Transcripts For BLOOMBERG Street Smart 20150408

Release their data. Street smart starts now. Minutes from the federal reserves march meeting show policy makers are split over whether they would raise Interest Rates in june. Officials talked about Energy Prices and the strength of the dollar. Two policymakers said the economy probably would not be ready for tighter policy until 2016. Google is stepping up plans to offer youtube as a subscription. The Company Working on a service that lets users pay to use material online without advertising. This will put google in competition with netflix and hulu. Luke fans will soon be able to purchase sections of the floor on which the blue devils won this years ncaa tournament title. They are in final talks to sell the maple floor used. They determine whether the university will buy it outright or with the help of a third party. The price is still being negotiated. We have less than an hour to go until the close of trading. Lets go to the breaking news. Carla is looking at the aftermath. Carla it feels like much of do about nothing. The minutes from the latest fed meeting show there is a split between policymakers, which reflects a division among comments on whether they will begin lift off sooner rather than later. You can see the big dramatic move. And a sharp come for major indexes. Right back to where we were much a do about nothing. The big mover is oil. It was more than three times the average analyst estimate. It was the biggest weekly build in about 14 years. You could see oil collapse. Now down 6 . Brent went lower, which sent european stocks down briefly. Earlier they rose above the record close from 2000. Oil and gas is by far the best performer. Portugal was the bestperforming western european market. I know you were talking about that. I have one last note. The shanghai composition close up. It did top 4000 for the First Time Since 2008. Lots of buying for retail investors. It is a hot market. You can see the fx i is up 6 . Alix we are waiting on a News Conference concerning Dzhokhar Tsarnaevs verdict. The question is will it lead to the Death Penalty for tsarnaev. Joining me is the Boston Bureau chief tom moroney. Jean west was a First Responder on 9 11 and a former fire marshal. What was the defenses case during the trial . Gene the defense knew going in they didnt have much of a case. They would consider it a success if they somehow could portray their client as more of a victim, somebody influenced by his older brother, and if they could use that and have the Death Penalty not be applied, they would consider that a success. I think that was their intention from the beginning. They didnt have much defense against the charges. With 17 Death Penalty counts its not likely this jury is going to let this young gentleman off the hook. Alix what is the process now . We are awaiting this News Conference. What is the process for securing any kind of penalty from here . Gene right now it is going to be aggregating and mitigating factors. The defense will try to introduce mitigating factors they want the jury to consider and the prosecution is going to introduce it. They have already introduced a myriad of aggravating factors that are going to support their case that the young man should receive the Death Penalty. The defense is going to try to betray their client. He didnt really want to commit these crimes but somehow got wrapped up in this event by his brother. I think thats what youre going to see taking place now. Alix what is a day like today mean for austin . Tom there is a sweep of emotion. We are relieved. We are still angry at what happened. There is a sense of closure. The mayor marty walsh issued a statement saying the incidents are staying with us. They left a mark on our city, but he looks forward to a swift sentencing. I think we can all agree on that. It does stretch up these emotions. I have to tell you, when i watch some of the evidence being trotted out, the closing clothing of the eightyearold martin richard, its the heartbreaking marks on these garments it tears at you again. I dont than we are ever going to quite get over this, but this is a big step in the right direction. Alix what happens of the Death Penalty is not secured . What happens to tsarnaev then . He is going to spend the rest of his life in jail. That is a conclusion. The only thing and play is the application of the Death Penalty. Once those photos were introduced of the victims and their horrific injuries that is something that imprinted on the jurys mind. They cannot dismiss that. The sooner they get to the Death Penalty phase, the better, because that is going to stay fresh with the jury. Once the Court Allowed the photos to be introduced, and once the jury got to see those photos, to see the horrific injuries, there is Nothing Better to support those photos. That is something the jury is not likely going to dismiss. Alix thanks so much for joining us. We are still awaiting that News Conference outside the courthouse in boston. We will be bringing that to you live when it happens. Coming up next, we are looking at a divided fed. Officials were split over a june lift off. Oil is a reason to wait longer. Later, we will discuss the deal of the decade for oil and gas whether it will trigger a new wave of super mergers. Alix we are awaiting a News Conference in boston. Dzhokhar tsarnaev convicted of the attack at the boston marathon. We will be bringing this News Conference to you lives. In the meantime in washington, a divided fed. The latest officials were split over whether to raise rates in june. Some say the recent data warranted lift off now, while others argued Dollar Strength and the oil slump will continue to curb inflation. Joining us, danny blanchflower. It is great to have you both with me. Professor blanchflower, let me start with you. If i look at rates, markets are very confused. They dont seem to know what the market is going to do. What is your call . Professor blanchflower they really are convicted. Conflicted. Something june. Some think april. I think they are trying to follow the data. I think the answer is the market is right to say there is not much happening at all. Some people want to raise pretty quickly. There are some who think wage is rising. I dont think we will see a rate hike based on these numbers. Alix you dont think the first rate hike will be in 2016 . Thats a think it will be in 2016. We have seen this impact from the Exchange Rate. The concern is maybe its the bad weather. It certainly looks like this is probably too early. If it starts to rise that will raise the Exchange Rate further. I think they will gain some allies as time moves on. Alix what do you think . Let me ask a quick question. If we got a couple months of 3000 plus jobs and we see durable goods orders start to rise. Would you move your forecast back into 2015 . Danny i probably would, that my view is we are going to see more numbers around 100,000. We are going to see continued weakness in wages. They talk about the three variables. If we get 300 thousand, i think that would change. I think the chances are slim to none. Thats the point. We dont know what we are going to get. That is why i dont think anybody knows. Trying to get too much out of these minutes is a waste of time. This is the stale bread in the back of the refrigerator. It was weeks before we got the jobs report. That has changed a lot of peoples views. I would look to Janet Yellens comments, but it not only reflects what she is thinking. They are not sure when they are going to raise rates. Because we see a slowdown, its probably going to be later and shallower. They are going to make a decision about when, but probably what they said about june is not on the table. Alix the question is if they will raise too soon. What are the other options . What if they have to take it back down again because the economy is not strong enough. What if they hike to slowly . What is the biggest risk . The biggest risk is raising too soon and having to cut back very quickly. We have two examples. The Swedish Central Bank has two cut. The worst thing they could do would be to have to raise rates too soon. The concern is deflation will be hard to get out on. Central banks know what to do with this inflation. Central banks have not been able to create inflation. The Downside Risk of the economy dominates. Is the fed concerned about markets . Should we be just focusing . It influences the inflation number. The dollar is holding down gdp. Oil prices are having a backandforth affect. Those things impact the forecast. What they are concerned about in terms of a policy mistake is not just what danny is talking about, whether they would have to go back and undo what they did, but the ability to do anything if the economy falls. They dont think qe works anymore. They cannot cut the rate anymore. They would like to get the fed funds rate up a little bit and give them ammunition should they need to react. Alix we need to put more tools in the box for the future. Takes so much. You are both sticking with me. Thanks so much. Coming up, a meeting raising eyes in europe. We are going to discuss after the break. Alix we are awaiting a News Conference in boston. Dzhokhar tsarnaev was convicted of the 2013 attack at the boston marathon. We will be bringing you the News Conference live as it happens. Heres a look at the top stories we are watching. My lan has agreed to by the drugmaker. The deal would create a powerhouse for generic medicine. Proctor and gamble kicked off the sale of some of the beauty brands. The company set out document for potential bidders for the well unit according to people familiar with the matter. Png is said to reach out to potential buyers. A meeting that is raising some eyebrows in europe today. Greek Prime Minister alexis suppress meeting with Vladimir Putin. Tsipras says greece does not agree with sanctions against russia. Putin is looking for an ally. Is this shortterm political posturing, or could russia be the white knight reese needs . With me to discuss is Michael Mckee and danny blanch power. Blanchflower. Does russia have the money to help greece . It has a lot of problems of its own. Clearly greece is in deep trouble. It is looking for some way out. It is trying to find any cards it can play, but if you simply look at the data, it is 29 percent below what it was in 2008. It has 50 youth unemployment. We are talking about trying to pay back loans it cannot afford. And away what you would do would be to say i am going to try to find any bargaining chip i possibly can to help get out of this hole. It doesnt appear they are going to get out of it. This is just a power play, but at some point something has to give. Greece saying Something Like we dont agree with sanctions. Do they have any leverage when it comes to sanctions . They have quite a bit. That is the card tsiprass is playing. The sanctions expire on july 31. To renew them they need a unanimous vote by eurozone members. Greece could lock the sanctions renewal. There is a question of whether turkey will go along. At this point that is the card the greeks have. Russia is probably not going to bail greece out. They may give them alone, but it could cost billions to do that. You never know with Vladimir Putin what he might actually do. The problem greece has now is the whole keeps getting bigger and bigger. They have to figure out some way to do it. Next week they have to roll over 1. 4 billion worth of bills. They sold that much today to do that, but they are paying two point 97 , so this sixmonth t bills what they have to pay with interest keeps getting larger. The rate keeps going up alix . What is the day greece can no longer write a check . Denny it is fast approaching. This is a card they are trying to play. They have a mortgage in deep negative equity. They cannot afford to pay the interest, but they are borrowing to pay the interest. This doesnt have a longrun future to it. My view is something eventually has to give. I think they will default in some way. We are going to get to a deep crisis. Domestically people are actually leaving. Young people are going to london. This is a country in deep is array. This is driven by the way the euro is set up, very different from the u. S. You cannot carry on forever poking someone in the eye with a sharp stick. Eventually they will fight the stick. You have another billion plus to roll over. That is the week they promised to have their letter to the ecbs saying what they are going to do. If either or both of those conditions are not met, that could be the trigger date. Alix thanks so much. I appreciate it. Always a pleasure to see you. Thousands of the worlds atms could be hacked thanks to an outdated windows operating system. I will tell you why microsoft is not interested in fixing potential bugs. [office phone chatter] [frogs croaking] you know what, let me call you back. What are you doing . [scream] [frogs croaking] [yelling and screaming] its back Xfinity Watchathon week. The biggest week in television history. Its your allaccess bingewatching pass to tvs hottest shows, free with xfinity on demand. Xfinity watchathon week. Now through april 12th. Perfect for people who really love tv. Bombing survivors are speaking out at the harbor. Dzhokhar tsarnaev was convicted of the attack at the boston marathon. We are awaiting a courthouse News Conference in boston. We will be bringing that live outside the courthouse. We are just under 30 minutes until the close of trading. Our chief correspondent is looking at some of the big movers on a day we saw a little volatility but the s p almost flat line. In terms of movement it was as if people reacted in a kneejerk way and went back to what they were waiting for, which was the start of earnings season and more distinct views about what is next. I to bring in the headlines. Brookdale Senior Living is in the works. It is in discussions. There is a ton of sudden interest here. My colleagues declined to comment. They did not return a request for comment. They published in the past it would be worth 46 a share if it were to sell off its assets. Mylan buys perrigo for two and a half dollars a share. If any wonder if this is an attempt to bypass corporate taxes, it is not. Perrigo is based in the u. K. Mylan has been searching for acquisition for a while now. This is a profile. We have tallied up the previous deals. 45 billion dollars worth of transactions. 19 separate transactions. The current one at 28. 9 million is in cash and stock. In terms of the largest one mylan never attempted anything like this. The last in was for 6. 6 billion in 2007. This was four times the size of that. We should mention in february they offered to buy contraceptives pour seven hunt for 700 16 Million Dollars in cash. That is still pending. Here are the top stories we are watching. Dzhokhar tsarnaev has been found guilty of carrying out the 2013 attacks on the boston marathon. Three people were killed and more than 200 injured. It was the worst attack on u. S. Soil since 2000 one. Jurors will decide whether to sentence him to death or life in prison. Minutes from the march meeting show policymakers were split on whether they would raise Interest Rates in june. The debate occurred before recent disappointing payroll figures. The officials talked about Energy Prices as well as the strength of the u. S. Dollar. Officials said the economy would not be ready for stronger policies until 2016. And a plan to identify rogue employees before they go astray. New data would compile dozens of input, including whether workers violate trading rules. Jpmorgan has racked up 36 billion since the financial in bills since the financial crisis. We learn the white house Computer System was hacked i russians last year. Officials say no Sensitive Information was taken, but the incident forced the shutdown for several days. Joining me from washington the chief Cyber Security officer at trend micro. Tom, if the white house can be hacked, what cant be . Tom as evidence, the cold war is alive and well in cyberspace. The problem is the adversaries did tremendous reconnaissance. They understand what Security Technologies were in place, and they organized a custom attack. It is about the reconnaissance of those systems we need to worry about because we are being hunted at large. Alix what did they take . What was the big gain . I am not sure whether it breached the networks. A campaign of largescale cyber intrusion began last spring with the leveraging of economic responses. We saw a cyber response. Alix why are we so sure it was russia . Tom we are not so sure. Realistically it is about who would benefit from such an attack burrowing into the sensitive systems. It did allied with economic sanctions last june. Alix when this broke my job hit the floor. What steps are being taken to make sure this doesnt happen again . Quest the administration has the best of the best working on the problem. The real issue is how deep did they penetrate. I think from a technological perspective, we need to move away from traditional Security Defenses and two next judd Security Defense next generation Security Defenses. Alix i want to bring in david hoover. David focused on this as a trial attorney. Very particular insight into this kind of issue. What was your reaction when you learned the white house had been hacked . Theyve it i think it shows to some extent everybody is boehner a bowl. Vulnerable. There is a breach protocol that will go into effect were they will immediately start assessing the breach itself, what was compromised what was the method, whether the network firewalls, whatever is involved, as soon as they discover it, the best of the best is on it immediately, and they will be looking to track it back to try to determine who is responsible. Alix the best of the best is not good enough. Where the criminals always a step ahead of everybody else . Why does that happen . David in any system everyone can take advantage of loopholes and parts of any particular system that people play by the rules. If you are not going to play by the rules, they will take their knowledge and use it to their benefit rather than the benefit of good. Some individuals involved in this particular trade, they are extremely well trained. They are well educated, and they are very good at their tradecraft. Tom there is a dramatic blending of social psychology tradecraft. Traditional tradecraft with cyber attacks. There are two segments replicated. The second stage used watering holes to attack users with attack codes purposely made for mobile apple devices. You look at the traditional alix blending. Staying with potential vulnerabilities, lets go to microsoft. Microsoft will no longer fix bugs within windows xp. The problem is this system currently powers most of the worlds atms. What does that mean for my money . David your money could be in jeopardy. The average persons money could be in jeopardy. The security of the institute cant be in jeopardy. It is something known for quite a while, that the system had some flaws. It was antiquated. Even in the business, its known outside of the computer business that they were having issues with it. The Law Enforcement industry has been aware of the situation. Alix what can i do. If it costs 3600 for the bank to fix an atm, what can i do . David they are updating their system. You may not fare so well when traveling overseas. The biggest concern you should have is mobile banking. That is what we are seeing with targeted malware to steal away from a mobile device. Alix i totally do that. Thank you very much. Coming up next, we will discuss the good deal of the decade for oil and gas, whether it will trigger a new wave of super mergers. Street smart is back in two. Alix well be bringing you that News Conference live. 50 premium to the Closing Price yesterday. The combined company will become the secondlargest oil entity on the earth, putting pressure on big oil to start consolidating. Here to discuss, ed hammond. The author of the upcoming book and my good friend. Did shell just call the bottom in oil . Dan this is not an oil deal. This is an actual gas deal. Shell has been favoring natural gas assets for years. The previous ceo sometimes watched conferences before he got fired. He would talk like show was a natural gas company. I thought van buren was going to move towards crude. They circled back to a very old target. Bg group is a Natural Gas Group for the most part. The synergies between shell and bg are huge. That is the reason it may not be as big as it looks. Alix for the premium . That and the amount of debt they have. They have 16 billion in debt. Its a heavy price. Alix they could be cutting the credit rating. Talk to me about exxon making a bid for that. It sounds crazy to me. Does this deal trigger the next wave of mergers like we had back in the 90s where we had one deal and a flush that followed . The difference was this there was some great logic between these companies coming together. I think for exxon, do they have the firepower to do it . Sure. There is less logic for them doing this. Exxon is big in the production but not so much trading. There is contentious stuff around regulation. There will be a move to say we really want to come over the top. Alix do you agree . They want shale. We are talking about the method in which they approach the market. Lets put it very simply. Exxon has made it clear they are going to center on oil, liquids, u. S. Shale and they have the money to buy practically anybody. They can buy continental. The point is those stocks are not valued at 55 oil. They are pretty pricey right now, which is why exxon despite saying they have a huge amount of cash and are ready to spend it, is kind of laid back. We talked about whiting, who was looking for a buyer. I dont think they are interested in the price any of these majors are selling at right now. If the stocks start to react to those kinds of crude prices we are seeing, there will be another major deal. Do you see the potential for the back half . Thats i think there is a potential for every single sector. There has probably never been a more favorable market for m a. It is wild at the moment. You have incredibly cheap debt. You have this phenomenon of companies being rewarded. Companies tend to get a big bump. The shares would come off quite a lot today. There is a hefty premium. They are not necessarily integrated. There is a lovely quote this morning. I think the situation is there to do it. Alix thanks so much. Always a pleasure to see you. Coming up, tesla is making a big bet on allwheeldrive. Does that mean lower price points . I will have details. Alix teslas switching gears. They are replacing the version with 70 d. Joining us, jamie. What is the strategy behind this decision . Jamie it is an interesting move. Elon musk has been trying to change transportation and get personal transportation electrified, nonpolluting. And going to a higher price point seems to be taking it away from that. What it really is is following the market. That has been where the vast majority of their orders have gone. They have gone up to the 100,000 version. They are going where the market is. Really strong in allwheeldrive. Even though it is complicated to build, it could save them money. The best thing in manufacturing whether you are producing 10 million with Something Like toyota or a few thousand like tesla, is to be able to make the same thing over and over again. It is to have consistency of process. That is something they should get if everything they are making is allwheeldrive. Alix thank you very much. The close is coming up next. You are looking at s p flatlining. We will be right back. Welcome to our viewers around the globe. This is street smart. Cutting to earnings. Reacting to minutes. Lets get to scarlet at the news desk. What are we watching . The minutes did not shed any new light in terms of when the fed will move. There is as Much Division among policy makers on wall street. Stocks reacted violently but went back to where they started. In terms of earnings, earnings season began in earnest after the close. They spent the last few weeks and months ratcheting up. The bar has been lowered but nowhere more than energy. Theyre expected to fall in the second and third quarter. I know you have heard this. The trend has been to switch out energy earnings, which are slated to collapse about 63 . If you look at s p 500 earnings without contribution, earnings will rise by about 2 in the first quarter. It has risen 6 in the third quarter. In the next 30 minutes i will bring those numbers. Alix thank you so much. Joining me is our chief economist and the Portfolio Manager lon erickson. We are going to slip out energy strip out energy. Is that a legitimate way to look at earnings by taking out energy . What do you think . I think we should leave them in there. It is a key component. When they were doing well everyone wanted them in there. We are going to go through a down cycle. Lets leave them in there. Lets take a look at the price action we saw today. We got an immediate drop in the snp and an immediate recovery. What was that from . It said most participants viewed a june rate hike. It is paraphrasing, but Market Participants saw that and thought this is a fed that is surprisingly hawkish and ready to act on Monetary Policy. However, the minutes are a bit stale and had to be viewed through the lens of a fed looking at gdp growth closer to 2 . Nonforeign payroll rates closer to 300,000 and a robust pace of economic activity. Since then we have seen a significant pack of the data. We know the economy is growing at a slower pace. We saw the stall of jobs. It was in the Manufacturing Sector, so it creates greater concerns that may be the strengthen the dollar is having a real impact on the Manufacturing Sector and into the broader economy. Alix i kind of feel like there is the bell. You have got members who are confused. There is the bell. Do you want to take it . There is the bell. Let me take it. The dow is up 26 points. The s p up to about five. The nasdaq up by about 40. We did see some kind of movement at the end of the day ending relatively flat. Today stocks rising partly thanks to a rally in health care shares. The nasdaq index jumping on news of the deal. Discretionary stairs shares also rallying. Energy companies sliding along with oil prices. Some of the big movers were exxon transocean, and southwest energy. Joining me is carl and lon erickson. Quickly on what we saw today, lisa, what was your reaction . Lisa it looks like members of the fed her watching oil and the dollar. The markets are watching. It is getting a little heavy. It is hard to follow the lines of logic about how to react to any of this. That is what i am hearing from people on the market. It makes total sense. You got the minutes from the fed march meeting. Policymakers were split about whether they would raise Interest Rates in june. You talk about the markets being confused. You look at fed funds Interest Rates, equally confused. No one knows what is going on. I think the market has to be ready for a continuous state of confusion, a continuous state of volatility. Not only do you get these minutes that seem to contradict the statement a little bit, but you also have individual governors going around and saying individual opinions. Somehow they come to a consensus and enact a policy. We dont know what that is going to be. When will they enact a rate hike . Investors will be better off saying rates will rise sometime. Diversify as much as you can across different products and different exposures and really focus on underlying assets. Alix its not complete confusion. There are a couple of consensus is. You have a couple of naysayers, and you have the idea that yields do not go up that quickly. The negative yield backdrop in europe. Realistically that is taken off the table. It is a massive rate hike. We will see the april fed has a lot less conviction than the march fed. Investors were also looking at fed governor jerome powell. He said the significant appreciation of the dollar against a lot of our trading partners currencies is having a restraining effect on growth this year, and that will probably continue. Powell also said hidden slack in the labor market justifies a gradual approach to Monetary Policy after tightening after an initial Interest Rate increase. I want to get to this point. We want to hit on alcoa first. Lets get to scarlet. It looks like the top line. It is a beat on the bottom line for sure. Overall economys were looking for anything from a range of . 20 to . 31. This is growth from the prior year. On the revenue lon revenue line, a little lighter than what analysts were looking for. We are still looking at growth from the same time a year ago. It is interesting that alcoa is revising higher. The Global Demand projection. It predicted 7 growth for aluminum globally. It is looking at 9 growth. Carmakers like ford have been upping their impact. The pickup trucks matt miller is always going on about. They have been demanding more aluminum. That is going into the auto industry. Interesting to hear all code alcoa raising its view. We are looking at commentary from the company on its purchase of rti, which it bought last month. A lot of questions over how they are going to integrate the company and be about to create some scale and leverage that. Scarlet we have some breaking news on zynga. The ceo will be leaving the company. The founder and chairman will return to his ceo role. The founder will be coming back. Scarlet, what is interesting to take a look here is zynga has been struggling. I am looking at earnings estimates looking to be down by about 118 . You have to wonder what is behind this sort of move. Scarlet zynga has had a tough time adjusting to the movement to mobile from the desktop. It was a big player when facebook came out with the game on the website, but ever since people try to access facebook through their mobile device, they had a tough time adjusting. They did not make the transition to a handheld device. It has put a lot of money into new games, but none of them took hold the way candy crusted. He had to make a lot of changes a lot of layoffs. They had to rethink everything. They changed management. He came from one of the videogame publishers. Mark pincus was pushed out a little bit or chose to take a step backwards. He is coming back as the ceo. This halt was made before the announcement came out. I will keep you posted on what happens when the stock begins trading. In the call they said they are confident of the outlook they gave. They are not changing any of the numbers when it comes to financials. Alix nevertheless, it was up 511 last year. He is taking an annual salary of one dollar. Scarlet im sure he has a lot more at stake. Alix we want to take talk about the fed. Professor lang flower says he thinks the fed could raise in 2016. Could that be on the table . What would need to happen . We need to see some contagion spreading deeper into the year. Policymakers are not of that viewpoint. They are looking at port disruptions and winter weather. They say that is why growth is slow. If we come to a new realization we are not going to have a sharp snap back like last year. If that is not repeating policymakers are going to be a lot more cautious. Alix what is the treasury market telling you . That is a real possibility. People are saying, what about the dynamic is going to change so dramatically by year end . The fed will have conviction the recovery will continue at the pace it has been going. What is going to give confidence . Jobs. Lisa what jobs . If we are running at 200,000 or more on payrolls, that is going to give them confidence. If we saw more reports like march it is a big question. Alix this is a big question. Investors are concerned about tumbling oil prices. We have seen a lot of layoffs in the energy space as well. You have restaurants and hotels built around this. What happens if that goes south as well . I think that is what everyone is focused on today and what the fed was focused on. You have to look at the bigger impact from the decline in oil prices and what can that mean to the consumer. We didnt see that as much as we thought during the Holiday Season or the last quarter with gdp numbers. Maybe that is yet to come. People are afraid to spend on a temporary windfall. Maybe they will be more willing to spend those dollars, and overall it would be a net positive to the economy alix . Will they if they are not adding enough jobs . That is going to be a key fact or are of spending. You are still adding jobs. One month of lower data does not necessarily tell the story. There is enough in all these reports and all the data for the fed to kind of make do with what they want to do. If they decide they want to get lift off instead of having this conversation, they can probably make it work. We will raise just this once and then slow the pace of it. Alix lets turn to china, because mark mobius says china stocks have raised too fast and face up what he percent drop. The shanghai composite is at the highest level in years. What is the influence of the fed on Something Like this . If the fed starts tightening, i think people are looking at a rate story that says chinese tech stocks are more overvalued than u. S. Tech stocks. If the fed starts hiking and disrupting, if they are not ready for it, it is a natural progression. This could become a problem. From a macroeconomic perspective if the economy is slowing its hard to justify stocks at record high levels. Alix do we wind up seeing a rush out of emerging markets if the fed does hike . Is that what we are looking at . Or think you could have something strange to have that occur. We have seen that in other emerging markets as part of the risk off trade. People rush out of everything. Highyield bank loans. You can have that and into u. S. Treasuries. We will keep a cap on what the backend really does. We have seen it a little bit already where the front and has moved. Back end has not moved that much. Because the u. S. Is viewed as doing it better economically, it puts an end to safe haven assets. We appreciate it. Always good to see you guys. Coming up, oil is down 45 since december. Banks reevaluate loan rates this month. I am going to have the details next. Alix this is street smart. Here are the top stories. We are going to poll murphy, the ceo. At this time banks and up rewriting their loans to Energy Companies. Banks are staring at a 45 decline this is happening right now. Paul murphy is in the heart of it. How many of your loans are at risk . 18 of your Loan Portfolio is in Energy Companies. Paul you are in the middle of the system that happens twice a year. This is when banks and Energy Companies get together to compare notes. Hit is going exceedingly well. We have 32 companies. We thought they would be at risk. We have found there is only one at the edge of being out of formula. It looks like a solution is at hand. There is a lot of new capital to provide additional financing. Alix what oil price are you lending against . It was 83. Now it is 52. That is a big change. The base case is 36 . The loan banks lend against is down. Its not as spectacular a drop because we are not lending at peak prices. Its stressful. Companies are losing availability. Alix what about trickle down. They do haave trickle down exposure. Happily were not seeing as big an impact. Just by making the rounds in talking to my customers on a daily basis, we are finding the restaurants are doing fine. Highend real estate, local Furniture Stores are doing well. Party rental equipment. One of our customers said everything is on track. We have this abundant supply of low cost natural gas fueling industrial plant expansion over the coast. Billions in expansion announced for other companies. It is definitely an offset. Alix thank you for your insight into these companies. We do have that bath and beyond earnings right now. Scarlet, tell me about the numbers. Scarlet this is a miss for the revenue line. Not necessarily the bottom line. The bottom line coming in as anticipated. The outlook is a little disappointing. For your earnings will be relatively flat. For your earnings will be relatively flat. Four year earnings will be relatively flat. One thing to note is Bed Bath Beyond has no Global Presence beyond north america. Alix thank you so much. Coming up, why a Southeast Asian Telecom Company wants to buy the Cyber Security firm. We are going to speak with the ceo after the break. Alix criminal hackers in the white house. Companies are feeling the heat. Southeast asia pass biggest operator is buying the chicagobased Cyber Security firm for 810 million. The ceo joins me now from chicago. Congratulations on the deal. Why did you decide to sell now . It seemed like a great time. We continue to expand to find a new partner. We are looking for a strategic investor. It really fit the bill. How does this change how you do business . It accounts for 75 of how you do business. We have been a leader for a number of years. For asia there is a huge market. It would be a tremendous asset. Alix you have a unique view. Is there a country most interested in a cyber attack . Are countries are experiencing financial risk. We are seeing hospitality, Food Services retailers all victims of cyber criminals. It would really become the way businesses need to protect themselves by leveraging a thirdparty expert. Alix 232 million deal. What do we see in this space. We see an impact for multinational companies. We will continue to partner and look forward to work with them. What is the biggest threat . The biggest threat is through emails. Sort of not realizing what is being downloaded. Alix thank you so much for joining us. Street smart will be right back. Welcome back to street smart. Here are the top stories. Rahm emanuel winning his second term. He thanks voters. As false show hispanics voted for garcia, while rahm emanuel one won black support. The city has a new governing board helped by 30 turnout. They made the sixmember council 50 black. South carolina, white Police Officer charged with murder. Video surfaced showing him shooting an unarmed black man. The officer says he feared for his life because the man had taken his stein gun. Stunned on. Dzhokhar tsarnaev convicted of the boston marathon. Will it lead to the Death Penalty . Roni joins me. Janel lawrence. Tom maroney joins me. There is a sense of relief here at the courthouse that this phase is over. These guilty verdicts are not a surprise. There is a sense of relief and anticipation that we are on to the next phase. Alix what happens in boston it there is not a Death Penalty verdict . Im not sure it will make a difference. If you know the city and people there is a split. I would guess that this is is in that jury as to what the punishment should be. There were people saying that maybe life and prison life in prison for a 24 21yearold is more punishment than the Death Penalty. I think the big emotion here today is a picture relief, and also the idea that we will close this. This long process is over. Lets have that next marathon on april 20 and let the sunshine. I think that is the overriding emotion. Alix thank you both for joining us. Staying in the United States california is in its fourth year of rattling a drought. The state must act. The fourth year of battling a drought. We talk about the costs to the state economy. Thank you for joining us today. My pleasure. Alix we have heard from jerry brown calling for a 25 cutback in water usage. That is not a of fact the agricultural sector. My information comes in the public media. The governor is the most important person in the state on the drought. I am sure he understands the gravity of the situation. He is required for the first time in history to report on its water use. Agricultural members who dont have senior water rights, rights before 1914, have not been able to grow crops for years. Lots of people have been laid off. To billion dollars three billion dollars loss. He understands that agriculture has taken a lot of hits. Mother nature is in charge. If the situation gets worse sure was a more alix action from the government. Alix alix looking at these pictures they are so staggering greatest not like this got his new we have been there for four years. What would it take to truly transform this state . We have to accept a reality. You told me that you are a californian. I have lived my whole life in southern california. I spent weekends in the south. From bakersfield south where more than half the population lives, youre in a desert or in a semiarid state. In los angeles, the average rainfall this 13 inches the year we dont mean that print that is a good weekend of rain in new york and washington. We have to use less water. We have to get used to this concept. We are going to have to use water that is recycled. We have done so. Alix what is that mean . For seven years they have taken sewage water and reintroduced it, and it serves half the population in orange county. Every study shows that water exceeds standards. It is going to be a part of our new reality. Were going to have to start recycling everywhere. We are making some efforts in los angeles, but we have to do more. We will have to accept that if we want to live in a semiarid part of the country. We will have to accept the fact that we will have to use water as waste. Alix give farmers take a hit . Almonds are grown in california. As i said, from recep taken a big hit, except those fortunate enough to have rights that proceed 1914. The governor believes in treating everybody fairly. This is an unfolding drama. If more action is necessary, he will require it. He has required that agricultural report on its water usage. They will look at that data and if they think they are using too much water, the Brown Administration will respond. Alix this is definitely not the end could a lot more to company thank you for joining us. Governor ray davis. We do have big news on the online social gaming website. Scarlet fu has been looking at the news. What can you tell us . Scarlett the ceo is leaving the company after nine months. The founder and chairman is returning to the company. Shares were halted for the announcement. They have just resumed trading. The stock is plunging, off 8 and the postmarket. I just checked because mark pincus said he will get paid one dollar in salary for his services as ceo, but according to bloomberg, he has 122,000 class a shares with a market bio 348,000. He also owns class c shares. Those dont have a Public Market value. They are shares that have the voting rights. He is doing ok. They also mention some comments about the first quarter, saying it was a Strong Quarter and they are confident on the outlook they gave back in february. No changes to the financial forecast here at alix thank you so much. Alix thank you so much. How hackers can gain axis to your home through connected devices. Alix breaking news on apache. Lets get to scarlet fu. Scarlett the oil company is selling assets, raising cash. Its selling its Australian Unit for 2. 1 billion in cash. It does make the mention that its keeping its Minority Stake in a fertilizer producer. This is part of its repositioning to north america. They say that following the sale of these assets, 70 of its production will come from onshore in north america. It is interesting, but oil prices are forcing companies to make strategic moves. Alix interesting. Not a last that we will hear from oil companies. Thank you so much. I appreciate it. While connected homes may seem like an episode of the jet is, the internet of things will include 26 billion units by 2020. How secure are these products . How easily could a hacker gain access . Im joined by the Vice President of research from boston. Lay it on me. How atrisk am i . The internet of things is growing at a tremendous pace. We are a lot of functionality added. The problem is that there is no requirement to build them securely. When we took a look at a hand full of home automation devices, most vendors failed to implement basic security measures. That puts customers and their data at rest. Alix like what . What do they wind up getting . Let me give you an analogy. If this is been automotive safety testing, we would not be doing crash tests. We would be asking if the car had seatbelts and airbags. Some of the products dont use encryption. Others dont require that the users choose strong passwords. Others dont verify the identity of the cloud service. As we have devices with more and more sensors and video cameras and microphones in the homes, we have to be concerned about how this is a is being protected where it is going, who has access to it, and so on. Alix what do i do about that . Most consumers are not security savvy. We have to think about what types of information these products may be collecting. If i have a product in my living room that takes voice commands i can ask the questions. That means i have a microphone in my living room at all times listening to what is going on. As a consumer, i have to ask myself if i am ok with that. Where is this data going . How is it being stored . Having the conversation is one of the things that consumers can do. Another simple thing is just to apply Software Updates when they can. The entire Internet Things infrastructure is not just the software on the devise, but the software that communicates with the mobile apps all things the to be secured. Alix thank you so much. Its really scary. Coming up next, google saying youtube could be going headtohead with hulu and netflix with a subscription model. More details on that after the break. Alix this is street smart. Here are the top stories. Dzhokhar tsarnaev has been found guilty of carrying out the 2013 attack on the boston marathon. Three people killed, 200 injured in the bombing that was the worst terror attack on the u. S. Since 2001. They will decide later to sentence him to death or life. Mark pincus is coming back replacing the ceo after the company is struggling. Nasas chief scientist is predicting that we will find alien life in space in 10 years. He says the agency knows exactly where to look. We can expect the discovery of little green men. Hes talking about the discovery of microbes. Here with me is pimm fox. Aliens . Pimm maybe . Hardly likely. As you described, he talked about how they know where to look. They are looking for water. They have found water on these icy moons of jupiter and saturn so where there is water, there is likely to be microbial life. Alix fascinating. Pimm it is. That you can do this with unmanned spacecraft. Its costeffective and does do a lot of the same things that many of the manned Space Programs have tried to do. Its going to be by 2025 youll be a would to get definitive results. Alix its also a big day for you too. They could be launching a subscription model as soon as this year to face off against netflix and hulu. What is that mean . Pimm it means more money, it will cost you more money. Lets do the google part. Google offers youtube as a free service. There has been a beta test that has been going on since november, and this has been designed to access music without having to watch or deal with advertisements. The idea is that you would pay about 10 a month, and you would sign up for a variety of channels, but the deal is that the content creators have to sign up for google and youtube will automatically list your videos as private, meaning that people cant search the web and access all this information. The idea being that the current split in revenues, which is 45 going up to google, 55 going to the content creators that this will mean more money for the content creators if there is a pay wall. They can charge more. That is the split now, and the ideas to encourage the creators to adopt this. Alix youtube is making its ads more interactive and more lucrative. It is rolling out a new feature called card. Hopefully it will keep the viewers attention longer. What is this . Pimm the potential is they will make more money. If you can get a qualified lead and sell something that will prove the efficacy of the advertising campaign. To put this into context, uni were talking about how many people have to pay nine dollars a month for netflix. How many people pay nine dollars a month for hulu . You have amazon prime, eight dollars a month. You at least together, hbo, 15 a month. Its about 675 a year. That does not include all of the cable and wifi. That brings you up to over 5,000 a year just for entertainment. Alix you are killing me. Pimm it used to be only television. Alix our encyclopedia here at bloomberg television. Great to see you. Coming up next, one of the yankees most in that infamous trades occurred in the bedroom. Now they are looking to bring that story to the silver screen. Alix what a majorleague base all infamous trades happened in the bedroom. What . In 1973, 2 yankee players swapped wives, and now over four decades later ben affleck and matt damon are said to be working on a film about the scandal. Our reporter joins me now to discuss the trade. Unbelievable story could what can you tell us . The film is in development with warner bros. It has been for a long time. Since 2010. It will chronicle this trade, the scandal. When you redo what happened when you lead through what happened, its a fascinating story. You can see that it would make for a fascinating film. One of the people link to it david mandel so thats how it could be. It would be made in the vein of shampoo could we will have to see. Alix what roles will matt damon and ben affleck be playing . Behindthescenes . They will be producers on the film for they have a Production Company together. They have a director, but no cast. These guys have a lot on their plate. Theyve got another show called incorporated that nbc and universal have given the green light to. On top of that, then Affleck Ben Affleck will play superman next year. That film is next to. He has of the warner bros. Films in that role. Matt damon has another bourne identity. Its unclear whether they will continue with this. Alix what are the chances does actually gets done . This is been in development for five years. What im being told is that the status is development. They are not in the process of filming it. We will have to see. These guys are diehard red sox fans. Alix a yankee story, red sox fans, a match made in heaven. Thank you so much. We will be tracking it. That wraps it up here. Have a great evening. I will see you back here tomorrow. With all due respect is up next to stay with bloomberg tv. Im john heilman. Im mark halperin. This is a motorcade. In our lineup tonight, just bushs monopoly, ted cruzs community chat, and rahm emanuel passes go. Do not collect 200. Go directly to jail. Mark and i wrote that one of rand pauls