Transcripts For BLOOMBERG In The Loop With Betty Liu 20140205

We just experience. It is. We have seen three times as much snow on average. All of it has a huge Economic Impact especially on the airline industry. In january, we saw an incredibly number incredible number. We have seen an Economic Impact sales figures were impacted in january due to the cold weather. Impact on people going out and shopping for cars. His shadow. Il saw this is obviously happening. Weekend . E expect this will it continue like this throughout february . Serious, real data. I would like to think i am more accurate than the groundhog. We are looking at a long winter so far at least this week. The first week of february, three storms in one week. One came conveniently after the super bowl, was fans are happy about. That one that canceled 2000 fights on monday when people were trying to get back. Another one today and it possibility of a third storm on sunday. Predictions have been all over the place. It is still a few days away so it is difficult to call. I do not want to depend on the groundhog even when he is right. I will get you caught up on other headlines this morning. Greece could be getting more help in the european union. According to knowledge of the situation, the eu is considering extending maturity on loans up to 50 years and lowering Interest Rates. It has already received 240 billion euros in bailouts from the eu and could receive more in a future package. A strike in london causing chaos for travelers. For a secondiking day. Usual, later than downsized line closures. Googles recent stock surge is paying off for investors but also especially for eric schmitt, executive chairman. He received a compensation package of more than 100 million in equity that will invest, starting in 2015, adding more to his 10 billion network. He will also receive 6 million as a cash on us later in the month as a recognition to his contribution. Chance elation, eric schmidt is rich. Are joined by one of my favorite guests. She was the longestserving female of the u. S. Public cleat traded company. She is also on the board of the washington think tank, center for american progress. Welcome. I want to start off with news of the day, about a drugstore we know well. Cbs will stop selling cigarettes beginning october 1. 7000 Stores Across the United States. The company says it will release 2 billion in revenue in a loss of sales. The president immediately came out and praise the decision saying, as one of the largest is s resell farmer retail pharmacies there you have it. President obama has come out in support. The question will be, will shareholders . This is important for cbs. It is a branding exercise. As a woman who truly understands brands and wellness, what do you think . Interesting both cbs and walgreen have been trying to reinvent the concept of a junk store and think about going beyond just giving flu shots to, how do they become a part of daily health needs. Wasboard seems to feel this a strong way to reinforce the Healthy Living brand. It puts pressure on walgreens. I also think there is an interesting question that comes from when you substitute judgment for your consumer judgment, where do you go after you started down that . He stop selling candy and soda. There are people theyd that people that do not like that they sell condoms. You cigarettesen become more dominant, which are much healthier . Do they go back in the business or stay out of the business . It is a big step. Cbs changed the symbol on their twitter handle to the no smoking sign. Theyre going to use it to as ae bigger and use it platform. They are. The question is how much money will they lose . They quoted a figure of 2 billion. Direct sales . Exactly. If i walk into cbs to buy a tobacco product, i will also pick up a gatorade and i see a People Magazine and i did not think about. I honestly think when you walk into the store to buy Tobacco Products, a lot of people walk out with a number of other products they did not intend to buy. People go to walgreens and bring the whole checkbook with them. Yes that is the other thing people people who buy Tobacco Products do that on a regular basis. They are now not going to go to cvs but they will go to walgreens and 7eleven. The question is, it will be harder to make a decision to not sell those things when they see their bottom line rising. They clearly want to do something to change their image and change their brand. Are you tired of hearing all this branding talk . I feel like here we are at the Holiday Season and every celebrity wants to be a brand. Playboy has been one of the most from and its american iconic brands for decades. Fact we talkat the about branding as important now . I do think the word is overused. It is used as if it is the same popular the name of any product and that is not the same thing. Is ad Airlines Transportation company and version is the brand. Reeboks is a shoe company and nike is a brand. A true brand has an emotional connection with consumers. A personality and attitude that makes it relevant and transferable across product lines. Often, when people say they have a brand, what i think is, you do not really. You have a successful or not so successful product. But i think thinking about all the aspects that go into how consumers perceive your company and your product, that is not going to change. The broader issue of social responsibility, clearly what cbs is thinking about, everything i see tells me younger employees will make choices about where they go to work based not just on the job they are applying for, but what they perceive as the companys broader responsibility. When i think about brand, i think about cocacola. Known one of the most well brands in the world. But i also think about diabetes when i think about cocacola, especially when i read the cbs story. How do they go about making their brand better, when their products are probably causing a lot of people in the longterm disease . It is why a lot of soft drink companies have tried to do line extensions that are lower caffeine, because they want the brand to be a number of that is not just in the high calorie, high caffeine and sugar water space. It is also true those companies have made a push into the non soft drink businesses, which have been their growth, whether it has been vitamin water or other kinds of juice that the consumer is gravitating towards, away from the classic coke. And ultraluxury rant, an aspirational brand. I do not know a woman who does not want to go to an Italian Ranch resort destination spot. And what do you need to do to make it a destination for men, a product that is not just ultrahigh end, or is that enough . Itself, turning 35, they were really the visionaries for healthy vacation concept. It appealed traditionally two men because there is everything from a rope course to intense training and if youre looking on marathon, and 25 or 30 of the guests are men. What theyre doing that is exciting is take great content they have, whether it is work on sleep and stress or healthy weight, and extended the on just physical properties. You could, at home, do things like personal coaching from a nutritionist. We are talking about delivering fast fresh food. The ranttself allows to go to more of a premium bit brand that is accessible who has not gotten the chance to go because it is not inexpensive but also because it takes time if you are a busy mother to go for five days. We will talk about this and a lot more. We are here with the executive chairwoman. She is here for a full hour. Still to come, we will talk more about the food business. We have the ceo of Food Services business plus, kristi will tell canyoncanyon ranch and resorts are making healthy menu available. And we will talk about a little bit of the service business. Stay with us. \ we added 170 5000 jobs in january, less than forecast. Economists were looking for. Mike standing by. What you think about these numbers . It is not good when you look at the breakdown. Lower than the forecast. The question is, what is the relationship between the forecast in fridays jobs report. You can see 230 8000 last month and 74,000 when it came to government data. Report thatng at a said we lost 12,000 manufacturing jobs. That would not be good news. No jobs in financial activity. Pretty much all the game in construction, Large Businesses do not add many jobs. 75,000 small business. Not a great overall look at the employment numbers. We will have to see how this all plays out friday and whether or not it still holds. The question is, did the weather influence this report and Fridays Labor Department report . Storms came in january on either side of the Labor Department survey. Ofy count the whole month the survey. It will be interesting on friday. It has been a better predictor over the last year. It has given us a good clue as to what were going to see. A big failure last month. Everyone is looking at it and saying, what is this telling us . We got many factoring, it was not good dues. The number went down. At 10 00 this morning, we will watch to see with the Employment Index says there. Thank you very much. It does. Now we are joined by the ceo of global provider of food and facilities. Might recognize a few of their clients. Eric is the ceo who joins us now from philadelphia. We still have chrissy with us. Lets start off. You went public in december and coming out with numbers today. We are looking to Corporate America to give us an understanding of where we are in the economic recovery. Tell us. We announced a great quarter. In terms of based topline growth and Margin Expansion and double digit operating income, which led to stronger earnings. We were encouraged. It was our First Quarter as a public company. Not only were we pleased, as we look forward, we continue to see bright prospects for our business and we are encouraged. Where . If you look at our business in the quarter, we saw very broadbased growth. If you look at north america business, that grew seven percent, International Business grew seven percent led by strong doubledigit growth in emerging markets. 21 growth in china. Our uniform business grew as well. We are in food facilities and uniform services businesses. We are seeing broadbased growth across geographies. I wonder how you respond to the news that they will not sell cigarettes at cbs. You are huge on ethics and wellness and community. You also have to sell beer and broth in stadiums. Youdo you respond . If are selling any type of Consumer Product today, you need to be very sensitive to what the consumer wants. Citizen todayrate is focused on health and wellness of employees and consumers. ,e have a wellness platform wealthy for life, and it is a approach to making sure we have the right food offerings and the right education around nutrition for our clients, and a Wellness Program that, to us, is part of what we need to do as a good citizen. We want to make sure the consumer has the choice to to eat. Hat they want can you feel the increase in the importance of healthy . Definitely. I think trends are permanent and you see it at all levels. You see it among baby boomers who want to stay young longer. You see it among our parents generation where we are concerned about their health. You see it among young people much more tuned in to healthy lifestyle. There is talk about the invincibles and young people and whether or not they will opt into insurance programs, i do not think it is a failure to appreciate the importance of Healthy Living. That is very embraced by the generation. You have seen it among employers and that the government level. The awareness that, in many ways, we do not have a health care in this country, but we have a sick care. To theu get sick, you go doctor and you either get a prescription or a procedure. What were trying to do is radically change that, whether it is the food we eat or help people understand sleep. These are big changes. Let me ask you, you ran pepsi bottling and now youre running a big corporation. You have got to look at the bottom line. You offer expensive Wellness Programs for employees. Do those pay off at the end . You have to satisfy shareholders. Aroundmission is enriching lives. We have got several constituents that are at front and center. Employees and shareholders. From a health care standpoint, it is very important we make sure we have two major strategic thrusts. It is important our employees are front and center. For us, they have to have quality choices at affordable options within those choices. That is what we focus on. Populations on health and their overall wellness. That is what were are trying to provide them. Does the move by cbs put pressure on you . There are customers that want to go buy cigarettes every day and they decided that was not the right thing to do. People go to stadiums every day and want to drink supersized sodas and beer and hot dozen that is not the right thing to do for their bodies. We are big believers in the marketplace that it sets the table. I listen to what Consumers Want and what my clients want. Then we will go deliver that. What is important to us is across literally every venue we provide services to, there are Healthy Options for those consumers that want Healthy Options. We want to make sure under the Healthy Living wellness platform, that we continue to provide innovative food choices for those who decide. Thank you. With us andl stick we will continue to talk about all of these issues, branding and wellness and canyon ranch. When we come back, we also have to talk about struggling retailers. Jcpenney and radioshack, they both ducked in the mud. We will find good advice. The queen of branding what she would tell them to do. Lets get a check on futures. I thought, we had a great day of cheap in japan. You can see down about a quarter half of a percent, really, adp numbers were not good. Everyone is tense right now. They want to be in recovery but we are in a recovery without confidence. The moment we start to hear anything slightly negative. I am waiting to see what cbs numbers look like after the bell. They might be doing the right thing culture early. If you are a shareholder and you know you could believe in 2 billion of the bottom line, it is an issue. Still here with our guest host. The executive chairman of canyon ranch. We have now got to talk about a couple of retailers. Jcpenney is a favorite of bill ackman, find the most in four months after posting Fourth Quarter samestore sales that missed estimates. The company is shutting stores a 75 stock price decline in the last year and it is not the only one. Radioshack, a favorite of maps, will close 500 Stores Within months. They do they should not have spent all of that money on super bowl ads. Julie hyman is here with more. What do you make of this . Lets get to jcpenney. Shares fell to a record low today. Samestore sales were up. They did better but they were not up enough. That seemed to be the crux of the problem. Most analysts were looking for double that. You are looking for a very low base. The same sale fell 32 the prior year in the same quarter. If youre looking at dismal numbers like that, you think you would get better than two percent gain off the base. It is a gain, but a small gain. It does not look like a trend. It would have to look like a to giver the market them credit. Unless we just saw a video of those stores. All empty. I do not see any reason to go to jcpenney. That is the problem. They are caught in the middle between true value, effective discounters on the one hand, and the upscale and more Specialty Stores on the other. There is not for most consumers a compelling reason to go. They alienated a lot of core customers when they went through all the bill ackman inflicted changes. Becauset in it anymore his influence went so very badly in the company and mike is trying to let me ask you what you think about what ron johnson did there. Do you think he needed to be given more time . The guy did genius things for apple. Or do you think you strategy would never have worked their . There . It is it is true it was a challenge to have a Customer Base and go so far upfield because, at a different retailer with a different Customer Base, the straight the same strategies work. I understand they did not do Much Research or the kind of slower rollout that would let you get consumer feedback and let you move the consumer with you and let you build a bridge from where you were to where you want to be. It is hard not to conclude there were strategic mistakes made. Think about playboy for a moment. The fact you could go to a Halloween Party and women are dressed as playmates all over the place. You would think, this is a mens rant. One might say it objective eyes women but it does not. How do you change the channel . One of the things we found out early was that as the generation younger than mine came of age, those young women who had been the beneficiaries of both the Womens Movement and the sexual revolution wanted the benefits of both. They want to be sexy and powerful. That is right. They did not see they had to dress like a man to be successful, they did not see that they could not go out to a club and look and feel sexy. For them, playboy and particularly the rabbit head, was a really appealing symbol of sexy sophistication and stylishness and that gave us permission to start to explore extending the brand through womens apparel and jewelry and accessories. When i left the company, we were doing 1 billion in retail sales. 80 of it were womens products around the world. That is an amazing figure. Go back to radioshack. The opposite of sexy. This company at the break, i said, i do not know what i would buy. I love remotecontrolled cars. Speaker wire, a wifis base. It is not necessarily that you will buy your little toy car. You will buy something for your smart phone. You created your own audio system there. Not know that. The commercial, as cute as it was, would it make you go to radioshack and communicate what the brand will try to transform . That is a good point. If that commercial is the first step of a marketing program, it did make you say radioshack. It is interesting they are willing to take a bold move and recreate them. Components, if they will be successful, is the service they offer in the new store. As cool as the design is in the apple store and as cool as the products are, do not minimize the genius bar and the sense that you can get help. If they could create that kind of geek squad, that kind of, i go there because technology is all around me and i am not sure how to navigate it, and the radioshack people can really helmet, then i may be onto something. I love to i love the apple store. Radioshack, the guy is genderneutral who work at radioshack, already a geek squad. Workknow how to electronics. You have to be a geek to go in there in the first place and that is the problem. He is a peculiar dog. I live closer to best buy. I am probably the only person who goes to best buy to buy stuff. Up their desire game. Julie hyman, thank you for giving us the negative update on radioshack and jcpenney. Ofstill to come, speaking jcpenney, we are focused on setter as the company gets on its earnings release. Stay with us. I like this weather. The Red Hot Chili Peppers performance at the halftime show at the super bowl was faked. Did not lip sync but all of the rest of the people in the band were strumming along. Arrangements were not hooked up. Told fans the nfl had them prerecord their instruments because they did not want to risk technical problems in the show or a botched sound. I will back flee. They have been outspoken about this. They were years ago asked to lip sync and they said, we would not do it and we will keep it real. Flee said for the opportunity to perform at the super bowl, the nfl did not give them another chance. There is not a lot of time to set up here it when you go to a regular concert, it takes a huge amount of time. They only had a few minutes and could not risk it working and they made an executive decision that it is better to be a part of an extraordinary piece of american culture. It is still sad. Clients i was there and it was bad asked. I do not think you can say on tv. Twitter reporting earnings after the bell. It is the first report going public. The company will take questions during the twitter handle. Another example of how the media is changing. We are joined by a woman who has been through a lot of changes in media over the decades. A former playboy ceo and executive chairwoman. When i think about media, i know people do not like to talk about this. When you look at what playboy has done, the entire adult industry went digital before anyone else did, and figured out streaming and Subscription Services and going online. Why is that . Why did you figure it out before everyone else . Arent you laughing yet so when you think about esquire tv, you had decade ago. We were early seen the opportunity for the company leveraging as a magazine publisher and more in defining itself as brand and content across platforms and a lifestyle brand we could invest in as a Global Licensing brand. The First Magazine to go online in 1994 and the first to do mobile content. In some ways, because we were a Small Company compared to the time warners of the world, we were more venture us creatively, but careful in terms of what we invested third we could take on, ahances and early time created pathfinder, they created go, neither of which worked. Partly, what we did worked because we were not doing a massive, try to put all the brands under one brand. I think that is a key point. I wantor example to point out playboy has all of their content, all of their content, on the ipad app. Aboute talking earlier the time inc. Situation because they fired 500 people, getting spun off from time warner. You said, sometimes being little isnt so bad. That is right. I think we all may be very present pleasantly surprised. They would be unfettered for the first time from the limitations the Sister Companies on the tv video and digital side put on the brands that did not let them do what they might have been able to do. They could not go into businesses. Partnerships with other companies. That is right. There was a video and tv division and other Digital Strategies in place. Incredibleow got franchises, incredibly creative people and a great chief technology officer. They will do innovative things they were not able to do as part of time warner. Didhen i think about what i four years ago, i bought magazines and subscribed. I basically now get everything on my smart phone from twitter. I could be clicking on content, smartphones, from canyon ranch website, and why would i buy Healthy Living when i could just click on it . We have to differentiate between the platform on which you are reading and whether youre paying for content or not. Publishers do not care whether youre reading their content on a tablet or a piece of paper. They care whether you think curated rented content is valuable enough that you will pay for it as opposed to the blogs and the free content online. That is the battle being waged right now, whether or not the Business Model for curated and professionally produced content can work in a world in which additional ads are a fraction of what print ads were. Right now, you are trading dimes for dollars and that is not working. What was the Business Case for putting content on canyon that wastent . Part of the strategy of extending the brand and content in order to lay the foundation for then putting premium content on top of it. We just finished data on healthy weight sixmonth Subscription Program that would allow clients to have their own nutritionists and exercise physiology us and behavior coaches to have personalized coaching on how to achieve. Guide is a noun and not a verb. A healthy way. That would be a pay service we would market through the free website. Not unlike what i did at playboy. Com, where you have a robust free site and a multi revenue stream model with e commerce and subscription and sponsorship on top of it. My canyon ranch cap, every time i open my refrigerator, it will stream, stop eating. We will talk more about that. We will talk about health care in the sense we will talk about obamacare. More when we come back. We will talk about politics. She was an obama reporter in 2008. Issue still behind the president six years and . We will be back in just a few. Stay with us. Welcome back to in the loop. Im stephanie ruhle, joined by matt miller and our guest host for the hour, christie hefner, former label ceo and executive chairman will chairwoman of canyon ranch and on the board of american progress. You said when president obama ran you were inspired. You yourself are a chicago girl. Six years later, still inspired . I think like anybody, and wish we couldve accomplished more over the last six years. Although i am enormously grateful that we weathered what wouldve been a true recession and came out of it not in a depression but in a jobless recovery that we are starting to build back from. I do think things could have been a lot worse. What i admire about what the president has done is he is trying to track of big issues whether energy and climate or health care reform. What is disappointing is we dont seem to have a functioning government in the sense that we have two parties that are willing to come together and craft laws that are around immigration, job creation, around these big issues that everybody admits we have to tackle but we keep kicking the can down the road. You seem to be very prochoice in kind of a libertarian sense and yet the president , a lot of people would say, is far from it. I think the president is remarkably nonideological actually and i thought it when i first met him and i think that today. I think he looks for solutions to problems. I think he is willing to get them from different quarters. I think he has put together a coalition within the moderate part of the Republican Party and the Democratic Party that needs to be bitter bigger. And i think the fact that the Business Community is pushing back to him of the tea party, and the kind of candidates they have been supporting is a good thing, frankly, for the country because i think we need a robust Republican Party to work with the Democratic Party and it has been a little robust instead of bus. How about hillary clinton. Would you get behind her . I think shes got some challenges. I was a big supporter of her in the senate and i think she did a fine job in the administration, but he elections are about the future and not the past. And i think the clinton brand, if we could go back to the word, is not forwardlooking anymore than the bush brand is. And i think there is not going to be a lot of nostalgia for the last eight years of this administration, so the association does not necessarily help her. I am in the camp that dont think she is the inevitable candidate. We have more to cover. We have to talk about womens leadership and initiative. You are an extraordinary example of a woman ceo. I can tell you, i am frustrated and i want to see if you are as well. More with christie hefner. And a little bit of a surprise for her as well. We will be back that will be back on in the loop in just a couple. Welcome back. I matt miller. Christie, time to put you to the test did a little bit of a surprise. A game called this or that. Here we go. Lets choose one of the other and tell us why. Or pilates. Yoga pilates. I actually do pilates and it is a great complement to the strength and aerobic exercises that most of us do, and i tried yoga and other than golf it was the single hardest thing i tried. I agree. Ted cruz, rand paul. I guess, just because i do like the libertarian streak that is part of america, the dont tread on me and i think it is an interesting thread in the political debate and it is often different from the rightleft the five. And just enjoys. Or Pierce Brosnan maybe less lofty choice between two men or maybe not. Between Pierce Brosnan and daniel craig, i like daniel craig as james bond. He was remington steele, below a lot of people dont know that. American idol, top chef. I guess top chef because i am more interested in cooking. Really thinking about these. Of this one i guess you do not watch a lot of tv. Of scriptedn dramas, like true detective, hbo series is great. White wine, red one. I like both and i dont eat red meat so i am here to say there are a lot of wonderful red wines you compare with the fish and chicken. Elected at the final thoughts on the subject. You and i focus him month and womens leadership. You were the longestrunning female ceo of a publicly traded company at playboy and still as important as womens initiatives leading fortune 500 companies, . 70 to a mans dollar. Are we in the pink ghetto. We cannot get fatigued. It can get frustrated because as you point out it has been decades now that we seem not to be able to get over 20 and corporate boards or cease week. But we are doing ourselves a little bit of disservice when we only look at the Biggest Companies because there are a lot of women doing exciting entrepreneurial things and more women people were for women owned businesses must fortune 500. A very entrepreneurial which is probably more important for the economy. It can be. But i am still very much committed to getting up to a place that a lot of countries have made more progress on a terms of representation. Do you think there is a hick up, something that has to be unlocked question mark i dont think it is a single issue. We know it is not a pipeline issue. Socalled leaky pipe people getting out of mba programs, going into business but not staying into the upper ranks. Ardent it is we are almost the only developed economy without paid family leave and women are primary caregivers and that and chris Angela Brandt gillibarand has introduced a bill. Will women are faced to stay home it is the person who makes less money, and it is the woman. It is part of it but the proof is in this economy as we know most women work because they have to work. In other words, part of the reason why Household Incomes and not stagnate more is because women went into the workforce. We are glad you did and we are glad you joined us today. Such an honor. Real pleasure having you here. Thanks so much for joining us. Just about 30 minutes away from the closing bell. Opening bell. Quick look at the markets. We are down across the board. 30 minutes to the opening bell. This is in the loop with betty liu. The countdown begins right now. All come back. You are in the loop here. A new survey said American Companies added fewer jobs than forecast last month according to adp. Ride it payrolls rose private payrolls rose. We will be joined by billionaire sam zell to talk about everything from markets, real estate, jobs, Chris Christie and what is really going on in washington. Plus, one of the countrys biggest drugstore chains will quit selling Tobacco Products by october 1. Cvs caremark says it decided it cant sell cigarettes at places where it also provides health care. It just doesnt seem to match. Lets go back to one of our top stories this week, microsoft. Nadellas second day on the job as the microsoft ceo. Bewith any new ceo he will tasked with examining Corporate Strategy and carving out the future for the software giant. Olivia sterns has been digging into what the future is going to hold for microsoft. Tell us where this company is headed. I think nadellas really big challenge is going to be trying to move microsoft away from the pc past and push faster into cloud and mobile. That is exactly what we heard them say just yesterday, it is a mobile and cloud world. Yes, they are still making very healthy profits with pcs and windows and licensing out Microsoft Software but the growth now is Consumer Devices and enterprise or most recently nadella, as you know, he has been running the cloud and that is where he sees the biggest opportunity and brands that operate on the cloud, including menu know and recognize, being skype and xbox 1 but ha doesnt want to stay with mobile question mark it clearly wants to accelerate into cloud but the biggest question of law is what is he going to do with its consumer business. Street,nalysts, wall what did he say . I suppose it depends on who you ask but most basically agree the stock is really undervalued and they do want to see nadella shake things up at microsoft, so trading at a pe ratio of 12. 8, that is the Second Lowest among Software Makers and we spoke to Todd Lowenstein and he said 80 of the value of microsoft is on the enterprise side and it is not being value that way, the consumer side of the business gets all the attention at a disproportionate amount, and a former microsoft executive was on surveillance was weak and he said the key is for nadella to get mobile rights but then we had a professor over at nyu sterns on surveillance this morning and he said he thinks a cant win in mobile, it is just too competitive, and he would like to spend the them off just as googles one of motorola mobility, but the good news, betty, is nadella is sitting on a 50 billion pile of cash and some analysts said what he could do is maybe boosted dividend to buy himself a little more time on what he wants to do. Thank you so much. Olivia sterns on the future of microsoft. Spending on the subject of leadership and growth, joining us for the hour is none other than billionaire investor sam zell. Holdings crisscrossed the globe in Many Industries from real estate, energy, telecom. He is also a substantial contributor to the world of education and politics. So much to talk about with sam so we are keeping them hostage to the rest of the hour. Great to see you this morning. You have been as well as all of us watching from the sidelines what is going on with microsoft. I do you think they carried out the ceo search . I think that the challenge of aying to identify a ceo for company as iconic as microsoft is is almost an impossible task. It impossible . They talked to this guy, they talked to that guy. Almost like a baseball player in free agency. No way to keep it secret, thats for sure. The real answer is, how do you define and identify someone who is capable of leading this Company Going forward . What do you think of microsoft choosing, after all of those names bandied about, finally choosing a relative unknown insider . I think it probably is a reflection of the Risk Appetite of the board. Had a number of examples, where the hewlettpackard or some of the others where they brought in superstars to take over the company that really did not know the companies that well and made a lot of mistakes. I think this was a safe decision. I dont know the gentleman, but somebody who has been part of the culture, ultimately culture premarital prevails. Speaking of the culture, sam, it did not played rectally into this decision but there is a culture of the activist investor these days in Corporate America. And while an activist investor did not push for a change here at microsoft, certainly there is this atmosphere that if a board and a ceo does not do this right, these people, whether it is bill ackman or carl icahn someone who dealt very you double or closely with will be at your doorstep. How does it change a ceos role particularly for somebody like you who runs a public company, how does it change your role . First of all, i have benefited from the fact that i am the chairman of everything and the ceo of nothing. [laughter] really critical, ok . Because that means i can be a strategist. That means i can think about what were going to do tomorrow by an hrnot confronted problem or hacking problem. Something someone running the company on an ongoing basis. I think it can be summed up in the most simplistic fashion. The activist in effect raises money by saying i am going to create superior returns by addressing inefficiencies and opportunities for companies to be better. Those activists are under enormous pressure from the money source the own clients. To some extent they say why should the ceo be under the same pressure . If i am being hitting thats being hit from behind i have to hit him from behind and make him perform. So you think it is right . The answer is, i think activism is very right and important in a capitalistic system. Have that photo of carl icahn . Carl icahn on the cover of time magazine. You have been on opposite sides of him before. His comeback at this age. What do you think about this . I dont think the world comeback is an accurate description. Carl is a force. Carl has been right. And admittedight to be right. If i had a hat i would take it off to him and i think america is dramatically better off from people like carl. Stay with us. We will talk to you about more. We will talk to sam about the jobs market, washington, Chris Christie and much more. But i want to say on that they on the subject of microsoft and talk to a man spent 25 years in the Tech Industry before running retailer sears and work closely with John Thompson at ibm. The former ceo of Sears Holdings and avaya doing this on the phone. Lou, you were emailing me yesterday shortly after this news on microsoft. Tell me what you know about Satya Nadella and John Thompson, you work with. I think overall it is a sound and very solid decision. Tya, when you talk everybody who worked with him, i think he brings a lot to the party. He is a very strong technologist. Importantly, he is in the part of microsoft which frankly make all the money, the Enterprise Software business. So, while a lot of the attention goes to the consumer gadgets, and they are interesting and sexy and so forth, the money is made in Enterprise Software and the cloud and that is a sweet spot. Very interesting thing, when you talk to folks who work close with him, he seems to have a terrific set of values. I think as they are continuing to build the culture, maintaining certain values is also very important. Like what . A sense of decency, integrity. , but not ins direct a way that frankly turns people off. I think he has several assets. But no matter which candidate they might have chosen, there is ng to be this metaphorical potential challenges as well. In particular, he has never been the ceo of a publicly traded company. Microsoft is a big, complex organization. Theres going to be tough decisions. Theres going to be situations where he might not be aligned with the board or his associates. That point, because is he going to have enough of the star power to push back on a board that maybe someone who was a bigger name wouldve had . An interesting question, but i think he is going to have to. I think one of the reasons for having this configuration, also bringing in John Thompson, i think many what actually help that. Ates spending most of the time not on governance of reading with the Company Running the company but helping with technology and the products, and then you have John Thompson, a real seasoned pro. He will not tolerate any of the nonsense. He will have clarity. He is not going to settle for speed which is not at an acceptable pace. I think in many ways the story that has been not emphasized enough is the role that john could have in many ways providing some of the air cover for satya. Bunny you mention that because we are sitting here with sam zell fun eu should funny you should mention that, were sitting here with sam zell. He said he is glad with the chairman instead of operating and running the companies. What job would you rather have . Nadellas job or thompson positive job . Having been aya and searsy holdings are now being chairman of sensus, that they are very different jobs. As a ceo you are grinding it out on a daily basis. Every single problem. Whether somebody said something inappropriate at a meeting and it is kind of an hr issue you are dealing with, or whether or not there is a big deal you are trying to close and you cant get the final term executed, dealing with all that stuff. As the chairman, you have the benefit to, frankly, be able to think and provide a certain clarity. Surely at as the ceo you get to do that also but at different points in ones life and based on different situations, it is a matter of preference. I loved when i had the ceo role. And right now i am loving life as the chairman [laughter] of a technology company. He earned it, lou. Thank you for joining us. The former ceo of Sears Holdings and avaya. Back in two minutes with more with sam zell. Then washington, Congressional Budget Office released arlington numbers about the president s health camp plan should feel more part of this fuel more partisan wrangling. In two years, obamacare will affect workers by prompting them to put in less hours in order to keep their federally Subsidized Health care benefits, costing an equivalent of about 2 million jobs according to the cbo. Thezell is with us for hour. Someone very involved in local and national politics. What do you make of this number . 2 million jobs. Think the mean, i issue is not 2 million jobs. I think the issue is, what is gdp ortribution to this lack of contribution of 2 Million People not working. People whow a lot of kept their jobs because they could not afford to lose their health care. Now they can Access Health care from the exchanges and all of a sudden not keep in keeping the job is not as relevant as before. Is that a small price to pay as a country for giving Everybody Health care . Comment ofthe best all goes to nancy pelosi. We have to pass this bill to find out what is in it. [laughter] exampleonly the latest of hundred and hundreds of mistakes that were made in the preparation of this bill. And you think it should be repealed . I think that the current form of obamacare, i think it is deleterious to our country and needs to be radically changed. The word repeal, i dont know what that word means. I think Health Care Care is an important issue. I think the question is, how did you go about it. We went about it half assed. However, the cat is out of the bag and we have to figure out what to do. One of the things that seems to be observed in washington as we are working to health care is to somebodyrding like Walter Isaacson who we had it program, may be the is breaking in washington, maybe this is a year the two sides come together. Do you feel this way at all . I dont know what he has been smoking. That. G i read suggests they made a couple of deals on a couple of simple things. But talk to me about immigration, talk to me about health care, talk to me about foreign policy. Whereare so many issues there is extraordinary disparity between the parties and very little interest in compromise. All right, sam, we will talk with you more. We will be back with billionaire investor sam zell, chairman of equity group investment. My guest post for the hour. Back in two minutes. Entertainment giant disney set to report results after the bell today. Jon erlichman nla, tell us what to watch out for. For the most part, the many parts of disney are moving in the right direction financially for the company, whether the Cable Networks or theme parks. Increased signs of people spending in the parks and a bigger way. Whether the box office, which had a pretty good threemonth stretch or the ability to go out and merchandise. Those are the key drivers of what will likely be an interesting quarter. Tell us about the pressure on espn . Programmingof continues to climb and espn obviously is in the business of buying all the sporting rights. Nfl, sunday night football, baseball, college sports. What to look for today is an indication of disneys our positioning in the battle for thursday night football. They are interested in those rights. Thursday night, monday night, all right. Thank you so much. Jon erlichman. He will be sitting there with disneys chairman and ceo bob iger tonight at 6 00 p. M. Eastern time only on bloomberg west. The opening bell for this wednesday is next. Welcome back. Im betty liu. It is 26 minutes past the hour, which means bloomberg is on the markets. Right next to me, equity futures are mixed right now. Had some pretty big losses over the last several days. In fact, the whole month of january. Thats who some investors out of the markets. That spooked some of the markets. It is depressing some optimism going into 2014 and raising concerns among investors where they will put the money. I want to bring back our guest host, sam zell, founder and chairman of Equity Group Investments and also economics editor mike mckee with us. Mike, you say the good news that while the glass may not be halffull it is also not half empty, meaning that a losing january does not mean we will lose the whole year. Exactly. Some interesting statistics when you look at what has happened over the years, you go back to 1926 as beyond Good Research did and is it is often true and yearnuary predicts an up for the market before a down january almost no correlation. About 34 chance he will have a down year in the market overall. So while you could say if we had a good january that things are going to turn out well, we dont know at all what is going to happen in this year because we had a down january. For the years we have the socalled january effect, doesnt the month have a good track record of predicting the outcome . Sure, so does every other month. What animists have found if you look at any given a month because the stock market has a propensity to go well up, it is likely you will have markets higher 11 months later. It is not just january but you could have the same effect in march, april, throughout the year. One thing the stock trader on sites, in almanac january, the years that dont seem to follow the pattern are the off year elections, which of course, 2014. Ck what are the markets telling us . On ands currents going people concerned perhaps about the valuations of december but what they are telling us about how the economy and markets will unfold over the rest of the year is very hard to say. Thank you so much. Mike mckee, economics editor. Sam zell is standing by. You thought the markets were overpriced going into 2014 good why did you think that . Activityk the economic did not correlate to the price of the stock market. I dont remember how much it was of last year 30 . We did not see i operate a lot of companies and we did not see a lot of come by yeah happening. It is prettynk healthy to see this kind of decline . I dont think declined to ever healthy. Us inalance is what keeps place. And when we get out of balance, like subprime loans or whatever, it is pretty disastrous. So, the market has to keep balancing back and forth, conflicting currents are relevant. I think the market in 2014 is a lot more likely to reflect what happens in 2014 then whether or not it was up or down in january. But doesnt make you nervous at all i know not much makes you nervous at all, but seeing how volatile the markets have been over the last few weeks, doesnt make you more nervous americans will look at this and fullback and perhaps may not be buying as much anymore or may not be selling as many houses and buying as many houses. The market went up 30 last year. It did the American People by everything in sight . No. What is the relevance now . Think the market has dramatic impact on buying and selling decisions unless it is such a prolonged period like we had in 2008 or 2009 that it really dampens everything. But it was so overwhelming essentially. Where do you stand now in real estate . What is your outlook . I think you have to distinguish between commercial real estate and residential. Residential residential singlefamily i think is going to be benign. I dont see any massive recovery, i dont see any massive rise in prices. I also dont see any significant downturn. Demand for singlefamily houses is, in my judgment, relatively muted. 700 orproducing about 800,000 a year down from 1. 2 million. I thought this was going to be this huge trend. Then we speak about before, the tiredtion xers sick and of living in the basement of the parents and will start buying starter homes. Where is that trend . Why hasnt that gotten bigger . Because these people dont want to live with her parents used to live. They want to live in the city. They want to be in in a 24 seven place and where all the action is. That is not out there where they lost dont all of these tiki tacky homes. Part of the demand issues the to more urbanization in the United States, and therefore a change in housing patterns. 15 years ago, someone would graduate with an mba and the first thing they will want to do is buy a house. Now they defer marriage, they defer buying a house, they defer everything to basically maximizing their lifestyle. That is why you are going into urban markets, right . 20 years,e last equity residential, basically suburban garden apartment owner citybarrier to entry 24 7 highrise provider of housing. Higher Interest Rates, do you think that will scare off any buyers or are we prepared for that . Depending on whether you are talking about commercial where singlefamily. Residential. On the residential side, i think affordability is still tight. I think Interest Rates going up will have a slight negative effect, not a catastrophic effect. Estate i think unlikely to have too much of an effect. Why do you say that there are too many reits out there. You said in a speech that we have actually a saturation of reits. What do you mean by that . At the last count, there are 203 reits. Probably 30 ofre them that have size, scale, market impact, etc. , and will be leaders and growing in the future. Yours included. Hopefully. Hopefully. Equity residential is 34 billion and equity lifestyle is ive billion of 6 billion, so they are big companies. There are also a lot of 800 million, 700 million reits that have no scale or liquidity, and i think they only obfuscate the clarity of the picture and i expect over the next 20 years we will have more and more consolidation as the reit industry continues to grow. Why do you think there has been a proliferation of these smaller reits . Lots of different reasons. Estate is a very attractive asset class. Everybody thinks that their deal is special, their deal is better , the opportunity is better. The problem is if you go public we went public with a reit 1993 for 800 million and we did another a year for 200. At that time, those were reasonable today, anything under a couple billion dollars is not relevant. The reason they exist is to provide capital to the real estate market. Provide capital without liquidity. Sam, stay with me. We will talk more. In fact, we will be talking about work smart because sam was gracious enough to interview for my book it and we are also watching another stock this morning, cvs caremark. Shares are slightly lower after the largest drugstore chain says it will stop selling cigarettes in their stores. Olivia sterns has more on the news that broke this morning and what it means for them. Cbs is saying it is the right thing to do. Cigarettes and pharmacies simply do not make sense. Saying it is the right thing to do. Is now not new but cvs the First National chains to take the step. Of course, though, this is going to cause them. Cvs said they will lose about 2 billion of annual revenue or by . 17 a share worth of earnings. And you have to think of lost sales and asked items of people walking through the store to buy a pack of smokes and end up picking up a magazine or sewed on the way out. It is a surprising move. Will not see it showing up in earnings quite yet because the ban will come into effect october 1. Why now . Whats certainly not altruistic certainly not out touristic above they are adding a lot of credit, even president obama applauding it, but they have been getting pressure over the years. Obama said one of the largest retailers and pharmacies in america, cvs caremark set a powerful example but really what this is about four them is a changing business. There are signs that they are slowly morphing from a Pharmacy Store to more of a health care provider, offering her own Prescription Drug plans as well as instore clinics for basic checkups. Sicily in interestingly put out a response saying they are evaluating a policy of selling cigarettes for some time but is not doing anything. Ideally, i just got an email in coversnnie herzog who the back of confidence for wells fargo she believes it will have no impact for tobacco manufacturers as smokers will buy them elsewhere, simply go to different retailers. Thank you. Olivia sterns. Coming up, working smart my guest post for the hour. Sam zell will share his recipe for success. Is in giving. N sam zell positive philosophy on philanthropy and how it differs from others like bill gates. With me this past hour is billionaire investor sam zell, chairman of Equity Group Investments, a company he founded over 40 years ago. Ongoing series around my new book work smart, what ceos eisai what you need to get ahead. I wanted to get his cap tips on the keys to success. He sat down with me earlier last year to talk about how he gets to where he is. He says its all about what a simple, the shortest distance between two points, a straight line. Sam, that really struck me when you said that in the interview for my book, because he said people tend to over thing, right . On, when i was talking about the 1988 speech at harvard, what i basically talked about was that the Business Schools and i think they are beginning to change but particularly in the 1980s, the Business Schools focused on, if you could just turn the page am a there is a formula that tells you how to do it. And the answer is, there are no formulas. Are access and failure combination of judgments and external events. But it starts and ends with a simple idea. And your gut. But your gut has played a key role in your success. I have been willing to have an opinion and then execute accordingly. Peaking about leadership, i want to talk about a couple of people in the news who are one who is considered a leader is new jersey governor Chris Christie who has now been under pressure given this whole bridgegates candle. Do you think he will survive this . I think he will. I think this bridgegate scandal is another example of journalistic hypocrisy. I just wonder whether the president lying to everybody about health care was more or less important about bridge van bridgegate, but i think dunmore press and focus rather than who knew what and when you think the press has given the white house a pass on obamacare . Do you have any doubt about that . I have no comment on that. There has been pretty Harsh Criticism of that. Years president for three told the American People the same thing. Not one reporter challenge that in three years . Not one reporter said that is false . Where did not appear . Afterwords afterwards does not when the actual implementation started coming out. , and it wasitten there, and any member of the press could have challenged it, but didnt. Youme ask you about are clearly part of the one percent. Tom perkins came out with this letter where he defended a one percent and he said, look, we are being persecuted the same as ban sees not the were persecuting the gees. He was lambasted and he came on the network and defended. How did you feel when you read the letter . I guess my feeling is he is right. Are beingercent pummeled because it is politically convenient to do so. The problem is that the world in this country should not talk percent,y of the one it should talk about emulating the one percent. Er, the percent work hard one percent are much bigger factors in all forms of our society. Tell that to the personal minimum wage and living below the poverty line that they should try to emulate the one percent, however going to get there . Rampant stories of a rampant of people who started with a candy store and took it from there. There are lots of people who have the motivation and have succeeded. Have come from nowhere and have become part of the one percent. Do you feel like because you are rich you are being persecuted . Whats the word persecution is not the word persecution is not the right word. Envy,k the politics of the politics of class warfare are what is separating america from many parts of the rest of the world, and we have benefited dramatically from not having class warfare and not having envy. Bryan in 1896gs was the first person to run publicly in the United States on a platform of class warfare. He lost. And at the time wilson at the time that this is not america and i think this is still not america. Do you think there needs to be some help, though, or some policy changes or something needs to be done about the growing income inequality among the growing gap . I think that is a function of policies, and i think that overall the policies that we passed for the last 50 years, whether it be unfunded Social Security or other issues have all contributed to this disparity. And we need to fix our government. We dont need 17,000 new pages of federal regulation in the last five years. I think all of those things. Ontribute to this disparity and the more complicated our government makes our world, the more the one percent can afford to hire somebody to figure it out and the other guy cant. But if you simplify government, neither one of them require and therefore the disparity slows down. All right, sam, stay with me for one more segment because we will go global and talk about what is going on overseas, particularly in china. Sam zell, founder and chairman of equity group. Coming up, the recent weakness is samging markets, what zells take on that . And coming up at 10 00 a. M. Eastern time, blackrock ceo larry think fink. It is time now for our Global Outlook into the International Property investor, sam bell, who is still with me. I want to play for you one comment that bill gave in our studio a few weeks ago. He talked a little bit about the cynicism that he sees around the world when it comes to helping poorer countries. Side ofacts are on the the optimists and i think it is dangerous that people focus on the bad news and do not see the progress we have made. It means that they do not look at the rest practices. It makes them less generous. We are raising up poorer countries, most people in middle Income Countries now. There is more to be done on how forms, but the track record of success, if you do not see that you will not participate in what we need to do. Is he right . The world is getting to be a better place . I hope so. Certainly, the world is getting to be a better place because of what will gates and Melinda Gates are doing. So, i have nothing but accolades for what they are doing. How effective is it . We will find out in 30, 40 years. Exactly. A generation from now. Did they ever call you to join the giving pledge . No. I am more than likely to give away well over significantly more than half of my net worth. That is what i am going to do. In effect, putting me in a position where there is pressure. Took my fortune and i will dispose of it as i see fit. The most effective way you are going to donate your money is going to be how . Well, i am different from some people. I very much want to use philanthropy to create change. Lots of people can put their name on a building. I dont need my name on a building. I want my name on a program. I want to contribute capital and my own effort to making a difference. Whether it is entrepreneurship, michigan, various others, these are all parts of making a difference. Right, creating job creators, in many ways. Sam, thank you so much for staying with me through the hour. Sam zell, it has been a great pleasure to have you here with me. Tomorrow we will be talking to a aol ceo, tim armstrong. It is 56 minutes past the hour, which means Bloomberg Television is on the markets. I am scarlet fu. Taking a look at how trading stands right now 30 minutes into the start of the u. S. Trading day, the theme is another down day for stocks. Slower a small than expected gain in workers added, raising concerns that the government jobs report on friday will show a similar impact from the bad weather. Ont is putting pressure stocks, the s p 500 down half of one percent, pushing treasuries higher as well. Is back as well against the dollar and the euro, causing analysts to say that there is a repricing of risk taking place. We mentioned the bad weather, another winter storm slamming into the northeast today. The forecast calls for more cold and snow. As a result, natural gas futures climbing again today. A second day of games, natural gas futures are at four year highs. Is this just the weather . Or is there volatility in the other asset class . I think that is part of it, but if you take a step back and look at the longerterm picture, this is a market that is coming from over 10 three or four years ago, bouncing off two dollars in 20 12, spending most of 2013 in a range. It has its own volatility as well. Absolutely. We call it dazed in the practical analysis. Inventories that are now pretty low. A tenyear low. The storage numbers coming out tomorrow. How highly anticipated is this report . Fairly highly anticipated, doubled the average. We are seeing a lot of volume spilling into the market. The natural gas outlet has about 7 million shares per day or 2013. The last couple of weeks, 40 million, 50 million share days. It shows you the amount of attention being played into this commodity. Another thing to keep in mind is that the commodity complex in general has been out of the news lately and this has been one of the good plays, the bullish stories of commodities. Everyone is jumping in on it. All of this the chore talking about in natural gas, is that based on true demand or speculation . I think it is probably brought probably both. It is tough to tell, but you are probably seeing part of true demand. The stock price is trading at record highs as well. On the other hand, commitment from traders is showing a bullish sentiment. We have seen the Options Market aat up. It is traditionally speculative market. Calls have gone lower, meaning they are being priced higher than puts. It is showing demand and possibly Short Covering after the breakout. We have had a high volatility and high volume, which led the cme to raise the volume. What does that mean . Traditionally raising margins would damper prices in the short term, but we are making another hide today. I think that part of it is trying to protect speculation. Here you have a market breaking out on pure volume. Looks good going forward. Thank you so much, greg. Higheather will keep the as well. On the markets once again in 30 minutes. Market makers, is up next. Downgrade in paradise. S p but the s p cuts puerto ricos Credit Rating to junk. He is a hedge fund allstar. What are the best performers in s performers last year. Kicking the habit, cvs caremark takes a habit, a move that will cost the company 2 billion per year. This is market makers, everyone. This is the big news from cvs, a move