Transcripts For BLOOMBERG In The Loop With Betty Liu 20140930

They go on sale at over 17th. Apple had to first agree to improve User Security and privacy. I have been seeing some of those out there. Back to the big news. Ebay announcing it will separate ebay and paypal the businesses. American express executive dan shulman will be the new ceo for paypal, postseparation. He joins the Company Effective immediately. Bloomberg intelligence paul sweeney joins us now from princeton new jersey. Also with me as skycard is, the founder and former ceo of about. Com. Web 1. 0 as we talked about earlier. Want to turn to you first. You were building about. Com at the same time yuan must was building elon musk was building paypal. You guys were all first generation. This deal makes sense. Jobs growingt paypal. But we are high were going to have a massive disruption. Little card is not as productive as my iphone 6. We use braintree, which is an ebay company. It gives me pause. Ebay wants to use our data. We run a market place, we were ebay runs a marketplace. It doesnt mean they are not seeing her data. They are processing your payment. They process the front end. We do double payment. We pay with another series of financial instruments. The financialthat industry has gotten more complex. It makes sense. Two weeks ago, paypal got whacked twice. Maybe carl icahn thinks he was the reason for this. I never like Financial Guys trying to dictate to technology companies. To weeks ago, back to back days, twiddle twitter and apple went on strike. There were sitting running both, you go wait a second. Im seeing the competitive issue. Two days in one week, two days ago. Deal. K that is a big two Major Players going with their competitor. It is a great point from scott. ,aybe things change so quick the firemen change so fast, the john donahoe had to make this about faith. The timing is very odd, given that carl icahn is pushing for this transaction, not just nine months ago, but i think this transaction is about two issues. It is about ebay stock price. Paypal is the fastgrowing highmargin business within ebay. Separating it clearly will have a major impact on the stock. Just given the growth trajectories of both businesses. It is certainly positive for the shareholders. I really think it is about paypal. Im sure the paypal folks were pushing for the separation, because scott mentioned, the payments business is rapidly changing. They need to go out and pursue business transactions and other Business Partners outside of the ebay platform a. It is beneficial for them strategically and competitively to be separate from ebay. Ebaymains to be seen what gets out of being separate from paypal. That is less clear. This seems more like unlocking paypal values. Unlockingmbination of paypal value, at a time when the competitive fervor is so great. Apple pay is an interesting new products. It will take a while, since google shut their checkout system down a year ago. This stuff is not easy. Google wallet failed. Its been exactly a year ago this month. Paypal has some of those same issues about being coupled with another company. An entity as powerful as google couldnt do it. Paypal being unfettered its not just unlocking value. Its unlocking the competitive issues. Being unshackled from ebay. One is a Payment Company come a one is a commerce company. While there was synergy there, and it helps paypal grow, there comes a time that when you break them apart, they both get to run. This issue of sharing data. You weresaying that getting uncomfortable about sharing data with ebay, which is your competitor. Do you find that is a similar situation for other Small Businesses and other upcoming businesses . You dont know what they are doing. It is a black box. The same thing is true with google. We use documents in mail, and who knows really what is being done with that information . Appropriate paranoia. You always need that in business. [laughter] we are close to apple. Since we launched, apple is featured are universal cart or it 90 days ago. We watched with interest that apple did not engage with braintree. They say they will have apple tech. Apple will strike first, twitter when the strike first, maybe we shouldnt be shackled. Without we need to leave braintree. Braintree says no, we are going to have that too. I think that it unshackled paypal, with another businesslike braintree that john has pieced together quite brilliantly its time for them to be split. What you think will happen next . Post blitz, what we see out of ebay and paypal . That will be the most interesting aspect for paypal. Paypal has been such a Great Success story. Largely on the growth of ebay. Mentioned, thett payments business is going under a terminus amount of trains change. They are free to pursue other Business Partners, free to partner with other major platforms out there. Whether it is pointofsale business opportunities, or just other ecommerce platforms. I expect them on a new Business Front to be very aggressive, and continue to drive their topline growth. That has been the growth story of ebay over the past couple of years. Are there any obvious partners right now . I think anything on the ecommerce platform, whether it is a standalone amazon, or a er looking for a more flexible you payments opportunity. Paypal is certainly someone most ecommerce players, if they havent talked to in the past, a are certainly going to have more incentive to talk to now, now that paypal is a standalone independent company. Unshackled as scott was saying. Inly chang had done interview with one of the initial paypal founders. This is what he said about potentially splitting off the company. Should paypal be spun off from ebay . I think there are large synergies between paypal and ebay. Maybe it is something we should consider at some point in the future. I think ebay was right to resist carl icahn. We dont want him to be dictating whats a look on valley does. It sound like it was more about we dont want carl icahn. Some high finance guy coming in and telling us what to do. But eventually these guys had to admit, and it seems that way today, that this was better off. Why did they resist for so long . The world changes everyday. A look at the fact that apple, which we always assumed would enter the payments business they have it at a billion credit cards. 800 million credit cards. It whacked him across the face, this is real. I got to see what consumers are saying. Is amonths ago to today different thing. If you are running a company, you hate to split it up. Its only one guy who says i dont even power, im willing to split off and run a smaller company. Most people like to run a big company. Paypal is a more interest in business than ebay. See, it isesting to a coup i think for them to prepare for the spinoff. It also makes both companys bitesize for alibaba. But iould take a law, think alibaba is probably more interested in ebay than the payment system. Its what they do in market places. They are quite behind in the u. S. Making bothgue that pieces bitesize is actually a good thing for them. That is interesting. We will see. Stay with me, we talk more with scott kurnit. Paul sweeney, thanks for joining us. Are looking up for apple and china. With the iphone maker may be in trouble in europe. Company may have to pay millions of euros in back taxes in ireland after the european urine union said it benefited from an proper tax deals. The eu isre on what accusing and ruling on apple. Is a 21 page document that was put out today. Very detailed. It talked about the tax deal that is existed between ireland and apple the dates all the way back to 1990. And what effectively brussels is saying is that this tax deal may have we still approve all this. May have been illegal. Fact that it the may have been motivated by employment conditions. I. E. , this was a tax deal for jobs. None of this is proven, and apple is making it very clear at the moment that it receives no selective treatment. What could this mean for apple . How much money will he have to pay up . Big numbers. It could run into the billions. We will wait and see what happens here. This is the first stage in what could be a long process. It has been going on for little while. This is the public event we are seeing surrounding this. It could amount to billions. We dont know yet. We will have to see how this all works out. It will take a long time to get this one done. It could be a big number. It could be in the billions. Apple is not the only one being targeted. I have to say, u. S. Tech companies are very much in the crosshairs here in europe. Not just Tech Companies, but he is like starbucks as well a very much in the crosshairs. Tech companies in particular seem to be in the crosshairs as well. Amazon is well could potentially be on the list. Yesterday the british chancellor was talking about the fact that the u. K. In the autumn budget is going to be going off of after Tech Companies as well. They want to get the tax field level here, and that means theng the double irish double taxing that ireland has in place the benefits tech cavities. Back to you. I thought that was the name of a drink . [laughter] guy johnson in london for us. The nfl may be on the verge of getting sacked. Regulators deciding to lift a viewers hate. Advertiser spending the bulk of money on tv, but digital ads are on the rise. It that week here in new york. We will be back. In new york, adweek is kicking off. On the same day google announcing to make it simpler to get more advertising on ever but a smart phone. The search giant, which is a dominant force in digital advertising, is implement and ing toolsimplement that resizes ads for your mobile device. All to make it more knowing for you. The me is scott kurnit, founder and former ceo of about. Com, and the ceo of keep holdings. Which by the way, is sort of like an advertising platform in and of itself. Advertising has shifted. I have an unfortunate definition, which is as there is something you dont want to see embedded in something you do want to see. Ive learned that from a lifetime of being in the ad business, watching commercials and of shows, all of that. Most ads are not good. They are annoying. Theres 5 or 10 , and those ads love being surrounded by other ads. During the super bowl. During regular times, i will see a good ad, bad ad, advertising is broken right now. The consumer lives in an interactive world. You dont need to watch them. Even if hulu runs an attitude, you tweet or check email, and then you come back. The new going to the refers rater is tweeting. Refrigeratoro the is tweeting. Google is in trouble. He was really lambasting google and saying their market share is going to continue to fall. They have been hit by you regulators, who are threatening that you should be broken up. They are being hit on all sides. The clicks are declining, the revenue for click is declining. They are coming out with products like this, trying to make it more automatic and more effective. The world is going mobile. Ive never heard the words google and trouble in the same section same sentence. I would like to be as in trouble as googles. Is a tough one, because consumers try to avoid the ads. We have native, which is also a bogus term trade it means trick the consumer without going to jail. Weve seen it in magazines. Magazines of the most interactive medium we have ever seen. No batteries, doesnt crash. World ofteractive webpages or videos, the westin is how do you put these ads in front of people the question is how you put these ads in front of people. We are tricking them. Native is going to change a lot. If you think about the beginning. Years ago, then are ads nativeads were kind of to the webpage. The consumer figured out the top in the side is where all the ads are. I dont look there. We see that with i tracking. And sayut them in line sponsored a small as we can without the ftc coming down on us. And that is a problem. The ftc is going to get its hands around it advertising. You think so . They have to. If the consumer doesnt easily know its an ad, that is a problem. Its a problem with brands. Or any of these media brands. The public is not stupid. If you actually trick them and say, this is content, you have diminished the brand values. Thegreat brands, bloombergs, the new york times, they have the biggest problems. They cant run these native as to play trickery. There is an integrity. You dont want to trick the viewers. When you look at Companies Like buzz feed, when you hear they had a 2 billion valuation based on ad revenue, a good chunk of that comes from this native advertising. Im not sure people understand exactly how much of that is out there, and how lucrative it is. Not a good chunk, all of it. He tuned to this at huffington post, and buzz feed is like half 2. 0. Huffpo they do it very well. Buzz feed is not the new york times. It is easier for them as a brand. Legacy brands for all kinds of reasons have trouble. On a final note with that, a matter how lucrative it is, and mcdonalds or cocacola is never going to make a big ad buy as they would on a television program. Advertising is going away and marketing is going to replace it. Someone in the ad business looks products, those are all native ads. The advertiser doesnt buy them, because the Public Places them there. That makes a big difference. Scott, great to see you. Scott kurnit, founder, chairman, and ceo of keep holdings. We are back in two minutes and it in the loop. You are watching in the loop, live on television. Im betty liu. Ebay is spinning off its paypal operation. The worlds Biggest Online marketplace, and its payments unit will become too public a traded companies. Carl icahn had campaigned for the split, and it looks like he won. Netflix is getting ready to make its bigscreen debut. It is seeming up with the Weinstein Company to release a sequel to the author winning film crouching tiger hidden dragon. The movie will be released globally in select imax theaters. Simultaneously on netflixs streaming service as well. This will be next summer. You can get that movie first on netflix. The u. S. Is poised to become the leading producer of liquefied petroleum. It is expected to overtake saudi arabia as early as this month. U. S. Oil industry has been transformed by the shale revolution, and advances in hydraulic fracturing. U. S. Crude production is on track to break 9 Million Barrels from 5 million in 2008. [no audio]time, despite the declines you saw overnight, particularly in asia. On the back of these prodemocracy protests in hong kong. You did see stocks drag out like this yesterday. We are on the markets again in 30 minutes. We will get housing numbers as well at night 00. 9 00. This friday, the Labor Department will be releasing its final monthly jobs report ahead of the november elections. The last look at jobs before go to the polls. U. S. Isment in the stubbornly over 6 . The fed is unsure about the economys grip on recovery. Both republicans and democrats will seize on these job numbers to make political points. Duo ofto bring in our all things political, former congressman martin frost, and tom davis, republican of virginia. Thanks for joining me. Tom, let me start with you. Republicans have been so critical of the jobs recovery over the last several years. Within the last six month, we have seen a pretty steady rise in jobs. The republicans have not much to go on here with the economy going into the elections. The recovery has been very uneven. I think a lot of americans havent seen a recovery. It is still over 6 , which is historically high. This is six years of the presidency. I think the economy may not be hurting the democrats as much as it has in the last election or so. I dont think it is really an asset. The term elections are more than the economy. Martin, what is your take on that . Democrats cant go in thumping their chests, saying we did a great job. Unemployment was up, the economy was in trouble, when president obama took office. It is down your 6 now. The stock market is up. The economy is doing reasonably well. You could always do better, but it is not an issue for the republicans at this point. This election will be far out statebystate. There will be local issues. Republicans will attempt to nationalize this, say vote republican, dont vote democratic. The Democratic Candidates will talk about what they have done in particular states. His election is on the cusp. It is very close. If anything the economy is slightly helpful to the democrats at this point. What will be the big issue martin, in your view. . What will be the defining force or issue for these voters as they had to the polls . It will be statebystate. You have democratic incumbents running in red states. Tough districts. Tough states to run in. Republicans have their own problems. They have a problem in the state of kansas with pat roberts, questions about whether he can be reelected. A problem in georgia, democrats have a shot at reletting electing michele knight. A lot of money have been spending in this race. Money is a big piece of what has been happening in congress. The book comes out in january. You are writing a book together . It is fun. , and what itnship has done to congress. We have suggestions about the future. A shameless plug. To understand, the senate races this year are basically all republicans have to do is get whats theirs. In states that romney carried. If they win the senate races in the states, they take the senate. You have states like iowa and colorado that are purple and on the cusp. Midterms were fought basically on republican territory. In the house come of the seats are so gerrymandered, its not up for contention. The question is how many seats , butrepublicans add it will probably be a single digits. The senate is up for grabs. This thing is tight. And that gain of six seats is a lot. But its not inconceivable. Thing is far from over. You have democrats running in red states who are strong candidates. Mary landrieu is a strong candidate in louisiana. Kay hagan has a pretty good state in north carolina. You have to look it everyone of these races, and what is going on in the states. I think it will be a very interesting election. Six seats is the average game gain for the up party since world war ii. Look at the amount of money being spent on both sides. You cant really tell what is going on. In some states, the democrats have outspent the republicans. That is remarkable. Look at california. California doesnt count. [laughter] that muchnia, not money spent this year. Only 2 billion 2 million in the republican race. Its pretty lopsided. If the republicans to take the senate, what do you think will be the biggest difference for business in the United States . What will be the biggest impact on business . You will see the administration going to the regulatory spirit to try to move policy points across. I think republicans at that point will have a grip on nominations. Not just for his own administration, but in judgeships. Regulatoryl with issues, whether there is a wide gap between the republican attitudes towards regulation and democratic attitudes . Legislatively, its going to depend on how much the president is willing to compromise to be able to get small increments on some of the issues he cares about like immigration. The big issue is probably going to be tax reform it. Its kind of under the radar right now. There is a fight going on in the house of representatives on the republican side to see who was going to be the next chair of the ways and Means Committee which controls tax reform. Paul ryan wants to be chair. Kevin brady from taxes is senior to him. He is going to fight him for it. The republicans dont always use in your day for basis of selecting a chairman. On you have to keep your eye what happens. That will happen in november, maybe early december. That will give you a pretty good indication of what is going to happen. Inl ryan is a true believer tax reform. He would cut all kinds of things in order to get the rates lowered. Martin, you mentioned about tax break for four, before. Peter or zach address that yesterday. I want play for you what he said. It always popular to go out and say we should do Corporate Tax reform. That sounds like apple pie. The problem is that effective tax rates vary so much from one corporation to another that when you try to broaden the base, you are taking away a tax break that benefit some corporations. They got there because there was political power behind it. Taking it away is not so easy. It is not so easy. The real issue is what are you going to do about corporations moving headquarters outside of the United States, jobs outside of the United States. Are you going to make them pay a price to do that . If you dont do that, i dont understand how you have a rationale for reforming the tax code. You lower the tax rates to keep them from leaving. There are so many special interests in washington that have won their fight through the years, as peter orszag said. To give itor them up. You have to prevent American Companies from leaving this country. You do that by lowering taxes. Thank you for both of you. Both former congressman. They are coming out with a book in january. What is the title . Divide rtisan congress and crisis. Send us a copy. Will get it. Thank you. Coming up, ebay splitting off from paypal. Big breaking news is mine. A victory for carl icahn. He has been calling for the breakup. What does it mean for investors and consumers . Plus an ftc vote slated for later today could change when we watch our favorite football teams. The regulars vote in favor of fans of the nfl . Thats today, in the loop. The nfl could be handed another blow, with the fcc set to end a 40yearold rule that gets games off television when doesnt sends sellout. The nfl no longer needs the governments help to remain viable. We have the fcc shouldnt be complicit in preventing sports fans from watching their favorite teams on tv. It is time to sack the sports lockout rule for good. Burke, whonow is lee is the ceo of lhp Sports Entertainment and media, a company that works with the nfl, mlb, and the nba. And matt miller joining me as well. Believe they will end this band. What will the impact be . I think the Immediate Impact is limited. There were only two blackouts last year. It has gone down steadily. The league and the team worked very closely and making sure these blackouts take place in a very limited basis. The broader issue is the ability that any league has to get people in the stadiums these days. The value and quality, the amount of programming that is out there is so attractive. Gets people in a stadium, as opposed to having them spend time on the couch. Esparza breakdown, the nfl release these figures officially. Its estimated to bring about 10 billion of revenue a year. About 2 billion of that comes from ticket sales. And stadium revenue. About 20 . They could really boost that if they were better at bringing in fans. By doing things that Roger Goodell has are initiated, like putting wifi in a stadium. Or dallas has this massive hd screen. Counselinge home experience, just with 65,000 friends over. Or 100,000 friends over. That is what they want to be able to do. Its a struggle for the nfl, but colleges are having tough times filling up stadiums for their football games. That is why some of them are trying to sell our goal. Its a wide range of things, food, tailgate parties, wifi, giant video boards. They are trying to capture the buzz of watching on multiple screens of the emotional buzz of being there. No one wants to walk away from tv revenues, those are massive. At the same time, no one wants to create a studio sport. Where you have great camera angles, but antiseats. Tv revenues are here to stay for a while. Those contracts dont come up for years. They dont come up until the next decade. They are locked in. Up. Hey are only going to go the question is can you maintain and build those ticket revenues . There is a wide range of things that teams need to do in order to drive the in stadium views. They have to invest. Revenues,ject of tv they will continue to go up. But at a much slower pace. If you look at a graph of the growth in tv revenue, each time they renegotiate a contract, get smaller and smaller. Has,ell Roger Goodell stoners he will trip has promised owners he will triple revenues to 27 billion by 2020. From 10 to do that, today, he asked to get every thing from the stadiums. He has to get everything from sponsorships, or indirectly to game onf you want tv, a yankees game for example, there is nobody in the stadium. Ticket prices are too high for normal people to afford. The corporate guys are hanging out in the club rather than sitting in their seats. It doesnt look good, and its not good for tv revenues. Thinking about which sport suffers most from lack of stadium dissipation. Participation. We have scott oneil on, and he spoke about this whole problem from his point of view. Tv is a great experience. For nba at hockey, i think hockey is incredible live. Much better than television. I think thats where we get the best of both worlds. I disagree. Watch almostrather any game on tv. Basketball may be better lives, if you have great seats. From receipts front row seats . Hockey is much better on tv. I think we are all complicit in making television such an attractive part of the overall fan experience. To the point where you can watch 30 or 40 College Football games on a saturday. You can watch every single nhl, nba, nfl game if you buy all the packages for it. You can see them on a 50 inch flatscreen with hd sound, with camera angles all on the 50 yard line. It makes it very enticing to stay home and not have to go through all the hassle of being there. At the same time, its the emotional buzz that everyone has. Scott is going to promote hockey and basketball, certainly football. Theres a tremendous emotional buzz. Ultimately, the economic transaction of how much you are paying in spending on media versus in stadium it. Why would wheeler now make this ruling . What is going on . They have so much pressure from congress and from the senate. I think this all started a few years ago, when a patriots game was going to get blacked out. Writingry started letters, saying this would be horrible for america, it is a historic moment. Meanwhile, guess who has the most expensive tickets . The average patriots to get is 122 before you buy beer and pay for parking. They have 114 average attendance now. There are still people going to these games. The lowest attendance is about 85 . 11 teams have more than 100 capacity. Is not going to impact that many games to start with. Thanks for joining us, lee burke , and matt miller. Go buckeyes. Go eagles. The latest battle of the billionaires. We talk about the fight. We are moving and shaking this morning. Indias new Prime Minister wraps up two weeks of meetings at the white house. The talks began with a private dinner last night, the first time they have met. Its also his first trip to the u. S. After he was denied a visa in 2009 because of antimuslim riots in the indian state where he was the chief minister. The u. S. Wants to improve relations with india. Americas close ties with pakistan have not helped that. He met with American Business leaders yesterday, and mike recep ceo microsofts ceo is in india as we speak. He will be making an announcement on strategic investment there. Ford ceo says its a Growth Company in a growth industry. So why do fords shares take their biggest tumble in three years . Not a good start. We will be back with more. For more on modi s visit, i want to bring in peter cook, who is much more. Who has much more. What was the big take away . There are a couple of things we should expect from this meeting. This is really a meeting that is supposed to reinvigorate the u. S. india relationship. When he first took office, it was within his first dinner was with the india Prime Minister. This meeting between these two leaders is a chance perhaps to redirect the focus, especially the economic relationship. We are being told that this is more than anything a chance for these two leaders to get to meet each other, get to know each other better. They have never met before. They had a private dinner last night. Prime minister of india right now is getting rockstar treatment everywhere he goes in the u. S. He had a landslide victory back in may. He is still riding high in terms of popularity. He is looking a lot like an american president was not too long ago when he was first elected. Maybe president obama is hoping the popularity for the Prime Minister might rub off on him right now. They do have very tough issues to discuss, including Security Issues in asia, and trade. There are major stumbling blocks and barriers between the two companies two countries over trade. They all seem very enthusiastic about him coming to power. They say he is a reformer, similar to what we heard about president obama. About the business relations between the two, and the trade between the two countries. Worlds two the largest amount received. Youd think theyd be able to do a decent amount of business together. Last year, six to 5 billion of goods and trade between the two but india rank 11th in u. S. Trading partners. Should beial something closer to 500 billion a year. Thats a target the u. S. Would like to hope for. Modi is looking for that investment, trying to insert trying to that india it will be a good place to do business under his leadership. Leaderst of business need to see those words followed with action, particularly in areas like intellectual property. Reducing some of those trade barriers, it has been a tough place to do business for American Companies. They would like to make it easier. Peter, thank you so much. Its 56 minutes after the hour, which means bloomberg tv is on the markets. Equity futures are slightly higher. Those numbers will be out in just a few moments. Housingglimpse on the market from caseshiller, we are on the markets again in 30 minutes. And windows, the next generation. Maybe that is what microsoft will be talking about and a special invitationonly event later today. We will have more in a moment. We are about 30 minutes away from the opening bell. You are in the loop. Stocks will be higher at the open. We await house numbers in a few moments. Our like on getting his way, ebay will spin off the payments unit paypal and create to publicly traded companies. The split will take place next year. Ebay doing this after saying for months that it will not splits. Johnson johnson has agreed to buy a bio pharma drug company. They spend about 1. 8 billion. The numbers are out on the Housing Market. Caseshiller come a month on month, down about. 5 , compared to estimates of no change. This msures the largest 20 metropolitan areas in the United States. Mike mckee has more the breakdown in these caseshiller numbers. Get out a pen and paper, i will confuse you. You will want to follow along closely. The numbers were down for the 20 city composite. There are so many home price index is out there. We follow this one closely. It doesnt look like good news. But the s p has now just to their methodology. Last month they started a new series. It is a National Home price measure instead of just the 20 series. On that measure, we are up by. 2 . The whole country is doing a little the better. The other bad news is that on a yearoveryear basis, it isnt a huge gain. But we are at least seeing some price increases. The interesting thing about this new index that they just put out is, when you look at it over time, the fall in home prices wasnt quite as severe. The recovery has been a little faster. We are including a lot of areas that werent hit hard by the home prices. We have to get used to new numbers coming up from s p case shiller. Where to buy . Weve seen this for many months. Last vegas is still leading the list out there, detroit is on the list because you are down that far, you have nowhere to go but up. It still looks like mostly the san cities where we are seeing the gains. Not a lot has changed on that front. Thanks. Mike mckee, i want to bring in our panel. This is the former fannie mae director. , Bloomberg Intelligence provides unique Realtime Research and context on industries as well as all the markets and government factors that impact business. We want to know the factors that Impact Housing here. As might just pointed out with the case shiller numbers, there changehasnt been a huge in where you are seeing gains and losses in the Housing Market. It is not a big surprise. We have seen prices decelerate. There factors for that. There are fewers investors if you were investors in the market. You have inventories starting to rise. Most of portland, affordability has gone down. Were down about 30 . Droveability was what demand, and that has come down, so that prices. There are also other stats out there. 6 looks like were only below the alltime. Even if people feel below their own house hasnt risen that much in value, we have actually gained quite a bit over the last several years. You are absolutely right. 6 , we are kind of spoiled. Win column in the the. The margin of victory is a little smaller. Appreciation should average around 2 or 3 . We saw 13 in 2012. 11 in 2013. We are kind of normalizing. I think we should still celebrate the fact that the Housing Market, which is 20 of the economy, is still doing pretty well. What is it feel like it why doesnt it feel like it . We had an unprecedented fall, we had an unprecedented recovery. It is a typical. You see recovery is being driven largely by investors. Institutional investors participate in the Housing Market the way they did. We have never seen affordability rates in the last 30 years as low as they are today. It is really being confounded by the fact that people have weak Income Growth and negative Income Growth. We are not seeing enough households being created. Tell me about the widening gap between new homes and the prices of new homes versus existing homes. Is that widening . By 20 orically there is premium. Part of that is due to the efficiencies of a new home in. But there are other factors at play here. On the existing side, like i said, you investor purposes purchases, which tend to depress prices on that end. On the new home side you had builders aggressively taking prices. They probably pull forward a couple years were the prices. The last thing i point out is during the cycle, building builders have deemphasized the new buyer. Why have they deemphasized the firsttime buyer . The demand hasnt been there. Its a luxury. As the entrylevel buyer starts to come back into the market, you will see that premium start to decline. Tim, will that be a catalyst as we see more firsttime buyers . It has to happen. I think we are all hopeful that it will happen. The firsttime homebuyers are all 25 from the historical average. You are not seeing builders really cater to that market. Im not sure if it is a willingness as much as it is a demand. Our builders willing to build those properties and drop the demand . Or is the native demand not there . One other thing you are seeing, builders are getting smart about following what people want. You are seeing all of these urban cities blowout construction. Apartment construction is at a toy fiveyear high. They are really drawing the millennials out of the suburbs. They are finding themselves lured into expensive urban areas. Tim, thank you for joining us. Drew reading and tim rood. Back to our other top story this morning, ebay announcing plans to split with paypal. After saying they would not. That they were better together. Carl icahn has are pressuring the company to do this for months. And what a payday it has arnie been for him it. He has arnie made 100 he has already made 180 million. Noy says that carl icahn had bearing on this decision. Joining us from Bloomberg Intelligence, paul, do you believe ebay when they say that carl icahn had nothing to do with this . I dont. Clearly, a lot investors have been arguing that paypal should be split off from ebay. Sibley because paypal is a much faster growing business and therefore would demand a much higher valuation in the marketplace. That would be an official to all shareholders. Did carl icahn came in and what is really put a point on that issue. He raised it to the board level, he got a lot of attention to this issue. I think we have seen over the past couple of months the landscape changing in the Electronic Payments business. We have seen apple get into the business. We have seen facebook and twitter do deals with competitor , a lot of things are changed. But clearly carl icahn raise this issue to the highest level. We heard scott kurnit say this in the last hour. Paypal has really seen its competition from upstarts. We saw twitter go to other companies. Apple as well. How competitive is this environment getting for them . It is getting more competitive certainly. Paypal is in a fantastic position. They really built their business on the backs of ebay. Ebay accounts are almost half of the transaction value on paypal. So they are the big player in the market, they are the big brand in the market. But there are lots of technological upstarts in the market places. I mention this cap nicole stripe this Company Called stripe. You see apple get into this business. There is a lot of players in the market place. It will get increasingly competitive on a global basis. Paypal, by being a separate, arguably will be in a better position to go out and forge new relationships. It sounds like it was a wakeup call for paypal, seeing apple go with stripe and other companies. Paul sweeney a Bloomberg Intelligence. Uping up, microsoft gearing for its invite only event in san francisco. The details are still under wraps. The only clues this invitation. We will find out. And we have talked about before, microsoft is hosting an invite only event this afternoon. There are no promises of a new windows, medications only reveal that attendees will hear what is next for windows. So what could microsoft have of its up its sleeve, and how important is this to their strategy . Dan, it is good to have you with us. Do you have a clue what they are going to be saying . This is been opening up the curtains on their next Windows Platform. Windows nine, or they will have another brand name. His is going to be a cloud centric platform that will be the flagship going forward. Especially after windows eight was a major disappointed. So what do you think will be the features here in this new Windows Platform . This is about interoperability between enterprise and the consumer across devices. The big issue with microsoft is that with windows eight, they kind of shunned the enterprise. Here they are focusing on the enterprise. Its about microsoft being a unified platform, having an actual upgrade cycle. It is all about the cloud. The della, his success and microsofts success over the coming years will be around the cloud strategy. Windows nine will be the main potatoes of the strategy. Today you get a technical preview. We expect more in the couple of months. Weak spectacle live in spring of 2015. You need to up their game. They have a small window of opportunity here. Windows is their cash cow. Cloud is where the growth is. On that front, Satya Nadella will not be out that event. E is actually in india he is announcing new data centers they will be spending money on because they want to support this whole Cloud Computing strategy. I think that is intentional. He was in china dealing with headaches there is well. Part of it is that it is all set in stage here for the next microsoft. You were talking about a decade under steve ballmer. They missed out on every trend possible. Now it is about them trying to escape where the puck is going. It is laying the groundwork for cloud. It all starts with the cloud. Key part of the success of microsoft the rock of gibraltar has been the cloud. That speaks to optimism in the stock. Investigators investors feel like there is a step in the right direction. Speaking of the right direction, i know that you also cover ebay and the mobile payments space. What do you make of ebay spinning off paypal . Finally loosening up to some of it shareholders . I think carl icahn is enjoying his coffee this morning. His 180 million coffee . He could buy a spent of cappuccino. Part of it is that he wins another one. Investors have been frustrated with the structure. Paypal has mark opposition from apple. More competition from apple. Investors dont like the structure there. Its all about value enhancements. Now you breathe a sigh of relief going forward. Companies can focus on challenges and opportunities ahead. That of these structures first seem good, but obviously, investors are not really getting the value. That is sort of the question here. They made the right decision. You can see that by the stock this morning. Dan, thank you. You certainly can see it. Senior analyst at fdr capital markets. Staying on technology, netflix is really going to hollywood. It is coming out with its first fulllength feature film. We will be back. Somber news coming from the u. S. Auto industry. Ford says it will miss its first year profit goals, and lose 1 billion to south america. The stock tanked. Matt miller returned from michigan. What happened . Investor his first presentation in detroit. We were there from 8 00 until 5 00. It was an interesting and really dramatic day. It started off giving investors and analysts rides in some of their hot new products. They have a new f1 50 coming out. They have a sexy mustang gt coming out. Everyone was in a good mood with a positive outlook. And then they started dropping the news. Oh, we will lose 1 billion in south america. That is much worse than had been expected. Maybe 300 million was the worst that had been expected. We will lose 1. 2 billion in europe. What . Without things were Getting Better in europe. Of the recall from last week will cost . 5 billion. It all adds up to not as much profit as we had been expecting. Margins not as high as could have been. And really kind of a somber, less excited mood. A were dropping all these bombs here and there. But the main message was what . He had to convince investors is that ford will make more money regionally, outside of the u. S. More money from smaller cars, not just the big trucks, and be able to make the big f1 50. This is a terrific story from where we were 7, 8 years ago. We are a growth story going forward. Hopefully the sense from the charts of what we have been able to achieve over the last 7, 8 years. And what is in front of us. Im very excited about where we are heading. We will face challenges, we will deal with them appropriately and positively. And move the business forward from there. , things aremessage getting incrementally better in europe. They are going to make a ton of money in asia. Growth is just explosive there. They still make so much from the countries best selling vehicle, for 35 years in a row, the f150. Fromtt miller, fresh back michigan. We are just a few minutes away from the opening bell. More after the break on in the loop. Welcome back. Bettye in the loop, im liu. The final look at features right before the opening bell. Things a rebounding from the declines we saw yesterday. Home prices, those numbers came out just half an hour ago. Sort of a mixed bag. Pretty consistent with what weve seen in the Housing Market. We are on the markets again in 30 minutes. Lets count down to the open with a top 10. These are the only stories you need to know about. Marriott, international. The hotel chain expanding in africa. They will open 30 hotels on the con that by 2020. That includes nine openings next year. In an email, the company said it will have 19,000 rooms across 17 markets by 2020. Number nine, slumber j, the oil giant. They are with drawing from russia amid sanctions. Members will reportedly be pulled. In the meantime, exxon appears to have been giving and hall pass. Graded forown vitamin shoppe. Prices remain elevated. Prices cut its prices by dollar to 44 a share. There are too many letters in vitamin shoppe. They need to chop off an e. Number seven. J j, the Health Care Product Company Buying privately owned maker of an antiviral drug. The acquisition includes antiviral therapy for children with rsv. Shares rise in the free market citigroup, 94 from 70 after it announced a new camera trade. Half of go pro roddicks will move up. it will miss product forecasts. Ford said it would also have 1 billion of orange he expenses this year. In three fell the most years, wiping out almost 5 billion in market cap. At dreamworks animation, number four. Shareholders celebrated yesterday. Shares are reversing, down a most 10 . The stock surging 26 on reports that the film studio is weighing a sale, and is in talks of the Japanese Company softbank. According to people familiar with the matter. Maybe that speculation has come down just a little. If they are familiar with the matter. Have a baby wrong how could they be wrong . Eight, new score news corps will expand real estate listings and Digital Marketing business. Walgreen said fiscal year sales rose. Results were driven in growth and prescriptive drugs, benefited from people joining medicare. Number one, the big story of the day that we have been following. Ebay announces it is splitting off its payments arm, paypal. It is a win for carl icahn, who settled with ebay after lobbying for the split. Both ebay and paypal will become independent companies, run by two separate ceos. Both of whom are not named. John donahoe will stay on the board, but he wont be running either company. Kickoff come i want to bring on barbara reinhardt, the chief Investment Officer at quincys credit suisse. Investors are worried. Does this mean there will be a big correction . You say the biggest threat to the market is a motion. It is. We think investors should focus on what Central Banks are doing at the margin. Central banks, the g4 Central Banks expanded Balance Sheets by about 10 this year. Interestingly, even though the Federal Reserve is likely to be hiking Interest Rates next year, europe and japan are going to be picking up a lot of slack and Balance Sheets are going to expand by 12 . We think that is going to offset with the fed is going to be doing. One of the strongest undercurrents in the markets has been the strength of the u. S. Dollar. The index is about 6 up. It looks like cash might be a pretty good place to be. What are the ramifications of the strength of the dollar for you . Theou want to focus on seven times we have had significant dollar trends since 1995 when the Bloomberg Index started. We found a couple of things. Financial does well, so does health care. Those are two sectors that really dont have to make sure they reyour any headache women are manufacturing. We think those two sectors can do well. Another to the 10 to also do very well our Consumer Staples discretionary. The dollar in general does not necessarily mean bad equity markets. It just means you have to pick your spots on where you want to be. Other, fairly liquid instruments to cash . Of rising the face Interest Rates, the possibility that inflation sort of moves in lockstep there, creating a cycle. That would move the dollar even higher, wouldnt it . The dollar is deflationary. If you have a rising currency, it puts a lid on inflation. That helps the Federal Reserve for next year. We also know that the fed has told us they will move on very dated dependent path. That means if they see weakness, they are not necessarily going to move very aggressively. I could be positive for next year. Doesnt that boost the case of the dollar . The dollar will likely move higher for next year. There is one other undercurrent in the fixedincome market that is important, that not a lot of investors have been focusing on. Its a high quality liquid assets. Its important. They have to owned u. S. Treasuries, highgrade corporate, they havent made a ruling on municipal bonds. But there is a case that can be made for new missable bonds there. That will make sure and keep it lid on bond yields. You wereg back to what talking about with emotions. Lets bring up the next the vix chart. Volatility has been tame it. , ient seen the mix peak heard a lot of people talking about fear. We have the fear barometer index, which is independent of the vix, and it is starting to climb it. Anecdotally, i monitor fear by the amount of incoming phone calls im getting from nervous clients. Hadink that because we have 13 corrections of 5 or more since the bull market started in march of 2009, investors are very mindful that we arent very far along in this process. We think you can go at least for another two years, based on the business cycle. It doesnt mean that investors dont intend to harken back to 2008, and 2002, and sake and 5 turned into something far worse . Do you have a gauge on the vix is a fear gauge . A lot of people dont think it works as well as it once did. We love to pull it up, it is easy to wrap your head around. But it may not show you as well. It is still relevant, but we also look at the vix in consolation with another group of factors. It as part of one of many things. Cann, sometimes markets tend to move in very small corners of the world. You have to watch a number of indicators. Next jim bianco yesterday was speaking about the fed. You believe that the fed will raise Interest Rates sometime next year. In his whole theory is that every time the fed has threatened to do something, take away the punch bowl, the markets 20 . Wn 10 , 15 , he doesnt believe they will raise Interest Rates at all. , equitiesest that lost 6. 5 last year. You can put a floor underneath it. I can say the fed is very mindful that they do not want to abort or in any way, shape, or form curtail the u. S. Economy. A six cent or 7 decline oah. The fed saying w that was a low bar. The markets do a lot for the fed as well. If theres concern about what the fed will be doing, the bond market tends to president. That is heavy lifting for the fed. Barbara, thanks for joining us. Olivia sterns and matt miller, thanks as well. Coming up, amc and bbc could be joining forces. Look at what the deal could mean for the networks and the viewers. Netflix big screen debut. We will tell you about the companys plans for its first fulllength feature film. Stay in the loop. Here is a look at the top tech stories on our bloomberg west radar. Amc is poised to buy a most half a bbc america. 200 million. Bbc worldwide will contain a controlling stake. The deal would both companies more negotiating leverage against paytv operators. A Technology Consulting firm is considering a leveraged buyout. Computer scientist has already contacted private equity firms like stone and bain capital. The company has a market value of more than 8 billion. Netflix going to make its bigscreen debut. This absorption Video Service is teaming up with weinstein to watchinga sequel tiger, hidden dragon. The release will hit imax theaters, and also on netflix. Catch all the latest on tech and media every week, only on bloomberg west. This one,e big story also intact, we have been reporting that ebay is planning to spin off its paypal business. Fromly bowing to pressure carl icahn, after the better part of the year denying it, saying they were better together. Garner,us now is mark the founder and ceo of north American Bankcard, a private Payment Processing company that handles more than 16 billion in transactions the year. They were closely with paypal. Great to have you on the program with us. Thanks for coming on was that short notice. You do business with paypal. Given this play, is there going to be any change in your relationship with them . Yes. We have worked closely with paypal, and we continue to work closer with paypal, and helping them achieve their goal of into the brick and mortar world. They are on a more level Playing Field with mastercard and discover. Does this move make sense . It does. They have done a good job of attracting a new ceo. Hes an innovative strategist, completely nonconforming. Hes the only person i have met wearing cowboy boots in manhattan with a suit and tie. He is the right stone cowboy that paypal needs the paypalone cowboy that needs. It sound like you know him. And you know his invitation. His reputation. What we bring to paypal that they need . Opportunity. Its an opportunity to grow the brand. To bring and offline. They have a really nice position in the online market. They have a Good Opportunity to grow offline. We are working closely with our company, which is the first tablet cloudbased free solution with activation. When we roll that out in the Fourth Quarter of 14, it will offer paypal to our core merchant base, which is small merchants as a fifth brand. Yours will be geared toward Small Businesses. Youre talking about offline, brickandmortar stores. Is this where paypal has been weak . You think a split will help them . It will allow their organization to be more focused, solely on payments. You know how it is when you are a piece of a Large International conglomerate. You get the attention and love of being one of the children, but you arent the only child. Your attentiong on many different opportunities versus being laser focused on one. And that is growing your brand. In your world, im sure there is lots of speculation going on as to what triggered this. You had a guest on this morning, scott kurnit, whose that i think the fact that twitter and apple both went to an alternative or rival, that kind of set off alarm bells within the company. Does that make sense to you . Have you ever considered leaving paypal . Clearly, there is a lot of contribute in factors. Contributing factors. Million an00 800 million acquisition. That would be a point of concern. You also have a pretty big activists, carl icahn, pounding the drums. Is value that has been locked up, it needs to be released to shareholders. There is a lot of contribute in factors. Having a lot of the focus, with a unique capital structure on both options, will ultimately suits their needs. It sounds like theres going to be a lot of value, more value unlocked with paypal being unshackled from this ebay platform. Marc, makes for joining us. Of northner, ceo American Bank card that works closer with paypal. I want to turn back to advertising. Adweek started here in new york. Advertising executives looking for new ways to grow their industry. They are making headlines are ready, and they are also partying hard in new york. The key to advertising may also be the woman, or is the woman consumer. We make a lot of those decisions. Stephanie ruhle joins me now. We are the ceo of her own household. That is the problem. We continue to be per trade is as only ceosayed of the household. Women have more spending control and household contro than men do. We continue to be the supporting character, the wife, the person picking the kids up, making lunch. A group of stakeholders have decided to change the conversation. Trial sandberg of facebook, cosmopolitan magazine, the cu of getty images, and the ceo of the have doneg giant cbo together to change the conversation. They have launched campaigns like always like girl. They took video of men and women saying run like a girl. Throw like a girl. Work like a girl. And what to those images look like . People behaving in a silly campaign. They started a campaign where men were doing female type things, get ready for prom, change a diaper. Noweters and advertisers have an opportunity to change the way women are per trade portrayed. Girlfriend,than the and if they want us to buy their products, they need to change the way they advertise to us. We have that conversation today. You dont want to miss it. What does it mean to be like a girl . Fantastic. She is a big star in the media world. Dont we want to be portrayed as more than just the girlfriend . [laughter] women,re powerful stephanie. The northrent note, Korean Leader hasnt been seen in public for one month. Smarting all sorts of rumors about where he is been hiding. More on that story next. Lets get caught up on global headlines. The new leader of afghanistan says he is using mineral wealth to reduce an addiction to foreign aid. He was sworn in yesterday, he is the countrys second letter leaders since the u. S. Invaded in 2001. The ceo of liz anza asking lufthansa asking people to be patient. A flight refused to fly today, it is the second day of walkouts. They are at odds over benefits. North koreas leader kim jongun has been hospitalized after surgery on his ankle. In public been seen for almost one month. Last week he missed a session of harlem and for the First Time Since coming to power, almost three years ago. That does it for today on in the loop. Tomorrow, how navigators are watching the swings in the market. Plus, one year later. Ceore state realty trust tony malkin joins us to talk about his first year as a public him in a. What has changed in the last 12 months. Thats all tomorrow, starting at 8 00 eastern here on bloomberg television. Its 56 minutes after the hour, which means bloomberg tv is on the markets. Im olivia sterns, we are about 30 minutes into the trading day. Lets get you caught up with where stocks are trading right now. Movingmarket futures are lower. The s p off about three points right now. The dow down 22 points, the nasdaq off by 10 points. Stocks of been fluctuating between gains and losses. Lets show you what is happening abroad. There is concern in the markets about what is happening in a move could send through the markets. We are seeing the russian ruble strengthen, even though it fell to a level where they thought the Russian Central Bank might intervene. We are watching tenure bonds, little change. Highyield bonds are on track with their worst month of performance as june 2013, amid last years taper tantrum. Joining me now with a closer look at what is going on is lisa ravitch, who covers the debt markets for us. Our bond girl. Why was september such a risk off month for bonds . Fell off morecks easily. Highyield stocks and bonds move somewhat in tangent tandem. Part of the reason why is supplied. There was more than 40 billion in bonds sold in the u. S. This is the greatest monthly issuance. At a time when there is increasing concern the fed will amidrates sooner, increasing turmoil overseas. You have significant geopolitical risks right now. You have the unrest in hong kong. You have ebola, and how that will potentially affect things. Ukraine, the Islamic State you name it. Theres a sense of concern. On friday, bill gross leaves pimco, there is a sense of what happens if someone has to liquidate it a lot of bonds that are not separately traded . Like highyield debt. With that kind of backdrop, people are skittish and unwilling to commit to this wager for the long term. There is a certain amount of highyield but would debt that all investors need. Its moving into impressment graded Corporate Bonds investmentgrade Corporate Bonds. We had big losers. It was the rally of junk bonds. This year, it is really not that. It is the opposite. Bonds have eeked out overall gains. Who knows whether that is the way forward . There is increasing concern the fed will hike rates sooner. There are some positive signs in the u. S. Economy. Going forward, what is a potential catalyst for further downturn . The common theme im hearing is that people are most concerned about surprise defaults. See it coming that soon, but the sense of runaway inflation and rapid Economic Growth is kind of waning. People are getting less convinced of that. There is a sense of privatization. People are concerned the economic slowdown could accelerate. The could be contagion from what is going on in europe and around the world, where you are seeing economies slow. And what does this mean for all of these companies and nations that have to pay back a ballooning amount of debt they have issued since 2008 . That is what people are watching. Interesting. Concerns about a hybrid of default. Lisa, thanks so much. That does it for on the markets. We will be on the markets again in 30 minutes. Market makers congo is up next. Live from bloomberg World Headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Carl icahn gets his way ebay is splitting off its payment unit, paypal, and creating two independent companies. From pariah to sensation, one decade ago the u. S. Would not give a visas to the man who is indias Prime Minister and now he is visiting the white house. Is the nfl about to get