Transcripts For BLOOMBERG In The Loop With Betty Liu 20140108

Fame inductees will be officially announced at 2 00 p. M. Im wondering whether the markets will pay more attention to that announcement or the fed minutes. Im just focused on indianapolis, trying to deal with the patriots on saturday. That will be intense. Fan, watchver sunday. From inside your home. The only thing we have not mentioned is the cold. No one wants to be out in the cold. Saturday,ew york by according to my iphone. Upsetse 49ers really everybody, right . They worn even supposed to show up the cousin was going to be so cold. They did the job. I look at the field and it was brown. That is what dead grass looks like. I got to talk about one of the big news items this morning, alan mulally bowing out of the race for microsoft ceo. This is a reiteration, by the way, of what he told matt miller on december 5. He said, matt, i keep telling everybody im staying at ford. And then he told a number of people yesterday the same thing. He says all you want to do is serve ford. And you can understand why. Fords earnings are up 13 . Microsofts are flat. The new models are all aluminum. I think matt miller wants to get one. He has done a heckuva job. It speaks volumes about allen and his commitment to ford and his employees. He made a commitment and is living up to that commitment. He has done a tremendous job there. Stay with it and go out on the town. Doesnt speak to the lack of ceo candidates out there . I feel like we talk about alan mulally and microsoft everyday. Is there a void at the top as far as possible ceo candidates . About that,lexed too. There are a ton of potential candidates that could be competitive for this job. We are aware of some of the concerns about two of the prior ceos still staying on the board. I have lived through that myself. Allen has lived through it. That is probably why he was in contentious in contention with bill ford staying on will stop a lot of people think that keeping bill ford in contention with bill ford staying on. A lot of people think that keeping bill ford on was a bad idea. There was one specific style of management and home depot. He had trouble there. He is a car guy. Could he have gone to a Software Company . I take exception with that we had trouble. We doubled sales. We almost tripled income. Question is, does management ability apply to every company, or do you need the background . If you look at for today, they are benefiting through multiple expansion on some of the fundamentals we put in place. Take chrysler. We were there with cerberus, the team. Took 5 billion out and now chrysler is bailing fiat out. Is fiat using chrysler money to buy chrysler . To me, it is a little perplexing that they negotiated to buy out. He balance the employees trust actually needed that money because theyve got to make good on the pensions. That is unfortunately what happened to american workers. You are getting squeezed. But they could have done it to an ipo. Through negotiations, they probably didnt want to take the risk of an ipo, because it might have been more than what they were offering in the back room. I think they kind of came together, the union and be the end said, maybe a bird in hand is better. Wanted 6 billion and ultimately, four point 2 billion was the price. What stood out to me last was at the Computer Electronics show, ces, it was all about gadgets and technology. Ceo we talk about all the time is Marissa Mayer of yahoo and when she joined yahoo , her whole platform was around engineering. And last night it was really about within glamour and name dropping, really. Katie couric joining us as the global anchor. And nick, the wonder kid. Sowas really a big show, not much about products. What is that telling us about yahoo . Just this week, Mark Andreessen tweeted engineers, engineers, engineers and that is not what shes doing. Shes putting on the glitz and glamour and making it exciting, which in. Is all about content. But now you have to follow through. And apple was all about apps. She probably is getting a sense of where the market is going. In the last few days, in the paper it has all been about collapse, whether in the or comfortarkets level trying to solve consumer problems. Whatever the issues are that consumers are facing and how you solved them with an app. About carses is all this year. Exactly. I saw all of this at home depot after 9 11. Home became a sanctuary and they wanted everything they had indoors outdoors. In you are seeing everybody the car business, they want everything theyve got at home in the car. Iside the car, whether it filters for allergies, direct connect for bluetooth, people are getting aspirational satisfaction about new apps for the cars. Another headline doing that was darioout of ceos securing 34 million in funding. They want to extend out and develop more apps for additional services. They want to create Real Technology and real apps, not necessarily just pull out. This is wild to me, broadcast or sending a broadcast been out into the air, that used to be the way to watch tv. Is now taking those airwaves, capturing them, putting them on the computer and charging for them. Here is the thing, if broadcasters go only to cable, aereo is gone. This new technology might ultimately get the song because everything is changing so fast. Look at apple potential. What did steve jobs do deco every product he created cannibalized his earlier products. Samsungot waiting for to step up. He recreated. He kept redefining it. That is it. Now it is more about broadcasting and content creation. Innovation is the buzzword of this decade, whether you think about the oil and gas industry, probably the Biggest Disruptive technology is horizontal drilling, fracking to gain independence and energy in this country. Earlier,re talking adam, innovation and culture. It is not just limited to products. You have to continually reinvent yourself everyday. If the rate of change internally to a company is not greater than externally, you are probably backing up. And going back to that jack welch machine machine is a debate. I have been very fortunate in my 34 years to have a great team of minimum and around me in each of these assignments. Team of men and women around the in each of these assignments. Jack welch, it was a privilege to work in an organization. We say it is all about disruptive information. Hasnt always been disruptive innovation. Hasnt it always been . We say that about jack welch. He was not thought about as an innovator. He was not about as a business leader. I think we put that tag on there. Jack was well ahead of his time as far as innovation, cultural change, having a strong, deep a collegiateating competitiveness. We would go to those quarterly meetings and it was as fierce as the championship playoff the other night. How did your division do, right . But not as cold. It got cold sometimes in that room. Ofn i stepped into some those Power Systems we went from last to first and there is a tremendous amount of pride and competitiveness, you know, in a positive way. No one was throwing anybody under the best, but we were all under the bus, but we were all aspiring to be the best. Then do we need more Business Leaders in washington . D. C. Ook at the gridlock in and in some instances, they are not even speaking. They are not playing a game. There is nothing. We need more jobs. Youve got to have people running the country the knowhow to sign the front of a check, not the back of a check. There you go. About jobs,alk Unemployment Benefits, minimum with all of that coming up the adp report when we come back. You are watching in the loop. We are alive on Bloomberg Television and streaming on your tablet, your phone, and at bloomberg. Com. Im adam johnson here with Michael Mckee, Stephanie Ruhle, and our guest host. We are moments away from the release of the private payroll reports, better known as adp. These are the guys who generate about 20 of the paychecks in this country, so it is a pretty good read. About as good as you can get in terms of a preview. Member, private sector jobs does not include government sector jobs. And i want to bring in Mark Crumpton right now. What is the word . 230number is 200,000 8000 private sector jobs. That is a pretty good gauge of where things are going right now. The estimate was for 200,000. The last number was 215,000. Added private employers 238,000 jobs in december. This is a good number. There was some concern after the Services Industry report that maybe there was a little bit of a pause during the month. This may give us some hope that, no, hiring continued. We get the jobs report on friday. Todayre was a note out saying that the correlation between adp and nonforeign payrolls in the past month was almost one for one. That is huge. That is a238,000, monster number. We hope that is sustainable and nonseasonality. Hiring in the retail sector, we used to hire a lot of seasonality. It will be interesting to see if that number continues in january and february. Well es, that both that bodes well. The issue is youve got to get gdp going to pull jobs and not jobs to force gdp. We got to get the engine going in this country, as you said, stephanie. That is what we will talk about today, to really get the gdp up, good paying jobs for good employees. You are a businessman, not a markets man. People in the markets might be saying commodity economy is doing really well. Look at the s p full stop do you say, i dont care and i need to see real jobs in this country . When i meet with ceos at the business council, it is a mixed review. S p and theee the dow. The market is really robust. Especially if you are long and the market. Yes, but what is driving that deco what is the underpinning to . Hat what is driving that what is the underpinning to that in the core businesses . There is a lot of uncertainty. Added oneusiness is hundred 8000. You always want to see that, because they are the generators. 108,000. You always want to see that, because they are generators. Large businesses, they do not hire usually as much as the others. And when you look at the breakdown by sector, manufacturing, 19,000 jobs. That is the best performance in quite some time. Which construction jobs, is a little bit odd, because this time of year you do not expect to see that. What the seasonal adjustment is there. And then financial jobs added 10,000, and that also includes realtors and things like that. But that is good news overall. It could be reflecting that the Real Estate Market is back, so the mortgage businesses are getting bigger. Businesses you talked about, industrials and construction, that is great. In the financials, how many of those are being added to meet government compliance . That is an awesome point. You look at jpmorgan and some of the big banks. Those are not jobs that are bringing revenue. Definitely not revenue creators. That is a cost. It is not revenue generators. But the more jobs we have let me still remind you there are a lot of people out of work. Yes, that is the good thing. We have to get into the details of what are the cost jobs versus a Revenue Generating jobs. Are there many banks right now hiring big prop traders . It is all compliance. Yes, and it is interesting avenues discussion about jobs and what it means. Phil mattingly joins us in washington. The congress and the senate are set to debate whether or not to extend Unemployment Benefits for about 1. 3 million americans. Tell us the latest. Yesterday, the senate voted with just 60 senators, the minimum they needed. That was a surprise. They did not expect to be able to move forward on this debate. They got six republicans to go with them. A long way to go on this. Republicans want this paid for. It costs about six . 5 billion. House republicans still do not want anything to do with it. When you are arguing one side of the other, you tend to pick cherry pick data points. The house does not want benefits extended right now. They will look at that number and say, you guys are telling us the economy is great. Why should we be extending a program that is an emergency related program . What is the dynamic going on in d. C. Right now . From John Boehners perspective, you know, where does he stand . House republicans are complicated. Senate republicans are willing to have this debate and could move forward on this. John boehner has a lot of members in his conference that simply do not believe his program should be extended. It is not a matter of paying for it or adding other jobs numbers to it. They do not want it at all. He needs to protect his conference and basically, try to get as much out of the white house as possible. House republicans moving forward in any way, shape, or form to extend this. Regardless of what their brothers on the Senate Republican side do. For the monthort of december will either confirm or undermined his adp report and probably the labor report for the month of december will either confirm or undermined this adp report and probably affect that decision. Will it be revised from today . Probably. It has been interesting the way it has worked out, probably because the isn numbers came out. Withll see what happens unemployment. That figure seems to be what phil is talking about. You have to be looking for a job to get Unemployment Benefits, or at least say you are. If those people cannot get the benefits and maybe they say they are not, then implement rate drops dramatically in january. Maybe 6. 7 or Something Like that. What do you think the number will be on friday . What is your number . 100 95,000. Ected at im saying higher, 250,000. Im saying higher. Higher than 250,000 . No. To hundred 37,000. 237,000. But i think it is really i think it is really makes as far as the confidence out there. I think they will let volume pull versus push. Mattingly, our white house correspondent, thank you for joining us. We will be back with more. We will be talking the car of the future with bob nardelli. That his guards gorgeous. Indeed, it is. Welcome back. Im Stephanie Ruhle joined by Michael Mckee and adam johnson and our guest host, bob nardelli. Check on the markets with Bloomberg Television. You would think with a really good adp report that we would see futures, but they have gone down. This may be because it is fed minutes day. Maybe this is bad news because the fed might accelerate. And bond yields are up, by the way. That is demented, dont you think . It always happens that way. Good news ends up being bad news in the market. I dont know if it is bad news for america. Many new yorkers are getting back to business after snow and canceled weather thousands of flights. There are a few hundred Flight Cancellations reported today after thousands were reported on monday and tuesday. Americans have much to do while they are sitting in the airport. They can watch movies on their ipads. Americans are Going Digital when it comes to movies. New data shows a 47 increase in digital downloads of movies last year, making it the Fastest Growing Home Entertainment category. Studios are pushing the digital purchases by delaying dvd releases. I can tell you this is true because im downloading movies on any one of the 17 ipads in my house every single day. 17 . Not 17, but with three kids and a husband, i feel like my house is an apple show room. Do you have an apple tv . Rex i dont. I dont. Shameless plug, bloomberg. There you go. Thats what i watch most the time, bloomberg. Of course you do. I would like to throw a shout out to the airline industry. My good friend jim mcnerney at boeing, they just had a fantastic year. A lot of people wanted to throw jim and boeing under the bus on the battery issue. I said he would persevere. He would find a fix. He did. Great backorders, great future. They resolve the issue in washington on the triple seven x. The most the way, deliveries ever. It was somewhere around 650. And they beat airbus. And they are a solid job creator. Oeing is creating great jobs in louisiana, south carolina, the state of washington, all over the country. A really great country company. And by the way, and his company is paying a lot of Corporate Taxes. Which brings us to something i want to highlight for everyone. There is an oped focused on we are focused on calling for abolition of Corporate Taxes. Weve got to put on our libertarian hats. Of boston university, Lawrence Kotlik off right this. He writes this. It is kind of crazy when you actually hear the words, but read,ou think about it, Master Limited partnerships, they are basically pass throughs. We tax at every level. We tax corporations, the owners, and then the individuals. Do we need those many layers . It is a very inefficient tax. I can say that. They paid zero Corporate Taxes in 2007, but today that they had to hire an army of lawyers and spend a lot of times looking for ways to avoid paying taxes instead of creating gdp. I would argue again that i think it would give us it would give both. We took full advantage at ge of the opportunities demise cost of taxation, which allowed us to reinvest in new business, new products, and new jobs. We manage that business fairly well. One of the things i learned under jack was that you have to be global. I never had an outsourcing strategy in all of my time. What do you mean by that . Outsourcing had an strategy. I was headed Global Competitiveness strategy. If the tax rate was causing me to lose business, just think about it if i lose business, i will lose jobs. If it goes offshore because a competitor, whether it was by defaultabv, i was going to have to reduce my workforce. If i can compete globally and still create competitiveness, create the Job Opportunities and be able to reinvest in our company, that is what we were after. Take a look at this, bob nardelli. Second only to japan in the highest Corporate Tax rates around the world. The u. S. , 35 versus latin america, the average tax rate, call it 27. 5. And in europe and asia, 22 . If that number, 35 , were lower, would it generate jobs in the u. S. . I personally believe so. I dont know if we should go to zero, but this is a great discussion between the Business Community and washington. We should look at how we can be globally competitive. I talked about how we need to get gdp going and that will pull jobs. You cannot just focus on jobs if there is not an economy to underpin them. This is the discussion to be had, to see if we can lower that rate come unto bring it back on shore and create mobile competitiveness for the u. S. Economy. And the other thing with the effective tax rate of 35 , but corporations on average paying about 13 , are we being dishonest with ourselves . Is Corporate America being dishonest . What do you mean . The official rate is 13 , but the average realized rate that is being paid, because of the ges of the world, liberty media, all of these guys is it ultimately hurting the economy . We are basically cheating ourselves if we are not fairly collecting what we need to support our own government. I think the article went on to talk about loopholes. Im not sure they are loopholes, but legitimate legislation and policies where if you do i see title ic title transfer and so forth, you can avoid taxes. And if you have talent within your company, you can utilize those. Why not having talent within the government and simplifying tax laws so you do not need to have that . That would be amazing. Aboutill be speaking Corporate Taxes later today. Tom. Home runs the u. S. Chamber of commerce and he can speak about that today. Runs the u. S. Chamber of commerce and he can speak about that today. And from the february issue of Bloomberg Markets magazine, the top performers of 2013. You are watching in the loop. Good morning. Im Mark Crumpton. At the breaking news desk here, we are getting word from jcpenney that it is pleased with its companys holiday performance, though it did not disclose specific results. On november 20, jcpenney expected fourthquarter comps to turn positive. Management on a Conference Call right now. Jcpenney is saying it is pleased with its holiday performance, although it did not release specific holiday results. Back over to you. Thank you, Mark Crumpton. We got to talk about the Bloomberg Markets magazine. It is out. Toge funds are struggling make money. The average hedge fund only made about seven percent this year. The s p was up almost 30 . The question becomes, how do you make money e how do you make money . What is my take away . Only 16 hedge funds outperforming the s p. That is a problem. The heat is on. I spoke to Sandra Miller sam druckenmiller and said, what gales what gives . Here is what he said. Thatfound it remarkable investors are paying these guys to plus 20 48 . Lastre is 1 two 20for eight percent. Youve got to take more risk. You got to identify the big opportunities and go for them. There actually were some guys who made some real money. There were some. And as sam would say, they are pigs. You have to be a paid in this market. You are a hedge fund manager, you are getting paid to have the best ideas. You should have those ideas and that big. Who bet big . Larry robbins of glenview capital. He bet on health care and hospitals. This was huge for him. It was the longshort equity funds. Timereally had a hard reading those centralbank tea leaves. They had a very hard year. Their investors put pressure on to reduce the two and 20 down to one. Or one and 15. Yes. Wasnd private equity another winning strategy. John paulson was a onehit wonder. He bit he hit so big on subprime. He was the thirdbest performer in his recovery strategy why . Recovery strategy. Why . He bet on blackstone. Two years ago, people were laughing at him. And if you were in gold, it is down. Thee did talk about incredible salaries that bankers make and how they always argue that you have to pay people that are going after hedge funds. I wonder if people might start coming back to the bank, because at least you know you will get a guaranteed income. A job at a bank is a much more secure position. Youll get a big payout at a hedge fund. Im going to show up and get a 17 payout. But if you do not perform at the end of that month, a secretary youve never met before will show up at your desk with an empty box and say, theres the door. They had a big year at the bank. They did, relative to payouts and so forth, but they delivered. They had great performance. Some of the hedge funds made some big bets and lost. Again, if you think about the m a market, the and some of the ipos, the mix has had an impact on the market. But was sam was saying was that riskadjusted returns and value funds, that is not what hedge funds should be doing. They should be making big that. Just go make money. Or you will be out of a job. And that is why these enl guys were saying, i simply cannot work here anymore. These pn dell guys were guys were saying, i simply cannot work here anymore. And you see 40 billion coming out of one because of performance concerns. Pay twore you going to percent to get seven percent back e and you are still seven percent back . And you are still looking. Youve got to find a new face for the olympics. That will be our topic coming up. Lex the one and only Dennis Rodman thats right singing happy birthday. Yes, that is right, Dennis Rodman singing happy birthday to his bsf, st for life, kim jong and kimim jongil of north korea. I am so astounded by this. He has missiles pointed in the direction of us and our allies and we have this guy going over there to sing happy birthday to him yet though we call snowdon a weitor, and he may be, and are embracing this guy. I am offended by this. You are a true american. What do you make of this . One could say that he is a joke. The guy married Carmen Electra wearing a wedding dress. Who cares . It is just a bizarre thing to have happened. Well, we do have free speech here. Yes, but adam is blaming the media. All right, lets move on with the hunt for the new face and it will not be Dennis Rodman at the sochi olympics right now. We are looking for a replacement for Gold Medalist lindsey von. She is out due to a knee injury. The founder and rector of sport impact joins us now. How much of a blow is this . The winter olympics, i know people watch skiing, but do they watch individual skiers . They would have in the case of lindsay vonn, she is so popular and so photogenic. She was a Gold Medalist. Yes, they would have watched. But lets face it, all the platforms will do fairly well in the ratings. You said she is so photogenic, and when and if she becomes a correspondent for nbc, who is to say that is not a win . I would be shocked if the embassy executives did not knock on her door and say, look, you need to come out and play and be one of our folks broadcasting this, because she is obviously an expert in the field and she will bring eyeballs to the set. We are talking about what nbc is losing. Lose ins lindsay vonn terms of her endorsements . Her sponsors have to be upset. You can see them all over her ski suit. Preks certainly, and you have to understand they know certainly, and you have to understand that the Athletes Health comes first. The problem is, when that gold medal favorite and it has been several years when she has won a gold medal, and she is 29 years old and will probably not compete in the next olympics. You will see the endorsements fall in the future. She will not be poor. Lets not cry for her just yet. But she will not make as much as she could have. When you are running home depot, you famously celebrated home depot employees who were olympians. You created a whole ad campaign about it. Does for thethat spirit of america. What does that do for business . That was one of the greatest programs, to have these olympians actually working in our store. Who else to create such enthusiasm, the competitiveness, the focus, the intensity . Does that equate to dollars . It does. We want we won more medals than some countries that year at the winter olympics. Our team, i could not be more proud of them. We were very excited. Our associates love the association with the olympics and the paralympics. Greatght it was a program. The association we had with the limbic committee and these young men and women was fantastic. Are you going to sochi . No, im not. Why not . Im not either. But why not. Youas such a passion for when you were celebrating our athletes. Salt lake is an easier flight. We had a wonderful relationship and we knew the olympians. We followed them in each of their offense. There was in each of their events. There was a camaraderie and affection that i just do not have today. If not lindsay von, who will be watching . Is there another sport that is a popular . Please, say snowboarding, because i saw adam johnson dogging on it yesterday. Snowboard, i to would injure every bone in my body. It is interesting how the ratings trend. Before i get to your question, you notice that the olympics ratings really usually trend older and more female. Last winter lyrics, 56 more female viewership in the states. Bringe snowboarding will in the younger demographic, so that is important. Figure skating has always been the queen of the winter olympics. That is where you get the older watchers as well as the female watchers. And in upstate new york, people like myself, we love the hockey. Still, the skiing. But again, lindsay vonns impact is amazing. I cannot name that many other winter olympians. It is like tiger woods. I cannot name that many other golfers. For being with us. From skiing to cars among which is a hard transition to make no, they are not. They are so cool. And bob likes both. You will be the star of the future. See the car that will be the star of the future. It will drive itself, park itself, wipe itself. Welcome back. Audi just unveiled something very cool, a concept car at this years ces. Get this, it has laser headlights and can park and drive itself. I certainly need that. Our guest, bob nardelli, this man certainly knows cars. He is the former ceo of chrysler. First, i want to get into driverless cars. Do you truly believe we are getting their . I am probably too old to accept that level of technology. I would be a bit nervous if i saw a driverless car going by me in atlanta on 400, which is six lanes. I think it is a little bit of a nascar mentality. I would be very nervous. But i like the concept. Thelevel of technology, level of Development Going on, it probably will happen. We pay a lot of money to live in the city. Imagine if we could get cars that would drive us out of the city without having to drive them. You could go 60 miles out of the city and you dont mind the commute, because you arent reading the paper and sending e mails you are reading the paper and sending emails. The Safety Devices that anticipate a crash, that have positive separation with oncoming cars. Things, good good levels of technology. We were just showing that audi with the laser headlights. Led headlight, i dont know what to make of that. You like the viper because you used to run chrysler, but you have to admit it is a great looking car. It is a beautiful car. I wish it was made in the u. S. Me, too. Former ceo of chrysler and of home depot, and of cerberus, and now running your own firm. What a pleasure to have you full sub thank you for allowing me to come on. Comeback anytime. Amazingly, we are flat on the futures in spite of the incredibly strong adp jobs numbers. America going back to work. We are going back to work, too. Welcome back. You are in the loop. Code the final tally is in for the fifth straight year, Hedge Fund Sales have eat the s p performance, which rallied to record levels at just about seven percent. Year, investors are still waiting for signs that the recovery will continue. We will talk to tom schapiro in just a few moments about why he is betting big on housing. We continue our coverage live in las vegas for the consumer electronic show. Find jonhere we erlichman. Phones, televisions, smart watches, battling for every screen that you use in your daily life. You cannot escape from them. Jon erlichman is joining us, he has been at ces for the last few days. How is the battle playing out . You are bombarded. People are pitching you everywhere with smartphones, televisions, wearable devices. A lot of this stuff was free. When you talk to a lot of the companies that are presenting, when you ask them who they are competing with, they will say that they are competing within individuals time. There is only so much time in the day to watch television, check social media, you will be doing that on a bunch of different devices. But the way that the data structure determines the kind of devices you wind up buying. That is why part of the pitch is not just the technology and what it looks like, but what it is connected to. The ability to connect these devices to the rest of your world is key and a big part of the messaging from the auto manufacturers who are here. Connected cars have been a big theme this week, people want to be able to take the technology from over the phone and use it in their cars. That has been one of the big themes, so far. Quite just as you were talking we are getting breaking news from barnes noble. As you know, they have been struggling here with the proliferation of screens and what it means for the traditional book is this. Naming a new ceo. I believe he was the president before. I am sure you will be getting some reaction there. Again, you are at a place like the Consumer Electronics show, which has basically put booksellers out of business. This job,been doing obviously, already for a. Of time, making it more official with that title. This is a business, obviously i mean, if you look at the way that their tablet is this compares to, say, apple or amazon, it has been a scale new business. Ir a lot of people say that they like the technology, the problem is how do they get it into enough hands . They still have that bookstore strategy, they are using that as a way to continue to sell those devices. The challenge is to compete on a wider scale around the world the players like amazon and apple. From toplete also create worlds around amazon and apple. We spoke with a Senior Executive yesterday at samsung. The partnerships that they are lined up foretting all of their devices, they become so important. It is not just what it looks like and how it feels, it is about how much you can do on these devices. It is not that the devices have been tough to use, it is more outsell theility to competition. So, i think you will see someone who has been looking at rightsizing the business, trying to find a place for barnes and noble, liking to continue in the role, and someone who knows the did the liberty side of things. That is right, indeed. John, thank you so much. It certainly is about the Old Fashioned types of companies and how they are trying to survive with these new startups. Jon erlichman, our senior west coast correspondent. Lets take a look at our other top news this morning. Alan mulally says he is not a candidate to take the reins at microsoft. Yesterday in an interview with the Associated Press he said he wanted to put an end to any speculation that he is jumping to stay athe plans fort until 2016. Jpmorgan is going to pay a total amount of 2. 6 billion dollars to resolve criminal and civil allegations against bernie made off. They will pay 1. 7 dollar , 350on to the government million to the comptroller of the currency, 540 2 million for private claims, bringing the grand total to more than 29 billion in legal settlements over two years. Both delta and United Airlines have experienced fewer canceled flights today, according to Industry Data tracker. Coldesttorms and the weather in decades have grounded millions of flyers over the last few days. Will be canceled today, down from 2678 yesterday. It was the worst on monday, more than 4000 flights were canceled. All u. S. Economic data points to recovery. It may not be a powerful one, but gdp is expected to be at four percent. Consumers appear to be more confident. Than one hourless ago prove that the u. S. Economy is in fact creating jobs, a full two hundred 48,000 private jobs last month. Are we turning that into buying homes . Are we actually purchasing more homes . With me now is tom schapiro, the president of tgif partners, the private equity firm allowing billions into every corner. Real estate, new construction, you have your finger on the pulse. You have been the one to call the housing recovery years before others did. Are we hitting a saturation point in some markets . We do not think so. We think that this will be a sustained recovery and that the market longer than we could have anticipated to recover and we are starting to see the point where things are recovering quicker than we thought it would happen, but we do not see oversaturation of what people are starting to use that term, bubble, again. Bubbles happen when pricing becomes irrational. For a while, people should clearly have been renting, not buying. It was a lot cheaper. And it is still affordability incredible, down to a five month supply of houses available. Things are very much an equilibrium right now. I think we are in for a sustained, though not as big, of a recovery. We are definitely not going to see the same recovery we saw last year, but i think we will see a very measured recovery. We are just getting back to normalcy right now. Some people look at markets like new york city and say that there could be a bubble brewing in new york real estate. Look at the headlines versus what is really going on. The headlines are that there are all of these 100 million houses selling, but that is really a lot of noise. Those are mostly International Buyers with smart capital, from countries that they live in, they think the United States is a safer place to put money in. Seeing the family, people starting to make money again in all different aspects, adding 200,000 jobs per month right now, as you know. We are starting to see the point where it is distort below and people are buying. Some economists have said yes, we are adding jobs, but it is not the huge pace that will bring the jobs rate down by that much. Just a little while ago you mentioned that housing has accelerated a little bit more than what has been forecast. How is that matching up . Map are growing, but at a at a moderate pace . Why would housing accelerate . Go back to where we were. Wasing dropping 65 , it incredibly cheap. Credit was the pendulum, credit was way too easy. Houses purchased by house painters . That should not have happened. Now families have taken their credit and credit is starting to come back. They reported this morning, for example, that wells fargo is putting five percent of their mortgage on their own portfolio, so they do not have to go through government qualifications. You are seeing banks wanting to originate more mortgages. They are more confident. All of that is helping the picture, consumers feel confident, wages are up, jobs are happening. 86 Million People entering the workforce. They lived with mom and dad, now they are moving out again. We have just moved too far. It sounds like a perfect storm. In a good way. We will be back to talk about the money you are putting into real estate. Coming up, the breakfast wars are heating up. Einstein bagels is firing the next shot, including a smart choice menu. Will it or bagels help you to thin your waistline . Help youitter daigles thin your waistline . To sing last got night, stay with us. You are watching in the loop. Streaming on your tablet and that bloomberg. Com. I am back with tom schapiro, the president and chief officer of gis partners. You have been on the program many times, talking about where you are putting your money in real estate. Is there a hot new trend for you . We have definitely started to morph our strategy, that has happened over a long. Of time. We are much more focused on urban development. We are actually putting sites together, we will buy pieces of the site to put together. What does that mean . Whenever you buy a site for a place, like in new york city, it is usually decided that there are vacant lots, so up and down you have to purchase individual boat individual buildings and put them together. Build a bigger building. We are very focused on doing some of that, focused on the urban markets. Why urban . We see urban is one of the big opportunities, obviously. EnteringMillion People the workforce, they want urban environments when they are younger. Bar scenes, restaurants, they will move out of the suburbs later. Why, because during the recession they were all stuck in mom and dads house . Going afterwards they are to move. We are seeing transitions into major cities, places like new york city, miami, San Francisco. We have large projects in each of those. What about singlefamily homes . For a while you were very big on that. , we have purchased 25 million 30 million a month in single home stocks. It has become a more stable market as there has been a lot more rice transparency. Are still buying that, that is the whole different and separate portfolio. Three to five years, from the consumer comes back. How do you do that . I imagine that it is your one big track, coming in to grab the homes in one area, is that how it is . Not at all. We have a person based in San Francisco who runs that business for us. We have local teams in the market that we buy and. A team on the ground that does the Due Diligence of buying from the banks. Some of it will be from mls, frankly, and often from the courthouse steps. We purchase very targeted macro research. We have continued to buy in those markets. Managers, they now have big portfolios up there. Involved on the reynolds side, sometimes we did it like they did it, but they will manage the homes once they are rented. What area will you not touch . The one thing we are nervous about is the rust belt. We have kept away from those markets. We are big believers in the higher density markets. Vegas, atlanta, markets we thought would have strong recoveries. Now we like some of the stable markets. Houston, dallas, and south florida. We think those are all good markets. And in chicago as well. What about overseas . You have also been active in hotels and commercial properties in countries like brazil. Yes. Is that the only muchp numbers have been slower in brazil, but that does not mean there are not a lot of opportunities there. We recently purchased a big Hotel Property down there. We just brought in a property for hyatt condo. About portfolio there are condos,on with 14,000 seven thousand feet in office warehouse. A final note, Interest Rates went up in 2013. They may continue to go up this year. Is that a big risk . Not as long as the economy moves. Certainly if it goes up a couple of hundred basis points, that will affect the consumer, but the economy is doing better. The fed is tapering, it is all good for us. Tom, great to see you. Thanks for having me. Coming up, robert gates with some very harsh words for the president in a new memoir. We will tell you exactly what he said. More on that breaking news, barnes noble, moving up a new ceo within its own ranks. Details, straight ahead. Moving and shaking this hour, incoming barnes noble ceo, michael huseby. He was hired to take the reins of the bookseller this morning, he joins as he joined as the chief Financial Officer and was promoted to president in 2013, he is inhouse, moved up the ladder. They have recently invested in their digital unit to gain a foothold in electronic books. John chambers, also moving and shaking this morning, yesterday he gave the keynote speech in las vegas, where he told a packed crowd that the internet of everything, the connected products, cars, household goods, could be a 19 trillion opportunity. Cisco is delving into the internet of things as they face slowing sales in their networking business. Finally, the former defense secretary, robert gates, just wrote a tellall book. It is due out on tuesday. Gates pressed questions the president s leadership and commitment to the afghanistan war. Bob woodward writes in advance. He also makes the serious accusation in the book that obama was skeptical, if not outright convinced, that the course in afghanistan would fail. Certainly some big bombs being dropped on the president in this book. We are just a few minutes away from the opening bell, though. Top trades that you dont want to miss, keep it here on in the loop. Welcome back here in the loop. Oh i am betty liu. Bloomberg television is on the markets. Mixed up here, alex . Kind of mixed, kind of looks like a snoozer. Despite the private sector at 230 8000 jobs. Scott, over at t3 live, says the markets are just working off the excess from 2014. He is looking forward to more from the s p, any kind of upside data is what they are watching for now, but steady as she goes right now. Steady as she goes. Thank you, alex. The only trades you need to know about today, alexs with me. Dallas alix steel is with me. Apple, the tech giant said that they will open the 10th store in china this week. They counted on the country for more than 15 of its sales, outliving 22 in china to meet demand for its smart phone. Number nine is kraft foods, shares to take a meltdown, perhaps, with some consumers having a hard time finding goleta cheese in the next few weeks. This kind of makes me sad. Kraft is refusing to give specific reasons for the apparent shortage of its brand. You got a love it, got a hated. Nachos and cheese. Exactly. Eight, the u. S. Drugmaker with Health Solutions has offered to purchase an unsolicited path from well above the 2. 85 per share that they have proposed. The containern is store, shares of the retailer fell in the premarket after reporting firstquarter results. Earnings beat analyst estimates, records fell short thanks to Merrill Lynch downgrading shares to neutral from buy. Number six is monsanto, delivering firstquarter earnings topping estimates for engineered soybean seeds. Monsanto reaffirming its Earnings Growth forecast for the fiscal year. Number five, alan mulally, setting the record straight, he plans to stay with the automaker to this year, he will not leave for microsoft despite recent speculation. 2014 is slated to be the busiest year on record for the 100 10 yearold company. Is fun to make cars. I dont blame him. Announced yahoo updated mobile products and the launch of digital Magazine Technology and food news, her latest effort to create original content as she reinvents and transforms the company. The number three stock is twitter. Fitzgerald downgrading shares in the microblogging stock from a hold, saying that the ipo istion on excepted. Shocker, he says that this is more of a downside than upside with a second downgrade in as many days, Morgan Stanley cutting twitter to underweight. Number two is micron technologies, shares of the largest u. S. Maker of memory chips in the premarket, up nearly 12 after firstquarter revenue topped analyst estimates with acquisitions in july helping to lift sales of their products. Theumber one, Pharmaceutical Company announcing that they would buy privately held gastrointestinal and Cystic Fibrosis companies for 2. 9 billion in cash. Add topect the deal to the adjusted earnings per share in 2016. We will hear from the ceo of forest labs in just a few moments. [opening bell] the trade on the call in the markets, i want to bring in the senior Portfolio Manager at sky booth capital, with 9 billion in assets under management. He is in the same camp as blackstone, who came out earlier this week to say that he sees the s p up again this year and you say yes. We think it is definitely a possibility, but there is a higher possibility that it could be flat this year. The reasons for that our economic we are making tremendous economic progress, with Monetary Policy still being extremely loose. And the politicians appear to have a lot less damage that they can do. Put that together, it seems that the likelihood that this continues is more explosive than people expect. 20 , most people are saying Single Digits if we are lucky. Five or 15 is more likely, we think. Coulde point is that you still have extreme upside this year. Do not be overly cautious. The surprise might be . The fed does not taper as fast as people might think. Or you get much better growth in the first or second quarter. Remember, the fiscal drag from the government is going to abate dramatically next year. You have folks on the technicals to, right . The call of equity was destroyed in 2000 during the crisis, people are finally coming back to equities. Ok, well you have got some other asset goals in particular. You have been looking at the bull case for goals . 28 inr prices are down 2013 and prices have fallen so much that some buyers are actually ready to get back in. Analysts are now the most bullish on gold that they have been in the entire year. With prices this low, physical demand looks robust. According to the world gold council, the worlds biggest buyer of gold was up 30 , with india, the secondbiggest buyer on consumption, up 24 . Longerterm they will say that if the economy recovers, that should be positive for inflation. You are not as bullish . Not at all. In the short term could it rebound . Yes. Gold has peaked. Market, theat bull fundamentals have finally moved into Monetary Policy being slowly better and the bottom line is that a lot of the buyers definitelyrth can turn into willing sellers as prices plummet. A key underpinning. You saw the russians sell. They had no emotional attachment, obviously. They are priced as buyers and sellers as well. You have that old market, more than likely in the second year or third year, next year of the bear market for gold. Final emerging markets, you are not that crazy about them either, but alix steel has made china. E for china is a hard landing as they rotate into a consumer driven economy, however they are spending more on things like power. The Chinese State grid, the Largest Consumer of copper and inminum, they were up 12 2013. Much stronger than anticipated. You also had power cable production up six percent. You also have the growth in the electrical grid, up six percent. Not to mention the fact that the state companies targeting 63 billion dollars in investment in 2014. Citigroup says that this is driven by real investments. There was a bad quality of current infrastructure, so even though they have the ship, they will have underlying demand for basic stuff like copper. Say no . Emerging markets are in a relative bear market against developed markets. They had a great run in 2003. Coincidence that it was after 2009 that most of the money floated from emerging markets. They did well, have great economic growth, but very few part very few people participated. Now it is continued disappointing growth on a relative basis, you are finally starting to see investors reconsider the longerterm growth forecast, as well as the performance potential. What we still see as investors as we continue to equate gm to growth and performance, they have not been shaken out yet. But you are saying that even if we see growth in the emerging markets, it will not equal performance . We will still get growth, but at a less compelling rate than in the past. The technicals are scary with the sellers. Troy, great to see you. Happy new year, by the way. Coming up, the ceo of einstein bagels joins us for breakfast, lunch, maybe even dinner to talk about healthy items on the menu. Dennis rodman, taking a break from his tour of north korea to sing happy birthday to his best friend . Stay in the loop. Trading, east coasters are at their desks, trying to get to work and get back on their flights after this winter storm. Up next our next guest hopes that we will all be hungry for breakfast and lunch, and maybe more. Jeff oneill is the ceo of einstein bagels, which i am sure many of you know. He is adding new stores, getting healthier, adding a new menu this year. Great to have you here, great to have you back. I imagine that this is good timing, right . Everyone has new years resolutions to be healthier and thinner. Do people think of bagels to help . I am glad to be here. You know, we have really got to when you think about Consumer Trends these days, everyone is thinking a lot more about what they are eating and all of the health trends. This is really more than a fad, but a longterm trend, we thought we would jump on that opportunity with our smart choices menu. We came up with that a couple of years ago and we have been adding to that. We thought that this year would be a great time to add to that. All of the great taste, the chewiness and texture from a bagel that you expect, with 35 of the calories. Do you expect this to be a big part of your business . Or is this just a nice addon . We are looking at it to be about 13 of the business. A good piece of the business. His is not in and out we have had it out there for couple of years. We really expect to build on this as we go forward. I know that you are adding a lot of items to your menu, youre not just about hegels and cream cheese. You are adding more sandwiches, grilled cheese, smoothies, things like that. All of that, jeff, is because you are moving more into lunchtime . You have got the breakfast space, but lunch time is kind of where Companies Like yours are trying to grab more market share. And the afternoon part as well. We have got some great any knees out there, which are very popular for us. That is been a big and growing part of our business. Afternoon snacking. And all the specialty beverages. In addition to the lattes, the mochas and all of that, we had a lowfat smoothie that did extremely well last year. When you think about it, a lot more people are drinking their snacks, which is a big piece of what we are doing, the happy hour that we are launching this year, 50 malt averages in the afternoon. Like you said, we are trying to expand the daypart. Is that going to become as big as your breakfast . It will always be about breakfast. Breakfast is 60 of our business. The breakfast part is still the fastestgrowing part across all the restaurants. In theare tight for time morning, we know that breakfast is the most important meal of the day. That will still be the base of the business, but when you think about what we are looking to do when we expand, we want to get into the other day parts. Catering, actually, our catering business has grown over 20 every year, and it has become a big growth area for us. I know that you are growing by leaps and bounds. You are opening more and more stores. From talking to analysts, from talking to investors, there are some concerns about einstein and where they fit, exactly. Are they competing with the nara . Or is this still about Dunkin Donuts . What areas do you sparkle in . Chipotle, the nara, that whole casual area of the food market is growing even faster, in double digits. Right. We really are a hybrid, in some respects. Have all the freshbaked goodness. Everything that we prepare his freshbaked. You know, from our bagels to our baked goods. When you walk up to get a sandwich, we are making it there. That is a lot like a fast casual side of the business. But when you think about our business, 60 is grab and go in the morning, which is more like quick serve. We really are a bit of a hybrid, how we differentiate ourselves from most of the fast food side of the business is, you know, we prepare all of our foods fresh baked, which gives us more of a a bettermage and alternative, i guess, to fast food in the morning. All right, bagel and cream cheese, certainly a staple at breakfast. Thank you so much, jeff. Jeff oneill, einstein restaurants. We mentioned this this morning, right . Pharmaceuticals, 2. 9 billion, adding treatment for gastrointestinal problems and Cystic Fibrosis. For more on the acquisition, we are joined by the ceo, brent saunders. Thank you for joining us on this. What made the company so attractive for you . It really is a compelling itsrtunity for forest, both strong strategic fit to the a bigss we are already player in gastrointestinal and sister fibrosis in europe, but also a very Strong Financial fit, delivering very strong sales, 700 million to fiscal 15, highly creative batting, 78 . Eps is the nongap basis. Is this something, brent, that you were behind . You had just been named ceo several months ago. Was this something that you were behind from the beginning . Or was it already on track . This is something that i clearly drove with the team here. I have been here for about 90 days, you are right. It has been a very busy 90 days, but we have a great team here, we are energized, we are committing against the sound strategy to create auto shareholder value. Are you looking for more deals . We are. Clearly, we have a mission to continue to build out our business in the key therapeutic areas we are in. Gastrointestinal, respiratory, hospital, and Infectious Disease type products. We have the capacity and capability to continue to go at. T and fill in those franchises how urgently did you feel you needed to make this deal . Was there urgency given the loss of patent protection on the drugs . I have seen that written up in the paper and whatnot, but we have cycled through the lexapro cycle. When i joined the company, we put out an internal plan to get margins, back to our sales projections from the past and everything else. We could have executed that organically, on our own. I think that these deals are to turbo boost and accelerate topline and bottomline growth in a leveraged way. There was the desperation. But i think that i bring the mindset of executing with excellence, and also with urgency. When we see something we want to do and it makes Strong Financial and strategic sense, like this deal, we are not going to sit around and watch, we are going to make things happen. Were you surprised that the sharp drop off that forrest laboratories saw with the loss of the patent protection . That happened several months before i joined the company. Know, i think that the issue in this industry is that when you have blockbuster products that lose patent protection, regardless of how big or small your company is, it is very hard to recover. Our strategy is a bit different, we want to create blockbuster line calls with three or four products instead of one. We would have the same economic costs associated, but three or four comprised of the billion dollar line call in the therapeutic area. Therefore you diversify and bladder your patent risk. You can recover a lot quicker irma 300 million patent expiring. Very true. That is what we are trying to avoid. Very true, indeed. Brent, thank you for joining us. Lets turn it over to washington for some news on the jobs front in washington. The debate over extending jobless benefits has now shifted to how to pay for it. At this hour john boehner is meeting with House Republicans to discuss their next move on this. Peter cook has more. Peter . A surprising vote in the senate is pressure on the house to cut a deal. Absolutely. The house had talked about maybe doing something here, but the senate vote yesterday, there was surprised that the six republicans backed democrats to continue the negotiation, basically, on extending the jobless benefits for three more months. It caught a lot of people in washington by surprise. It puts pressure on john boehner, showing you how some of the gop see the Political Risk of not working this issue out. The big issue now is how to pay for it all. Democrats say that tax extensions have not usually been paid for and they do not think that this one needs to be paid for as well, but it is clear they will have to talk about it. Republicans in the senate and house say that not paying for it is not an option. John shimkus this morning. Democrats always want to spend money that has not been paid for. If this is important, it should be important enough to pay for. The price tag is a 6. 5 ilion dollar one. 6. 5 billion one. This is the one of the topics coming up, what would they pay for that House Republicans could accept . Houranagement, in the next or so, cameras will bring you the very latest. Before and let you go, though, the idea of paying for this, exactly what are we talking about . There are a host of ideas. A lot of them are not going anywhere. Chuck schumer talked about the tax break that democrats say pushes jobs overseas not going anywhere. There is a new idea from kelly ayotte, the New Hampshire republican senator who yesterday voted to again consider debating this legislation more fully. She was one of the people who surprised folks in washington. Her idea is to pay for this by getting rid of basically requiring anyone who gets the Child Tax Credit to actually show a Social Security number Going Forward. The idea would be that you eliminate Illegal Immigrants from qualifying for the tax break. She says that would generate 20 million over 10 years to pay for not only extending jobless benefits, but also pay for the military pension change that had also been controversial in the budget deal. It would get rid of two issues all at once, but her idea and proposal has been quoted before and harry reid has not been supportive of it. Some democrats have already stepped up and said that they will not support it. Savings inbunch of the farm bill, if they can get a farm bill together tom and there is some talk of trying to apply those savings to pay for the Unemployment Benefits Going Forward. 6. 5 billion dollars does not seem like a big number in the budget picture scheme of things, given how big the budget is, but right now finding money for anything is difficult. I can imagine that. Peter, thank you so much. Turning now to todays global outlook, Dennis Rodman sang happy birthday to his now best friend, the leader of north korea, before leading a squad of former nba stars onto the court in a pyongyang stadium. The crowd clapped wildly as he sang. There he is. The controversial basketball star says that he dedicated this to his basketball diplomacy. What a trip. The german finance minister and leaders are expected to discuss growth in the largest euro zone day that, on the same german reported factory orders rose more than economist forecasted in november. That does it today for in the loop. Tomorrow i will be joined by john and a former nfl star in the house, here on in the loop, talking about everything from the upcoming super bowl here in new york to that nfl settlement on concussions. Lots of issues to talk about, tomorrow on in the loop. Is 56 minutes past the hour, which means that Bloomberg Television is on the markets. 30 minutes into the trading day across the screen, the dow jones trading average is down by half of one percent, but over a gray wolf they are saying that it would not that it would be worth getting selloffs a lot of credibility here. Short term they will be kept on a tight leash for technical pressure to keep the markets down. The markets are also looking forward to investment coming out at 2 p. M. For insights into how the december meeting went. Time for futures and focus. Last year was a tough one for a much for all of the medals. Metals. Gold, silver, platinum, all falling. One of them outshone the rest, palladium. Ken hoffman joins me now with a look at why. For me it is going to be all about cars. Can you explain the correlation . And palladium, going together as the t g. M. Space, that is something, the main use cars. Teleconverters and what we have seen is just for our viewers, for me, i just learned how to drive, catalytic converters make your cars cleaner, a very popular thing in china and europe. That is exactly right. What happens is that when it goes through the exhaust system, the bad stuff comes out, the pollution stream comes out, it comes in contact with platinum. The difference is that platinum is mainly used him gasoline engines. Used inm is mainly diesel engines. What helps palladium last year was the big increase in people looking for diesel cars. Major carmakers came out with diesel engines. 600 miles, 700 miles to a tank full, they are all trying to make these cafe standards, at the end of the day they like platinum and palladium. China has a huge pollution problem. Analysts all love latin him and palladium because they believed that china will implement new rules out there and impose stricter standards, like we might see in the west, which could mean a big increase. My understanding is that asia is more tied to palladium, where europe is more tied to platinum. What will be the distinction between the markets Going Forward . Do youill come down to see diesel or gasoline engines . That will be the number one area of differentiation between the two. What hurt them last year was europe being different, those car sales were not good, at the u. S. Helped pick up the slack, for the first time we saw a lot of diesel cars in the u. S. , then you just have to look at the supplyside side. 75 of platinum comes from south africa. One third comes from South African palladium. They have had strikes going on as we speak. That is tightening up the market. What is the ability for sister metals, cousin metals, like gold or silver, to weigh in on the investor aspect . In a way you are right. A lot of people look at the precious metal space and look at the deviations between them, that can sometimes way down on these metals, like you saw last year. Metal. A sister palladium is seen as further up. We will have to see if they can still be the metal of 2014 like it was in 2013. Thank you so much. We are on the markets again in 30 minutes. Market makers, is next. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and Stephanie Ruhle. The battle for your tv screen, aereo wants to expand its controversial Screening Service streaming service but it has some powerful enemies. The state of american business. We will hear from the top business lobbyists here in the commerce ceo of tom donohue. It is the crack cocaine and marijuana. The new way of getting high on pot is called dabbing. And it could be dangerous. Youre watching Market Makers here in new york city. I am Erik Schatzker. And i am Stephanie Ruhle