Transcripts For BLOOMBERG In The Loop With Betty Liu 20131226

Have beenory we following, which is a rough start for ups, not a rough start, but a rough finish, for ups and amazon. Com. Joining us. Is how did ups miss its shipments . This itsd ups shipments . Itself,ad braced rejecting it would ship 132 million packages go bully during the week leading up to christmas. It did prepare. It added 55,000 our time holiday workers. At least 23 extra jets its trucking fleet to keep up with at least 23 extra jets and increased its trucking fleet. This would seem to be good news for Holiday Shopping numbers overall. It is not good news for ups. Amazon is squarely placing the processr ups saying, we the deliveries and did our part. Something failed after the packages of our warehouses. Clearly, something failed. They have got to get to the bottom of it. Amazon and other retailers are reacting in what ways . Gift cards offering and Free Shipping on wednesday packages get there. They should be there in the next couple of days if they did not arrive on christmas. s will actually refund the not of gifts that were delivered on christmas. We contacted a number of other retailers, who were expected to see high demand. We have not heard back yet. People are still trying to figure out what to do. These companies are figuring out what to do. Many of these companies had lower staffs yesterday. They are trying to figure out exactly what is going to happen next and what the fallout for ups will be. It does not disclose how much of its business comes from amazon input cheat killer or from retail sales and comes from orzon in the tick killer from retail sales. Icular or fromart retail sales. In pault to bring sweeney, who covers these companies for us as head of research. This is unheard of. We have not heard a story like this in a long, long time. What does this tell you . It tells me ecommerce is ofoming a much bigger part total retail sales. The Commerce Department has held that retail sales from e commerce equates to 16 of retail sales. 6 of retail sales. That number is closer to 14 . It shows that retail sales via ecommerce sites is the absolute growth story. You are talking about the Commerce Department. Estimated the growth online. Thatvestors have long held retail sales on ecommerce are much higher than the government might be thinking. The government statistics might be lagging on what is going on in the marketplace. The data point we got this Christmas Season confirms that. Whole retail ecosystem from the retailers to the theributors to the upss of world got caught flatfooted. The bestn have Processing System of amazon or ebay, but you are still dependent on these brickand mortar companies, which are ups and fedex and others and others in the government system. It could all break down. What has to happen to make sure the whole process is smooth . Last couplever the of years, has been spending billions of dollars sacrificing nearterm profits to invest in their Fulfillment Centers and their Distribution Centers to ensure they can deliver on time and maybe even sameday. At the end of the day, they are dependent upon the last link, the oldfashioned ups and fedex. The shipping companies have to step back and take a look at their processes and the infrastructure to see if e commerce during these times of the year is really going to have that much valium volume. Year untile about a the next Holiday Season. There is going to be a little bit of time and reflection. Is an opportunity to look at their processes and bring up their capacity for certain times of the year. Thank you so much. You will stay to talk to us about the box office on what you saw over the christmas holiday. The mcdonalds ceo finally shut down the companys internal employee resource website. It had been criticized for being out of touch and tone deaf. The final straw was a tip posted on the site showed that a picture with a cheeseburger and asnch fries that showed it an unhealthy choice. The site is temporarily undergoing some maintenance. After a twoday delay, the deadline to apply for Health Coverage has finally kicked in. The administration is still pulling out all of the stops to get people enrolled. Theater cook joins us with more. The lastminute crush continues peter cook joins us with more. The lastminute crunch continues. 2 Million People visited the site. The Obama Administration extending the deadline for people to enroll under obamacare and still qualify for coverage anywhere one. That was a big deal for the 5 6,000,000 of americans said to million to 6 5 million americans said to have had their Health Coverage canceled. If you try to get coverage monday or tuesday and had trouble with the website, and there is an appeal process underway and there is time to make the case and still qualify for coverage on january 1. It is a big week for the obamacare website and for the effort overall. We are waiting to see the final numbers in terms of enrollment. Of the states seem to have a problem with it. We have been focusing on healthcare. Gov. There are some states that have been having some problems. They had to post their own extensions. Maryland, hawaii, minnesota, a few of them. To replaces had their top officials in charge of these websites because they had their own problems. How do individual states, the 14 states that set up their own exchanges, function . They will be responsible for boosting those enrollment numbers. Of people had christmas messages and another person did also, edwards noted. He had words about the u. S. Surveillance another person also, edward snowden. To be a thorn in the side of this administration, raising questions about the governments surveillance tactics. Message fromd moscow that aired in britain. He warned about the surveillance threat and talked about the challenge that should be made with governments like the united states. Take a look at Edward Snowdens christmas message. Amountill determine the of trust we can place in the technology that surrounds us and the government that regulates it. Find a betteran balance, and mass surveillance. Mass surveillance. The Washington Post mission accomplished. He thinks he has done a service to the nation and the world by raising these concerns. He has triggered a firestorm of debate in this country. Peter. With me, i want to bring in richard, who is a senior fellow at the council on foreign relations. Most people think we have some form of balance and it needs some form of adjustment. President obama said he sees some areas where it needs some adjustment. Was quiteiew panel harsh on the government surveillance program. Was aneneral, it endorsement of the overall effort. This is a regulator program. It is subject to oversight by the courts. 2 different president s have supported it. There is support among the people who know all about it erie it the snowden revelations are shifting the ground underneath that consensus. Public and International Attitudes are shifting. Surveillances. Apparatus going to adapt to that . In 2014, how is the white house going to respond to these worries about surveillance . President will roll out his own set of ideas. He will do that in january. In thing to really watch addition to what the president does is what does congress do. There is bipartisan support for making even bigger changes than the white house is prepared to do. Watch pat leahy, the democrat in charge of the judiciary committee. What he does will come to the senate floor. This is one area of common ground. Do not be surprised to see more dramatic changes coming from congress. It is hard to put the genie back in the bottle. These disclosures are the worst ever. There is an exit schedule loss of trade craft. There is backlash against them. Dothey will try to adapt and new things. It will change consumer behavior. Legislate in this area. The president can veto. Congress toult for legislate without intimate involvement with the executive blood branch. Inre is bipartisan interest adjusting these laws. I would not hold your breath on that. It is a complicated, divisive area. Imagine if the president has to veto a proposal coming from democrats like pat leahy. What a pr battle for the white house if they have to challenge fellow democrats on these issues. Right now, that might be where it is headed. That would be a political mass. In order for it to get to the president s, both chambers have to pass it. Pat leahy is not the only one up there. Richard, i am curious. Makingreer is based on america safer. In your personal opinion, and edwardowden do a snowden do a service to america . No, he did not. He is entitled to these views. I support his right to express his views. He took an oath. He went in as a contractor to one of our National Security agencies and stole highly secretive information. With, in hist mind, the greater good. He lied directly about what he was going to do with that information and betrayed a trust that was laced in him wrongly. This was a criminal act. We are learning things that were not widely known before. As an expert, i learned things i did not know before. It is having an impact. You cannot excuse the criminal act because of triggering some larger conversations. Thank you for joining us. Washingtonur chief correspondent, peter cook, who has been on this case from the beginning. It ofnder of square ownre tells us about his business as a glassblower. He is a partner with jack dorsey. Warren buffett may be from omaha, but his influence impacts every part of your life. Plus, it was a tough christmas for Justin Bieber fans after the wasstar announced he retiring. Later, he took back that announcement. For does this hold for beliebers . Loop with betty liu will be right back. You are watching in the loop live on Bloomberg Television. Christmas is one of the biggest days at the box office. Six films open yesterday and have a lot to live up to. I want to bring back paul sweeney. Did you get a chance to go to the movies . I got a chance to see one movie. I saw american household. That was good erie it there are a couple more that was good. There are a couple more i would like to see. See my parentsto for christmas. I drove by a few movie theaters. This Holiday Season is the most packed Holiday Season we have seen over the past 15 years. 12 movies have been released over this holiday period. Receipts box office for north america were flat coming into the Holiday Season. We saw wolf of wall street with leonardo dicaprio. That was number one. It had 10 Million Dollars in box office. It is suspected to do about three and a half million over the weekend. That was followed by the hobbit. Bithe hobbit had a little of a disappointing Opening Weekend. It still beats anchorman 2. It will have a great run through the end of the year. That movie will do well domestically and internationally. What about the marketing behind these movies . A long wall street had lead in marketing. So did anchorman 2. Did you really see the return for that type of marketing . It is tough to measure. This Holiday Season is tough to measure. Had an Opening Weekend that was a little bit weaker than expected. Not only did they spend some money on television promotion, but they did a lot of out of the box promotion. Having the ron burgundy character featured in chrysler commercials. He was everywhere in terms of time to promote the movie. Came and a weekend little below expectations. The movie that none of us talkedked about in about is the hobbit. That is one that nobody really talks about. Over 200 Million Dollar budget. The expectation is that it will do well and it is part of a trilogy that will always do well. It has had a lot of legs. It will do well domestically. The will be interesting for hobbit versus previous successes for this series is the International Box office. That is well north of 50 of global ox office receipts. If a tentpole movie will to well global box office. Toa tentpole movie is going do well, it has to do well overseas. Coming up, we will tell you what record the german automaker is on track for. You are watching in the loop live on Bloomberg Television. Im betty liu. Bloomberg television is on the markets. Equity futures are creeping. Initial jobless claims for the week ended december 21. A little bit lower than what we. Aw there are seasonal factors. We are on the markets again in 30 minutes. Here is a look at our Bloomberg Top headlines. It was not a happy holidays for target. Security breach exposed data on 40 million debit and credit cards. Most of the lawsuits accuse target of failing to detect customers information. Volkswagen has sold more cars inn gm for the first time nine years. They delivered more than 300 golden state will be on target they will be on target to deliver 3 million vehicles in china this year. Softbank wants to take a majority stake in tmobile this spring. A lot more going on in telecom. We are standing by to bring you the latest read on the economy. Julie hyman will have a breakdown of those numbers. Alix steel is watching corn and how washington will determine the fate of farmers. Chief washington correspondent peter cook watching the president s decision to nominate max baucus as his next ambassador to china. You on thatwith story. Will it have an impact beyond china if he decides to nominate max baucus . He is nominating max baucus. We know that. This is a big deal in china given max baucus ideas about china. On as a collateral impact whole host of issues. Max baucus has been the point person in the senate try to push through an overhaul of the tax code. He announced he was not running for reelection in 2014. It was always going to be a heavy left. Now his nomination all but kills that effort. Some democrats are thrilled with this. They were a little nervous that max baucus was too eager to cut a deal with republicans. Replaces max baucus as chairman of the finance committee . Wyden, he is ron chairman of the Energy Committee. He is eager to overhaul the tax code, but does not have the back ground to move quickly as max baucus. Meanwhile, the all powerful interests are setting their sights on ron wyden and his staff. To financens moved will trigger another really big change. Another ripple effect. Ron wyden will have to give up his chairmanship of the Energy Committee to move to the finance post. Will bens Mary Landrieu next in line to take over at energy. Over night she boost her profile just as she is running for reelection. She is considered one of the most vulnerable democrats out there. This might make her reelection a little easier in a state like louisiana, where energy is a big deal. Her chances of holding her seat just improved dramatically. Our chief washington correspondent peter cook. Those jobless numbers are out. 335,000 claims were filed. That is better than what the Commerce Department estimated. The revision for the prior week up by 1000. Julie hyman breaking it down for us. Jobless claims during the Holiday Season do not tell us a lot. Enough to look at the longer term 4 weeks continuing claims you have to look at the continuing four week claims. There are fluctuations at this time of year and it is tough for the government to figure out and adjust. Better whenwill get we get into january. You mentioned the weekly number came in a better the next amazing. Better than estimated. Was for 2. 8 million and it came in at 2. 9 million. That is a trend we should be watching as we get into the new year. Markets correspondent julie hyman. We will be keeping our eye on jobs trends. Another debate is brewing in washington and it could have a big effect on the corn industry. The Environmental Protection agency will decide how much ethanol the u. S. Will use next year. Alix steel is here with more on that story. Tell us what is at stake. Jobs, corn prices, oil. Everything is at stake. It has been a lobbying war refiners,o companies, and ethanol producers. In midnovember, the epa issued a draft rule lowering the amount of ethanol suppliers would have to blend with gasoline. Senators came out trying to get rid of the cornethanol mandate altogether. Ethanol production has outpaced gasoline consumption since the law was put into effect since 2007. We are driving less and using more fuel efficient cars. Each gallon of gasoline must be blended with 10 ethanol. The only option is to move it up to 15 . The problem is cars were not necessarily designed to run on the socalled e15. Since 2001 have been approved. Many manufacturers say their warranties do not cover cars that use it. Only 16 gasolines gas stations in the u. S. Supply e 15. It would be painful for the loss of jobs. The average ethanol plant employs 4050 people. Those jobs are concentrated in the midwest. You have the big producers like. Rcher daniels midland corn is a 64 billion business. It sends a message that the u. S. Means less corn. That could be painful. This is the corn price throughout this year. Really hit by an oversupply of corn. Out is when the epa sent its new proposal, continuing to put pressure on the corn price. An agricultural economist at Purdue University said it was ethanol and the emerging market demand that had been the 2 pillars or the growth of the corn industry. Now that debate has shifted. No longer for growth, but for farmers to keep what they have. It is continuing to keep pressure on corn prices. That means farmers cannot sell their products for more money, and which has ripple effects across the fertilizer and equipment industry. Coming up, he is known as dr. Doom. We willbeanie tell you where he will be putting his money now. Warren buffett is everywhere in your life from your kitchen to your office. Stay in the loop here stay in the loop. In the loop. Known asthe economist dr. Doom for his nightmarish scenario for the housing collapse that played out in 2008. If you did not listen to him and you were invested in stocks, you lost a lot of money. Now you have another shot. We asked him how he would invest 1000. Here is what he said. Every day you have to wake up and make sense of this complicated world. I prefer to be called dr. Real list and not even a pessimist or an optimist. I predicted the global meltdown would occur in 2008 or 2009 and i got that nickname. There are risky assets like global equities. A 50 or 60 correction occurred and we had a two thirds drop in global equities. A global, there is economic recovery. We have to be realistic about what can go right and what can go wrong. You do not want to listen to only people who agree with you. Make a special effort to listen to people. That pushes me to think harder about whether my views are correct. You have to be diversified. Some of yourut money abroad and in europe and emerging markets. You might want to be marginally overweight in equity. You might want to be underweight in emerging market equities. Maybe a marginal overweight in global equities. That would be the correct choice. Check your portfolios. Here is another prediction. Stocks are about to finish the year with one of the best run since the recession. Our next guest says those days may be over. Next year, we are likely to see a more normal return of numeral 8 return. roubini is saying the same thing. He was cautioning people after the meltdown. He missed the bull run. I am pleased to say we did not. What wasifference is, the big surprise in the huge rebound in corporate trough this despite tepid recovery. The question is rebound in stocks despite this tepid recovery. Bullsavent met that many honestly. Most have said, up 30 in the s p, youre not going to get that next year. That is correct. That is the healthy thing. Despite all of this, there is still a skepticism in the market. That makes me feel better. When the market is up dirty percent, you ask, are we going back to the days the market is up 30 , you ask, are we going back to the old days . Do not get scared and pitch out. I am trying to set expectations thesay, the days of supernormal recurrence are behind us. He was saying,e, you might want to be overweight a little bit in u. S. Equities and you want to be underweight in bonds on the longer and because of rising rates. Cautious want to be with emerging market equities. As i repeat, this seems to be the strategy we have heard from a lot of strategists come and not just a bear. That is a fair point. For the most part, i would be in the same camp. Market between the stock and the bond market is the biggest i ever remember. And i am not a young man. I never remembered 30 up and 2 down. People will say, do i rebalance to bonds . In4 could be a breakout year the economy and we grow more than 3 . Bond yields. Gher maybe you do not have negative returns in bonds. At rest, you are flat. You can probably get high single digit returns. Is going to be emerging markets. They were negative this past year. Three years. For Value Investors might say, do you dip your toe in that . Yes. It is not a bad idea. I still think they will be under harsher partly because their economies have slowed and they do not have the flexibility to lower Interest Rates to custom of their currencies and commodities are under pressure. They have dropped significantly. You look at the performance of this year with the stock markets. Could you say that stocks have been a good leading indicator of where this economy is headed . I would have a hard time. This was not the explanation for a 30 rise. The economy has done better in the second half of the year. The key driver was the fed a sickly telling us even though they shook up the market on quantitative basically telling us even though they shook up the market on quantitative easing, we have your back covered. That is thesaid, if case, do i want to keep earning zero in cash or should i put money in the market . The driveren more than the economy. This move, weng have to see an acceleration in the economy. I am hopeful this will be the year, 2014, that we will see the growth rate get over three percent overall 3 overall. What is your biggest worry . I do worry that when the market goes up every day on no news, are we starting to get frothy . It when we climb a wall of worry. We did that this time last year. Right now, we have momentum. My worry is not that the end of the bear market is in sight. My worry is some on for Scene Development that causes a correction Unforeseen Development that causes a correction. Isnt that a worry all the time . I was on your program a year ago this time and i was worried about the long overdue correction. Said, letsd and i stop worrying about all of this stuff. And it paid off. Thats right. As an investor, where i share a little bit of ruby me roubin oubini, when i start getting too happy, i think i am missing something. I think this market is going higher. I keep saying, what am i missing . For me wouldoncern be profits disappointment. I am banking on the economy showing stronger growth next year and Topline Revenue growth kicking back in so that the valuations do not get stressed. Thank you so much. It is always good to have a little bit of something in the back of your mind when everyone is happy with what is going on. Take you so much. The cheap chief investment officer. Yourp, youre horny morning newspaper read. Warren buffett has a hand in many parts of our lives. A shocking announcement from Justin Bieber. Is the pop star really retiring . You will find out on in the loop. 2013 was a big year for Berkshire Hathaways Warren Buffett. He found his personal fortune had risen. Lets take a look at everything Warren Buffett has invested in and how it reaches your life. Cool. Coming up, the cofounder of mobile Payment System square on giving back. Helping to bring jobs and companies to his hometown of st. , missouri. Stay in the loop. Minutes past the hour, which means Bloomberg Television is on the markets. We are up over 30 in equities this year. We are on the markets again in 30 minutes. Up, shoppers take aim at target. The retailer facing dozens of lawsuits after massive data breach. We will have an inside look at what lengths producers go to to win that oscar. Welcome back. Jobless claims fell 42,000 last week. Department estimates that the holidays will make it difficult to adjust for filings. There are seasonal factors here. Taiwan find apple for restructuring restricting prices. Hey require wireless to request permission. That is a violation of the free trade laws. Amazon is trying to mend fences with customers. They are opting 20 gift cards after ups failed to deliver some packages in time for christmas. Delivery problems came as Online Shopping surged in the last days of the Holiday Shopping season. Retail, the Security Breach at target exposed to the information of more than 40 million customers. That has resulted in a lawsuit. Customers are claiming that target was negligent and how they handled the data. They may have a hard time proving this. For more on the heist and the legal implications, i am joined by josh. Thank you for joining us. Why will this be difficult for the customers to prove the target was negligent . There are a couple of things. It will be difficult to prove the damages. That is a problem with credit card breaches. Your number is stolen and is scary. The Credit Card Networks usually pick up fraudulent charges. The merchants who lost the data usually offer credit monitoring. Of, howecome a question did i suffer from this . That is tricky to prove. Why is that . Look at these erroneous charges. Look at this. They are damages. Why is that difficult . If you are not being forced to pay, you have not suffered. I assume you also do not know what the future could hold. You do not know where the data has gone. It could come back to hawaii. If you do get your identity damages,nd there are if i am the merchant, i will say have you know it was my breach . What have the people who are looking at filing lawsuits there are 11 right now. I assume there will be more. What are they seeking . They are seeking some kind of compensation for damages done by the breach. This is still the early stages. Targets response has been credit monitoring. It cards or discounts. What else . Will have to wait and see. Obviously, as the phone. Are there any similar cases that can be looked upon as a precedent here . This has happened several times as i mentioned before. It is hard to prove that you are suffering damages from these breaches. That is always a concern. First al regular regulators have gotten involved. They have been forced to pay settlements in the past. Merchants are starting to say that they are not they do not think that the regulations are in place to start doing this. Theyre questioning the enforcement capabilities. They saying that there still needs to be some work on who is responsible. That raises another question. Is, how arelem regulators going to get involved . This is massive. Sure. I think that the core question is when are you responsible of the merchant for being the victim of a hack attack . It is increasingly common. Just a real question because i got beat, and my negligent . There is no clear line. If you are a mom and pop retailer, you might be a little worried here. How liable would you be . You are relying on the security of the overall system. If that system fails for target, what about you if youre a Small Business . This thing they might hope is that you are a less of a a less attractive victim. Possibly. All right. Thank you. For more on that story, check out bloomberg is this week on stands. Moving and shaking this hour, former musician Justin Bieber put out a series of is our tweets. He announced to his followers that he is officially retiring. Some on twitter reacted with shock and sadness. Others did not. That it is the greatest Christmas Gift ever. The representatives did not immediately respond or verification. Scarlet fu is our go to on pop culture. First off, do you believe them . Promotes something to here. His new movie just cannot. He needs publicity. Wayve read that he needs a to transition to the adult phase of his career. This is the way he will do it . He can tear himself down and build a backup. Think about Britney Spears and christina aguilera. Britney went crazy and shaped her head. Maybe justin is finding a way out and coming back later on. He can be a serious adult star. He is also 19 years old. He has the mindset of a 13 euro. He is surrounded by yes men all the time. Been to all of the movies. What about the oscar buzz . This is the time of the year when people go to see these procedure movies. Hollywood spent a lot of money to try to win oscars. There is a strategy here that has been affected by harvey weinstein. Main things they you do not have to spend a lot of money making the movie. If you look at the award winners, they averaged about 21 million in production budget. You have to spend a lot of money initially. That is rule number one. You do not have to go crazy on the budget. You also need to shop some festivals. Go to sundance. Look for something that will catch the eye. Since he bought the rights to the book before it was published, he had an idea that it would be good. Eventually, Jennifer Lawrence one. He must have good intuition. It has been honed over several decades. Strategic rollout is another one. . D you see blue jasmine let the buzz build up from there. Once the movie is out, that is when you go for broke. That is when you break up the budget and work on advertisements and getting stars out. Dicaprio and get the actors to work for their salaries. Put in fullpage ads. When those actors and actresses go out to promote a movie, it is almost never about the movie. That is another thing. Harvey weinstein is good at making sure that his stars reveal the parts of themselves at opportune moments. Maybe they have a new romance with the costar. Something that gets people buzzing about it. You can contrast with the movie. Get the conversation going. How is the season stacking up . He calls it the most competitive oscar season. He delayed the release of a grace of monaco movie. It is a biopic starring nicole kidman. The movie was not finished in time. Be any there will not festival buzz going into the oscar season. He will hold off for another year and give it time. Station isvale about the killing of oscar grant. He may rerelease it. Includentenders philomena. Adam dench. Absolutely. I hear them referred to. Thank you. Could st. Louis be the next hightech hotbed . We will talk to the founder of square. He will stop by with his take. And shares have fallen. We will talk about the footwear makers next up. You are watching in the loop. If they could get any bigger, social media x loaded in 2013. From the twitter ipo to platforms like snap chat and instagram, people like jack dorsey became household names. One person who knows this well is his business partner. Founder of square, who has himself found much success. New start ups and hits home of st. Louis, missouri. Great to have you here. First, did social media it has gone crazy. A whole new level now. My 12yearold nephew is instagramming constantly. What is the next up . It will continue to evolve. We are carrying around these devices that give locations all the time. That is so new. Youre still seeing evolution. One of the great things that we have in this business is this ignorance of the future. Nobody knows where it is going. We can all make these bets on new directions. It is super exciting because it changes so quickly. It is very exciting to watch. Foursquare, i know that you are limited in what you can say. How can square benefit from this . I know you have already. How much more can you do . A tremendous amount. We are really trying to make it accessible. We want to conduct commerce easily. To essentially disappear. The best ting that would happen would be if nobody knew that we were there. Were really trying to build technology that gets out of the way. What does that mean exactly . They know because we made a square device. Eventually, that device will go away. Things will morph. Were really trying to get out of the way of the transaction. The Value Exchange is so fundamental. Outmore that you can step of the way of that and let the communication happen naturally, the better you will do. In pursuing that, one of the things that we have to do is help to bring the technology up. It will help the communication. General, it increases the level of trust. Then you have two contrast that to target. The data breach there. That will raise all of these questions. You will put some data out there. So what . It is very well protected. I have a target card and i shop there. My account has not been compromised. The banks cover them. It is not that big a deal. We tend to make a big deal because it sounds scary. It makes news. You have to take it seriously. It does not impact anyone very much. You are doing quite a few things. I know that you entrepreneurs do. One thing is bringing Tech Startups to st. Louis. That is your hometown. Were both from st. Louis. Theres a lot going on and we are trying to encourage a couple of programs. Take Promising Companies from anywhere in the world and give them 50,000 grants. Very successfully from all over the globe to st. Louis. We give them 50,000 at the beginning. That is crucial. When you get the money is almost more important than the amount of pay they get. Investment, it can happen 1001 if it is an early investment. This very early money is not diluted. We do not take anything in return. It has a real boost. I was reading up on st. Louis. There is an article that said that there are many cities around the country that have been attracting Tech Companies. St. Louis was off of the list. Louis cameecause st. Late to the whole tech game. Nashville, austin, dallas all started earlier. It depends what was to look at. The fact is that there will be a natural transition to the middle of the country. Partially because opportunity will spread that way. It is concentrated in these areas. It becomes more diffused. You see different kinds of opportunities. In st. Louis, biotech raises a lot of interest. There are typical apps. With ag that is geographical advantage in one city, it will naturally go there. You put out these grants and focus on the kind of companies because you want to develop certain areas . Were not that specific. We look for companies that will be successful. We fund by a Tech Companies and Manufacturing Companies and life sciences. We fund mobile Tech Companies. It is pretty much that there is no specific method. Specifically with 630, another investment in st. Louis, we give investments to companies and financial technologies. We will talk more about that and your favorite companies. The cofounder of square. Stay with me and we will be back in a few minutes. Coming up, some amazon customers are up the river without a paddle. We will tell you who they say is to blame and what they are doing to make it up to customers who did not get their gifts in time for christmas. The opening loop. Bell is next. Love them back. His 26 past the hour. We are on the markets. Olivia sterns has more on futures. Equity futures are climbing right now. Theyre set to open higher. They are said to extend their records. We did get data that was better than expected on unemployment. Weekly jobless claims fell more than forecast. That is helping sentiment a little bit. Were expecting a late day of trading. People still recovering from christmas. We are on the markets again in 30 minutes. I want to bring back square cofounder jim. I glossed over this point a few minutes ago. You did such a great thing in your career. You are a glassblower. That is how you are able to fund your first tech investment. I am kind of curious. Given all of the different areas that you have been in, what do you look for in an investment company. The company has to solve a real problem. Were discussing exit strategies. I am looking at a real world problem and a real solution. Tell me how glassblowing fell into that. That was the way that i had to make money. The problem was poverty and my answer was that i could make stuff. The solution was how to get jack out of poverty . Yes. I needed money and i became a glassblower. I was not trying to be an artist. I was trying to feed myself. You wantedas because people to have a way to process payment on the go. Personal problem. I was trying to sell my class and i could not accept credit cards. I knew it was a problem for me. We did not know how big a worldwide problem it was. Jack was interested in tackling the same problem and it became square. What are you trying to find solutions for . There is a huge i. T. Talent cap. People can be great programmers. They do not have traditional credentials. Fouryear degrees or work experience. Some of the best programs are still trained. A lot of the companies do not hire unless you have a fouryear degree. One of the things that were weis in st. Louis allow anyone with a nontraditional skill set to be placed in a fortune 1000 or fortune 50 company. We have mastercard and other startups that have agreed to change hiring policies to take people who are self trained. The cool thing is that you can get self trained for free. What do you mean self trained . It is not about degrees. It is about having skills. You can get those online from three sources. A joint venture between m. I. T. And harvard is free online education. You can take that the same classes for no money. We can get you jobs. These are programmers. They do not have the fouryear degree. Theyre going to launch code to get what then . They go to get the jobs. They train somehow. They can go to school. The point is that you have to go to school you have to have the skills. If you do not have the credential or diploma, we can still get you a job with these companies. Ok. Are you getting them the equivalent of a diploma . We get them a job. They get hired and they get a salary and health care and a cubicle if they want. Ok. So you get them a job. I am hearing that theres a bigger problem. Youre finding a lot of programmers who dropped out of school or do not have the background. They do not have the academic credential. The problem is that a lot of schools teach things that are not relevant in the work lays. You do not even need to pay for this education. It will be world changing. What are the other problems or solutions . I am working with companies that have cancer treatment. That is experimental. I am so ignorant and biology that i cannot explain the mechanism. It is super interesting what is happening in life science. I am working with a bunch of Financial Technology companies. I have experienced that has given me an edge there. What are you most passionate about . I am most excited about the education. Were filling a skills gap. If we train more people who are creative, we will have more tools. You is the biggest have started some of the companies. What has been the biggest mistake that you have seen so far that new entrepreneurs make . My biggest mistakes those been chasing opportunities. That i think is an opportunity and then i go for with the wrong reasons. What i do is look for problems. I look for things that frustrate me. Theres a problem, then there is something concrete to work for. An opportunity would be mobile devices. Well have cell phones that are connected. What does that mean . Device andk at that say i should start a Company Using this thing. What will that be . Isnt that were a lot of startups are headed . I think they do. If they can do it, that is great. You asked me what i have been able to do and the answer is not much. Im great at tackling problems. Even if it is a problem i do not understand. The resources are out there to solve a problem if you are passionate enough. Theres always a solution. When entrepreneurs come up to unc u. S. And investor, what impresses you the most . What is in your head that says that they are somebody that you will put money in . I look for people who have the talent and resources. I do not care if it is sophisticated. It do not want a fancier presentation. I want passion and a metric that we can measure. Solve this problem. If they come in with a powerpoint it depends what it is about. Right. If it is something that youve seen before. Metastatic Breast Cancer is killing people. We funded a company that that has a very experimental treatment for this. It has been working in clinics overseas because it is not licensed in the united states. It is saving lives overseas. We called these people. It is very experimental. It may never be fda approved. But it is saving lives. Theyre trying to pursue this technology. That is meaningful. Had he no a company is there are hits and misses. Had he make sure that you get more hits than misses . I think humility, really. Do not think that just because your have money, you know it you are doing. A lot of investors get arrogant because people are nice to you. Because you are rich. They think it is skill, not luck. There is a factor of luck involved. I think that humility keeps you openminded. That said, i will display that by not really telling you what i think will work. I do not think i know. You invest your own money . What is the wackiest investment you have made . Probably this company with a cancer cure. I understand none of the biology behind it. I have been reading up in trying to figure it out. Clearly, if it continues, its applicant could be very transformative. Team, i like the problem. I like what theyre trying to do. Even if they fail, fine. I am not raking a bunch of investors. You cannot say much about where. Square. Maybe the next step is to go public. Is that a goal for you . I do not think it is goal. It could be a stop along the way. Were trying to solve problems. To dohicles that we use that, as long as we have the resources, we will be doing the right thing. If a Public Offering is appropriate, then sure. If it is not, then it does not matter. The company not how a structured, but what were doing to change lives. Right. Not about the endgame for you. For some people it is about the exit strategy. I hate that. No. What is the exit strategy . We will all be dead. That is a huge distraction. If you look at that, youre asking the wrong questions. Good to have you here. Founder of square. We will be back in two minutes. Heres a look at the top tech stories. Giftn is offering 20 cards to refund shipping charges. Holiday orders did not reach their destinations on time. Ups, the Worlds Largest packaging delivery company, says that the volume of air packages exceeded its capacity. And softbank is in negotiations to raise funds to purchase tmobile. That could be worth 20 million. Softbank aims to buy a majority stake in deutsche telekom. Taiwans regulators say that they need approval for iphone prices. They are violating the countrys laws. That is all the latest. Catch is that 1 00 eastern on bloomberg. Create as thew markets open, it is time for the call. Funds ands manages describes himself as a value in contrarian. His call is that cash is an ugly place to be. He has one quarter of his money in cash species. What gives here . Our specialty is trying to find a discount between market price and where we estimate private market value. You have had smallcap shares do pretty well. The tech bubble crashed in 2000. Also, ensure yield debt. Those Asset Classes are very expensive today. If we cannot find a corresponding security, we will befall to cash. As prices have risen, we have had harder times finding you ideals. Ideas. Do you expect that to change next year . I do not expect the volatility to remain in the low doubledigit indefinitely. Perspective,m my that when volatility is the lowest is when you should be have your guard up. I do not think people do. We have had a very benign environment for the last two years. Since the summer of 2011. Who knows when things will go bump in the night. A lot of times it is the things you least expect. To be cash allows us better when others are unwilling to show up. There are some targets that you have. One of them is a retailer. American eagle outfitters has been struggling. Julie has been looking at them. I have. They have been struggling. One could argue that the value category the shares are down 29 . We have seen a lot of losses from other retailers as well. They have said the operating lessns tell from 14 to than five percent. This is a huge decrease in margin. Like many competitors, they are slashing prices. Theyre offering discounts to get people through the door. You see the Value Proposition potential here. The company is also trying to shut a lot of stores and open more factory stores. Theyre shifting to a lowerpriced strategy. Nonetheless, for retail generally, it is hard to see the light at the end of the tunnel. Then, why would you pick American Eagle . Out ned the disc and the disconnect. You have to find something with hair on it. American eagle asset. Abercrombie fitch has it. You have a wellknown Retail Executive in the executive chairman. He has been around since 1980. He was ceo from 1992 to 2002. You are paid to wait at 3. 5 dividend. They have given back most of their Free Cash Flow to shareholders. Sheet is circling clean at this point. It is a 2. 8 billion market cap. The Stores Remain constant. It is a tough environment 14 retailers. Buynnot find something to unless theres a profit. It has been a tough environment. There are Little Pockets of success. Another tough environment has been for crocs. You have a take on them. Olivia has been looking at the case. We all know those brightly covered colored shoes with holes in them. They were a big hit a few years ago. In the past couple of years, they have fallen out of fashion. Shares are trading at 20 of what they were. One of the big problems has been that they have not diversified enough away. Come from clogged. We have learned that they have been in talks with attentional investors about a eye out deal. They have yet to reach a deal because theres such a big gap with the falling share prices. Ok. You are looking for a buyout here. You are singing my song. It,ink that if you look at they had it in 2000 seven. They had a near death experience in 2008. They may be over optimistic. I do not know what they think it is worth. We think it is worth more than where it trades today. One billion market cap if you , they sell 40 to 50 million pairs of those. Can they get away from those materials . The other problem that they have is that most of their cash is overseas. They sell a lot of shoes in asia. They cannot repatriate that cash with hours our tax structure. Buyers of the company with consumer demand. Balance sheet. We will see what happens. There will likely be news at some point. Mark, thank you so much. Up, japans Prime Minister pays his respects at a womans memorial. It sparks even more attention with china. Worldsyou aboard the largest solar powered boat and how it is changing on a coal exploration. Is time now for the global outlook. A new investigation into the death of Yasser Arafat has found that their leader died of natural causes. It contradicts a report recently by switzerland that claimed to have found traces of polonium on his clothing which is suggests that he was poisoned. The official cause of death is now listed as a massive stroke. Tensions and a that are rising after eight Prime Minister visited a memorial in tokyo. They came after the 120th birthday of mao zedong. 14 world war ii leaders were convicted of war crimes. Inomemade bomb exploded cairo, wounding at least five people. It was the latest in a tax by islamists. They are moving toward the center of the capital. The blast comes two days after prompted the military backed government to declare the Muslim Brotherhood as a terrorist organization. Lets stay overseas on a much later no. The World Largest solar powered boat a designer from new zealand. It was built in germany. They spent 19. 5 billion signing a giant catamaran. We caught up with the captain and ask how they are changing the future of monocle exploration. L exploration. Basically, i am now, i am the captain of this extraordinary machine. The boat was built for your sick in germany. Boat was of the seduced by this idea of building the first but with solar energy. It is the biggest solar boat in the world. It is a huge floating solar field. Those solar panels create electricity which is stored in batteries. I have to adjust the route and speed with the forecast of the sun. It is quite a challenge. I found that my personal energy was not sustainable. It is good to utilize the sun. That does it for today on in the loop. We are on the markets next. The hour, which means we are on the markets. I am olivia sterns. We are 30 minutes into the trading day. You can see that stocks are rising. The s p 500 and the dow are extending their records. The nasdaq is also up. Stocks were closed overnight in europe for boxing day. The nikkei in japan hit a sixyear high. We got better than expected data on unemployment this morning. Weekly jobless claims fell more than forecast last week. It is time now for futures and focus. Oil is hovering. With a look at what is holding up traces, we have jeff grossman. How are you playing crude this week . Very carefully, as always. It is a bit of a heads catcher. The crude oil is very overpriced. They are drifting higher. Reach 100 to satisfy everyones desires. The truth is that the products have been amazingly struggling. They are bolstering the markets. Theyre keeping crude oil higher than it should be. Will you buy the dips . Oil atcan buy crude 95. 5. You may not even get there. 96. 25. Ly i dot is a market not know where the rally could take you. I am not surprised if it does touch 100. I do not know how much more can give you without real help. Products are going much higher. One thing that could skew natural gas trading is if we get more severe weather. There are Power Outages in many arts new england. How do you protect yourself . You can buy futures and upside. Very seasonal as far as the heating oil. It is northeast. Natural gas is the midwest. If the weather comes in, there will be a move up there. There is no way around their. The fact that there is a perception that there is more need and there will be a drawdown of some inventories. That is just what we need to keep the flow of oil looking like it should the. You also trade currency. What do you think will happen with the dollar heading into the end of the year . I think that the dollar can go a little bit higher. We will see a few more handles to the upside. I am not overly bearish on the dollar. You had a funny expression. He said it was the best horse in the glue factory. We always say that, compared to the other currencies, even at its weakest, it is the best course at the glue factory. That says it all. The currency may be weak, but it is better than the others. Were looking at the fact that the dow jones is up 25 . The s p 500 is up 28 . You said earlier that you cannot understand why the market keeps going up, no matter what news is. At what point will you short the benchmark index . Very close. Every day, i walk in and see the s p 500 and think i should selloff today. It may give here and there, but it keeps coming back. Those are tough markets. You would be much better off looking for a place to sell if the market would spike up. That has not been the case. It is going higher. Tough market to be sure. We will leave it there. We are on the market again in 30 minutes. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Mess up. Brown let them down. Seasons greetings. Electronic cards are booming. With hereet a ceo stance on a paperless future. Which is studios are making a push for oscar action. I am to Market Makers scarlet fu