Settlement with the department of justice, 4 billion of which will be a fee to the government. Results,of the earning adjusted earnings per share 1. 24 beating the average estimate of one dollar five cents. One dollar five. Cents. 1. 05. Net interest margin is the money on loans increased to 2. 87 but that appears to be a myth to what analysts were looking for. They were hoping for 2. 88 . Michael corbett is making comments. Commercial and industrial loans continue to do well as the economy recovers. They want to reduce operating expenses. We continue to lecture that any talks about the Significant Impact of the settlement on the net income because we know that from the 7 billion settlement with the department of justice, there was a 3. 8 billion dollar charge on citigroup. The Second Quarter, net income was 181 million for the period. Revenue beat analyst estimates in the earnings per share number also beat analyst estimates. I will look for the Capital Market numbers coming up. To increasepected on a quarter by quarter basis. Thank you so much. They agreed to pay 7 billion in fines and released consumer results in the government claims it misled investors of the quality of mortgagebacked bonds during the financial crisis. Phil mattingly joins us with more on the settlement. Many banks have already paid their fines on this, jpmorgan being one of them. How is the citigroup settlement different . The model is largely the same. The justice fine to department, payouts to different state attorneys general plus the fbi fdic and the consumer interestingwhich is compared to jpmorgan. Its the actual number being paid to the Justice Department, a cache find that cannot be written off for tax purposes. It cannot be credited by other mortgage actions. This 4 billion in Civil Penalties is double what jpmorgan ended up having to pay to the Justice Department. What this underscores is that while they are using the same came toey used, when it citigroup, the Justice Department officials thought they held the Higher Ground and they pushed to increase that fine. Who is next . Right now, it looks like it will be bank of america. They are next in line and Everybody Knows it. Negotiations between the bank and the Justice Department over these crisis error loans are not in a good place for the Justice Department is pushing hard not unlike what you saw with citigroup to increase the fines and increase the number. I think bank of america has been resisting to that to push back. When it comes to the Justice Department, they feel like they hold the high ground in these negotiations. Bank of america is having problems and they should be the next to settle but as of now, there is no Clear Pathway from when the settlement will occur. Thank you so much. Overseas to the fighting accelerating in the middle east. 17,000 palestinians flee the u. N. Shelters after israel wants them to leave i had of airstrikes. Elliott gotkine joins us now. The israelis accuse the iranians of being involved . There were shots fired from syria and lebanon into gaza . The shots fired from syria and lebanon have been responded to by the israelis but they are not necessarily coming from an organization like has below has below hezbollah. Netanyahu is saying that iran is arming the palestinians. Describe what it is like now in the north of gaza. Comfortable. Xactly in certain cities, the sirens have sounded nine times. The claims by the israelis that there is iranian involvement, what do you know about this . Lost betweeno love Benjamin Netanyahu and the iranians. To iranians are trying thrash out a permanent deal in vienna. Benjamin netanyahu is trying to remind the west that these are guys who are financing cells who are terrorists so be careful before signing a deal. Thank you so much. The israeli prime minister, said why heanyahu, had such an extreme attack is necessary. These people are not into political settlements. It does not mean that we cannot actione necessary coupled with diplomatic backing to achieve the protection of the Israeli Citizens from these rocket threats and so on. I am not going to get into the specifics. Sometimes you just have to fight against people who want to murder you. For more on this conflict, i want to bring in richard haas and also Boston Properties chairman Mort Zuckerman who is prominent business voice on middle east relations. Do you agree with Benjamin Netanyahu that there needs to be this kind of extreme force in response . I think they are a very small country surrounded by countries that are trying to destroy them. Hamas,here a thing from a whole series of Television Programs in which they say to their kids that there is no such thing as israel. All of it will return to us. These are pictures that are put out why the palestinian media. Anybody who knows that region knows there is an unrelenting attack on israel in every possible way whether it is propaganda or Public Affairs or military or intelligence. Its everything. This whole thing changed once you had weaponry that was rocketry. The israelis have this protective system, the iron dome where they could interdict these missiles being sent. You can imagine if United States had canada sending in these missiles every day what the response would be. Let me all this up for our viewers. This is from the palestinian media and watch. Media watch. You see this on television that there is no such thing as israel. Hamastv and the israeli said that is adjusted occasion for defending themselves from this kind of attack. What is your response . Israel, like any nationstate, has the right to selfdefense. The problem with the israeli strategy it is really the israeli predicament is that it cannot illuminate hamas politically or militarily eliminate hamas politically or militarily. To some extent, it could because hamasas will survive even if it is weekend. It would reinforce its standing as the only Palestinian Group willing to stand up to israel. In the short run, the best strategy for israel is to figure out a way of getting what the promised her called calmk for calm, a ceasefire which does not resolve the situation but at and i think the israelis need to reconsider their diplomatic or political strategy and what they can do to away fromplit hamas the less radical palestinians and see if they can get serious about negotiating a deal with those palestinians who essentially run the west bank. But havingwith that been directly involved, i can say they have been trying to negotiate with them. Anyone who sees what hamas does or says not only to the israelis , hamas isown people not prepared to do it. No one is suggesting that israel negotiate with hamas. My point is that the israelis need a strategy for negotiating with those palestinians who at least have been historically prepared to negotiate and to accept israel. They have not been historically prepared to make major compromises for peace. Have been trying to have these negotiations and they have been unsuccessful. Between a struggle hamas and the slightly more moderate groups. The moderate groups are afraid to be too moderate because hamas appeals to the fundamental views of a lot of the palestinians. Its a hugely complicated thing and the israelis have tried to develop this kind of peaceful resolution for decades and it has not taken place. Party, take an outside for example the americans, if they could handle themselves which hopefully they can, to lead the two of them together to a common ground. Do you think the americans have the wherewithal to broker something . History would suggest a little bit of modesty. In a number of american secretaries of state and administrations have tried. In this particular circumstance, i dont think the situation is particularly rife for a diplomatic breakthrough. Kerry tried but its the only real game in town. You need to strengthen the palestinians on the west bank economically and one has to build them up more in the security sense and then youve got to put something generous on the table. I think that is the only hope we have lest we find ourselves every couple of years facing a d attack with more dangerous attacks. Thank you for joining us. We will talk about more domestic issues including the jobs market. Coming up, the largest private Real Estate Developer in history and we will talk with the ceo who may have the most at stake. Grossman turns down a job offer from a highprofile retailer. The gop has delivered another blow to obamacare. House Speaker John Boehner announced a lawsuit which challenges the administrations decision to change the Health Care Law without calling on congress first. Suings is not about me the president. Its not about republicans versus democrats. This is about the legislative being this is advantage by the executive branch. On the other side of the aisle is paul krugman who says Mort Zuckerman is still with me, the chairman of Boston Properties, you have written quite a bit on the subject before on Health Care Reform. Paul krugman says he believes that there are just obamacare deniers and they will not admit that Health Care Reform is actually working. What do you say . I wrote an article that said we have created an enormous amount of our time jobs and we have limited amount of fulltime jobs. I was responding to the governments presentation that we created 288,000 jobs in the last month. When you look through the numbers, it turns out we lost over 500,000 fulltime jobs. What does that have to do with Health Care Reform . Health care reform is a part of it but not the only reason we had a weak economy and we have been growing at about two percent for the last five years, the weakest economic recovery in our history, with the most monetary and fiscal policy so we have not fashioned the right policy to get the country out of the slow rate of growth. Obamacare has contributed to the parttime issue that we have to face where we have 47 Million People working parttime in workca and the parttime comes about as a result that obamacare does not apply to people who work under 30 hours per week. Many companies have been employing people for under 30 hours because they dont want to get involved in the obamacare thing. The majore of outcomes of obamacare. Let me take it one step further you cannot say that all parttime jobs are being created because of obamacare. Cycledse who are being into parttime jobs because they cant find fulltime jobs, isnt it good for them that they have some sort of safety net where they can get insurance if they dont work for a company . In thelieve totally social insurance of health care. I dont think this program is the right way to do it. You look at a country like canada where i am from and you see a much more Effective Health care program at a much lower cost. I think that is the kind of program we shouldve had. This program does not really work. One of the cost of it is that it inspires people, employers, to hire people on a parttime raises and not fulltime because then they are not responsible for obamacare. Do you agree with the john boehner lawsuit . Thats not the way to resolve things. Thats old mother issue. With the agree Obamacare Program not because i dont support health care but because i thought it was the wrong program. Let me read more from your oped you say there has been a distinctive odor about the National Jobs report most people have the impression that the 288,000 jobs traded last month do you see any of this changing . Will we continue to see more parttime employment . In a weakthink we are economy and people are not hiring people on a fulltime basis. By obamacare. Red i think this is a dangerous pattern in most American Families cannot survive on the basis of parttime employment. If they survive, its a low standard of living. When you have 47 Million People working parttime, you know you have an economy that is in real trouble. Great to see you this morning as always. A lot of opinions on a lot of issues, more zuckerman, the chairman of Boston Properties. Coming up, turning abandoned railroads into Historic Railroad development. We will talk to one of the key players in new yorks recordbreaking project. We will also tell you about a big acquisition in the chocolate business. We will be back. You are watching in the loop, on Bloomberg Television, streaming on your phone, your tablet, and bloomberg. Com and now available on apple tv and amazon fire. It is 26 minutes past the hour which means Bloomberg Television is on the markets. Julie hyman has more of a big earnings day. Thank you so much. Its time for futures in focus. Were looking at oil. It drops down toward 100 per barrel for the First Time Since may. We have had this decline in oil. This is despite a lot of what they vaguely call geopolitical tension. Is it just that there is enough of a supply cushion that we can absorb this . I dont think so, these geopolitical problems will have a real effect on the numbers maybe not today but over the next couple of weeks, months, and years. There is a financial component to the oil market that no one is looking at very closely. Thats the amount of speculative activity in the oil market. Or is more speculative longs today than at any point in the history of Financial Futures. Everyone cannot be right at the same time. Everybody is long oil waiting for one of these next shoe to drop and they continually dewdrop. We have the iranian issue getting worse, john terry has thrown in the towel on trying to get a nuclear deal. Israelithe palestinian dustup that will go on for a while. These things should drive oil but everybody is long and oil is slowly starting to creep down trying to chase the longs out for it is when you chase these longs out that you will get that big jump in oil prices that you should get. Michael, youre betting we will see that jump . Absolutely, those longs have been just getting smoked on this recent news only because the market was up but 107 and we were expecting higher. I am looking to see if we can 100 the lows around dollars. 3. 99 is a great target. When you start seeing liquidations, that will be the first sign that they are wrong and the market turns around. If you buy the oil futures at 99 76 per barrel and seldom them a104, and sell low 104, you get quite a profit. Fundamentally, thats the downside which is limited. We are waiting to get some of the weeklong players out of the market. I like that trade a lot and i think there is a place where you need to buy oil and youll find that over the course of weeks and months. Maybe not today but you will find it eventually. Idea that whenhe you are talking about the geopolitical issues in iraq specifically and most of the conflict seems to be happening away from the oilproducing areas. . What are you most concerned about . The same place as you speak of. Because of the parallels involved, thats what i start to see brent crude turnaround first and catch this bid versus wti. I want to reference the fact that the spread between the two different contracts is almost narrowed an in half. We watch that spread closely. You should see the snap back in brent crude first. Because the refining scenario is holding in the u. S. Come i think thats what you start to see the market sell off. I like eying these dips. Lets take more weakness which is a great indicator area every time you have seen the selloffs in the snp, the u. S. Dollar is one way and that is week. Longtermline up for scenarios you just have to be careful as of when you come into the market. That brings to the word of the week which is convergence. There are two parts to any commodity market and one is physical. The farm takes his corn to a company and sells his corn for a price. Then there are Financial Futures that i play3 we discover a price in trading. What happens over time as those prices are supposed to converge. That is the basis of our future market work. It does not always work that way but the erratically, it should. Thats the word of the week and it takes more to describe but it should converge. Convergence is the theory and would or which futures market under which futures markets operate. Thank you both very much. We will be on the markets again 30 minutes. Here is a look at our top headlines british rug maker shire says it will recommend shareholders accept the latest takeover offer the bid was for almost 54 billion. They would be able to lower its taxes. Mindy grossman has turned down an offer to run jcpenney. And has been pushing jcpenney to replace the interim ceo. In the candy business, the Worlds Largest producer premium chocolate has agreed to buy Russell Stover which make theh would make lindt biggest chocolate manufacturer in northern america. I had a chance to take an exclusive look at the massive 17. 4 million squarefoot hudson yards real estate project underway on the west side of manhattan. Its a project so big that in many places, it would constitute its own city. Feet. Million square what we have is about one million square feet next to the building. We have been working on different tenants right now we think you have heard we have been negotiating with Neiman Marcus. Do you take them to the site itself . Ceo and their investors and shareholders all want to come through and feel what will happen. This could be one of the largest urban stores and they are not going to make that decision lightly. Do you want to show them how big this places . You cannot come here and just look at the construction. You have to see the plans. We are creating the new center of new york city. Yuan everone hanging out by central park or downtown coming here . Of theant to become one biggest Tourist Attractions in new york city. Hudson boulevard will go six blocks north. Line hasr seven subway three stops along the way which will bring the transportation infrastructure necessary for this to work. Thats why our commercial and retail tenants know this will happen. You want someone to be able here, work your, shop year, easier and have their entertainment here. They can isaac we live within six blocks. This is bigger than most downtowns in the United States. Absolutely, this is a live, work, play environment. Acres our land area, 20 is an open and byron meant. Green spacee more per square foot than almost anywhere else in the city. Standing in all the way to the north, this will be our next commercial office 60. 7 millionghly square feet with an observation date. We already have an account space, dont wait . City, 65 of the buildings here are over 50 years old. If you think about how technology has changed in the way business has changed in the way people to business, our infrastructure and buildings have not kept pace. The buildings where putting up today are unlike any others that exist in new york. New york city is growing. There are new neighborhoods and i think people are moving from a residential perspective to downtown and that trend has started and has been going on for 22 years now. If you look at residential rents, we get our highest rent in new york city in west chelsea in this new building. We get our lowest rent per square foot on the Upper East Side. If you wouldve told the new yorker 10 years ago you would get the highest rents in new york, you would say you are crazy. Dont you live on the Upper East Side . I am moving here. Blau joins me now. You mentioned Neiman Marcus is one of the tenants up there at hudson yards. Have you made a deal with them . We are talking to Neiman Marcus a we are not quite done but we have had tremendous interest from the retailers, one million square feet of retail ranging from super highend luxury to Department Stores and everything in between with lots of restaurants and creating that incredible excitement that comes around retail that interacts with the public. Every big project needs big tenants. Youve got coach moving in, time warner as well. What else are you looking for . What are the big anchor tenants are you looking for . It has been a trend in the in technology, advertising, and media. They were the forerunners in the beginning of who we were talking to. We are seeing response from the Financial Services sector and theyre looking for large floor space. If you think about the buildings that exist today around new york city, there are not many options for them. We have these tremendous new and highly efficient spaces and i think we will go after that sector. A big bank . It could be. Larry silverstein was honest last week someone you know well. He said what about his project by the world trade center. Hes got conde nast moving down there and i want to play for you one thing he said to me. Tothere is a lot of activity see the degree of interest, the number of people who want to come down from attempt to Lower Manhattan is amazing. It has been a trend but slowly but surely picking up speed. Everyones got the best forecast. Yorker, whats happening in Lower Manhattan is incredible. I think there is space for everybody. Every large tenant will look at both. For the most part, tenants would prefer to be in midtown and prefer to be on the west side and downtown. It comes down to a pressing issue and historically downtown has always been a less expensive alternative. For the most part, they would go to his project of they want to see a lower rate . I think thats what happens. People looking for the right environment are staying in midtown or going to the west side. Theyre going to wear their employees want to be. West chelsea is one of the strongest neighborhoods in the city and we are creating that work and live and play environment. You have not started on construction the residential towers. That will be to come . The first rented building we onished on the quarter the corner of 30th and 10th. People are moving in today in the first four cell product, the First Condominium Development people look at that condos and they think high prices and think about the penthouses. The cover of new York Magazine says that new York Real Estate is the new swiss bank account. It has the feeling of maybe there is a bubble in the new york residential market. That article is interesting. It was referring to what is happening at the very high end, the 57th street corridor. We have tried to avoid that sector. If you think about pricing in that market, but as a 57 house and dollar product that new york is never seen before. Our products for the most part will be less expensive than that and will not be competing with those types of buildings. Those are truly speculative and all of the buyers are foreign. In our buildings, we find the majority of our buyers are domestic, they are new yorkers and i think we will have a lot of people moving from the Upper East Side and the Upper West Side including myself to hudson yards. I dont think we are competing in that market and i dont think thats what will fuel our development. Because you have a lot on your plate. You got several developments outside of new york city as well. Well talk much more on the property market. We will see why some investors say it is the right time to invest in detroit but the art of the deal we will see what has brought lebron james back to cleveland. We are back in two jeff blau and just talked about the hudson yards project. Many businesses to other cities in working on many projects around the country. Let me ask you about investing in detroit. Visited detroit where we talked to a lot of officials including dan gilbert the founder of quicken loans. About why he thinks investing in detroit are pretty is the right that. We have over 1 billion in investment in real estate that is in technology and existing buildings and new construction. There is 100 residential occupancy in downtown and midtown. The young people who come here cannot find a place. You know that dan. He is terrific. He is trying to do what you are doing in hudson yards, trying to revive the whole city. What do you think of that . I think its an amazing opportunity. What he is doing is incredible. I went to university of michigan so i have a lot of local support. He is successful. When he started this crusade maybe 10 years ago i said you will either lose 100 million or make 1 billion. 10 years later, i think you will make 1 billion. Detroit is a tough city. A lot of things have to happen politically to make it work. I think the city is too big and needs to be compressed but working on that now is what they are doing. We have looked at detroit and he gave us the tour. It could be an incredible opportunity. He is able to use his own as ms. To drive whats about to happen in detroit. You are doing many things in other parts of the country you are building housing near fracking development. I find the Energy Sector amazing. Whats happening around the world is the u. S. Being able to become Oil Independence is important as we have more chaos around the world. I think that is leading some of the to some of the stability in energy prices. What we think is how we can take advantage of that. Great for the nation but its also great for the local economies were the fracking is happening. Out areas of check north dakota and texas were that Energy Development is happening. We decided to fill and develop housing in and around those areas where there is a tremendous shortfall. Into areas of north dakota, its like a frozen tundra and there is nothing but Energy Fields and oil fields and ask flurries and happening and theres no housing. But anyonets of jobs who shows up there gets a job that makes a lot of money but they have nowhere to live. They are living in camps like risen blocks. Permanents to bring housing there. Its a tremendous effort i think it will be very successful. You are grabbing that opportunity, great to see you this morning. The city battles his way out of bankruptcy, one detroit ace businesses looking to be part of the change and take share from jack and dorothy square. Lebron james arguably the next player and basketball will return will leave miami and return to the Cleveland Cavaliers on friday. With me now to look at what may and whatsll of this next for lebron james is Robert Lamson from the nba players association. Jeff blau talking to off camera on the lebron james thing because everybody is talking about it. Were you shocked . I think it was a terrific economic decision. A huge percentage of what he earns as a direct result of marketability. What makes it better is coming back. Its a great deal. It runs for two years. At that point in time, the nba will have a new contract. Negotiating in 2016, what better time if salaries will go up . He has to see if other players will join the team. He has one ofhat his advisers was one of the finest contract attorneys in the country. Split area the Television Contract is h tell me the split. How does that work with the players, the Television Contract . They get a share of whatever is produced through the television deal. Is it 50 50 . It can be 51 49 depending on factors. Be up isntract will that Television Contract is up, well kind of leverage does that give him . They dopends on what but players of a maximum salary. He will be able to negotiate a better deal in 2016. The fact that he is back in cleveland, he makes roughly 40 million on his endorsements. I think it was a terrific coming home story. This contract is worth about 40 million as well. Thats right. Thank you so much for joining us. Up, who said you cannot go home . We will take a closer look at the deal that is bringing lebron james back to the Cleveland Cavaliers. The citigroup morning earnings are out in the bank settles the big investigation into mortgagebacked bonds. We will be back in two minutes. Pass the hour which means we are on the markets. Equity futures are rebounding a little bit about half a percentage point. Citigroup is a big stock to keep your eyes on. Earnings came in better than expected but they also announced their big settlement with the department of justice, 7 billion based on the bonds the mortgages they sold before the financial crisis. We will stay on citigroup and that 7 billion settlement. The ceo of kbw will join us in just a few moments. Minutes awayut 30 from the opening bell and you are in the loop. Futures indicate stocks will open higher coming off their worst weekly loss since april. Will recommend that shell holders accept the takeover offer. Citigroup has settled an investigation as to whether it misled investors about mortgagebacked bonds and citigroup will pay about 7 billion to settle the claims in the Bank Reported secondquarter earnings that Beat Estimates this morning. Schatzkerned by erik for more. Thomas michaud the chairman, is with us. D ceo lets kick things off on citigroup. Give me your bottom line. I dont like to talk too much about those about better than expected because it puts pressure on analyst to get it right. The bottom line is that citigroup did report earnings that were better than expected but it is how they got there that matters. Two things determine how you get to the bottom line revenue and expenses. In both cases, citigroup has made progress. I think we should focus on the revenue. The revenue came in at 19. 4 billion. The ceo wouldve loved to get it above 20 billion but that is 600 million better than analysts had been looking for. That suggests that something good is happening at citigroup. What is happening which is good mirrors what we saw from wells fargo on friday. Loan growth is improving. Citigroup is actually extending consumerst, not to who continue to deal ever, but two companies. From arall loan growth year ago to the Second Quarter, about 4. 4 which is accounted for by torbert lending. Consumer lending is down. A goodhink it was quarter and beat our estimate by about . 13 per share. There is some positive operating leverage happening there. Citigroup is continuing to manage the Balance Sheet so while the revenues were better, there are still shrinkage but expenses are shrinking faster than revenues. Positiveuce th outcome. It is part of the greater story as to where citigroup is headed. Investors are looking for the company ultimately to earn six dollars per share which would be roughly around one percent on assets which is something the market place is looking for over the next 1224 months. How does this quarter fit into that broader picture . Does that fitw into that broader narrative and do tooes mike corbatt drive the loan growth in the face of headwinds including Rising Interest Rates . There is a delta coming. I think the loan growth will be the bullish story of the quarter. Wells fargo reduced Great Results on friday. We talked about the citigroup numbers were solid today. What we will get over the next two weeks is the regional banks to start reporting. As you get into the middle tier, you will see essentially 9. 5 and 10 loan growth. 1 3 of the banks we follow that is a big number. We think 1 3 of her banks love alone growth of 10 or more annualized. That may be the sleeper story. We have yet to see if citigroup and wells fargo are doing something the other banks are not. We have yet to see jpmorgan or bank of america. Of a sleeperthing story in the banking industry. We had a terrible First Quarter number from gdp. All the signs suggest the secondquarter gdp growth was much faster and you should see loan growth coming out of that. And you are seeing it brought now. Loanscial and industrial in the First Quarter are improving. We have been seeing auto lending starting to improve. Let me bring in the other piece of news which is citigroup settling 7 billion with the department of justice. Thats a big dollar figure but you can see the shares are affected and investors are looking through it 100 . Stock closed at 47 on friday and is now above that. You cant get excited about citigroup, it has a long way back to where was before the crisis. The trading revenue was not down as much as people as anticipated. There is operating expense control which is still in force and the company has cut 1. 5 oh yen dollars worth of operating expenses since the end of 2011. Thats not an insignificant amount of money. The other big issue is where they will come out on next years capital tax and what will they be allowed to do with their excess capital . We think citigroup is wellcapitalized. How much will they be allowed to repurchase . Its the only stock in the key bank an index that trades below book level. And jpmorganson, is trading above 1x book. At the very least, the most simplistic analysis possible is that investors consider the wells fargo Balance Sheet to be a vastly higher quality. Its hard to be effusive 4. 88. 80 translates to prereverse split. Thats a whole lot higher than the . 97 that citigroup dropped at the depths of the crisis. Once upon a time on that very same basis, it was up 55 stock. In todays terms, it was a 550 stock. For less than 50. While the settlement is not a positive for the bank, it certainly is one piece of the puzzle. The latest result was pretty much in line with what the most recent expectations were. It is not good news but in terms of latest expectations, it was in line. There are a couple of other settlements ahead of us. We got libor and Foreign Exchange trading so this is not finished yet. It does matter because stocks to care about were tangible book value is. These hits are direct hits. Thank you so much for joining us. Moving and shaking this hour dan loeb has been putting the heat on auction house saw the these and criticize them sothebys in the antiquated way it does business. He calls it an old painting in desperate need of restoration and it seems like some of these is of these sothebys changing. Instant bidding access to everything from ancient masterpieces to fine wine on ebay. It hopes to add online only sales and try to get on the technology age. Coming up, highstakes battle and theleft and uber real winner is the drivers. There is china concerned that iphones may be leaking state secrets and we will see what apple has to say about those acquisitions. Lift was scheduled to roll into brooklyn and queens but held off because of regulatory road locks. The Company Hopes to roll out those mustaches sometime soon. Matt miller has more. Lyft is trading in the hills of San Francisco for the cobblestone roads of brooklyn. They made an exception to allow me to drive in style. Why did you guys pick brooklyn and queens rather than manhattan . The need for transportation is greater. Lot the subway lines and only a few runs in the outer suburbs. Most of the taxi activity happens in manhattan. People need affordable transportation here. The company just received 250 million in funding and is burning through some of that cash offering the first two weeks of rides for free. Its a 1 trillion opportunity. Out anle of tilting international highway system, and International Railroad and its a massive opportunity. Says is more of a social opportunity and suggest you right in front and give the driver of fist home bump. These are suggestions and are not required but its a way to break the ice. I talked to a driver last night. He said he just started meeting people and it helped break the ice and have a good time. If you want to be quiet and sit in the back, you are welcome to do that. The company aims to disrupt modern taxi pricing, how much you pay depends on what you thought of the ride. Cheaper than a taxi . Yes. And the passenger decides if they want to pay more or less . Thats right. Thats crazy. The new york service must originate in brooklyn or queens. But people can say that i want a ride to manhattan and lyft will take them there . They are allowed to leave brooklyn and queens . We launch aever city like los angeles, we start in one area and then we expand. We plan to do the same in new york with brooklyn and queens being places that need it the most. Culture in theof outer boroughs and interesting people. , we you get them together think it will serve new york well. Very cool. Matt miller joins us for more on his experience as a lyft driver. You cannot actually becoming lyft driver if you have a twodoor vehicle. I made a special exception for me on that day and my only passenger was the cofounder of the company. Eric schneiderman, if he had his way, you would not be getting any rides with lyft. Atearing is scheduled today 2 30 p. M. In the new York Attorney general and the department of Financial Services and the taxi and Limousine Commission are all against this. It will be interesting to see if they are allowed to kick it off tonight at 7 p. M. Whats the Biggest Issue here . Eric schneiderman has accused lyft of waltzing into new york which is a verbatim quote. Insuranceoper regulations. Lyft requires its drivers to buy insurance. They are insured and have a 1 million of primer insurance but the problem they have with it is that lyft requires the drivers to buy their insurance. It. Doesnot give them a choice which is an understandable concern and the new york taxi and Limousine Commission has an issue with the fact that it is so convenient and costeffective. The pink mustache on aston martin do you think it works . It does not cut it for me. Would jamesnd bond wear a pink mustache . Not on duty. Thank you so much. Coming up, Jack Dorsey Square made a one billion dollar acquisition we would hear from a detroit ace competitor fighting to make a name for itself against the Silicon Valley darling. We will be back. Another Food Delivery Services the target of an acquisition and this time its between jack dorsey payment andessing Companies Square mark gardner joins us now is the the northd ceo of american bankcard which is a Processing Company that competes directly with square. I know you are facing this battle with someone like jack own thisis trying to space on mobile payments. What do you make about him going into a whole new line which is Food Delivery Service . It doesnt fit into our field. We stay true to our core competency. Going up against the likes of larger entrenched competitors is not something we are thinking about. Our 20 years of corporate history is about payments. We are really focusing on delivering future enriched data experiences and simplified payment and check out experiences. Large think about a ecommerce provider like amazon and how simplified their checkout solution is and empowering smb, they are not only based in ecommerce but their traditional businesses have an opportunity to have a simplified solution. It seems like everyone is getting into this space. There are rumors about apple and mobile payments. How do you compete effectively . How do you stay in the game . And being light and nimble. Sincee been in the game 1992. At the end of the day, you need to distribution and our organization not only delivers the technology but the distribution. We recently lost pay anywhere storefront. It is the first solution free of its free software. The entire ecosystem is free and all the processing revenue is charged to the merchant. How do we compete with square . Our hardware is more robust, our software is stateoftheart, and our price point is less. I can imagine cheaper would be an attractive proposition. Thank you so much for joining us. We are just a few moments away from the opening bell and we have the top 10 stocks you dont want to miss after this break. Welcome back. It is 26 minutes past the error which means Bloomberg Television is on the markets. Julie hyman has they open for you. It looks like we are setting up for a higher open. The context is that we had a pretty dismal week last week, the biggest weekly decline we have seen winter months in a down about one percent for the s p 500 but the week was marked by highs and lows. Abovew managed to rise 17,000 for the first time at the beginning of the week. Things seemed to be turning around this morning. We had the better than estimated numbers from citigroup and more deal activity. Are still a concern for some investors. The s p 500 is trading at about 18x earnings which is the highest since 2010. Lets count down to the open with the top 10, the only stock you need to know about today. Lets start with number 10 and the blackstone. You have 10 million to spare on the investment arm. Blackstone is creating a fund that will invest in the companys buyouts and credit. Number at nine is acom technology. It agreed to acquire urf corp. They will pay about 800 billion. Cakember eight is crumbs shop following for by filing for bankruptcy. It went public three years ago and listed as much as 50 million of assets and debts in a chapter 11 filing. Number seven is trip advisor. The rating was cut to neutral from a buy reiterating a price target of 103 per year. Per share. It is unlikely to raise its fullyear forecast. Number six is riverbed technology after the Company Reported pulmonary Second Quarter results. It says sales fell short of expectations mostly in north america due to longer sales cycles. Number five is Whiting Petroleum who said it is buying kodiak oil and gas for 3. 8 billion dollars. Whiting will launch ahead of Continental Resources of the premail oil soap wire oil supplier. Ebay is working with sotheb s to make collectibles available online. They will have a redesigned website arian website. I will be on that site right away. More deal act civilian the drug industry, abbott labs is selling part of its generic drug business at a price tag of about 5. 3 billion dollars in stock which creates a new publicly traded entity and will and they will get a 20 a 20 stake in the company. , inching two is abde closer to buying shire. Would own about 25 of abbvie and it would be the biggest pharmaceutical takeover outside the u. S. This year. Number one is citigroup. Profitks secondquarter came in at 96 . The bank Beat Estimates and scarlet will be diving deeper into those results in a moment. First onto the call on the market. Holt,nt to bring in kevin the senior Portfolio Manager at invesco. His call is that the one big area of value is in the financials. Why . Good morning, betty. We still like the large universal banks. Better than expected earnings, very low expectations, valuations on a normalized earnings basis are still below. The companys ability to execute city is our largest holding. Digginget has been through these results. There are several headwinds that citigroup still faces. I want to recap the numbers to give you some perspective. The headline number everyone is focusing on is the three point 8 billion pretax charge at is tied to the settlement. Excluding vat, earnings per share came in at 125, easily beating analyst estimates. Trading was sluggish for the quarter but fell less than anticipated. They warned it would felt anywhere below 20 to 25 . Operating expenses, you know that expense control has been a big theme for these financials. It was almost double the rate analysts anticipated. Are some of the numbers that scarlet has gone through. Certainly as we are talking about earlier citigroup has done a good job on keeping costs under control. Loan growth seems to be coming back. What about some of the headwinds on the economy, on Interest Rates rising and even being able to return capital to shareholders . The good news on both those points is expectations are low. I am a longterm bottom of value investor. In terms of Interest Rates they are likely to go up. When rates do go up we think it will be beneficial not only for city but for financials. Companies do a good job there. We are constructive on it. There is a reason these think prices are depressed. They also have the Regulatory Oversight that hangs over all of these big banks. There wasnt a lot of return capital this year. With our expectations even before the settlement announcement that they had 24 billion of excess capital under the governments own calculation so even if we take 2 billion off of that, because the settlement is higher than what we expected six or eight weeks ago, you still have a Company Generating 26 billion of excess capital. You take three or four years out you are going to have mark your cap have your market cap in excess capital. Lets move to other stocks you favor, including carnival and the ledger industry. I know you have been looking at carnival. There is actually an event related to the company today. A lot of headline risks associated with carnival over the past several years. The largest maritime accident in they are actually bringing the ship back up today. It still has been submerged 30 months after the accident. They are going to take it to a salvage yard. That is just now happening. The stocks have recovered to some extent. The numbers start to turn around as well. The company has been shifting its strategy. It had been offering deals to get people back and cruising again. Recently it has turned that around. The cfo of the company said we givingding the price in up the occupancy, and that has worked very well for them. He says perhaps they will be reviewing them. The revenue had been affected by the lower occupancy. There are still some challenges for carnival in sort of recalibrating that price and occupancy. Why buy into carnival now . We are longterm investors. It is probably the second ending of a turnaround. It is the numberone brand and cruising, they own a number of different brands around the world. Their operating margins are down 200 basis points, partake particularly because of the incident. They created an opportunity for us as the company did have to lower price and get people back on the ships. If you look at this company and look at a normalized operating margin, which is 16 of what they were at in 2008, you have four dollars earnings power. Get the pricing back to their peers at this point, 37 stock selling at nine times earnings. We think it is worth 65 to 70. The senior Portfolio Manager on the call. Notadvanced fighter jet is anywhere these days. It wont be long before gets back in the air. Dont count on getting that bigscreen screen iphone in the next few months. He will tell you why it will be delayed. Stay in the loop. Pathless time chinas government not to worry, the iphone does not pose a security risk. Last week chinas government said that apples mobile software may result in a leak of state secrets. Cane says Location Tracking be used to identify individual activity. The debut of apples big screen iphone six might be delaying. Has issuessays apple with the panel and the phones metal casing. The bigger iphone has a 5. 5 inch screen read it may not come out until 2015. Smaller versions are expected to be released sometime this fall. Home depot will be selling 3d printers for the first time. Customers can use the printers to create parts and supplies that may be used for repairs. And hem, cupholders that is pretty cool. Latest in tech and media only on bloomberg west. We have more moving and shaking this hour. Boeing ceo is firing his latest is targeting Budget Airlines and wants to cram in as many passengers as possible. Modify its now popular 730 72 seed as many as 200 people. Mcnerney inoke to the air show in the ukp it he says he does not see a slowdown. Lagging demand, not exceeding demand. That is the way this game is usually played. You keep a backlog yet satisfy customers as quickly as you can without getting over the front of your skis. The scott the Star Attraction remains a noshow. The f 35 fighter jet remains grounded after an engine fire last month. Chief washington correspondent peter cook has more on the most expensive program in u. S. History. What is the latest with the f 35 . This is supposed to be a very big week for the f35, a chance for it to strut its stuff in front of an International Audience in that air show outside of london. Instead it remains grounded. It is not there at the air show. The good news for supporters of the f35 is that the top officials are telling us that they do not see this as a systemic problem. F35 backfire with an on june 23 appears to be an isolated incident at this point. We heard specifically from frank kendall, the head of acquisitions for the pentagon, saying at this point we do not see systemic difficulties. That is good news for sure for this program. It had its share of bad news over the past couple of years with delays, bulkhead cracked, software glitches. This is still a big concern, not great news for the f35. I havent exactly figured out what is happening here. Plane has line is the not flown to farm borrow. Any sign of any foreign buyers for this . There are plenty of foreign buyers for the f35. The question is does this problem with the jet engine cause any of them to have second thoughts about buying the plane . There are eight other countries besides the United States committed to buying the f35 in varying numbers. Is do any of them get cold feet because of these problems or do others get scared away . There are no delays on contracts, no one bugging out because of these problems of the engine. This is something to watch very carefully. This would have been a great opportunity for the f35 to show stuff in front of an International Audience. It still may happen. A lot of people are hoping the plane does show up this week. Ourcheap washington chief washington correspondent peter cook. More immigrants have been able to enter the country illegally. We will look at what can be done to shore up the borders. 1. 4 million is the size of the largest embassy in the world. John kerry leaving the Baghdad Embassy last month. The u. S. Embassy is only 1 of and u. S. Area officials have identified several drivers of the sharp uptick of children entering the u. S. Illegally at the border. Of one issue exacerbating the wave of illegal immigration, understaffed and underfunded in the grecian courses. Bill mattingly took a look at the numbers. What is the and what is the administration doing to change the momentum . 200 43 Immigration Judges on the federal level, a case backlog of 375,000. Thans a major issue, more 20,000. The backlog has grown more than 20,000 cases in the three quarters of this year. It is a big problem for immigration but for this issue specifically, because of that , each of those children is given a mandatory asylum request. They get an asylum appearance in court. It is majorly problematic. What is the administration doing to try to address the issue . It is merely funding base. The key is to add new judges. Take a look at what eric holder said on abc on sunday. The immigration laws are being enforced but we are faced with an extraordinary situation where thousands of people, young people especially, are fleeing Central America for economic endemic violence in their countries. Immigrationhing judges to border this process. It is a surge of Immigration Judges that is the primary focus on the administration and from the Justice Department. The administrations nearly 4 billion Emergency Fund request includes 64 million for the Justice Department. 40 million is going to hire new debt new judge teams. I think what the justice is theynt is hoping can get between 60 and 70 new judges. What that equals, the hope that it will help about 70,000 extra cases. Think about the backlog, 70,000. Not a huge debt in 375,000. Still, regardless of where the money comes from, a major issue. It sounds like they were caught off guard with this problem. It was and that they were caught off guard so much as people were not willing to Pay Attention to it. They recognized and reported to congress they were having a major issue with training on judges. Then in anurged back effort to root this up. There was a hiring freeze implemented in 2011 and then a lot of judges have reached retirement age. That continues into fiscal year 2014. There is a chance theyre going to be in a very deep hole again starting next year. Certainly this issue is not going to be ending anytime soon. That does it for today. Tomorrow, the Container Store has warned of a retail funk that fewerpping america and shoppers enter their doors. We will dive into the retail world. That is tomorrow at 8 a. M. Eastern time. Bloomberg television is on the markets. Lets take a look at where we stand 30 minutes into the trading day. We do have a rally with the nasdaq, the dow, the s p all higher. Bouncing back from that. We also see the treasury market. A 10 year yield rising for the first time in six days. Not very high. Stick with the bond markets. Emerging markets now. It appears to be piling in. J. P. Morgan analysts say by. With us is someone who covers the bond market to further understand what is going on here. Give us the context of how the performance of the emerging market that has been going so far. Sovereign debt of emerging markets have been sold in the u. S. 10 . Have rallied this is a tremendous game tremendous gain. People are wondering if this is it, how much more can i possibly go . There is this debate between j. P. Morgan and ubs. What their argument is growth is really stabilized within the emerging market countries. You have a sense of what theyre expect nations are. To be clear the growth is about double what it is in developed markets. Then you have concert in developing markets. Growth seems to be slowing. There really are mixed signals around the world. It may excel break their stimulus to ignite more growth, which frankly would be good for emerging markets. They are saying emerging markets for all of the gains this year has not caught up. Has not cut up to developed markets. At theeas ups is looking relative landscape of sovereigns around the globe. And what theyre saying is the risk of rising rates and rising benchmark rate has not gone away. If anything now is the time it is going to happen. Now is the time youre going to start seeing that rise. He sovereign debts of emerging markets lost more than 8 in may and june alone. These are incredibly volatile bonds. They tend to be the very much hot responders to any kind of fluctuation in market rates. The say it is not worth risk. Why not stick with less volatile Asset Classes and less volatile risk. It is not an emerging market but portugal made headlines last week. Are the repercussions at all . Are the lessons to be taken away from the emerging markets . That is a great question. Evenything this is perhaps a good thing ironically in the twisted logic of quantitative easing. This may actually end up being a good thing. That may further encourage the forpean central bank further popup values. Staying thank you for staying with us. We will be on the markets again in 30 minutes. This is market makers, with Erik Schatzker and stephanie ruhle. Citigroup pays the price. The bank will pay 7 billion to settle claims that misled investors about mortgagebacked bonds. Israel strikes back. Palestinian targets are counted taza,rockets fired from syria, and lebanon. Big tobaccos not so secret weapon. Menthol cigarettes make it easier to get hooked on the habit and harder to quit. So why wont the government banned them ban them . Youre watching market makers. O