Recently at costco. Especially when you look relative to other retailers. This is something we have been seeing. Comparable sales up six percent. Especially impressive given what we have seen in the First Quarter given so many retailer said weekly results were due to the weather. Sams club is comparable sales, down half percent. Walmart down 2 10 of one percent. Among the big discount retailers, this is the only one that has seen an increase in comparable sales. Not only an increase, but a big increase. On the other hand, shareholders meet did meet estimates. It seems like a combination of different factors. Higher preopening expenses for some of its stores, accelerated some of its store openings. Fewer shares in the quarter contributed to some of it as well. Membership fee income, which may have been due large part to courtesy currency headwind. Areall, we see the shares down 7 10 of one percent. Commentary i have seen has not been that negative, saying essentially weak numbers are in line and we have to look at costco relative to peers. Ander income consumer, those folks want to save money still. They are still under pressure to keep prices low. They had a good report. They did. It is all relative. For abercrombie, it is better relative to peers and expectations. Not fantastic, but better than folks were looking for. Overall sales are down one percent. Analysts were looking for a job close to 1. 6 . Abercrombie is really trying to get a better mix, a more fashionable mix, of merchandise in their stores. That seems to be bearing fruit. It also has to do with discounting, a lot of emoting. Offering sales with a lot of items. That puts pressure on asset companies. Got traffic, but it may have come at a little bit of a price. Qwest thank you. Our senior markets correspondent on the retailers. In washington, pressure grows on eric shinseki. A shutdown after the release of a scathing report detailing delays in care at the v8 medical centers. The waiting list. Has more. Democrats have now called for go. Sex for him to some claim the whistleblowers to parers were not up and they were hiding the list of official participants at the v8 the v. A. Er medical center. Politics here, the Senate Passes only iraq war veteran. Report is thehis final straw and there is no repe final straw and there is no way for shinseki, a vietnam veteran himself, to leave the department. Left veterans at risk of being lost or never having received care. The report centered in phoenix and found 700 veterans were left off an official weight less to prop up the performance. The most recognized member of Congress Agrees shinseki needs to go. Numerous inquiries from the senator and me that it is time for secretary shinseki to step down. He does not voluntarily, then i call on the president of the United States of the United States to relieve him of his duties and fire him. Mccain had been waiting for his report to decide on assessment of shinseki. Shinseki responded as well in a statement. He called the report here and to thele department of Veterans Affairs he promised to implement the changes called for in the interim report. But this is a tremendous amount of vertical political pressure. He survived six years so far in the obama administration. What has the white house reaction been . The report was they were troubled by the report, but so far, it deems the president is sticking with eric shinseki. He defended him last week, you will record recall. Eric is still there, but this report and any more revelations to come it is important to not the onlyis place there were problems. A systemic problem nationwide. You. Thank our chief washington correspondent. It may be early in the morning boost thebut how to size of your economy . In europe, they are doing it by drugs and sex. I have to say it that way. How are they doing it . This stuff happens. People pay money for it. It is part of the economy. It will not show up in our numbers at 8 30, but by the end of the year, they will start calculating drugs, smuggling, and other things. As part of their domestic product. Some of these things are legal in some of those companies. They will give a boost to the eu because it is fun to buy a tax on the side. It also gives a boost to each country. They have a restrictive gdp rules. If you have a larger gdp, you have more debt and less pressure for spending cuts and less austerity. The problem is, how do you count this stuff . Up with a good way. They also have to figure out how on reportinghe economies. Stuff that might be legal but does not get reported. Experts say it could make hundreds of billions a difference. Overall in the economy, maybe not that much, about 3 10 of one percentage point or so. But it is still worth doing, they feel, once they get some sort of method of doing it. Qwest what about in the u. S. . It has never been seriously discussed here because they cannot figure out an accurate way to get the data. You can imagine army of bureaucrats at times square. How much, baby, each month. The unreported economy, about a half trillion dollars a year because they know that happens. Is stillrts say it undercounted and a could be as high as 2 trillion. Theyll be the next move, if they could figure out the method to get it. Qwest thank you so much. Thank you so much. Moving and shaking this hour, former nba officer grant hill and the microsoft ceo both had to buy the l. A. Clippers from don serling. Don sterling. Offered 1. 2 billion for the clippers and in the meantime, ballmer is said to have made a strong bid for the team. He is said to have promised he would not try to move quickly clippers from their home base in seattle. Almost 19worth billion. Also moving and shaking, the people behind apples acquisition. President. Enior vice apple agreed to buy it for 3 billion. They spoke about apples Upcoming Product in a conference near l. A. Qwest later this year, we have the best product i plan i have seen a apple in my 25 years at apple. Qwest the best roddick pipeline you have seen. The best Product Pipeline you have seen. Qwest that is right. That is right. That is a really strong statement you made a few minutes ago, for the rest of this year, you have the best Product Pipeline you have seen in 25 years. Imac,years, you did the ipod, iphone, ipad, macbook. They are widely recognized as good products. Qwest i agree. I believe the products we have got coming are great. Qwest coming up, be careful who you become friends with the states on social media. American lawmakers and defense contractors are finding out the hard way why. Plus, shelling out millions of a new tracking system for Young Athletes and concussions. Were just getting started. You are watching in the loop live on Bloomberg Television. A new report showed that iran created a phony News Organization to compete with facebook, twitter, and linkedin. 14 star general to share concert confidential information. Informed sources into their networks, in some case getting them to open an account that permitted iranians to scrape personal information about them. An incredible story. Jones, now is tiffany who issued that report. Who, our legal reporter, has done a lot of reporting on cyberattacks. Let me start with you on how ishares came about how you came about to detect that something was off with this organization. Ofst we are in the business cyber Threat Intelligence. It is what we do for our customers, both commercial and government clients. We are out there every day looking for cyber and skin nosh, cyber crime, threats around the globe. Tomie specifically how you found this organization and how did you find them to be a fake News Organization . Cyber Threat Intelligence team began to scour, looking at suspicious urls, fictitious learned, and we soon that it was in fact a thick vicious News Organization. With over a dozen fictitious personas that had been created as both journalists and other types of individuals having different types of jobs. What they did was go after highvalue targets. Military,ly, u. S. Government diplomatic individuals, diplomatic officials in other countries, as, u. K. , saudi arabia well as defense contractors in both the u. S. And israel. Qwest what kind of information were they looking for . They were trying to get close enough where they could eventually send some sort of malicious link, which would download software, allowing hackers to take control of accounts like email accounts, or to take fuller control over the computer so they could download documents. They were basically looking for anything they could get. Qwest tiffany, how did you trace them back to iran . There were a number of things we looked at. We looked at some of the malicious code we found and analyzed and found terms throughout the code. We also looked at working hours of the actors, what they posted and when, and learned that, when overlapping all the data, they were working working hours as well. In the story you wrote about know it was a secret website,ion and a fake but it was not exactly done very well. It was a messy job is that correct . The website looks pretty sharp. They put news on it every day that they essentially stole from other News Organizations and put under the names of their own journalist. When it came to personal interactions, when they try to connect through linkedin or facebook, grammar was off. They would misspell names sometimes on the website. They were look like done by proficient english speakers. That is one of the problems with being a cyber spy. When it comes to exchanging interactions, it does not necessarily look as clean as you would want it to. Qwest is this not part of irans plan to up their own game in cyber warfare . With css 2010 iran has consistently said and done things that suggest it wants to become much more proficient in Cyber Espionage and cyber warfare. In 2012 and 2013, we had a wave of attacks against u. S. Bank websites. Really sophisticated, which through the banks for a loop for a long time. This looks like another layer of in terms of the basic approach and tactics of the target, not that much different than what we have seen in china in terms of their espionage or the u. S. Doing know this is linked to the Ukrainian Government . We cannot be sure of that. When you look at the highvalue targets they were after, and you can infer the type of information they could be gleaning from those highvalue targets, pacific lee from defense contractors looking for military secrets, military blueprints on Weapons Systems and other things, if they were targeting people focused on nonproliferation and sanctions, you start to pull together a story around the types of information they would want to glean for strategic advantage. Qwest michael, have we gotten any response from the companies being targeted . Thee do not know specific specific victims. Facebook and linkedin have had to investigate themselves. Facebook has removed all of their profiles associated with this fake news orson News Organization. Linkedin said the account is not any longer active. Theyre not saying much more than that. They are seeing if they can strengthen security measures. Qwest thank you. Thank you. We will be back in two minutes. You are watching in the loop lowes quote live on Bloomberg Television. Good morning. It is 26 minutes past the hour. Bloomberg television is on the markets. Equity futures are slightly higher. Of stocksching a lot and economic data. We are watching shares of Abercrombie Fitch, losses are narrower than estimated. Shares are surging this morning. Sales missed estimates. In terms of data, jobless claims and the revisions of firstquarter gdp will be out in just a few moments. A look at Bloomberg Top headlines. The world bank of scotland agreed to sell its Minority Stake for 167 million. The buyer is an Investor Group led by street partners. Regulators have been pushing rbs to boost capital. Another breakthrough for bitcoin. Bit television has agreed to let subscribers pay their bills with bitcoin. That will start in the Third Quarter. Another missed major toward him and for tiger woods. He will miss next months u. S. Open while he recovers from back surgery. He has not played on the toward this early in march. In washington, the beat of the minimum wage from continues. Today, seattle will take the first step to increase its wage to 16 an hour. Yang yang has been following the minimum wage. I know you were also at mcdonalds during that fight at the Shareholders Meeting for higher wages. Tell us the significance here in seattle and have a came to this. Class i was in chicago. The minimum wage fight all across the country. It is a big day for seattle and for the workers. The minimum Wage Committee has a plan for 12 00 p. M. Eastern and what they are considering is raising the minimum wage to 15 an hour, up from the Washington State minimum of 9. 32 an hour. To be phased in over seven years, at which point the wage will be ingested adjusted for inflation. There is not much suspense on the outcome. The mystery is what will happen next year it the university of washington estimates that in seattle, 102,000 workers, about a third of the population, makes 15 or less. The wage increase would put about half 1 billion of extra spending money into seattles worker pockets. That comes at a cost to businesses. It is hard to predict exactly what will happen. Seattle will serve as an experiment for that that many will be watching. This comes as michigan, a republicanled state, just the other day passed a law increasing its minimum wage from 7. 40 an hour. A lot of momentum on the minimum wage fight. Qwest clearly, a lot of momentum. An hour. Ries for 15 hypothetically, what with the impact be if the federal minimum wage was increased . Qwest that is the big question. I am happy you used the term hypothetically because the chances of this happening are slim. Even the chances of the proposed 10. 10 an hour do not luck promising. Americans. 3 million earned exactly the federal minimum wage of 7. 25 an hour. Because the figure is so unlikely, we do not have that much data or that many predictions on the impact area on the 10. 10 an hour proposal by the white house and senate, using data from the Current Population survey, it is calculated we have. 1. 3 million workers right now making less than 10. 10 10. 10 an hour. That is 23 Million People directly affected. 9 Million People would be indirectly affected. Aroundwho make on or 10. 10 now, they could see a bump in their pay. That brings the total to 30. 3 Million People and an average of 2400 in additional annual income. That comes out to a whopping billion dollars in total wage increases, which translates to a cost of business is paying the wages. Happening anytime soon, at least not in 2014. Qwest thank you for that report. Thank you for that report. Firstquarter gdp revised slightly lower than what was reported. Down one percent. The prior number was a decline of 0. 5 . Personal consumption pretty much stayed in line with estimates of 3. 1 growth. 300 thousand. Economists had expected economists at 318,000 claims. Take on these numbers. Class it is interesting. The numbers do not look all that bad. First, consumption is higher than the initial report. Business not as bad as the original estimate. , not ase spend money on bad. We saw a big decline in inventories. Away in the gone First Quarter, they probably have to be rebuilt area things do not look as at as they might otherwise have been. Exports, trade contribution, not as bad as well. Tell only one cents of a percent. Not as big a move as people anticipated. The headline number looks bad for the economy, but the underlying data points suggest the Second Quarter could be better. Almost as much as four percent growth so far in the Second Quarter. Qwest thank you. Mike on the economic numbers. We are taking you inside pepsico tonight for an exclusive look at how the beverage and snacks innovate, including with my interview. First, we have a preview for you. Here is a look and i pepsico by the numbers. To pepsico than pepsi. They each pull in more than 1 billion in sales for year. The name ford with pepsi cola when it was first created in North Carolina by a in 1898. T in 1940, they made history with the First Ever National advertisement to have a jingle, a catchy little ditty. You can remember the pepsi challenge . How about the super bowl ads . From Michael Jackson to be on say, pop stars and pepsico together at halftime. War. Is still a soda you need to look at pepsicos food business, which counts about half of its nearly revenue. Everyones favored chris b smack, fritos corn chips started a Small Business selling chips out of the back of a ford. For ruffles, chinos, doritos, crackerjack, and much more. A 100 emerged with 35yearold Quaker Oats Company to increase food imprints in a major way. It gave them gatorade. That is about time ingenuity got a promotion. Since 2007, she has been the chairman and ceo for a grand total of 20 years with pepsi. She is a global powerhouse all her own. Speaking about food, i want to tell you about breaking news that is happen now. Tyson foods made a bit of its own for hill shyer brands, a 6. 8 billion offer, and allcash proposal to buy hill shyer brand. A 35 premium to shareholders just two days after you heard we woke up in the week. Clearly, there will be a bidding war here for the company. For more on the whole Food Industry and challenges for its board, i want to bring in the longtime beverage analyst who covers pepsico people. Own. 8 two percent, just one percent of the companys shares. The last year about breaking up pepsico and putting in numerous other changes in the company. With us, doing covers the Beverage Industry in bloomberg news. Any thoughts about tyson foods throwing their hats in the ring . It looks like there will be a knockdown drag out over reports here. These Companies Really wanted to be a meat company. It looks like the pinnacle deal could be in a lot of trouble. Knew that would be a hot commodity to buy right before summer months. Let me get to you on pepsico. You met with nelson last week and he went into the meeting for what purpose . I wanted to hear the argument straight from the horses mouth. Had you had any position before that . Yes. Thatntinue to have position. We think pepsi would be better than one. Panies qwest you are not going to be convinced otherwise. You want to hear supporting arguments. Qwest that is right. I am talking to a lot of owners of stock. I met with his team, peter, josh. The chief counsel. The folks making decisions. With two things. Number one, they are committed to having their voice heard by the board. The board is not just in cook, but 13 people. That leads to my second point. To talk about the power of one and i came away with the power of 11. You have these other 11 board nelson and it is clear and his team want other Board Members to listen more. Have to more than they the arguments being made. Talked to many investors . Where do they stand . Among theu will find largest owners of the stock is that there is skepticism about the power of one. Not necessarily about pepsi remaining one company, but there is a certain amount of will to actually see pepsi split into two companies. Qwest pepsico would argue they have had several straight quarters of growth, that they have Beat Estimates in the last quarter, that they beat analyst andth in the single digits, that power of one is working and shares are up as well. Earnings were looking at today for pepsi are lower than a few years ago. That is evidence we are not quite seeing pepsi perform as well as it could. When you look at the third player in the soft drinks, it is snapple. They have been defending their share and donating less to coke and other than others and pepsi have. Been talking to investors as well. What do they say . There has been a lot of Interesting Research out. At least enough questions to get some ammunition here and make up moreo ground on his case. Investors seem to question whether longterm sticking to power of one is really going to thehe right way to go for company and whether it really does create more focus for the companies. The key thing you have is that is company over time built up a large bureaucracy and it has become unfocused. One of the ways to really solve the issue is to allow management for the snacks and beverage businesses to really focus on the businesses instead of taking from snacks to pay for beverages while at the same time losing to coke. Will be a lotere there. You might lose up to 1 billion in the synergies. A good idea. Not that is what they are duking it out over right now. Class is it necessary to lift there beny or might changes . In some ways, you have a template. Business that average off from the candy business. That business actually defied expectations in north america. It was a north american beverage business. North american soft drinks are challenged and have been for a while. The focus seemed to have worked. They have been defending their share against coke and pepsi. Devils advocate, pepsico would say, their brand, they would not be able to grow their brand to billion dollar levels were it not for the fact that they have power of one. Sometimes, you do not see it work on the outside, but is working behind the scene. The fact that she came in with both a beverage and a snack brand, the Company Really helped in goingeir leadership into new markets. They see great value in it even if you cannot see it physically. Works. Ertainly i am not sure it works for moms and other folks buying the products. While moms and others do want choices, your kiosk here at bloomberg shows a wide friday of soda and snacks choices. The do not need to get choices from the same company. They can get it from multiple companies. The power of one to the extent ,t has power at the local level it can still be preserved through companies doing that. The corporate umbrella qwest what do you mean . Thehere are others in industry that like to use the term, the power of many. And beem at the shelves among the vendors of the products showing up on the shelves. Being among the mentor the vendors does not mean you are one vendor. Your coke. You are the multiple of the products and then lets work with retailers to buy that choice at the shelf without one company doing it. Qwest thank you for doing this and joining us. Tonight, you can watch our special inside pepsico, including my interview with the chairman and ceo of ingenuity, and her champion of power of one and why it works and also in an exclusive interview with other pepsico executives. Up, the netflix of toys, the sharing economy. Letting parents hold onto toys for as long as the kids are interested in then send them back. I want to get more on the tyson offered to buy hills shire brands. Is going on. S what a neat bidding war. I was just actually emailing. Knew that jimmy dean sausage was a hot commodity and yet here we are very the maker of the product is at the center of the bidding war between pilgrims pride, owned by jps, the brazilian conglomerate, which had offered 45 per share, and now tyson offering its hat in the ring. A sizable premium to the earlier offer. Are seeingng we hills shire trade above the 50 ,ffering price at this time which suggests investors perceive the price will go higher because of various parties bidding for the stock. Aroundhire is trading 51, 52. Qwest thank you. We will be back in two minutes. Netflix changed the movie world when it launched two decades ago. A company that rents legos for kids for a month. Parents return them for new ones after their kids away with them. Can this share and economy . Rent the one ray runway for children. Great to see you this morning. Qwest thank you for having me. Qwest you have a threetiered pricing . Absolutely. And 35 monthly plan. Qwest how many people are on this so far . Lets 50,000 people have signed up for the membership. A great response. Qwest what makes you what made you think about this . Qwest my cofounder came together and we both had kids and we were sending an inordinate amount of money buying sets. Four per month. 160 per month, versus a rental for 39. We did the math and wanted to make any comic an iconic toy affordable. Upst with any kid who grows with legos, do you have an affiliation with the company . But we know about us have no affiliation with them, we just make sure we take all of our rights in terms of ip are respected. Right, that you respect theres, obviously. Work . Es this do you buy legos and warehouse them . Exactly. We have a warehouse and it is a very complex operation in the sense that we have intake where we weigh the sets before they go out and then again. Qwest how do you know someone does not throwing a tennis ball . We have these bags and then we make sure the person is taking it apart and then we sanitize with ecocleaning solutions. And thatw it is safe it comes in a good package for the next consumer. Planning to expand this to other toys . Yes. Thing and it is barrier to the market, something we are passionate about. We will extend a platform to other toys. It is all about openended, helping kids engage in a way that is constructive, rather than focusing on screen time. This is a way for parents to engage their kids in activities and build activities. We wanted our toys to reflect that platform. Qwest thank you for joining us. I see a lot of entrepreneurs with a netflix approach in other areas. , two of ourr. Dre biggest members as the Company Completes its heart largest sale in the loop. Day stay in the loop. Bloomberg television is on the markets. Are slightlys higher. Jobless claims better than expected. Gdp pretty much in line with what we saw in the original reporting, although gdp has theined by one percent in First Quarter. Coming up, we will talk about the french economist whose 700 page film on inequality has become something of a status symbol for liberals in the u. S. Apple welcomes two new members as it completes the biggest acquisition in the tech companys history. Loop watching in the live on Bloomberg Television and streaming on your tablet and bloomberg. Com. Were about 30 minutes away from the opening bell. You are in the loop. I am betty liu. Futures indicate stock slightly higher. The s p closed down yesterday, that ended a quadraday winning streak for stocks. The economy did worse than expected in the First Quarter. Gdp actually shrank for the first time in three years. And dish network will become the Biggest Company to accept bitcoins. Dish subscribers can start paying their bill with bitcoin by september. Apple sealed the deal. The Worlds Largest music seller among many things agree to buy the electronics for 3 billion. Iphone makers largest acquisition to date. Beats cofounder jimmy iovine spoke at a conference. Take a listen. That loses its point guard needs to change its offense a little bit when they get a new team in, and they are adding pieces. They have andrew from burberry who is brilliant. What a great choice that was. I had a meeting and i went wow, she is incredible. There are other people have added to the team that are amazing. Isnnie, you know, the guy incredible. Steve put the greatest team in the world together. He is drinking the apple koolaid, jon. Senior west coast correspondent jon erlichman. You have been following this story for us, so put this deal into context and what iovine was talking about, assembling this new team. Well, yeah, the point guard he was referring to, steve jobs. I think that this is somebody who is very comfortable in these two worlds, and that is something that apple could really benefit from. When i have spoken to iovine in the past coming likes to highlight the fact that apple did in a lot of ways changed the music industry. Steve jobs played a huge part in that, and that open the door for him to move away from just music and think about the listening experience after spending all those years in the studios trying to make songs sound good and then people using earbuds that do not cause for a much. What is the way that we can maybe capitalize on that . And then the company that is beats comes together. They became very clear how close these Companies Already were. Jimmy iovine was asked are you going to start spending more time with cupertino, are you going to work there. He said i have already been spending and making 10 trips there a year for 10 years, and he talked about how he would work with the itunes team to make the music a better experience and obviously now that they have moved into the subscription music service, that is something that appeals to apple, too, so all of these things start to come together that maybe we did not necessarily know about as rumors of this deal first started to surface. Are iovine and dr. Dre actually going to work for apple . Isyeah, i think that arguably the biggest reason for this deals to come together. It is a talent grab the same is easy with any technology company. Beyond that, what is apple getting . They are getting certainly a hedge in this new world of subscription because beats is going down that road, even if they are not fully vested in that business yet. The idea that people are comfortable with renting music, not necessarily buying songs, what does that mean for itunes . Now they may be lean on this new business. I think there is a certain unknown. Some people described this as a defensive deal. What about their offensive deal . What theyre buying things we do not know by . I spoke last night with george blankenship, a longtime apple executive, who feel strongly that is the case. If that is the case, it would make sense, the idea of apple seeing something that we have not seen or thought about yet. All right, jon, thank you for that reporting. Jon erlichman, our senior west coast correspondent. Plane ofis very public being the first hiphop billionaire from this deal, the has failed to boost the dr. Dres net worth to that amount. Route, there has been a lot of noise that this acquisition will mitts, so whats are the real numbers . Drehe role numbers is that is not a real billionaire, so some say it put the deal itself that rascal said jimmy, however, is a billionaire if you count the value of the restricted shares. Were getting to splitting hairs here. Were talking about a difference of 70 million or so. Restricted shares are part of the deal that was originally announced or reported as an all cash deal, but under california law, there will be taxes. You take the 33 rate out of the shares command is net worth is over 1 billion. At 850comes in million, not quite a billionaire , but he is almost there. Tell us about their fortunes. They are both wealthy. Extremely wealthy. In their history together is really the interesting thing. It goes back well over a decade when jimmy iovine became a pioneer in the rye business, and in the rapid business, and then time warner, which he sold to interscope, universal. And then dr. Dre who was already a star from his earlier act, nwa, they created the label aftermath, which is a venture that dr. Dre had a piece of. Interscope consumed at all. These that have been working together building up only together for over a decade, and beats then became a followon on top of that. There is that video, the video of dr. Dre boasting at that time earlier this month about becoming hiphops first billion there. We will see if he gets there. Maybe another deal. Rob, thank you so much. Rob lafranco of bloomberg billionaires. For more, check out bloomberg. Com billionaires. The billionaire who is at the head of dish announcing today that it will become the Largest Company to accept bitcoin. Customers of the satellitetv company will be able to pay in that Virtual Currency starting in the Third Quarter using the online Payment Processing site. For more, i am joined by the ceo of coin co, the new yorkbased. Onsulting firm is this surprising, dish . Yeah, it is surprising whenever a Large Company does that, but it is becoming less and less so. Writes because what i was going to start with is it is inevitable that more and more companies will start accepting big go with the momentum. It is sort of like email in the early days. At some point, a company has to get its first email address, and it is hard to be be first one over the fence to do that, but its more more companies do saysmaller companies will look, dish is doing it, overstock is doing it, larger institutional players are doing it, so why can we not do it . Why does it make sense for dish come a which is a tv company, does not like it is selling product why would it make sense for them to accept bitcoin . Is actually easier because you can pay your bills online. You have lower fees than visa, mastercard, paypal online. The Bitcoin Network essentially allows you to have lower fees and no chargebacks. There are financial reasons why to do it. What are the unusual or other factors that you expect would start accepting bitcoin . Announced they are politicalbitcoin for donations. Youre starting to see campaigns, political organizations excepted because contrary to what a lot of people think, the government is actually not so opposed to bitcoin. Isnt the biggest question regulation . Biggestthat is the question, which is good for the tech side because the tech has improved and the finances have been proved out, and it is the government that needs to clear up the answer to the yeah, and they are because they want to keep money in the u. S. And nato, to send it elsewhere. Of bitcoine value has gone down dramatically, hasnt it . It has come down from the late last year numbers, but it has gone up substantially from a year ago. Aroundow it is hovering 500, actually came up that little bit recently, but it has been in this poor under 50, 550 range for a wild, which is comforting this 450 dollar, 550 range for a while. Matt raskin, thank you, founder of coin co. Moving and shaking this hour, latenight tv host and author Chelsea Handler full stop handler had already announced she is ending her program, chelsea lately, after seven years will stop now the e channel says the final shows august 26. Is planning a monthlong celebration. Handlers that she has not decided what she will do nex t. She is a big draw on the comedy circuit. Plus, amber has written several bestsellers including one titled are you there, vodka . It is me, tell the. Chelsea. Andng up, self striving street legal . Google talks about its prototype driverless car. Of you have been on a subway or at the bookstore lately, you may have noticed someone reading the fake book called capital in the 21st century. It is not light reading. Written by thomas piketty, the book has become Something Like a manifesto on inequality, but recently it has come under attack by some economist who point out inconsistencies with his numbers. That is the cover of this weeks Bloomberg Businessweek on newsstands tomorrow. We have Bloomberg View columnist Megan Mcardle and bloomberg editor Michael Mckee as well as author and former Bank Capital Partner at conard whose own book unintended consequences, talks about the issues of who in society acquires well. He it is safe to say he is on the u opposite end of what piketty describes. Say there are a bunch of minor errors that you might call transcription errors where he just copied the numbers into a spreadsheet incorrectly from the original source. That is inescapable in a book that is 700 pages and has a lot of charts. Error worrying ar really . I dont know. When i read a book, i expect it to be accurate. Readers email me about my book and that you have got a typo. It happens no matter how careful you are. The more concerning kind of errors because the early ones do not change the story is that the economists have said they have found a good inconsistencies between the data sources he says he is using and the actual numbers for weapon quality for britain. The other biggest criticism just on the data side is the group of friends economists say if you controlled the housing bubble might as here but in europe, if you control for that, then most of the fact that he shows of increasing inequality basically disappears. Of that is a big if, ed, what do you think . I read a paper, and i think it is a very serious criticism of the book. It says there is no rising wealth, and we know real estate is not substitutable for labor. Just because you buy a bigger house, has no effect on labor. The criticism in the financial times, it is probably true, but im not thinking of a big impact on his conclusion. But i do think that boast summers and along have admitted , andes not have a theory larry says he has gone so far as to say gets misread the literature and he knows nobody that has come to the conclusion other than piketty, totallyd he misinterpreting . I think larry savaged the book and larry is the credible leader. You sound like you are jealous that you did not get with your board the teen beat cover. [laughter] i disagree with your characterization of Larry Summers review. He was kabul memory of much of the book was the question comes down to how fast you think the economies of the world are going to be able to grow in the future because the central piece is the capital. Were talking about not income inequality but wealth inequality that capital is going to grow the economy zoo, which is where incomes come in. The people who have money are basically going to make more of it. Unprovablet of an thesis for the future. Larry is looking at the past performance and saying theres no guarantee we will see that. In the past, however, the debate is what the data show. And theres a good investigation in megans article, he uses a different set of data is then an chris giles does in the today. He has a large response to people who criticize him. It is an interesting backandforth that will go on for a while. Won ahink ned phelps, who nobel, came up with the theory many decades ago which is that we need more capital, so the return and stay higher than the growth rate because we are going to cause more capital to grow. What we have seen historically is that we have needed more capital. We need computers, we need buildings, all kinds of stuff. When it is factories for a long time. So i think that you have to just roof that the reason why i was going to say greater than g, returns will stay greater than the growth rate, if somehow we will not need capital but returns will stay high never the less, or they will say hi because we need more capital, in which case bob solow, another nobel prize winner, wrote a great review, very subtle but basically said would you rather have faster growing wages or a higher share of income . By the way, you cannot eat a higher share of income, you eat your wages. Have we heard anything from piketty in response to the growing criticism . He has responded, but not fast enough to my liking. Of course, i have deadlines, so i would like to get a little more before the story came out. He initially responded to the ft basically saying it was a work in progress. It is worth noting he put his data up and that is how the ft found this. Deliberatelyn skewing the data, that sort of argues against that. That is one of the things he said. He also told bloomberg during hours of my work, what i think is on mike lee get in a 700page book full of charts, but so far we have not heard some stance of this is why i chose that data set, this is why i did these things, this is why the numbers look different from some others, and this is why ive made some choices. Some choices are different, but there are arguable, and we want to hear more from him why he made those particular choices to be confident that these are good results. To be fair, chris giles took several weeks to put together his critique and go through the numbers, and one can imagine doingrofessor piketty is the same thing. It is almost impossible for him to answer these questions off the top of his head and to put together his defense. So i would imagine we are going to hear from him in the future. I think that its right. I just wish i had had it before the deadline. When you look at the original data that is in his book, it is not so much of a trend of an increase in wealth, and the adjustments that the ft is making, the changes are small, it is minor, not significant. So you go from not much patrons to even less of not much of a trend, so i do not think that when people go and look at giles analysis, i think they will come to the conclusion that it does not matter much, but it does not let piketty off the hook. This is a fiery debate among economists and academics and this could go on for quite some time, but really obviously the reason why he has captured the i want to say the imagination or the zeitgeist here in this country is that no matter what, whether it is one set of numbers or another set, people are still going to support and those who want to will still support us thesis. Lets bring megan back in here because she did something in her story but i have not seen anyone else do, but struck me when i was reading the book. Megan, you wrote this is basically five books in one, and you can agree with parts of it and disagree with other parts of the. Yes, absolutely. Empirical data, almost everyone who has read this book offers tribute to the incredible amount of work that went together in assembling these data sets, and then you get into the analysis and people start to quarrel more, but with various things but you know, some of the things, catch phrases like ra is greater than g, with return on capital is greater than the growth rate of the economy. That is not really controversial. It is what he does with it. When he starts making productions and policy recommendations, that even people who are pretty admiring jobhis book and kind of opposite ok, well, i am not really sure we can extrapolate that way and im not really sure that we need a Global Wealth tax, which is his kind of most signature proposal, that those things are the way i would fix it. I think the liberal economists have dam him by praising him for the quality of the data. In the usefulness of the data. And it undermines their credibility. And i think they have intentionally done that so they can criticize the conclusion that he draws night, which is that the return on capital can say hi even if we have a surplus and capital. No one would argue that the return can bea more capital. Of course it is going to be high if any more capital. The question is can it say hi even when we do not need capital . I have not read anyone who takes that arguments are asleep. That is the important part of this book. Not the data. More people are biting the hardcover than downloading the ebook. People want to be seen with the book even if they are not reading it. I feel smarter after this conversation even. Thank you, guys. Megan mcardle of bloomberg ,iew, and of course ed conard bestselling author, into economics editor mike mckee. See the latest issue of Bloomberg Businessweek, download the Bloomberg Businessweek plus app free on phone, andandroid the opening bell on this thursday is next. Welcome back. You are in the loop. I am betty liu. It is 26 past the hour, so that means bloomberg is on the markets. Argus reporter alix steel has futures. Ready for the open, alix. Reading for the quarter, contracted for the first time in three years. It declined more than expected by 1 . Inventory growth on the flip side, that was pretty much telegraph. We knew it was going to be bad. We also have earnings from some retailers like Abercrombie Fitch. Keep in mind pending home sales for april coming out at 10 00 a. M. It should be a market mover as well. On the treasury market have i want to point out we continue to see these longterm data deals continue to slide down, so investors rotating into longer terms and treasuries. Also part of that is a sovereign european bonds rose across europe as well as german unemployment actually rose, so that is affecting the treasury market, betty. Alix, thank you. Bloomberg is back on the markets in 30 minutes. Lets count up to the open with the top 10. Alix steel stays with me and julie hyman joins in as well. 10,s start with number consult lighter than what wall street estimates were. More traffic going down. Number nine, staying with retailer, Abercrombie Fitch posting a fourthquarter loss that was narrower than estimates pending salesle decline. Ceo Mike Jeffries has been trying to revive his companys appeal to teens. Number eight, we have got rbs. The Scottish Bank has agreed to sell a Minority Stake in private equity agreement. Rbs is the largest bank to do ivest and focus on its Main Business of the struggles with risky assets five years after receiving the biggest bank bailout in history. Number seven is twitter. The microblogging site has been raised from buy to hold citing the recent 50 decline in shares and substantial Growth Opportunities. Those Growth Opportunities will not come from china in the near term. Yesterday, twitter ceo sethi does not see the sites being unblocked in china anytime soon. Number six, palo alto networks, the Cyber Security company has been raised at oppenheimer and Raymond James after meeting thirdquarter estimates by one penny a share. Oppenheimers analyst said the Patent Infringement settlement is a positive for the stock. Operativefive, the Surgery Centers has agreed to by Sheridan Health centers for 2. 5 billion in cash and stock. Employs over 2400 doctors over happy states in the u. S. Disability paytv company has announced it will begin accepting bitcoin for and dish. On he paytv coming up announce it will begin accepting du quoin for subscribers. For subscribers. Lifelike matt miller. Number three, apple, the Worlds Largest company has agreed to buy headphone maker beats for 3 billion. The deal, what is expected to close by the end of september, simplifies apples tim cook is willing to give the companys 150 billion piggy bank more aggressively than his predecessor to acquire larger companies. Price costco costco estimates are up a little bit as sales rose 16 across the board. U. S. Retailers have been struggling with the harsh winter and shaky Consumer Confidence over the past few months. It is impressive given that. Wife very impressive. And the number one is hillshire brands. Tyson has now made a 50 a share all caps option to buy the food its 6. 8 billion bid gives hillshire shareholders a 35 premium. They come to todays after pilgrims pride offered to purchase the company for 45 a share. So a bidding war looks to be set. Now, to the colony market, i want to bring in the chief portfolio strategist at Wells Fargo Fund management. His call, the election in ukraine may use or your dirt cheap. This is not a part of the world we often talk about. Where exactly are you seeing bargains . Well, if you look at europe as a whole, i think it is pretty much undervalued before the long term. I am a little nervous as to what could happen for the eurozone, with the et bes meeting next week, but Eastern Europe from a valuation perspective, especially in poland, i think that those stocks are trading at a significant discount to where they could be, perhaps a year from now or even over a shorter term because if we have some sort of diplomatic resolution of the tension between ukraine and russia, i think that could be a significant pop for a lot of merging europe. Howdy play into that, brian . It is a little difficult to do it unless you have boots on the ground over there in order to invest in poland or estonia or let wheithuania. If you are investing with a Portfolio Manager who has exposure there, i think that would be a prudent approach because that way it is diversified amongst a number of emerging markets. I am bullish over the long term of the emerging markets. Europe, youn mentioned ecb and how it is a wildcard for foreign investments. Julie, you are looking further into the ecb. The ecb will have a meeting next week and investors, economists widely expect the we could see a change in the rate and that is because mario draghi has left the door open saying we are going to be aggressively easing if necessary given the economic data. We take a look at the economic data. They do have some room to move if you look at inflation, poor cpi in the eurozone, around 1 right now, so not getting overheated, one could say. Other Economic Indicators came in weaker than estimated. One that stands out is the increase in the number of germany. D workers in so again here, betty, the expectation is that the ecb is likely going to act. And your excitation, brian, is what . Do you believe they are behind the curve . I do. I really believe the ecb has been behind the ball whereas the Federal Reserve is very much ahead of the curve. The ecb is on the exact opposite side of it. Inflation is already very low there. Everybody knows that Monetary Policy operates what is called long and variable legs. That is a dictum from the great economist milton friedman. They could take six months to two years for any action that the ecb takes on thursday to actually have an effect on the economy. If they want to try to stem this disinflation every pressure, they should have been acting about six months to two years ago. Now it is a little bit too late. If they do start lowering rates, is even going to do anything you go according to the ecbs own data, most of the lending is banks lending to other banks. Not a lot of it is going out into small and mediumsized enterprises. Right. You mentioned before, getting out of europe, you mentioned about emerging markets. I know you are looking at asia. Alix has been looking at one of these big markets, which is india, and the bear case against india. Any install has seen a election. In the modi already india has received 5. 5 billion in equity inflows today. There are problems with that thesis. If this is our overleveraged. Some say the new fiscal stimulus is unlikely because deficit is still in the danger zone according to some rating agencies. Will not rulearty the upper house, so the real question being how much change can he really implement, betty . Is there too much uncertainty there, brian . I think we are given a slight resolution of some of the uncertainty that already existed, so this makes for a more conducive environment for investors to look for opportunity. Given the landslide election that he had, i would be very surprised if he was unable to push through some sort of a ambitious agenda. He will not have much of a fiscal stimulus because he is about cutting the spending, but it will be very targeted, so i am actually a little but optimistic about the prospects for significant reform over the next year or so. If you look at indian stock, they are not at their alltime highs miami stretch of the imagination, so that should be pretty positive for longterm investors in that area. Writes brian, thank you so much. Brian jacobsen, chief portfolio strategist at Wells Fargo Fund management. Still ahead, china crackdown on social messaging apps. We will see what that is about. And speaking of secure data, we will take you inside facebooks new data centers in oregon of all places. Stay in the loop. In china, Government Agencies are putting new pressure on message apps. Hone three sets of authorities will conduct a monthlong special operations to monitor the apps to see whether the platform is a means of spreading illegal and harmful information like some have alleged. This comes on the heels of facebook seeking antitrust approval for its plan to buy it foraging Service Whatsapp 19 billion. I want to bring in our coverage of internet media. Great to see you this morning. Tell me what this is about here. The chinese governments investigation into the private messaging platforms is really just an extension of the new regime trying to keep up with this explosive growth in mobile communication that we have seen in the last couple of years. This comes on the back of the investigation to online video websites. Some are on content, some are losing their licenses, so we really see this as an implementation of the content regulation that we have seen briefly in traditional media outlooks. Is there any legal activity right now being conducted on ande messaging apps . Its hard to say. What we have seen so far as we have seen Certain Applications and that warning messages to people who use a certain words or topics in china through private conversation, so i think this is a new paradigm because before we were used to seeing this on public problems, but now we are talking about private conversations and who is to say what people talk about in their private messages. Is this a way for china to censor now some content and data that they normally would do when youre online, when youre on your computer . That is correct. This is just an extension. What we need to realize is that mobile is now becoming mainstream, and china is no different. Newer regimes really had to catch up. They had grown dramatically in the last couple of years. Praveen, who are the companies that be most harmed by this . By far, the Biggest Company is . 10. That is by far the biggest application out there. We have a few other players, a , iple of smaller players think the needed a concern for this companies is to limit their exposure to prevent them from doing their core businesses because they do not want to lose any of those licenses. Is this going to hurt their valuations at all . We have seen some mergers and acquisitions in messaging companies, but the valuations are not as high as what facebook paid for whatsapp. Right that is true. You have to look at the deal separately. That is true. You have to look at the deals separately. When you look at the difference in the valuation, it does really has to do with size and scope and what they are really trying to do. So with the facebook acquisition of whatsapp, that is a europe yet that is a universal platform. Facebook, theyre fighting with apple, fighting with google to control be ecosystem. You are saying the ones in asia are a little bit smaller. They are smaller, they are more niche, for example like kakao, with mostly does games. Praveen, he went for joining of bloombergenon industries. And facebook is also looking for a new home for all that the data that it is collecting. Facebook and apple are putting down roots for its data centers in oregon. Oregons went to see newest neighbors. One at the end of the line for the oregon railroad, this is a new spoken the information superhighway. Everything that is going on in the world related to facebook comes through a data center. All of those photos, videos, and updates that hundreds of millions of users are often faced with everyday are stored on servers in the past buildings like this known as data centers. This is facebooks most Efficient Data Center to date, and it is in prineville. The is due in large part to climate of central oregon. This place is what . This is the air intake room. We call it the penthouse on the data center. Youre in the high desert, so whether it is hot or cold, its very dry air. On a cold day, this dry air is used to cool the service directly. In summertime, the warmer outside air is forced through giants, damp membranes to cool it before it is circulated. The power requirement that electric bills can be enormous in data centers like this, but in prineville, the naturally dry air helps cut costs. Prineville resident karen monitors and replaces any problematic servers and this naturally airconditioned environment. Were people surprised when you said facebook is moving to prineville . A largecompany like facebook i think it was definitely a shock. And now apple has come to town building a facility just up the road from facebook. And there was another big and apple. R facebook we told him that we could give them 15 years of taxfree on the improvements that they put on the land. Communityeople in our say to us, you gave it away. And i say no, we did not. When it becomes a taxable entity in 15 years, they are not only paying taxes on the land, but aey will be paying taxes on huge facility. Those tax revenues may eventually run into the millions of dollars. In this town that is still in need of a boost. This was going to be the new grade school. The mayor hopes the kickstart will help revitalize prineville and serve as an example that other small towns can follow. What has been the Economic Impact of having these companies there you go there . The big was comes from construction. Veterans oregon more than half 1 billion including 3500 jobs. In terms of running the data center, the area of the town, prineville, central oregon, 45 Million Dollars in output, another 200 jobs over the last 12 months. It is pretty significant. That is significant. What about for the local community, for the people . Are they getting some tax breaks with this . Apple does not have to pay taxes on the added value. In terms of the tax income theyre getting, stayed in income taxes, it is not huge. It is about 500,000 in property taxes and three quarters of a Million Dollars in state income taxes. But compared to the break they are getting, they are doing really well out of it. Are they looking for other places outside of prineville, oregon . Centers are these huge boost to local communities. Facebook has one in four north sweden because it is another one with cold air that makes life easy. Companies are opening up in North Carolina, iowa. It depends on all sorts of things including cheap electricity, availability of fiber. Thank you so much. Coming up, germany and its chancellor Angela Merkel get a reality check. Details when in the loop returns. Time now for the global outlook. German chancellor Angela Merkel said they confronted rush over closer ties with Eastern European states. Merkel made the comments in ukraine yesterday. A Bloomberg International correspondent hans nichols joins us from berlin with more on the story. What did she say exactly . Good morning, betty, or good afternoon for me. Merkel was receiving be prime ministers of moldova, ukraine, and georgia, and these are states that obviously ukraine has made their decision, but the other two are still thinking about having an Association Agreement with europe, with the west, so what merkel was saying, and she was giving them clear voices and votes of support for mushy with giving a warning to putin but also giving him an opportunity to maybe have a dual track policy. Here the actual quote we want with respect to russia know eitheror but that each country is able to choose its own path. She does not want to set up the duality of a Foreign Policy where every country that is in Central Europe just east have a choice to make between russia and the European Union. She wants there to be a multiplicity of use. It is a very nuanced position. It is exceedingly difficult to get across. And the danger with it is it it will be seen as a sign of weakness by the russians. Hans, what did she say on additional sanctions been . This is from a close a lly of merkel, talking about how sanctions from a unified European Union force russia to take their troops out the border with ukraine. And this unified voice from europe, two rounds of sanctions that the escalated the situation. Those comments were after the most recent news we had, which was that a helicopter was downed in eastern ukraine, and it is easy to see how that will escalate tensions. Foreign minister lavrov of russia had a conversation with his german counterpart as well, using some harsh and hot rhetoric on the u. S. Side. The general view from berlin, betty, you need to keep the threat of additional sections on the table because that is the only thing Vladimir Putin respects. All right, so much, hans nichols, our Bloomberg International correspondent in berlin. That does it for us today on in the loop. Tonight, do not miss my inside visit to one of the Worlds Largest food and beverage companies. Yep, it is tha pepsico. Breade some cheesy garlic chipset the fritolay kitchen comment plus, we sit down with the chairman and ceo all tonight at 9 30 p. M. Eastern time and pacific on Bloomberg Television, streaming on bloomberg. Com, or on our free app for your smartphone or tablet. It is 56 past the hour, so that means bloomberg is on the markets. I am alix steel. Getting caught up here on where markets are overall, climbing their way into the green despite the negative read on First Quarter judy coming in at negative 1 . Helping support the market is m a,bidding for hillshire as well as positive earnings outside from Abercrombie Fitch. We are also keeping our eyes on copper prices this morning. They are retreating for the first time in five days at the u. S. Gdp number was arrived slower than estimated on speculation that demand for the metal was low in china. Reaches comes as its widest level in two years. It means you are paying a higher premium now than you would later. For more on the Copper Market, i am joined by Bloomberg Industries senior metals analyst ken hoffman. Can you explain what causes it and what it means . Just means the price of copper today is higher than the price of copper tomorrow. The reason for this and what has made copper really interesting for traders this year is it takes a long time for the Mining Industry to get a mind going, so everyone has been ramping up for the last 5, 6, 7 years to supply copper to china. Now all of a sudden china is slowing down a little bit and the traders were looking last year saying wait a minute, you have 9 new copper coming onto the market, it is going to flood the market with copper, short copper, and copper was done was down the first few months of this year, but lately things have changed. Copper prices have been heading back up, and that is a completely different story. That get to that because you are looking at an oversupply down the word because down the road because of prices in the future, but in the immediate term, we are seeing immense demand out of china. Imports in april were up 86 , month on month 20 year. What part is that plan . We have a really complex model we use at bloomberg that lists 104 new mines. We are tracking that into things have happened that are clinging be Copper Market back up. Number one, those new mines a really hard to start up, and they are way behind starting up the new mines this year. Number two, we flagged this in Research Last year. Pre2008, we with the about one million tons of copper out in the market. Since 2008, that number was around three hundred thousand, 500,000 metric tons, and we wonder will he go back to the pre2008 level, or will it stay at this low level . This year it has come back. We have seen indonesia really stop copper exports. Down 36 inrd minus production in the early month in this year. That has kept the marketing good production today. They are bidding up, the price is high, but they start the new supply in the future. What about demand . So china buying and importing this copper does not mean that much . I think it does. China has not slowed down as fast as people thought. Youve seen good numbers relative in the u. S. Versus last year. Europe seems like it is doing ok. He demand is pretty good. It is soaking up whatever new supply making it to the market, it is obviously soaking it up. The traders are thinking longterm. It is going to come into the market. To your point, the estimate is that it will move later this year, about 470,000 tons. That is true. If you stop seeing these outages. If you continue to see the outages in the market, that is where the shorts could get this wrong. Quite right. Hoffman, i love talking about copper, Nothing Better this morning with me. Bloomberg is back on the markets in 30 minutes. Market makers live from bloomberg headquarters in new york, this is market makers. Offermping a takeover with its own bid for 6. 8 billion. And the beat goes on. Apple agrees to buy Beat Electronics for a whopping 3 billion. We will see how this deal could change the music industry. Star power is that what golf needs now . You are watching market makers