Transcripts For BLOOMBERG In The Loop With Betty Liu 20140417

Arizona, texas, virginia, maryland, and most recently, my own state and new jersey. Pending restrictions and others. Bloombergs matt miller breaks down the numbers. Can go for ae dealership when theyre shopping for a new car. When you go to tesla, when you want a tesla, you go to the mall. The tesla store in westchester sit between two we are. Two retailers. Theyve done their research. We also have folks who are shopping at nordstrom ticking of a new handbag that are not as familiar. The real reason tesla has shut set up shop at the mall would be a it would be expensive to build a National Chain of dealerships. Just like a dealership, you can take a test drive in what is likely to be a sixfigure purchase. We will go out that exit. You get to drive them on the open road. Class that is insane. Class of is like a spaceship here there is no sound. I am super impressed with the pickup example. I want one. Class then it was back to the store to configure my dream tesla. Class you wanted to max out yours. You have a button for that. Everything included. Class it cost just short of 130,000. It is a little out of my budget but next time i get a raise, i will be back. Takes is about two or three months to custom build a car. Most people design it in the store and then go to a service center. What is nice is we have folks blocking it through the car, how to clean it. I think you hate owing to the mall, you can even use paypal to pay for it. Account. S a big paypal matt miller joining me for the hour. Thank you. Did you see anybody buying a tesla . Class i saw people milling around, i saw people talking to the sales staff, but i did not see anyone plunking down 100 grand on the spot. You might not see someone doing that because you can do it on the internet. Paypal, you can use at least for bitcoin, you could definitely use. We know people have taught teslas in the past. At home. Ould do it people go into the dealership and talked to the people there and then i tend to mull over a car purchase for a good six months to a year. When theyre finally ready to pull the trigger, they can do it online. What is the disadvantage to this motto . You have to wait. You will not just go out and point to a car and drive it home. A lot of people say, it is convenient and you can come in and leave with the car the same day. The average transaction takes 6. 5 hours. That did not take 6. 5 hours. Luxury buyers are used to buying cars. They have exclusive Premium Options and tesla fits that model permanently. It is a much simpler process for most buyers. Class given the Consumer Satisfaction for auto dealers, are you surprised it took this muskfor someone like elon to come along . Unless you are a small independent making weird cars like teslas, or german. The first car i ever bought was direct from audi in germany. I did not have a dealer and there was no middle man no haggling over the price. I went to audi and got it. In the u. S. , you have a situation number one, i do not think the big Auto Companies want to be dealers. That is not the business they are in. Focusedet someone very on one main goal, they do not want a conglomerate. Most carmakers in the other part of the world do. Musk aoke with elon while ago and here is what he said to me about why the dealers do not want him selling directly to consumers. In this case, theyre not doing that because they are such huge contributors to the Political Campaign on the local level. He is advocating for the average consumer. You had a Heated Exchange with one of the representatives of the new jersey dealers. I did. I got to talk during your show yesterday with jim appleton, the head of the new jersey dealership group, the new Jersey Coalition of automotive retailers. Of the franchise. Listen to what he had to say. The Consumer Protection statutes are on the book to make sure they do not control the safety recall process. There is an independent auto foriler who is an advocate the consumer. I get what youre saying. Look at what happened with general motors. They drag their feet for a decade. Class 12 years. 30 people died. Think about this. Perfect. M is not with gm, it was far from perfect. You do not change the system because it is not perfect to make it worse, which is what the tesla Business Model does. It up litter rates price competition. One choice, buy from the main factor. There is no competition interbrand. It places the fox squarely in. Harge of the chicken coop you do not want the manufacturer to be in control of the system. Class look, i do not think anyone watching with think the retailer did anything that was really helpful in the gm situation. It was 12 years. 13 people died. 12 years later you obviously do not understand how the recall process works. Let me ask you something else. Let me ask you about tesla. I am not a baby. I can read. I can join the army. I can jacob year. Why can i not decide if i want to buy a car my own . Why do i need a nannys day assigning franchisees to make money on my choices. I do not need a middleman. This is not a nanny state. We do not allow people to sell securities or real estate ishout a license. All that being required of tesla is to submit to the licensing requirements of the state of new jersey. As far as the warrantee and say retail, we believe that is the value added in the auto retailer and that has to be protected in our state. Pointing out that story with elon musk, some of the auto me, thesaid the same to service part of the whole equation, you cannot get that with a direct consumer model. I do not think that is entirely true. Tesla has a great system and if you have a problem, they know about it when you do. I had a a guy had a charging problem and could not charge his vehicle and could not drive it so they sent someone to minnesota to help them out. For tesla, it works. You can only do that if youre selling thousands of ours and not millions of cars. If that is what tesla is doing. Selling 30,000 cars a year. It is applicable for them and keep in mind, it is a very different product. There is not much to break on a tesla. There is not much that can really happen to a tesla driver. I do not think any driver has been killed in an accident with tesla. Other than dealing with the battery and the charging system, it is not like a car, where you can have so many different parts and it can go wrong. The fact that they are only selling thousands, i think elon musk would like to sell more about that more than that. Why are they so riled up . The dealers are in a classic struggle with a lot of lyrical power and no support. Tesla has a lot of cloud amongst people a lot of public support and very little power. If he is able to overcome the political part, they have lost their power in the political structure struggle. They went statebystate because they cannot not get a National Consensus for what they want to do. Washington just signed a law saying tesla could sell directly so they can open a store there. Tesla wants a giga factory. In new jersey, it will be a long time. Certain states will be tough. Placesd more, in urban really improves your experience in buying a car, they will survive here there is a reason for them to be there and they will want to go. It is a deal that does not add anything. The whole haggling process, the idea that they offer price, consumers do not want that. You do not want to go to try to figure out if you will get a good price or a bad price. I buy an iphone, i pay the same as you. Class for consumers, the complaint is more that they feel add on morers hidden fees in some cases that they do not know about. Class that does happen. Gm is doing a really good job of this with dealers. They have been trying to purge bad dealers. Make them more competitive. You still have dealers where and have been there forever keep others out of the market and have done nothing but a bad job. Those will hopefully go away. And you have automakers. Do you really want to sell directly to consumers . I think they do not want to add another layer. It is a lot of money and hassle. They a lot of the business are not in. General motors wants to focus on building cars and do not want to do with all of this stuff. They love franchisees. Especially countries like toyota. They adore and it is a huge help to their business. There is a partner that does them good. Dealers add a lot of value for a lot of people in this equation. Not always for the consumer. Hang on. Still ahead, we will hear directly from tesla. The companys head of divisive of Business Development will be joining us. Automotive retailer in the u. S. Will join up in a few moments to talk about tesla and whether he wants to sell those cars as well. They reported their results this morning. Stay in the loop. As we continue our special, were back with our resident auto expert, matt miller. Also, my cohost for this hour. As well is allen, normally based out on the west coast but he is here in new york for the auto show. You met with tesla last night. By phone. You . T did they say to class they are upset with the way things turned last week. You talked about new jersey today but there was another issue in arizona where they thought ability go their way in the state legislature that failed on friday. It was a setback. A setback because of this giga factory plan. It might be based in arizona. That is one of the four states they have identify theyre looking at. There is also texas, which bans direct sales. Texas and nevada did do not. Pointsrhaps puts a few in their corner. In terms of what happens in their new jersey stores, they basically turned into galleries or showrooms. It is not as if they are shut down. What happened to their sales . Is anything going to happen . Class they have been able to figure out workarounds. You want to see the car, you go to the gallery. You can discuss price. They will go they will take you to the website. I heard they are giving tors. Essentially, you will order your vehicle and what happened in other states, and taxes would be a good example, you order your vehicle and it may get dropped off at a Texas Service center and someone might let you know that could be there for pickup and arrives with california ties and it would have to be registered. Right now, new jersey is a decent state for them. They did about 500 or so units last year. Not theirnothing, but biggest state. There are workarounds. Matt, you were talking about how tesla does not have the legal power now. Is oneole giga factory lever he can poll. Thousands of jobs and so much money. Putting the state on a footing toward advanced technology. Rick perry is not running for reelection. He said he wanted up to the idea of letting tesla do what it wants. Legislatorsstep. Were apparently meeting in secret with some text tesla folks because they would love to play in san antonio. The university of nevada was very friendly to it. All the states, i think nevada is the most likely and has the best lyrical set up for tesla right now. They have a rail line that leans directly to the factory. There is a huge pole there. It is also for solar power, the biggest state. Texas, he do better with wind. Factory plan is huge. Thatllion and 6000 jobs will be created. Elon does so many things. Is it even possible . There is more than a little skepticism. The critical factor is they have got to get a major sell supplier to go in on the plan with them. Like panasonic. Far, they have not publicly said anything positive. Yuan has said several times he is full full they will. They are the primary supplier. The challenge for tesla is they do not control the supply base. They have got to have a panasonic great to see you here. Matt miller is staying with me as well. In two, we will be back minutes. Meanwhile, tweet me and let me know what you make of elon musk and teslas dealer disruption. Stay in the loop. Welcome back. Ton musk once you to be able buy a model s the way you buy an iphone. You could buy it online through a thirdparty or directly in the apple store. There are rules governing governing franchise dealers that go back a decade. We will talk about an automotive dealer in the u. S. Who will join us and talk about his company to buy a model s theearnings. It is 26 minutes past the hour. We are on the markets. Olivia sterns has your look at the early trade. Futures are pointing to a higher open. Equity markets will decline. They already posted the biggest threeday rally so far this week and months. In just a few minutes, we will get weekly jobless claims at 350,000. Come in last week was the lowest level since 2007. We also heard from Morgan Stanley and Goldman Sachs beating earnings estimates. We will be on the marked again in 30 minutes. Thank you. Retailerst automotive in the u. S. Just reported record firstquarter earnings per share for continued operations. Its 14th straight quarter for growth. Premium luxury business sells audis, like mercedes, all of those that compete with the model s. Mike jackson from autonation joining us now. Know you want to talk about your earnings and your business, but i have to ask you about tesla. Add a model s to to your lineup . Of course we would. As far as the controversy over i am atribution model, Free Enterprise guy and there are no existing tesla dealers to be harmed. If you want to launch with a direct model, this is america and he should have the right to do that. I do not think that is a threat to existing franchises. I believe also when he wants to higher volume, he will ultimately return to the Franchise System but he should sell his cart to as he sees fit. Most agree with me. He has been selling in states like california and florida for years with no controversy. It is only a few militant states that have strong feelings and i find Common Ground Going Forward. Most dealers i have spoken with, especially done in texas, a lot of people have been speaking in the last few months about car sales. They have been saying it is too is the winter months. No one wants to buy a car. We have seen a turnaround in march. Do you think the last three months the slowdown in sales was purely weatherrelated . Basically, i hate talking about whether and business in the same sentence, but it surely was an epic winter and no question, the customer went into hibernation. We were beginning to wonder if they were ever going to come out. Lo and behold, the last few weeks in march, this all came and our showrooms were bursting with activity. Level of intensity has continued in the start of april. The last two weeks of march, no question a sign it was indeed whether that disrupted the itnomy and auto sales and gives me confidence my original prediction for the year, growth at threeive percent, and breaking her 50 million, will indeed happen. I dealt with a bunch of people in autonation and always got great service. Do you think it is really the dealers that do not understand the customer that are so worried about tesla . A lot of people i spoke with at the auto show here in new york yesterday, the dealers said, we do a great job and add value to this whole experience and that is why we are not worried about tesla as a threat. Concerned arere more on the slippery slope argument, saying other manufacturers are now saying, tesla will do this, we should be allowed to do it. You will see an unraveling of the franchises i do not agree with them, but that is their argument. Auto you are around the show and youre talking to the president s of all the big automakers. Do any of them say to you, we would like to try direct sales in the u. S. At some point . Vaseline not. If i go back a decade ago, certain manufacturers attempted that and it was an absolute yes go and debacle. There auto show and youre talking to the president s of is a firm consenn the industry today that the Franchise System is very compelling as an equation for the consumer, the manufacturer, and the retailer. It will be in place for decades to come. The launch strategy strategy from tesla is really quite different. He should be free to do it. Ultimately, i think youll end weh a ranch is him. Are getting a question right now emailed to us from jim, who represents new jersey auto dealers. He said, you should be asked about your business relationship with tesla. He said tesla does not take trade, but autonation has a deal to take trays from tesla customers. Carsrs make more on used then new ones. In the slide automakers like tesla . I am a Free Enterprise guy. He is correct we have a relationship with tesla. We will take trays from customers who want to i a tesla, no question. Ok, so, therefore, that is why you would support that. He is saying,ion, what youre saying, which is that, look, this is a threat to our system. If you start letting tesla do this, you might allow ford to do this, you might allow other big automakers, and then it becomes a big threat. He ultimately says, this would not be good for the consumer. He is saying it is a threat to the status quo. These disruptions happen. That is what technology and innovation and progress is all about. It is a free country. Why cant you sell a product the way you wanted and why can i as a is him or by the product as the way you wanted. Is difference the auto dealer provides some service as well. I am an auto dealer. I just said i do not think it is a threat to the Franchise System. I am in such strong agreement with jim that on a Free Enterprise system, the Franchise System exists. Not because of protectionism. Muchecause it adds so value. In that sense, we are in complete agreement. The difference is there are no existing tesla dealers. If you did not have the trade deal with tesla, would you still support the system . Let me put this in context. We read detailed 500 cards last cars last year. We took 1000 vehicles and trade involving tesla. I am assuming you believe it will become a Bigger Company and there will be other electric cars that will become more in the consumer market. There is no question theyre coming from all the manufacturers. We are launching i three and i ate, fantastic new electric cars which will give Competitive Choices to tesla. We are building i centers within right nowise stores because we have existing capabilities erin the new electric cars coming from the mainstream manufacturers are being sold under the existing franchise, whether the nissan leaf or the bmw i three. Three. I do not know i do not know how he would want to be called. You call him a pimple . No. I said that part of our business. Elon musk is a brilliant engineer, and exciting entrepreneur. Here is a guy putting things in space. You have to admire it. I think he ultimately ends up with a Franchise System and i think the majority of dealers in america agree with made. Thank you. Mike jackson and matt miller. We have breaking news moments ago on jobless claims. Mike mckee breaking this down for us. Week and it got revised up to 3002000. No change. That is very close to a sevenyear low. The last time claims were lower in september of 2007 before the recession began. This is noteworthy because last week, it was the week in which jobs survey for april is taken. It suggests labor markets were a little tighter and a lot of people will look at this and say, we had a pretty good month in april for hiring. Following that, the market is getting a top on the pond years bond yields higher. Maybe the economy is coming out of winter. Thank you. We will be back with more on our tesla special, including elon musks righthand man. We will be back. The ban on direct sales in tesla took effect in new jersey. Modelst cannot buy the esther ackley. For more impact, we are joined by the Vice President of Business Development. Elon musks righthand man in the battle for direct sales. With us is matt miller and our guest host editor. Anyt off, are you seeing impact at all from the new jersey dan . Too early to tell. We just went into a new model of upgrading our former stores as of yesterday. I cannot tell you if there has been in effect. There has been affected as far as Public Opinion is concerned and anecdotally, the reaction of our customers in the Broader Market to the idea of the ban. And it came to be. Headon withing various auto dealer associations around the country but you are eventually going to have to be ae rent if you want to bigger car company . I do not know. The answer to the question will be revealed by the market over the course of time. If we become so big, that it makes sense to explore a more hybrid model, then that will become self evident as we received signals from the market that we need to expand more quickly geographically or we need to move more volume through the channel. Right now, what were doing did not require independent deals in terms of a volume of distribution. Firmly our success is driven by the fact we are representing the new technology to the public ourselves. I do not think it is a surprise to anybody that this happened in a state like new jersey. But it is a surprise it happened in a state like texas, which you expect to be a freemarket capitalist state. What is going on in the you are right that there is a deep irony and probably the clearest loss of regulations, with respect to car sales are defined in california, a state which has a represent reputation as overregulated, and texas, known for deregulation, is a place where we find ourselves with the most are tony and retail prohibitions. A lot of history here probably not worth going into here. Let me be clear. I have had a tremendous and very positive reception in texas from legislatures and policy makers and that is a big market. We have got customers have to jump through hoops. Our better markets. We would like to invest more in texas. I was in austin last week at the airport and they have a charges nation for free. Eight teslaske there at 6 00 in the morning. A quick question, texas is one of the states in the running for a giga factory. How much does this play into your ultimate decision of where to put that. I will leave my comments to what has been reported to other channels in the past. We are seriously pursuing the giga factory site locations. It is a separate process from what we are doing right now. It is the just saying presss imagination . No. Commentsefer you to my several weeks ago, where i said the two issues our Business Matters and separate processes the but we are all one business. You cannot completely divorce the two issues from one to the other. Something to the effect of, where we do business Going Forward is intimately related on where and how we can sell our cars. Your position now is this is a development for tesla but you used to work for the state department. One of the more interesting things weve said about the giga factories, you will produce way for batteries then you need cars but the military can be a huge fire of americanmade battery systems. If that part of the longterm people . Sell to other my brief experience in government and military aside, the production of giga factories will find its way into a number of applications principally as we discussed more recently, stationary storage applications who facilitate Energy Generation and storage. That is a huge potential. Developed our extraordinarily robust and have to be because they live in that environment. They are energy dense and have an excellent cost profile which will only improve when the go to scale in the giga factory. The opportunity in the market to wind andher life to solar is fantastic and tremendous. It is something we have not spent a lot of time on, but i have from prior experience, i am aware of some potential applications. The scale is in the consumer market. This explains supercharger locations. Looks like tesla is up to a little bit more than just holding cars and selling them, but a Bigger Picture energy play. One of the main complaints these dealership franchise unions make is that the service of the vehicle will be a real problem. But you have said, you want to have Something Like to service stations for every store you have got him a country. As matt points out, in a lot of cases, you will just drive out to somebodys car and deal with issues you know about a lot of times before the user does. What do you say because it seems to be the only real complaint the unions have. I hope you meant dealers. Franchise unions here they are dealerships really. Ok. Just so were clear. Im not trying to pick anymore fights then i need to. I have lost the ball on all the arguments they have had. Ish respect to service, it incontrovertible with many mechanical moving parts, a well designed and manufactured it will have a much Lower Service profile than a combustion vehicle. Point inom and should the market, weve developed a system for all sorts of service. The one that has gotten the most press is our ability to diagnose and service remotely many functions of the vehicle. When that is not possible, we want to take care of our where it is most convenient for them. You have Service Centers building on a 21 ratio. Might get bigger than that. Why can you not do both. Why can you not sell to dealers as well. He already touched on that in your first question. In the faroff future, who knows, when we have a highvolume product. Why cant you do both now . Look at apple. They sell directly and through best buy. Necessary given the volumes were doing. You have to go back to our mission. Our mission is electric vehicles. We are not yet there. There are fundamental disincentives in the dealer system for them promoting electric vehicles as they need to be promoted in the market to get traction and drive the technology into the masses. We believe there is ample evidence for it in the market. Energy pursue this with for the future until we are confronted with the market reality we talked about. Thank you for joining us. Great to talk to you. The Vice President of Business Development. Is the Bloomberg News auto editor, jamie butters. In his latest new column, he wrote that though tesla is attacking the franchises most rectally, it is hardly a loan , must weng for changes do well to reach out to other players. What do you recommend he do . Who else should he reach out to . There has been a lot of effort to change how retail is done. It goes back to the early 90s with the real automakers. Experimenting with brands like saturn. There has been a real sense of how traditional dealerships have operated in the u. S. Could be better. There is a possibility major automakers will be interested trying to find new models for other retail. Also, outside traditional fields, you have companies trying to change online auto retailing. Companies like costco show think the only way this is going to be really successful is if tesla reaches coalitions. Ds friends, i am curious what you think about the Political Landscape right now. They just passed a new law in washington. They have thehink best chance of growth within the United States right now . A lot of it comes down to whether they are able to make progress on the dealer issue. To leverage able the plan to get an agreement there, that is obviously one of the huge markets that really holds a lot of promise for them. Broadly, the answer is that tesla is fantastically positioned politically. We are a very politically divided country but tesla has been able to inspire huge passion from the green environmentalists and also on the right, taking up this sort of freemarket cause. The political position in this country that has been brilliantly done. He said, look, he does not think tesla, if they were at a regular auto dealer, that they would get a fair share of the sales pitch, that the dealers would make. Is he right . Islike you said, there anecdotal and numerical to go with it. When somebody goes into a nissan dealership and they are saying, i want a small car and a smaller carbon footprint, they can show them the leaf and a bit they go . Ay, how far will it is that a dealer problem or just a consumer Public Knowledge problem . There is a learning curve. For the dealer, theyve got to make a sale. They want to make one as efficiently as possible. A traditional car, whether the bmw or seven series or the i8, or selling the nissan rogue instead of the leaf, is also easier. That is what the salesperson on the floor is trying to get done. Theyre trying to make a sale. Aboutade a good point bringing america together on teslas side and going against dealers. There are a lot of nice dealers but a lot of people do not like car dealers. They do not like the car process and have been unhappy for decades. It pretty favorable light in most peoples eyes. Classes that why the leaf for instance did not do well . Classes that a good point. Or the vault. Were seeing this bmw now. E have seen the example bmw spent a lot of money training if people. This is the tesla model. Here is a place fully devoted, a pyramid to tesla to come worship. It is a super trendy car, a real status symbol. U. S. Seen it in the wealthiest in america. It is a luxury item and will cost basically 100 grand or more are the one i auctioned out was 4 30. 430 grand. Hang on. I want to say, thank you so much. Also, thank you to ed. These last few moments, i know you were at the end of your auto show. I talked to a lot of them here. Do we have a string of that . We do not. A lot of the manufacturers say, we really need our detailer our dealers. I talked to someone from mercedes and a porsche. These are luxury carmakers. They love their franchisees and need them. Took decades to build. A lot of them could see the option of adding direct sales model to what they already have. Gm has been experimenting a little bit. You can go through all of the steps to get to the car and a couple mark is and what happens is you have to go to the dealer to finally get to the car. The dealer is the last step and then got the point is you have to pay them off. Everys true of ford and major car manufacturer. You can finish the purchase process by yourself but are not allowed to get the car until you pay the delivery fee to the dealership. Dos how they do but their business. A great customer. Thank you so much. Matt miller, our resident auto expert here. And also the a great customer. Editorinchief. We will have to have you back on again. Thank you so much. We will be back with much more. The opening bell adjust a halfhour. The we are about 30 minutes away from the opening bell. You are in the loop. I am betty liu. Equities syndicate stocks will open pretty much a little changed. As it be coming off its best threeday rally in two months. Chinas Microblogging Service weibo is one of eight Chinese Companies to file for ipos in the u. S. This year including alibaba. Pepsico had firstquarter profit that Beat Estimates. In a few moments, we will hear directly from the companys cfo. And shining a light on heights frequency chaining. Highfrequency trading. Eric schneiderman has sent subpoenas to six highfrequency trading firms. Tom keene had a chance to sit down with princetons to paul krugman. Governments have shaped the markets all the time. There is no law of nature that says that people have to be free to build a new fiber optic cable that allows us to be three milliseconds ahead of the rest of the market. That certainly could be regulated and i think there is a good sense it is actually two things. One of the market being too perfect. It is undermining the work of actually discovering useful knowledge, and the other is we are spending resources on europe. Is a part of the gap, the criticism of main street and wall street and the lack of confidence in the Financial System is it because we have a belief that the smart guys have to much information that we will never have . Anything, there is not enough skepticism. We have seen this our Financial Sector has gotten way bigger, taking a lot more income certainly more concentrated. More concentrated, and it is growing from 4 of gdp to 8 of gdp, and it is not clear what society is getting from that. If anything, the general public is too willing to take wall street at face value. Performing ay useful service. For more on what krugman told tom keene, i am joined by tom this morning, who is taking a little break from radio. Tom, are we getting into trouble if we Start Talking about legislating the market . Again, that is what we have seen in the last 24 hours from the attorney general new york state, and that is the beginning of a real effort to at least review highfrequency trading, certainly in securities and Exchange Commission could be involved. The game changer, betty, and i know what you are doing, you are doing be famous easter egg hunt, 45 acres and 2000 head, i am paperg Joseph Stiglitzs on highfrequency trading cover to cover. So is paul krugman. Lor tiglitz, the aureate is writing about it, and he says we have got to do something about it, and that really gets the attention of people thinking about what to do with regulation. But they are so skeptical of wall street. The flipside is that it has an better for consumers . Yes. It is nice to say that the laureate krugman and the laureate stiglitz are skeptical of the land of finance in the land of jamie dimon. Arthur levitt takes a more balance you, do not throw the baby out with the bathwater. There is benefit to hft. The framework is dont touch it, it will fix itself. That is a quiet that right now. Fix itself how . You would arbitrate some profits. If there is a profit of e had an highfrequency trading, everybody will dive into it, and when they dive into it, that delta, that profit goes away, and some will say that have occurred in the last number of years. Is it surprising, tom, that it took a book to really draw attention to highfrequency trading . And that is not predictable. We did not know that a week before it came out. No, we did not at all. But what will everybody up to High Frequency trading was not enough to get regulators to really focus on it. That is the unpredictability of this and it is much like what we saw in august of 2007 and very early 2009. I remember sitting looking at the bloomberg terminal the day bear stearns went belly up, watching be very fancy mathematics almost in a state of disbelief and that it takes a jump condition event to begin any kind of financial dialogue or financial transaction, and clearly mr. Lewis book has a condition of that. On a lighter note, tom, i hear you are such a social media maven. I am doing time lapsed photography now. I have no clue what i am doing. You do it on the set, too. Tom is immune to these selfie disease. I was going to do a selfie with paul krugman, and he said it would be beneath his reputation. [laughter] who took thisw one, Vice President joe biden snapping the selfie what the president in a white house limo by his office. He says he is now joined instagram, tom, so followers can find out what happened on the road with that guy. You should be on instagram. I talked to people this week about boomer social media about it, i see facebook domestic waiting and now international is waiting, twitter has a life of its own, which is great, but instagram is the one that is really picking up. It is amazing to see the vitality of instagram, good and bad, going on like that. Tom you should do instagram. I think we should do a selfie. Should we do a selfie right now . Where we doing. Have finally declaring the selfie is completely overrated. Hold on. Hold on. 1, 2 ok. So we have done a selfie. When does this go away . You wonder when the fad goes away, and the answer is the accessibility of this ecosystem. It is unreal what you can do. I am doing this thing where the linens and stays open and the light streaks at night, i have not figured that out yet. That is my next instagrammy thing. I am not very good with my phone. I cant find my selfie now. I am going to tweet it out. Please tweet it out. All right, tom, thank you so much. Tom keene of bloomberg surveillance. We do not do selfies in radio. That was a selfie to end all selfies. 4 appears playstation to be a winner. The company has sold 7 million of the game consoles. That beats microsofts rival xbox one about 4. 2 million xboxes have been sold. Raised 280 6 million in its ipo pricing shares at the lowend of the market range. Chineseined seven other companies who have filed for ipos in the u. S. This year. And it is the make or break case in the Supreme Court next week was a Justice Samuel alito had originally recused himself. Now the court says he will be hearing that case. I will be live outside the high court throughout the day and will bring you an exclusive interview with aereo ceo chet cankanojia. That is at 8 00 a. M. Eastern time on tuesday. Staying intact, google is have a it harder to search to mobile. It had an increase in ads sold but drop in pricing. The quarter ton more than 11 billion as google has been on this and pursuing some of these moon shots. Bloombergs julie hyman joins us with more. What is the issue with mobile . It is a very simple issue and the screen is smaller. You do not fit as many ads on a mobile screen, although so many people are migrating to mobile, even though mobile is seen as the future of advertising for many. While we are seeing rates continue to rise on desktop, laptop ads, you were seeing them go down for the likes of google. They went down 9 in the quarter even as the number of ads overall for google went up by 26 . Sales commit lower than estimated and we are seeing the google shares fall this morning as a result. Google has been on a spending spree. It has. Everything we talk about with google is about the cool stuff it is doing. We talk about google glass, the Drone Company that google just bought this week, we talk about the socalled moon shots like glass and robots they are developing, but the vast majority of the companys business is still boring old search, and we talked to tom yesterdayanalyst about when are they going to get stuff out of this other stuff, and this is what he said. I think the next labs acquisition, drums, automated car, all this Technology Goes to the culture of the company, and they are planning future growth, and it will be some time before they hit it. Too specific. T sometime before they get any money from it. In the meantime, the core business is still enormous, but they are facing this challenge with mobile. All right, julie, thank you. Our senior markets correspondent julie hyman. Coming up, more on weibo, the Microblogging Service from china. We are will look at why so many Chinese Companies are going public in the u. S. Also, a painful split for actress quit paltrow. We are not talking about her divorce. We are talking about something else. Where is tom . I need to show him this. That is our selfie that we just took a few minutes ago and it is on my twitter page now. I say we look pretty happy for a thursday morning. Well, not so happy, moving and actress and hour is entrepreneur were gwyneth paltrow. She is going through what she uncoupling. Cious the ceo of her lifestyle website goop has quit. She ran the aids charity read before joining paltrow. Thatnew york post reports the ceo quit. Chinese Microblogging Service at 17 aced its shares piece. Travelocitys Parent Company will also start trading at 16 a share following the 18, 20 that it had targeted. Joining us for more is Bloomberg Newsleslie picker. Is this a sign that the ipo market is waiting . It is not a good sign. We have seen almost every single deal this week price below the range. There is clear sign that investors who buy into these ipos are not looking at them as a great deal anymore. They need to be priced at the low end of the range or the below for them to buy in. That is a sign that investors are not looking to ipos as just buying any ipo and it will go up. They are looking at them as a specific story by story basis, and right now, none of the stories are attractive to them. Weibo what is not attractive about weibo . Weibo is facing a lot of competition in china for social media, unlike twitter who went public hereto wild firstday pops and lots of what many people would consider success. Weibo faces a lot of competition. Not profitable on an annual basis. It is a tough story to sell in an environment where there is not much momentum surrounding these tech stocks and not much growth are on these tech stocks here in the u. S. In this current market environment. And four sabr . Parent company of travelocity, but travelocity has not been great for this company. They have been making losses, so they realize this and they are weeding down there travelocity opponent. This is decades old, and it has a lot of debt. And it is not profitable. It has not been profitable for the past five years, yet it is a mature tech company by many standards. It is not a highflying growth company, so that is a difficult sell for investors in this market. What will happen to the pipeline . Will we see a slowdown . In the short run, yes. Looking at the calendar for next week and the first oriole in the foreseeable future, there is nothing on it. A lot of companies are waiting. If they dont need the cash or the proceeds, they are just going to delay and wait for this environment to settle because they are looking at the performance of ipos that have come out, and they are all down. The majority of companies that went public since 2012 are performing down over the last month, so that is a lot. And so they look at that, they look at the stock market, they itteriness,estors j and they say we will wait. If they can way, they will. Thank you so much, leslie packer, who covers ipos for us at Bloomberg News. Coming up, more from our special report today, tesla dealer destruction. And you can get snap foods the credit for beating estimates. Ofwill hear from the ceo pepsi in just a moment. In the last hour, we had a special report on tesla motors dealer destruction. It is very clear how most Car Dealerships feel about tesla stepping in on their turf. We went to the Top Executive of Car Companies to find out what they think about musks disruption in their industry. We see all the Car Companies, which are producing electric cars, not so much as competitors but as contributing to something unavoidable ats the level of the car industry, so we welcome competition, and we think the more competition there is, the more there will be popularization, adaptation to the market of electric cars. The tesla is basically one car, one model that has to be sold. It is interesting when you take a look at what is happening. In order for new technologies to become accepted in the marketplace, they do need a different distribution method. With the tesla, there is no use market for it. There is no repair business for it. Oh so for it to go through the normal dealership channel, theres not enough profit, and also there is not enough all you. So you can understand why they want to go this way. Just selling the product does not differentiate you from others. That our network has a very strong contribution, added value to our brand. Maybe tesla has got it right that is going to take something as dramatic as revolutionary as what he is trying to do to try to get a compromise. I do not think it is either or. I think it is in todays digital world, you want to have option allete to buy a car option the way buy a car you want. We spoke to elon musks write command and the ceo of automation, mike jackson, as well as others. He sure to check it out at bloomberg. Com tv. We have got the top 10 trades you do not want to miss right after this break. Keep it here on in the loop. Welcome back. You are in the loop. I am betty liu. It is 26 past the hour, so that means bloomberg is on the market. Markets reporter Olivia Sterns joins us. The s p is now a race to draw for the year. It is back in the grain, in futures also in the grain suggesting that markets will open again higher today. The s p futures and the dow little changed, the nasdaq up when three percent, suggesting the big momentum names thats all the brunt of the selloff last week will continue to climb today. Not a lot of Economic Data out. We did get it better than expected jobless claims coming in at 3004000 from a revised 302,0002000 suggesting the labor market is continuing to cover. Thank you, olivia. Lets count down to the top 10. These are the only traits you need to know. Olivia sale of me, julie hyman joins in. Number 10 is ge. The company posting firstquarter earnings that Beat Estimates topped by its industrial businesses. Industrials he wants units eventually to account for 70 of ges earnings, up from they did three percent last year. Number nine is apple. The tech giant is planning to song discovery feature in the updated i was a software that will allow a user to identify a song ended artist according to people with knowledge of the matter. Apple is the Worlds Largest music seller through the itunes store. Number eight is mattel, the maker of barbie doll and fisherprice, unexcited firstquarter loss, workforce cuts. Luster holidayck season, sinking more than six 6 . Number seven is Goldman Sachs. The wall street firm with the highest to report equity reported a decline in firstquarter results, but it still topped estimates. Goldman sachs Investment Banking revenue jumped to the highest level since the financial crisis. Six this and this. Sandisk. They both of their growth margin fighting and improve product limit. Number five is google. The internet search provider fell search of short of estimates. Expenses were up 23 in the period. Sales were 19 and mobile ad rates are falling. Number four is pepsico. The food and beverage giants said firstquarter rough it rose due to stronger snack sales in north america. As the cfo told me earlier, pepsico is seeing strengthen its he regular soft drink brand and itsects to benefit from noncarbonated products. Number three, ibm dropping more than 4 after the Computer Services provider posted firstquarter revenue that was below analysts estimates. Sales continue to decline in hardware and developing countries. Number two, more earnings, Morgan Stanley. Firstquarter profits beat analysts estimates. They posted the only increase in trading revenue amongst the six biggest u. S. Banks so far this year. And number one, cash flow, we hittinghing tesla, a ban in new jersey. We spoke with elon musks righthand man, his head of Business Development, as part of a special report. Had to bloomberg. Com tv today caught up on all of the interviews this morning on tesla. Now to the call on markets. I want to bring in the chief Market Strategist at russell 250 9ents, which has billion in assets under management. His college that earnings season will be pretty flat, and that china is one of the biggest areas right now. Steve, great to see you again. You. D earnings are going to be not so good this time around. I think it will be challenging. We have a firstquarter which in the best Case Scenario is very contaminated by the weather affect, and that will create a work through through second quarter, sluggish right now, we think it will be more of a revenue gain in this challenging environment company, and the name by name basis that can demonstrate Pricing Power will be smiled on more favorably by the markets, so it becomes more of an active management security. Grinding through the hard work of analyst. Steve, it has been a revenue game on earnings over the last few orders. What is different this times around . At the marketsk last year, up over 32 , smaller caps face up almost 39 , so there is a lot of movements. In this more challenging earnings environment, more challenging revenue environment, it is more of a name by name basis, so maybe not a specific and that it would have been 2013. You underweight one sector, utilities, and i know olivia has been looking further into utilities. Utilities dotty, not get a lot of love, but we have a few graphs that hopefully will disburse that sentiment. At the v up less than one main percent, utilities up nearly 30 year to date as a sector. Compare that to the s p overall, as i said, less than one bank percent. Words,ocks are doing the down about 5 . This is forecast firstquarter sales. Happening tois utilities. Utilities are expecting to see growth in firstquarter sales of more than five percent. The red. 3 in you will see forecast earnings per shares growth, excited to have growth in this quarter of more than 4 . Compare that to the s p overall. What is wrong with utilities . On a is one that will be lot of people screamed, and they have been under waiting our portfolio for a large portion as well. I think coming into 2012, 2013 and into 2014 is the costliness, the price lateness of that segment. Investors when they became disenchanted with a low income environments, they moved out of fixedincome entities bond analogues and equity markets. From a valuation perspective, what are you paying for what you are getting, so the costliness became to you, that rally has peaked. I would think so. About have been talking how investors should take a multiasset approach in order to gets, in order to find that yield. Julie, you have been looking into that strategy as well. This is something that is not really gone away. Point, we have seen people continue to buy utilities because rates are remaining low and they still want that yield. Coincidently, i spoke to our resident etf guru yesterday, and he was talking about this very thing you pointed out there are etfs thatasset people can buy to sort of capture that yield and get that multiasset strategy. We are seeing here listed a number of them. They combined stocks, in some cases mlps, high yield bonds, for example, try to achieve that yield, but to trying to use risk by having a multiasset strategy. One example is the first one, multiasset income. As you can see, it has out reforms stocks this year. As are getting that yield well on this. This does not include mlps, so that is the difference here between it and others. It is one suggestion eric had for folks looking at the multiasset high yield of strategy. Is that a good way to get in . That if the name of the game from our perspective. Specific, but one looking globally as well, looking at real assets listed in structure commodities, emerging markets, but also from a perspective of global credit, looking at ways you use currency strategies, looking at ways of using security within a global credit portfolio for a total return strategy not just a yield strategy. Yellen luncheon yesterday, and i think the Federal Reserve as well as the Central Banks globally will be in coordination to bush on that yield. They are giving investors no alternative. You need to look at that multiasset strategy to get the number that you need. Widest china keep you up at night . Pretty well, but i would look at what is moving the global economy. I think the u. S. Is doing well, but i figured china right now we are seeing a global deceleration from a 12 , 13 , into what the government wants, probably a 7. 5 . They will hit that number. They are decelerating, transitioning that economy, and that will create some lump in the global glow. Growth. Those that markets, are disproportionately exposed to chinese demand have been hit really hard, but also commoditybased economies like the australian economy, the creditdollar, the kiwi, and chinese Financial System i think is unfolding and that will be very important. Something to keep an eye on. Us, thank you for joining steve wood, chief Market Strategist at russell investment. Epsico, splitting off its mac business, and i sat down with ceo hugh johnston. Former cfo took on more money last year than his boss. We will to you why that happened. Stay in the loop. Another stock where watching is at seco. Earlier this way, the company eating wall5 jump street estimates. I had a chance to speak with hugh johnston, the ceo of pepsico on a bloomberg surveillance. If you go back to the investments we made a couple of years ago in brand building and innovation, those are strengthening our brand and give us new products Consumers Want to pay more for. What you saw was 5 snacks growth in revenue, 3 Revenue Growth and beverages, and frankly consumers are moving more and more to our 22 billion brands around the world. So the company is really performing right well right now very well. Individually be pieces are putting collectively be portfolio is working really terrifically together. I hugh, your margin expanded believe by about 40 in some areas. Tell me about where you were able to raise prices the most. Got thenow, we have ability to do it pretty well around the globe whether you look at developed markets like the u. S. Or whether you look at russia or india or brazil. Because our brands are strong, because a renovation is so good, it really does give us considerable Pricing Power, and to do it in a way where consumers are willing to pay extra for our products because the products are just that good. The reality of it is in doing that, we are also not losing market share and often times we are gaining market share. We are three percent global Revenue Growth. We did outgrow our competitor from a revenue perspective, and we feel good about that. In latin america, disappointing results coming out from mexico. Revenues declining because of this kobe city that mexico put in place. Reversalint you see a here or are you stuck with that performance . I expect the mexico performance will continue to get better. Our overall latin American Performance was quite good. Mexico had its share of challenges because the mexican consumer face a lot of taxes, not just on food and beverage products but elsewhere as well. As consumers reoriented their household budgets, they now need to figure out what their disposable income is. Exactlythe results are as we expected, and we do expect as things move forward and consumers get their budgets restricted out, that will go back to growth in mexico. There is little doubt in my mind about that. In the u. S. Where we see soft drinks volume decline quarter after quarter, you are saying that yes you are seeing riot pepsi volume decline but some of that market share now going back to regular pepsi . We do see the regular performance up, particularly in flavors like john do, performing a bit more strongly. There is a little bit of a trend there. In addition, you see consumers going to progress like gatorade, going to lipton tea, going to tropicana. The good news for us as we really do have the best noncarbonated portfolio and all of north america and as that tos shift from noncards, that benefits us. That volumecarbs, be higher than 2 . I think right now used the category that will grow probably in the 0 to 1 over longer periods of time, and 2 that is reflective of that migration from carbs to noncarbs. Again, that was pepsico cfo hugh johnston. It is time for bloombergs big number. 58 million is how much yahoos chief operative officer got in his severance package all after 15 months. We will wh he will wind up taking more them are at the meyer. A lot of money to walk away. Coming up, as the u. S. And its european allies look to tighten the economic screws on Vladimir Putin, some are wondering how far is too far . Stay in the loop. Time now for the global outlook. Secretary of state to john kerry is in geneva for talks of your opinion and Russian Politicians trying to ease tensions in ukraine. Chief washington correspondent peter cook is in d. C. Looking at what the impact of these talks could be if they fail. Peter. That is right. If there is no deal to use this crisis, a real concern here in the u. S. And in europe about where this thing is headed and the possibility of cores is that we could see once again more sanctions put in place by the United States and europe, but there are some worries about the Division Within europe that could undermine these sanctions. Senior Administration Officials and the u. S. And say theyre ready to trap the heat, betty, on Vladimir Putin and the russian economy by expanding the list of putin cronies on her hit list, and that means these bands for some of the most prominent Business Leaders in russia, people close to Vladimir Putin. They could also sense a more russian banks, effectively tonight them access to International Financial markets, and the threat of sector sanctions on these entire Russian Industries remains out there, but the Obama Administration is holding that in reserve at this point. The u. S. Also prepared to provide more nonlethal aid to ukraine, but short of any Real Progress at these geneva talks, you can expect something from the u. S. And former site in the form of sanctions over the next few days. Peter, are the europeans willing to turn up the heat . Openat is sort of the question right now. Publicly the europeans say they are on board the idea of more sanctions, but privately behind the scenes, there are divisions among the europeans, specifically over the issue of how one country might be more hurt by sanctions than another. They were all given a list of bysible sanctions by the eu, the commission this week to look at this, study this list, offer their thoughts back, and to weigh in in about a weeks time, but again specifically there are concerns about how some countries might be hit harder than some others. One example for example is energy. Russian Energy Exports to europe. That would be painful, particularly for lithuania, 100 of its gas comes from russia. Individual countries have a different take on what those sanctions might mean for them. All right, peter, thank you so much. Peter cook, our chief washington correspondent. I want to turn now to Ryan Chilcote from Bloomberg Television in geneva. Ryan, the talks were overshadowed by russian president Vladimir Putin and what he said about deploying troops in ukraine. Right. Is he was doing a televised q a session with the russian population, and far from offering to pull back russias troops from the ukrainian, russian border, he suggested that he hopes he decide to send them over the border into east ukraine, sort of inversely suggesting that maybe you will see a point where he will need to do that. It is not the first time he said that. He did say that in early march. He also said that the ukrainian Central Government had committed a crime, accusing them of using aviation and tanks against their own people and previously he had for usat would be enough to justify russian intervention. Those comments plus some comments he made about how eastern and southern ukraine only became ukraine in 1920 when soviet leaders decided to give to ukraine really got raised eyebrows here. Of course you remember with crimea, president putin claiming 1954, that is sort of decided on his own volition to give crimea to ukraine. So many people saying president putin instead of trying to accommodate these talks is already building the justification for proper Russian Military intervention in the east and south of the country. What is the mood like right now, ryan, surrounding these talks . The talks are underway. We are supposed to get the press conference, the conclusion of the talk any time now. It has to be said that people are very pessimistic. This is the first time that ukraine and Russian Foreign ministers have met. About a month ago, the Russian Foreign minister was supposed to meet with the Ukrainian Foreign minister in paris, and a reporter asked of the athena many joked who is that . Because they do not even recognize ukraines Central Government. So that was the foreign minister making a joke that this person was not important enough to talk to. They are sitting down today that is progress. Whether theyre going to sort of really resolve all of the issues that the russians would like to see like the centralization of power in ukraine, like ukraine agreeing never to become a part of nato, particularly the strong comments we got from russia earlier today. Ryan, thank you so much. That does it for us today on in the loop. Int does it for us, we are for a long weekend. We will be live outside the Supreme Court on tuesday. We will bring you an exclusive interview with aereo chet kanojia. It will be the last time he speaks before opening arguments in the future of paid tv. On thursday, we will be joined by tony malkin, ceo of the Empire State Realty trust for the special look at the business behind the iconic new york city skyskraper all next week. It is 56 past the hour, so that means bloomberg is on the markets. I am Olivia Sterns. Were about half an hour into the trading day. Lets get you caught up on where the markets are trading right now. Stocks have actually turned around and futures are pointing to i higher open, but now the offx is in, nasdaq selling the most was that we did get some better than expected numbers on unemployment, weekly jobless claims falling more than forecast. That is also had a little impact on the treasury market. Lets show you what has happened to u. S. Treasuries. Falling with yields coming up but only slightly. Yields on the 10year note up about 10 basis point. Now it is time for futures and focus. Bond buyers searching for safe reliable returns this year are having a hard time finding a. Wall street predict that treasuries will lose value by the end of the year and some warned that junk bonds are now getting overvalued. Plus, it is only getting more treacherous. Here with us is Bloomberg News bromowitz. Its how are you see investors change their teaching around bonds this year . People are really pushing money into unconstrained funds, a big hedge against rising rates, and you are still seeing money going into unconstrained funds, but people are starting to rethink that and they are starting to say maybe bonds are just on the bonds and we can go into them and deals will stay low for a longer period of time than we thought, so maybe they will go back to treasuries, investment grade. And just go into the traditional plays because were getting our principal back at it has performed pretty well. The question is where do we go from here can you continue investing in bonds . And it seems kind of impossible over a long period of time if yields are rising from record lows as the investment banks predict. So if you are seeing value bonds having rallied this year, are you speaking to any investors who do see this as an opportunity to go back into the bond market . Yes, particularly longduration bonds, people think the curve is going to flatten or yield on the shore end might rise in yields on. Hese long and might rise they gained a lot from the stock market rally last year. Youre looking at cycles from the backend of bond market, lock it in for a longer period of time. People are seeing value there. Even all of the dealers have been positioning and long wagers on the longest bonds. It is totally against what happened last year. This is like the biggest loser section of the bond market last year. Going forward, people like the value there, they are seeing value in bonds in europe, particularly in italy, greece that is a sort of mary. And what people are doing is they are trying to find places where stimulus is coming to a head. And mario draghi, president of the European Central bank, says if the euro appreciates anymore, the Evening Program just like in the u. S. Because they want to make their economy more competitive. They wanted to value their euro, they can increase exports and have a more viable economy. True, mario draghi said he is interested in pumping more money. One of the catalysts for the bull run in the market was his idea that we were going to see this macro rotation of money coming out of wanted to stocks. That the investment thesis is still hold . Not so far this year. It has been exactly the opposite. There has been a rotation out of stocks into bonds. Realistically as there is a stellar student economy, that could be the better bet, and right now people are not really seeing it. Lisa abramowicz this is market makers. Goldman sachs and morgan ststanley earnings beat estimats and shares are soaring today. Firstquarter report still shows some potential warning lights ahead. Tale of two sodas, coke and pepsi both out with earnings. Theyre looking to diversify out of sugary drinks. One is doing it better than the other. The new women. When it comes to fashion, they just might be. The publisher of gq will tell us why men are more concerned than