Transcripts For BLOOMBERG Street Smart 20150414

Here are the top stories we are watching. The white house signaled president obama will sign a propose iran compromise. This would give congress a say on emerging deal to curb tehrans nuclear program. Energy future and in its creditor groups expressed optimism over an 11 billion proposal to reorganize the company. It would allow them to exit bankruptcy by years end. The final agreement maybe two months off. Tencents market value plunging after the chairman cut his own stake in the company. The stock seeing its biggest decline in almost a year. We have less than an hour to the close of trading. Lets go to scarlet fu. Scarlet i want to start with news from the European Central bank. Thatit is raising its greek ceiling to 74 billion euros. Perhaps greases government is preparing behind the scenes for an eventual default or exit from the euro. That was denied later on by the Prime Minister. But if you look at how the euro is performing, no real change on the sideline, which right now is the European Central bank has raised its ela ceiling to 74 billion euros. You can see a little bit of a leg higher in the major indexes. This has been a very tepid a overall for some of the moves. The nasdaq is lower by 2 10 of 1 . The nasdaq as i performed. The s p 500 has finally found a little bit of direction. You have chevron and axon lifting the dow. Because of the move in energy stocks, you have to look at oil prices. Crude oil is up for a fourth straight day. U. S. Production growth is starting to slow down. Crude oil having its best winning streak since midmarch. We will see if it will continue to build on itself. At the very least, many people saying this will this shows it will have stabilized. Producer prices came in weaker than what analysts have been looking for. Retail sales was disappointing, insofar as it did rebound from three months of losses. But they gain of. 9 did trail. The yield is coming down at least for the tenure. Matt more breaking news. President obama intends to live to the cuba terror designation. That is according to the. National security council. He met with rau castro in panamal. They shook hands. Castro asked for this, he will lift the terror designation. He is submitting a report to congress on this terror designation for cuba according to the National Security council. Really an historic moment an historic few weeks for u. S. Cuba relations. But he will lift now the terror designation and maybe it is pretty safe to say there are no terrorists coming out of their bank. Bank earnings out of there. Bank earnings, u. S. Bank posting a profit, beating analyst estimates. It was the wall street unit that really proud its earnings. Will this bode well for competitors like goldman and Morgan Stanley . We mean the unit trading the trading unit here on the street. Yes. Equities trading blue ahead of expectations. Bond trading, we saw the first gain in five years. Matt this is kind of a trend. We see bond trading coming. Up it is contrasting from jeffries who did not do very well. Companies that have big currency trading platforms, that do have the ability to issue debt, there was a huge amount in particularly on investment trade issues. There were some dynamics that were helpful for them with the volatility and the issuance kind of a perfect storm. Matt this really turned the bond trading business. This is a business that has not been down, absolutely hammered. A lot of the bond traders i know are hanging out at the bar now. Whether they did before . Matt they worked for the big banks trading bonds. What does the future look like for a bond trader here in new york . Weak. [laughter] [laughter] the question is what form will bond traders take. Will they be shepherding out new issuances . Will they be matching offers . Will they be using proprietary capital . That is the big question . Where are they going to be where they can provide proprietary capital . That is the question with the regulations coming down the pike. Frankly the place for that seems to be narrowing a lot. Matt how about an investment bank. . . They have been heard a little bit by regulation. A lot of the big stars went off and started their own shops. How are the big banks doing in ib . They are hoping this is the start of something. You are finally getting a little took up on the fixed income side. There are two pieces to it. There is the cyclical piece in the secular piece. The secular piece has a lot of things coming. But on the cyclical side, use also volatility in the First Quarter, especially on the macro site. You have europe going one way and the u. S. Going on another in rates. That causes a lot of movements in the currencies. It causes people to adjust their portfolios. That is what banks are hoping is going to continue a little more in what they call good volatility. Do you think, michael, that the fact that these banks dont have as big inventory because of some of the regulations has enabled them to profit from these types of volatility . They dont have books that will be roiled by all of the turbulence. Right. You have a lower upside. You are not going to have these blowout quarters that they once had like in 2009 when you had a lot of inventory. But a quarter like this where there is some volatility, it is probably better that you are not as worried about covering her losses and you are more worried about handling find trades and handling client trades and benefiting from the volume. Matt hurt by capital requirements, they lowered their return targets. Even if they are doing better than the street had expected the outlook still is not as bright as it was in january. Yeah, the upside is not there as it once was. The are we the roes will be secularly lower. Now analysts just want to see them get there. Matt at a time when m a is off the hook, right, and ipos, last year was insane. We are going to continue at the levels we have seen the last couple of years so they should be doing a lot of business. But at what types of profits . If you have margins that are so thin, particularly in bond world and the m a transactions have to be done at a good price otherwise people wont be doing it, they are doing ok. They are doing well. Profits are good by any normal person standards. It is just relative to the pass when they were acting more as Fund Managers in some ways. Investment banking has been eclipsed by trading at this point. They are all in the same units. And trading is so much bigger now. Its not like the late 1990s where an mna boom an m a boom could really move the needle. Matt very interesting stuff. In the next hour of street smart, i will be talking with john truce. Stick with us on that interview that you dont want to miss. We are going to give you an exclusive interview with standup and miller. Find out why he is sounding the alarm bells like its 2004. Former u. S. Security homeland security, tom ridge comes to talk about the latest in iran and iraq. Ridge i clearly believe that jeb bush is the best qualified to lead this country. He did an exceptional job in a very difficult state. I appreciate the fact that he is looking to solve natural problems like immigration. I appreciate that kind of bold leadership and i look forward to supporting him. I hope that will be multiplatform. Digital, Television Stefanie we talked about rate hikes. Recently, we have heard from prominent investors, top minds that they want the fed to be patient. Dont rush into this whole rate hike thing. Sam druckenmiller saying quite the opposite. He is saying when are we going to stepping attention to the unintended consequences of leaving rates this low this long . Get on it. What are you doing . Druckenmiller we havent pulled the trigger in many years. Im not saying its easy to be the one to stand up there and get us off the jews would have been on for six to eight years. I am just saying that the time has come. I thought the time came six months ago. The risk reward is skewed to early. And watch and see what is developed. When you asked about doing in september, every month that goes by we have more and more financial engineering. Easy Monetary Policy i think every academic would agree, rose from the future. It is a temporary demand stimulus to borrow from the future. It makes sense to borrow from future generations and future people when unemployment was 10 . Why does it make sense to borrow from the future generations when unemployment is 5. 5 . I dont get that. Stephanie stan is saying hikers rates. He said hike those rates. He said a whole lot more. Matt it will be online at bloomberg. Com. Stephanie we will be talking china, japan, u. S. Economy, who is running for president come ibm, technology, millenials it six closer. You are going to want to watch. Matt kicking it off with tom keene or betty liu . Stephanie go big or go home. Matt the girl that never sleeps. I went to augusta. Stephanie i thought you would be roaming around here in your full getup. Instead, i was honoring jordans winning outfit with the navy and white. Matt i think he is required by contract to never wear leather pants. Im pretty sure about that. I think that is pga rule. I hope that is online because i intend to go watch. Then you are going to do the druckenmiller special all day tomorrow. I am looking forward to it. Im going to come to work. Stephanie for the next hour and 20 minutes, i will be watching street smart. Matt we will bring you stephanies interview with jordan spieth. Stephanie the minigolf really paid off for me. Matt coming up, will the Senate Foreign Relations Committee give congress a say in a nuclear deal with iran . I will speak with former army colonel wes martin. Matt welcome back to street smart. Fighting in ukraines easternmost region has claimed the most lives among Government Troops in the last two months. The class has threatened to undermine a february truce. The Peace Process is at risk. President obama wants to lift cuba as a terrorist state. It has provided assurances it wont support terrorism in the future. Germany and italy say russias air Defense Systems to iran is premature. Russias decision runs counter to the framework nuclear deal and that such deals should wait until he fully agreement are decided. In the middle east, where closely on the possibility of the Obama Administration striking a nuclear core with iran. The white house signaled doesnt obama would sign a proposed plan if approved. Joining me is colonel wes martin. He served in three pentagon tours of duty. Thank you for joining us colonel. The me ask you about the most recent developments. What do you think about the possibility of an agreement being hammered out in iran that Congress Actually lets to develop, to go through . Col. Martin Congress Needs to look at this. When you look at the u. S. Constitution, the first branch of government identified is congress. Unfortunately, this administration thinks its the first branch of government. When you start making international treaties, Congress Needs to be involved. I would like to have john mccain involved in taking a look at this. Matt looks Like Congress initially was dead set against this, the republican majority at least. Is there a likelihood now that you have bipartisan support for some sort of oversight that you actually get congress to agree to any kind of deal in the end . Col. Martin i think you will. Also, there will be a lot of sanity checks in it to make sure we are not giving iran what we dont want to give them. Unfortunately, we played into that countrys hands, not just the Obama Administration but the bush administration, too. We need to have come especially the senate, but both the house and the senate involved in examining this. And they will work out the deal. Matt let me ask you about iraq. In Washington Prime minister haider alibadi is seeking support from the administration. He sees the need for billions of dollars worth of drones to fight Islamic State at home for him. In turn president obama promised 2 million in humanitarian aid. Col. Martin we have given that country hundreds of millions of dollars. Unfortunately, much of it ended up in the pockets of the corrupt administration especially Nouri Almaliki, the former Prime Minister who is a billionaire today. If we give that country money, we have to have the mechanisms in place so that it is not skimmed off like i have personally seen it done continually before. There has got to be controls. And also, there is also climates about the weapons we to the country so they wont be used for the genocide that we saw Nouri Almaliki doing. Matt dont you think we have to be involved in some more significant way in order to fight off the advances that Islamic State has made . Col. Martin i have been making that point from the very beginning. We will not be able to do it with just drones. We wont be able to do it with just flying air missions in tikrit in support for the iranian codes force and the shia militias. We are actually going to have to go in and work with the sunnis and work with the kurds in order to develop a more effective force and also not be afraid of engaging. It has taken us a year to clear to create clear tikrit. Thats amazing. The entire iraqi force cant clear out a couple thousand of the isis fighters in tikrit until american bomb support comes in . You cant depend upon well the iranians are coming in and the shia militias are coming in after isis its pushed out. And they have been going into their own gets pushed out. And they having going into their own genocide campaigns. Matt the president wants to live the terrorist designation for cuba. What do you think. . Col. Martin i have no problem with that. Matt we are going to take a quick break here on street smart. When we come back we will hear from governor tom ridge on a number of similar issues, as well as cyber security. Stay with us for that. Next, we are going to look at an expressive talk with canadas director of general resources. Stay with us. Matt welcome back. Here are the top stories we are watching. According to reports, europes antitrust regulator has decided to file former charges against google. This is after four years of scrutiny by the european union. The ecb is said to have raised the greek emergency lending assistance to 74 billion euros. This is a lifeline for greek banks. We will hear from mario draghi on this breaking news tomorrow morning. The two sides are not moving closer to a deal. Amid creditor concerns that athens will not come up with a reforms in time for the april 24 deadline. Just under 30 minutes until the close of trading. Scarlett we want to start with some victims from the collapse in energy prices. We knew Falling Oil Prices would hurt the railroad sector. Coal shipments are down because lower Natural Gas Prices have led power clients to switch to natural led power plants to switch to natural gas. Norfolk announced a 15 growth drop you can see csx has rebounded. But unp is still lower at the moment. Casinos are falling on the continued weakness in macau gaming. April gaming in macau probably fell as much as 42 compared to the prior estimate of a 40 drop. And there may be a visitation cap on chinese visitors as well. That would be a headwind for the longerterm. Avon products staging its biggest rally since january. It is now at a onemonth high after reports come including one from bloomberg, that it may sell its north american operations along with exploring other Strategic Options for the struggling business. One analyst estimates avon could be worth 6 billion in a takeover. Right now, it is just shy of 3. 9 billion. Matt i wonder if they will have an investment banker race that sale or if they will just go doortodoor and offer it. [laughter] scarlet or do what Warren Buffett did and go to jpmorgan. Matt doortodoor, that is how avon does it. Thanks very much for that. The imf lowering its outlook for canadas Economic Growth today. The country has been heard by the drop in oil prices. One of its largest exports obviously. Earlier today, Erik Schatzker set down with canadas minister of natural resources, greg redford. Erik what would the government use for its next budget . Rickford the federal government takes the responsible approach in assessing its revenues. We are more interested in the average cost over the course of that time period than relying too heavily on an excessively high price or like what we are doing now on one of the lower ranges on price per barrel. Erik the government did change his view on oil for fall. But not nearly as far as it ended up getting. Federal revenues are to a degree dependent on where that price of oil is. Rickford there is no question that this has limited or reduced our fiscal flexibility. Without question. And certainly in the instances to provinces. Like we have seen in. Alberta. Some very tough choices have had to be made. My own view is that it will probably increase somewhat. But as to how much and what range it will fit in right now i think it is too difficult to say. And as i said before, we cant fixate on that immediate price. We have to model on the longterm and obviously deal with the realities of a reduce in revenues reduce such ability and balancing the budget. Erkrik shows agreement to buy shells agreement to buy, some say this will kickstart m a in the oil patch. How do you see the hollowing out of calgarybased all production in the way we saw in the Mining Industry in canada over the past 15 years . Rickford we will see increased production for the federal government in terms of how they are implicated in this detailed and business question. We then need to ensure that we create new opportunities for development of our resources particularly the oil and gas sector, but also to seek new markets. It is it has probably not been a great for business. We are understanding that now more than ever and to have 99 of our oil and gas to go to one customer. The Pacific Basin and the European Market offer great opportunities. We are seeing great signals for desire for our energy, specifically crude. Now we sit amongst erik but canada cant get anything done. The Keystone Pipeline isnt being built. Decisions are being delayed. Shell raises a question mark. Rickfour very strong sales that oil is going to increase. Eri k how do you get it to market. Rickford it is going in 27 years, next dictation where canada could and should be for the new markets. In two to seven years where canada could and should be for the next new markets. We would like to see pipelines offer up greater capacity. In fact, we believe keystone xl is a question of when, not if. I cant comment on the specifics of energy east. But i havent seen anything so far except for transcanadas recent announcement that something will not be a terminal. The market, the industry, and the government are suggesting that canada should be in those new markets. As we marched towards two to seven years, it is getting smaller. I appreciate that. There is a sense of urgency. Matt that was Erik Schatzker talking with his minister of natural resources, greg rickword because erik is canadian. Intel reports after the bell expected to issue revised guidance with todays earnings. Matt is in talks nokia is in talks to acquire alcatel lucent. What would they get out of the deal . How could it spark a new wave of consolidation in the sector . Joining me to discuss . The fascinating facets is jeb macaque and. For me, it is really fascinating. What i find most fascinating is the current ceo of nolkia made shareholders money by laying off 25,000 people. Why wouldnt the french say fire our citizens instead . Jeff there are wah way wawai out there with it are difficult to compete with. They see nolia as a way to do that. Matt the french are coming to their capitalist senses is what you are saying. Jeff they were a little difficult and they tried to get siemens and others to take a look but eventually the deal got done. I think this deal is where the french government are probably behind the scenes to make sure matt good for them if they are pushing and getting what they want. This leads to probably more deals in this space. There are so many of these smaller in equipment makers around the globe and they really dont have to be. Jeff you have a company like juniper that can be a buyer and a seller. Juniper and ericsson will be wireless will be passed in the wireless equipment. You look at juniper and say, ok theyre going to be matt you look at market share and it is about a quarter per company. Jeff will they go out and do deals . Or do they get bought by and ericsson . I think the market is trying to figure out which is the next shoe to drop. It has been quite in the Telecom Equipment space. Now you have a deal like this that can kickstart the engines again. Matt niokia. Takes out alcatel they leapfrog over erickson. Ericsson executives, this is the way the world works, right . Jeff i think ericsson is one to keep an ion as well as juniper, which can be taken out or part of a roll up strategy. Matt very interesting stuff. Thanks for joining us. Can intel survive the death of pcs . Rpcs really going to die . We are watching are pcs really going to die . Matt Avon Products is exploring the sale of its north american operations as it evaluates ways to turn around the struggling unit. The company isnt running a former sales process although it is open to offers to the unit according to a number chores are to a member source. Blaze pizza is a lebron jamesbacked pizza chain aimed to talk to probably. Two top chipotle. Intel reporting earnings in under 10 minutes. For a long time, the company has primed best priced in the wind down of the pc business. Now they are waiting for her strategy on its mobile strategy and waiting to hear if it has enough cash to offset losses from pc business. What do you think first about the idea of the death of the pc . We hear about this all the time that we all use pcs here. Everybody that i know that works at a company in the world. Anon you have large screen phones and tablets in the pc. I think people are in the midst of figuring out what they are going to use their phone for the tablet, the pc four. The reason the tablet is caught in the middle and shrinking is that people have figured out the use case of the phone and the pc. When you are doing heavy lifting, doing some models, try to do real work, you will go back to matt this is what analysis says is real work when youre using a spreadsheet. Lately, the data will be left in the cloud and ibm is on to that business. Anon that is a great point. They migrated away from making big boxes to making servers and storage and software. That business is doing well. The question is will ibm be the right company to be the cloud provider of the future . If you have it back to intel, intel is tracking really well in the data center that powers that cloud. That business is doing awesome. And the pc business is mixed. At the end of the day, you want to tread water in the pc and have it not be a big loss maker for them. Matt the other side of it is obviously mobile. Intel has done well coming into this. Qualcomm is also a big player in this. There are a number of people that want to take that business. How do you think what are they going to say today. . Its the outlook that we are going to care about, right . Anon a lot of that will be focused in the q4. They are doing really well in pc and have great market share. They are doing well in the data center which is a grid a good Growth Market for them. So the only market adjacent to this is the mobile market. Matt massively untapped. Qualcomm is just dominating in that business. Qualcomm in yellow intel in the blue at the bottom which is barely existent. And not climbing. Anon qualcomm has potentially been losing share in some key players, such as samsung. Lower end players like media tech are gaining share. But there is potentially room for another player such as intel. Intel has done a lot in terms of tablets and is growing in mobile phones. I think we will see in 2015 and 2016 how they fare. But its too big of a market matt they have done fairly well. But when you look at that, you see how much they still have left to do if they can. Stay with us. The close is next on street smart. Matt welcome to our viewers around the globe. This is street smart. We are just a few minutes away from the closing bell. Stocks are higher on the back of gains of jpmorgan and the price of oil. We are counting down to earnings from csx as well as from intel. Lets go to scarlet fu at the breaking news desk. Scarlet the nasdaq is still looking at a loss as the other to do bureau indexes have come off their lows. The other two indexes have come off their lows. If you look within the dow, four to five of the biggest computer contributor are banks and energy companies. Chevron, goldman sachs, exxon and mark merck. That stabilization seems to have provided some support to these Oil Companies. Increasingly, the talk around the Oil Companies is that the cut in analyst earnings estimates is already priced into their shares. On average, the Energy Sector is expected to report a 6 plunge. Equity trading surged 22 . That bodes well for morgan saks Morgan Stanley. Of course we do get more earnings from the financial tomorrow with citigroup reporting at 8 00 a. M. We will keep you posted on that as we await intel earnings in a couple of minutes aired a couple of minutes. Matt let me first ask you, dan, what you think about the price of oil. It has been an exciting story. It has been incredibly volatile. We have pretty much come back from the depth we saw in the low 40s. 53 a barrel doesnt look that bad now. Dan we think it has more or less reached the bottom. We will see some short turn shortterm weakness, perhaps. But if we look at where oil will be for the rest of the year, we see a slow positive trend. Matt i wonder how much gasoline demand makes up total oil demand. Car sales have been off the hook lately. Especially sales of cars that use a ton of gas, like pickup truck sales. In terms of consumer preference, there has been a shift to these fuelthe yourhungry matt they are going to have to put gas in those trucks. Call even though gas prices have increased, it happens every year. The run up in gasoline prices through midapril is actually muted compared to the historical pattern. They are still down on your on your terms. This is still providing a benefit to u. S. Households by reduced fuel costs. I love it that you can bring it back to cars. There are a lot of people out there bank who are out there who are bullish on oil. It makes some people i speak to kind of it is making some people i speak to kind of nervous. Matt you hear the closing bell of their. As scarlet said, we still see a slight loss on the nasdaq. Intel is one of the biggest weights right now on the nasdaq. The fourth biggest decline are as far as index points are concerned. We still see a gain on the Dow Jones Industrial average at 18,039. On the s p 500, 2096. Wells fargo says low rates pushed lending margins below. The one bright spot for wells fargo is the u. S. Mortgage market. Joining me to discuss the companys latest results the cfo john shrewsbury. The Mortgage Market is a huge make or break for you guys. Right now, it is a big make. John it is not a make or break. They are about 10 of our overall revenue. We have about 20 billion per order in revenue. Half from interest, have from other streams. We were thrilled the First Quarter was very strong. That brought some people into refinance and people are still purchasing homes. There is a lot of other drivers running the business. I thought you might have been referring to deposit and loan growth at 9 and 7 . Matt i wonder when we talk about wall street banks we are talking about trading, we talk about the hurt that regulations have put on those profit margins. You dont face the same kind of pain. John not to the same magnitude. Those are important businesses but a smaller percentage of the overall pie. Those are activities our customers demand and need and we are happy to provide. If there are they present a drop off as a result of regulatory change we will not be impacted to the same degree. A bit more of a study story. Matt thank you so much for speaking to us. Intel earnings are just crossing. Scarlet joining us with that breaking news. Scarlet intel shares are rising by 2 reversing its loss from earlier today. The earnings per share . 41 topping the consensus of a penny. Analysts were looking for . 40 on average. Revenue pretty much in line. What . 8 billion, matching the consensus. 12 point 8 billion, matching the consensus. The growth margin for the quarter that ended came in and hired higher than anticipated. Certainly at the high end of its previous forecast, which was 58 60 2 . Foley for europe 2015, they are looking for a growth margin of 51 . Earlier in the month in march intel had warned it was cutting its firstquarter revenue forecast because the pc refresh cycle was slowing and the strong dollar hurt its deals in europe. The stock has phone 3 since then. Theres been a lot of discussion over the forecast. Was the slump in demand temporary or was the demands temporary . Matt im here with lisa abramowicz, Carl Riccadonna come and dan morris Carl Riccadonna and dan morris. Scarlet mentioned the strong dollar. That is probably the feds biggest concern going after all companies who do business overseas and something that may pull back on additional jobs. Do think the strong dollar will be a limiting factor for corporate profits . Dan companies are bemoaning the strong dollar overseas. The march employment report come if you take it into the context of profit growth, is struggling. It looks more like a sustained trend than a hiccup. Matt a lot of Company Executives are commenting that they are not as worried now. Scarlet has more revenue information from intel. Scarlet this is a gross margin forecast for the Second Quarter. It is looking for revenue this quarter of 13. 2 billion plus or minus half 1 billion. That does miss the average analyst estimate of 13. 4 billion. The only profitability metric it gives is 62 plus or minus a couple of points. Analysts were looking for 60. 8 . Gross margin seems to be at this point a little bit better than what analysts had been looking for. Matt a huge key for intel. I want to bring in cory johnson comedy Senior Editor at large for bloomberg west. Corey, why is gross margin so important for this company than it is for other companies . Cori the guidance for growth is 64 . In her the gardens. Intel is all about how well they can make their chips, how much volume they can put through their plants to make a lot of chips and make them with substantially good yield . Intel has become a master of this creating yield of the most Difficult Technology they could imagine five or 10 years ago. Reducing a lot of chips. When you make a chip, sometimes you get failures, but there yield is high. Keeping those yield high keeps Gross Margins high. That gives you profits and free cash flow. It does not seem like a big deal to lower the guidance from 64 to 62 but it is because it is in the wrong direction for intel. It has historically been a sign we have seen particularly for intel that can often begin with gross margin decline. It is a super important number for this company may be more than any other because it is the first sign of things going bad. In the past, that has been one of the first places you see it. Matt according to afterhours investors, things are not going horribly bad or they bet before the bell they would be even worse and they are a little relieved. Cory johnson from San Francisco on intel. Scarlet will continue bring us breaking news. I want to get back to the question i posed to you which is what are you here and from executives as far as how the dollar is affecting their profits . A lot of them say we produce locally and it doesnt hurt us. Dan we are as pessimistic about the dollar. The u. S. Is not a trade ended economy. Trade dependent economy. We are a net importer. More companies benefiting from the cheaper imports. That is a positive. Another thing to keep in mind is the contrast. Look at germany, very trade ended. They did well with the euro. It did not seem to hurt their growth. I think it will turn out fine for the u. S. Matt they make some of my favorite cars and i always bring it back there. I am filling up those cars much to per now and i can spend my money on a lot of other stuff. The American Consumer somehow at the end of the day has to spend the extra money. Dan what advantage of this recovery is it will be longer lasting because you have a lot of went up consumer demand. People have not spent on vacations, on cars. This will propel the u. S. Economy not at the rate we would like to see but it will be increasing the growth weight in the u. S. The percent by the end of the year and it will go on longer than we have seen historically. Lisa why would consumers start to spend that end up savings right now . Right now especially with Interest Rates low, what will they put their money in unless they will buy willy nilly. Dan if you look at the household leverage, it is at a good position to pick up some credit. The story for the last couple of years has been people trying to pay down credit debt getting out of mortgages. That process has gone far. When you look at household leverage it is the lowest it has been since the late 70s. They are in a position to do that now. You have lower gas prices. It is a positive environment for consumer demand to celebrate. Matt this would be the result of weak overseas market and Oil Companies cutting production which we do see. Also, vertical drillers cutting back. What do you expect for i. T. . Carl i think the consensus will be disappointed by a weak result. Matt even worse than expected . Carl even worse than expected. The number will be driven down by utility outputs. A much warmer march relative to february means utility demand fell considerably. That depresses the headline. The real story will be in the many factoring details of the report. When we look back to the employment report if we look at aggregate hours worked in the manufacturing sector, not very good. That votes for a stagnant reading if not a modest decline bodes for a stagnant reading if not a modest decline. Matt not what you want to see, right . You saw these average hourly pays go of a bit go up a bit. Carl the more weakness we see, the marketability is given to that march report. Once you strip out auto sales not a great report. If you add a weak industrial report, it looks like an economy that is going to do a little better in the Second Quarter but not roaring back like we saw in 2014. Matt thank you so much. Dan morris, appreciate you joining us. Lisa, always a pleasure. Karl, thank you for keeping us grounded. [laughter] matt my interview with former home and security secretary and her you see the rocket. This is live. Omg, the specsspacex launch. What it means for the future of space travel. You know what we really care about how well they land these things because elon musk has made a huge bet on not just putting these things up but getting them back in tact. He is really into the environment. He wants to recycle everything including his rockets. That would make a lot of sense for the bottom line of the Space Company as well. Lets watch this rockets soar. What incredible pictures we are getting live. This was supposed to take off at 4 10. I figured it would be 6 00 or 7 00 before they got it in the air. Elon musk has a history of being very late. Rockets always seem to get postponed because they are so sensitive. To the weather, the atmosphere. It looks like a gorgeous day down there. Soaring into the clear for the sky. Lisa you want to go to space . Would you go . Matt i would go. They will send a bunch of people to mars. A oneday trip. If i could take steve, i would go. I could spend the rest of my life with steve and be happy. [laughter] matt the spacex launch of its falcon nine rocket going exactly on time. Very punctual for them today taking off there from florida. We will talk about this with pimm fox in a minute. What this means for the future of space travel. It is not going up. That is the interesting part. It is coming back down. They will see if they can get that back in one. It looks pretty good. It is more impressive going up than it is coming down. I guess that is true for a lot of things. [laughter] matt we will take a quick break as we watch this gorgeous rocket launch in florida and will be right back with more street smart, matt just moments ago, the Spacex Falcon nine rocket launch. It is carrying supplies to the International Space station. No people but two tons of supplies including i believe an espresso machine or an italian astronaut on iss. Pimm i bet it is for everyone to enjoy. Pimm fox is here with me to help explain what is going on. You know how this works in the most basic of terms. Pimm you have a twostage rocket stop the first stage has rockets that fire on liftoff as the rocket entered the orbit of the earth. That is the first estate. They are trying to reuse that. There is an autonomous space port part of the spacex project in the atlantic designed to recover this first stage of the rocket. Matt normally it burns up. Or the rubbish falls in the ocean and no one really cares edit is horrible for the fish and everything and not good for the bottom one because they are very expensive. Elon musk cares about the fish and wants to save the money because he can use this thing again if you can get it to land properly. Cory they are landing on the autonomous space drone ship. You and i might call it a barge. Pimm but it is a very nice barge. Cory it is a lovely barge. It is called just read the instructions. Last time comes they had to abandon it completely. The time before, they tried to land the remnants of the rocket and encountered what he called a hard landing, i would call a crash. He will go for a soft landing empathy odds of success at 75 this time. Very exciting for the entire Space Program. Exciting for the military, who are hoping to use this American Owned Company to launch some space satellites used for spying. They have a budget larger than the cia. Matt what will we see this soft landing . It is gorgeous to watch these pictures going up to the iss but the important thing we really want to watch pimm in about 11 minutes. Maybe 4 33 eastern. That is the scheduled time. We will know more about the disposition of the rocket and landing on this spaceport. We will also see later on a separation of the dragon supply vehicle, which sits at the top of the falcon rocket ship. Dragon will then be positioned using electronic transmissions. It will be positioned to dock with the iss and that is where they will begin to resupply. There is about 4300 pounds almost 2000 kilos of material in the dragons. Matt we will see i am guessing the separation. Well see the falcon. I will say it has some sort of camera on it as it comes down. Or as elon musk does he hold that close to digest . Last time we didnt know about the hard landing until after it occurred. Cory youre also seeing what some of the shots, shots of the spacex headquarters in their control room. You have a lot of open desks with pcs. Most of the time, it is a very open space in that facility. A former aerospace facility. He saw this huge crowd outside of the Mission Control lined up looking in the windows to look at what we are looking at. How this patient is doing as it is going up and what is left on the economist spate fort drone ship. Matt doug says it is passing to the south of us now. If you are in new york, give it a way. It is flying by. Pimm the iss was positioned over australia as the launch occurred among which is one of the reasons we launch timing has to be precise because it has to coordinate with the iss. This is the seventh spacex launch that has resupplied the iss. They are estimated to believe 13th or 14th in the Current Program in order to compete with the variety of the United Launch Alliance. There is a competition to get the supplies to be space station. The dragon supply vehicle will spend about five weeks. The space station. They will take out what is in it, including the espresso machine. Theyll also then be putting all of the garbage and stuff they want sent back. That will splash into the pacific. That is reminiscent of those apollo missions. Matt we are focused on what is the barge called . Read the instructions, corey . Cory it is called read the instructions with a giant x in the middle. It is a reference to a scifi novel. Elon musk trying something kind of amazing. Its interesting the way they are doing this in terms of reinventing how the rocket works. A lot of other space outfits are still using russian rockets that date from 2030 years ago. This is a new technology they are trying. They expected to be a lot more efficient in terms of use of fuel and cost. The goal is to dramatically lower the cost of putting things into space so that new businesses like cable tv satellite to come of become possible because of the launch of these satellites will be more costeffective. Pimm you see the deployment of these solar panels which will provide energies to the dragon supply ship. In addition with what happens to the dragon, you will be able to have a no go situation which will be confirmed as you have said by the Mission Control in hawthorne. The waiters is positioned is basically youre using a combination of signals sent directly from the dragon supply vehicle to the International Space station and the astronauts manning the Panel Controls their as well as a redundant check through the Mission Control operators in hawthorne. That should be something that will be done over the next 1520 minutes. It is about 265 miles from the surface of the earth. This is the orbit they are currently in and this will mean a lot to the people in florida. As you know, this is the launch center where they hope to hold many other space x launches. Pimm socory suddenly, these people are in hot demand. Richard branson is moving ahead with his spaceshipone project. He said the program because of the crash today of last october was a year behind schedule. He said he will stop giving out dates. The spacex in terms of shares has an opportunity to get ahead. Matt who is leading you are . It is not just a race between these two billionaires Richard Branson and elon musk. Who was leading the private space race . Cory you have a handful of companies doing this. You have Companies Already offering wifi from outer space. There are a lot of Companies Getting into this. Pimm United Launch Alliance bellowing come along tina martin boeing, lockheed martin. We had a cancellation of a launch recently. Of course, you have the russians, also a reliable rocket launch system. What i think its also worth mentioning what this particular falcon nine launch is this is the 16th successful launch from Cape Canaveral. The reliability that is being demonstrated by the launch today is certainly good for elon musk and spacex. Cory you have another company doing well. There is a tremendous race to get these things out. I cannot over emphasize how important it is to have a u. S. Owned company. Matt we are showing you tape of the launch. Pimm just to give you a little perspective, that is about a 20 Story Building. That is a 20 Story Building that is being powered by a combination of liquid oxygen and kerosene. There are nine marlon engines on the bottom of the rocket and you are talking about a payload of 4300 pounds. Most of the weight is in the fuel. That is always been one of the issues with trying to get people to mars and so on. Watching the launch that took place at Cape Canaveral in florida the landing i understand will take place for the first stage sometime around four 30 3 p. M. Eastern. That will be in the Atlantic Ocean. Cory, you just want to say it again, that barge with the x on it. Cory the space fort drone ship . What if they had one from albany to buffalo . Pimm i dont know if it would weather the swells and get planted. That was one of the points that sticks into the crash of the previous a launch attempt. The swells contributed to the fact this rocket came in at an angle. Matt the interesting opportunity is that reusable rocket. Spacex has a 1. 6 billion contract with nasa to ferry supplies back and forth between here and the iss. A 2. 6 billion contract to ferry people back and forth. That is 4. 2 billion they can make and the costs are extremely high. Anyway they can minimize those for example, reusing these rockets, means more money in their pockets. Pimm youre able to cut the cost by 100 if you can reuse these rockets. Cory this is predicted to be a 70 billion market through 2030. Theres a lot of money on the table. Profitability is enormously different if you can cut the cost by 99 . Matt let me recap. We are three minutes away from what we hope is a successful landing of the rocket on the barge. You see space ask spacexs rocket. It left Cape Canaveral 18 minutes ago. We are watching tape of it now. Pimm you see of the first stage. Matt the falcon rocket has separated from the dragon capsule. Rocket falling back to earth as we speak. In about three minutes, it will hopefully touchdown softly on a barge. Pimm the twitter feeds for all of this are live. It is one of the ways in which many people are participating. Using social media and getting on the various websites that show all of these details which used to be clouded in a briefing book like the size of an old telephone book that are now available online. As far as what happens next the astronauts will be interested in getting their espresso machine and conducting experiments which are contained in the dragon whic h is atop of the falcon. How do you like those titles . Cory they are wonderful. Elon musk give me a tour a couple of years ago. While thiat the time it was to discuss ferrying cargo, i said what do you need a window for for cargo . He gave me a big grin. Clearly, from the start, he is a imagined carrying people in this thing. The cost of doing that really changes things. Matt corrie, you know doug the engineer here. He says each time this rocket is launched, it is like blasting three blue whales into orbit, assuming a blue whale is about 400,000 pounds. That is something to think about. A 20 pound building the weight of three blue whales. That is imagery. Pimm i got the chance earlier to speak to an astronomer at the university of arizona in tuscon. One of the Biggest Challenges for exploration and space and putting human life on mars is actually getting there and being able to come back. Gravity being one of the greatest impediments. One of the things he mentioned is you might be able to launch one of these rockets and have a go into an orbit around the moon, set up a launchpad on the moon where you would be able to launch vehicles that would basically not have to be constrained by any of the gravitational issues. Cory for all the talk about a special machines and science projects and fifth graders trying to grow basil in sp ace, there is a tremendous business of spying. There are more powerful telescopes that are pointed not into space but at the earth. The ability to launch payloads of the military or Security Issues cannot be farmed out to the russians for obvious reasons. That big businesses waited to be had. Matt i have to say i dont think the landing was successful. I will give you some information that you dont have access to. Elon musk is tweeting. He says dragon en route to space station, rocket landed on drone ship but too hard for survival. I guess that means they crashed. There could be a number of factors. Pimm, as you point out, the waves in the Atlantic Ocean make it difficult to softly lead a rocket ship on the deck of the barge. We will not know the details until they release a video. Cory, will you get access to the video even though elon musk has blocked you on twitter . Cory luckily, i have access to the National Office telescope. Lets not underplay what an incredibly difficult task of this is they are trying to pull off, landing this rocket softly on a floating barge in the middle of the ocean in a way that can be reused in any way. An incredible attempt at something they have done successfully on land but have yet at sea. Pimm what has to happen is you have to be able to guide a rocket that is falling out of the atmosphere onto what is more or less a stationary vehicle floating in the Atlantic Ocean. So, depending upon the attitude the altitude and the speed and the angle in which the rocket hits the drone ship, that will determine how reusable it is, whether it is reasonable at all. This is not something that has used the rockets and looks like the jetsons. This has quite a bit of speed to it. It will mean going back to the drawing board when it means what it is. The autonomous space ship. Cory just getting to the right spot at the right time is difficult enough given the forces that are guiding it and coming back into the Atlantic Ocean. Owhen it goes wrong, at least the goes wrong in the ocean. The blue whales have to worry about it. Matt lets recap what is at stake 70 billion industry through 2030. Elon musk has contracts worth 2. 3 billion. He is doing this not only for money if he can landed safely he can save 1 of his cost. As we watch this tape footage from just about 25 minutes ago, again it is like putting up a 20 Story Building carrying three blue whales about 1. 2 Million Pounds of weight. It is a lot to put up there and a lot to bring back down. Pimm the seventh launch from Cape Canaveral to the iss where the dragon will shortly dock. 16th successful launch for the Falcon Program from this particular launch. 17th successful will factum launch since 2010. Private enterprise is reliable and is something we have seen over and over again demonstrated by elon musk of spacex if not from some of his competitors. Perhaps this is something that will be a change for Richard Branson. Matt here we continue to watch footage of this spacex stop and falcon nine launch. You can see elon musk tweeted the landing was unsuccessful. He tweeted the takeoff was successful. Dragon en route to space station, but it landed too hard for survival. What is the rocket called . The falcon nine. It has the Dragon Council on top. The dragon came back too hard. The dragon is on the way to the space station where it will be docked for about five weeks. Pimm it is also worth noting to be able to receive a communication from elon musk in realtime about something that is currently happening now this is not something when you think about the Space Program and is very complicated series of events that have to happen at the right time, to be able to determine 4 33 p. M. The launch was at 4 11 p. M. The liquid oxygen rocket fuel taking this into a 265 mile orbit above. Well, this is something that is worth beholding. A private enterprise and Public Enterprise coming together to do this. Space nations adMission Control all of the world making sure this is and Mission Controls all over the talkingworld. You kind of think this is just normal stuff. When you see them open up this track and supply vehicle and they have done this repeatedly. We forget this is not something that happens every day. Matt it is something a few people are doing. We talked about this a moment ago. You have a couple of billionaires at play. You also have Richard Branson who wants to be doing this. Pimm jeff bezos. Maybe cory you can talk about jeff bezos and his launch facility in new mexico. That is what anybody knows, that he is working on something. Cory it has been his secret project that brad stone uncovered the details about in seattle. Hiring era space engineers aerospace engineers. Not anywhere as advanced as the effort right now. It is a good time to have a resume that you are an aerospace engineer. Who would have imagined this 10 years ago with people all over the world trying to figure out ways to launch things . It is innovation in an area that is not seen any for a long time reinventing rockets. The material side is different from what they build it out of. Things like carbon fiber. The changes in the way they build the rockets and how they imagine the payload and how much fuel that will use. Matt pimm, you bring up the europeans with their rockets coming out of african ginny or something. And then you have the rockets from russia coming from the pacific because the rockets out of russia that are 20 or 30 years old it creates an opportunity for some new blood and freemarket capitalists to get in here. You have Richard Branson at virgin galactic. Elon musk at spacex. Paul allen of microsoft fame. Jeff bezos of amazon with blue origin. It is really getting to be a fairly crowded billionaire space. Pimm we are spending time talking about paul allen recently has managed to discover a world war ii era japanese battleship at the bottom of the pacific which he has helped to raise and identify. That has been about a fiveyear project for him. Cory, is there any notion that there will be other people who would want to join elon musk in spacex . What about going public . Cory he has raised a bunch of money for spacex from a handful of investors who see a real big business in this. While this reusable notion is very exciting, there have been tests of this. The u. S. Government tested a reusable rocket ship in new mexico in 1996. And this idea of rockets that can be reused has been thought about for a long time and was tested by the u. S. Government about 20 years ago. The idea of the Business Outlook is important. What blue origin is trying to do is similar to spacex in terms of business opportunity. Richard bransons effort is different. He sees this as an opportunity for a tourist effort or something of a thrill ride like none other. He s had people sign up and put money down years in advance. They will ride in the ship and get as much as five times zero gravity. Part of that effort, some of those astronauts future astronauts are coming together to determine the work to do charitable work. Taking these tests zero gravity flights. Two notions initially of the business process one being launching satellites for government or for business. The other is the tourist idea taking people into space for a thrill ride and the enjoyment of that moment of looking down on the earth. Matt let me finally say i think it is great that Richard Branson is doing that. I would love to go to space. Cory, you have experienced zero gravity. I think paul allen is looking at the numbers here. Jeff bezos and elon musk seeing that missions the space have soared. You mentioned the need for satellites for the nsa. We have a lot of exploration that we want to be doing. If you look at the chart on bloomberg. Com that i have tweeted out, so you can check it on my twitter feed, it will be a massive lift off in the number of launches over the last few year. 450 in 2014. That is an average of 100 and the decade before. There will be a lot more money and contracts in a lot more of these rockets, assuming we can get want to lend correctly. Next time. Pimm fox, thank you for joining me. Cory johnson thank you. We will come back with an exclusive interview with governor tom ridge. Matt we just saw the spacex rocket launch into space, driving its capsule towards the International Space station then break apart and the rocket dropped back into the Atlantic Ocean attempting to land on a barge. It landed too hard for survival and blew up on the barge so will not be able to be reused. Elon musk has about 4. 2 billion in contracts to send people and supplies up to the International Space station and to launch satellites into space for nasa. He wants to save on cost and every rocket that he can successfully save and reuse will save him 100 basis points and cost. That is a lot of money when youre looking at for 2. 2 4. 2 billion. A reallife pastor not is on the phone right now who spent a lot of time. How key is it we get the supplies out here as quickly as possible . Leroy it is crucial to maintaining the iss. We did have a problem with supply for about four weeks the you get it supplied successfully is a big deal. Matt what about the idea of landing the top and rocket. They have not been able to successfully do it but they are the first to try reusing rockets. How much time and cost would it save . They did get to the target. They were able to hover above the water showing they could make a soft landing. They have to get the components together. Three usability itself would be important for lowering costs. Certification is the big issue. Want to recover something, what you have to do to refurbish it and certify it . That is something we ran into with the Shuttle Program where we will able to refurbish and reply shuttles on a regular basis but cost was not nearly what we had hoped them to be. It is a bit of a doubleedged sword but it is important once spacex is able to recover. Matt people worry about the loss of the budget for nasa but we are sending about three satellites into space last year and that comes from an average of more than 100 from the decade before. Why the number getting so why . Loeroy satellites are important to the infrastructure. We use satellite every day whether we know it or not. It is logical we are launching more and more of them. The more difficult would be the human twitches the part that has taken we are flying astronauts the space. There is always at least one american aboard the station and we have plans in the future to you spacex and bowing to launch boeing to launch astronauts into space. We have had not the political and Financial Support from the government. Every business is trying to get support for that. Matt is there a Silver Lining on the cloud of defunding nasa that we have all these privateers getting into space . Leroy they are partially funded by nasa. It has been more or less slashed. The real dollars for the real important programs have done that a little bit so that is not a good thing. I think the commercial success of spacex is something to be applauded. Elon musk is a visionary. He is not afraid to go out there and try to make it. Matt thank you so much leroy, nasa asked her asked her no astronaut. Stay with us. Matt we have the technology greats like bill gates, steve jobs and andy grove. At their peak, the companies were worth more than 1. 5 trillion, closer to 2 trillion really. My next guest has studied these leaders and writes about it in his new book. He joins me now. David yothi of Harvard Business school. Thank you for joining us. I take a break from watching other billionaires in the space race and talk about the giants on whose shoulders they stand. I have to say andy grove has to be one of the biggest of them. He was not the wealthiest. What do you think the most in and poor lesson we take from andy grove . David he was an extraordinary man. I think we learned about trying to build a vision for a company which he was able to do starting when he first became ceo. We learned about his ability to break the rules and make big bats. Nobody in the world thought you can brand a microprocessor. He was able to make it one of the greatest brands in the world. Andy was very thoughtful and understanding that intel was not going to be a sole product company. It had to be a platform that affected the entire ecosystem and pc world. Finally i was going to say that andy was also a great tactician. He understood how to run the daytoday business. He was also very tough and sometimes could even be ruthless in the way he managed the business, extracted numerous amount of value from everybody in the ecosystem. Matt that is a thread that carries around to the others you talked about especially steve jobs. He had a reputation for being incredibly creative forwardlooking, willing to take big bets but also very tough to deal with. David he was known as somebody that would never leave a penny on the table. If he was buying something or investing in something, if he felt the other side was getting a penny too much, he would tell his people to go back and ask her more for more. Ceos try to do everything they can to maximize the profits of their company. Matt what do you take from bill gates and if he is still using that at the Gates Foundation because he makes a lot of progress that i dont think Everybody Knows about since he is no longer the helm of a public traded company. David bill has many of the same attributes. He expresses them in different ways. Bill invented the Software Industry. The Software Industry did not exist before bill gates. He was accustomed to making big bold bets throughout his career. If nothing else he built probably the most powerful platform environment of any tech company in the world. I think bill stands up equally well with andy and steve. Matt thank you for joining us and sticking with us. David yoffee there. We have a little bit of a lesson as well from elon musk. We showed you the launch of the spacex rocket. It apparently landed on the barge but with too much Lateral Movement and it took over. Tomorrow, we will show you jack lew. John im john heilemann. Mark with all due respect to chipotle, you are the only ones ready for hillary. Mark on the show tonight christie is unafraid. Something something ron charade. Hillary part two, hawkeye edition. The pillars of her campaign explained by hillary herself at a campus