued to expand since the last beige book. Characterized the growth as moderate. The other seven, modest. Boston and richmond saw a slightly slower pace of growth. Consumer spending helping to drive much of that growth come especially in car sales and tour is him. Consumer spending continued to increase at a moderate pace since the Previous Report with generally modest growth among nonauto retailers and moderate to strong growth in be cool sales and tour is an activity. ,or districts reported robust very strong auto sales with more optimism from all districts for the months ahead. This is interesting. Richmond mentioned that recalls were weighing on car sales while chicago noted an increase thinks to the recall. Other highlights, tourism activity increased across all districts. The same story for manufacturing. A different one for real estate. There is the beige book saying Residential Real Estate continued to vary by district. Mixed levels of demand. Better news on the jobs front. Labor Market Conditions continue to improve since the Previous Report with all districts reporting slight to moderate employment growth. The beige book consistently said jerry elin has been testifying to Congress Following the release of the feds policy report. Chair yellen. Yang yang joining us from washington. Thank you. Also from the fed, day two of Janet Yellens semiannual testimony on the economy. Today, she faced questions from the House Financial Services committee. Extensive analysis with peter cook. He is on capitol hill. And Michael Mckee joining me from the newsroom. Thank you so much. Peter, lets start with you. Is it correct to say that the honeymoon is now over . Safe betk that is a after watching the Performance Today in front of the House Financial Services committee. At the roughest treatment she has received so far from lawmakers. It started right from the start from chairman the chairman. He has been pressing ellen in the fed yellen and the fed for more transparency. He really dug in right away. Attentionl focus of of tension for he and other house republicans. Yellen pushed back saying it would be a grave mistake. The chairman challenging ellen to provide more information. To provideing yellen more information. Would you be willing to report to this committee on the matters of mutual concern that we are discussing and any agreements reached . Ati am not willing to report a regular basis in private conversations. With any agreements that were reached, that would be in the Public Domain. As far as our conversations how would it get to the Public Domain . If you dont report them, how o they get into the Public Domain . That was just a taste of some of the frosty moments between the chairman and yellen. What was really happening here is a sense that janet yellen will have a rough road ahead of her testifying in front of this committee. A lot more about politics and the tensions in the room. Michael mckee. Also standing by, the takeaway from todays testimony not much for those who have been watching, but what about investors . Everybody knows the type of behavior that the congressman exhibited towards the fed chair. Really what people want to know is, when will you raise Interest Rates . She posed a little sliver of daylight between the stated lower for longer policy in 2016 and what might actually happen up the economy keeps expanding at the rate it is. Here is what she said. The actual progress we see in the labor market and inflation theur general assessment of labor market could change that over time so there is no mechanical formula and no clear date. At this point, there is still if the economy keeps going the way its going, it might not be on hold. We talked about the beige book at the top of the hour. Does that reinforced the message . Not really. Some districts were moderate and some were modest. Whats the difference between those two . We know the economy is expanding but the beige book does not tell the way whole lot more than that. Its not something people are going to trade on. We do know that things have been getting better. What theyre really watching is the inflation numbers, the cpi and the jobs numbers. Michael mckee here in new york and from capitol hill, peter cook. Gentlemen, thank you so much. More breaking news this hour. General electric is in talks with potential acquirers about selling it centuryold Household Appliances business. That is according to people familiar with the matter. Ge has moved to revive efforts after an unsuccessful 2008 attempt. Electronics giant was waiting to wrap up its acquisition of assets. Ergy with that deal now signed, ge is talking to bidders for though goods unit for the goods unit. It includes appliances and lighting. It generated more than 8 billion in sales last year. 5. 6 of the companys total revenue. It makes it 12 billion in sales. Rupert murdoch wants hbo so badly he is willing to buy all of time warner to get it. His 21st century fox made an unsolicited bid of more than 75 lane dollars for time warner 75 billion for time warner. Time warner rejected the offer. Jon erlichman joins me from los angeles. Sweeney, head of north American Research for bloomberg industries. Derailment, thank you both so much. Bothntlemen, thank you so much. He said hbo was the holy grail that Rupert Murdoch had his eye on. Is that what is happening . A lot of things going on here. Hbo is a tremendous asset. Almost 2 billion of operating profit every year. In theous growth here u. S. And also internationally. , they are saying a lot of things have changed in this business on the distribution side. We have seen comcast make a bid for time warner cable. We have seen at t make a bid for directv. The distributors have gotten much stronger. It Rupert Murdoch stepped back and said we need to think about our Competitive Position going forward. Jon erlichman, apparently mr. Murdoch sees this as initial rejection. How soon before fox makes a higher bid . There are a lot of moving parts. Fox is interested in pursuing this. On the content side, sports rights. Live sports these days, tnt and are places where you see both professional basketball and baseball. If you were to add those in with the various sports rights that fox already has, youve got a nice combination of both local and national sports. Youre at a time when a lot of people want to watch those sporting events on the go. They may have cable packages already and want to access that. Speaking of leverage, beyond hbo, i think its an important part of this deal. If not fox, who would be in the best position to make a bid here . The list is really small. This is an 80 billion plus transaction. One of the interesting things to really think about over the weekend, a lot of folks out to invaluable step back and say, do i need to be thinking about time warner . If im a google or an apple and ive already dipped my toe into the media waters over the years, here is an opportunity if i want to get big and to the content business and mary tech content. Marry tech with content. Talk to us about the regulatory risks here. Whenis happens at a time we are already seeing a couple of monster deals trying to get the thumbsup in washington. Comcast acquiring time warner that alsoch is a deal includes content because comcast owns nbc. You have at t acquiring directv. There is a certain logic that could be put forward that broadcasters or content players should be in a position to come together in a big way. There has been a lot of discussion about cnn. So far, because of the fact that fox is home to fox news and fox has made it known that cnn would not be a part of this transaction. They would sell that asset to get this deal done. Talk to us about how a deal would reshape the industry. Wouldd he thought it start a feeding frenzy throughout the media world. Is that possible . Its possible. We have been writing about it a lot over the past couple of months in response to the consolidation on the paytv business already. Balance of power is changing a bit. Its going to the distributors as they get bigger. That will probably force a lot of the content players to think about bulking up themselves. It time warner would be the big transaction. There is a lot of smaller that are very strong Cable Network companies but perhaps they might look at themselves and think we need to get bigger. Distribution . Ut its a huge factor. Think about the brands that fox has. In a world where they have to negotiate you have the best brands. Onesports one has been of the most organic projects theyve been working on. Jon erlichman joining us from los angeles. And paul sweeney from bloomberg industries. Thank you so much. We will have more on the story throughout the day including an interview with bob wright coming stock. Aking coming up, the federal debt outlook. A closer look at the longterm budget rejections released by the cbo. The Congressional Budget Office has released its longterm outlook for the u. S. Federal budget. It the president of the committee for responsible federal budget joins me now from washington. Welcome back to bottom line. Good to be with you. The cbo warns the u. S. Is on an unsustainable fiscal path. This is not news. What is news is the projections which detail the budget outlook for the next 75 years. How dire are they and what does the extended baseline scenario look like . Really important report because this is the time the Congressional Budget Office lays out not just the picture for the next 10 years, but the longterm picture. That is so important because we have the effects of the aging society and growing Health Care Costs that have real longterm repercussions. As you said, the news is not good. That is not new. Its something that comes out as a reminder to all of us. Where we are right now is the become twicecally the postwar average. The debt is growing and its going to be the size of the entire economy by 2036. You have a lot of troubling benchmarks along the way. Disability insurance running out of funds. The trust funds will be running out in a couple of years. By 2030, the combined trust funds for Social Security and Medicare Part a will have run out of reserves. There are so many warnings we need to be making changes. You look at whats going on here in washington and we are not making a bit of progress. Uconn republican senator, says the cbo report is a stark reminder of the urgent need for entitlement reform. You and i have discussed this for the past couple of years. Where should that reform start . The most important thing is those reforms start in sensible ways as quickly as possible. The longer you wait to make se texa necessary reforms they have to be made. The disagreement comes on how to make them. If you start gradually and target the reforms, you can actually change Social Security and medicare in ways that will wholy protect people depend on the program. In themake no changes, early 20 30s, you will see an abrupt on a 5 cut of all benefits. That should be avoided by looking at how to combine benefit cuts for people who can afford it. Onthere is also that salt the wound scenario. The higher Interest Payments will contribute to the higher costs of the entitlement programs. Widepoint out is a critically important the fastestgrowing , Interest Payments. It can be used for so many other things. The key to fixing all of that is definitely our entitlement programs. Social security, health care affected by the aging population and growing Health Care Costs. That will help get those Interest Payments down and you also need to look at the other side. A sensible tax reform that could competitiveness, growth and raising revenue. All of those together are a ay to deal with the budget. We have about one minute left. You believe policymakers still have time to act . I think the American People lawmakersmand that are giving them answers. People should read the cbo report. They need to talk to their policy and representatives and say, how are you going to fix this . The midterm elections going on now in the president ial election its such a high level issue. At the whole country will have to come to an understanding. What the game is, if people are more concerned about keeping them jobs been doing their jobs, how will this happen . Dealing with the National Debt is an integral part of growing the economy and helping the recovery and creating jobs and growing wages. The report lays out that because of our higher levels of debt, this poses a real risk for the economy, wages and jobs. Deal with those very real challenges of jobs and growth. Mcginnis my mcginnis joining us from washington. Thank you so much for your time. Up next, we get a look at trading as we go on the markets. The metal that has become a gold mine. Everything you need to know about the billiondollar deal for lithium. It is 26 minutes past the hour. A Bloomberg Television is on the markets. Matt miller is standing by with the latest details. Good afternoon. Lets get you caught up on where the markets are trading after everyone listened to janet yellen this morning. You can see gains across the board. 5 on the s p. One of the stocks were keeping our eyes on today is general electric. Latebreaking news here that the industrial giant is in talks with attentional suitors potential suitors. Ge is reviving its efforts to divest the unit. We are on the markets again in 30 minutes. More bottom line up next. Welcome back to the second halfhour of bottom line. Im mark. Thinks first thing with us. , at is an air conditioner coke bottle and a tesla have in common . Lithium. The company has agreed to spend over 6 billion to buy one of the largest lithium producers in the world. Alix steel joins me now. Every used in everything you buy your own. 53 of all lithium is used in rechargeable batteries. Power tools, ipad, tablet, electric car, you name it. Nickel to switch from a lithium ion. It is also used in glass. Bipolar Medication Committee for medication,ipolar defibrillators. 50 pounds is used in electric car. The only place i have heard about them, car batteries or in the phones. Ofmedication is a small part lithium, but its very profitable. The growth of the batteries coming up to talk about electric car market. 20 million electric cars will hit the markets. That could grow 1600 in the next 11 years. Where does it come from . Its recycled. You can mine it or you can find it in brine. You have the lithium sit in the sun 41218 months and it eventually evaporates and the material gets put into a concentrate. You purify it and then you are left with white powder that looks like cocaine. 35 comes from chile. There are four big producers we can look at. There is 13 million tons of lithium buried under the ground. Those are reserves. It is really hard to find and hard to get up. Am sitting here staring at you because i was like, wow, she did her lithium hallmark. Lithium hallmark. Lithium homework. Up. Rices have been going tonsut out a note of 5000 5,000 per ton. That is how much its trading around right now. The risk is to the upside. , it is aperspective relatively small market. We are looking at a few billiondollar market. The rapid rush to adopt the electric cars may be a little overhyped in some capacity. Half of what you pay for a tesla comes from the battery because its so expensive to buy that lithium. It takes 57 years or that car to wind up paying off for you. Obviously, elon musk is trying to change that. To huge factory he wants build. 17 of the worlds lithium could go into that accurate. Alix steel, thank you so much. Coming up, more on the feds latest report on the Economic Conditions around the nation. We look at how the west economy has rebounded from the firstquarter downturn. It is time for todays latin america report. Argentinas government dollar bonds fell. There is concern the country will not be able to reach an accord with holdout creditors that would keep it from defaulting for the second time in 13 years. Talksttlement caught have taken place. Bid urt ruling for forbid the country from serving bonds. With no further meeting scheduled, the prime ministers r is in brazil. The first president of the new Development Bank will be from india and the position will rotate every five years among brazil tomorrow russia, india, china and south africa. That is your latin america report for this wednesday. Its return to our top story. The release of the feds latest beige book report. Constance, welcome back to bottom line. You sat down during the commercial break and said, wow, this is a strong report. Ofevery area you could think is up. Manufacturing, lending, the labor market, tourism, hotel occupancy. Auto sales. Residential construction. The only area where we have a little bit of variability is in real estate, which is existing home sales and new home sales which, there is low inventory and their is some shortages there causing slowdown and variability. Higher Interest Rates are playing some role as well. The report said that overall Consumer Spending increased in every district. What is fueling this resurgence . Will it be enough to give us a look behind the feds stimulus curtain . If you were to do a graph of retail sales yearoveryear, you see that we had a dip down in the first quarter. Some of it is pentup demand that did not get executed in the first quarter, which is being brought forward to the second quarter. Some of it is what is happening in jobs. We had a strong jobs report last month. We have been fairly strong this whole year. People get employed and earn money and are more likely to consume. The report showing continued improvement in labor Market Conditions. Slight to moderate employment growth seen in all 12 districts. Or increased wages on the horizon . Would these wages be limited to the sector of skilled workers . Yes. That is a good question. Exactly right because its not going to be across the board labor increases. The thing the fed has to figure out is, at the margin, what is going to cause inflation . The shortterm unemployed workers . That yellen has indicated she thinks there is a shadow labor supply. In certain sectors, you are seeing increased wages. Orther its in Technology Biotech sectors, you have seen some areas where there are shortages of labor. All of these stem areas. You spoke about housing a moment ago. Lets go back put. Janet yellen said it gives her pause. Showing book report many districts reporting low inventory and increased home prices. The current state of low Interest Rate environment, wasnt that supposed to be the thing that drove people to more homes . Some people are still anchored to the high prices we had during the boom. The low inventory is a reflection of the fact that some people are still not putting their houses on the market because they want to make that killing in real estate. We have had a big recovery. We are not back to previous levels. As those start to come up to an annualized rate of 1. 1 million by the end of the year, we will get more supply and it will help on the inventory side. What is the economy going to we are already starting to see some of it. There are projections from the American Chemistry Council which show that we are going to see job increases of 500,000 jobs a year from the energy sector. Starting about this year, which is much more than we have seen historically. That would take us closer to 3 million jobs per year and we would be very significant. You mentioned chair yellen on capitol hill. Again about how the fed plans to exit this 4. 3 trillion Balance Sheet as it also normalizes monetary policy. How do you exit something of that size without causing some sort of Seismic Shift in the global marketplace . I will give you some context. I will give it in the form of mortgage equity withdrawal. Up to five years leading the crisis, we went through 11 trillion from our homes. We used that liquidity and put it into the marketplace. Addede had the crisis, we 7. 4 trillion dollars of equity back into homes. That is what we call deleveraging. The fed has made up for it with the 4. 3 trillion yuan talking about. You are talking about. It will be gradual and it will hopefully be made up for by other leverage taking place within the market. It really depends on what is happening generally in the market. Let you go, your growth projection between now and the end of the year. A lot of people have been saying 2. 5 . I think 3 might be a stretch. 2. 32. 5. Im expecting a strong rebound in the second quarter. The National Association for business economics, we did a flash survey and people really looking for that rebound in the second quarter. About 2. 3 for the year overall. Hunter joining me here in studio. Always a pleasure. Thanks for your time. Dole had, he got his start by making a Haunted House in his backyard and has become the biggest name in the business of medtronics. Ani medtronics matronics. If youve been to a disney theme park, you know his work. Garner holt is a master of animatronics. Caribbean toe chucky cheese. All that his 60,000 squarefoot workshop in san bernardino, california. Company while still in high school and has become the biggest name in the animatronics business. June, morea. M. In than 50 miners started digging for gold los angeles. Despite the sevenday work week, you would never find a single nugget. Ronics. Re animat the miners started their workday los angeles. Ng in it features a lowkey appearance from one man who knows people will not recognize by his face or signature hawaiian shirt. This is garner hold. Even though you wont see his name on the right, he built these miners. Is almost like a magician. People look and stare in disbelief. Wow, thats amazing. Its like three dimensional magic. My parents always wanted me to theyveterinarian until took me to disneyland. I remember walking through and seeing the pirates of the caribbean. How is it possible that these things looked like real people . That moment that was what i wanted to do for the rest of my life. I opened a shack and called it the Haunted House. . 10 per ticket. It was the starting ground. Making a lifelike robot requires proficiency in some a different arts and technologies. Its hard to imagine his company does it all under one roof. We develop it on screen, carpet and sculpted. Sculpt it. Writing and sound and special effects. And maintain it. What we are creating is the illusion of life. Thats not really easy. 70his whole production is a Person Company that has produced thousands of figures. Everything from pixar characters to a 45 foot tall firebreathing dragon. Does a figure cost . I quit it to a car. Equated to a car. Sold human characters per 2535,000 and some for 1 million. It depends on what they do. Very cost intensive. When you look at what it does for your ride or something in a park and they perform over and over again, they pay for their keep. Occasionally, you reach this strange thing called the uncanny valley. A spot in which you actually have a fear of something because it looks so real and you realize its not. Ive had a number of characters we have done. Thele have seen them in districts and walked up to it and believed it was a real person and they are surprised and startled. We wanted you to know that bloomberg is the only new service being offered on amazon fire tv. If you missed any of our interviews, you can now watch them on bloomberg on apple tv. It features Live Streaming and ondemand videos. Stay with us. We have another checkup the Market Movers on the other side of the break. Chairman bob wright will be on taking stock at 5 00 p. M. New york time. The will discuss the report 21st century foxs want to pay more than 75 billion for time warner. Stay with us. Get the latest headlines at the top of the hour on Bloomberg Radio and streaming on your tablet and on bloomberg. Com. That does it for this edition of bottom line. Things for joining us. On the markets with matt miller is next. I will see you tomorrow. It is 56 past the hour. Bloomberg television is on the markets. I matt miller. Take a look at where stocks are trading just one hour until the close. You see the s p 500 and the dow jones up. 5 . The dow adding 62 points. The nasdaq gaining as well. All of those indexes before your very eyes. Daring gains. The secondbiggest u. S. Bank said profits declined 43 as it spent 4 billion to cover litigation cost, including the mortgage settlement with aig. Pay 13 billion to resolve state and federal probes into the mortgagebacked bond sales. Prosecutors previously had rejected that offer. For more on the state of financials, im joined by Michael Moore who covers wall street 4s. For us. Banks continue to face legal fallout. Definitely pure bank of. Bank of america and citigroup and goldman sachs. And wells fargo on a lower scale. Slight upticks in that. We are continuing to see that. Jpmorgan got a lot of theres outoftheway of the way last year. Not as big of a deal for them this quarter. We are continuing to see a longer tail than we expected. A number of years with higher litigation. A lot of people at thrown around the word extortion. Its more can we get this over with. Matter,ers, while they the finality matters more than ask will number. That it does not get too extreme degree. When cindy came out with outings citigroup came with earnings, shares were up 4 . That is not because investors are happy. It is behind them. There is some certainty that they know what is ahead at this point. When you strip away these , how do the earnings look . Part, they are down and not great. And not great. They are not as bad as expected. Trading, there were a lot of fire warnings in april and may about how bad the fixed income side would be and it was not as bad as expected. Bank of america was up every year while the others were down. Not nearly as dire as some people expected. Reliefa bit of a sigh of for investors. We saw most of the banks up this week. We talk so much on the consumer side. You dont focus as much on the Capital Market site about how they have a lot of deposits. They need to see loan growth. Highdont have it at Interest Rates. That business is mediocre at best. The Capital Markets business does not sound much more exciting. A lot of the banks are waiting for Interest Rates to rise on the consumer side. We have seen a bit of growth fargo. Lls it was not robust. Down the net interest margins because you have so many deposits. Michael moore continuing to cover this for us. Street smart is next. Correct the s p earnings the s p earnings hitting an alltime high again. Im trish regan. Street smart starts right now