Transcripts For BLOOMBERG Street Smart 20131230

Morning to the 30 year, getting closer to four. As it climbs up, that could present problems for banks in a lot of different ways. And the dollar versus the yen, even though i have switched entirely to bitcoin, ben bernanke and paul krugman are still big users of the dollar and not into the digital currency. Blog postposted big saying it is evil and reportedly a letter from his College Roommate saying why it does not work economically. People one of the many sticking with the dollar. I guess there are others. Lets look at the top three stocks that im keeping an i on this hour. One of them is disney, trading at a record today. Analyst raised its looking at its. Obust content cycle crocs as well. Blackstone is buying a 200 million stake in the company. They will turn around and buy back shares with that. Was supposed to be acquired by apollo tires of india. It is now canceling that acquisition, because the two parties had trouble getting financing. Now they are suing each other over it. Cooper was lower earlier and now it has turned higher by more than 5. 5 . Now onto the big story today. With six weeks to go before this sochi olympics, terrorism is casting a shadow over the winter games. At least 30 are dead after two days inbombings in two the same province as sochi. There are new concerns over security at the gains. Lets bring in our panel of experts to discuss that issue. Rick nelson is senior associate at the center for strategic and international studies. Is here, andin fred burton is Vice President of intelligence at stratford. He helped arrest a man behind the trade Center Bombing back in 1993. Thank you all for joining us. Lets turn to you, fred. Look at this situation, there has been a lot of talk about security, not just at the games but elsewhere in russia, surrounding the games. Someone who has had experience securing an olympic games, what do you think russia can do our needs to do in this situation . Its going to be extraordinarily difficult to secure the transportation hub leading in and out of the olympic venue. Having protected olympic athletes at these kinds of events before, the focus will gear down toward the Olympic Village to make sure that the athletes are safe. It really is a daunting challenge to try to just secure the perimeter and the infrastructure leading to and from sochi. Let me bring in kimberly. Russians, as opposed to what we have to deal with in our free country here, they can just throw people in prison whenever they want, accuse them of tax evasions or get some punk rock girls and throw them in a work camp. Theyre putting so many resources into protecting sochi. Putin has a personal stake in making it work. The person who leads the is aern Federal District very close food and ally. So everyone has a strong interest in making sure that andrity in sochi, moscow, st. Petersburg works well. My biggest concern is about rush outside of those areas. My concern is for the russian population, not the foreigners coming in. So they could hit a soft target a few hundred miles away. They will pick another city to hit or another set of soft targets. Theyre protecting train stations, they could hit soccer fields. Who knows what they will do next . Greg scheuer talking about a country where there is a certain ability to restrict movement, for instance of people or to jail people if that is needed. With a focus on sochi, how do you see these type of terror acts happening . It has been talked about a lot that there would be issues outside of the area where the olympics are being held. This is a very potent situation where these terrorist groups this particular instance, you have some groups that have had a low level conflict with russia for over a decade now. Iny have a visible target the sochi olympics and at the same time they have the rest of the country which may receive less protection because russia is still focused on so she. Quite aians are in security conundrum here, even though they have extensive capabilities. Put it into context for us, fred. When we think about terrorists, we typically think about qaeda. What kind of terrorist are we talking about here in russia . Looking at the kind of attack that it is feasible we will see continue, meaning it looks like until the russians hunt down the actual bomb maker with the forensics linking the two blast, that is going to be critical. First and foremost that is on their minds. I can tell you firsthand the challenges, for example in atlanta, the bomb went off outside the security perimeter in centennial park. It is really difficult to clamp down all of your soft target sets from hotels to buses to any other kind of mass transit going in and out of the city. So who are we talking about, really . It is not al qaeda that is causing problems for Vladimir Putin. They have their own slew of terrorist organizations in the area. One group has been fighting in the chechen insurgency for 15 years and is now heading up the islamic insurgent group. It is not very well organized. They are loosely organized and he has called on his followers to do everything they can to disrupt sochi. One thing important to keep in mind is that the russian government is only going to allow people into the sochi area who were on the official government approved list. Its going to be difficult for outsiders to get in. You were talking about how putin can throw anyone in jail. One of the things that has made the insurgency last is the antiterrorist techniques have been so violent and indiscriminate that you have a Large Population of people throughout the north caucasus who are feeling despair. That adds to the potency of the cost. It is a tactic that you would try to increase these terrorist attacks to increase the crackdown, and then increase the sympathy. So it is a tertiary effect that could be a goal of this. I think youre absolutely right. My concern is it will lead to a massive ethnic conflict after the sochi games. Putin is going to be reluctant to make any mistakes, but then afterwards, to keep himself in power and reassure his closest supporters, he has a strong incentive to take up the cause of as nick russian or nationalism. I am concerned about the long term consequences. Can the International Community offer or does it want to offer Vladimir Putin and russia any help in this . We have obviously dealt with these issues before. Intelligence and assets that we could add to sochi. Are we going to . We will be looking to protect our athletes and those of the International Community. The problem is twofold. Russia has not always been willing, open, receptive to getting u. S. Or Even International assistance on these times of manners of matters. Direct there are not threats to the u. S. Or the u. S. Interest, we do not have the depth of intelligence as we would with other targets. , ifimberly, very quickly this scenario unfolds like you described in the wake of the gains, International Pressure has not historically made a big International Pressure. Theres not much the International Community can do at this point because putin has made it clear he is interested in only limited cooperation with the west. Russia has Nuclear Weapons and a veto at the un security council. In themits what anyone outside world can do inside russian territory. It aswill keep an eye on we get closer to the gains. Up, the best performance of this recordbreaking year are next. Plus, hightech on the high seas. The Worlds Largest solar powered boat is coming up. 2013 has been one for the record books in terms of stock performance. Julie has been compiling the stats for us all year long. Do you have a book where you write every single Closing Price . No, sorry. That seems a very tedious. I have been using my handy dandy bloomberg terminal. In terms of records that we are looking at, it is the biggest outperformance for stocks over as fare we started as our data goes back, to 1978. The s p up 29 , treasuries have returned or lost 2. 3 . The market cap for the s p 500 is up 2. 7 trillion this year, the biggest ever. It has been a good year for stocks. When people look at their end of your statements and realize they have lost money in bonds and it is that much it has gained momentum during the year. The amount that has gone in to mutual funds has not been as much as you might expect. The socalled great rotation has not been as huge. You have seen a lot of money go into stock, the most since 2000. It is split between mutual funds and etfs. Fundould think the mutual flows would be a more accurate reflection of what Retail Investors are going are doing. You still so relatively robust auctions,treasury partially because foreign governments are still buying treasuries and partially because a lot of people have to own them as part of their investment strategy. Charts isthe greatest looking at how gold has done compared to the last 13 or 14 years. Saying it proves all the austrians wrong and it is true that all you have to do is just cut Interest Rates and make do so much, and quantitative easing that you cant even sleep. For peoplely works invested in the stock market. The gold return is the worst since 1981. It has been a longtime since the gold bugs were this unhappy in a given year. Do you think it is because people were selling gold to buy bitcoin . Im sure thats what it was, matt. If you look at bitcoin, it is sort of the opposite. Coincidentally it must be equivalent to the dollar going into bitcoin. Somebody call them hard money clacks, the people that want guns, water, and goal. Now they could get guns, water, and bitcoin. You have to make it last now. Our closer says it is not just about the markets. Dont forget the progress washington has made this year as well. She is a top Portfolio Manager and she also ran citibank Global Asset Management Value Investment group. You are saying congress was getting along at the end of the year. On the day of the taper, markets boomed. I think that reaction in the market, the springboard was set by the day before, the announcement that paul ryan and patty murray had come to a bipartisan budget agreement, which is the opposite of what we saw at the end of the last previous two years. All of a sudden theres some optimism that if the government can get out of the way of causing these disruptions and economic uncertainty, then you could have a stronger economy. One of the big reasons for the lackluster recovery is the unwillingness of corporations to spend and invest in higher because they lack confidence. If you could get confidence in addition to the slowly recovering economy that is a lot of faith in the u. S. Congress. There are still a lot of things they will have to address in one would hope a bipartisan fashion. It remains to be seen if it is a trend, but it is something different. I think is the time of year when you are optimistic. Finish, thea strong strongest return of the s p 500 since 1997. We are saying maybe will take off and 2014 instead of crawling along like we did in 2013. Growth. Gdp shocking. Very strong growth. In a good way. Expecting maybe 3. 5 for the fourth quarter, which makes it a decent year. To taper insed september after having signaled it. We are sliding out of the new normal . I dont know what the new phrase will be. Think we will have fits and starts in the new year . What is your outlook for the first few months of the year in terms of the market . It has been consistently strong. Is also the lack of volatility. It has been a oneway street. It would make sense to have a correction, but going into next year, while the Federal Reserve has basically said the economy seems to be on a sustainable path, at the same time they are continuing a massive stimulus program. So it is the best of all worlds, thinking the economy could be firmer but the fed is still people who will see their bond funds and think, omg, i need to get out of stocks and get on the bus with everybody else, right . 2013 was the first year where inflows, thequity first year since the downturn. Even though we know this anecdotally and from clients, people are wondering whether or not to get in, and they are under investing. Hard to get in after such a strong year. Thank you so much, barbara. We will talk to you more later. Sailors use the stars , andvigate the high seas now the Worlds Largest solar powered boat is next on street smart. The Worlds Largest solar powered boat is an international creation, and we caught up with the ships captain. I am the captain of this extraordinary machine. It is known as planet solar. The boat was built four years ago in germany. The owner was seduced by the idea of doing the first world tour with the biggest solar boat in the world. It is a huge, floating solar panel. It isgo from a to b quite a challenge. It is good to have a partner like the sun because my personal energy is not sustainable. Bu grow re watching her you are watching street smart. It has been a rocky year for apple, but tim cook is still bringing home the bacon. There are a couple of parts to this compensation story. It is true that tim cooks compensation was up about 2 , but it was in part because of the stock performance. Lackluster this year. You probably recall a couple of years ago the board gave him a big vote of confidence, gave him a million restricted stock units, worth a lot of cash. They were going to invest half of them over five years and the rest over 10 years. To show his commitment to shareholders, some of those will vest annually. Because of the stock performance, he basically had to give up in the neighborhood of 4 million. In a year when Technology Stocks were pretty hot, what was happening with apple, despite all the big revenue and profit it was posting, everyone has an opinion on that. Notably, carl icahn, who try to put a lot of pressure on the company this year. He wants them to do a big buyback. Apple has not budged. Isck so now the company putting this on its annual meeting agenda. Itsate february apple have annual meeting. They told us late friday that on the agenda will be this carl icahn issue. The board saying they dont want you to vote in favor of the buyback, because there are a lot of things that apple could be using its cash for, perhaps better for the company longer term. Not to suggest they are not looking at ways to return more shareholder money. An interesting annual meeting to compare to last year. Now the focus is on carl icahn. At beginning of the year the focus was on david einhorn. In a lot of cases you have long term shareholders who would rather apples been more of its cash on some of these next week things. The challenge for investors is they are waiting for the next big thing in not exactly sure where apple is going. Know we are still a couple of months out from that. Are you getting any kind of feeling from shareholders or analyst or the company itself as to whether there is any real support for carl icahn behind this kind of buyback . To theecently spoke major pension fund about how it feels about all of this. It certainly did not suggest it is in the carl icahn camp. For the average investor, a lot of people are frustrated. They look at the apple story on paper and dont really understand why the stock is lacking. Whys never easy to explain a stock may struggle versus other stocks. If you look at catalyst in the reportrm, the earnings in january will show how all those new iphones that came on the market late in the year sold during the holiday period. It could change the story overall for investors. Of the investor, what have you done for me lately . Have failedle may to well investors, 2013 was a big year for google. Rage, glass was all the and the stock hit at a record high. In a rare interview, eric schmidt gives us his predictions for the new year. Im eric schmidt, executive chairman of google. Everyone is going to have a smart phone, and the fact that so many are connected to what is essentially a supercomputer means a whole new generation of applications. The trend has been that mobile was winning. It has now one. Won. As now the arrival ofut big data and machine intelligence. Find people and talk specifically to them, to rank what they are doing, to decide what to do with products, changes every business globally. The biggest construction that we dont know what is going to happen is probably in the genetics area. The ability to have personal genetics records and to start gathering gene sequencing will yield discoveries in Cancer Treatment and diagnostics over the next year that are unfathomably important. The biggest mistake i made it google was not anticipating a rise of the social networking phenomenon. In our defense, we were busy working on many other things, but we should have been in that area, and i take responsibility for that. Google is very much investing. We see strong growth all around the world with the arrival of the internet everywhere. In that sense. Google benefits from transitions and transitional injure industries you read even when things are tough in the country, it is smarter to move advertising from others to so we win whether the industries are in good shape or not, because people need our services, and we are very proud of that. How can we get the new systems deployed . We want to do that as fast as we can. Barbara, what is your outlook for technology as a sector next year . The stocks we were just talking about, apple and google, certainly are successful will have more successful products over the next year. There is some visibility there that makes you more comfortable. There is some spending ahead of we do have a stronger economy over the next year or two. Is one by one. It is hard to group them. There are probably some of each that would be attractive to would you be caught dead wearing google glass in public . That is a good question. They are not attractive. When you walk into a room with someone else wearing google glass, you either want that person to leave, or you want to leave. Up andt a bitcoin meet there were three or four people wearing google glass. It is a small subset of the population. 140 robots, one california will take you inside where the model is made. Plus, the genesis for many of this years most popular gifts. The 2013 year in review from tumblr, coming up. Tesla pumped out an average of 500 model s cars a week at its factory in fremont, california, all thanks to some pretty cool robots. We went inside for exclusive look. Check it out. We are here inside the tesla factory getting a supersecret tour. The car is made from scratch, essentially, here in Silicon Valley. In the early days it was a little bit quieter. We are doing 500 cars a week. Were not using the full factory yet. One day very soon we are going to use it all. We have had Car Companies in Silicon Valley in the past, but people said it was too expensive to build cars. Higher,rice is a little but we are convinced that by integrating a lot of the manufacturing here, we save money with logistics. We have about 140 robots making the body structure of the car. It is very highly automated. It looks like a game. It looks surreal. These guys are never tired. Even for us, it is pretty cool. I saw a tesla driving through wrong spill yesterday. They are undeniably nicelooking cars. I just discovered that two of my cousins own teslas. City. Live in the there are not too many of them here, but there are apparently on the west coast. Where people can afford them. They are centered around Silicon Valley, new york city suburbs. In carhave been factories before. Is it that much more automated than a typical plant . No. Most cars are mostly made by robot now, arent they . Are not. Ey there are still a heck of a lot of people necessary to run them. I have seen robots in car factories as long as i have been going to car factories. They have always been there. But it is key to point out more robots now. I didnt see too many people every it is a former gm factory. Paint shop and any factor you have to have a robot, and grabbed the frame and turn it over and dip it in the paint and pull it back out. Thats how it goes. We get more credit for calling a robot a robot. Before it was called a machine. Now it is a robot. Coming up, we will debate the difference between robots and machines. We will show you why you need to invest in stocks. Chart attack is next. It is time for chart attack where we show you a chart that will hopefully make you smarter and make you a little bit of money. Even after great year for stocks , we will talk about why they will continue to do well. Now is a good time after this past year for people to really think about if you are under invested in the market. The majority of people apparently are, as we see from statistics and anecdotally. That is understandable because of what happened. These are couple of things to keep in mind. If you have money that should be in. He market, leg it you say to yourself over the long term, the longterm return orthe stock market is 9 10 , though it is delivered in an uneven way. About half of that comes from dividends. Dividends are an important oer sin of total return. Pays dividends says i believe a lot of my earnings are cached. Im confident in my ability to continue earning this, and i also believe in returning cash to shareholders. It is higher than inflation. Substantial. Some Companies Pay high dividends. If you invest in companies that have a growth outlook, they will grow that dividend over time. Is there concern that as rates start to go up, people look at the competition between treasuries when rates start to go up and these high dividend payers. Are we going to start to see some of that phenomenon . I would say dont invest in something just because it has a high yield, but investing something that has a dividend and will grow that over time. Next before we go to the table, isnt it shocking to see 3. 9 compounding annual growth rate in the Consumer Price index . Doesnt that seem like a lot . It does in the context of the last few years, certainly. Have had high inflation that balances out low inflation. It seems like it is poised to continue. It includes the late 1970s, early 1980s, which was a high inflation time. Lets get to the next chart. We are looking at longterm growth of earnings and cash flow. The point is, if you have cash and you are saying should i put that in the market, leg it in. I wouldnt put it all in at once. You will either buy more cheaply , but the chart makes the point, this is why you invest in stocks. To participate in the growth and of cash flow in corporations. The s p earnings are participating in that, the price appreciation is showing up, and you will get your total return beyond that. This is the point of why you invest. Thank you so much for coming in today. She joined us as our closer today. We will be right back. If you missed everything that happened during todays session, dont worry, as we are getting you caught up on the stocks you need to know about. It is time for the top 10. I will kick it off with my Favorite Company, monthlies my Favorite Company will stop they are selling their cookie and cracker business to nature foods. They are owned by a private equities firm. That is your Favorite Company . I think they are the worst named company in the world. What a horrible choice. That i love it because of that. I always picture eddie murphy going hercules, hercules. Mondelez. Citing a decision by medicare and Medicaid Services to lower their reimbursement rate i49 for screening devices that help predict breast cancer. Twitter down more than 4 . The stock for most on friday since its debut on the new york stock exchange. Capital downgraded the shares, saying they had risen to far, too fast. I do not think it was just the report that triggered it. Momentum. More sellers than buyers. Ford down a fraction. U. S. Sales will surpass 2. 4 million vehicles this year, proving Alan Mulallys new strategy is a suggest is a success. He sold off when rover and aston martin so the company could narrowly focused, and wants to sell one product around the world. It has pretty much been his strategy for a decade now. Extract or beryl is down almost therejecting the proposal restaurant put itself up for sale. Cracker barrel plans to stick with the current plan. Favorite five, your shoemaker, crocs, up 21 , rising after blackstone announced it will invest 200 million in the company. The ceo, john mccarville, announced plans to attire. Am i the only one of here who has a pair . I do. I do not have the clogs, but i have slip ons. I would get the clogs. Go with a classic. In fact, i think i am going to go out today after this and buy a pair of classic crocs. It is crocs weather right now. The ceo retires and the stock goes up. 200 million does not hurt. I am sure the investment was contingent on they agreed to invest if the ceo leaves. I thought it was a great story when i heard tom keene tallied this morning on bloomberg surveillance. The tire manufacturer is pulling out of a pending deal with apollo tires. Apollo was going to buy super tire for 2. 5 billion, but there was a valuation dispute. The largest u. S. Home lender will pay fannie mae ive hundred 91 million to resolve loans that originated before 2009. Unders from wells fargo to bank of america have agreed to pay fannie and freddie for losses in an effort to cap costs incurred by the housing crisis. Facebook down almost 3 . A Research Study shows the site is losing popularity among teens. Wrote facebook was dead and buried for young people in the u. K. , who are moving onto cooler things. The number one stock of the almost 3 . Ey, up the stock hit an alltime high after an a grade to guggenheim buy from neutral. Iron man 3 is carrying hollywood to a new high for 2013. What is amazing is that these movies make so much more money throughout the year than they do in their opening weekend. Even if they make a few hundred million in the opening weekend, they can make another few hundred million the next few months. Toys, lunch boxes, thermoses, and all of the other things. And you have got all of them. I heard the closing bell. What an interesting stock market it has been today. And minus. The s p is down both publicly and confidentially. I checked. You do not want to believe everything a spokesperson tells you. They said it is not for sale. Things could change. What is interesting about this story is that you have a chinese billionaire i think he is a billionaire interested in making such a splashy investment. I do hear from some and mende people i speak to, lawyers and bankers, some and mende a people,some m lawyers and bankers. The government is releasing some of the restrictions around investing outside of china. We could see more and more of this kind of activity, Going Forward. It may be splashy. The stock has done really well this year. That their earnings are projected to fall 30 this year. They fell 30 last year. This is not about earnings. Washington post was not about earnings either. Probably dow jones was not for rupert murdoch. Think about upholding democracy. There we go. Speaking of democracy or the lack thereof, and where french or chinese billionaires do not want to be, Francois Hollande has won approval for a 75 tax on anyone who earns more than a million dollars. A millionaire in euros, i guess. I said it all in the headlines. Taxes of 75 on salaries above a million euros, 1. 4 million. Infuriated companies and soccer teams which threatened to go on strike. , who won said he did not like the rich, announce the tax last year as part of the president ial year. We remember it because it was so insane, and it actually is going to happen. You are actually saying hollande correctly, even though you are a germanspeaking guy. Likes france is next door, so you learn these things. For someone from america, it is absolutely nuts. You are from a household that has a connection. Germans see it as not as insane as we would, because they are also a social democracy. Older people are cared for. Kids have health care. All the things people do not have to work, which is the best part of it. You can just get paid. Keep in mind there is a cap. It cannot be more than 5 of the company revenues. The company has to pay tax on anyone who earns more than a million euros. It is extremely hard to start a business they are and, god forbid, if you are successful, you will get taxed. You had highprofile exiles. You had your deferred due looking elsewhere. You had the ceo of lvmh. There are probably a lot of people who did not talk about it, but quietly left. Lot of really great places to go if you live in france that are not far away, and exempt from such , speakingf people say of benefits, u. S. Federal Employment Benefits ran out. Weekly jobless benefits for 1. 3 million americans expired over the weekend. The federal program provided 450 a week to the unemployed after their state benefits have run out. House republicans resisted continuing the benefits without budget cuts elsewhere to cover the costs. At its most generous, it allowed unemployment checks for up to 99 weeks. It had since been scaled back to a maximum of 73 weeks. Of people saying, why is it just this group of people . I got an email from someone we both know saying it should be the young people who should be helped out. They are graduating from school. They have times of student debt. It makes sense to help. But it is harder for an older person to get a job. Also true. Cannot imagine the republicans really fighting this. It is a long time to get unEmployment Benefits. You have this happen at the same time the Food Stamps Program is being cut. You still have 7 unemployment. There is probably going to be fallout from this in terms of people truly hurting as a result of both of these programs we had michael for rowley on, a u. S. Economist for j. P. Morgan chase. He said this will show up as far as Consumer Spending goes. It is going to hurt the economy, and that is not something you can ignore. You know what . When Congress Gets back is it going to hurt the economy that we are not printing more money to pass out . Economy if youe give out money . In the shortterm. Then, we should get out more. We should give out more. Lets look at the stimulus program. Look at qe. Let us help wall street. Why such an opposition to help america . We have been generous in terms of doling out food stamps. No . You do not think it was . And a total dollar term . It is being cut right now. I am just saying. In the last five years, how much money we have handed out, compared to history. On what, Government Programs . Are you going to count qe or no . Counting qe. It is everything. Qe is also a program that looks to boost prices. That makes it even more difficult. Let us talk about music. The boss is somebody who might not be happy right now. Not just matt miller. According to billboard, Bruce Springsteen fans got lucky. Amazon accidentally released his latest album, high hopes, more than two weeks ahead of its official release date. Amazon recognize its mistake and remove the songs for purchase, but the songs have already made their way, no surprise, on to file sharing sites. People still by Bruce Springsteen music. He is a legacy artist. People are still spending money, surprisingly. His fans are loyal. It is a big deal when Something Like this happens. Lexus was not a stealth release. It was an accident, correct . He apparently is not pleased. Is it going to hurt his sales, Going Forward . You can make an argument that if you are a Bruce Springsteen fan are you going on filesharing sites . How will they not everyone is. Quickly demographics do not lend themselves. It will make a dent, one with him. Will it make a dent . To the wolfe on of wall street, one of the years most anticipated movies and i think one of the most disappointing. But the actual wolf once a reality show. Jordan belford is pitching and uplifting reality show to networks. The page is he helps others who have hit rock bottom. Redemption to improve their lives. This is according to the hollywood reporter. Andrently interest is high, it makes sense after the wolf of wall street raked in more than 34 million at the box office. What is so interesting about him now . Scorcese is getting killed for this. Before i saw this movie, i was thinking, isnt this just like the ben affleck movie, oil room . Boiler i realized it basically is, but with more cocaine and hookers. Which i am not against. I am not sure what would make the reality show compelling or interesting. Good point. The reality show would probably be even more disappointing than Martin Scorseses horrible movie. Once again, you are siskel and ebert. You keep giving the same reviewer. It was made for the lowest, and the nominator. And you do not like it, matt . She is right. She is right. Maybe we should leave and on that note. Not just for the indie creatives anymore the microblogging site and the biggest trends from this year. X the blogging platform tumbler in 2007. Was founded to put the popularity in perspective, the engagement tends to be higher. The average user will spend 18 session, versus 11 on facebook or three on twitter. Of Creative Strategy joins us for the year in review. Thank you for joining us. Quickly, before we get to the year in review, i want to talk to you about corporate engagement with tumblr. It is not just people posting cat pictures. We were asking you what years they were what some of your and you tumblrs are, mentioned yours. How are Companies Using tumblr for branding . Fax we have had many brands come on in the past five years. In the last year, they have really come in in a huge way. We respect the content they are putting out and try to make content that will appeal to them. Of ais a good example fashion brand embracing this Youth Movement with content putting out some beautiful pieces of art that happen to be advertising at the same time. Speaking of which, we are showing, i believe, some of the s of the year. Some are sponsored by various companies. We are looking at aston krisher as steve jobs. We are looking at someone being pulled up into the sky by balloons. What are some of the top sponsored posts . It looks like almost all of them have been gifs this year. Bit. Fs are big. There is a big debate about the pronunciation, but we will have that another time. Ford. Congressman a beautiful piece of art that shows their iconic shoe dancing across the screen. We had a lot of Entertainment Properties show up. Her bubbly what will surprise most people is, when you look at the list of sponsored brand content, you think, this is advertising now . That is probably the most refreshing thing to see. What separates tumblr from vine or instagram or twitter . What is the Value Proposition of tumblr . We think of ourselves as a network that plays nice with all the other social networks or media networks. Or instagramne are tools to help you become more creative in those artistic categories, you can post any content from any network on tumblr. What is great about tumblr is the fact that we play nice with instagram, vine, youtube, and so on. That is probably why we are number one for time spent online at this point. I found interesting in the year in review stuff you sent over a lot of stuff like the most read blog movies movies, those are massmarket things everybody talked about. Your top tech posts are a little more esoteric, the first being schwartzstz coverage. Hich did get something called the bionicop ter. What do these things say about your audience . You have an audience that spends a lot of time online, looking for these more unusual Technology Stories . Ask most people think of us as being the place for millennials. We are number one there. We have a huge crowd of technophiles and users interested in innovation. I think the aaron sports content content,ron schwartz his passing resonated on tumbler tumblr. He was a pioneer of open access. That shook tumblr in a different way. We see the interactive and seekingsystem out over the potential for that. Toshows the other side tumblr, a place where people come to create innovative content and talk about innovative tech. What do you think they can offer next . You mentioned holograms. What comes after pictures, text, or gifs . What is the next thing . I do not think it will be holograms just yet, but i think tumblr, people are going to be surprised and amazed. T some of the brand work we have huge events like the. Lympics and the world cup the experience is going to be dramatically different. As far as the next big media format, i personally think it is a further evolution of things like the gif, which are just pictures that move. I also like tools like vine that help people be more creative. So we can geek out, which is something we all love to do. Thank you so much. Appreciate it all stop appreciate it. What are investors thinking for next year . Predicting what will happen is never easy, but we gathered titans of industry to get their outlooks. People should not get excessively enthusiastic, but i think generally they should be a little bit more optimistic. I think the main trend of 2014 is going to be more of the slow, painful same of what it was in 2013. Big thing is a question of the United States and what sort of role america is going to play internationally. I hope the United States has our big moment in 2013, that we are viewed as being strong and firm and credible. 2014 will continue to be a very positive year for the market. More so for the economy. I think in our industry are going to be, what does the individual investor do . Are they embrace equities after this market run . Fixedy continue to hold income . Investors are going to maintain their current posture, which is optimism with a dollop of caution. We think energy, on a global basis, is going to be very interesting for us will stop we like certain parts of technology. We think that will continue to be of interest. With the uncertainty in health care, that does create some opportunities for us. I did not hear any bears in there. Did you . I like the spoon playing. As predictions . I think that is an interesting time. Bears. Re no even nouriel roubini. All of the big bears have been flushed out. States competed to open drumtesting sites. Can the system deliver the goods . Amazon shocked the world when Ceo Jeff Bezos said he was actively working on delivery to your individual home by drone. U. S. States are trying to get in on the action. The faa just awarded drone testing to six u. S. States, new texas, anda, nevada, virginia. We break down what the faa ruling means for the future of Unmanned Aircraft. Is it here . It is here, but very incrementally. The faa still has a number of very difficult that nickel issues to work out before you will start seeing drone start in the sky. They have a deadline of 2015 set by congress to come up with rules for integrating drones, but i think it will be sometime after that before you see a huge influx of these. He sat down with the faa administrator, and i want to take a listen to what he had to say about the importance of drone test sites. Shows promiselogy and brings challenges. This provides a structured framework where we are able to conduct research and test operations, and really understand how we can safely integrate these aircraft into national airspace. Is going to mean it move forward and eventually we will see we will see drones delivering packages to our homes . I think it is inevitable. The question really is how much time it will take. Will it be five years, 10 years, 20 years . Just as we see google working on automobiles that are controlled automatically by computer, i think it is inevitable that we will see these aircraft as well. What kind of things are they going to be testing for . They haveis early and not set up the test centers. What exactly are they looking for here . They are basically trying to figure out how to solve all the major technical problems. You think about how aircraft operate now. Planes and the pilot in each plane is responsible for seeing other aircraft and avoiding it. With a drone, you do not have a pilot. There is a time delay from when a video picture is taken. They have to come up with technology that will do what they call sense and avoid. It is not just that. It is controlled by a radio link. What happens if somebody jams that radio link . What if somebody spoofs the gps system and all of a sudden the plane is in another place . Thoseseems like a lot of would be addressed by a Google Program you just mentioned. I know they are making incredible headway in helping motorists leave the car in automatic and lean back and read the paper. We know, it is not quite ready. It is coming incrementally. There are devices that will keep you in your lane and that sort of thing. I think that is how we are going see the Unmanned Aircraft small, incremental steps before they can nail this problem. I know fred wilson said he wanted to do the same thing for Federal Express years ago, but not many people other than the editors of wired made a big deal of it at the time. There is a huge advantage if you are a cargo shipper like fedex, flying people around the world, up all night, backside of the clock. If you could have an office where a guy could come to work and fly the plane from a ground station in memphis, i think it has got tremendous potential, but we are talking decades. Thank you for joining us. Lawmakers are looking to ease the tax burden on digital products. There is a bipartisan effort underway in the house. What is the goal, here . Basically, what we are looking at is, lawmakers are going to try to cut down on duplicate if taxes. And government officials have basically been faced with a patchwork of state and federal tax laws, something that has proven very problematic to both. Starting in january, representative lamar smith, a senior republican in the house, is going to push a bill to try to findmline things, out what Digital Goods are and limited taxation, or merrily to the state where the customer is registered. Say you are dying to get the new beyonce album, and you live in virginia. The retailer is based in california, and the server is in texas. There is a chance that all three states could try to claim jurisdiction. That has caused major headaches for online retailers. To create ae trying structure to better define how these products are treated. They tried to make this happen in 2012. It did not work them. What did not work them, and what has changed since . It was all the states. Wouldo estimated this cost states 3 billion dollars if the original legislation went through in 2012. They lobbied heavily against it. Essentially killed it at early stages. Lawmakers have tried to tighten the definition and give states more leeway to put this in themselves. The nga has not said anything about this. I do not have to lobby for it. They have to not come out against it. You have bipartisanship on this bill. Obviously, not a lot moves in washington, but there may be a bit of a window for this issue. Coming up, it is netflix for the readers four for e readers. Robot thatspider shoots death rays, frying everything in its path. It is time now for the business of media, entertainment, and pop culture. Ebooks are going netflix. Reading has become easier than ever. You can even read on your iphone or your android. It is a company tapping into the market as a subscription service. Access allows users to looks through one of its service plans. It is a little bit different from netflix. And you get a movie on netflix, you do not own the movie, whereas if you do your service do you end up owning the book . For keeps. It is more reminiscent of the netflix model. As much as you can own an ebook or an electronic file. What if you leave the service or it takes you longer than a month to read a book, it is yours. There is no time constraint. Was harkening back to the cd clubs. Is this similar, in that you pay a Monthly Subscription and are allowed to take a certain number of books per month . We have different plans, where you get two, three, or four books per month. If you do not read them all, it does not matter. There is no time constraint. X how do your content agreements were . Work . Amazon is obviously a huge company and has the lead some of the content providers in some cases. And still charges 15 for a book. You are charging 15 for two. How to the economics work . Courts 2011, i first started going to publishers, talking about, how do i bring this model to readers . Think amazon has had such a stronghold on the market, they are looking for alternative ways to get content to people. Something i have said when pitching to publishers is, you cannot beat amazon by being amazon. We need to do something a little bit different, and that is kind of where we fit in. How do you guys end up making money . You collect the subscription fees from your subscribers per make, and then do you guys money yet . Are you profitable yet . How does the model work . We Just Launched number 16 to the public. There is a lot to learn. We should be profitable really quickly. We make money on most of the downloads that come in. You are books are 14 99,two books for and they are 20 books. Apple is not as easy to work with as some of the more open source hardware makers. It is aptbased. We submitted to apple and it is on their device now. No problems whatsoever . Apple andnt than android . Correct. That is interesting. Would nott know why i do this at this point, as somebody who probably reads a couple books a month. He said you just started the site. Are you guys doing any Marketing Campaign . When you have a name that is so lknown in the industry we have different partnerships we are looking to expand on. Obviously, Digital Media is a way to attract people, and you can see what happens instantly. If we run a campaign online, within an hour, we can tell how that is working and iterate from there. Obviously, we have a Big Marketing push. I think channel partners, working with partners, is going to be instrumental. Thank you so much for coming. The founder and ceo of entitle, an ebook subscription service. Coming up, why chinese scientists there is a green pig. Creating hogs that grow in the dark. A rough year for washington, until maybe the very end. We gathered leaders from industry and asked what advice they would give washington in 2014. An expert on relationships, but i know if you spend all of your time talking about what the status of your relationship is, your relationship is doomed. Au would be better off having cream soda. Go for a movie together. If they could just ran down the warfare, i think that would help a lot. When i think about washington, i think about leadership. Or unfortunately a lack thereof. Leaders bring people together with differing views, find common ground, and create compromise. When i look at washington, that appears to be missing, leadership that says, it is not my way or the highway. The people that have elected them want them to actually accomplish something, and to work with the president in order to solve the issues to do with the budget crisis and our deficit, so that our own people have confidence in the way the government works, and so that international respect is returned. What is most important is to have a stable and predictable budget outlook. Crisisery two months approach causes tremendous uncertainty and stress in business, and that has a negative impact on the economy. The one piece of advice find the common areas you can all agree on, and agree on them. It is time for weird wall street, where business is czar. Izarre is just business bizarre is just business as usual is our tagline . I am sorry. It is the penultimate day of the year. Word again. S that even mothers are saying no thank you to flip phones. A brooklyn resident and his friend were walking in central park when they were accosted by a guntoting mother. They handed over a leather briefcase, credit cards, 113 in cash, but when the thief saw the threeyearold windows phone, gave his victims a surprised look and handed them back. Is that surprising . On that thing is what, five dollars . Why did he still have a flip phone . Good question. Some people like the flip phones. There is less risk of not dialing of butt dialing, perhaps. And if you are kind of addicted to using a phone like this and doing other things with your hands at the same time you know there is a story about pigs. They are being turned into literal guinea pigs. Not really literal. Figurative guinea pigs. Injected piglet embryos with dna from jellyfish to turn them into glowinthe dark pigs, all in the name of medicine. The people behind the project say this could help them develop cheaper and more efficient drugs for humans, and they are not stopping with hogs. Next in line, fluorescent sheep. The goal is not glowinthedark pigs. It is the idea that you can splice one creatures dna onto another. And what better way to show it been to have glowinthedark eggs . Pigs . I am not sure how i feel about that. Although if you said that to deer deserve to die. Pigs are smart animals, emotionally intelligent. You do not eat pork . I have tried to cut it down. Actually, wild boar Everybody Loves the baconator. It is delicious. Diy laser guy is a homemade drone guy. His latest creation, his most terrifying as of yet she has turned a toy into an attacknid, built to attack other robots, with a blue laser that can fry anything. What 13yearold would not love that . It is approaching 56 past the hour. Stockslike that where ended the session. Not a lot of movement. The dow ending higher by 26 points. The nasdaq down just 2. 5 as we head into the end of the year with the s p 500 up about 28 . We are seeing treasury yields continue to get higher. You are seeing a bit of red. Still close to 3 on the 10 year. Joining with joining me with where stocks and treasuries are headed in the new year, matt miller, who has been with me the past two hours. I have been here the last two hours. We will find a reason for you. As we see these deals pushed up and we get into the new year, what are you looking at for the 10 year . Our estimate is 3. 5 . Level inmaybe a january if we get a good solid december nonfarm payroll level. Every thing says the fed got it right, the economy is growing. The yield will continue to back up and the purple statement. I wonder what you think about the poor performance of gold in 2013. Is that another data point that proves the fed got it right . The lack of fiscal demand for gold will depend on the strength of the eller. It is that story. If risk is not there, if inflation is not there, we have seen that kind of weakness. In thehere any suspense treasury market, going into 2014 . If you know the fed is going to keep tapering, you assume the economy will improve to some degree, if in fits and starts are there any Big Questions that you are looking to get answered . If the fed does not get it right. We are expecting 3. 5 the end of last year, but it could easily if the fed decides this is going full bore and they will taper a little more in september. To the contrary, if the fed gets it wrong and the economy goes into a stall, you could have the bond market rally. If we assign probabilities to them, they are relatively small. They are still there, nevertheless. Do you have a favorite trade going into on a 14 . Playing the Global Growth thing. In my opinion, one of the big caveats is what happens in the emerging market. It will be a have and havenots in reo that will help export growth in developing markets. Expectingct to much for europe. It is just a question of to what degree it is a positive trend. Would you look at sovereign debt . It would have to be short duration. There are political risks, fiscal risks, Economic Risks to go along with that. You saw that trade happen prematurely in italian, spanish, and portuguese debt. Along with the ecb supporting it, the upside on those sovereign yields. Thanks for coming in. Happy new year. Matt miller, thanks for hanging out, just because. On the penultimate day of the year. Exactly. This is taking stock for monday, december 30. We are going to speak to the president of the New York Times Alliance Just one day before the new york square times square new years party. We also post 2014. I talked to an executive to hide all