Transcripts For BLOOMBERG Bloomberg Surveillance 20140523

We go to the vxx which is 12. 03. Some of the geopolitics of the weekend the ruble is putin friendly. The indian rupee after that momentous election continues to strengthen this morning. Lets look at this data check. Is the one year yield guess five years forward, in 2019. We have come down and down. This is disinflation, dampening. Tradersher words, what think the one year yield will be five years from now. Andhere it is, we go down that is the back story as we go into this memorial day weekend. We scoured the papers and looked at the websites. Weve got the day off on monday. In ukraine, they are looking ahead to the president ial election on sunday. There is a burst of violence overnight there. The military suffered their worst loss as it prepares for the polls. Rebels in ukraine attacked Army Checkpoints and killed 16 ukrainian soldiers and i been other fighting. You have to believe the next 2448 hours injure sunday is critical into sundays critical. Vladimir putin has promised to withdraw Russian Troops that he has made a lot of promises. He promised that a week ago and chuck hagel promised said there was no evidence. Does he have control of the separatists . I have not seen any good work on that. Vladimir putin is speaking now at the st. Petersburg conference. We will check in with Ryan Chilcote later to find out what he is saying and how it is being received. What else do we have . The next story is hewlettpackard. Its another round of job cuts. Up to 16,000 positions eliminated which is about five percent of their total workforce. All over twitter yesterday, the article on ibm. It says Hardware Companies are fossils. You look at ibm and it went from a hardware copy to a software company. You wonder where technology is going. This is up to 50,000 employees. Including the previous job cuts. Sales are no longer following. Meg whitman says they are stabilizing. They have not figured out what their next move is. What does oracle do and cisco do over the weekend . Theyve got to react to this. This will save one percent . Cent earningspershare. They are laying off 50,000 people to save a penny. What else do we have . We are tracking the developments in a couple of big merger stories. Astrazeneca shareholders say the company should continue talks with pfizer after it rejected what pfizer called its last offer which was 117 billion. Blackrock is encouraging discussions between the two companies because it owns eight percent of astrazeneca and almost seven percent of pfizer. I guess it can go both ways. Its a matter of what price. 53. 50 pence was the third and final offer. Frenchs agreed to the request to extend the deadline for its plan 17 billion dollar of the Austin Energy unit. This drama will continue through the month of june. The french may see better terms siemens of germany may come in for a bit. Jobssue is the number of can be guerin teed to stay in france. Can be guaranteed to stay in france. We want to get to Ryan Chilcote. Is right nown addressing Business Leaders and billionaires. Ryan chilcote is at the International Economic forum in st. Petersburg. You told us yesterday about all the western leaders who chose to skip this main event because of the tensions in ukraine. Among those who have decided to show up, what do they want to hear from Vladimir Putin . Naturally, they are looking to hear about things he is intending to do to improve the Business Climate and business in general. Of the specific rings things that they all agree as to make conciliatory remarks about ukraine. That very important president ial election is coming up on may 25 and we had the biggest single loss of life yesterday. Things are not looking great going into that election. If the election does not go the right way, the eu, the u. S. , and germany have said there will be more sanctions on russia. None of the executives here want to see more sanctions. What sort of interaction are tin andng between mr. Pu the other executives . He has just started talking 10 minutes ago but what he has said is that russia is open for business with all international partners. He was speaking specifically to india. India has a decent sized delegation not unlike france. Think he is giving a little love, if you will, to those. In a couple of in the last couple of minutes, he called he talked about access to the Russian Energy surprisingly talked about its new relationship with china. Theres a question about whether russia is ready to open up its commodities to the chinese. They have been anxious in the past about doing that because china needs it and russia has a limited supply. He is even addressing that. The russian president took a victory lap after that chinese deal. Thank you very much. About fashionk and luxury and things i cannot afford. We will have the chief executive officer of robert work associates. Is with us. Hormatz is the former under secretary of state for Economic Growth and that barely describes as a compliment in International Relations particularly at Goldman Sachs international. Its wonderful to have you with us today. My head is spinning with things to talk about. We need to speak about ukraine. With all of your research, does mr. Putin have any voice with the separatists in Eastern Ukraine . He has some voice but it is not decisive. He called upon them to do a number of things and get out of certain areas that they occupied to not go ahead with the referendum that they had in Eastern Ukraine on independence from ukraine. They did not go along with it. He has some voice but he is not decisive and if they think he is not supporting them strongly enough, they will take to the streets and get sympathy in other parts of russia. A lot of people are sympathetic toward the separatists. You have have a lot of writings about jimmy carter and Holding Elections over the past decade. Is there any belief that we can have a Fair Election in ukraine or in Eastern Ukraine . In Eastern Ukraine, it is hard to have a Fair Election although i think there a lot of people there who want to be closer to russia. A lot of the younger people in Eastern Ukraine, even people of russian origin, dont necessarily want to leave ukraine and become part of russia. Its hard to have a Fair Election when you have a lot of russian pressure on Eastern Ukraine. The real problem is the elections are not only unfair but they are disorderly. That would raise problems because one of the russian goals is to demonstrate that the government of gf is not legitimate. If the elections are not seen as legitimate, that will just strengthen the russian narrative. Was there 16 killed in the last couple of days . How do you get stability of an election on sunday . The separatists dont necessarily want to be associated with russia and Vladimir Putin is not necessarily associating himself with them. If thats the case, are we mistaken in the u. S. To punish russia for what is happening in ukraine . What we want the russians to do is back their troops off of the border, the russian side of the border with ukraine. There is considerable evidence that russians empathizes are fomenting unrest in Eastern Ukraine. Limning the russians, they are partially responsible. They could help the situation considerably more than they have but they are not entirely responsible for these very emotional people in Eastern Ukraine who genuinely either want to be part of russia or at for thent autonomy russian speaking parts of ukraine. They certainly want closer economic ties with russia. When you add the potential russian economic leverage with ukraine plus the presence of these troops and russian advocates or agents running around Eastern Ukraine, they could certainly do more to make a constructive. We should not hold them totally responsible for everything. They are real ukrainians with real emotions. We also want to ring in robert burke, our guest host for the hour. For the retailers have wrapped up the latest earnings season. One headline is that Abercrombie Fitch ceo finally changed his tune a little bit as they try to revive his brent. Yes, that has been a long time coming. People anticipated him kind of changing his approach. , he hadeally weak sales no other choice really. Its a total retail space that is struggling. It is overall but they had been the leader for so long and to see them fall back it is the teen consumer that has so much to do with online and how the consumer is changing rapidly. What happens to people like you on memorial day weekend . Im curious about the panic that is out there and what did not happen in the spring. Up. Abercrombie fitch what is the level of sweat this weekend . Its higher than its ever been. It was an incredibly cold winter , people were not in the mood to buy spring, you start to lose some of that selling and you cannot regain its. That is whats on error ones mind now is recouping the lost sales and the spring season. Two smart people for a great conversation this hour. We are getting you ready for a threeday weekend. I will be in monday. Why . I want to go shopping together with you. I am boosting the economy monday. I think you will be all alone. I will not be here on monday. Therell be no staff year and no friends. Be the tomliterally keene show. When we come back, we will talk about what is happening at tulip packard cutting thousands to save a couple of pennants pennies. This is bloomberg surveillance, on bloomberg television, streaming on your phone, your tablet, and bloomberg. Com and now available on apple tv and amazon fire. Good morning, everyone, bloomberg surveillance. Coming up, kebnt cokle, president of the most Important Company of the world, cinnabon. If youre watching, bring dozens. I was walking through the Cincinnati Airport and i get off the plane and i wondered what smells so good and it was cinnabon. She will be with betty liu today. There is blood in technology. 11,00016,000 jobs are set to go at hewlettpackard. This is to save about 1 billion. Er year additional by 2016i was looking at Company Notes and jefferies analysts point out that the earnings per share benefit for 2014 will be 12 cents from these job cuts. It comes down to help meg whitman has to engineer these job cuts as sales take time to recover because they need to keep the profit numbers going. The cost cuts are the way to get there. This is the story of old technology. Hewlettpackard earnings shrank in 2012 and shrank in 2013 and this year, they are forecast to rise only three percent. That is the problem Piper Jaffrays says where will the growth come from . With that is the Creative Destruction of what america does about technology. Robert hormats is with us. You did for secretary clinton, you went at ibm andworld ends hewlettpackard are good people to do business with. What do we need to do at the margin to sustain the Revenue Growth . For most companies, its largely an internal problem but at the margin, exports. Told mesador froman that this past week. Mike froman and i worked together for four years. We worked on one major goal and that was to recognize that a lot of the growth on the world was abroad. We had a rather tepid recovery and middle classes are growing in many parts of the world like china and india. 95 of the worlds consumers live abroad and they want new technology and they want new consumer goods. Weve got to penetrate those markets. Can we manage meg whitmans in the unitedobs states and not malaysia . Its hard to do. Companies have their own ways and preferences as to where to allocate production. The one thing that is important as some of these countries dont want as long supply lines as they have today and are feeling more comfortable with jobs in the United States or number of the short north america. Its easier and cheaper to move things around the globe than ever before. When you combine the two, i think its happening now. Expect the unexpected. I think thats what hewlettpackard is doing. There shares are trading lower in the premarket. Hour, alexext clement of Eurasia Group will be our guest to tell you what you need to know before the ukrainian president ial election this sunday. Our twitter question of the day i have the new issue of vanity fair with jon hamm on the cover. Wha makes Good Companies great . We want to hear from you good morning, everyone. Lets get right to our top headlines. In ukraine, Government Troops have suffered their worst losses yet when russian or so still 16 soldiers in an attack at a checkpoint. Ukraine will hold president ial election sunday. In thailand, signs of optimism following that military to. The bonds and that thailand currency are improving and the cois likely to be positive for their economy. Months of turmoil her to gdp in that country. Nhl playoffs a thriller last night if youre canadian. Was an overtime score to give the Montreal Canadiens a win over the new york rangers. The rangers had a 21 lead in the series but that was painful last night. It boils down to sunday. The rangers completely outplayed montreal in the first period. Lets get to our morning mustread. My morning mustread is on extreme wealth. Its from vanity fair. I love the description and how there is no price sensitivity. You see this fancy stuff and robert burke is with us who travel the world. Is this any different than previous eras . Is this a luxury fetish . New. s a new how high is high . People continue to want the most exclusive, the most desirable, the highest price, so it keeps going and going and its because i think the Global Demand at that high luxury level. Hashe metropolitan museum those wonderful fashion displays but that is a different time. Wealthy anylously different from now . The difference the exposure today because of the internet. Everyone has access to know what the very best is and what the most exclusive items are. Then it was very much club, wordofmouth and much more discrete. Today is not. Everyone can know everything. What are you wearing today, scarlet . This is rachel malloy. It is all accessible. I was going to go to the riverside this weekend versailles this weekend but im going to be kimye wedding. Good morning, everyone bloomberg surveillance. Morning to our armed forces and all the retired orme forces, aarmed special memorial day weekend. Lets do a quick data check. Housing is out at 10 00 a. M. And that may Movement Market may move the market. Its a quieter screen. Its a weaker euro but it needs to be much weaker to keep your going. This one sums up the state of the economy dollar tree is a big gainer yesterday. Firstquarter profit beat analyst estimates. The lower and retailers continue to do well. Soda stream is down 3. 5 . The home soda machine maker is struggling and the u. S. Its all about cutting down sugar and sweet averages. They need a smaller machine. Its too big. Espresso exploded when they got the smaller machines. They need a smaller sized machine to make soda stuff. Ive got the espresso machine on my desk on my computer, its that small. People dont think little cups of soda. It has to come from a little machine. Tom is the head designer. The world is voting and the theme is change. In india, there is six secession. Hormats was the under secretary of state and vice chairman of Goldman Sachs. This is like a Global Change of the guard. Yes it is, and one of the facts we should bear in mind is this is the biggest single year in World History for elections. More people will vote this year by far than any other year in history. Elections, indian elections, South African elections, indonesian elections and the u. S. The european elections are interesting because we will see an increase in the vote for european nationalist parties, populist national parties, many on the right and many of them are voting on the right of these extreme parties because of unemployment and resentments of brussels and eu rules and because of concern about globalization. They feel they are becoming to some franchised. This is a powerful signal to governments that many people are disaffected. Is this a circling of the wagon . The world is getting smaller because there is a trend toward nationalism . Yes, they dont want to be in a big regulatory cuisinart. Many of them are antiglobalization and feel they are being impinged upon by globalization and people cannot compete or keep up. Technology becomes more resentful of government and globalization in general. There was history made in india. The world bank, the imf, the different major institutions including nato have to respond to these elections. What will they do . Big challenge because these are institutions developed after world war ii and modified somewhat. They have to respond. What will have to happen is that governments we talk about global relations. Governments have to concentrate on improving their economies and giving younger people greater opportunities for jobs. That means helping and developing the kind of domestic policies that are going to be more opportunity related and more inclusive. That means breaking down some of the regulations of access to market and opportunities. Lets talk about one of these countries and how they have to adapt. This is from Robert Hormats. This is in the Huffington Post in october, 2010. This goes right to expecting the unexpected. What is the unexpected now . The unexpected now is that you will get them as a result of people who are concerned about globalization, greater degree of nationalism in the way policy is constructed. Thats particularly in the internet. Different countries are developing their own regulations. The u. S. Is trying to strengthen the Global Economy and strengthen cooperation with the trade agreement in europe and asia but a lot of countries are resentful of having to be part of a global situation. If we dont have a washington consensus which you were part of, is Vladimir Putin taking advantage of some semblance of a multipolar world . He is definitely trying to strengthen his position and the chinese are playing a strong role politically but more as a major power economically in the region. We probably wont see a balkanization of the system. You said this will be a huge year for election yet more than 60 of people in Eastern Ukraine are undecided or not planning to vote. The incumbents have something at stake. We have any sense of how much participation there will be in these elections . In europe in general, you have seen a lot of reduction in Youth Participation in elections. The United States doesnt do well in getting that message across either. The fact that you got the increase in these populist nationalist parties and you have many people who are disenchanted with the political system. There was a recent poll in the United States that showed many people thought the political system and Economic System was stacked against them. They felt that money dominated politics in washington and to a degree it does. If you have people alienated from the democratic process feeling they dont have a voice, that is very corrosive of democracy. Weve got to worry about that. In other parts of the world. Decisions are made in brussels from far away from their capitals. Certain countries will have a german vote but some of the other countries probably wont. Given this trend of greater nationalism globally, what is the pivot for secretary kerry . Secretary clinton was superb to strengthen americas role in the world and strengthen cooperation. I think kerry is making an statesthat the united has to have friends and allies. Its not a bipolar world. We got to work with these other economies. Weve got to develop markets in these countries and we have to make sure they dont develop rules that are nationalistic and inclined to restrict access of certain investments are certain products. Thats what these trade ago she haitians are about. If there is one way of demonstrating western support for your, it is to have a trade negotiation. That would be a signal of europeanamerican transatlantic solidarity. , even we inthat europe, cannot agree on the next stage of globalization. You are with Kissinger Associates and you will celebrate your 91st birthday this week. They kissinger wrote classic book on diplomacy. We yearn for that. What will be the diplomacy forward that kissinger would write about in 10 or 20 years . He is doing a new book but my view is that you have to have diplomacy that you have to work with the capitalist but you have to understand what is going on internally in these countries. You really have to have a people diplomacy because people influence with new media their governments. We need to do more and more of that. Our own domestic growth depends on expert opportunities. The message here is that versailles does not matter. The venetians understood this. They had economic diplomacy all around the world. Weve got much more coming up. Is a bigr engines, it race weekend, our single best chart is next. This is bloomberg surveillance, on bloomberg television, streaming on your phone, your tablet, and bloomberg. Com and now available on apple tv and amazon fire. Good morning, everyone. Will go to a three day weekend. This is our twitter question of the day and and tiren for our about that. For an entire hour about that. This is bloomberg surveillance. Jugglingent obama is his cabinet again. Housing and urban Development Secretary Shaun Donovan will be named as the next budget director. By the sanreplaced antonio mayor Julian Castro and democrats are hoping to lock them in. Is likely to be in average or below average season for hurricanes this year. That is the word from government forecasters to predict there will be 36 hurricanes in the atlantic and gulf of mexico with one or two being major storms. When it comesugh to American Culture and the english language. Havear american tv shows been yanked from chinese streaming websites in the official Party Newspaper complains about english words creeping into the chinese language. Would you please comment on this . Im sure people find a way around those walls. They will get a version of the good wife. Im surprised the french have not done the same. Its time for our single best chart. This is a huge weekend for race fans. The indy 500 which is known as the greatest spectacle in racing takes place on sunday. Did you know that . Yes. Its the most attended single day sports event of the year and the single best chart shows a much faster racecars are now than when the race began 100 years ago. Plotted out the speeds since 1911 and it has been a steady climb. Televisionup but ratings are down. Why is that . Thats because they have been moving to different channels. You use to see a lot of these races always on broadcast on the big networks and they have been moving to some of the smaller channels like nbc sports network. If you look at the ratings chart, they have been going down over the last several years. The indy 500 itself is special because it draws more than triple the audience of a normal Indycar Series race. That has been holding steady. That has been their flagship event for money and event ratings and that stays on abc. That one gets all. The coverage. There is also formula one . Monaco in the morning and then you see indycar midday and nascar coke 600 in the evening. Bush will be racing and two of them which is interesting. He will finish and get in a plane . Inyes and then he will start charlotte so you got 1100 miles. He might finish in the top 10. He could possibly win both races. Is it the same kind of car for both races . A totally different car but i think theyd need more drivers doing that and some sponsors dont allow their drivers to drive in the other series. He owns his team so he does not mind. You weldnt for should inform you that mr. Ch emis desk is loaded with model cars. Fragmented . Ome too the big races have been there for so long and have not fragmented from each other. We are seeing a fragmentation on television. The sports get put on the lower tier Cable Networks because those Companies Want ratings for their lower channels but then the race series gets hurt because they are known the big channels like abc. Garner got all the chips in the movie. What movie . Every driver gets the girl in the movies. Was ricky bobby accurate . I know a guy named richard richard. Thank you. Coming up on surveillance, we talk about Luxury Retail and was behind the rising prices. Have you tried to buy a chanel bag lately . Actually, no. We will be right back. This is bloomberg surveillance. Lets get you company news four states have questions for ebay after the cyber attacks. Connecticut, illinois, and florida say they are investigating. There is a report that google is developing a tablet with advanced vision capability. It says they will make 4000 prototypes next month on the tablet would have two cameras and have depth sensors and software that can capture 3d images. Facebook is shaking up its Privacy Policy again. The default position for new users will be to share posts with friends rather than with all users. Users can change the privacy settings more easily. Thats todays company news. I cannot get the privacy settings on facebook straight. I gave up on facebook. Me, too. They let you know weeks later and youre confused. I use it as an instagram dump and i see less and less use of facebook. Twitter is powerful and i love it and i use it a lot. I get good information from it and put stuff out but facebook, if ive got Nothing Better to do, i go on there and im like a peeping tom. Lets spend some money. On ultra high end luxury goods, the prices keep climbing. The classic chanel handbag retails for over 4000, up from 2695 five years ago. Robert burke is our guest host. He is with the Luxury Retail consulting firm. Prices go up because of rising demand. That has been the story all along and the demand boils down to the demand for the Chinese Consumer. The Chinese Consumer is different from the european or american counterparts. Can you give us a snapshot of who this person is . The Chinese Consumer is upset with brands and brand image and exclusivity. They are buying at a rate we have never seen. 30 of luxury goods spending coming from the chinese right now. 29 . How come the big design houses do not make a more overt groep are these customers . They could name a chinese designer . That often doesnt work with the chinese. They want International Brands with international recognition. They dont want to be played to. To put in a chinese designer would probably not go over as well as a european or merck and designer. Or american designer. Goodman lace is overrun. It looks like Grand Central station. How do they have the capability of making all this stuff . Dont get how they can scale up the manufacturing . They watch their production very closely and they really control how it is bought by the stores. They control distribution and the design which is very important because exclusivity really pushes sales. Lets go to scarlet fu for this weekend. I think the leather print ballerina at 750, is it called miu miu . I think its for you. I would rather go for prada. There it is, that could be your luxury good for the weekend. For the ill go counterfeit version of that. I wonder if the counterfeit prices for luxury goods continue to rise with the real stuff. But theprobably do houses and the governments have become more stringent on counterfeit goods. We are seeing a crackdown in the u. S. And in new york on the counterfeit goods. Bought richamnd. How many players are there at the top that control these other brands . Ldmhu have really three groups carrying richmont and they have been aggressive. Before that, people were looking at houses that were doing hundreds of millions of dollars and they are now looking at investing in young talent. Within these place design houses in these fancy Department Stores or someone like Robert Hormats who wants a basic diplomat look . I think there is. You go to Brooks Brothers. They do a very good job. Are they doing a luxury thing . They keep moving up. Many of the brands continue to move up so you can go to Brooks Brothers and get a more bespoke type of suit. You can also get a 700 blazer. Its really about tearing the price. People are driven toward the brand. With all these brands, you tell us that they are set to raise prices has anyone gotten any backlash from raising prices too high . Surprisingly, not so. When we look at the toptier brands, you look at vuitton, cha they are not getting a backlash and is driven by the global tourist. The global tourist has an on yielding desired to spend and buy luxury. The houses are going with it. Will sanctions have any affect on the robert burke world in moscow . We have been working on a project in moscow which has slowed down significantly because of being an American Company going there. Yes, there has been an effect at least for us. The ruvell going down hurts, too, because foreign goods cost more which the russians dont mind because that allows them to develop their domestic products. There is a clampdown on lavish giftgiving in china which has hurt sales. Meals and gifts is really getting out of hand on the Chinese Government for reasons of appearance have really clamped down on that. Robert burke, thank you so much and bob homats lets do a four x report. You have to look at eurodollar. A weaker euro by a solid 3 10 of one percent. We will talk about ukraine elections in the next hour. Readies for sunday elections. Considers a lack of Revenue Growth up to 50,000. Follow your passion, your dream the controversy of commencement speeches. Good morning come a run. This is bloomberg surveillance. Good morning, everyone. Join me, scarlet fu and adam johnson. Clement of Eurasia Group. Had a very brief morning brief. Overnight german Business Confidence declined more than expected. At 10 00, we will get new home sales and foot locker before the bell. Scarlet, what do you have for company news . The way at cuts on hp. They will limit up to 16,000 more jobs after reporting sales dropped for an 11th straight quarter. 50,000 job cuts announced so far. Hps problem is that consumers are buying fewer computers and printers and have switched to mobile devices. France has one criteria when it comes to deciding who is allowed to buy energy units. It will all come down to who agrees to keep jobs in france. General electric has offered a 17 billion. A 17 billion. Lt has the plans for an electric car on hold. They say there is not the demand for electric vehicles just yet. Only. 2 of new cars sold or electric. Than pfizer zeneca as well. Shareholders are pushing pfizer to consider a deal again. Alex clement with us. I need a briefing to get to the weekend. Mr. Putin is in china. He had a victory lap coming off of china. Russia and china signed this is sort 400 billion gas supply deal last week. Plan to show this options whening things turn sour. And is in st. Ck petersburg and Ryan Chilcote is there. Then he looks to ukraine. What is his fondest outcome monday morning . Putin says that the election only helps to solve the crisis if the rights of all ukrainians are guaranteed. What that means, what that is code for is an extensive level of decentralization of ukraine that would make the kiev government powerless to control its own destiny. That basic clash will remain even after the election. If we had a u. S. President ial election and we had 16 people die in a gun battle in new england three days before it, can you call that a stable place to have an election . I think they can. This question of whether the election has been disrupted is in the eye of beholder. The beholder at the moment is the European Union and United States. President obama and chancellor merkel said the threshold for escalating sanctions against russia would be if this election is disrupted. Both the United States and europe have a strong interest in seeing this election as legitimate. They wanted the new key of government to be seen as legitimate. Also for russia. The u. S. And eu have a high threshold of what they consider disruption. They may criticize certain aspects of how the election was being run. I dont think we will see a situation where washington and brussels say this election is illegitimate. They have said a lot about the government. Theyve given it legitimacy and validity. But they have not been able to build on that. What needs to happen so that the new government can do what the interim government failed . The biggest thing is to reach some sort of accord with the thatus regions of ukraine. Really is the key Sticking Point with russia. What russia is looking for is a level of decentralization that is so extreme that it enables russia to buy proxy control Ukrainian Foreign policy by influencing specific regions of ukraine. Theyre willing to give fiscal power and lyrical power and leg which rights and cultural rights to various regions of ukraine. The russians want more. When you talk about decentralization that becomes destabilizing, as the russian goal, is that why he has taken himself out . He has tried to create a sense of plausible deniability. Everybody understands that these separatist forces are backed by the russian government. We have interviewed that some of the separatists dont want to be associated with russia. They just dont trust kiev. What we make of that . There is a principal agent problem when you deal with proxy forces. There is the possibility to empower local forces and they have their own agenda. Rush is powerful enough to rein in those agendas. Is ae heart of the issue is redux in form of soviet union. Doesnt it have a soviet characteristic to it . Im skeptical of that. Russia is an authoritarian state. Its not the soviet union. Ideological idea that guides todays russia the way it did in the soviet union. The key difference is that the soviet union was a broadly institutionalized thing. This is more of a traditional autocracy. Why does he stop with the success he is having in ukraine . Doesnt he just say, whats next . Thats a good question. If we look back at what russias goals were six months ago, it was to get ukraine to join in this new eurasian customs unit. We can all say that is impossible. He took crimea. That was a red line at the time. He went ahead and did it anyway with no serious response from the west. How much further can he go . Im skeptical. He cant go to the baltics because those are nato states. He can really antagonize kazakhstan or belarus because those are his only two key allies in the region. He used this new idea of russia resurgence for russian animalism russian nationalism. They seem to not be able to come to agreement on how they should interpret russian motives. Ukraine is not a native state. There are no formal obligations to defend ukraine. Not a nato state. One of the key issues here that russias worried about russia wants to make sure ukraine ever becomes a nato state. Im not sure theres serious discussion about ringing ukraine into the organization. But that is one of the key issues and why putin wants to have that control. What is the state of the russian economy as we go into to. 14 into 2014 . Do they have enough cash flow to finance . The russian economy is stagnant. The crisis is above the investment. Russia has been shifting its fiscal priorities away from investment and towards military and social transfers and things like that, which is sapping key investments in health care, infrastructure. Hydrocarbons is a good one. Its important to recognize that even though oil prices are relatively high now, russia gets less and less out of each barrel of oil than it has in the past. Right now, russias budget balance is 110 a barrel. Who do we talk to Ryan Chilcote talk to lavrov. How do they relate to mr. Putin . Its not like president obama with secretary kerry. No. Vladimir putin is the guy. Simple as that. What is the relationship of their foreign minister in service for 10 years with mr. Putin . Hes a very skilled diplomat. He does not make policy. Neither does john kerry. The execute and articulate the policies. In the russian kids, putin is much more the guy in president obama. Thank you so much. Nt giving Us Intelligence on the russian situation. Russian president is speaking right now at the st. Petersburg International Economic forum. You can watch it live on our live event channel at bloomberg. Com tv. European leaders, many of them passing. This do a quick data check for you. Stocks, bonds and the euro. 33. Uro is 126 a weaker euro in the weekend. They need a lot weaker euro. There it is right now. One of the scenes happening right now in st. Petersburg. Its a threeday weekend right here at home. It is summertime. I put a question of the day. What is on your Summer Reading list . I need some good suggestions. The morning, everyone. Our guest host, alex kliment with Eurasia Group. On consensus will be focused on ukraine this weekend. China for the United States and russia is important and remains important. And america shift. What is going on here . Any perspective on the new china. China is increasingly becoming as their geopolitical rise occurs, they are increasing in position to choose allies opportunistically. Needussians are in badly of investment and a burst of buying their energy exports. They have gone to china as a a savior. Putin said he wanted to see a chinese wind phil russias economic sales. Matters more for russia than it does for china. One of the great messages of 1989 is we got so wrong in our what is good intelligence on the Chinese Military . These people spend all day looking at the china military. Do we have a clue . The question with the Chinese Military is no important one. The people you just mentioned are the specialists. They know more than i do. The question is, chinas Foreign Policy is not a confrontational one at this point. Its is a key difference between china and russia and why i dont think we can see meaningful chinarussia axes. What china wants is relatively constructive peaceful relations with United States and with the west to facilitate his rise as a Global Economic power. Is actually looking exactly the opposite. Putin is thriving right now on direct confrontation with the west. Those are two very Different Things and i think they drive a wedge between the foreignpolicy priorities of china and russia. We have to end up with a projection. The washington consensus that we all learned in school, for reads a car he is postamerican world s what is alex kliment projection of our fallen policy our foreignpolicy . The pivot to asia has been made in the light of obamas second presidency. That is the key thing. While we were talking about ukraine several weeks ago, we discussed this. President biden Vice President biden was into kiev while obama was sent to asia. That was very illuminating on where the real priorities are. Salmon. Ok at what does it mean for your sushi . Are you kidding me . Good morning. Futures up, too. After the question of the day. What is on your Summer Reading list . I told scarlet fu my Summer Reading list earlier this morning and she threw a shoe at me. Was the book you said you were reading . Development will indian economics. There was another one that was way nerdier. Were not talking lincoln logs. Is bloomberg surveillance. Scarlet fu and adam johnson with me. Alex kliment has a reading list for me on International Relations. You have our top headlines this morning. Were going to start with ukraine where troops have suffered their worst losses yet. ProRussian Forces killed 16 ukrainian soldiers. Ukraine holds its president ial election on sunday. Of optimism following that military coup. Bonds and the currency both rose. Emerging market investor mark says it is likely to be positive for the economy. Here at home, talking the nhl playoffs. A thriller for the canadians. The rangers have a twogame lead in the bestofseven series. Game four will be sunday. Those are the top headlines. Tough loss last night. I thought the rangers looked really good. They were phenomenal in the first period. Keep the momentum through the weekend. Fascinating. The internet is a blur with technological progress. Internet destruction just yesterday, ecommerce site disappointed in that retail space. 35,000 feet, the mobile technology we have become addicted to is about cyber security. The nextt ordering bowtie from amazon. Forget about bricks and mortars. A large finger on internet and the chief executive officer at opera. He has seen most of all of the internet and comes with a terrific industrial background as well. What has surprised you most in the last 12 months . Lays anrnet p increasingly Important Role in our lives. Its true in russia and china and nigeria. The concentration on and it is happening through mobile phones that. At opera, we have 280 million users going online through our browser. It the uptake is global. It is changing lives for the better. People can access web m. D. That is a good thing. The battle be fewer players in five years or do you see it as a more diffused, more eclectic space . Ive been with opera many years. Was really interesting and whats happening in markets like china and russia is that you asd local players which are dominant as facebook and google are in the western world. Ive been going to these markets for 10 years. It is really interesting to see that you have local companies who have managed to fight the big internet giants by being innovative and local. I used me understand to use Internet Explorer and people said you can do that. Go to firefox. I did that. Why would i go to opera . We are different. We have 350 million users using our browser on phones. We only make a browser. We are out of the model and we do things different. If you check out our browser, you will see we are different. We have complexion in our browser. Mobileu. S. , 60 of all subscribers run out of their data plans. If they use opera, they probably dont have that problem because we compressed data and media. If i dont have an unlimited data plan, its cheaper for me to use opera . We compressed everything from text to media. Think about seeing an hd video here in new york. If you use opera, you will compress it down and you can see it. Thing . T that the big your first position was that the lego group. Operas biggest market right now is eastern europe. You have a lot of experience dealing with russian market. What is the biggest change of scene from doing business in russia . It is really changing a lot. Business in russia today is very similar to doing business in the u. S. Around in every city i had to go to, it is very similar to doing business everywhere else. People use internet in russia like they use it here. I would be fascinated to what you think of apple computers. Do you buy it . If youre into browsing, we Just Launched a new product. The browser that it should come with. We throw away all of the traditional its a tough space. It treats websites as its apps. That is what people use. About the optimistic concentration here. The u. S. On monday and went through immigration and they always i said, who do you work for . I said opera. They said, the web browser . We will be right back. Chris christie stuck in traffic in the lower left corner of our shot. Good morning, everyone. That is new jersey looking over the manhattan. The glorious perfect memorial day weather. Im going to play through. Pretend there is no rain. This is bloomberg surveillance. Im scarlet fu here with tom keene and adam johnson. We are looking for new home Sales Numbers at 10 00. Very good. Toasted withel cream cheese. At fancy hotels in new york. Alex all the way to the state of maine to get her salmon. She put on the accident and went inside the only company farming the beast on the u. S. East coast. Salmon. It is pink, high in protein and americans eat more than one Million Pounds a year. Most of that is farmed. One billion pounds a year. With demand growing and wild salmon running out, it marks a huge opportunity for a farm to scale. Lay eggs andlmon fresh water lakes. In a farm, these eggs start in a hatchery. They are so small. The temperature where they are at will double every two weeks. Farm salmon grow faster and are four times more likely to survive than in the wild. When they get big, they move outside. How many are in here . 6000. The average weight is 250 grams. They still until they are 18 toths old and then move mimic how they move from river to the ocean. This is half a mile from the coastline. 17 penance on it. How many in each pan . 25,000. Strong ties help circulate the water to prevent disease and make waves. They prevent overfeeding the fish and saving fee costs. One of the biggest expenses for the company. I see one. There we go. At 10 pounds, the fish are big enough to eat and wind up on your plate in 48 hours. Cook is hoping to produce 160 Million Pounds of salmon the season. It comes with a high cost. Probably in the 5 million range. Build thellions to hatchery and regulatory fees, it takes three years to raise the fish. Salmon farming is a big business. Alex joins us now. You were wearing a raincoat and boots . I was decked out like a true fisherman. It was raining. There were storms. I probably put on 40 pounds with all my gear. It was really amazing to see the conditions they have to work in every single day. Does the salmon taste different . Yes, does. It does not taste fishy. I actually did taste test at fresh direct. We did some wild salmon testing as well and some organic farms from europe and here. Theyll taste differently, but not better or worse than another. The wild salmon in the west coast is pacific salmon. A totally different species than what is farmed. What is farmed atlantic salmon. Dinner. Nd i have our what do we eat out our plate . I dont know. You have to ask. Restaurants are taking where they are sourcing from very seriously because demand has picked up so much. The only produced when he thousand tons a year. A less than one percent of global supply. We import the bulk of our fish. Depends on where it comes from. You were shaking your head and saying, that is a lot of luck. I wonder if theres is enough are we entering a peak salmon phase . Are we running out of salmon . It seems like that is an increasing risk. We are running out of wild salmon. For multiple reasons. You could say we have overfished. There was disease and pollution. That puts a lot of strain on the farmed salmon world, which has become a booming business in canada. Alix steel, thank you so much. Cant wait to see what you dress up as next. Me, too. Not that i planned it. Lets get you a data check. Sale numbers coming out at 10 00. Numbers cominges out at 10 00. There is a lot of mixed data out there. It to hang your hat on any one piece of data is a little tricky. At 2. 54. Year yield good morning, everyone. This is bloomberg surveillance. Clever Digital Product on bloomberg. Com. And Bloomberg Radio plus and itunes and android. It is free. Im tom keene. With me, scarlet fu and adam johnson. Four days before three days before the ukrainian election, alex kliment lament men with us with Eurasia Group. College seniors are handing out rejection letters of their own this year. At those letters are going to Commencement Speakers. Christine was one. Shes not welcome at Smith College. Condoleezza rice got another one. Did not make the cut at rutgers university. Were joined by the dean of columbia business school. He knows a thing or two about how to manage educated students. Thank you for joining us. Thatis it about this year makes it feel like weve gone back to 1968 . Speaking out is fine, but intolerance is not. The whole purpose of the university is to hear different points of view. Somebodydy thinks saying something of consequence, there is bound to be offense in there somewhere but its important to listen. These protests have come from a minority of students and its winning. What does that tell you . Tells you administrations are not handling this very well. Universities have to be places of openness and tolerance and that you has to start with the faculty and the administration. I thought bill did a great job at haverford and remind the students of that. You grew up in the south. The fractured south. Where are the administrations on this . I will go right to Smith College. I find it appalling that the Smith College administration did not step up on this. What happened . I can speak to any individual situation. I dont know the facts. Peoplenfortunate to see of great reputation like Christine Lagarde not being able to speak to young people. I would think many people aspire to her success. Were blaming the students the administration also bears some blame. Are the speakers at fault in any way . Robert withdrew because of 40 students demanding he apologize. I can really judge individuals. They have to decide for themselves. It is unfortunate that we are even having a conversation like this. Young people should have an opportunity to hear great voices all over the spectrum. Dean hubbard, youre interacting with students all day long. We are not pure were sitting here in a studio. What is it that those of us in our 30s and 40s are missing that the young 20yearolds are telling us . I dont think you are missing very much. There are always people who different points of view. What is different is this notion that i dont want to listen to points of view that are not mine. We have to win against that. Unique think people are in this aspect. To Commencement Speakers get paid . No. They are free. Fabulous. Do you remember your Commencement Speaker . How was your Columbia School commencement . Were very proud that rachel somehow snuck through the arduous program. Its a great class. It always is. I was pleased to have shaken 1000 wonderful hands. It. Very good. They are headed all over. Tec, consulting, manufacturing, global services. Thank you for joining us. Dean glenn hubbard. He was an advisor to mitt romney as well. It is fascinating how this year, there is a real change. People are speaking out. I dont remember who was my Commencement Speaker. I cant think that are back. We had a speaker on class day. Best commencement speech i overman. , keith everybody should read his speech. He talked about how he screwed up so bad as an undergraduate. Fabulous speech. Will head overe to kiev for the latest on ukraine ahead of sundays president ial election. This is bloomberg surveillance. Good morning, everyone. Futures up. With me, scarlet fu and adam johnson. This friday before a threeday weekend. Betty liu is also with us to tell us she gets off monday, too. We have a couple of great guests. He president of cinnabon im assuming you have always tried one. They admitted recently that they marketing tactic to get you into their stores. You can probably guess what it is. Its called delicious. They put their ovens in the front of the stores. They found recently that when they put the ovens in the front and that smell goes out, more traffic comes in. That is one of the ways they are actually able to drive sales despite being in malls where traffic has gone down so much. The president will have cinnabon delivered here. The ceo of halo they are like work with taxi drivers, not against them. He will comment on that recent lawsuit filed by the taxi drivers in connecticut. Accusing uber of being an illegal company. You sure to save some cinnabon sport tom. Cinnabons for tom. Ukrainians are voting for a new president. Chuck hagel sat down with charlie rose. Heres what he said. , ithe resolution to ukraine dont believe president obama has said this. It is not going to be resolved militarily. I think what russia is doing here, isolating itself in a very dangerous lace or its own fortry dangerous place its own country. How many countries supporting what the russians are doing . Not many. Alex kliment, the head of russian studies for eurasia. How legitimate is the selection . Legitimacy is in the eye of the boulder and the people doing the holding. Theyre the government in kiev, which has a strong interest in legitimizing itself and the u. S. And the eu. What do the russians think . The russians have a lot of leverage in Eastern Ukraine to destabilize them further. They will welcome the election is a positive step forward. Ricks would say that the United States supports the imf. The imf supports the foundations of economic ukraine. Are the american taxpayers the conduit to ukraine to keep them going through the summer . The imap support is in spite what the ukraine the extent going to the imf, then yes. All imf members. China as well. Is a geopolitical issue. You can catch the rest of chuck hagels interview with charlie rose tonight at 8 00 on bloomberg television. Tom and i will be right back with more surveillance. This is bloomberg surveillance. Scarlet fu with tom keene and adam johnson. Our guest host is alex kliment of Eurasia Group. Four states now have questions ebay following that cyber attack. Asking if they will provide free credit monitoring. Google is report that developing a tablet with advanced vision capabilities. The wall street journal says google will make 4000 prototypes starting next month. They will have two cameras, depth sensors. Changing up its privacy policies yet again. Users will share posts with friends rather than all users. Current facebook users will be able to change their settings more easily. That is todays company news from the files of bloomberg west. We want to get back to our top story this morning. A new burst of violence in ukraine just days before the president ial vote. 16 soldiers killed near a checkpoint. You are taking stock of the situation. Can you give us a description of the biggest threats to the election process at this point . Good morning, everyone. Its really about intimidation of those working on the election and those voting in the election. We spoke to one of the five District Election Commission workers. The five people running the boat in the city, the capital of the new peoples republic. A bunch takenad away from her by armed men. They came back to her office and close to down. It the latest news i have this morning is that, of the five administers responsible for holding the vote, one of them is still operational. The heads of two others have been kidnapped and released. The others have been padlocked shut. In the citystations are also not yet operational. That is 48 hours before the vote is meant to be beginning. Within that very good and very important reporting, can it be a legitimate election if they dont get a proper election in Eastern Ukraine . The question. I spoke to a couple of the , ther people from the osce organization responsible for observing the election here. One of their leaders, the former foreign minister of finland, he told me that the big concern is that, without violence, there will be questions of legitimacy. The Prime Minister of russia told Ryan Chilcote that there is a concern among one of the complexities of the election is the low turnout. Election st the cast the election into doubt. I want to break in here for a moment. Some breaking news headlines. Vladimir putin says russia will work with elected ukraine president. The whole series of elections. Here of trying to run a proper election is front and center with mr. Putin. Fascinating turn. Maybe this is the deescalation we have been talking about. Use. Calation is a word we is there any evidence on the ground of deescalation or is it the other extreme where people are being intimidated about going to the polls . Everyone ive spoken to who was against the idea said they were scared to go and vote. There are reports of more violence in the region this morning. We saw yesterday the ukrainian army, 16 of them killed. We went to checkpoint out by the city. The soldiers are terrified. Ensuring security for voters is a big concern. The osce says they will be close as they can get. Without international observers, therell be grounds for dispute from the protesters in russia. Get theegitimate do you sense that people in Eastern Ukraine see these elections . Outsideabout whether policy sees it as legitimate. What do the people in the streets tell you about the selection . Weve been to these potential polling stations. Just like in schools in the nine states. I spoke to one school and they said, nobody will come to vote here. Its a shame. We would like things to go differently, but they want. Of the people i spoke to, it does seem a lot of people are concerned about whether these elections will mean anything. The proseparatists are saying they will not let it happen. Those who would like to vote are concerned that it wont mean anything. Youithin the intimidation have describe in your reporting, how does someone actually walk up to a voting booth on sunday . How do you presume that will happen . The first challenge will be to find those voting booths. A lot of them are not operational. They will have to worry about how they can find these places. Information being sent out by the central Election Commission seems to be a little sporadic. At the local election workers we spoke to said they are not getting much support from kiev. Of will have the concern death if you do go and vote. Thank you so much for describing the scene for us there. Joining us from kiev with the latest on the ground ahead of the sunday president ial election in ukraine. We want to get with the agenda now. Tom, you go first. Mine is yields. We go to a threeday weekend. Of the sensesawe being wrong. We are at the end and we begin the final month of the Second Quarter here and everybody has onn wrong, wrong, wrong yields. The mystery of what these low yields signal is front and center. Just before janet yellen and everybody else. You were talkineaabout the o, fiveyear going forward. What people think it will be five years from now. Its still very low. Volatility that jpmorgan is talking about. To have warned about thehe weakness in the fixed income trading. You have to get to the radio studio. Aj and i will continue to hold the fort down here with alex kliment. My agenda is housing. The Federal Reserve has made it clear that its a risk to the economy. Janet yellen has mentioned it in testimony. We have new home Sales Numbers coming up at 10 00 a. M. This morning. The consensus is for a read of 425,000 new home sales for the month of april. We got existing home Sales Numbers yesterday which came like, but still showing increases. The spring selling season. How many years in a row have we say, its alles fro the spring selling season . Its been a little late. The sense that the economy is slowing down a bit. For memorialfo day weekend rings me to my mustread. Able always ask me what my favorite books are. With summer almost here, i thought i would recommend the ones that have been pivotal in my life. Rationalism in politics. Brideshead revisited. The ones that made a difference. Were looking for books to read. Whenever the summer begins, that is when everyone tries to read up and get uptodate on the things they forget during the winter. That brings me to our to the question of the day. What is on your Summer Reading list . He divide i did not know he wrote a new book. That sounds like a benign total. Criticism. Malist that is not what i bring to the beach. You might read it at your office. With a red bull. Read . O has time to i will be checking with her on the beach. Twitterwill be checking on the beach. I have read some interesting books. The read for pleasure . Or is it all for work . I try to read for pleasure. Im embarking on the kindly ones. Is extremely lengthy world war ii, holocaust related story. Its fiction. Not something you would ring to the beach. I will be reading good to great. What makes Good Companies great . Read about the 25th anniversary of tenement square. Things for being here. Bloomberg surveillance continues on radio. The loop is up next. Have a great long weekend. Good morning. Friday, may 23. Live from bloomberg world headquarters. You are in the loop. Heres a look at our top headlines. Ge extended its deadline for the 17 billion offer for alstoms energy unit. May also beemens making an offer. More job cuts on the way at hewlettpackard. Meg whitman may cut as many as 16,000 more jobs on top of the 34 thousand already announced. Hps sales have fallen for 11 straight quarters. Ukraine preparing for sundays president ial election following a military setback. Real Russian Forces killed 16 troops. N Vladimir Putin says he will work with whoever ukraine elects. The economy is in the house today literally. Mike mckee says the real deal is the strong reported april home long, 8 30 a. M. , will go a way towards reassuring investors the housing recovery is underway