Innds and taking a 70 stake 17 stake in monster beverage. Alibaba will not be able to publish results on time. A will go public next month. The unrest in the wake of a shooting of a black teenager in new policeissouri, a commissioner hopes to turn things around, but the question arises, why have local policemen armed as if they are in police been harmed as if they are in a military zone. Phil mattingly, this has gone on to washington. Is there a single definition for why local Police Forces have been using militarystyle equipment . Vincent truglia teambuilding for the last couple of decades. It kicked into high gear post september 11, 2001. Use a change of posture and state police. Postureaw a change of in state police. It made it an issue of not only who gets the money, but how much money can we give them. The key has been a department of Defense Program called at 1033 program. That was written into law. Excess material from the department of defense can be transferred to local Police Forces. It is no small deal. 3 billion worth of mature equipment have been transferred. As the wars in iraq and afghanistan have wound down, there is a lot of excess equipment at the pentagon. In large part it is transferred to local Police Forces. It is not just about the equipment, but also the tactics. What has changed their . Is the biggest concern in washington, and it has been jarring watching the images out of ferguson. It is not just that they have militarized equipment, but how they have been using it rubber bullets, sound cannons and gas to push away protesters. What we have seen local police move toward is more swatlike tactics. Raids were of swat just to serve search warrants. Interesting thing people have tried to figure out is why are the tactics going this way, and if you want to know if they were, look at the change in posture in ferguson over the last 24 hours. Since captain ron johnson came in and made clear the gas masks will be gone, the police would be out in the field not firing rubber bullets, the situation has the escalated in a big way. Before we go, what about lawmakers what they are saying about this . There has been shocked. There has been genuine shock as they have watched what has occurred. This is rolled into a political issue. Senator rand paul, a republican with a libertarian bent, came out with an interest in a statement saying the images and scenes we continue to see in ferguson resemble war more than Traditional Police action. He is lining up and democrats are coming with him that this is wrong and something needs to be changed. Thank you, phil mattingly. In the meantime, with the iraqi crisis continuing to unfold, for leaders are gathering in brussels for an emergency meeting and on the agenda, options on oil measures and arms to kurdish forces. International correspondent hans nichols is outside of that meeting. There is a lot to cover in one day. Well, there is a big agenda. It is an emergency agenda. Think of this as they snap summit. All of europe is basically on holiday. They are here discussing first, iraq. Going into the meeting, some Foreign Ministers made a little bit of news, namely the German Foreign minister who said he would visit iraq himself to get a sense for the situation on the ground. That is significant for a couple of reasons. Here is perhaps the most important it makes it likely that germany will join britain and france and arming the kurds. Ways to turn the tide, the emerging consensus here in brussels seems to be back the kurds and have them do it, prevent baghdad from falling, provide safety for the refugees, and generally bring some stability to at least one corner of iraq. Tell us what they are discussing with regards the situation in the ukraine. There is confusion on what is happening on the ground. All of the four ministers want to know one crucial question, and that is our Russian Armored vehicles interspersed with the humanitarian convoy, and if they are, they say it is an acceptable. The first role is intelligence gathering. They want a sense of what is happening. They will be talking to ukrainian and romanian counterparts. They want to know what is on the ground. The Spanish Foreign minister was speaking and he said it is unlikely additional sanctions would come out of this meeting. Basically, theyre taking stock, the temperature, and they want to send clear signals, but the idea that there will be new sanctions on russia, that probably will not happen at this meeting. Daddy betty . Hans nichols, our international correspondent. Back on the corporate front, moving and shaking this hour, jcpenney ceo mike ullman. Jcpenneys is reporting a smaller loss than expected in the latest quarter. They have not shown an annual profit in three years. Mike ullman is reviving jcpenney by bringing back much of what ron johnson had discarded privatelabel goods, affordable housewares, and discounts. Partullman could not take in the earnings call. He was recovering from surgery. But it is interesting that they have bulk the sales trend. It brings us to the bloomberg big number, 38. 1 million the price of the most expensive car ever sold at auction. Seat coop was sold at yesterday. It. Lets just look at moste 250 gto is the charismatic of the models. It is really the holy ground of all the collectible motor cars out there. Well, they rarely come to market because fundamentally they are just so rare. Gto arehat own a 250 reluctant sellers. They do not want to sell the car. They are that good. When a car does come to market, they tend to get treated quite quickly, quite privately. It is a recordbreaking car because it was unbeatable. It is not a trail of green. It is a it is in great roadgoing condition. When you see the aesthetics, you pretty much have the royal flush. There is a pyramid of desirability, and, lets face for our is for ari is are at the top of that pyramid. It can be argued these are living masterpieces, these cards. Beautiful. Coming up, speaking of money, having a lot of money, a milestone for Berkshire Hathaway. In some parts of the country, one share of Berkshire Hathaway can value a pretty decent house. Plus, a fight over fruit. Chiquita response to an unsolicited takeover offer responds to an unsolicited takeover offer. Economist Martin Feldstein at 9 00 a. M. On the fed challenges ahead and why several economists are coming out against his position. Is thateantime, it season when Fund Managers disclose what they bought and sold. Julie hyman has the job of going through these 13f findings. , julie what they review hyman, someone beat carl icahn to the punch . This has to do with did not. Tt. Been and ganne mount ing do my dash campaign to split up the company. He says he still wants to talk to management and a spokesperson for the company said they are mr. Y to discuss plans with icon as they do with all shareholders, but it is interesting that it sounds like he did not approach them initially but he was going to go to this activist campaign. It was not necessary. There were going to take action anyway. The street seems to be against bill ackman on herbalife, but with him on another investor investment. This is interesting. Allergan. He is trying to make this acquisition. John paulson took nearly a 1 billion stake in allergan. He is not the only one. T. Rowe price already has investments in the company. Essentially through a vote of confidence in bill ackman, this will get done. Otherwise we heard David Einhorn of Green Knight Capital trend is apple holdings. He added time incorporated. 72, which is managing hen number steve co added to its stake in Berkshire Hathaway in yahoo . What about Berkshire Hathaway. They are essentially adding. O Charter Communications directv is being acquired or agreeing to be acquired by at t. Just a note as well when you look at berkshires 13f versus f, foreinhorns 13 example, why are they useful . They are a snapshot of what these guys are doing. In the case of berkshire, it is likely to be more useful. Berkshire is a buy and hold shop. 13f,u look at a dan loeb he is more of a traitor. If youre looking to follow what these guys do, you have to keep that in mind. Julie hyman, thank you. Speaking of berkshire and Warren Buffett, class a shares of hit a buffetts Company Record of just over 200,000 a year, up 14 so far this more than three times the return of the s p. Talk about an outperformance. Join us to look at what is driving the stock, longtime shareholder tom russo of russo and gardner, and Bloomberg News reporter noah brier. , whatote the story, noah is the driver here . There are a lot of things going on and we should get toms take, but there is a growing recognition among the Shareholder Base that Warren Buffett has built a company that will outlive his time as chairman and ceo. Two guys toht on help investment portfolio. He has assembled operating businesses that produce a lot of earnings. The Second Quarter was a record, 6. 4 billion. He has avoided share splits, two, right . Yes, part of this is just how he set up. You can see the amount of wet that he has built. , i enjoyed reading your musings on Berkshire Hathaway after your 25th pilgrimage to omaha. And many of those cold mornings when we were there together, we would not have thought it would be at 200,000. I think it was 10,000 a share when we first spoke with you. One of our readers. They chart if you at 1000,ed in 1964 you would be richer by 10. 5 million today. Rideyou have ridden the for quite some time. I was thinking about that compared to the gto you were showing. It would have just about kept up, but there are not many of those, and there are limitless number of people along the way who could have owned berkshire. In 2000er the setback and eight when the markets were so tumultuous, berkshire shares dropped back as well. You could own them because you have a stake in the management to invest properly for you with fiduciary standards. Tom, what did you make of the particularly on the pay tv side of the business . Those are companies the most extraordinary thing those are businesses Warren Buffett has looked at since its inception, and todd and ted are able to put capital to work in businesses that Warren Buffett, for whatever reason, chose not to invest in. Cable is the most interesting one in charter. Warren buffett known about these businesses for a very long time. The most profound thing is how much he has been willing to release the reins, which gets back to noahs point about success or ship. Companiesvest in Warren Buffett would not have invested in, and now we see it in the portfolio and size. Noahes anyone talk to you, about the vulnerabilities in this portfolio . I do not know. That is probably a better question for tom. Wanting to note, we only know in Broad Strokes out ted wechsler and todd combs are doing. Warren buffett till this day be the s p 500 by double digits, but we do not know in a granular detail how they have been doing since they came on a couple of years ago. I think tom, you jump in what would be the one vulnerability or piece of worry you would have on the buffet portfolio . I am not soolio worried about. There are some exposures that have to do with regulation. In the portfolio companies, a whollyowned, we have utility, rail, and other businesses, and they all really depend on having a thoughtful, sensible regulatory body to allow them to reinvest properly and deliver the services the country demands from them. So, that is a general area of overall risk. In the portfolio, i think ted and tired have shown themselves todd have shown themselves to be excellent investors, and moreover is the work they are doing as consultants within berkshire broadly. Tom, thank you for joining us. Tom russo and Nouri Almaliki noah buhayar of Bloomberg News. Thank you, guys. First. Bloomberg. You are watching bloomberg in the loop, live on your phone and streaming on your tablet and bloomberg. Com. The ukraine once the red cross trucksect the convoy before bin laden and russia has reportedly agreed. Governor george soros has ypf. Ed its stake in ofy now long more than 23 the depositary receipts. Banana producer chiquita has rejected an unsolicited takeover offer. Instead, chiquita will go ahead with its planned acquisition of its irish rival. In the meantime, lets take a look at where stocks are. It is 26 minutes past the hour. Bloomberg tv is on the markets. Stocks are a little bit higher. They are trending slightly higher this morning. Numberssome pretty good coming out from another retailer like jc pennies. Ofwill get another measure inflation as well as Empire Manufacturing numbers. We are on the markets again in 30 minutes. A new york city startup wants a piece of the General Electric empire. Quirkyr product start has thrown his hat in the ring in a bid to acquire the ge 122yearold appliance unit. For more on this five year startup and whether it has a chance to be a formidable player, i want to bring in alec, who covers the new york tech scene. Quirky has been a rising star. Crowd fundront venture ideas. . Hy would they be interested a lot of things we have seen are a better charging station, a new air conditioner, this would give them the baseline, a head start on creating products that crowd funded people want to see. The whole appliance unit might baseline airthe conditioner, and they can use the patent that exists and, with things of the public wants. And there is already a relationship between ge and quirky. They have it cooperation called wink. They have a smart air conditioner that works on your schedule that you can change with your smart phone. That is the kind of thing they want to create, this internet of things we are seeing from big players. Speaking of the air conditioner, we actually had the invest the inventor on with us, and ben kaufman, the ceo of quirky came on as well. I want to play what he said about this relationship. They have in making a conditioners for Something Like 80 years and the scale of how many they make is absolutely amazing. One we found the idea, obviously we already had a relationship with ge appliances. Some of the base technology, the compressor, the way the air flow works, that was taken from ges intellectual property and knowhow. We layered on design, technology, the auger is him and the smarts. X how is this kid going to come up with 2 billion and buy this unit . They have a little bit of help. Blackstone is coming in saying they will bankroll this deal if they can get a hold of the unit, and you come up with the smarts. You can come up with new designs. What about electrolux and . Heir bid you have the old school versus the new school. This would help them in the same way, but what do Consumers Want to see . If this is a crowdfunded thing where people say i want the next washer dryer, we will see how this shakes out. Geif quirky were to buy the appliance unit, which is not the first time they have tried to sell this unit. They have shopped it before. They shopped it around before. How could that impact the development of quirky and perhaps other tech acquisitions . The changinges unit, and google took them over. Internet of things is the the consumerour in space when it comes to your home. This might set a high standard. Quirky coming in with the ge unit, what will the competition due to keep up . It could change the way we live. Thank you, alex barinka. The economic numbers that i mentioned, they are out right now. , 14. 69 aacturing bagel undershoot. Estimates were for a reading of 20. In terms of inflation, when you look at final demand, month on month, just up. 10 . Scarlet fu has more on these numbers. Highlight the big things to watch. Betty, you pick the right Empire Manufacturing which measures manufacturing in the new york state area. That was a big disappointment. 14. 69 was the reading. 20. Consensus was it is a higher drop than anticipated. The last time we saw a drop to 14. 6 9 not so long ago, the end of april it was right around actually right above the unchanged line. This is a volatile measure, but we have a lowerthanexpected read for Empire Manufacturing. In terms of producer prices, wholesale inflation, essentially, not much surprise pretty much what analysts and economists were looking for an increase of oso prices of. 10 in july from the previous month. From one year ago, it was a 1. 7 increase. If you strip out of food and fuel costs, it was 8. 3 increase, a. 3 increase, exactly what economists had been looking for. Futures remain higher. The next set of data we will look for is industrial reduction and capacity utilization. That comes out in 45 minutes. After the stock market opens for business, the university of Michigan Consumer confidence numbers will be coming out, and will bring those to you when they cross. Thank you, scarlet fu, our chief markets correspondent. Coming up, this might be the weekend when hollywood breaks its summertime slump. We will look at three movies. Of can not fool the fans downton abbey. The popular pbs series is now in hot water. Good to have you back. To be. Er place oh, yeah, tough guys. Expendables 3 opens today. Premierecial theater is today along with that of , and be tops cops the giver pickup we have a the giver. Have you seen all of the movies the Summer Movies . It is impossible to catch up with all of them, but i am tracking the numbers diligently at my desk. , and thisbles 3 piracy issue how big of an issue is this . It is the first time we see this this early on. It will be a case study. Rightk they are doing the things, taking it to the courts, and the Movie Theaters are doing the right things, putting a lot of investment on the Movie Theater experience, delivering a singular experience. I love college football, watching it on tv, and going back to the stadium, you cannot replicate that. Movie theaters want to accomplish something similar. They need to do that because ticket sales continue to go down. This summer has been tough. Decent august with the teenage mutant Ninja Turtles , but december will be disappointing for hollywood, and they will have to put a lot of pressure on the Holiday Season coming up to save the season. Over the last 10 or 15 years attendance has been roughly flat, which is better than some people would think, and they have been raising the prices, particularly on the 3d side. The gators are hanging in there. Isnt part of the issue that they release some of their blockbusters earlier. It is happening now. A movie like the lego movie came out in february. That did very well. Wire studios doing that . You have so many movies in the summer, you have a glut there. You have the award season films in the fall. We are starting to break that apart and have more of a 12 month schedule. What about some of the real disappointments in the theater. Spiderman was probably one of the big disappointments. Studios are relying on these big franchise features, and even though the price tag goes up to 200 million plus, it is actually a lower risk proposition for a lot of studios because they feel him moving in a triedandtrue product feel much more comfortable bringing a triedandtrue product to the market. Lucas films will resurrect the star wars franchise. That is a surefire bet. It should be. The studios are relying more on franchises. , explained to me, daniel lora speaking of franchises, why did teenage the Ninja Turtles why did teenage mutant Ninja Turtles do so well . Right l bay has a good track record. It did so well that it might influence some Power Rangers movies. Boop there is a betty movie. If we see ticket sales down almost 20 so far, what does that mean, paul, for the Holiday Season . Therell be much more pressure, and what about Going Forward for the schedules . The Holiday Season looks good. Coming out, and the hunger games will probably be one of the most anticipated films. The Holiday Season looks good. 2013 looks very big. The reason theater stocks are performing well despite a weak summer is investors are looking forward to next year when there will be another marvel film, obviously a star wars film. Therell be a host of bigticket items. Boysl geared toward young some women . Are we talking about guy films, basically . They are trying to see that across quadrant appeal, so you will see a little mixing between those demographics. , teenage the 3 when will i get a film that i want to see . Downton abbey has received released pictures and it stands out for the wrong reason. Can you spot what is wrong . . It is the water bottle. [laughter] the picture went viral on tagram after some egoid fans pointed out the flaw. There was a potential get out flaws with a fan to reading obviously they invented the water bottle and that is how they were able to support the lavish estate. S has pulled that photo. The new season is set to begin in september. Maybe they did it on purpose. Now we are talking about downton abbey. , paul sweeney, thank you for joining us. Coming up, samsung makes a move into the internet of things. The number we talked about quirky and ge they will face of tough competition in that market. Ae disaster in gaza disaster for some, a marketing bonanza for others. Well, the conflict between israel and hamas has demonstrated the gaza strip and severely damage the israeli economy, but for the countrys Defense Industry, including drill manufacturers, it is far from a disaster, as willem marx reports. Israeli troops spent three weeks on the ground in gaza, but most of the damage and the deaths during the conflict came from the air in the form of rockets fired by hamas militants and air strikes from the Israeli Military. The targeting and intelligence required for these strikes often came from Unmanned Aerial Vehicles known as uav or drones. They can also see ballistic launches and things like that . They can see that, basically from an attitude of 60,000 feet, from a soldier, to a rifle, to a vehicle. The deputy ceo of aeronautics that focuses almost exclusively on drones. They are selling more uavs, numbers of platforms, more than anyone in the country. The share of the domestic drug market is less than 10 , but success here guarantee success elsewhere. This local market, unfortunately, it is a battlefield. And you our combatproven here in israel, you have a stamp of quality and it is easy to convince an International Customer that this is a local, proven solution. Companies 200 million in revenue comes from five continents. Israel has overtaken the u. S. In export numbers, and the country of 7 Million People is the six largest arms exporter overall. I tell my students that israel used to be known once for exporting oranges and now it is exporting military technology. Most israeli men serve the countrys military at some point or another which means consequently the entire israeli economy benefits from a massive workforce affects military personnel. Knowhow and worker skills comes from people serving in these Israeli Defense forces. It has been an Excellent School for many workers. Close links between the military and Defense Companies have been crucial to developing andweapons systems developing these businesses. How often in conversations with the Israeli Military does this come up . On a daily basis. Daily basis. You are talking to them everyday . Everyday, everyday we are meeting with them, and it is a small community. Aeronautics mightve butrectly succeeded, theyll say they would rather have the Technology Used for peaceful services. Willem marx joins us. Industrys the defense in israel, and in terms of Global Exports . Good morning, domestically, it is difficult to get numbers because the census of bureau of statistics is not twice on data in terms of our put, but studies over the last few years have percent of the countrys industrial output is related to defense, and as much as 1 5 of and to unemployment comes from these sectors. Overseasonally, sales have tripled since 2001. They are now around 7 billion, which makes israel the largest, or the fastestgrowing exporter in the world. Just how heavily involved is the Defense Industry the Israeli Government how involved are they . A well, really, here is country where a lot of the largest arms manufacturers are majorityowned by the government. People in washington talk about the revolving door between, you know, the u. S. Military, and contractors. Here in israel, it is discussed as an open door policy where people come and go as they please. While i was interviewing this in executor Senior Executive from the drone company, he was in a meeting with senior members of the Israeli Military. It is an example of how closely they cooperate. You mentioned their export position, their dominant export position. How did they get there . Israelerms of the drone, claims to have invented the drone around 40 years ago and that was crucial for them and securing borders with jordan, egypt, and now with gaza, so they have overtaken the u. S. As the largest drone exporter because they have the situation on their borders where they need this Technology Every day and therefore they have become the experts in how to build these things. Willem marx, thank you so much. Willem marx in tel aviv for us with Bloomberg Television. Our morning mustsee it happen in nashville when a tanker truck tipped over spilling gasoline and fuel, and most and set up in a sewage draining, but watch and listen to what happened next. Get in the house my goodness. A series of explosions were set up throughout the sewer system. One was treated for a minor injury. Five nearby schools were evacuated or placed on lockdown. You can see the smoke, by the way, for miles and miles from that site. Microsoft and google will battle to see which Company Takes control of the American Home in this internet of things. And the baseball world welcomes a new commissioner bud selig gets ready to step down after a quartercentury at the home of americas favorite pastime. In this morning this versus that samson takes on Google Samsung takes on google in home automation. Google bought nast in the socalled the biggest moving it socalled internet of things. That is samsung. They are acquiring a start up 200 million. Make things does not devices itself. Instead it makes mobile applications to control devices in your home. Smart things will operate as an independent business. Chanceo says it wanted a to be closely integrated on the samsung smartphone. The way of the future. And it is 56 minutes past the hour. Bloomberg tv is on the markets. We have been trending higher in equity futures. We are continuing to hold those gains after inflation came in pricestame with producer and also Empire Manufacturing surprisingly taking a dip in its reading. We are on the markets again in 30 minutes. Coming up, former reagan Economic Advisor and harvard professor Martin Feldstein joins me to give his read on the fat and the state of our economic recovery. Two decades after buying a thatladen soda maker, the creators of Monster Energy drink are billionaires thanks to cocacola. You are watching in the loop, live on Bloomberg Television and streaming on your phone, tablet, and on bloomberg. Com. We are about 30 minutes away from the opening bell. You are in the loop. I am betty liu. Futures indicate stocks will open slightly how are on this friday. Carl icahn has taken an activist decision in usa today publisher gannett. The icahn has called for company to split into, but the company has done that, as you saw this week. Bill ackman pushing the fannie mae and freddie mac, claiming they cheated investors out of profits. Cocacola is reenergizing business with a 17 stake in monster beverage, tightening the bond between the two companies that share marketing, production, and distribution. For more on the deal, i am joined by Bloomberg News doing standard doing stanford. What is cocoping to gain . Cocacola hoping to gain . The big twist is a cola is buying a percentage versus the whole thing. Right now, soft drinks in the United States have been in decline. Soft drinks as a category have been down for nine years. Energy drinks are sort of the new soft drinks. It is a category that has been growing. One of the big things coco hopes to gain here is the International Distribution of monster. Most of the business, about 80 , by some estimates, are here in the u. S. , so there is a lot of room to grow, these companies think, overseas. Why do they want to do that take a stake, rather than by the home the whole company . As muhtar kent told me yesterday, this is a pattern for coke. They are looking at fastmoving categories, or innovative categories like the new cold at home drink machines. The idea is to buy a stake, if incubate it. Perhaps there is a lot of less risk there. They could perhaps better use capital that way and take a more methodical, intelligent approach to acquisitions, rather than they did what they did several years ago to pay 4. 1 billion dollars for vitamin water, and over the years it has been good for them, but perhaps if they had gotten in earlier, they would not have had to pay as much as they couldve gotten more benefit over time. Just before we go, they have an option to buy more of the company. That is right. They could buy up to 25 . There is a standstill that prevents them from buying more. The board of directors for monster can approve a larger stake. The board at cocacola did not rule out buying the whole thing later. Right now it gives them a little room to get around the regulatory front of government looking at Energy Drinks and wondering if the caffeine content can be dangerous. It gives them an easier entrance in that regard as well. Thank you, duane stanford, in atlanta, who covers the Beverage Industry for us. Shifting gears, yesterday we had we had ther founder of staples who suggested the economic recovery is hampered by a lack of Consumer Confidence. I think the consumer lacks confidence. The cash positions, in terms of credit card balances and so forth, r. O. K. Ok, but as you look at the news, weather you look at the ukraine, the middle east, what is going on with health care, regulation, if you are a Small Business person, an entrepreneur, you are worried, and when you are worried, you do not spend. We will get the latest Consumer Confidence numbers. Lets talk about that a bit more. I want to bring in Harvard University professor and former Economic Policy adviser to ronald reagan, Martin Feldstein. Thank you for joining us on our program this morning. Good to be with you. Do you agree with tom stemberg Consumer Confidence, is that shaky . So. Do not think i think Consumer Confidence, for the average person, reflects what is happening in wages and overall income, and of course, employment. Employment is up dramatically month after month 200,000plus per month, so i think the survey shows people think jobs are easier to get. There are now big increases in vacancies. I think all of that will keep the consumer coming back, even though we had a weak retail sales month recently. We did have a weak retail sales month, and i agree that we have seen jobs comeback, but wage growth, though, it is still pretty lackluster. Is, that if you look at total income, which reflects a number of jobs and also nonjob income, all of that is up significantly, and wealth Household Wealth increased last year by 10 trillion and it hasnt it has continued to rise at an annual rate, not quite that strong, but nevertheless between housing and stock markets Household Wealth continues to rise, and that is a driver for that segment of the population. So, for all of the republicans, the naysayers that say obamas economic policies have now worked for the last six years, is this proving them wrong, marty . This is really about fed policy. Ben bernanke said after the obama socalled big stimulus package got us nowhere, what bernanke said is what we will have to do is encourage consumers to spend more and businesses to spend more and we will do it by a policy that will drive up equity prices, and that was the socalled unconventional Monetary Policy quantitative easing plus the promise of low, shortterm Interest Rates for a long period of time. Right. I think that is what brought the stronger of turn we are seeing now. So, fed policy. Of course, in washington, the white house would say some of their measures is help to increase job growth, and i know along with several other economists you visited the white house and met with the president and some of his advisers. What did you say to his staff . What were you able to say to the president , even, on Economic Solutions to create more jobs . Well, the one thing that i stressed was because there is so little that i think can get done politically one thing that i think and get done is Corporate Tax reform. It is something that the president has spoken favorably about before that seems to have fallen by the wayside. It is something that, if structure the right way, could bring republicans and democrats to support a bill that would stimulate the economy, stimulate job creation, and bring back jobs that u. S. Firms are now placing in the rest of the world. You said something very key tax reform falling to the wayside do you get any sense they are paying much attention to this or that he could get back on the agenda some time soon . Say, butreally hard to i would not say based on the meeting that you described that it looks like it was on the top of anybodys list. And just getting back to the fed, ill, we had you know, we had former fed chairman Alan Greenspan on a few weeks ago where he talked about the economy, and he was a little less enthusiastic about the Economic Situation here, and i want to just play part of what greenspan said to us. We are running out of buffer in the economy. We do not have the capability, should, for example, we run into a major conflict in the middle that requiresere a major increase in our Defense Budget. Our Defense Budget is headed in the direction where in two or three years it will be at the lowest level relative to gdp since before world war ii. We do not have the physical resources. Right. Similarly, we do not have the physical resources to respond to global warming. Would you agree . Well, of course, that is not about the Federal Reserve at all. No, it is not about the fed. I would agree that we have a problem. I would say we do have a problem, but it is primarily a budget problem. It is that were squeezing down on defense and on other things because of the significant fiscal deficits that are projected for future years, and i think that is a serious problem, which, unfortunately, i think, is not going to get tackled until after the president ial election. Martin feldstein, stay with me for a moment. Well have much more with you in a moment. Harvard professor Martin Feldstein. It is one of the most unlikely corporate marriages of our time, cent and50 and 50 intel we will tell you what they are selling together. Well, we are back with Harvard University professor and former Economic Advisor to ronald reagan, Martin Feldstein, who wrote a mustread wall street journal oped on the fed and it raised a lot of conversations. And how whether much markets are mispriced relative to fundamentals is always uncertain, but when markets have moved across the board is much as they now have, that should be a warning of accesses in the market. I would like to welcome another economist who read the piece as well, the director and cofounder of economic and policy research, dean baker. I read through some of the notes you had on Martin Feldsteins piece, and one of them you said basically it was painful to read this piece. Why . Think back to 2014, and professor feldstein and secretary rubin are issuing this warning, and if they issued a comparable warning about the housing bubble in 2004, given their stature they might have saved the country and the world an enormous amount of pain. Martin feldstein, do you want to respond . Is arst, let me say it good thing dean baker pointed out that i had a coauthor on this wall street journal these, bob rubin, who had been president clintons treasury secretary. It is important that bob and i did this. Bob, a markets guy with government experience, and myself. There is no question that the housing problem was a serious one. I wrote about it a lot. I did not write about it in 2004, but by 2007 at the Federal Reserve banks kansas city meeting, i was saying we are in big trouble, markets are freezing, we have to do something about it, and then kept talking about how we could remedy the housing problem. Fortunately, as a result of fed policy and other things, housing eventually turned around, and house prices have been rising back. Homeownership has been increasing, and Housing Investment is making a contribution to gdp. But, martin, i think some of the confusion though, that was generated that i read some of the confusion generated from your piece was on the one hand you recognize there were some excesses, and on the other hand you said perhaps those excesses are not enough to warrant Interest Rate increases. So, there was a bit of confusion as to where you really stand than on Interest Rates. That may say that what we primarily said was that as janet reliance, yellen about in her imf speech the feds reliance on macro is not goinglicies to be enough, or may not be that the fed has such tools for dealing with banks, but the Systemic Risk problems are much broader than that, and involve investors and lenders in very many different ways, which bob and i wrote about as looking to us to be excessive. We were emphasizing that the fed really has to be careful about thinking well, this is not our problem. We do not have to raise Interest Rates at any point because we can count on macro prudential policies. I do not think they can count on macro potential policies. And dean, you say . Lateoking back, 2007 was in the game. In 2004, were warning 2003, and the damage was done, by 2007, im sorry to say. The housing bubble was directly driving the economy. That was easy to see in the data. Booming, driven by housinggenerated wealth. It was easy to see how this was going to be a big problem for the economy. When you look at the situation today, i think janet yellen is entirely on top of the case. She has her eye on the ball. She made this warning in congressional testimony last week about junk bonds being overpriced, spreads being too low. I think she is very much on the case and you do not raise Interest Rates and throw people out of work on a whim. Hedge funds always lose money. So you think the inflation hawks are basically job killers . Estimates with the imf and the congressional budget office, we are still around five Percentage Points below their estimates for gdp. You are talking about millions of more people that could be working and when you have a tight labor market, most workers are in a situation to push up wages. We see the wage growth for most workers that they have not seen thus far in this recovery. Martin, what would you say to people or we are seen is prices are beginning to come back, cpi is up 2 . The numbers the fed focus on are also running over 2 . We are not saying, i did not say, and bob did not say in that article inflation is currently a problem, but as the fed judges the things that we focus on, Systemic Risk, they have to be thinking about whether there is a need to use Monetary Policy because socalled macro prudential tools, well, they just have not been well defined. We do not know what they are. They have not been tested. It is not just junk bonds. It is a whole range of things where the economy is taking the kinds of risks that it took back in 2006 and before. Feldstein,t, martin thank you so much for joining us from Harvard University, and dean baker as well, one of the cofounders of the center for Economic Policy and research. We will be back in two minutes on in the loop. It is a friday and we are just a few moments away from the opening now. Stocks thattop 10 you do not want to miss that after this break. Keep it here on in the loop. First. Bloomberg. Welcome back. You are in the loop. I am betty liu. It is 26 minutes past the hour. Bloomberg tv is on the markets. Here is the latest on equity futures right in the final moments before the opening bell. Thank goodness it is friday, dies. Ok, equity futures friday, guys. Ok, equity futures are higher. Inflation is still pretty tame. That does not cause for call for that action on Interest Rates anytime soon. Equity futures are up. 25 . We are on the markets again in 30 minutes. Open witht on to the the top 10 the only stories you need to know about today julie hyman and scarlet fu join me. Shares areverizon higher after Berkshire Hathaway said they increased their investment at 36 in the Second Quarter. Managers at billionaire warren reallocatedmpany, on paytv bets companies. A lot of interesting stuff to sniff through. Sciences. Nine, gilead they get a boost after a drug won the backing of the u. K. Health regulator, paving the way for treatment to be reimbursed by british taxpayers. It is no small amount. At almost 700 a pill, a standard 12week course of soval di will cost almost 50,000. Seaworld is building new housing for killer whales after criticism for the treatment of animals. The controversy was sparked by the documentary dark fish. Cooperman, we learned yesterday from a person familiar with his investment, it theyot in the 13f, but said he had sold out of the state. He had been in the top 20 holders. Interesting move on his part. , with carln, gannett icahn exposing a new activist state and the company. He had planned to mount a campaign to split the print and broadcasting this is before gannett began to that. Carl icahn still want to talk to management. You mentioned this, he was late to the game. He was late to the game, and they said they would talk to him because they talk to all of their shareholders. Barrons issued and rating of outperform for a carryon and names of buyers including bristolmyers squibb, johnson johnson, and roche. M a inhas been a lot of parma. Number five is Applied Materials benefiting from demand from makers of flatpanel displays. Number four, jcpenney its revival of promotions and discounts bring shoppers back into the doors. Can expect positive cash flow and end the year with about 2. 1 billion in liquidity. I find it fascinating. We have seen walmart, target, and others coming out with dismal sales. They have been trading from around here. It was so bad. It was so bad. It could have been worse. Reducing a stake in yahoo the fed now controls less than one million shares. Firstquarter forecasts were shy of estimates. For estee lauder. Two companies are sharing marketing, production, and distribution. Cocacola already distributed monster beverages across north america. Iny took a 17 stake monster. As stock trading gets going, i want to bring in portfolio , or he Matt Mccormick helps manage 12 billion in assets. You say there are some real threats to stocks right now and there is volatility that is only going to get worse. Absolutely. Weak retail sales yesterday. Mortgage applications are the lowest in 14 years. Small caps, high yield are getting beat up. Market an economy and that is somewhat bipolar. Two steps forward, one step back. I would rather be more conservative versus aggressive in this type of environment. I would like to get paid to own some stocks. When you look at the run we have had, some of these stocks look a little bit tired. I would be a little but little bit more cautious. When i was looking at your notes for higher dividend payers, i was surprised. You look at utilities and those are high dividend payers, but the membersse are of the s p 500 broken down by dividend yield. As it gets higher, the return gets lower. To your point, we have seen underperformers from the higher dividend end. People have been looking for yield. Yes, we want yield, but we want Dividend Growth. Find a way to maintain purchasing power and increase it. A stock like apple that is growing its dividend, there is areas where you can get Dividend Growth and that is an area where you do see rising Interest Rates speaking about apple, we happen to have this chart that is perfect for you. I know apple is what you recommend. The chart still holds up. The dividend advantage it had over the s p is dwindling. Is gettingend payout less, it is falling down. The second is their stock performance. The stock does not have that much more room to ride, they say. Without a magical product release. There was a magical product coming out in september. You look at the iphone six or the watch. Is that magical . Come on. You are looking at apple taking share, especially from samsung. This is a global area of growth. You are seeing price appreciation. Thele are looking at catalyst, the iphone 6. I think the watch products coming out will be a bottom line. Apple is one of my favorite stocks and technology as a whole. Safety andme is getting paid because the volatility and geopolitics. The percent of companies from geo that have dividend yield more than the 10year treasury yield are more than 31 . In 2012, it was more than 50 . Fewer candidates and a lot of buyers. Doesnt that great difficulty . I dont think so. There is no alternative. When you are looking for people who want yield, you have to buy stocks. 51 through the next decade, people who are over 60. Scarlets point, arent they going to get more expensive . That potentially could. When you see a situation where period skied tough. Get tough periods tough, people will pay up for organic growth. Down, imket goes willing to pay for Procter Gamble or j j. I think people want a little bit of understanding of the market. I dont think they get a lot of these ideas come but they get this. Great to see you. Great to have you here. Coming up, what eating bacon says about your politics. We really mean that. Kale says something completely different. Julie hyman, i know you are a kale leader. I like my bacon. We are a few minutes into the session. Stay in the loop bank. Stay in the loop bank in the loop bank in the loop. it is the time of the quarter were funds are filing their 13 f s. Erik schatzker read these. It is bedtime reading for him. Along with a whole other remote securities filings. Ream of securities filings. [laughter] this is one of the things we learned about in the 13fs. Carl icahn and gannett. We learned about apple. It is a hedge fund favorite. We saw a number of hedge funds load up on it over the past few months. Discovery capital. Millennium loaded up as well. People feel differently about apple on the other side. We saw a number of big hedge funds unload apple. You is that there is no unanimity. It raises questions about the validity of the 13f as a trading strategy. [laughter] 6 is going to be the next big accelerator for the stock, says Matt Mccormick. Are you waiting with baited breath . I know a lot of people who want a larger screen iphone. Im waiting with bated breath because i do think it is going to be the mother of all refresh cycles for iphone users. s and why about 13 f they are important. You can place trading strategies if you look at some of the longshort Equity Managers who are buying tore the net long. You can draw the assumption that you are in these stocks for a while. You have to do your research and you have to look at stock price. But you can build a stock price using some of this information and eliminate or avoid the fee you would have to pay if you could invest like these fun shed hedge Fund Managers. Justere are funds that follow these 13 f filings. There are. What is more important is the Hedge Fund Manager himself. Has a 4 billion hedge fund, mostly inequities, and he will be with us for the 11 00 hour. He has been very successful. I know that people have learned a lot from john. And a nice beard there. Thank you erik. A Film Production purchased by alibaba suspended trading of its stock today. After possible accounting inconsistencies were discovered. Irregularities happened before alibaba took a stake in the form firm in june. Withtel is teaming up sms audio. Are going to create biometric earbuds. An Unusual Partnership between intel and . 50. 50 cent. The u. S. Ke a map of and the good mentions on twitter of kale versus bacon, you can see that it looks quite similar to another map often seen in the u. S. We have been digging into this. It looks like a map of the political leanings. It looks exactly like the 2012 election map or any redblue state map. Companies want to use this data to target the customers. I saw the map and i said this looks like an election map. Ratio of kalethe mentions versus bacon mentions in each state is almost exactly correlated at the politics of that state. There are very little inconsistencies with the two maps . The 23ou look at 17 of most popular kale states, they voted for obama. 11 of the 14 top bacon states voted for romney. The middle states are exactly 5050. The moderate kale and bacon moderate states politically. It reaffirms our own biases. For sure. I think that this is what is so great about it. Can you use this data for any other purposes . If you are trying to run a campaign, what people might give you clues about what how to cater to them. Companies may want to target advertising in certain ways. Targetingl party is your purchase, were your purchase is a vote. Thank you so much. Very interesting. Bacon versus kale. We bring you live pictures of a press conference on the shooting of the unarmed black teenager in missouri. Ferguson police chief tom jackson is speaking right now. Police are expected to release the name of the officer who shot michael brown. Police say a struggle ensued after one man pushed the officer into his squad car. We are going to continue to bring you any headline that comes from the press conference that has become a national story. You can watch this live on bloomberg. Com tv. We will be back. Ferguson police chief tom jackson is speaking at a press conference. Inamed the officer who shot michael brown. Is the name of the officer. He has six years in service and no previous disciplinary action taken. We will keep you updated with more on this story. Time for a global outlook. Eparing topar monopoly onend the oil in mexico. We have many people who want to invest. I would not name a few. There are dozens and hundreds of companies we have met over the last year and we look businesso landing some opportunities that are profitable for mexico, for our partners. It is already public that you have been in talks with chevron. How are those talks going . Have mous with all of the Major International oil companies. Not just chevron. Bp, exxon. Absolutely. The majors are mostly interested to invest in deep waters in the gulf of mexico. Mex has had success in exploratory wells. Theo not necessarily have expertise to develop those projects and bring them into production in a relatively quick period of time. Done so onnies have the northern side of the gulf of mexico, the u. S. Side. Theyre suitable to work with on this opportunity. Olivia sterns joins us now. This is a major landmark. Why now . I think they got to the point where they felt like the Energy Industry had hit a breaking point. Oil production is back down to where it was in 1990. 2. 5 Million Barrels per day. This is despite the fact they have been investing more and more money into extraction and exploration and they have been hiring more and more people. They have realized that they need the money, the foreign expertise to try to trap these cap these unproven reserves. Of the entirehird Mexican Federal budget. It is the Largest Company in mexico. They feel they had a breaking point. They feel there are 115 billion dollars of potential reserves in the country. They have just begun to scratch the surface. Or the ocean floor. [laughter] what are their immediate plans . They hope to get plans started right away. They are hoping to have 10 joint ventures in place by 2015 with some of the major Foreign Oil Companies we just mentioned. In total, they hope it will add 50 billion in Foreign Investment by 2020. They said it will add at least 1 or 2 of gdp growth to mexico. It does it for today on in the loop. The minimum wage debate rages on. It leaves franchises more vulnerable to more lawsuits. Be in theo will loop. That week at 8 00 a. M. Eastern time. It is 56 passed to the hour. A television is on the markets. Im scarlet fu. Bloomberg television is on the markets. Im scarlet fu. Pressures means investors are betting the fed is more likely to keep it super easy Monetary Policy for longer. The university of Michigan Consumer confidence numbers came in a little bit disappointing. An unexpected decline for the month of august. The same dynamic is helping gain in prices as well. Lower yields on the yonge and long end. The 30year. Lowest in that is the a while. We are going to move to fixed income overall. In 50 or more years. They are taking in advantage of investors. Lisa who covers debt markets. Why are investors buying this . Arent they concerned the fed might do something . They have been concerned about that for quite a while. The 30 year level is the lowest since may of last year. You have pension funds, insurance companies, endowments. They may not be willing to go delving deeper into riskier and riskier corporate debt. They are going up the duration curve. Longer data, longer maturity bonds. Companiesr bonds from like volkswagen, caterpillar, monsanto a seed manufacturer these companies are taking advantage of this incredible demand for yield and this incredible believe that rates will remain low for longer to lockin buyers for 50 years. It sounds like the demand is driving them to pressure. Do they actually need the money . It is always good to have extra cash. If you can lock them longerterm borrowing that are really low borrowing costs that are really low, i was looking back to see what it was like back in 1964, the most recent innovations were astroturf and car seats. A lot changes in 50 years. Borrowing can change a lot. We dont know longerterm what some of the stimulus plans will do as far as igniting inflation. Longerterm we dont know what some of the stimulus plans will do as far as igniting inflation. There is not a sense right now that inflation is taking up. 50 years is a long time. To investors plan to hold onto this debt until 2064 . It is unlikely. It sounds like this is more of a tactical bad or they are looking for a oneyear wager. They are betting they will continue to have these rally. What is the biggest risk factor for investors . They can get out of liquidity drops. Or if rates do come up in significant way, which would be less likely. If they do, it will be hard to sell these and a they will have to sell at a big discount. You have to bet that they will keep modernizing themselves and adapting over 50 years. I cant even look out into next year. And they want to look out to 2060 four. Exactly. Technology is changing so rapidly. We will see. Thank you for bringing us this very interesting story. 50 years or more. We will be back on the markets again in 30 minutes. Market makers is up next. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Investing clues from the stars. We will see what carl icahn and soros have been buying. Monster investments. Meet the fight promoters who are taking the ropes in the corners out of the ring. There is nowhere to hide in knock out boxing. Happy friday, everybody. Im Erik Schatzker. Im in for stephanie ruhle