Transcripts For BLOOMBERG Street Smart With Trish Regan And Adam Johnson 20140130

Quite a decline for gold. We are just about one hour away giants,nings for tech amazon and google. The air is pregnant with expectations. A good way to put it. Google sold the Motorola Mobility unit. Here with us for the hour is atter isaacson, former ceo cnn, managing editor at time but he is also known for his biographies on steve jobs, and many others. He will tell us about the next book he is working on. Were also watching another piece of news we have talked about, Time Warner Cable reporting results. That was not the big news, but the big news is who is after them. It is turning into an epic takeover battle. The ceo Robert Marcus was talking about how he was sending over this takeover bid from charter communications. There are scale benefits associated with consolidating. We acquired insight several years ago and achieved meaningful synergies. You just not like the charter did bid . Company,ervalues our and it is significantly lower than the value we think we can create on our own. This is a deal of big personalities the biggest of them all being john malone, who is driving this. Walter. Him well, as others are trying to get out of the cable business, because they seem to be aging Business Models in this age of netflix, john malone wants to get back in. John malone is a true believer, he invented the model. One of the big stories of the next five years is will the cable model be broken . Will people get Bloomberg News and netflix to their computer and not have to worry about being bundled by the cable industry . I suspect so. It does not necessarily hurt the Cable Operators because they still own the pipes. So, if i am getting, as i do, Time Warner Cable, and my Internet Service over time warner, you say i cut the cord with Time Warner Cable. They still have me. One of the things that would have to happen is there would have to be more competition to bring you Broadband Internet into the home. Secondly, Cable Companies and cable content providers, which john malone is also in, would really be hurt if they did not have the bundles come aware somebody like my daughter has to buy a bundle as Espn Networks and everything else. You want to wage a war of attrition with john malone . I have, and he is still standing. It is not people waging a where war of attrition. It is the Disruptive Force of digital technology. Once you have more than a couple of pipelines into the home, ubiquitous Broadband Internet access, once google decides to provide Internet Access to cities like it has done to kansas city, you have the disruption. Have you cut the cord . Newe have an apartment in york, and believe it or not, we have an antenna. I tend to watch everything over my computer or iphone. Lets talk about facebook. The Company Reported earnings. Much better than expected. Mobile is the big driver. That onkerbergs big mobile is paying off. Booming business we got a chance to speak with Mark Zuckerberg Bloomberg Businessweek got the chance to speak with Mark Zuckerberg. I want you to give us your impression of Mark Zuckerberg and sheryl sandberg. They form a dynamic new oh given the fact that few people understand the intersection of media and technology as you do, in part by virtue of your time with steve jobs. Facebook is 10 years old this week. One of the things that has happened is they have formed a great partnership. I am writing a book about collaborations in the internet and computer age, and one of things i discovered is people like steve jobs who form a wozniak,on with steve or Mark Zuckerberg, who cooperates with sheryl sandberg, tended to succeed. I also think about bill gates, 10, 12 years ago, saying we will be in internetcentered company. It did not happen at microsoft, but about one year ago, Mark Zuckerberg said were going to be a mobilefocused network, and he would not even attend a meeting in which people pitched products that were first for the pc as opposed to mobilefirst. He wasnings showed that able to turn a company and make it mobilefirst. That is awesome. Where is the trajectory of a Mark Zuckerberg question rick where do you see him in the next 10 years . I see him running a Great Company. Facebook is getting into new content. I look forward to pages, something i will be able to hit and have a microphone magazine on my phone. Unlike google, where you have to logon, facebook, in some ways, is allowing you different apps. One of the things that comes story that you have right there, zuckerberg is a pragmatist. Facebook was the one and only platform to start off with, and then he bought instagram, and guide used to the idea that may not a badalone app is idea. He is doubling down, and on top of that, getting his head around the idea of online anonymity. One facebook started, you had to register as yourself. That hes that say appears to be so pragmatic as he matures and becomes a 30year old relative to other people you have known . When steve jobs turned 30, he said his biggest problem was you and it is hardve to break things after you are the age of 30. Steve jobs was able to do it. I suspect Mark Zuckerberg is able to do it. The fact that you can sign onto instagram without using your facebook account that is different than the way google is doing it. I think it is good that facebook tries to prevent pure anonymity because it allows for social networks where there are real integrity where there is real said flexible he enough to say that maybe on. Nstagram there should be is hot and trendy to talk about tailoring everything content tailored to what you want. You love print area one of the things you live print. One of the things i love about print is there is so much information i can look at just because the way it is formatted. There is a serendipity where you want to read about facebook and then you find a great story about china or the internet. I think new Media Companies are trying to figure this out including facebook pages. They will throw a lot of stories at you based on the type of thing your friends are using. Maybe it gets you into a rut, but maybe it exposes you to new stories. I like the way trove allows you to have people curate the news streams you want. Walter you will be staying with us through the hour. I will do whatever you want. Great to have you with us. But we would take a great a commercial break. When we come back, well be asking is the fever breaking in washington . In the debt ceiling debate, it felt like 112. Where is it right now. Walter isaacson will help answer the question. I intend to continue fighting as hard as i possibly can to listen, to force this on to address the real problem so that we can pull back from the fiscal and economic class because the window to turn this around is not long. That was texas republican senator ted cruz speaking to us on Bloomberg Television earlier today. To defund fight obamacare that contributed to the partial Government Shutdown in the fall and you heard him saying he is going to keep fighting. What will it take to break to the partisanship in washington, break the fever, so to speak. Fever pitch. This is Walter Isaacsons idea. And, we have a senior fellow of government studies at the brookings institution. You heard the statement that the state of the union. Bill, does a president who talks about using executive authority to do an end around end run congress, ac contributing to breaking the fever, or keeps the temperature rising . I think it is a sign and a symbol of the problem we have right now. The Political Parties are at loggerheads. People are exhausted. In order to make real progress, we will have to do more than stop fighting. We will have to have a new governing process in this country, which no labels, an organization i cofounded, believes has to be organized around a National Strategic agenda, at the core of which is shared goals. When the comp country has agreed to large goals, we make progress. We do not have that kind of agreement, we are stuck. No labels is funded by former governor John Huntsman. It is an organization you know very well, walter. You say the fever is breaking. Why . You saw appropriations deals move, they are not going to stop the debt ceiling and shut down the government on that. Ted cruise can say whatever he want but he is not the leader z can say what he wants, but he is not the leader of the republican house. Mitch mcconnell is taking a more problemsolving approach, and youve already seen a turnaround in the atmosphere of washington. What was the breaking point . Asked the fever breaks when you do Something Like shut down the government for 16 days. Thanks to ted cruz, by the way. Many others did it. He could not have done it alone. He needed Something Like that to say this is not a good strategy. I thought president obama was good in the state of the union saying that is not why we were sent to washington. Bill galston, would you agree with what walter is saying . When ted cruz says he is going to keep fighting, and you have to assume he speaks for the tea party wings of the republicans, can the fever break when you have folks that hot and bothered about the way politics is being done in the sea . In d. C. . Was morek ted cruz influential six months ago because they saw the strategy missed the target , and that the Republican Party to the greatestperiod of unpopularity riod of intest pe popularity in my lifetime. If you look at the budget agreement, everybody agrees it was the most minimal agreement tookble because each party the most controversial items off the table, and what you are left with was the status quo minus the fight. Betty was asking you about no labels, and mentioned that John Huntsman was cochair. I know senator joe mentioned it the other cochair. Tell us about the National Strategic plan that you think could help get us out of this. Just a word about no labels, we started with a massive mobilization of citizens nationwide, now in the hundreds of thousands, and we now have a group of problem solvers in the congress numbering more than 80, evenly split between democrats and republicans. They get together at least once a month to talk about serious issues. They have agreed on legislation, and what we are planning to do through antified process of broad consultation, a handful of highpriority goals that bring the country together, and then we will organize a National Discussion around the means to those goals and we will get that done within a year. Listening to bill say that, it sounds reasoned and reasonable, but the fact of the matter is, bill, that no labels was ignored for a long time, and perhaps this might now find me be your moment in the sun. We started from nowhere three years ago, and now we have more than 80 members of congress identifying not only with your organization, but with the a nationaldeveloping strategic agenda that will produce these goals and the means to them. That is enormous progress in three years from a standing start, and if we do as well in the next three years, we will be a force to be reckoned with, i promise you. Walter, what bill says sounds appealing it is reasonable, sensible, rational, but i have a problem with it. At the moment, it does not sound american, and i see that as a canadian. [laughter] it is the equivalent of my national model. Each faction fighting for it believes is best, not gravitating toward the center, where there is not anything for people to latch onto. Ami pushback because i disagree let me pushback because i disagree. Right now you see and americans. That says all of this fighting, we got that out of the system. There are a couple of things we could do. Immigration reform a lot of democrats and republicans would like to get that done. You could do it entitlement reform, a serious budget. I think america has a wonderful, it is not just a pendulum, but like a gyroscope. You think it will tell tovar, but it rights itself. I am not saying it will tilt over. It is righting itself and saying lets have more practical things, and quit being idiots and getting in the way. What is important is you are starting to see an economic rebound and people are saying get out of the way of this rebound. Walter, you stay with us. Bill golson of the Brookings Institute in washington, thank you for joining us bill gholston of the Brookings Institute in washington, thank you. When we come back, well talk about a two state solution in israel. Will john kerry accomplish it . Turning to todays global outlook, we are focusing on secretary of state john kerry ago she haitians for a two state solution between israel and the and ainian john kerry twostate solution. Is this possible . Absolutely. Is the only thing that will be theorically safe for region, two states, for two different people. Most people know that is how we have to go. The problem is how do we get there . That is why i applaud secretary john kerry. I know there are disputes within the secretary within Prime Minister Benjamin Netanyahus cabinet, but there are some deeply in favor of a solution, and we pretty much know within a hundred yards or so of where the border is going to be. I do not think you have to get a final deal. I think what secretary john kerry will do is get a framework. It is doable and it will be huge. In the pages of the New York Times argues the plan is risky for Benjamin Netanyahu because in order to see it through he will have to reverse on some of the things he has campaigned for long and hard, and in doing so risks the collapse of his coalition government, and if that is the case, you run the risk that not only do we lose ground, but the legal situation becomes chaotic and dangerous. I think if Prime Minister Benjamin Netanyahu gets to a deal he can live with, and i think it is possible, he could have a grand coalition. There will be people that will not be in the coalition, but 70 of the knesset, and 80 of the Israeli Citizens would be able to make a deal. What you think he could live with . You have to have security, security, security. You heard the president of the Palestinian Authority in the past week say we can live for at least three years with israeli troops on our territories, in the borders, and on the west bank, and he even said you would have some force where their interests would be respected. If you have security for Benjamin Netanyahu, that is what. E wants and his legacy Walter Isaacson, our guest host for the hour. We are 26 minutes into the hour. Mark crumpton, when we checked in last, the dow was up 100 points, and it creeps higher. It does. Strong earnings from facebook, a Commerce Department report that hased the economy grew, it the dow industrials up 133 points. Jetblue is a stock we are watching. Carriers a deal for fighting for spots American Airlines was giving up. Quarterxxon had fourth profit that fell the most and fourth years. I am Mark Crumpton in new york. Welcome back to street smart. We are 30 minutes away from the close of trading. I am Erik Schatzker. I am betty liu. We will be here with Walter Isaacson. Thats go to the big earnings we will see. Google, one day after announcing a sale of its Motorola Mobility for 3 billion after they pay 12 billion to acquire it. Cristina alesci, tell us more already know. Not you cannot sugarcoat this. It looks like a complete retrenchment from a strategy that failed. If you look at the unit sales out of the motorola business, you will see they have been on decline. There is no positive spin. Johnson, our tech expert, has been talking about the 12. 5 billion price tag, but google says they still have value, and not to forget that they sold the box, and theyste patents. E the at the end of the day, they saw a conflict with their partner samsung and thought it would be better to join forces even more with samsung because they have to take on apple. Anybody who will make a decision about whether this is a good deal for google in the long run has to decide on the value of the patents, and the value of the patents changes with every case of ip legislation, does it not . It is aand for google, huge company, and they feel it is worth the protection to pay for this. People in the industry say you have to give them credit for cutting losses relatively early. ,enovo also taking a big bet diversifying their business, protecting themselves from a going intopcs, servers, and now with this deal, deeper into handsets. Risk. Oes not come without they will have to take on apple and samsung, and we know that apple and samsung already have issues at the top and lower end of the market. Like any other big tech deal, this does not look like it exactly and out, but the future will have to give us more information. Pursuit of lashing, thank you. What does this say cristina alesci, thank you. What does this say weakness, strength, and what does it say about the role leadership plays in innovation . With talk more about that Walter Isaacson and our bloomberg west editorat large, cory johnson. Walter was nodding his head. What do you think, cory johnson . We see Companies Make mistakes, try to bury them, and hide the results. It is something common. I think it is important for us as journalists to say google management really screw up, blue billions of dollars of shareholder money, but they also did the right thing. Im not quite sure how much , because one of the most outstanding fact was there were 15,000 patents. It shows how the patent process has gotten out of control, but im number one i was talking to steve jobs, he said he would go thermal nuclear on google for ripping off the iphone, and the best defense against apple suing the monitor actual property on intellectual property grounds is to have the patents as a shield. It is not about the number of patents. You need one for a certain thing, so there are a lot that are close to right, but thus far there has not been a single injunction that has held up with the motorola patents. We had david martin when the deal was done on our show and they did a detailed analysis, and they said they are buying 15,000 lousy patents. Did they not cross those with samsung and get value from that . It is not clear the value what the value will be. I watch this when the computer was invented in the 1950s, between texas , theuments and intel microprocessor, the microchip, they take 20 years, and in the meantime you negotiate with the patents that you have and try to do licensing deals. The patents system is not worrying working right now, and it is more about enabling lawsuits it takes longer. In all of those cases, they settle before the courts did because they had patents to use as bargaining chips. You your self cause social media buzz when you said you think google is the most Innovative Company right now. I think they are very innovative. I was not trying to contrast it to apple or something. Mad. Fans got i think google is smart with its purchases and other things to try to integrate almost every part of our lives. I think it feels like they have an integrated strategy, but cory johnson knows more than i do about it. Their notion of where data is going to come from, and know that it is not the desktop, you can start to look at the google nestgoogle glass, and now as ways people will interact with something, and they want to know where they are. The question is do they go back to being in the Media Business, advertising . That is what a Technology Company wants to be. Doing that already have the Technology Company and apple do we not already have that Technology Company in apple . The one thing i will say is innovation is great, but it is not everything. And it does not always make money. Execution is what really matters, and apple is the best. Look at the margins. Apple is 29 . 23 , and thento the Samsung Division has an operating margin of 16 . That is the greatest question walter, so far removed from publishing this steve jobs, maybe one of the best Business Books ever, if you look back i think apple is in an attentional is in an exit essential point, where they are doing 18 of the products, and they are having trouble figuring out how to do lowand. I do not think apple will ever figure out how to do low end. What i think will have to happen is they will have to figure out a new set of disruptive product. You have heard tim cook hint about that, whether it is tch,vision or a wearable wa i do not think they will do well end. He lowand low walter will be with us and cory johnson will stay with us. There is disruption in media. We will take that up with walter and cory when we come back. Welcome back. I am betty liu. We are back with Walter Isaacson west editorat large cory johnson. We were talking about innovation with apple and google, and within all of that you have to think about amazon, which is sort of an 800 pound gorilla in seemingly every industry. All, thes, first of book on him what is the book on him . In 1999 we are trying to figure out who should be person of the mag of the year at magazine, and people said should it be in the internet business, and i said he is in the customer business. Amazon fixed a problem. They are innovative, and they execute. I think jeff bezos, i would never bet against him. Totally. I really loved brad stones book. Speaking of which, what is the book on amazon. Interesting, the people of amazon hated the book. Including his wife. It is interesting to look at jeff bezos adulation of sam walton, and how he has always seen the company as walmart, including when he got a number of important executives that guided the company to put it in a position to be right now, where he really is a retailer of a lot of things, not just books and cds. Out why he isure so enamored with media that he would go out and buy the post . Parks i love this. I think all people that are ash i love this. Ithink all people that are love this. I think all people that are successful should say how can i help the Media Industry . [laughter] overnight, there has been more news. I think once again, what me in the Media Business have to remember is we are in a Customer Service business. We have to schematically know what people need and want. . Could thatget into dangerous territory could that get into dangerous territory . Won think people know they a healthy diet of media, and if you give them good stuff as opposed to junk, it will succeed. Cory johnson, the jeff bezos just by a buggy maker, and the automobile is just about to arrive . As for klein leaves the Washington Post. These are not blonde, these are great. Cory johnson and i worked. Ogether in the early1990s we walked in, and and they said he looks like corys father. Jeff bezos sees a future in this. I see future in the news business. Look at the legacy costs that he inherits. The Washington Post should have been researching listening. Minutes interview, there was a message complaining is not an option. Another point, people are reinventing the Media Business very quickly these days. Took fromched as vox theyWashington Post, and with seriousg journalism. You are watching a lot of companies trying to create new, digitalfirst journalism. The Washington Post missed the opportunity when politico spun off. It will not miss that opportunity with jeff bezos. Thank you. Cory johnson. Here is a question for you, what biography will Walter Isaacson right next . Find out. We will be asking him after this commercial break. This is street smart. I am Erik Schatzker with betty liu and bestselling biographer Walter Isaacson, who has been kind enough to spend the hour with us. Lets talk about your biographies. Kissinger,d about benjamin franklin, steve jobs, the book that made you much more famous than you already were. Who is next . To do the notion of how people collaborate in teams as opposed to a single biography, like the wise man that we wrote many years ago about six friends that created foreign policy. The most important creations of our time are the computer and the network, the internet, and most people do not really know who invented them. I am going back to the 1940s and the 1950, and looking at how it was a collaborative teamwork effort among the creation of the first computers, the personal computer, the microchip, and then the internet. It sounds quite challenging. Why not make it easy about yourself and write about the creation of the internet and you can do a biography on al gore . [laughter] i love creativity, and at 1. I was trying to do louis armstrong. Kennedy, i i love creativity, and at one try to do louis armstrong. If you are not doing this, who would you like to do a biography on . Elon musk is a category interesting. Bill gates. You have the creation of a software industry, one of the greatest companies on the then a of the earth, and reinvention of philanthropy. Why would you now want to write the bill gates book . I am doing other books fairpoint. How long does it take to go from start to finish . It takes four or five years, but usually you are gathering strings, doing interviews for six or seven years leading up to it. It is up to me to ask this question and you have written about great men in history, wine is the book going to be written about the great woman . The book i am talking about lovelace, with eta lord byrons daughter, who was a mathematician and love the beauty of science and technology, unlike her father. What you see is the connection of the arts and technology and what she is able to understand, talking about the analytical engines, the calculators of the , she writes a0s notion of where they are going to go, and become allpurpose computers to do everything, including art, music, and word processing, and she writes some of the first of the rhythms. She is a programmer. She is often called the first computer programmer. She is the person that published the first computer program. A program to generate the newly numbers. It is still challenging and she was a great mathematician. We will have to leave it there. Thank you so much. Walter isaacson. Big show, to the everyone. I am trish regan alongside adam johnson. We are heading into the close of trading. We have the s p e racing this weeks loss. The dow up triple digits. So much for this sea of red ink that we saw yesterday. Change. Ce for a we had decent economic data. The dowy siegel thought was going to 18,000 this year sticking toain that target. He said a little bit of bad news is good because it is a reality check. Facebook is rising. Revenue jumped 63 in the last quarter. Facebook has generated more than half of its revenue from mobile devices. Best buy is falling again today. It is down about 5 . They are eliminating around 950 jobs. Will include both hourly and salaried workers. Alexi on showing the highest gains in the s p 500 after they forecast profits above analyst estimates. Analysts got it wrong again. I cannot believe it. Its a rare blood disease treatment. Postedvegas sands fourthquarter earnings that trailed analyst estimates, but the Company Reported a double both inmp in revenue macau and las vegas operations, but macau is the cash cow right now. 68 of sales, it is amazing. It has totally surpassed what they do on the strip. Pandora jumping on a positive call from Goldman Sachs, who says that my top 60. Emi and Radio Service increases advertising the online Radio Service increases advertising. Under armour, the highest price since 2005. W past sales estimates. Again. Is a Sticking Point for you, but for investors, they cling to the estimates because the stock price goes up or down. My problem does not know my problem is we do not know if it was up or down. Incredible. Number four, Time Warner Cable gini 1 after beating Fourth Quarter profit estimates gaining 1 after beating Fourth Quarter profit estimates. Is up about 2 following a beat on firstquarter earnings. They are seeking ways to increase business outside of the u. S. 5 . S gained about the shipping giant said it will spend about 100 million for peak service as the latest surge they areopping going into reinvestment mode. You hear the bell. It brings us to the number one stock of the day, google, up about 3 after they announced they are selling the motorola smartphone business to lenovo for 2. 9 billion. They are set to report earnings we will have full coverage for you a moment. Take a look at that stop there. You get the giants cornerback, eli manning, as i mentioned. Giants coowner there as well. There they are. Market ended today the worst since january 2009. Its been a bit of a rough road, a lot of people concerns. A lot of people taking some money off the table. January looks like it is finishing down well, weve got one more day, but at least down 2. 9 as of today. All right, we hope jeremy is right with the 18,000 price target on the dow. We are waiting on all these results from Companies Like amazon, google, chipotle, all reporting momentarily. We have full team coverage. Partnersm wedge joining us, and we also have our very own cory johnson to break down the numbers. Christina, interesting deal in the headlines right now. Lenovo and google saying goodbye to the motorola smartphone sellingeller motor rotor mobility for a good chunk of change to lenovo. What is the opportunity here or lenovo . For lenovo isnity great. In one way, it is diversifying its business away from the declining pc business, so in essence, its further along than some competitors like hp and dell and hedging itself, but on the other hand, its taking on a business that has declining sales. Motorola right now was struggling really to compete with some of the giants like apple and samsung. That is who they are going to have to take on. And one sense, however, if you look at the operating margins for lenovo, they are not at 3 . That is compared to about 16 as samsung and 30 at apple, so you could say, if you wanted to be positive on this deal, at lenovo is trying to get into a highermargin business. We have google earnings just crossing here. Olivia stearns joining us. Down. It its a little bit of a miss on the earningspershare number, but as cory johnson was explaining earlier, the bigger numbers to watch are those revenues x transactions, which does look like its a little bit of a beat coming in at 13. 55 billion. The real number you want to watch with google is paid clicks, and that means they rose 31 versus a year ago, which is better than estimates. Analysts ought they would rise, but whats worrying is that the cost per click, the actual money they were making every time you click on your mouse is down 11 . Analysts thought that would fall by 8 . The cost per click has been declining for some time, though, because of the shift we are seeing in users moving from ecs to mobile. Clicking on mobile ads, the rates are lower there. A little bit of a miss on the cost per click and a little bit of a miss on earnings per share. Looks like perhaps some advertising prices really weighing in. The results coming in on the call for google, coming up or 30 p. M. We want to hear anything they can say on margins. You look at where the stock is trading, its kind of a messy report, and people obviously like the fact that paid clicks are up 30 . How important is that for them . Is very important. As was said earlier, mobile was driving everything google is doing right now, so even if those costs are a little bit even if they do not make his money off of those, the penetration of mobile globally is the big opportunity ahead of mobile globally. It also puts some clarity around questions raised about google posterity, is a getting confused going into hardware. Google thought maybe they were taking their eye off the ball when it comes to their main source of revenue and profits. Thats true. The bottom line as they are activating about 1. 2 million Android Devices globally every single day, and they are monetizing though slowly, and thats not just happening in the u. S. And asia. Its happening in the emerging markets and asia and latin america and india, and thats where we are seeing a lot of growth and thats what investors are focused on. Why doesnt google breakdown mobile advertising the way facebook does . Yesterday, facebook was 53 . That was huge. Highest its ever been. What is google not give that same number . They have to be careful about giving too much. You do see fluctuations, especially in markets where smart phones are relatively new, but it is something people will focus on. I would not be surprised if they talked about it on the call and little bit, but they may in the future break it out in more detail because that the big driver of revenues right now. Lowend and midtier smartphones and emerging markets. Whats your take . Google does disclose a lot of interesting things. Headcount has always been the issue for them. Towas an interesting number watch on the motorola deal. Going through a big wallop, some adjusted employee had cap numbers as they report quarterly, but headcount is 56 at the end of the quarter. They added about 1300 people all these guys, thats probably a slowdown in hiring, which helps them contain costs. Zynga reducing headcount by more than 300 jobs. Lets go to olivia, whos got their earnings as well as amazons. Lets start with amazon here. Fourthquarter earningspershare coming in at . 51 per share, a big miss for this estimate that . 69 per share, but the estimates for amazon you could have driven a truck right through them. Estimates vary from one cent all the way up to 1. 88, so they come in at . 51. The key question around amazon is how much are they actually spending . How much does it cost them to deliver on the membership services. How much do they spend to hire all those workers amid the surging demand for online shopping. Im interested to hear what brian has to say about all those numbers. Also want to highlight what we are hearing from zynga. They are said to be acquired natural motion and announcing job cuts after their fourthquarter sales missed analyst estimates. Lets get back to the amazon news. Eps if you one cents versus estimates of . 69. Was it really that challenging a Holiday Quarter . They are spending a lot of money right now on prime. Remember at the end of the Holiday Season what are they not many money on . They are spending a lot of money getting product to people in todays, at the end of the Holiday Season, a lot of people did not get their presence, so amazon i remember that. I was actually one of them. And they are doing sunday delivery now. I think what they are going to talk about on her call regarding the bottom line was there were some at a cost in the last two week of the the last two weeks of the quarter that were unexpected. They also made up for some of that. Ups was the one that had a breakdown in the shipping, but amazon came through. They did with those credits. And thats going to directly come from the bottom line. By the way, sales no, amazon is down. A very big miss on the sales. Thewhat you want about cost, but this was a huge miss on sales. Where itlion is landed, and it was supposed to have been 26 billion dollars. Does this Say Something about the consumer . We have heard repeatedly from different retailers that it has been a challenging Holiday Season. Absolutely. There were some analysts on the street i was digging on analyst, but some analysts were looking at traffic numbers saying that ebay looks below what was expected and amazon looks like above what was expected, so there was a big trade on the street at was short ebay come along amazon, and you see that not working out. Amazon numbers also not really blowing past what those kind of bullish estimates had been. Best buy had a very public shortfall. The stock was crushed. A lot of people thought that it must be amazon taking business away. What we are finding out was amazon took some business but not as much as people thought. The consumer, to some degree, slowed down in the purchasing we have seen reports in the Fourth Quarter, seeing highend retailers doing well and lowend retailers, and maybe we put amazon somewhere in there, not going well. Talkingis week, we were about income inequality. You can see it in the results of these companies. Olivia. There was one headline i saw that i wanted to jump in on because i think it really tells the story of what is going on with amazon. They are saying for the Fourth Quarter, operating income came in at a profit at last. This is a big deal because in the third quarter, they reported a net loss. Did not matter. Stock is up more than 20 since thirdquarter earnings. Meanwhile, the s p overall has fallen about 2 since then. Really interesting to see amazon in the Fourth Quarter finally in the black and look again in the First Quarter for the forecast for the operating loss for the coming quarter, they say it could still be anywhere between 200 million net loss of to 200 million profit. Epic the bottom line is when you look at sales numbers, its telling you we still have a week consumer, and this is somewhat on this is somewhat of a surprise on the heels of some positive economic news. The gdp numbers. 6. 7 its hard to argue with that given where weve been on the jobless front, but perhaps this is telling us those who say its because people are giving up and they are not looking for a job right now maybe theres something to that because, clearly, people are not spending. By the way, did you see the guidance . This was unbelievable. Revenue estimate for next quarter at amazon, if you look analyst, 19. 7o billion dollars, and the company saying its going to be somewhere between 18. 2 billion dollars and 19. 7 billion dollars, so they are steering down about 1. 5 billion dollars below the current estimate. Thats real money. Do not forget, one of the other big trends in the holiday was a tremendous amount of aggressive discounting among all the retailers. Walmart was really going hard after best buy, and they were all trying to keep up with amazon and this move to mobile shopping. A lot of these guys saw a bit of a slowdown. A billion lower from the street estimate i guess its good for consumers because of all these guys are fighting with one another and lower prices, we are going to get some deals. I hear you. Its good for consumers, but at the same time, you want whats good for the company as well because at the end of the day, the company is the one employing those very consumers. The Conference Call is going to be important because the discussion of Capital Expenditures is going to be a big deal. For the year was actually down year over year. That is not surprise me at all. Nobody was investing in. Amazon has been, jacking like crazy. Jacking jacking capex like crazy. Click they said they were going to move distribution facilities close to major cities so they could do sameday delivery, to do sunday delivery, so you might have expected that capex to go up because of the closer proximity. Thats going to be one of the big trends, not just of 2014, but of the next few years, the idea of sameday delivery, instant delivery. We are seeing a lot of startups popup tying to take on amazon in that regard. Ebay has that ebay now, and thats been making headway. It took me literally less than 10 minutes to get one of my favorite perfumes. Thats so great. Actually have to pay some bills here believe it or not. Do we have to pay bills . We do. Lets take a commercial break. Before we go to commercial break, hold that music. Zynga 18 of its workforce whats your reaction to that . Is this dead in the water gecko this is a train wreck. Zynga was a stock and not a company they cannot with a primary offering, secondary offering at 10 i know you have said its just another form of entertainment, but you know what . I say this whole thing is bogus, and, sadly, its costing jobs. The fact that you would use real money to buy fake farms and fake cows that was years ago. The fact is they are nowhere in mobile right now. All the Top Grossing Games are other companies. Supercell, glue mobile. Is the one thing that i think is promising for them they are getting into the online poker game via facebook and the that when in doubt, sex, drugs, rock n roll, or gambling. Thanks a much, guys. Great to see you. Thank you for being here. Ing up, Margaret Carlson sorry, congress. President obama is going to ball about executive action this year just going to be all about executive action this year. She came out to tell us what our commanderinchief can really get done without the help of washington. I intend to continue fighting as hard as i possibly can to thisd. C. Listen, to force town to address the real problems so we can pull back from this fiscal and economic with because the window to turn this around is not long. President obama made one thing clear in his state of the Union Address 2014 will be the year of executive action. I am eager to work with all notou, but america does stand still, and neither will i, so wherever and whenever i can take steps without legislation to expand opportunity for more american families, thats what im going to do. In fact im a the president is planning on making 12 executive actions this year alone, but how much can he really get done without congress . We are joined right now by Margaret Carlson. Always a pleasure. What do you think is going to be first on his agenda, and how realistic is it that he can in fact to get it through . Usuallytive orders are not as good as Getting Congress to cooperate with you, but we have learned and the president learned hes not going to that get that kind of cooperation from the house, so its full speed ahead on what he can do. The most important when he mentioned was raising the minimum wage for government contractors, the people who cook the meals for the troops, clean the toilets and do all that kind of work and then the thousands of them that do similar things here in this country, and then he challenged congress to also do it for the rest of the people who are doing minimum wage jobs but still living below the poverty line, and theres huge support for that in the country, so i think that is the most important one. He talked about some other things Training Programs that Vice President ryden is going to review, and he says the ones that work are the ones that should be funded. One of the interesting things, at least to me, was this ,reation of the mira account another vehicle for americans to save, and he is ordering treasury to go through with. Reating these how successful do you think Something Like that might be, and is this another example of trying to get anything he can done on his own . These are for people at the bottom of the ladder economically because you can put very little in. Many of the vehicles out there are people who have the Discretionary Income to put into these things. I heard jokes and in the name its not good. You dont like that name . No, i dont think it works. My aunt its your aunt mira. However, this is good and he can get it done. The emancipation proclamation was an executive order. What about trying, or is it that impossible to work with republicans in congress right now and to try to sort of hole and bill clintonesque clintonesque move and work with them . The clinton days look like a day at the beach compared to what president obama has been working with because they vowed not to work with him and have proved that to be the case, but at this very moment, they are in a meeting,yland at and this is one of the things obama mentioned but did not count on during the state of the union. It would be good if obama was completely silent about immigration now because john boehner wants it. They appear to be considering it, moving towards it. It will not be exactly what the president wants, but if its anything, it will be a step forward. Let me share with you some sound from peter cooks interview with senator ted cruz earlier today. Senator cruz obviously being someone who has perhaps contributed to some of this partisan thinking in washington. Take a listen. Everyone on wall street, everyone in business who is worried about this brinksmanship needs to call the president to account. Stop playing games with the debt ceiling. The best way to do it passed the default prevention act so we can never again have any question of a possible default on the debt. Are we going to have a question of a possible default on the debt again in the near future, margaret . Senator ted cruz had his moment. The Government Shutdown. It hurt republicans. It hurt his party. John boehner is not letting it happen again. There is no appetite for it. Nothing senator ted cruz needs to do or the president needs to do to prevent it because it is not happening. We hope the 2014 is indeed the year of action. Thank you very much for joining us. You can read margarets columns on bloomberg. Com. Course, all of our most popular shows like street smart after this break are available on the web. Not easy making money this year, so we need to find a couple of places to hide. Time for a little insight and action. Let me show you the disconnect them talking about. Five companies, all of whom in the past several weeks have guided up their sales forecast. Thats money coming through the door, good stuff. Yet, look at all five of them down. It just does not make any sense. I mean, like, look at pvh. Buying theirople tommy gear. Sales forecast of 36 , and yet, the stock is down 11 . Total disconnect. When markets get this difficult, when you do not see what should happen happen, and instead, its the opposite, you need to just sort of step back and say, when need to find a couple of places to hide. Let me show you a couple that have caught my attention high yield ons. Bonds. They are up, unlike the Dow Jones Industrial average and s p. Each by. 5 . Thats one place to go. Look at this Master Limited are to ship, yielding about six percent. Not about 1 , but thats nearly as bad as the s p 500. Finally, take a look at gold. Kind of interesting we forgot about gold. Theres the s p there, but gold miners are both up. In fact, small gold miners, the gdxj is up. When we come back, well talk about google and try to make sense of the whole thing. Alright, some breaking news. It looks like we now know how much the man who runs Goldman Sachs made. Lloyd blankfein made 14. 7 Million Dollars. Thats real money. Those guys make a lot of money at Goldman Sachs, and clearly, the ceo does as well. Meanwhile, time for a big story google. Company profit fell short of estimates. Google announced its selling the motorola handset unit to lenovo. Lotta moving parts. Lets try to break it down. ,rian blair of wedge partners and the author of googled the end of the world as we knew it. Below expectation, that is the end of the world as we know it. What you make of that . Not the end of the world for google. They are doing fine. We always have this debate about analyst expectations and estimates, etc. , etc. , and do they really mean anything. Agreed, but tech stocks the other day are about growth. Forget what the analysts thought, which does influence stocks in the shortterm, but at the end of the day, tech stocks go up on growth. Look at apple. They stopped growing, and the stock came in. And facebook is growing, so the stock is going up. 13 ,e is growing earnings and if you backup motorola maybe its a little bit higher than that, but the reality is historically, the stock has been about 1. 2 times growth rate, trading about 22 times earnings right now, which is expensive relative to its history. Its not expensive to a tech stock, but ruble is no longer growing like it used to. Everyone has moved to mobile, and a first, that was the credo because people were searching both desktop and mobile, but now people are replacing with it. Thats fine. Mobile search is fantastic. I think it increased overall volume, but theres a limit to that overall growth. Earnings growth of 13 is not something i wanted paid 20 times earnings for. I got to agree with what he said. In addition to the growth, google is doing everything the right way, in addition to just search, with all the acquisitions they are making around robotics, with the acquisition of nest, arguably one of the most exciting companies of the last few years 3. 1 billion dollars exciting . Thats what they paid for it. I am a user of it. I think it will be a Great Company under googles umbrella, but i think what they are doing with wearable computing. They are innovating. They are innovating publicly, and we could argue multiples all day long, but they are innovating in a way you are not seeing a lot of other companies in tech especially apple. They may be innovating, but its behind the scenes. Googles innovation is behind the scenes, and i think investors are willing to overlook a shortfall in revenues because there is still growth. I think that if you if you look at how google has positioned itself in the mobile world where the revenues are inevitable he declining because you do not get the same ad rates as you do elsewhere, the 40 of all the youtube traffic is on mobile phones. With android, they are positioned with the majority of all the operating systems. They are wonderfully positioned, and when they figure out when people figure out, as i assume they will, how to do advertising on mobile phones without feeling like an interruption, they are going to be growing again. One of the things thats happening that is important is we are seeing larger screens on smartphones, which is allowing more opportunities for advertising. Boy genius was on with us earlier this week saying 4. 8 inches is probably the likely new size of the new iphone. That allows more space for display, for text ads, and to your point, that will allow google to further monetize the mobile user, not just in america, but in the middle east, in emerging markets, and that really is one of the probably that is the most important thing theyre doing as a company, growing and mobile. Their mobile modernization is still just adds. They have innovated that people talk about google glass, and we Driverless Cars are financial analysts, and innovation is defined by only one thing in finance, and that is do you have a return on investment on that innovation . I would argue that none of the innovations 110 of the profit today is not one single algorithm that they invented when they were in the grad school dorm a search. The only thing they can make money on. Maybe you can address this because this is your strike zone, right . Google changing the world. It started with search. Talk about some of these other new businesses, whether it is nest, robots, glass, cars. For years, Steve Ballmer at microsoft used to love to say that google is a one trick pony. Well, its not a one trick pony. If you think about it, it has not just search, as you talk about, but the important thing about search is the advertising in search is perceived as information by the user, so half of the people who click on ads its the best mousetrap in advertising. All in 10based. Holy agreed. Not growing like it used to. All these investments they are making other products are not yielding financial results. If they do not, at some point in time they have youtube, the biggest tv station in the world. They have android, the dominant operating system for mobile phones. You talked about google glass and some of the other investments theyve made. They were a very wellpositioned company, and one of the things where we make a mistake and they are very disdainful of it at google looking at quarterly reports and looking at what analysts say, and i do not mean any disrespect, but the truth is that its kind of crazy to say analysts projected that it would be numeral four cents or five cents agree 100 . The bottom line is that google is going to keep growing because of exactly what you said. They are going the global growing their global user base of people buying smartphones for the first time, and when i signed up for those, they are usually android, and they are reading google ads. Thats why we will continue to see growth and innovation from google. Thank you all for being here. Next, so to stream, the slap down on its super bowl ads sodastream. The slap down on its super bowl ads. Stream facing a twofront battle over this ad starring Scarlett Johansson. Pepsi. Y, coke and first problem frost at the company to eliminate the coke and pepsi reference. Second, an organization that s plant inastream the northwest. Spoke with the ceo about both of these issues yesterday, and she started by asking it playing by the rules is the price to pay for reaching millions in about 90 seconds. Unfortunately, it has become a pattern now. I guess someone is trying to protect the big guys he does maybe we are too threatening to them since we have a solution which, in my opinion, is a lot smarter than the way they do it. Its a lot healthier for americans and a lot healthier for the planet. Stream tonedp soda down and maybe not let america hear the truth, but america does deserve to hear the truth, and we are going to make sure we figure out ways so that america does hear the truth. Youtube is one way, and theres others as well. Here you are talking about it with me right now. In some ways, does this help you . All the additional publicity ,rrounding this censorship as you refer to it . It has given us plenty of additional publicity, but its not something we asked for. I had my choice, i would rather air the ad as it was created the line, with sorry, coke and pepsi. Some people accuse me of deliberately creating the situation, and thats not the case at all. We just had that one line that Scarlett Johansson says, and even that is too much for fox to air. If you just mention the companies, thats too much . Yeah, thats all we did. We live in a world where competitors advertise against each other. Coke and pepsi constantly show competitive product, as other advertisers do, but we cannot do that. As an american, im upset and ashamed and disappointed because america should be a democratic society, and freedom of speech should be very important. Actually, we are going to be running this spot in russia in russia to make the point that what runs in russia does not run in the United States. Come on, guys. I will take this opportunity to turn to fox and ask them to reconsider run the ad. Anyour spokesperson is ambassador for an antipoverty organization, which has said it opposes all trade from israeli settlements. How do you think this affects your marketing . Thats a whole different controversy. We have enough challenge revolutionizing the beverage industry. We are also revolutionizing the Peace Process in the middle east. It so happens we have a factory in the west bank, which is a wetroversial location, but are utilizing that location to employ palestinians and bring people together, and by doing that and paying everyone equal wages, equal benefits, equal opportunity, what we are doing is creating an island of peace. And setting an example for coexistence in the middle east. For some reason, they did not support that, but what i did upon the encouragement of Scarlett Johansson i invited the president of Oxfam America to visit the factory and see for himself the work we are doing there, and i still have not heard back whether he is coming, but im confident that when he does, he will embrace what we do in this factory because we are working for peace. Let me just ask you about sales right now. You had a weak holiday sales quarter, and we have seen this not just with you, but a lot of retailers over all. The concern is that American Consumers just are not really spending in the way that people had anticipated. Is that going to continue to 2014 . In a time when i cannot discuss financials, but i can tell you that we have lost none of our optimism and bullishness about the potential of our business in the United States and elsewhere in the world. We have markets where we have household penetration over 20 . In finland, in sweden, and theres no reason why the United States should not embrace soda to space stream the same way. Every 10 seconds, another family joins our community, so this is probably the Fastest Growing beverage brand in the world, and i do anticipate that growth to continue into 2014 and well beyond. Commercials obviously a big part of the super bowl. Having a good time trying to make a side better too, so today, we have a treat for you. Goare joined by teddy, the to guy in vegas. Great to have you here on the show. Who do you like . Thats a good question to ask, and the answer is i like seattle, but only if i can find a plus three with the seahawks. We saw here in vegas, seattle opened as a favorite, and the money poured in on denver right from the opener, but even right now, across vegas and even across the global betting markets, theres a fairly wide ball game. Ts on this you can find denver as low as minus one, and there are a few spots where seattle plus three has popped up. So this about a twopoint line variants on a super bowl, which is pretty rare. I think that will continue right through the game. If i finance ev plus three on seattle, its a clear choice for me. Obviously taken. Two totally different quarterbacks Peyton Manning, oldschool, fits in the pocket. Russell grant, the pointandshoot player. If we are wondering what denver emerged as a favorite in this ballgame, it is quite simply that matchup. The betting public would not accept Russell Wilson versus Peyton Manning in a pickem price range. They said manning has to be the favorite. You can certainly understand that process. Peyton manning is a hall of famer and Russell Wilson is a secondyear quarterback who does not have anywhere that have been here anywhere near the type of recordbreaking season that manning had. That said, will someone incapable of making big plays with his feet as well as his arm, and he is a heady kid, dating back to his days at in c state and that wisconsin. He has been a moneymaker for those of us in vegas who have supported him over the years, and i would not be surprised if that continues. You said you would take seattle for three points. What is your over under on point halftime and ended the game . Total here in vegas is to 48 range. 47. 5 i like the first have to stay under the total. Upre are 24s that may pop between now and kick off, and its a market that moves, much like wall street, so whats available right now is not necessarily what will be available tomorrow or the next day or in the hours before kickoff, and when we talk about the first have to stay under, in most super bowls, we see a little bit of a feeling out process early. The First Quarter tends to be the lowest scoring of the four. To take that first half under, im hoping for a couple of field goals instead of touchdowns and hoping for a couple of tons unts instead of scores. Any good side bets on this thing . Are you kidding . Its the super bowl. Christmas morning for bold betters. What do you have . Some of the books have hung 400 different prop wages, but lets talk about a couple. I like doug baldwin, the seattles wide receiver. I like him over 39 and a half yards. For 106 yardsches last week. He has emerged as Russell Wilsons go to downfield weapon, and with percy harvin playing this week, that will take some of the coverage away from baldwin. I think baldwin will have a big aim. Sacks for the game, i will take that under four and a half. You have to lay a little bit of juice with that price, but i do not mind laying juice with super bowl props, not at all. In general i wish we could keep going, but sadly, we are out of time. Teddy awesome, please come back. We will see you soon. Thanks for being here. Theres nothing more terrifying than a longrange highaltitude super destroyer. The business raytheon specializes in the companies and the countrys most powerful businesses coming up next. Welcome back to street smart. Before we wrap up, lets talk about Lloyd Blankfeins compensation. Bolivia. This is according to the regulatory filing Lloyd Blankfein got an 11 stock boost to compensation. Chairman and ceo of Goldman Sachs. This is on top of his base salary of 2 million. This comes after jamie dimon over at jpmorgan got a 74 increase in his salary and stock awards worth about 18. 5 Million Dollars in restricted stock, and we also heard from morgan stanley, james gorman getting about 5. 1 Million Dollars. Obviously, its good to be the king on wall street. Those guys making a lot of money. And thatt the hour, means Bloomberg Television is on the markets. Thank you for joining us. Lets get caught up on how wall street performed today. Stocks rose, pushing benchmark indexes up from twomonth lows. Gains were fueled by an increase in Consumer Spending and corporate earnings that the estimates. The boards so nasdaq leading the charge up 1. 3 at 41 23. The s p 500 index up just over one percent. At 1790 four. 1. 1 Dow Jones Industrial average nearly. 75 . The markets have had some wild swings as investors try to find their footing in a new year of trading. Swan Wealth Advisors Mark Sebastian was on the floor of the cboe, where the volatility indexes traded. Thanks for your time. The vix started out the year calm, but it has surged in the last week. Is volatility going to settle in at this new level . It certainly could. I will tell you looking at today, if you see how much the s p moved it was up about 20 points i would normally expect the fixed to have sold off twoplus points, somewhere in the 10 to 15 range, and instead, its almost completely unchanged. When we see the s p up big and the vix near unchanged, thats almost always a huge red flag for the market. Im looking at today as a potential oneoff event, and we are likely to head right back for more volatility. Looks like they are not buying it at emerging markets and being completely calm, so that really moved. There was a large rally on wall street today, as i mentioned, but the vix is underperforming the market. Why do you suppose that is . When you look at the cash vix, that is basically traders bet on how much the market is going to move. If the vix is not selling off on a big rally, that is traders betting that the market is going to continue to be whipping backwards and forth, and thats why the vix did not sell off. Traders were saying even though we are having a big rally, theyre not feeling any better or any safer about this market and theyd rather own calls or thanagainst long equities go straight long equities, and thats why the vix held up so well today. Traders, as you alluded to, selling vix options instead buying s p options. How much exposure to market movements are traders looking for at this point . Its interesting we saw the volatility of vix options get absolutely smoked while traders were out there just bidding up s p options. I think traders are looking at to 15day, the immediate, saying theres absolute risk in the near term, and they are willing to sell longerterm volatility, the vix option, to pay for it, and thats the trade that we were watching today. Cboe plans to initiate shortterm fix futures beginning next month on february 13, and thats pending a regulatory review. What will this tell us about how the smart money plays nearterm expectations . I think thats going to be our real panic button. People like to call the vix the fear index. It really is not. I think of it more as the cost of insurance. If you want to know what the true fear index is going to be, the cost of immediate insurance thats going to be a really powerful index, and thats what people should reference if they want to know whether people are pushing the panic button. Thanks for your time. Appreciate it. From the markets, im mark from to Mark Crumpton. Forhis is taking stock january 30, 20 14. Im pimm fox. The theme at this hour is center stage nathan east spent his career playing with bands like after punk and artists like eric clapton, now he is taking center stage with his own music and his own album. We will discuss his life as a musician. The First Mutual Fund devoted to 3d printing and attitude manufacturing. We will find outt