Transcripts For BLOOMBERG Lunch Money 20140227

And brick greg rig, a lego. Its more than just toys. More tension in the ukraine. Curiously, its not inc. Yeah. Okiev. Not in key that is the scene in front of the Parliament Building in the ukrainian peninsula of crimea. Overnight, 120 militants took over the Parliament Building and raise the russian flag. The group is allowing deputies to enter the legislature for a possible vote on the status of crimea. The peninsula is in the south of ukraine, population 1. 9 million. Grammy is part of the country, but governs itself as a semi autonomous state. It is also home to russias lack see black sea fleet. Are dedicated to the integrity of my country, and we will do everything we can, everything possible, and we will use all tools and legal means in order to civilize ukraine. That is the new prime minister. 30 5 billion in aid. We caught up with him this morning. We will do everything not to default. We have enough resources and if we get Financial Support on the united states, the european union, the imf, we will do it. Billion. 5 the imf says it is ready to respond to ukraines request. The u. S. Thus far has pledged 1 billion in loan guarantees. 1 billion down, 34 billion dollars to go. Ukraines money problems, together with the situation in crimea, are shaking of the regional markets. Fell to recordle lows against the u. S. Dollar. Ukrainian stocks also fell. It does not help that russia is flexing its military muscle. Russia has put fighter jets on alert given what is happening in crimea. That on top of military drills that president Vladimir Putin ordered yesterday. I think the russian angle is what has people worried right now. They have signal that they will try to protect people in crimea. No one expects russian intervention right now, but with the military exercises yesterday, what happened in georgia is always in the back of peoples minds to my that you could get some kind of russian reaction. U. S. Defense secretary chuck hagel is concerned as well. He spoke yesterday to a group of ministers in belgium. We expect other nations to expect ukraines sovereignty and avoid provocative actions. That is why i am closely watching russias military exercises along the ukrainian border, which they announced as you know, yesterday. I expect russia to be transparent about these activities and i urge them not to take any steps that could be misinterpreted or lead to miscalculation during a belly a very delicate time. Would this fall into the category of steps that could be misinterpreted . This is a russian warship docked in habana, cuba yesterday havana, cuba yesterday. It went into service in the black sea back in 1988 before it was transferred seven years later to the northern fleet. This is according to Russian Media sources. Neither cuban authorities, nor state media have mentioned the ships visit, unlike on previous tours by russian ships. Does it, cold war . Secretary john kerry said yesterday, this is not rocky iv. Dont you love that face . Seriously, that seems to be the international response. This is something everyone was very concerned about in terms of the russian speaking population. It was part of russia until about 1954 come of the soviet union. And the concern is with ninkovich on, where will you have the russian speaking population feeling under siege . You mentioned, we want to they are saying they want to rejoin russia. Were talking over the break about the sphere of influence that russia is trying to protect. And that has been a longterm story. There was an interesting claim about syria. This goes back to international relations. Are we trying to redo the soviet bloc . Simple as putin wanting a russian bloc . Look at what has happened with the expansion of nato, they very much believe there is a western effort and a natoled effort to break apart its sphere of influence. Can i ask a dumb question . Why is no oil moved . There is really no oil in the story. Many are concerned about the gas pipeline inc. Cut off. So much of europes gas goes through ukraine. There was a concern that with a shakeup in ukraine, would russia shut off the flow of gas . They have done it before. But this time, no one is thinking that is going to be the russian play. It is not in their interest to do this. They are not worried about this right now. But that is something you always have to watch. And i would say that is the weapon they are likely to use. . Who would likely use it the russians . The russians shutting off the gas pipeline at some point. I worked in georgia in the 1990s doing privatization and that is exactly what they did. Several times we worked in the dark. Is there a georgiacrimea equivalent here . Clique that is what is in the back of peoples minds. Is whatwhy that is the back of peoples minds. That is why you have john kerry basically telling the russians to stand down will stop in fact, reminding them of what the russians said about libya. You told us not to go into libya. You should stand out on this situation. As for former president viktor yanukovych, he has been on the run. Yesterday, moscow granted him protection on the territory of courting to russian news agencies. In one report, he was seen in a moscow hotel and was now seen in this kremlin sanatorium just outside the city. Gm coming under fire for waiting 10 years to read all faulty cards to recall faulty cars. First cars, phones, now we are seeing google fiber. Is doingie you how it in its latest location, provo, utah. And as we had to break, a video advertising drone delivery. Amazon, youve got a opposition. Competition. This is lunch money on Bloomberg Television. We are also streaming live on bloomberg. Com, your smart phone and tablet. New competition in broadband. It turns out google fiber promises speeds 100 times faster. What is google fiber . Orie johnson explains. Google fiber is an attempt to jumpstart Internet Service and them unprecedented speed. Google fiber, 1000 megabits per second. It is 100 times faster than cable modem. Bios faster than verizons 300 megabits per second. It is faster than at ts experimental 300 megabits per second offering. Other competitors google is living in the dust, time warner cable. In kansas city in 2012 and now is in provo, utah, and will soon be coming to austin, texas. And it Just Announced Service Coming to 34 more cities. How does it work echo cutting out the settop boxes and routers and modems. Intoll bring cable right each customers home. It could cost as much as 900 per household, up to 3 billion per year. But if google builds it, will customers come . As many as 20 million broadband customers are estimated to come, giving google fiber nearly as big a Customer Base as comcast at 24 million. Is in provo,on utah today. It is one of only two cities were google fiber is currently available. Google is installing the technology at no cost to the homeowners. Additional services are competitively priced and in some cases, lower than the competition. City is papered with advertising. The newspaper everyday has got it. And the other cable providers are here as well, trying to up their games. Comcast has lower their prices and increase the speed of delivery of service here. Theres a big change being driven by this google fiber project. How many homes do you think it could really reach and when . What is the target one small time town at a time . The analysts writing about as many they will reach homes as they can get. We had some people at the diner today saying they are spending months waiting to get this installed in their homes. There is clearly some demand. Provo mayor john curtis says the people of the city are excited. Almost every discussion ends with a conversation about google. The buzz is incredible. And then beyond that, the actual application. Provo is a city that loves technology, that loves startups. It is a Perfect Match for google and the speed and the fiber into every home. It seems to be a Perfect Match. Schools are having dialogue about what it means to have fiber in every home. And how do we take the next step so that people understand how to use it and have the equipment to use it . Do you feel like you had to what have you had to give up to google to make the development . Our deal was so different because we had already put the fiber into the ground. We gave them that fiber. In return, what they gave us far outweighs what our initial investment was. Its not even close. Our residents have Free Internet and the hook up is only 30. Thats 30 hookup used to cost the city thousands of dollars. Highspeed internet, i get it. How much bandwidth does one person actually need . I got google fiber two weeks ago. The main way i would describe google fiber is the jump between dialup and dsl. Dontjust so fast you notice loading times anymore. I got the gigabyte gigabit plus tv plan and it was 100 a month and i did not have any insulation fees. When it comes to gaming, connecting to friends, joining into parties, its pretty instantaneous now. One of the things i wished i go google fiber had was more apps for the tv. I wish it had things like youtube and other ways to browse media online. From the tablet, i can see my entire guide for all of the normal stations. If i want to pull up something from my dvr, say i want to watch an old episode of supernatural, i hit play and bring it up. Lets see how fast something loads. The only thing i dont like about google fiber right now is how much time i spent sitting on the couch watching tv. Dont get too excited for google fiber. Right now, its only available in provo and kansas city. Austin is in the works. There are talks with nine other metro areas, according to google. New york city however emma not one of them. New york city however, not one of them. Is there anything google cannot do . Now you can visit the church in manitoba on the street view. It is the polar bear capital in the world. They teamed up with a specially designed tundra buggy with an emphasis on how Climate Change is affecting the polar bear population. Some parts of canada has seen a in decline in population recent years. Coming up, behind of new yorks massive hudson redevelopment. In the largest loading crane the world. We will tell you what its doing here in new york after the break. As for nasa, it hit the planetary jackpot. The space agency discovered 715 new planets, thanks to the kepler space telescope. It almost doubles the number of planets we know about. Nasa says four of the new planets are in whats called the habitable zone of the stars they orbit. That means they might actually be able to support life. This is lunch money on Bloomberg Television. We are also streaming live at bloomberg. Com. Im adam johnson. All week, we are entered introducing you to the most innovative thinkers taking part in bloomberg businessweeks Second Annual Design Conference. Is planning the nearly 30 acre hudson yard government here in new york city. Hudson yards is aimed lively neighborhood that allows for people to both live and work and play. My role is to be the maestro. Multiple buildings going on at one time. We have artists and engineers and my job is to make sure to the best of my ability that we are producing music, not a cacophony. Designing is a very important part of how we envision hudson yards. You get toften design basically a whole city. Because we are going over the railroad tracks, we are building our own land, streets, sidewalks, plots, gardens. Half of the ground had to be open to the sky. That is free unusual. Take any city block, is half the block a park . No, but with the nature of the zoning, the buildings are twice as big as you might think is muchl because you have so open space. What we did not fully appreciated how big the buildings are. One challenge is just the sheer magnitude of construction. Trillions of dollars of construction underway at any given moment. And it requires a lot of money. There are not too many veins making 500 million loans, and that is what we need. We need a series of them. The challenge is making sure that we create a great sense of place. Ive always wanted to do a big commercial development in new york city. I dont think you can get any bigger than this one. The churchill phrase that all my life has been preparation for this moment, we will see how i haul. T off over the long louvered business week is hosting its Second Annual design bloomberg at businessweek is hosting its Second Annual Design Conference in san francisco. For more information, just go to bloomberg. Com. Relief is friendly on the way. This is thanks to a new 3. 9 billion replacement bridge. What is going to make it possible . The Worlds Largest floating crane. Here is a look at this monster and how it is actually getting to new york. Tesla is going to need some cranes for its new lithium factory. Musk is hoping it will be the worlds biggest. That is next. In thetephanie ruhle Bloomberg News room. Open moment ago i hung out with dan loeb. Hes got an almost 10 stake in the company and its not enough. This activist investor is getting more active, calling for the company to appoint three new board members, including loeb himself. He had a breakdown in negotiations with the board earlier this week. He said they did not seem to want to negotiate, and that is, about putting loeb on the board. The difference is, in the fall he wanted to see the ceo get removed from the company. He said hes willing to work with senior management, but that they need more direction. I asked him about Eddie Lampert. Do you feel that he knows how to run a company the way they did in the 1970s . He said someone needs to hold the Company Accountable as far as the direction they are going and the money they are spending. He thinks he is the right guy along with harry wilson. He said he could even see himself getting along with the management. Im not sure if that is the case, but he is getting significantly more active. Italy interesting to see how the company will respond. They did not know this 13 d would be filed today it will be interesting to see how the company will respond. He did not know this or team d would be filed today. This is lunch money on Bloomberg Television. Im adam johnson. Todays moving pictures now, where the video is the story. Arizona governor jan brewer shoots down the bill that was seen as antigay. It allowed Business Owners to refuse Service Based on their own religious beliefs. Opponents said it would have allowed her discrimination against gays, and companies from apple to intel had lined up against it. Per issue the video last night. Brewer issued the veto last night. Smog in beijing dropped to very unhealthy. It is the citys biggest challenge. The topic will be front and center when chinas leaders gather next week for a meeting of the Natural National legislature. Of diary of anne frank have been delivered to togo tokyo. 300 copies had been vandalized in the last few months. Tokyo police have created a task force to investigate that vandalism. Gm motors is in the hot seat. Regulators want to know why the largest automaker what took 1. 6 million cars that have been linked to 13 deaths. If your key chain was too heavy, or bounce the wrong way after you hit a speed bump, it was switched off. That is incredibly dangerous because you lose your power steering, power brakes, and more importantly, your air back. General motors identified this , in 2004. He old gm it is 10 years later that they started to recall some of these cars. They issued a Service Bulletin in the middle of the last decade, which is sort of one step below a recall. They fixed Something Like 700 cars. A couple of pontiacs, a couple of saturns, a chevy cobalt those two brands, pontiac and saturn, dont even exist anymore. What are we talking about here . 35 million is the most the national Highway Safety administration is allowed to find. Would it really hit 35 million echo the most has been 17 million. This is a company that makes almost 7 billion per year. On to tesla. The electric carmaker has plans to build the Worlds Largest battery factory. It is exploring vocations in texas, nevada, arizona, and new mexico for a 10 million square foot facility. Elon musk spoke with betty liu about this last week. If we want the factory done in three years, we probably would need to raise some capital. What is the impact this giga factory will have on the Auto Industry . It is Pretty Amazing for the car industry, because at a time when beijing is being drowned in , maybe we will see the biggest car market in the world make a huge push for electric cars. But it will also be interesting for everything. Because he will have the ability and im talking about elon musk year to power all of our stuff. Combined with our supercharger stations, which will be strategically placed around the most important urban areas in the country, will give elon musk the power to run america beyond just building cars. Staying with cars for a second, he looking to produce half a million. He said this would produce enough batteries to make half a million. Hes not saying he will produce half a million cars. Hes just giving you an idea of the scale of the giga factory. Is that the same mass market if it is 10 million cars a year . It would still be a mass market if it was the 90,000 car class. Analysts,ng to some that number has the potential to reach 27 by 2017. Lithium today is mostly used in our smart phones and smart tablets. Coming up, the Building Blocks. F success coming back from the brink of bankruptcy. And exposing how the university of North Carolina is failing its athletes. Money on lunch Bloomberg Television. We are also streaming live. Im adam johnson. Sports, the tar heels take it with only nine seconds left in overtime. Markets page sealed the deal. 8584. Pel hill winning the team is now on a 10 game winning streak emma but it turns out not all is well in tar heel land. We are talking about people who are being cheated. Murray william, learning specialist for the Athletic Department at unc. You her story and that of the unc athletes is on the cover of this weeks bloomberg businessweek. It is not an easy job to be a truth teller. Matter of fact, my last hair hass, i think my accelerated into gray. My name is mary willingham. I worked at the university of North Carolina chapel hill. When i started working at the in theity, i worked Academic Support Program for student athletes. I saw pretty quickly that athletes were not getting the same access to a real education like all of the other students. Their writing levels were so low and im talking second or third grade maybe we needed to work out letters and sounds. But they told me they had never written a paragraph before. Many, many years, close to two decades, we had a paper athletestem where would never have to go to class. They would at some point in the semester begins in a prompt to read a paper. And nine times out of 10 they did not really right that paper. It was a recycled paper. And the papers were almost always graded as or bs. Day learning did not take place. That is how i reckon but everyday learning still took place. That is how i reckoned all of this fraud. I help them along. It just doesnt seem right to me anymore. My title was taken from me. Ands moved to the basement all of these things that happened to the snowblowers, kind of classic. I really believe the university would do the right thing to fix the problem now that it was out in the open. We are still not doing the right thing for these guys. We are not teaching them in remedial classes on this campus because we say that they dont need them. But they do need them. You cannot teach students up at this level when they are down at this level. It doesnt work. If were going to connect a College Sport to academies of higher learning, then we need to make sure that these students are getting the real education we are promising them. Is that the games are spectacular and it is part of our culture here. Weve got to figure out how to do the right thing and still have the entertainment that we enjoy on saturday. Paul barrett authored the businessweek article. Teamined the surveillance this morning. What is going on in unc is just one slice of life in the ncaa, incorporated more broadly. Billionins how this 16 industry operates. The problem is, you are taking people who are very talented athlete, bringing them to these University Campuses come and they dont necessarily have the Academic Skills to match their athleticism. I go to casablanca and im shocked. Round up the usual suspects. Is anyone shocked by your cover story echo people should not be shocked. University of North Carolina is one of our most prestigious public institutions. If you are not shocked, then you are not in tune to what is going on. And you share some of the most egregious examples of what is happening behind the scenes . There have been many scandals over the year, as we point out in our article. Unc is not unique. You had tutors writing papers for football players. You had people taking tests for basketball players. What you had a unc was the corruption of an entire academic department, which was offering fake classes, classes that were supposed to be lecture classes, which in fact never met. What is really poignant here is that this was the black studies department. The department that was corrupted was the department that was devoted to the study of africanamerican and african culture and history. The students that were being channeled into this were disproportionately varsity basketball and football players. And that body of students was disproportionately africanamerican. Story can read the full in this weeks bloomberg businessweek, which hits newsstands tomorrow. Its available for download tonight. Someone who is earning top marks , lego. We will hear from the man behind the big tour makers big him back. And we will look at the fascinating history of this 82yearold this 82yearold brand. Legoland sales jumped 10 to 4. 6 billion and its first future film feature film is dominating the box office was up there, long way from a decade ago, teetering on bankruptcy. Here is a look at the company we have come to know. Let me show you the lego history. Today, the lego group is known for the lego brick, but it started out in 1932 with the production of wooden toys. The founder started playing with words, danger danish which means play well. Together intom lego. In 1960, we had a wood making factory. We had a fire in the factory. We made the decision to stop making toys from wood. We focus solely on the lego brick. I have six bricks with the tubes in the same color. I can combine these in 915 million 103,000 765 different ways. 915,103,765 different ways. To lose faith in the lego brick and the construction toys and we started to spread our vocus in various areas of the business. We wanted to open up new legoland around the world. Its a huge task. It takes a lot of focus around away from our core business. Our core will always be the brick and the construction toys. That is what we need to focus on, because that is what we are experts in. The last seven or eight years weve had doubledigit growth every year. That is mind blowing. He is the man currently leading lego. Him this up with is the man currently leading lego. David caught up with him. Im expecting in some of the western developed markets we are reaching a penetration where healthy singledigit growth rates is the name of the great name of the game. Getting into other markets and we are extremely grateful for it. Five percent of a lot is still more than 50 of the developing country. Organic growth is still likely to be in the high Single Digits rather than doubledigit growth. Will it always be organic echo organic . We have determined not to make and ask physician. We think there is something quite unique about this company, its culture, the engagement with the consumer. It is very much time tied to the lego name and brand. Your otherone of companies echo that is me, with a lot more hair. Next are you a fan of lego . Lego . Are you a fan of you have company. 10,000 people on the roof. It is not a music concert or a football match. It is a legofest. A fan event that spans the ages. The grownups here are adult fans of lego. This is what is inspiring lego designers. This tile has a smooth. Urface my motors can run freely. It has not a weve been like this. And the great ideas do not always come either. They welcomed it with open arms. Havech actually, that they a special community for fans. Martin is in the netherlands. His team works on the mind storms legos. Some of them can be programmed. They have to upload the motors powering conveyer belt. Understanding the technology is im is as important to these fans as developing it. We look at what lego did and we look inside and then we try to figure out how they did that. Other brands,me they are very close. Closed. They dont want you to look inside. Lego opens it up and says, here is the whole thing. Here is how we build it. Lego has even started employing them. His creations impressed so much that lego gave him a job. Worldhave gone around the showing off inventions. At this point, showing how big you can think with lego. There is really no limit. You can do what you want if you have the imagination and the patients. X perhaps the biggest problem lego has with its fans is that it just cannot hire them all. And todays mystery meat, how is this for Building Block echo they are sugar cubes. Building blocks . They are sugar cubes. This took place at the Ulster Museum in belfast. 5000 people build it with 500,000 sugar cubes. They are raising funds on kickstart to bring it to new york, specifically harlems sugar district. It is 56 past the hour, which means Bloomberg Television is on the market. I will get you caught up on where the markets are trading right now. Stocks are rising. The s p is trading around it alltime record high. Will it close above that level . In the past four days we have seen it trading higher, but pulling back before the end of the day. And comments from janet yellen earlier this morning saying the fed could taper its strategy if the economy weakens. That, perhaps, is losing sentiment on wall street. To highlight a couple of stocks for you, the first is jcpenney. See shares are surging the most since 1980. They have seen an increase in annual revenue and margin expansion. Ceo predicts the turnaround will be complete this year. Shares are up about 25 right now. We are also watching sears, also getting a nice pop today. The company run by Hedge Fund Manager Eddie Lampert said fourthquarter losses narrowed to 358 million. Sales however, fate theyll sales however fell for the 28 straight quarter. And now poised for its biggest , the dollar, since september. Changes thatf the have happened in the last few months in terms of the direction of the fed policy, all of the money that has flown out of the united states, that has begun to reverse. It is going to create some churn overseas and i think the dollar will be a much safer place to be. If you agree with him and think the u. S. Is the place to become, weve got a couple of stocks you will want to watch. Adam johnson joins the with todays insight in action. The market gets two shots in the arm today. Let me show you what we are talking about. Capital goods orders and durable goods orders, Capital Companies respond to durable goods orders, and consumers respond to durable goods orders. In each case, the actual numbers released by the Commerce Department were better than the forecast estimated by the different analysts. Look at capital good orders , that is estimate good. Companies are spending money. And you look at durable goods orders, the estimate came in at 1. 7 up. The estimate had been a decline. Consumers are spending. Both consumers and companies are spending and when you have spending in america, you have investment. Correlation over time. I went back to 1990 so you could see the trends. Is it exact . No, but the direction is generally the same. They go up and fall together. On a day when you see both capital goods orders and herbal goods orders rising, that should be bullish for the market. You could say, ok, im going to buy the market or im just going to buy an industrial etf, but we can do better than that. We drilled down and looked at roughly 60 Industrial Companies in the s p 500. We found the five that are forecast to grow the most. Here they are. Again, these are your top five sales growers. Have businesses and consumers spending money, they are buying products by Companies Like these, industrials. Adam johnson, thanks so much. Leave it to adam to come up with a patriotic story about the market. Bloomberg west with emily chang is coming up next. Live from pier three in san francisco, welcome to bloomberg west, where we cover innovation, technology, and the future of business. Fed chairman janet yellen weighing in on bitcoin, telling the Senate Banking committee the fed has no authority to regulate the currency. This has protesters set up shop outside of mount stocks. Mt. Gox. In one citybe