Growth forecast as the easing of austerity policies. Supports recovery now, 4. 2 . Mortgage applications have been going down since june. They are out at 8 30. P. M. , the fed releases the beige book. What have you done for me lately . Earnings. Before the bell, scarlet will be out all over this. Bank of america after the bell, cfx csx. Cold is a big deal. Michael mckee is famous for carrying vietnamese dong in his wallet. The president talked about the economy in North Carolina. Let me do a data check. The king at stocks, bonds, currencies, commodities. We are up. We have been churning euro dollar. The nymex crude recovers a little bit, but there is a dampening thing going on looking at the global economy. On to our next screen. The idea of the vix churning again between the 11 handle up to 13. We have come back nicely in the last two sections. This is important. The dollar has gone nowhere. You see that in the dollar index spot rate. 1. 0972. Eakens that secondarily, the turkish lira. Aving a tough go of it at 2. 19 i am really focus on the Canadian Dollar within the quiet Foreign Exchange market. We scary we scour the busy papers wednesday morning. On the color of the wall street journal, brace yourself or pay more for Internet Service if you download tons of movies. I know you do. A federal Appeals Court will allow verizon and other carriers to charge extra fees for speedier delivery of your online movies. A big win for verizon. Netflix would have to pay more, but we all know who will end up paying. Of course. Is this a win for verizon or a loss for the government and the Obama Administration . Fort is certainly a blow Obama Administration. They have been pushing for Net Neutrality. We are going to end up paying up for the difference. The wall street journal with a great bar chart of who uses the stuff. It is all netflix. Efforts by the senate to send jobs benefits for unemployed hitting an impasse. So much for the come by our for the kumbaya on capitol hill. There it is, alan krueger with us in the 7 00 hour. This is really heating up, intractable. When they talk about this, is it to assume they are out past 26 weeks, unemployed benefits . They extended it to 47 with benefits. It could come back. If it does not come back as an actual decision to extend this, it will come back as a political issue. The press wi charge republicans with throwing people into poverty. We will feature that in the 7 00 hour. Professor blinder is a colleague of refresher kruger. China mobile, the worlds biggest cellphone operator, begin sales of iphones friday. Cell phones there hit a record in the fiscal first quarter. We know that china mobile says millions have been ordered, but both china mobile and apple face challenges because they are facing falling market share. Customers are buying cheaper chinese made phones that run on within sam grobart us article sam grobart article is going strategic by going after that is frontpage stories. Guest host for the hour is larry downes. Boy, is he qualified. It is sick berkeley, clerking for judge pozen are out of the university of chicago. His latest book really is interesting. Big bang disruption. It pushes against disruptive world. Here we are with big bang disruption. Where is the big bang disruption now . Are the Old Tech Companies just fossils . Not only Old Tech Companies, it is really old all incumbent companies. Get adopted by all segments at a time. Get with microsoft. What would be your prescription . They need to get much more involved with the start of community, with the hackathons playingthe young people around with these technologies rather than focusing on r d. I could see how they are at risk of being disrupted. Where does google fit in . It has been around for long enough, but it is buying startups. That is how the companies can overcome this kind of disruption. If they cannot build it, they buy it. But you want to buy it early enough. 10 years from now, three years from now, the money would have been even more. Old tech company echo Silicon Valley, definitely. When you look at this, strengths, weaknesses, allrtunities, whatever these old formulas. The young kids dont care about that, do they echo no, they just like to tinker. The internet gives them a great ecosystem. If it takes off, it takes off like a shot. To you sooner that do you assume that if someone spends 3. 2 billion it is at the top of the market . No, i dont think so. It might have been 6 billion if it got hotter over the next couple of years. We did a great comparison in our research. Kodak and fuji film. Thek could not make transition from film photography to digital photography. Even though they had some of the best patents around, culturally they just were not why not . They could not commit. Their whole life was built on film photography, and they kept hedging their bets. Google is out there buying these startup companies. It has this google arm that is looking into developing new technology in ways that may not be profitable yet. How is that comparable to fujifilm or kodak . You can fall very quickly, and in Silicon Valley if you dont continue to innovate or come up with new products and new ideas constantly, it doesnt take long. You are not disagreeing with Clay Christiansen, the professor from harvard, about a disruptive world. What is the distinction between big bang disruption and innovators dilemma . Saysristiansen us work that when these disruptions come in, they come him cheaper they come in cheaper but with worse quality. The digital and analog he had in the book. But because of falling cost of technology, particularly information technology, when new products and Services Enter the market, they come in better and cheaper. That means there is no time to respond if you are waiting for the innovators dilemma. The young kids are so impatient they will not go through the normal corporate hierarchy and bureaucracy of traditional tech. Thats right, they will just throw it out there, and if somebody likes it like twitter, it will take off and have millions of users in a short time. I could go forever on this. Larry downes has been on the show and it has been great. Can we get you and clay on the show . I will get down on my knees right now. Please, you and clay will stop you dont have to beg me. We will leave him there and find out what is going on with company news. Digital making a big difference with Retail Revenue at the british luxury goods maker. Digital innovations and Customer Service are pushing its sales higher. A first ever vote at amazon, a group of 30 technicians in a warehouse in delaware voting on whether to become the tech giants first u. S. Union. Machinists and Aerospace Workers if they approve that move. Time warner is close to a deal for its headquarters. The media giant is set to sell forColumbus Circle related one point 3 billion. This according to people with knowledge of the deal. The related bit is backed by funding from sovereigns wealth funds in abu dhabi and singapore and would be one of the biggest deals in Foreign Investment in commercial real estate. The need to spend the whole foods in the basement and i cannot get a good cup of coffee in the building. For dollar, five dollar, fixed our cooks of coffee. It is all about location. There it is. A lot more to talk about in the next two hours, including mary barra, taking over as ceo of gm this morning. Her challenges and priorities as she begins her new rain. Everyone. Rning, bloomberg television. Jack welch, former executive with general electric. To thatooking forward at 8 00 a. M. He has a lot to say about the recovering corporate processes out of the financial crisis. This is bloomberg surveillance. Tom keene. Michael mckee is with me as we get ready to speak with alan krueger in the 7 00 hour. Scarlet fu is here as well. Lots of headlines from General Motors at the auto show. Matt miller is so excited this week. Gm is the news of the day. Not only are they going to start repaying dividend, they have a new cal ceo on dividend. Barrette takes over for ran ackerson, mary bar takes over for dan ackerson. It has been called our fortress balance sheet, substantial liquidity, strong cash flow providing the foundation to payout to investors. Her biggest challenge has been getting across the floor of the Detroit Auto Show without being swarmed by reporters. But once she gets up to the executive suite, what is the biggest challenge that analysts see for her . The idea of whether gm can continue to build on the process the progress it has made the last two years. It won the north america car and truck the rewards truck awards for the First Time Since 2007. There is a lot of product rollout coming out over the next two years. The question is whether they can build on that momentum on overall auto sales. Million,more than 16 but what happens after that . A cannot continue at that pace, so the competition will intensify because gm is not the only carmaker out there. I think the real issue with the enthusiasm, it is well as her and she is a phenomenal engineer and all that. The gross profit of ford is lightyears superior to General Motors. Our perception as kids is gm was ys giant and ford and four did not have to take a bailout either, so its finances have been in better shape. Brian johnson of Barclays Says with all of gms new rollout, the new models will help profit increased by 2 billion this year, but it will put pressure on until we get to that point. I wonder if we will get to the point of overcapacity. The airlines seem to have discipline, but you wonder if the autos have discipline. They are cutting back on production in detroit for the first quarter. They may be at the point where their inventories are too high. Would you comment on how important 16 Million Units is to america . It is a huge deal still, isnt it . It is, but not what it was. The Auto Industry is much smaller as a portion of the economy than it was. 2 . S a little over coming back, but it will never be what it was. It isteresting thing, spread out all over, not just concentrated in detroit. Real issuepoint, the is whether carmakers go back to their bad habits of discounting, incentivizing to push those on the floor. What is her message at the north American International auto show. And want to continue to build on the excitement they have been. Larry downes is with us with a sterling resume, thinking about business processes. What would be your counsel to ms. Barra . Vegas ate saw in las the ces last week you survived. I did not get anything to eat, but i survived. Driverless cars. We were told but the engineering was all there. The only Thing Holding it back is the law. I cannot get there. Help me. Can america get to a driverless car . We can. We have the technology, as they used to say on tv. We just dont have the legal regime to put it in place and let it happen. . As it happened is safer, more energy efficient, and it would reduce traffic. We had an interesting discussion monday. A tech guru Business Insider said that the Auto Industry has completely changed now and it is going to be no longer about the metal bending, that the cars are now computers. The people who will run the auto bepanies in the future will software engineers. Is that what we want gekko the ford f1 50 is that what we want . I guess we want fancy, but do we want to pluck city within our auto systems . Work, but weem to have had Driverless Cars for decades. We have antilock brakes, automatic parking. Which really are cool. We are adding a lot more tech as it gets cheaper and faster and more reliable. Is every car going to look srs the interior of a tesla . That would be nice. Some of the cars in las vegas just looks like cars. You could not see the tech. I am terrified by the idea of driving down the street and seeing tom keene behind the wheel tweaking while driving tweeting while driving. At his another serious issue, all the media and technology hitting in the way of safety. That is if you are still driving. But if the car is still driving, youre fine. I cannot get there. Is gone. My ear drive in forever. Our twitter question of the day would raising the minimum wage help or hurt the economy and why echo coming up, former white house chief economist alan krueger. Good morning, everyone. 4. Ures up dow futures up six. Mr. Mckie has our top headlines. We start with germany. Its economy expanding past forecasts. Gdp up. 4 . The growth also weaker than the points seven percent increase in 2012. The shortfall blamed on week. 7 increasen the in 2012. Mario gabelli, one of the bidders in the auction of u. S. Airways. The chairman of the holding owns lynch three g communications. Meeting demand demand for smartphones, devices, and cars. Concerned that the 765 Million Dollars set aside will not be enough to pay the cost for the 20,000 retired players covered by the deal. The judge is asking for more Financial Analysis from the two side. Those are top headlines. There was a lot of focus on all the times that people got hit and knocked out. Good morning. Michael mckee is a broncos fan. We cannot explain this. The doctors can take a guy right out of the game. That is the protocol. The players do not want to leave the game. The players never want to leave the game. But they can pull them right out. Scarlet, we have some great ones today. Ofdall stephenson, the at t. He is writing in his capacity as a new chairman of the business roundtable, which is an association of ceos of big u. S. Companies. In the german in the journal, oneays were stumbling from fiscal crisis to the next, so businesses find themselves with no ability to plan beyond a single quarter. The budget deal between ryan and murray offers some predictability, for businesses to invest. It also gives congress some breathing room to attack important issues like tax reform and immigration reform. As if they are going to. But at least they can start spending, we hope. At is the big question, for 2014. About up, we will talk the internet of things with our guest host, larry downes. Good morning, everyone. Bloomberg surveillance. Im tom keene. Lets get to data check. Futures elevate a little bit, down,f the glidepath scarlet fu has our gainers and losers. , a big gainer in yesterdays tesla. Tesla saying that it delivered 6900 model ss in the Fourth Quarter after predicted it would back in november. Doing better than targeted. The video Game Retailer cut earnings forecast because of lower than expected of games as it sold plenty of hardware. The ps for and the microsoft the shelves. Off your kids did not get one, obviously. No, im withholding favors right now. Good for you. Every home should have a 3 billion bet that google is making. You need a smart thermostat, a smart smoke plus Carbon Monoxide alarm. The author ofs big bang disruption. Also joining us, paul sweeney, u. S. Director of research at bloomberg industry. The speed that you talk about of the new new in technology. How does google try to keep up with the new new . It is a lot of investment in engineering, but it is also looking around in the valley and seeing who is doing what. Is it a new delegation of authority . Dont the principles of google know that they cannot do it all themselves . That has always been there in approach. It has been a very decentralized company all along. All, you have provided some insight on this. Motorolaolves mobility. It was kind of a surprise for a lot of google investors at the time. Here is google, a search company, software company, services company, and now they are getting into hardware manufacturing, distribution, and retail. If you step back from the motorola deal, it was all about recognizing i am interested in the patents and i recognize the future of the internet is mobile. I need to be a player in mobile. I need to be all over the mobile space, so lets get into that part of the business. What are the best practices of old tech, either a dinosaur like motorola or google with all the new upstarts . Theyr the older companies, are trying to look for ways to take their technology and move it to another industry that may use it better. Research showed tech instruments in the old days they took their dsp chips, and when they got out of the personal computer business, they said now we can be a supplier for other sorts of devices. They moved to another industry. That was successful. Is a mistakenly thought for a hardware purchase that is really a Software Purchase . It will eventually run your thermostat and Everything Else from your home . Just over the last several months we have heard this term the internet of things taking hold in the valley. People on the street are starting to get a sense of that. Thes the whole context of internet, the intelligence of the internet coming into traditional dumb devices and perhaps making them smarter. Toyou guys are old enough remember when we talked about innovation as Technological Progress. Talk about how innovation or i would say Technological Progress . Is being redefined today. It is about better, cheaper, smaller, faster. As computer chips get cheaper and use less energy, it doesnt matter. They will throw them into any free thing that into everything. We are putting chips, components, into dumb things to make them intelligent, and the cost keeps going down. The chip i have in my neck right here to give you i want some context because cisco estimates a number of devices will go to 50 billion by 2020. So companies that we do not think of all need processors. They all need some kind of hardware. Larry, what kind of winners can come out of this . The big winners will be software companies, information aggregators, who will figure out what to do with all this information. How does it tell us about products are performing . What new products we need . Intel and cisco . They are betting heavily on the internet of things. Davos in a week or so, what would you want to listen for him the disruptors of the world, the pretentious elite that get together . Himself. Speaking of help me here. I am interested in how the model has changed a way consumers interact with products and services. We are seeing more consumer aggregation of their power and ability. They are using social media to discipline companies and industries to design products. What does transformation mean . Mike, do you have a definition of this . We are transforming. What does it mean . I have a real definition. Thank you. I am glad i am not dumber than everybody else. It means our lives are getting better, not worse. Paul sweeney, this will be a big issue because the designers of the internet of things face a possible backlash if we do not set some rules up. And we have seen that in history, whether it is from the social media business. There is so much data from the whoal Media Companies controls, owns, and secures the data . Thank you for telling me to buy google eight years ago. Throw the chart up, courtney. This thing just continues to advance. One of the things about the google story that investors like, it is not just a search company. You step back and say the dominant search player, they have created the display advertising business out of nothing. They have traded a mobile business out of nothing. They have created an Online Business out of nothing through the acquisition of youtube. To reinveste themselves out of their core business of search, and search continues to be a Global Growth story. Paul sweeney, thank you for coming by today. 100 or so Research People that do smart stuff. You can see that. The number for you right now, 6809. In the next company. Tech companies are loading up on patents. Bloomberg surveillance next on bloomberg surveillance. Bloomberg surveillance. Michael mckee and scarlet fu with me. Bank of america will be out in 20 minutes. Scarlet fu will go beneath the headline data. Lets go to top headlines with Michael Mckee. Guy, i bring good news. The World Bank Bank says it is higher than the forecast hinges on the quarterly on grinding of the bond buying. European Union Lawmakers agree to a new rulebook for financial markets. Changes include commodity derivative speculation. Their version of the vocal rule. The changes still need to be that of the folder rule. Online gaming in new jersey gets slow start. Revenue 8. 4 million during the first five weeks. It needs 22 million per month to meet projections. Banks will not let customers use their credit cards to play. City casino revenue falling below 3 billion last year for the first time in 22 years. We have done a lot on this. I still dont get it. To have to be in new jersey do online gambling. Physically in new jersey. That is insane. Ohio, i cannot do it. Yet online is transformative. Folks, i am lost. To provide sanity here, scarlet fu with our single best chart. Is on patents, a unit of fairview research. It shows the total number of patents granted by the patent and Trademark Office in 2013. Winning the gold medal is ibm with 6809 patents. It has more than 2000 patents over number two. It has this reputation as a copycat, but the number of patents filed suggest it is trying to be more of an innovator. The other u. S. Company is microsoft, coming in at number five. Where are google and apple . I see the names at the bottom. They are not in the top seven. Wasle was number 21, apple number two, which was surprising. Downes, is a patent today the same patents that Michael Mckee and i, in our basements as kids i am going to invent something, get a . Atent, and be rich patents today have gone berserk. Over the way i tie my bow tie. I have seen worse than that. The patent over how to apply for a patent. You are serious . I am. The Supreme Court will take a look at this again in the coming term, but the Patent Office has gotten way too liberal. Said . T would judge pozner very skeptical. He has sat on some cases, written some opinions. He is very unhappy with the way this is being used as a business weapon instead of a tool. When you and Clay Christiansen come back, i am not letting up. I want you to spend an entire block on this because i know for all of our viewers and listeners worldwide, it is like, what . There is a lot of importance behind it, right . Billions of dollars in lost revenue. Lets get something exciting in here besides boring patents. Lets start with very old media. North korean defectors now cannot getouth korea a computer in there, so they release balloons denouncing the situation in north korea. They particularly drew attention to the execution of kim jong uns uncle. We have had freezing rain and snow in california. Dumping water on a large brush fire. A 10 acre blaze created disasters traffic, as you can imagine. Every year this happens. It is the dry season out there, and it is an ongoing issue. Clouds, highrise buildings you can barely see them. Chinas self part of the country, officials issuing a yellow warning, the third more the third most serious on the fourlevel scale. When i see a china city, they all look like that. Look at that. That is daytime. My offspring was home from china and he would check his phone and he said it is so serious where he lives, it is a habit every two hours, we checked the time or the weather. Not allow the u. S. Government to disseminate information about the smog levels, but they cannot get around it anymore. Are they anywhere near a Tipping Point where they do something about this . There is a lot more talk about it and people taking it seriously. A lot of industries have vested interest that do not want to let this happen. Government is against it. The french industry has great industry there. I think the president of france flies to china to begin negotiations with china to clean up their air. The French Nuclear plants there. A long way. Another debate to talk about. Robert mcdowell will join us to talk about regulating technology after the Appeals Court shot down Net Neutrality. This is bloomberg surveillance. This is bloomberg surveillance. We start with a first look at iphone sales from china mobile. The company taking preorders reaching onee, Million Units. China mobile began taking orders for them 21 days ago and will sell the iphone in stores on friday. Revenue last year rose eight things to smart phone sales. That is huawei. It has benefited from the companys shift to 4g wireless service. Fivee has spent more than biggest rivals combined. Spent 17 billion on acquisitions. Apple, microsoft, facebook, and he yahoo combined for 13 billion in the same period. That is from the files of bloomberg west. That page is using some of cash buildup. Call that Net Neutrality, it is the battle for the open internet, and it is heating up as a key fcc role was struck down yesterday by an Appeals Court. I will rip up the script. There is a lot of stuff about the law. What it comes down to is companies that use more bandwidth are now going to have to pay for it. Netflix would be charged the same thing as google, even though movies take longer to download than an internet search. That could change the governance of the web. Joining us, former fcc mcdowell, a robert strong proponent of regulation Free Internet during his sevenyear tenure. Thank you for being with us. This is a bit of a game changer. The companies that argued it would stifle creativity if they could not continue to put whatever they wanted on the internet, but meanwhile the fcc ruled it would not be fair to the little guys. In favorttle guys lose of the big guys . Not at all. It is not a game changer because we have little guys like google andfacebook and twitter ebay and amazon. They were all little guys at some point and they blossomed beautifully under the internet before Net Neutrality rules. We are back to that. What consumers need to know is that there is a whole host of laws and regulations already on the books that have withstood court challenges. This is actually good news for consumers. It is good news for innovators, and all the apocalyptic hyperventilating declarations in the wake of yesterdays Court Decisions do not hold any water. Let me start with the consumer. Suppose verizon goes to netflix and says you use more of our band philly our bandwidth, we will charge more than that. First of all, Companies Like netflix or google, they plug in their big price into the telecom networks, and they are already paying money to do that. They have not been able to do this for free. When we talk about a twosided market growing, it has actually been in place as there were Communications Networks to begin with. It could be that it is good for consumers come in that more heavily used sites might subsidize Consumer Usage so that consumer rates do not go up but stay lower. That would be a good thing for consumers as well. It would not prevent the little guy from starting up. There are antitrust laws and Consumer Protection laws. The federal trade commission has a lot of oversight in this area. If there is any anticompetitive conduct, it will be addressed by the rules. What does the fcc and the Obama Administration do next . They have a number of options. They could try to appeal to the u. S. Court of appeals from the District Of Columbia circuit, they could appeal to the Supreme Court. They can classify broadband as titled two in the business, which would be a bad idea. They could try to take an inventory of other agencies am a federal and state, of the existing laws that already protect consumers, and put those weapons on the table, and that will act as a deterrent if it is even needed for Internet Service providers. Let me bring in someone you know well. Lawrence downes. I need to get an autographed copy of his book. Shameless plug there. It has been since 1996 that commerce has rewritten the new communications law. Do we need a rewritten law . I do think we need a new law. I have worked with congressional leaders on this very idea in the past few months. Congressman greg walden, chairman of the subcommittee, have launched an effort to have a dialogue. They will have a hearing today with some former fcc chairman to talk about that. We need to look at the competition. What consumer harms are arising . Regulate Different Services based on Old Technology in their history. Emergence has changed things. What you two talk about is the internet for america. Robert, you went to high school down a country road where there was an indian battle in 1704. Sometimes it is difficult to get Internet Access out there to the rest of america. Why is our Internet Access so moldy compared to london or another 20 cities around the world . This is the first time Deerfield Academy has come up in an interview. Very good. Wireless broadband offers the most help. In 4gs. Leads the world growth. Wireless rock band is the fastestgrowing segment of the broadband market wireless broadband is the fastestgrowing segment of the broadband market. Our world is becoming increasingly untethered as we see the internet of everything start to converge our physical world with the virtual world. That is going to help broadband and deployment. It will be a wonderful time. We are entering the golden age of wireless. At is where i wanted to go. Is this a golden age and are we going to have a distribution of all this fancy technology all of americas . It is the golden age for consumers. We are seeing much greater distribution, a lowering of what used to be called the digital divide. It is now more about seniors than it is about minorities. I think we should get Clay Christiansen, larry downes, and Robert Mcdowell all on together. Want to thank Robert Mcdowell and larry downes for being our guest host today and keeping us up to date on the big can expect. Absolutely fantastic. I mentioned the Canadian Dollar earlier. That morning in canada, watching the weaker Canadian Dollar, on a 10 move off parity. The turkish lira is weaker as well. Bloomberg surveillance. Should the minimum wage be raised . A question that america considers over perpetual unemployment. Fargo outperforming jpmorgan, bank of america will report in moments. Make, everyhat you breath you take, track in your local department store. They are spying on you at bergdorfs. Good morning, everyone. It is wednesday, january 15. With me as always, scarlet fu. Michaelme this morning, mckee is with us as well, the former chairman of the president s council of economic advisers at Princeton University, arguably the nations expert on the minimum wage, alan krueger joins us in the hour. Lets get a check on the morning break before mr. Moynahan destroys the show. Gdp coming in at 4 10 of one percent, maybe a side of the fragility of the euro in 2013. We can tell you that the euro marches on, the legal tender of euro zone. Ining the meanwhile, the world bank, easing austerity policies and advanced economies, supporting recoveries. Mortgagein the u. S. , applications out right now, up quite a bit, 11 on the week. Good nose good news for those in the industry. At 8 30 we have Empire Manufacturing and at 2 p. M. The Federal Reserve releases the. Eige book moments ago, bank of america released its earnings. That is the big story of the morning. Per share when the consensus was for . 27. In line with what it got last year at this time, higher than the . 28 reported in the third quarter, revenue higher than monthpated. In the past they had eight analysts ratcheting down there forecast. It looks like expense reduction was a big theme here. Operating expenses in higher than anticipated compared to the consensus, even as Brian Moynihan talked about cost savings initiatives being on track. You have to love a press release that starts with pretax negative adjustments. This is a big theme for the banks this earnings season. The onetime items, the litigation expenses. Lidded litigation expenses has been a theme. Absolutely. Hadhe Fourth Quarter they the pretax expense of 2. 3 billion dollars, selling various claims from regulators over mispriced. You have to figure that will continue. They are still waiting to do that at bank of america. Which is the buildup of legal reserves that analysts had been looking for. The cfo talked about capital liquidity being at record levels , and we should note that given what wells fargo said yesterday about mortgage origination, it has declined almost half. Worldwide for those of you on radio and television, there is a theme that we have been talking about for months. Bank of america fulltime employees down nine percent. That is a big number. We have to look into where that is coming from. They are also saying that their mortgage originations have dropped off tremendously. They are getting out of that is this and they are cutting their mortgage staff. Meredith whitney and others are way out front, the new banking will be people banking and the shift from fulltime to parttime america. Chris chris auntie is joining us this morning. Bat of america is seen as a on the u. S. Economy in particular, because unlike citigroup it is not as exposed to the emerging markets. U. S. Economyf goes, so goes bank of america . Wells fargo, also. We do not have enough growth for really true strong bank growth earnings, but investors are willing to give folks the benefit of the doubt. You are seeing these stocks do quite well on fairly mediocre earnings. Jpmorgan,eport from no big hiccups. The strong balance sheet, the liquidity, the capital that Bruce Thompson talks about, is that enough for investors to get excited about . For investors to want to buy bank of america . For the time being. A but you do not own it. They put the litigation stock closely behind them. But you guys all did the same thing. We are waiting for that shoe to drop. Compare and contrast, william cohan, he has been a critic of the banks. You come from the investment angle. He talked about the new banking , if not aopolistic monopoly. Do you agree . There are so few competitors, shackled like gulliver. I have to talk to Brian Moynihan next week. People expected so little of him. He took over at a terrible time and it has taken years, but he has done pretty well. Alan krueger is with us from Princeton University as well. This is a little bit of what you do in labor economics, but financial economics, do we need big tanks . Do we need nonjacksonian banks . What Andrew Jackson rollover in his grave right now . I think we need both. How did i know that we would get that answer . On one hand, on the other hand . We need both. Big banks help to monitor national scale. As long as the economy continues to grow global, you need big banks. Do you value big banks differently Going Forward . Absolutely. The government looks at them as utilities. We use to model jpmorgan and others with a seven percent ro e. Are they satisfied with these numbers . I do not think that they can get it. They can lay off bodies. But they have to keep the regulatory capital unused. Look at it as safety. You shrink them as part of your portfolio . It depends on valuation. What youre talking about is if they are Good Companies or Bad Companies but our job is to compare them to how they sell in the marketplace. It also depends on the Interest Rate environment. We know that they have boosted some banks. Bank of america has gone up to 2. 56 . Still fairly low. The yield curve will start to play more into their earnings and quality earnings down the road. Before when rates went up it was terrible for banks, but for the first time that such a low rates they can make Money Lending money for a change. Is ben bernanke going back to princeton . I would be delighted if you would. Chairman bernanke gets high marks for saving the bank system, give us some light on that. We have a look at banking investments. Was then bernanke the savior . He was a key part of saving the financial system. The efforts to the efforts taken by the fed were extraordinary. They invented a new playbook. I suspect we will be seeing him write a book about his experiences. He is very interested in history and i think you will be a key figure in the history of central banking. Lets go just lets just go see the red sox. The nationals. No, the red sox. He is a nationals fan now. He is a nationals fan when he is at that building. [laughter] Morgan Stanley was an asset manager. They really are. James coburn was executive of the year last year. Room to go on the stock . As opposed to the fix. For the year,p shafter did some interviews with gorman. Look at the latest Erik Schatzker interview with james gorman. It shows his acuity. He is on the painless bankers list. He says derivative in interviews. That is why you love him. I love him. He is great. Much. Thank you so data check here, stocks, bonds, currencies, commodities, churning off the first of the year, nymex crude is back above 93 per barrel. Lots to talk about with alan krueger here on the American Labor economy. We are just Getting Started a quick note, bank of america shares currently training hider and trading higher in the premarket. They got a little bit of a pop. Yesterday,st from when jpmorgan reported better results as well, not getting much love from investors in the immediate aftermath. Coming up, seven dollars . 25, the federal minimum wage. Top economists are calling for an increase. Is that the question . Would raising the minimum wage help or hurt and why . Not just the economy, but the low income earner. This is bloomberg surveillance, on bluebird television and radio. Good morning, everyone. Bloomberg surveillance. Talking to our guest right now, alan krueger, the recent chairman of the council of economic advisers, of course, at princeton, where he teaches smart to cherubs. There is a raging debate, how should we change Economic Education . Front and center for second four professor krueger. He has a new book out for economics, for high school education. Explorations in economics. The current, doing something to make us smarter. Wendy carter is front and center in this debate. I have heard you speak at aea about it. How do we need to change Economic Education . They need to be involved, engaged. From day one . From day one, learning about topics relevant to their lives. We are teaching micro and macro economics like it is 1910. How did we get to this stage . Whack about 2 Million Students , theyconomics each year took the college book and they watered it down, which is not appropriate. I tried to reinvent the course, teach them behavioral economics, present them with interviews of people who shaped the economy, and give them interviews. There is such an emphasis on the dynamics and the math of economics. We risk losing that if we go to soft, right . Alfred marshall said that he would figure out the math and a race the intuition. There is a little bit of math, not more than a few equations, but they are mostly in the appendices and you can find it online. You,e same thing is putting policy first, how do you teach policy different after serving president obama . A great question. The book was completed just what i was leaving the administration. Booku had time to write a while you were serving the president . No time. Had most of it was completed before i went to work for the government. [laughter] but i also worked on it in between. From are lots of examples the financial crisis that matter deeply in peoples lives. Policy response to the crisis. So, i try to enlighten the book with actual examples. Education today, what is the number one mistake that schools make as well as professionals schools make with freshman . Freshman in college . I think it varies across schools, but students need some individualized education, no matter where they are. Someone needs to know the name of that student. Alan krueger, louver surveillance, good morning. Bloomberg surveillance, good morning. Morning, everyone. Bloomberg surveillance, worldwide. Alan krueger is with us for the hour, of course, the former chief economist for president obama. He would go in with a chalkboard in lecture the president in the oval office. Erasers . Remember what and a racer is . Whiteboards. Come on. The president . You can ask al about it. It is a proper profession. Mike has the top headlines this morning. The german economy, expanding less than forecast last year, up 4 10 of one percent. 7 10 is what they had in 2012. Linked partly on week to man for exports, the euro still trying to rebuild after the financial crisis. Online gambling in new jersey, getting off to a slow start. Revenue, just a . 4 million, supposed to get about 22 million per month according to analysts. Part of the problem is that some major banks allow customers to use credit cards to pay. A setback for the National Football league, rejecting the league settlement from retired players over concussions, the judge confirmed that the money set aside will not be enough to pay for the 20,000 retired players not covered by the deal. The judge asked for more Financial Analysis from the two sides. This is what you have been waiting for, a smart conversation. There is no greater debate in america than should we raise the minimum wage . You know the arguments. Economists argue, will economists kill jobs . From Princeton University, without question the nations expert on this contentious and ambiguous subject. The backdrop is income inequality and the president s debate over extending unemployment benefits. The present idea is to move to 10 per hour from 7. 25. This goes back to your book myth and measurement. What was the fact when you told conservatives that the minimum wage should go up . I did that Work Together with my colleague in the 1990s, frankly, and i thought we would find the opposite. We would find that minimum wage had an adverse effect on unemployment. Previously it had broken down, when people look at that historic relationship. It was eroded by inflation. We did not see a big growth in jobs, we were looking for other ways to explore the impact of minimum wage on unemployment. Frankly, i was very surprised when we compared new jersey and pennsylvania. We did not see a difference in job growth between the states. I was actually quite surprised, but we favorably reported the results and the reaction was quite strong. Quite strong to say the least, i remember when they came out. Certainly there is a problem with income inequality, but the argument i am hearing most is that this heat with which the administration wants to raise the wage in just a couple of years is too much, that they cannot raise prices fast enough to account for that or make other changes fast enough to account for that. Does speed make a difference . The experience we have seen is that moderate increases gradually over time do not have an adverse effect. I am very comfortable with the range we have seen in the past. The president proposed raising it to nine dollars per hour over two years, bringing us to where we were in 1981 in two years. I was comfortable that that would have beneficial effects for workers and the companies would be able to absorb it. Who is against you . Who disagrees with the idea of moving 1. 75, the government we are arguing about like . 85 per hour, right . Side, who iser against it . Often fast Food Industry groups, often their lobbyist. Groups,ate funding though they do not say where they get their funding. And there are many businesses actually support it. Who gets the minimum wage, in your research . The businesses or the price of my value meal . It is both. We found that it mostly comes out of profit. So of it gets passed onto customers. If the idea is to reduce income inequality, should we not be talking about raising the minimum wage way past seven dollars . 25 . 10. 10 barely gets you where you need to go. Inc. About 7. 25 per hour thomas living on that. I think that the strategy is to help provide more opportunities for lowincome workers so it is not the only part of the strategy. Why are they arguing about peoples benefits for over half a year . Benefit debate right now . They arguing about how to pay the mortgage extension. My experience taught me that the pay for is always the hardest part. No one has come up with a viable way to pay for it. Define this for us, please. How much of a hit to the economy is it that they do not extend it . Less now than it was a year ago, but it certainly is a hit. The unemployed has a high propensity to spend their benefits. We have over one Million People who would lose benefits. Than the effect on supporting the economy is the effect on those peoples lives. Blinder,olleague, al published a blistering essay in support of your research, saying that scaling back Unemployment Compensation is a highly efficient way to create more work. Members of the government terminated the benefits. Is that the distinction to you, now . Is that the debate, the idea that there are so many people unemployed . What makes this time different are all the people who have been unemployed for more than half a year. So many people in this country, facing extreme obstacles to finding work. Our twitter question of the day, there it is, on the minimum wage. Help or hurt this is really special. This is not hollywood at work. This is real. The fog of the east river, the brooklyn bridge, build 130 years ago to the right. Front and center, built last year, one world trade center. That is the next ordinary shot. That is this morning. That has got to be the image of the year for rumored surveillance. Bloomberg surveillance. They are all over there building in black tshirts in manhattan. In the distance. Good morning, everyone. This is a beautiful new york city morning. With me is scarlet fu and Michael Mckee. Lets start with a big win for verizon. Actually, you know what . We are going with bank of america earnings, profits quadrupling in the Fourth Quarter. About . 29 per share, the average analyst estimate was . 29 for the full year. Profit more than doubled. Meantime, digital makes a big difference over at burberry. Rising 14 last quarter, topping the forecast, they said that investment in individual innovations push sales higher. Time warner is close to a deal for its headquarters. The media giant is set to sell its Columbus Circle property for one point 3 billion according to people with knowledge of the deal. The latest it is backed by funding from sovereign wealth funds in novel dobby. That is todays company news. We will start with a production now. After hockey season, i know what youre doing tonight after hockey practice. Season 13 of American Idol, kicking off on fox tonight. Not quite the franchise it once was, what is the story here . Hard to believe, 13 years. That is a long time. The amazing thing is that it still commands the second highest ad right among primetime shows either that even as it has lost 10 Million Viewers over the past two years. Competition from other shows have certainly played a part. I quit watching after kelly clarkson. The first season . Nice. They changed to the whole industry, though. Absolutely. It was a live talent competition. Remember, they debuted in the summer, once upon a Time Networks aired reruns back then. You had to participate, you had to call into your text or phone line to vote for your favorite star or singer. They have Product Placement before there was really Product Placement. Before you tell us about the reinvigoration, to be honest i have never seen it, American Idol expert, alan krueger, is with us. Myi used to watch it with family. We would root for our favorites. When i started to work for the president , i had no time. It was one of the first things to go. What did you like about it . It was a bit about it was a bit like the old ed sullivan show. You learned about the talent, i like the energy in the show. That is the thing, people , authentickward moments. Paula abdul was a bit of a disaster because you never knew what would come out of her mouth, but at the same time every time she said something what else is new . Harry connick jr. Is joining the season, for one thing. Way upscale. I wonder how many young people know who he is. Maybe it works for him to rejuvenate his career. This is Nicole Kidmans husband. He is a huge star in his own right, in his own field. He is. Certainly in the Country Music sphere. He has taken on this persona of being someone who can work with jennifer lopez, as opposed to that antagonistic relationship. Sunday night, everyone loading in. How does scarlet fu handle it . It is all about ondemand. I watch everything and space it out to the week. But for American Idol, you cannot space it out, you have to watch the live competition. There is kelly clarkson, by the way. One of the waiters . She is a megastar. Inauguration . E i think i actually stepped on her down. [laughter] manyese are way too exclusives with alan krueger. The six degrees of alan krueger. Can we have him back tomorrow . Any time. We want his review of the First Episode of season 13 of American Idol. Please, do so. I wont. Lets get our data check. Flex lets do the data check right now and look at how futures are creating. We have Economic Data this morning, coming out at 8 30 this morning, futures going by four points this morning, the 10 year yield inching lower, the euro trading less than the dollar, crude Oil Moving Higher by half of one percent at the moment. Good morning, everyone. Bloomberg television, bloomberg surveillance, we thank you for listening on bloomberg radio, bloomberg worldwide, on the ipad radio plus and the new thing that we have going with apple tv. I hear tons of people. Love scarlet. Le i do not even understand why it is a big deal. But it is a huge, big deal. We are disrupting everything. Like boston. I do not know about that. Good morning, everyone. The hour,host for alan krueger, former white house chief economist under president obama, a professor at Princeton University. Talking about surveillance . It has now come to retail. Stores are tracking technologies to keep on top of what you like all of for, bowties, and that. Apple announced their latest rollout, 200 50 retail stores, using bluetooth to send information to customer smartphones. Winston beat apple to the punch in 2011, combining video from already installed security with he maps and optimal floor layouts. Both companies, former executives under steve jobs and tim cook, joining sky labs to expand their visual merchandising. Welcome. Is reallybout the emphasis by brick and Mortar Stores to even the Playing Field with online retailers, because they do not quite get the data that the others get and they are trying to catch up . Give thesetrying to retailers a kind of realtime view of their stores, where customers are moving in the optimizethat they can the merchandise. Will this lead to fewer new store or new store openings . For so long they have focused on building new stores as opposed to necessarily maximizing sales. With this kind of data help them maximize and not jump to new stores all the time . Help them to will maximize sales against the competition. I think that stores are always going to be a real critical part of what these companies do. I think i am afraid to talk to you. How much do they actually know about what we do when we enter a store . Privacy, the question you are asking, is one of the big reasons i joined. We are not looking at individuals. We are looking at patterns and trends within the space. We take the individual out of the discussion. Everyone knows that their cell phones are being tracked, that we give our data to facebook and twitter, that sort of thing, but i do not think people are thinking about when they go into the store, you are watching me. Whether or not you keep it private, that might be creepy for people. Do you worry that more getting out about your technology will hurt the store . I do not want to go in there because i know they are watching me . We are not watching individuals. That is the key difference. We are looking at patterns of groups within the space. We are actually tracking product movements as well. Give us an example. Give us a client right now, like sams club, walmart. Bergstrom. What is it . Partners that and we are working with are keen to keep their competitive advantage to themselves, but for example, a new york, one of the mutual things down on 10th avenue, we worked with them, but what we are using the data for is simply for the product. Optimizing the merchandise in that space. If something is not selling their it is, we can do that. Who actually uses the data . Floor sales staff on the know more about us and realtime than we realize . I know you say it is aggregated, . Ut can we approach time tom you were not there last weekend when they threw me out of bloomingdales . That is the fear. I think that is the fear. That is why we are steering well away from the individual. We are just looking at the patterns that retailers can use, putting it into good data and other stores to make changes to the merchandise. Interesting. This will certainly be a hot topic as we move ahead with more big data. This is not going to go away. Absolutely not. Thank you for joining us there, from skylabs. Coming up, how would janet yellen and Stanley Fischer steer the economy . Good morning, everyone. Morning, everyone. In the loop, with betty liu, she joins us this morning. We have a very special guest host this morning. Bob, the cio of aig. He has taken a pitch over the last several months. Theill talk about not only operations of the company, but his thoughts on the fed, the economy, and jobs as well. , in the loop. G it is an earnings calendar with we have to do bank of america, they reported earnings of the top of the hour, 2. 25 this morning, revenue beating analyst estimates, taking a big pretax litigation expense. Some see that is smaller than anticipated. We should also mention that the net interest margins at bank of america are coming in higher than anticipated, two. 56 as Interest Rates increased. Three dollars . 59, why did you not tell me to buy . The same reason i did not tell you to buy that biotech stock. Four to 17 . For the rest of the week we have more banks reporting. Tomorrow we have blackrock and citigroup announcing Fourth Quarter results, followed by Morgan Stanley on friday with bank of new york mellon. Goldman sachs reporting tomorrow as well. That is not ours. Or is it . It used to be the biggest financialnt of the earnings season. Once upon a time. The trading is no longer the driver it once was, certainly it goldman sachs. Our guest host, alan krueger, and mr. Hite house crosby, joining us here as we look at a lot of different things. Is i begin . Why do i have it on my phone . What will it do for me . Liney skills and off retail, i am not the technology guy. I cannot help you. Offline retail is a big success. Apple stores are going to perform better than the average retail. What is their secret that is not replicable elsewhere . Dont want to get you into talking about that, but i think it is obvious, having worked at nike and other companies as well , the common thrill there is looking out for your customers and doing the right thing for your customers in the store, getting a genuine relationship with your customers. That is always going to work and always going to keep the brick and mortar working right. What is the next innovation in store with Customer Service . It is looking at how people work in the space, going with products, helping people in stores, which is going to improve the Customer Service. All right, thank you so much. Kris humphries, presumably currently with [indiscernible] about up, we will talk mary bharat and what her rival is planning on doing for the detroit automaker. Morning, everyone. Csx, the tomorrow, chief investment officer, michael ward, joining us. They have been moving coal for years. That party is over. What will csx be doing moving forward . That, look forward to tomorrow. I am scarlet fu, here with tom keene and michael. Our guest host for the hour, michael krueger, former white house economist under president obama. Company news some now from the files of bloomberg west. A first look at iphone sales of four china mobile, preorders have reached one Million Units. They started taking orders 21 days ago. Staying with china, revenue last year for them was eight percent thanks to smart phone sales. Revenue topping 39 billion, the maker of equipment for smartphone networks, embedded in the chip to the wireless service. Google has announced more on the deals from the past two years with five of their biggest rivals and matt rivals combined. Google spend 17 billion on acquisitions. Yahoo , combining for 13 billion in that. If you have been following us for the hour, you know we have a guest that is correct on the American Labor economy. Thely, decades of work on nations and equality. Just front and center right now. If we get economic growth, will it trickle down into inequality . It will help. It will not solve the problem. Like in the late 1990s, when growth really got going, there is truth to it. It is necessary, but not sufficient. You need to essentially incentivize high earners. People, causing them to work incredibly hard. Because there are such big differences, the tax code contributes to that. What is the president going to do about it . He is in North Carolina today talking about new education partnerships that are clearly key. I think people have to appreciate the rise of inequality that we have seen, it is truly extraordinary, back in 1920s levels. It will not be solved overnight. There is bipartisan agreement now that there is a problem and we need to work towards a solution. Some of it can record show, like minimum wage. Others, like universal preschool , will take more time. The onehour session on this topic in washington, the room was packed, you could hear a pin drop. Much more than most seminars. What is the thing we should focus on in terms of inequality . What is the one thing to look forward to in the next 12 months . The most instructive aspect of the rise of inequality we have seen are the opportunities for children born to less fortunate parents. That is a detrimental loss to the company. The gap and opportunities for children in bottom and top quarters have been google have been growing rapidly. The kinds of schools that they can go to, how do we provide more opportunities for children who are going to be the future . We need all the new capital we can, giving the given the aging of the funding growth. No one seems to be able to agree on that. What is the fastest way to address income inequality . The fastest way would always be to raise the minimum wage. That would have an immediate effect. I think we need a comprehensive over a longer horizon. Quickly, and i do not want to overplay this, but it has come up, matt dowd wrote about it not if we continue to have this kind of income inequality where the elites make so much money and get a lot out by the government the taxpayers getting stuck with the ill, the bonds of Society Start to fray, populism arising. Was that talked about at the white house . Absolutely. Go back and listen to the president s speeches. That it willieves be much easier to get consensus and avoid the kind of bubble and bloom cycle that we had before, where people borrow too much because their income cannot keep up. Factors, i think, contribute to the instability we have seen. Let me rip up the script. Janet yellen, fisher, two outstanding people. How do you picture the assistance. Anyone who knows stan fisher knows that he is a diplomat and a delight to work with. He stays cool under pressure and has a wealth of experience. Will be an ambassador the ambassador to the financial sector. Are you the only economist in america that did not study understand . [laughter] i want to get to our twitter question of the day right now. We asked will raising the minimum wage hurt or help and why. We have some answers here. It would help to stimulate the economy and provide americans a chance at enhancing their lives and selfesteem. It would help stimulate the economy it would provide purchasing power that is not currently president. Argumentssee your reflected in those . Those are all sensible responses. We had a long. Of productivity growth. I think that gives some headroom for this position with businesses. A lot of businesses say that it is more consumers they want to set want to see. If you manufacture pillows, you can only so only sell so many pillows to the top one percent. A lot of people say that having the super rich contribute gets more thant just the ball moving. Weover the last 30 years have spent one dollar trillion on the top one percent. So, we need to address this imbalance on the top and the bottom of the economy. Toviding more opportunities get into the middle class. Oure want to focus on agenda, looking at stories of the day. Of course. I want to see the beige book today, the reason being for the last couple of quarters growth has been picking up. The Fourth Quarter is supposed to be three percent, four percent, but the beige book keeps talking about moderate growth. I want to see if the companies and people out there and the rest of america start to reflect what we see as an improving economy. Is there anecdotal evidence from those many critics in the regions that catch up with Economic Data . To be perfectly honest, i have never found the beige book that helpful. The difference between modest and moderate . Like to see them say that things are picking up. The word acceleration would be good. That would be helpful, but i would believe it more if it showed up in the jobs numbers than the anecdotes of regional president s. Not only was alan krueger the chairman of the president s Council Economic advisers, he figured out where everyone sat at the fancy dinners. He will need that as the president of france visits washington later this month. , andhas become a big deal at first we laughed, but it is not funny now. Involving an actress. Rosetta stone,e . Right after the show. Is coming aswife their companion, his companion. They are not married. I will tell you one funny story. In the council of economic advisers, they needed to know the rank so that we could see you at the dinner. Bob said he was a full professor at m. I. T. And there was no higher rank. There we go. Motors,a, general selecting a modest profit increase in 2013. The u. S. Alan krueger, thank you so much for joining us this morning is the guest host. Alan krueger, current professor at Princeton University, this was fun. Tom and i will continue to talk on bloomberg radio. Betty liu, in the loop, at 9 00. Have a great morning, everyone. Live from bloomberg world headquarters, this is in the loop. Schatzker with trish regan and alix steel. Have are thrilled as we jack welch. Also, the executive director of the jack welch management institution. Good morning. Lots to talk about. Jack, im sure you know we are in the midst of earnings season. Wells fargo and jpmorgan reported yesterday. Bank of america reported this morning. And the 13rgan billion settlement with the doj a couple of months ago. Going into this quarter with bank of america, everyone was expecting Brian Moynihan would have to take a big litigation reserve. It does not appear that was the case. Why do you think that