Transcripts For BLOOMBERG Lunch Money 20140325

Is it finally here . We will take a look at the oculus rift. Were kicking off with what everyone is talking about. It looks like someone is not invited to the party. The Big Industrial nations essentially kick russia out of the g8. It is the g7. They wont be attending the g8 meeting in sochi. The group of seven industrialized nations, the u. S. , canada, france, germany and italy and japan and britain are all coming together. They came together in the netherlands. They said in a statement, they wont go to russias g8 gathering in sochi. Instead, they will throw a party of their own in brussels. They look so happy around the table. We are very much in favor of everybody in the world and keeping the dialogue open. There is no sense in discussing these issues in the g8 form. Thats why we are going to brussels. That weree dates planned for the original g8 session. A little History Lesson here. After the soviet union collapsed in 1991, russia eagerly sought to join the worlds top economies and eventually gained entry in 1998. When russia first hosted the g8 summit in 2006, putin did it sochi style, building a palace outside of st. Petersburg and adding a series of new mansions to the grounds for each leader to stay in. Those were the days. A spokesman said russia is interested in continuing contacts with g8 members. Toldas foreign minister reporters that he is not clinging to the g8 format. He says mother russia is the wider g 20. As for the g7, its statement reads, we will suspend our participation in the g8 until russia changes course. The situation in ukraine. If that escalates, president say they other leaders will levy tougher sanctions on russia. We are concerned about further encroachment by russia and ukraine. Announced and what the European Council announced was that we were consulting and putting in place the framework and architecture for additional sanctions and additional costs should russia take this next step. We know the president can walk the walk. Can he talk the talk . , we have a United States after having back down on this red line in syria, he feels he has to follow through on his threats. ,e is coming up against putin who feels like this is the most important interest he has. We are set for more escalation here. It is starting to hit the market. Was president putin bailed out up president obama in the searing conflict a couple of months ago. President obama threatened action, but it was putin who brokered the diplomatic solution. Russia still holds a wildcard. It supplies europe with one third of its energy in the form of natural gas. That means russia can make life very difficult for europe as well. Make ae wants to political decision, he has to be ready to take it. Among all thesion governments that they are ready to pay a price to show that International Law has to be respected in europe. We dont want these kinds of scenarios coming to europe. We are a union based on peace. Ukraine, who offered to be , all ofed with europe these things started when there was pressure from moscow, not letting ukraine come closer to the union. They want to be closer to the European Union and our common values. I think we have a moral obligation to show our support to ukraine and im sure the European Union Member States will be ready to do it if necessary. The markets in general made it tough for russia. The government canceled its fourth ruble auction. The stock index is down about 11 so far this year. The ruble has dropped more than seven percent against the dollar. Whenuble actually rose investors speculated those tougher sanctions wont happen after all. Stay tuned. Gms recall troubles have just gotten bigger. Well tell you why after the break. The Supreme Court showdown. What the ceo has to say about future of broadcast media. Resident jimmy carter stopping by David Letterman late last night. He said russia taking over crimea was inevitable. Letterman asked that the u. S. Could pull off some expansion of its own. If the u. S. Decided they , ontario,dsor which is just across the river from detroit. And we went up there and we said our sent our tanks and, could we get away with that . I doubt that the people in montreal would approve. [laughter] this is lunch money on bloomberg television. Also streaming live on bloomberg. Com. Im adam johnson. What is arguably the most talked about court battle in media right now. Streaming service area, taking on the top broadcasters. Tv to yourroadcast to mobile device. They are expected to cement a brief on wednesday. John ehrlichman recently sat down with the ceo, who says one of their manufacturing facilities are asking him if he anticipated all the legal hurdles. The thing i didnt anticipate were going to happen, like the direct impact of the association with the cloud. If i had taken a moment to step back and say, wow, which you never do. A lot of those things the controversy is the scale of whats transpiring. Outside the courtrooms, broadcasters continue to think about what their options are in terms of where they can take their channels. We can move our broadcast network to cable and take our broadcast network to the internet. What do you say to that . They have had an agenda to go to cable for a long time. Aereo has nothing to do with it. They step back and say 50 Million People use antenna tv. Are they capable of disenfranchising that large a number of people . I dont think so. Thats very difficult. Noto be clear, if you were successful in the Supreme Court, is there a plan b . No. There is no plan. E believe in our merit thingthink its the right. Progress is important. The mission of this company was to try to create an open platform and which the system open. Thate dont succeed in despite our best efforts, it would be a tragedy. How will the Supreme Court battle impact the future . Heres david bank from surveillance earlier this morning. Is there a such thing as legal momentum . I dont think there is. I do think the brief on behalf of the department of justice for the broadcasters was a very clearcut, powerful argument that the area of technology was essentially a violation of the spirit of the law. I think it is meaningful if you are trying to read the tv, you would argue that the momentum is going the broadcasters way. Do investors were watching today really caring about . We care about the outcome of the case. You know whats going to happen at the end of the day. Whether or not it is legal, aereo itself is a footnote in history if it does not find a distribution partner. It doesnt have the scale to make a difference. What investors want to know is, comcastsrecttvs and going to adopt this technology to somehow avoid paying retransmission consent fees . I dont think they are. What is the plan if paid tv does decide to copy his technology instead of fighting it . Its a free country. We have invested a tremendous amount of money and resources. This is a very complicated technology. Im not suggesting we are the only people in the world that can solve these problems, but they are not that straightforward. When we hear stories about you hitting capacity in markets like new york city orlando, should we see that as much stronger demand than you had anticipated . And that there is going to be a lot more usage . Outsourced your the design of the technology, that each consumer gets their own piece of technology in which they control it on their own, it becomes a forecasting problem. You have to determine in three months, how many customers will have that. Apacity for a company that was just commercially available for 78 months now, there is a challenge. We will get better at it. You can see more of john ehrlichmans interview coming up on bloomberg west. Cant watch this on network television. Were talking about the Worlds Toughest sailors. You will meet one of them today and wildcard. A new lawsuit for General Motors. New probes about its bankruptcy filing five years ago. All those details, coming up in motors. Take a look at this. Video taken from a helmet cam on one of three men who parachuted off the world trade center. Enforcement has been charged. Heres a look at how they floated down to the ground at 3 00 a. M. Incredible. This is lunch money on bloomberg television. Also streaming live on bloomberg. Com, your tablet in your smart phone. Im adam johnson. Gettingubles just keep bigger. 13 customers now and the u. S. And canada filed a lawsuit against General Motors over faulty ignition switches. According to two complaints filed yesterday, the carmaker may not have recalled all of the deficient chevrolet cobalt. It doesnt end there. In addition to their handling of the nations which failure, the Justice Department is also looking into whether the company committed fraud by not disclosing the defect when it filed for bankruptcy. That those effects could lead to a cascade of liability claims. That is according to the new york times. Jim doesnt meant that it learned about the baltic nations in 2001. The question remains as to whether the carmaker knowingly failed to tell the government about this issue when it filed for bankruptcy in 2009. Is protected from any sort of economic losses or ages occurred the light before july 2009. Challenging that immunity requires asking the judge to reconsider the terms of the bankruptcy. Gms lawyer says the time for that has long passed. This latest bankruptcy fraud probe does beg to differ. Says that she will do s right. Whether that means to settle these lawsuits or fight them in court is something we dont know yet. Pickups he is never an easy issue. In gms case, its a different piece altogether. Bankruptcy is never an easy issue. Its where a buyer hid assets from the creditors. First up here is we are talking about hidden liability. You get into a whole different area than a lot of these bankruptcy fraud doctrines were meant to cover. Appies if there was a hidden goldmine. These were liabilities that were understated. A recall for the cobalt. Theres a problem here, but not enough to issue a recall. They issued a service for the rs to bring them back in fix an ignition problem. 400 cars were fixed. Why wasnt there a total recall if they knew about the defect . Why not bring everything back . What does this mean for gm shares . A feeding frenzy time. They will throw everything they can at gm here. Bebasically said, there will dollars. Illion we can get into the legalities of whether sales sheltered them or not. It is clear that they will put up some money. The stock Market Reaction is overdone. That is less than two dollars per share. Lets talk about safety. Testing a cars crash resilience can cost up to 1 million. The crash dummies are the one to tell the story. A love are familiar with crash testing. But a lot of people are not familiar with the behindthescenes work. Before a dummy gets behind the wheel of a General Motors car, needs to prove itself in tests like this. And this. The reason to ensure that the ys technology is working properly before a crash. Crashing a car does not come cheap. Neither do the dummies. 11 people are surprised that the cost of a crash dummy. A crash dummy is a very sophisticated device. We have electronic instruments on the dummies from head to toe. Theyre designed to behave as a human would be it. Our dummies can range anywhere from 100,000 400,000. Thats for a fully loaded escalade. They have some pretty Old School Shoes on. Theor some of our dummies, shoes were regulated. The reason the clothes are pink are for the photography of the crash tests. A number of our dummies will measure all of the recordings during the crash test on board they will be measured inside this small little body. General motors has learned a lot since its 1935 psa. Like how to buy build safer cars that take human error into consideration. Crash related fatalities have dropped dramatically over the past 50 years. As cars get it could impact payouts to insurance policyholders. The technology involved automakers are being forced to redesign cards to keep up with more and more rigorous standards. That is why gm is investing so much into making smarter dummies. Michigan. Both sides of the minimum wage debate is ahead. The vote in congress we will bring it to you. If meetings are taking up too much of your time, we will get to a robot who can take your place. That is next in innovation. A tribute to lady liberty echo a land artist created an image of the statue of liberty in a field in italy. The artwork is here to mark president obamas meeting with pope francis on thursday. Is 26 minutes past the hour. That means bloomberg tv is on the markets. Im julie hyman. Take a look at where we stand right now. The markets fluctuating a bit as we have mixed Economic Data on home sales and consumer confidence. Barely intos very the red. The dow is the loan riser for the moment. Stockse of individual were watching right now first is american apparel. Clothing company is facing looming debt payments with a net than the much wider 37 million loss the previous year. American apparel lands to sell 30 million of its common stock, giving a financial push to turn around its business. Were keeping our eyes on walgreens. The pharmacy chains secondquarter earnings did miss estimates. It still sees a net increase of 5575 locations. We will be back in 30 minutes. This is lunch money on bloomberg television. Im adam johnson. Todays moving pictures where the video is the story. A search team is using everything from dogs to sonar, trying to locate victims of that mudslide in washington. The slide started when a large land gave wayaked to a community. Dozens are still missing. Relatives of passengers on the missing malaysian jet are protesting in beijing. Have accusedembers the malaysian government of covering up information in the search. They were notified via text message that no one had survived. Suspended today due to weather conditions in the indian ocean. Michelle obama gets a little workout. The First Lady Joining a demonstration of the traditional exercise routine called tai chi. ,he told students to aim high citing Howard Schultz as an individual from a modest background who has succeeded. There are two sides to every argument. One of the more polarizing ones, minimum wage. Raising the minimum wage would raise the wages, not just of employees now below the minimum wage, but also millions of people just above. Differentials were preserved. It would make a real contribution towards what should be a very basic value in our economy. That if you are prepared to work fulltime, you can support a family. This is a very bad idea from a number of perspectives. The businesses would hurt job creation, especially among lower skilled workers. I dont think its an accident that when we raise the minimum wage, we now have teenage unemployment over 20 . No agreement there. The former treasury secretary Larry Summers is all four. He says the u. S. Is at risk of becoming a down to now be economy a downtown at the economy. There are two americas. A set of people who live one way and a set of people who live in another way. Justtruck that its not income inequality that is increase over the last generation. If you look at the improvements in life expense and see, they come to the upper half. Life expectancy. If you look at educational achievement, the gaps between the children of the affluent and less affluent are rising. If you look at College Attendance come easy something similar. Were losing our status as a socially mobile opportunity society. We are seeing increasing cleavages within our population. Cleavages in which people live and how people get around. Cleavages in the medical care. Overall, its differences in the lives they lead. I dont think thats healthy for the unity and ultimate strength of our country. The president of the center writes, lets put all of this in perspective. This has been a bad recovery. People hear a lot about the jobs. Even those who have had a job, we have not seen the real wage gains that the left and expecting and are used to. There. The median Family Income has declined over the recovery. When they say, hey, you can get paid more, it is very popular. Group ofget a economists to say, hey, this will have no impact on employment. We have a bunch of fancy studies and politicians have something they feel is bulletproof. It doesnt her jobs and raise income. It doesnt seem like it would have that much of an adverse affect. It really is targeted on a small section of the labor market. Away. 0 jobs that would go that doesnt seem like a big number. Trouble is, its a very big number if youre in retail trade or eating and drinking establishments. This is where the low skilled workers wind up. Its pocketed distress with wider gains. That is a recipe to do something that is not very smart. Heres one thing both sides can agree on. In minimum wage hikes come its not the allencompassing solution to close that income gap. Thatm under no illusion raising the minimum wage is enough or is sufficient or is going to roll back the kind of trance that we have seen over 25 years. That is going to require much more. Ultimately, what is probably most important is education. Citizen schools and organizations are focused on extending the school day for children. Thats looked at Research Demonstrates the magnitude of differences between the children of the more affluent and the children of the less affluent. It takes 10,000 hours to achieve real true expertise. There is a 6000 hour difference in the amount of attention and enrichment attention that children of the fortunate and those of the less fortunate get. Going to be perpetuating this inequality from generation to generation. There wasnt always such an income gap in the u. S. Rapidly and at roughly the same rate across a number of different eight age groups. The startup that is making Virtual Reality a reality. It is called oculus. It is about to revolutionize the gaming world. One of the worlds top is sailing races. That is coming up. A lot of money to get you there. This is lunch money on bloomberg television. Also stream live on bloomery. Com from your tablet and your smart phone. Im adam johnson. Todays wild card we are setting sail and going around the world. The global ocean race. It starts on october 12 in spain and ends in sweden. Thousands of sailors dream of earning a spot on the professional team and the volvo. Only the toughest and most skilled get to sail. Olympic and world champions dont necessarily make the cut. Then there is charlie and cardinal they have sailed for brown universities nationally ranked team. It was their business and economics degrees that are going to help enable them to compete against the Worlds Toughest and best funded sailors. They spoke to alex deal earlier this morning. We know that at the end of the day, this is a business. It does take money to compete and get to this next level. Fortunate topretty see it that way and we have been able to make the most of our opportunities and create opportunities for sailing. Versus just show up and go sailing. In terms of attracting sponsors, how long did it take you . This is basically a 2. 5 year mission. After we competed in the atlantic race, we were put in charge of the volvo race and we have been working with them for 2. 5 years. To tailor youre marketing to each company you try to hit. Tell me about this business inside. A struggle of is conviction and malleability. You are what you are. Toevery sponsor would like see something different. You work for them. Its all about their return on investment. We wanted to make sure we had a good plan to work with all of our potential sponsors, not only the ones we end up representing in the race itself. We talked about your brown degree and you brought up the turkish medical devices company. We were a team looking to do the race and they were a Company Looking to be a sponsor. Met and were able to get in front of each other and found out that we had a lot of the same core dna. We are both young and ambitious and looking to take the next step. Raceoth of us, the ocean is that next step. We have a great relationship so far and we look forward to rying through the race itself. Robots that can go to the meetings for you. We will introduce them to you. A new Virtual Reality that is about to hit the gaming world. That is ahead in innovation. How about some google class from this morning . You do have new glasses. Show off the new glasses. I dont know for comparing glasses here. These might look a little cooler. Put those on. Dork withok like a these glasses . You look like harry potter. This is lunch money. All streaming live on bloomery. Com and your tablet and smartphone. Im adam johnson. Robots have come a long way to friendly. They talk and some can even help you skip meetings. Welcome to robo. Is the International Robotic summit. All the latest robots come to strut their stuff. Stealing the limelight at this show is dont feel like going to the meeting . Hes got your back. He takes videoconferencing to a whole new level. Its a machine that we call mobile telepresence. It lets you teleport yourself to a place that youre not physically. Its your avatar that goes and meets people. Down andan do the dirty and dangerous, too. Its a walking, talking rescue robot. Maybe it will be used in an emergency situation. Its big business. Organizers for this event to save the industry is growing at a rate of 30 per year. Are particularly popular. One question everyone is asking, its how much longer humans after decades of false promises of Virtual Reality, that is going to feel more real. Much of the credit belongs to a startup called oculus vr. They have produced a prototype. Gamers are excited. Now, i am wearing an oculus rift. A Virtual Reality headset. Here i am, flying up into space. I now see the enemies so im firing my machine guns. The maker is making a big promise that Virtual Reality will finally feel real. What if it were perfect and we could have an experience with full body language, full presence. Luckey created the prototype in 2012. That was the beginning. This was your hobby. Now you are the cofounder of a company that is worth 75 million. You get to live your passion. Its pretty great. A lot of people are a lot smarter at what they do than me. One of the people he is working with is brandon aribe. I grew up in the 80s and 90s. There was a lot of expectation and excitement around it. Now is finally there. Realize that this has potential to change the world. Oculus has a new technology called positional tracking. When the player leans forward, the character leans forward as well. Optics technology has advanced. We are friendly able to deliver on the promise of synthetic 3d environments that are photorealistic which we could never do before. They have accomplished a lot with this version. Any nausea right now. Its almost like im there. Brought out some competition. Sony Just Announced project morpheus. Those that oculus are not worried. We have now proven that there is a market. I am a huge sony fan and i hope they take it seriously and deliver something great. Both companies have many hurdles of them. Its not clear whether the biggest Gaming Software developers will ever embrace new technology. There is no release date. By an oculus rift when its ready. Is that in 2014 . We will see. Here is one innovation you dont have to wait for. It is called the flip onaut. Footbonaut. We are coming up on 56 past the hour. That means bloomberg publishes on the markets. Bloomberg television is on the markets. We are in the green again. A lot of bouncing around today on some mixed Economic Data this morning. Right now, the s p 500 is up a little over five whites. The dow was also up. The nasdaq slightly up. Way. Hoping it stays that lets also take a look at how the russian ruble was trading today. We have been monitoring whats going on in ukraine. We are seeing the ruble actually a bit mixed. Earlier, up to the third day as companies were looking to buy me the tax deadline. We are seeing turned downward. Dollar bulls this is your moment. Time for some insight and action. The team and city making the case for the dollar. Let me ready for the argument. Bullish fans the behind us. The better dow adds to it. We can see what has happened with all the bad data. Retail sales are a lot less than expected. That is behind us. Accelerationan excel ration in the Economic Data. Argument number two, weakness in asia. The u. S. D be here in instead. Japan will be a new sales tax. Hat kicks in in april meanwhile come in china, we find out overnight that urbanization is slowing by about 30 . Urbanization has taken people from the farms and bringing them into the cities. That is bringing the middle class up. That has been the whole change of paradigm in china. Looks like that is not the same story. That is bullish the dollar. The g8 effectively gives the boots to russia. Reducing it back to the g7. When you have that kind of byertainty in europe, default, that argues for being in the west dollar. You take a look at the dollar and you understand why. Here we are over the past couple of years. 23 different strategists who follow the dollar. 21 of them think we are getting higher, up four percent over the next several months. I know four percent over several months does not sound like a lot. That one works. There is the argument. Dollar bulls, this is your moment. Is it your moment if you are investing in russia . Scarletning, fu spoke with jay j jordan. He went from a russian bull to a bear. 1998. Went in in we invested in russia heavily. We built the largest Cable Tv Network in russia, which we sold in 2006. It was a legitimate trading on the london exchange. We look for opportunities that we have backed away because of what were seeing in russia. It is the rule of law there. Foreign assets are under assault. We are very frightened. On the markets in about 30 minutes. Talk to you more about whats going on here and abroad. Bloomberg west is next. Live from pier three in san francisco, welcome to bloomberg west. Where we cover the future of business and innovative technology. I am emily chang. President obama has a new plan to curb and hopes it is workable. It would end the collection of american phone records. Is it enough to ease concerns in the Tech Community . We will have much more on that, later in the hour. Today, a bear