Transcripts For BLOOMBERG Bloomberg Surveillance 20140724

Pmi, purchasing managers index. Bloomberg consumer comfort index. Home sales. That is the one we want to key on. Moving onto earnings. Ford, gm, caterpillar. Starbucks, amazon, pandora. Im looking forward to amazon. Lets do a data check. Particularly the politics. The market moves ever hire. Higher. Futures are up so much. Yields are weaker. Some dollar strength. Nymex crude. Under 13, under 12. 11. 52 on the volatility. A slightly weaker yen. That is a benchmark of stronger chinese currency. To the bloomberg terminal. One of the observations. This is the russian equity market. You can see what is not happening. The u. S. Is going like this. It is able market. It aint happening in russia. Is there value . It is a political question. And a sensitive topic as well. It has recovered from that big lunch plunge. We will talk about it in the next hour. The papers, the websites. We need an update on our front page. If you guys plan to fly to tel aviv, you can do so. The faa listed its 24hour ban on u. S. Flights to israel. This only covered United States carriers. El al and british airways. Lufthansa is keeping its restriction in place. You look at what is going on overall, no sign of a breakthrough in ceasefire talks. Hamas has vowed to keep firing until the embargo on gaza has lifted. Israel is no plans to scale down its military campaign. It is the most interesting thing. Not just america, but many other nations a mother is minimal discussion of how exactly do we or israel or others speak to hamas . That is john kerrys challenge right now. Tom, you just made a key observation. Through egypt. It is egypt that in the past is been the conduit through the muslim brotherhood. The Current Administration ousted the muslim brotherhood. All of a sudden, the lake link were going to check in with Nicholas Burns, the former nato ambassador. Our second frontpage story. European leaders are considering new sanctions on russia, including restriction Capital Markets access and an arms embargo. As of these discussions come fighting continues. Two ukrainian fighter jets were shot down over Eastern Ukraine bright by rebel forces. It is a war wrapped around some form of dialogue. Media has been something. The cartoons, the debates. Pushing against the slowness of european officials. Rebels are armed with far more sophisticated weaponry than we thought possible. The imagery on the cover of wall street journal. It brings back the emotions of those who died. There is an entire human story. There has been a whole narrative on social media talking about this. Talking about this as the netherlands 9 11. The same emotions we went through. That,contrast to all of our last frontpage story, everyone in the markets here, what problems worldwide . Are we climbing a wall of worry or is this Something Else . The dow did retreat a little bit. The s p record its wrong earnings. Strong earnings. It is up 7. 5 . Rbc Capital Markets looking not year, but 12 months trading. What was facebooks revenue up . It was better than the estimate. , does note question begs the question, but reinforces the idea, this is where you go for growth. All of the uncertainty and angst around the world, Corporate America is doing well. You have to put your assets somewhere. The raging debate about whether you should be in emerging markets or not. We also have some breaking news we want to bring you uptodate on. This just happened. Flightt is missing a is missing. They said they lost contact with the plane. It took off from her cuneiform faso. Burkina this is from our geography lessons of another time and place. Near the ivory coast. The trajectory is north across mali. Unrelated, it would appear, to any of the other news on troubled aviation. The plan lost contact and never reached destination. Right now, bloombergs middle east editor Elliott Gotkine is in tel aviv. He joins us. Before we speak about your work yesterday for bloomberg south of tel aviv, lets get an update from you on secretary kerrys efforts. Lets start with your israel. Was it a successful trip for secretary kerry . I guess there will only be a successful trip if it transpires that some point in the future and helps to secure a ceasefire. So far, there is no sign of that. Militants of hamas and israel seem to be digging in their heels. Hamas wants a lifting of the siege on gaza, a release of prisoners, and whatnot. Was real is talking about expanding the operation. Side arelike neither not on the same page. You cannot call it a success. Within your reporting, how does the United States or israel speak to a terrorist group that they dont want to speak to . Im fascinated on the process, the conduit to hamas based in qatar. Officially, there are not any channels. If you look back in history, there were the oslo accords when the plo was still designated as a terrorist organization. They were back channels. Unofficial conversations going on directly. Officially, there are not going to be any. Egypt has often been the conduit , the mediator between those two countries. It would seem like the most likely candidate still. Hamas would like to get turkey and qatar involved. Those are not countries that israel trusts nor on good terms with. The relationship with turkey seems to be going from bad to worse. There has never been much of a relationship with qatar. It is hard to see where the breakthrough is going to come from. You have the u. N. Secretary general, the secretary of state kerry here, everyone is calling for a ceasefire, yet we dont seem to be able to get one. Outside the box for is a little but based on your outstanding reporting over many months if diplomacy is not working, is there some sort of emotional point at which there becomes a breakthrough . Look, from israels perspective diplomatically notking it is becoming quite as isolated as it was after the u. S. Flight ban. Acreasingly isolated, warning by the u. K. Foreign secretary. Israel is finding itself on the wrong end of a resolution from the u n human rights council. That isnt the first time and israel doesnt really agree with what it says. Thank you so much. The headline across bloomberg france. 11 Million Euros to a gaza, humanitarian aid. My morning mustread is from bloomberg, michael bloomberg. The owner of this television station. Why i flew to israel. One part of this mustread from bloomberg view. Scarlet, you have been following this carefully. There were some tumble to say the least. He wanted to draw the parallel between what happened after 9 11 and how you cannot let the economy shutdown, the city shut down because of that one event and how you would need to prove that life continues even when there is violence. The twitter feed was really something. Pro and con with the former mayor did. In his interview with blitzer last night. I did not think it was as contentious as the reports, even though they went at it. He was pretty passionate. It is emotional. That is what is at stake here. I want to bring in our guest host for the hour. The executive editor of linkedin. You see how social media is driving the narrative. Diplomacy does not speed up in this age of social media. Everyone has a voice. People are weighing in the way they would have liked to before. We see it on linkedin with a lot of people writing articles about how they are doing business during the turmoil. Businesses so much in more international. Youre doing business with people in a way that you are tied in to world events. If something bad happened, you find a contractor elsewhere. That you canng move on if there is some problem in the part of the world whether have operations. They are tracking down people who dont want to be tracked down. They tracked down Vladimir Putins. Are. Daughter. She lives in the netherlands. I work with dan roth, full disclosure. You people, are linkedin, facebook, and the others, are you replacing traditional news media . Or are you and avalon to it . Addon to it . An i think news media gives the final word or context. You see a lot of people writing passionately, but you do not have the dispassionate third party who is going to round up the voices. That services such an enormous and is so important to have. Social media is taking the role of writing the first draft of history. People are saying what is on the mind. It is up to the journalists to say what this all means. Notes. Thand account a lot of it wrong sometimes. You get the passion and you get the people and what they are seeing and feeling. We are glad you were with us for the hour. The day after facebook hosted record earnings and a record high for the stock. We will be talking about it after the break. Good morning, everyone. Bloomberg surveillance. Great perspective across all of Bloomberg Television and radio. Ian bremmer will be on of eurasia group. Every day the stories are been giving he has great perspective on International Relations and what it means for america. Good morning, everyone. This is bloomberg surveillance. Im tom keene. We have news coming out on the president. What a white house official briefing officials reporters on a speech obama will be giving. He will discuss the attack ,ersions tax aversions Corporate Tax avoidance. This is a huge issue and thank god he is taking a stand on it. , pfizers. Companies tried to do this, the u. S. Companies leaving u. S. Soil to relocate abroad so that they dont pay as high taxes. That means that you and i and every other american is left holding the bag. I go back a few years ago. You have a right to take the tax law and do what is in your best interest. Itk even a president is the lot right now. Law right now. There is bipartisan support to fix the law, but they cant get to where the president would like to take them. They cant get anywhere to where anyone would like them to take this thing. They are seeing an Alarming Number of these deals being proposed. Whether they stay out right or whether it is buried in the details, this is something that is going to be a bigger deal. It is treating taxes as a profit center. If you can lower your taxes, you have increased your earningspershare. That is one way to show Earnings Growth in a challenging environment. It rubs me the wrong way. I know it is totally legal. It just doesnt feel right to me. It is not just in the healthcare sector. I dont agree with that. It is not unamerican. It is the law the people in washington have made. It violates the spirit of the law. Change the law. If you are an american corporation, you pay your share. Change the law. This is one of the issues everyone agrees on. Republicans and democrats. Is the big question. We will keep you updated and let you know when we find out what time that speech will take place. In the meantime, be sure to check out the cover of this week Assad Bloomberg businessweek. One of the youngest ceos of publicly traded companies. The energetic young leader of bloomberg burger king. Good morning, everyone. Futures up three. This is bloomberg surveillance. A lot of morning must reads. Here is adam with top headlines. At least 42 people were killed by a pair of explosions in northern nigeria. A moderate cleric and Opposition Leader were targets. Both survived. They have been vocal opponents of boko haram. Group thatthe same has kidnapped those 200 young girls that we have been talking about for weeks. Lawyers for a condemned arizona inmate say his execution took nearly two hours. Afterrted and gasped long he was given lethal injection. It took so long, lawyers had time to appeal. The execution was not stopped. A u. S. Senator is suspected of plagiarism. Copiedlsh of montana some of his masters thesis word for word. He said he does not recall using other sources. Distinctions here is modeled using the sources word for word, but not fighting them. Just say where you got it. Even if you cite it, you have you cannot use it word for word. Did you play dresser morning mustard . [laughter] no. But i am citing it. Jeb bush. The tension here as i have been reading about immigration, only 2 of those who actually go to a hearing are ultimately returned. If you go to your immigration hearing and you simply slip through the cracks, you are not found. I believe the count is up to 58,000 children and presumed on its way to 90,000. It has dropped off the headline be because of ukraine. It remains a huge story. How much do people write about immigration . It a lot. Ad about it is a huge issue. It is a big issue in business because of the idea of hiring people. Immigration issues in the u. S. Cut through problems with bringing people and or keeping them. Crisis,dren, the border that does not factor in as much. It is certainly a corporate issue. Dan roth, of lincoln linkedin, our guest host. Our twitter question. Would you invest in russia . Good morning, everyone. It bloomberg surveillance. Crash. A plane as reported. Not in the ukraine and not around israel and gaza. This is in africa. In burkina faso. It is a missing flight. Travel from mali to the jury a. Algeria. We do not know it is a crash to be clear. It is a missing plane. That is the headline coming across the bloomberg terminal. Bloomberg surveillance. Futures are up 3. Dow futures are up 30 off the bloomberg terminal. America experiences a protracted bull market. A nastys a sustained bear market. Many strategists and investors run. Mark mobius of Franklin Templeton sees opportunity. Russiaests that putins staggers into 2015, but there can be better time ahead. Defend investment in russia right now. If there is global outrage against Vladimir Putin, does that change your Investment Strategy . Not really. I think this outrage will probably continue for a while. There is a good chance of sanctions being increased. I think Foreign Ministers from all over europe are meeting in london today and they are trying to assess what is the next up for them. It is for difficult because there is mutual interdependence between russia and europe, as you know. My feeling is that if the price is right and many of these russian stocks are looking very attractive, in two or three years, we will get some benefits because the market will recover and the whole situation with ukraine will have been worked out. Early june you in who impressed you the most. Here is what you said. [indiscernible] he has shown control and restraint. Logical in his decisions. Very logical in his decisions. Given the events of the past couple weeks, do you still love this view of mr. Putin . Hold this view of mr. Putin . Yes. The strategy is to take as much as you can without any consequences. If there are consequences, to logically pull back. That is the reason why sanctions are important if they impact on the russian economy. Is a good chance that if the europeans pull off a very strong set of sanctions, then logically, putin will pull back. Mark, about a month ago, jim and wasme on our air really pounding the table on gas prompt gasprom. He took heat for that comment because of the motions of investing in russia. Have you taken any heat for your willingness to put capital to work and by russian stocks . Not yet. Surprisingly, we have not really gotten any negative feedback on that. None. We havent received any negative feedback. Because i think generally speaking the people it in our investments are taking the long view as well. They know russia is going to be around. The russian economy will eventually recover. There is Good Opportunity to be in that country. Can you share with us some of the names you are buying . Names are Oil Companies and spurbank. Those are the most noteworthy names. What would you expect other institutions will do . Would you suggest that Institutional Investors worldwide will be demanded or forced to sell russian shares . That is a very important question. That,. Sanctions include then the game is over, at least temporarily. I think it would be a very difficult move and one that would be the very last step. That would be very close to hot conflict. Thanks so much. I think it is appropriate to ask our twitter question of the day. Regardless of the potential return, would you invest in russia right now . Please tweet us. Mark mobius made his view very clear. As has jim grant. Breaking news. Adjusted earnings per share in the second quarter, . 40. Ford shares moving slightly higher in the premarket right now. The Company Reaffirms its fullyear Profit Guidance of 7 billion to 8 billion. Investors seem to like what they are hearing. There is a better europe. That is the headline. The idea of finally turning around. Achieving profitability in 2015 is the headline in europe. Coming up, our single best chart. Emerging market ripple effects. The triple threat. This is bloomberg surveillance. Good morning, everyone. Bloomberg surveillance. Lets get to our top headlines. Here is adam johnson. Stormy weather from the typhoon may have caused an Airline Crash near taiwan. 48 people were killed. 10 were hurt. Including five on the ground. It was coming into to land on an outlying island. There was heavy rain from the Tropical Storm at the time. The u. S. Nofly zone rules are now published. The names of people who may have links to terrorists were found. The revelations may damage national security. Golf. It has a glaring generation gap. Participation is down for a fifth year. Millenials are not interested in teeing it up. I do not play. But im like the only guy i know who doesnt. It is the weather. Out in california. It is like 370 days of the year you can play golf. I get it. I understand what people call. Theres only so much time of the day. There is other stuff i would like to do. You cant do it all. Could you see me on a golf course . You . They dont make off clubs long enough for you. Your 65. They dont. Lets get to our single best not golf chart. This is definitely not golf. Or has not been a lot of love for emerging markets. Our single best chart as a venn diagram published by Morgan Stanley last year. They identify three threats for emerging markets. Quantitative of easing, chinese leverage, and slowing emergingmarket credit expansion. , theyou overlap them markets that get exposed to all three are brazil, indonesia, and south africa. What are the three . Said unwinding of quantitative easing, chinese leverage, and slowing emergingmarket credit expansion. That is good for them . This is bad for them. Bad for them. Triple threat. Bad. A threat for foreign investors. If you look inside the country, there is still tremendous entrepreneurship going on. It is easier to Start Companies today. An ad for want to be linkedin, but they have linkedin and others. Were there. We are seeing people use it all the time. They are writing their own thoughts about what is going on in the market. They are doing be to be outreach. B to b outrage. The first week i ever got was from vietnam. You are a big hit in emerging markets. Were going to bring in mark mobius. We should this emergingmarket faces theeat that region. How different are conditions this year . The situation is completely different. First of all, china is launching a 10 point reform program, which is going to be revolutionary, in my view. They are going to allow private enterprise to go into areas where the Government Enterprises had monopoly positions. To encourageg private enterprise to establish financial and traditions institutions. Is pumping more money into the economy. If you look at india, you see the reforms that are going to take place there. Indonesia, another case of reform with a new president to his reform minded. Who is reform minded. There is no shortage of money, is my feeling. There is a tremendous amount of money. If you look at the loan to deposit ratio in the u. S. , in europe, japan, and china, they are all down. There is lots of ammunition for the markets to move. You are referring to shadow banking. As a percentage of gdp, it is so much larger than it is for china, where there have been all of these dire warnings of the Financial System collapsing. Direct, is the emergingmarket system overleveraged right now . It seems to be a great debate. Not at all. There is an awful lot to be done in terms of leveraging up. If you look at the loans in the system, you will see that consumer loans are still a very small part of the banks. That is expanding. That will give a tremendous influx to the government. Let me ask you another question. Can i invest in your world for u. S. Multinationals . Good idea. In fact, in our emergingmarket funds, we have invested in some of these global multinationals who are becoming emergingmarket multinationals. Over 50 of their earnings are in emerging markets. A good example of that is uniliever. Sandsple forget las vegas actually gets two thirds of its business in asia. When we talk about multinationals, the relationships between nations, how concerned are you about what is happening in the South China Sea . Am very concerned. Into a very nasty situation. The good news is that the chinese have pulled back. That was in waters that vietnam claims have been pulled out. I think the chinese are going to be very cautious about this. Very good. Mark mobius. Think you very much. You very much. Our photo section. Thank you for your emails yesterday on our photos. What are our photos today . Number three. Leadering audience in the during the 17th stage of the tour de france. The tour is coming to an end. Kilometers. 2700 miles or so. Why can i see matt miller doing this . He prefers motorbikes. He likes harleydavidson. Is it rude to say i totally dont get this . Why not . I think it is weird that he came right after the world cup. Coming after the excitement of the world cup. It feels that a real letdown. Where is lance . [laughter] dont even go there. That is sad. Broke my heart. Number two photo. Before and after look of lake mead. On the left side, Beautiful Lake mead second 2007. Now after a 14 year drought. That is deep to left field over the last red sox wall. Hoover dam is seeing receding water lines. Our number one photo, money really does grow on trees, especially in london. Surprised to see a money tree in full bloom. The tree was planted by sun life to encourage the nation to start saving. Save a martini and month. Give thet that opposite advice . Just go up for a walk and pick the money. Sociale are a lot of media younger campaigns that stodgy corporations think up that go wrong. Create something that goes viral, but just going viral is not necessarily great on its own. You have to remember who did it. Theou have any idea who did tree when . You just mentioned it. Is this to do with old far its like me not talking to young studs like you . The idea is that you people are throwing everything against the wall. The old rules dont work. You want to see what will work and what will happen. It is cheap to try things now. It is. Im glad to see our top photos today prompted a vigorous debate [laughter] and discussion. [laughter] can linkedin become the next facebook . This is bloomberg surveillance. Lets get you company news from the file to bloomberg west. 10 people arrested or indicted worldwide for hacking stub hub. They stole more than 3500 tickets worth more than 1. 5 million. They resold the seats. Ebay has a huge Debt Offering underway. 3. 5 billion bond sale. The want to Fund Operations and pay off loans. The company does not have a cash crunch. On the move are driving the company to new heights. The stock is trading at a new record in the premarket. Facebook credits ads to its monthly active users. Were looking at facebook numbers. You are impressed by the margins. The margins and the revenue. 38 bubbling at south. They deliver the goods. They have delivered. If you think about mobile ad revenue, 62 of the total versus 59 previously first is almost nothing at the ipo. Has beenkirkpatrick steadfast in the thinking of facebook back in the gloom. He wrote the book on facebook. Do you know much money they make off of individual users . 2. 24. Im not one of those individuals. Im going there less and less. It looks better, it looks fresher than i remember. I use it as a dump for instagram. You do use it. You are an active user. I am an active user, but im not active. You are on instagram, youre part of the facebook community. Sorry. Linkedin. Certainly part of my community. It has but two companies in the past two weeks. It streamlines the whole process. Roth is with us. The executive editor at linkedin. He is about putting content on the site. How are these acquisitions going to make linkedin better able to compete . That linkedin succeeds is by making that all businesses are connected to each other and all people in business are connected to each other and sharing ideas and what they are working on. When you look at Something Like the bizo acquisition, it is all about b to b. When you look at the other acquisition, it tells you about something when someone you know is in the news. I so that you were mentioned on bloomberg, here is what is going on. It is queuing people to write their own articles on linkedin. This was also one of the minor investments for bloomberg venture capital. I am finding more and more that the newsfeed is becoming a more targeted, more expanded twitter. Are you trying to reinvent the newspaper . Is that what you are doing . About what ank newspaper is designed for, we absolutely want to make sure we are there. It is a lot about inside. This is a lot about connecting an individual user with the information they need that day. Relevant. You are not just throwing the whole thing up. Absolutely. If you are a doctor or a pilot, you are going to get very different information. Us. Is different for all of what we see is different than what an architect is going to see. I want to bring in my morning mustread as we talk about content generation. Murdochs bid for time warner threatening the golden age of television. There is a link in a moment. This happened in an extremely competitive Market Driven by four broadcast networks, six hollywood studios, and the Disruptive Force of the internet. No company had sufficient power of distribution to inhibit it. We had this golden age of distribution competition. Oft does the consolidation media mean for someone like lincoln . It used to be hard to get distribution. To get your product in front of people used to be difficult. Linkedin, facebook, twitter, the audience is there. We have built people in audience. Tom is already in front of people who want to read what tom keene has to say. My word for the year is distribution and i totally agree with what dan is saying. Microeconomics of distribution have financially changed foundational he changed because of linkedin and twitter. Would you guys go into video . We do some video. We do business to business video. It is already working. What we find is that people do not necessarily want to sit in a cubicle, you might not want to watch video all day, or you cant without getting in trouble with your boss. We will get there, but right now, the written word is the way people are doing it. You want to read something quickly in line. It is written. The influencers are key to the written word. Why dont i see them in my feed . I feel like you are not using it to the way that you should or could to maximize their impact. If you are following influencers, you will see them right away. We get to bang new members per second joining linkedin. You want to start following tom keene. You want to follow mark mobius. Everytime they write, time they share, that is in your feed. Thank you so much. Let me do a forex report. Strength at the bottom of the screen. The yen is weaker. Burns, a up, nicholas former u. S. Ambassador to nato is joining us. This is bloomberg surveillance. Israel will do what is necessary to bring calm. The fighting continues as america negotiates a ceasefire. The president goes on the offensive against companies that use mergers to escape u. S. Taxes. Facebook and apple have shown mobile is the future. Perhaps it is the only future. We are live from our headquarters in new york. It is thursday, july 24. Joining me, scarlet fu and adam johnson. Our guest host this hour, howard ward. We get right to our morning brief. Raises toanufacturing an 18month high, European Manufacturing races to ayear high. ,ot a lot of Economic Data starting with the weekly initial jobless claims, and that 9 45, the u. S. Purchasing managers index. At 10 00, new home sales. 11 00, the Kansas City Fed manufacturing activity. We also have earnings before the bell from gm, caterpillar, and united, starbucks, amazon, and pandora. Record highs in the s p 500. Correct, in spite of the difficult headlines around the world, record highs. Thank you, federal reserve, for all that money. Detroits top carmakers are issuing their Quarterly Results today. Estimates. Lysts the carmaker credits sales in china and europe and says it profits in 2015 being in that region. Gms report is due out at 7 30, half an hour. Bob rdas cutting 1800 jobs. There was a similar layoff months ago. By marty a certified bombardier is working on his biggest series ever but it has been postponed several times. Hepatitis ccess pills cost 1000 each but subject say they were quickly cured after taking the pill. That is the latest company news this morning. We want to bring you uptodate on the latest headlines regarding this missing aircraft. It is an air algeria jet with 116 people that finished vanished en route from burkina faso to algiers. A loss of the aircraft would be the third major accident in a week. This is from the french news change the plane direction after heavy storms. 16 passengers and crew on board. President will make taxinge today on companies that change their allegiance from their home country. Phil mattingly joins me from washington. I dont get it, both republicans and democrats support Corporate Tax change. Why are we arguing about this . Because it is washington, essentially. Everybody agrees there has to be changes. Most people agree on both sides with the top line changes and numbers should be. When it comes to what the president will attack on today, it could be fixed by largescale tax reform. There is simply no appetite to do it. The key thing, you start goring sacred cows when you do tax reform. It will be a brutal, rural fight fight, andal, brutal there is no way it will happen in an election year. What will be the nuance ones we hear from the president today . I dont think we will hear much of one. He will go hard and delivered, questioning the citizenship of ceos who go for these crossborder mergers, saying they are renouncing it. A is the policy track lot of people agree does not make a lot of sense that corporations should be buying companies from another country to take the tax rates. That pulls well and they like that. The bigger issues that this is an issue domestically that the president can grab on to. Treasuries as it could prevent 17 billion leaving the u. S. Over the next decade. You will see the president sees on this. It has been bubbling around the white house the last couple weeks. You saw the jack lew secretary letter last week. Phil, all the major pollsters effectively place president obamas Approval Rating near the record lows of his presidency. Is this some sort of attempt to try to find an issue where at least some people will come to his support . I think it is less about his numbers and it is about democrats on the whole. The administration we talked about multiple times, the number of Foreign Policy crises they are dealing with now, all they wanted this year to be about was domestic issues, the economy, particularly as we are 3, 4, 5 months out from the election. This is another attempt this will be very explicit to grab an economic issue that they feel like it resonates with the electorate and really hammer it home. That is their big issue here. They are weighing a ton of attention to Foreign Policy high seas and obviously to the president s Approval Rating, but theyre big issue is to swing this back to economic issues. They think this is a winner. Another topo go to story this morning, and that is israel. Israel will not halt its military campaign against hamas. Our guest is Nicholas Burns, who began his Foreign Policy career as an intern in mauritania that is exotic. He then served the nation in the Eastern Mediterranean from 1967 to the sadat assassination to the chaos in gaza. Ambassador, wonderful to have you here this morning. How do we negotiate with a terrorist group that we are not allowed or choose not to speak to . How do we negotiate with hamas . John kerry is effectively the mediator between israel not hamas, the egyptian government, the turkish government, the government of qatar. Those are the ones who can talk to hamas. We have seen these rocket wars several times over the last few years. Egypt has a terrible relationship with hamas. Egypt has set conditions for the ceasefire but it is really the turks and the qataris and others who need to interpret for hamas. I want to go to a burns quote, about venezuela but it is particularly appropriate to the issues and parties right now. This is Newsweek Magazine and the idea of who we talk to. Palestinian authority to a great extent this is what the president faces. It is what he faces, and the white house has been right to say all along that israel has a right to defend itself. No country can withstand a terrorist group firing rockets at its major cities and that is what happened to israel. Israelisme time, the have to understand that the number of palestinians that come over 500 now, the world cant tolerate that. Neither side can win the war. Hamas cant hope to defeat israel. The israelis have discovered a much more extensive Tunnel Network than they anticipated, some of which go right to israeli settlements. They need to stop the war. That is kerrys mission. We saw michael bloomberg, the founder of this company and television station, traveled to in the last 24 hours. Ambassador burns from action americas and master burns, how should americas attitude towards israel change, or should it remain steadfast . I think we have got to remain steadfast friends of israel. Israel is our friend in the region and we want to see israel survive. At the same time, there are times when a friend needs to pull another friend back. How does president obama affected that going back and making the effect that pu lling back and maintain the domestic situation . The israelis need to get at the Tunnel Network and they wanted more time to do that but the israelis never thought this would be an operation that would continue for months at a time. They always thought it would be shortlived. It has gone on longer than we thought over 500 palestinians dead. And the greater number of israeli dead is soldiers in the handtohand fighting in those tunnels that i can anticipate and then have been anticipated. Isnt working, if war is not working, what is the catalyst that might work. Diplomacy is going to be the way to end this, and it will be kerry putting a deal together and convincing hamas to accept a ceasefire, which will be the most difficult part of it. S the israeli are looking the israelis are looking at this possibility but they want to see that hamas will agree to a deconstruction of the Tunnel Network. Their communities will be susceptible to continued attacks. , our guest host for the hour, you say that the time ari risk to the markets is geopolitical. Does that include israel and the middle east . It does. The thing for investors is how do you handicap that, not only for the last 12 years, the United States was involved in a 2 was in the middle east and that virtually no impact on our economy and stock market. Until we see influence on our economy, it is best not to react to that. We will link both of these together, geopolitics, and the markets, and it brings us to our twitter question of the day. We will be right back. Good morning, everyone. Bloomberg surveillance. I am tom keene. Nicholas burns has witnessed and made much of americas modern diplomacy. He knows that the premises diplomacy mattered in 1989. Who was Edward Trevor not say . The communist Party Official from the republic of georgia. He united with a rich off. He united with gorbachev. With ronald reagan, george schultz, there were the ones who effectively brought the cold war to an end. They recently passed away, zakarias postamerican world, 10 those operate . Can those operate . It is not how the majority of civil war sorted out. It is mostly people sitting down with each other and making a compromise and making diplomacy to end human conflict. That is what john kerry is doing. When you look at the cacophony of International Relations we see now, so much of the middle east goes away from the arabs to the persians. What should be the nick burns prescription . We have had a 35 year cold war with iran and all us know the history. President george w. Bush and obama have a singular policy they thought that before we think about the use of military force, a third war in the middle east, we are to see if we can negotiate with a country we havent talked to for three decades. Lo and behold, president obama has us poised to win an agreement with the iranians that would stop them short of a nuclear weapon. From tunisia today to the collapse of arab spring from economic failure, is tehran the middle class of iran . Is that the template for a better world . Well, yes. The iranians have a difficult economy living under sanctions but they have a more successful than many other caribbean countries. The Supreme Leader is resolutely antiamerican, antiwestern, doesnt travel, doesnt meet leaders. They are being held back by a shortsighted leader. Nic burns with us on u. S. Diplomacy and International Relations. Coming up, it is earnings season. Facebook decided to answer the critics yesterday. It was about mobile. Can they do mobile and can they do it better . They are proving yes, yes, yes. Stay tuned. We have howard ward of campo and Nicholas Burns. Futures up 2, 4. The princess to our twitter question that brings us to our twitter question. Important question. We heard from mark mobius earlier. Regardless of the potential return, would you invest in russia now . This is a bloomberg surveillance. Lets get right to our top headlines. 110n airliner carrying passengers is missing. The air algeria flight took off from burkina faso on its way to algiers. Lessnished from the radar than an hour after its departure but the plane had been missing for hours before the news was made public. Lawyers for condemned arizona inmates say the executions took nearly two hours. It took so long that the lawyers had time to appeal as he lay there. The execution could added to increasing criticism of Capital Punishment nationwide. Fund in a retirement california, and other major pensions are moving away from hedge funds. Sayswall street journal investors are turned off on high fees and low returns. They had hoped to make hedge funds that go to place to make money. Howard, what am i trying to say here . Gamco. Howard ward of gamco, this is right up your wheelhouse. You do not charge hedge fund fees. Our mutual funds are straight , longonly funds. We have a small part of our business that is merger arbitrage. What you are talking about rigt here is an asset reallocation away from alternative investments in the direction of longonly equity. This is the mirror image of 2008, will when the crisis hit and stocks plummeted. The institutions had a stampede out of stocks of the bottom into nonmarket correlated returns. They got lousy returns for the last 5 years while the s p had 20 . With the market having nearly tripled off the bottom in 2009, they are coming back. Js is returned. Capital chases return. I know thatou and hedge funds are blended in at about three times Fee Structure on institutional money. I want to know why. Why have hedge funds failed . There is no predict ability to most hedge funds. It is based on some kind of trading prowess. Contrast that to investing in the market. There is some big ability some predict ability, over the long term, correlating the stock market with gdp. Hedge funds, it is hit or miss, personal talent, who knows. Howard and i could go on for three hours on this topic this morning. We will later on. We want to introduce our other guest host for the hour, professor Nicholas Burns of harvard. He served for the u. S. Government 27 years, advising republican and democratic president s. You were ambassador to nato. What would you advise president obama and secretary of state john kerry on ukraine . I think they are doing the right thing. Putin has broken all the rules. He has invaded crimea and annexed it. He has put special forces in Eastern Ukraine and destabilized it. He has got to pay a price for that. The u. S. Has come forward with substantial sanctions. Look for the European Union to agree to stronger sanctions next week. The europeans have insisted that, but with 290 people that in the Malaysian Air flight, everyone presumes shut down by russian separatists, there has to be a price paid in moscow. What about what senator john mccain says . Should we be doing more to help ukraine . We have to give political to retake poroschenko control of those cities including donetsk. The question is should we give military assistance, and theyre the United States can do more. Not to put our own troops in, assistance military to the ukrainians so that they can stabilize the country. It is a failed state that they have to put the country back together. You were on the soviet watch for the United States of america for years. One of the distinctive features here is how alone Vladimir Putin is. Even the oligarchs are around him. How can they affect at her voice advice for thein Common Ground . It is a nonvirtuous circle in the kremlin. Putin is the authoritarian leader in the oligarchs to do well can we change that . I dont think we can change that but we can change the deterrents and send a message to putin that when you invade another country in the 21st century, there has to be an economic price to be paid. The key person is Angela Merkel, the chancellor of germany. She is the most powerful politician in europe. It germany decides to go for these economic sanctions, it will happen. That is the trend as of this morning in europe. Or by contrast, is it possible that Angela Merkel will broker some sort of offramp to allow him to save face, as president of the council on foreign relations, richard haas, has suggested . I think we will see sanctions next week. At the same time, the europeans and president obama will leave lines open to putin. We need his help to deal with the Iranian Nuclear program, to deal with the dictator in north korea. It is not a return to the cold war, shutting down all of news. Shutting down all avenues. We will switch gears because an auction of a bit point website. Good morning, everyone. Bloomberg surveillance. Coming up, doug parker of American Airlines. The chief executive officer. Too many topics to talk about, but front and center, the faa is again allowing flights into tel aviv and also doug parker on earnings. The new American Airlines. He will join us here in the number of minutes. This is bloomberg surveillance. I am scarlet fu come here with tom keene and adam johnson. Filing to regulators about recalls, gm says it had 16 deaths and 100 six and seven injuries. Gm is not officially raised its death count. U. S. Company apologizing for the tainted meat scandal and its chinese subsidiaries. They repackaged old meat and labeled it as fresh. The company is owned by the osi group of illinois. Chinasatchdogs say food standards like behind the rest of the world. And at ts Quarterly Earnings fell behind analyst estimates. Many wireless subscribers are on installment plans which reduce cash flow. That is this mornings company news. Facebook with terrific revenue growth. This as apple prepares for a ginormous fall season. It is reported that the howard ward household will require 70 new apple products before years end. Can the apple optimism come over to the rest of technology . I think it is very much happening. 27 a couple years ago. Ibm was given up for dead and even ibm with less than 10 times earnings are showing strength. Intel, Committee Given up for dead at 20. Howard ward, is it money finding a warm spot because it doesnt know what else to do, or is it going to these names because the future expectations . First of all, these stocks cheap and the expectations became very low and the bar was reduced. They have managed themselves better, their businesses on the fundamentals are improving, stock prices are reflecting better expectations for them now than in the future. Putting myter off money in facebook, which announced blockbuster numbers last night, trading at 50 times, or the old guys intel, cisco, etc. . I own both. We bought most of our facebook at 30 and added to it in april at 54. Over 2 position in our fund now. Next yearso earnings is about 35 times. You are paying about 16 times for the s p 500. Bottom has grown top and line midsingle digits. Facebook, 30 . Runink facebook has room to you dont think it is that expensive. Has entered the sort of hall of fame media hybrid Technology Company like google with this tremendous Platform Global and now monetizing mobility. Im going to rip up the script here. Be equipped byl parker in a moment they start a dividend. Buying back shares as well. Can howard ward, conservative guy, by airlines is a conservative industry . Is a growth . Should we get a bloody mary have bought would an airline in my 36year career. High capital costs, high labor costs. Editors go bankrupt and yet they still compete with you. Competitors go bankrupt and yet they still compete with you. It is a nightmare business. The economy is doing better. Price of oil has been pretty flat the last couple years. They are making a lot of money. I doubly that was convincing. I dont believe that was convincing. [laughter] rent it, dont own it. I like it. A 2. 5rpillar setting billion stock buyback program. This is comparable, that is compared with the estimate of one dollar . 52. That is a huge beach for caterpillar. Beat for caterpillar. Caterpillar is raising its fullyear outlook. Good morning, everyone. Bloomberg surveillance. We are on Bloomberg Television and bloomberg radio. I am tom keene. With me, scarlet fu and adam johnson. Howard ward is with us from gamco. High, high, like record high. Howard is fired up. Good to have him on the show. It . Oing bitcoin, remember the u. S. Requires your Social Security number if you want to trade with the. S. Comomain name bitcoin might be up for option. Brendan greeley of Bloomberg Businessweek is with us. I think something is happening around bitcoin. When we saw the bubble at the end of last year that was speculation on the asset value of bitcoin. When you are seeing now, i think, is a very small amount of confidence in the possibility of bitcoin as a means of transferring money. One indicator i talked to someone this morning who said that at the bitcoin you are now seeing x goldman traders showing up. Bitcoin is getting boring. We have an illustrious desk here this money. Brendan greeley doesnt believe in bitcoin, howard ward doesnt believe in bitcoin. Scarlet is never stated im not big into it. Lets think in a platonically world, thebardie bitcoin transaction costs would be zero. That is not going to happen. Volatility has been very high. It will be high for a long time. When you add on basic services that prevent you from having to hold bitcoin, if you have to traded in, you have to i a kind of insurance, that brings transaction costs up. It is significantly greater than zero. Probably also significantly greater than the 2. 5 you take mastercard a brendan, you talked about great Nobel Laureate and his analysis of the systems. Is this a legitimate system, howard ward . Time will tell, tom. I am very skeptical. We call it a currency. It is not. The irs says platform so were tulips in the 70 hundreds. May i quote you on that . Im sorry. I wish the people at bitcoin well. But i just dont see this becoming an institutional product for mainstream finance. Brendan, there is something that people may or may not know in this country. The largest payment work why is that working so well and bitcoin seems to have fallen by the wayside . It is a good question. It is working because kenya is still a cash economy, despite the fact that they are well ahead of us in terms of digital payments. You need a place to get cash into the system and backed out. Agentsis started it had in boots all over the country. That network existed. There is not yet a comparable physical network for bitcoin. I spoke to an economist at the university of Chicago School of law and i asked him about this yesterday. , abitcoin, as it is claimed way of providing Financial Services in the developing world . He was skeptical. We are out of time. Brendan greeley, thanks for joining us. Lets recap breaking news that broke in the last couple minutes. American airlines setting a capital plan. It will return cash to shareholders. It is starting a dividend. This is a Success Story for American Airlines, which not so long ago was in bankruptcy. This came out of the merger with us airways. Speaking with the American Airlines Ceo Doug Parker shortly. We want to bring you uptodate on caterpillar. Earningspershare blowing away the consensus of 1. 52, setting a 1 billion stock buyback program. General motors is reporting results. Gm is also setting aside 400 million for ignition recall victims. We will bring you uptodate on all of this when surveillance returns. It is a busy earnings day. The General Motors chief financial officer. Challenging earnings there. It will be interesting to get detail. Mr. Stevens more than than distracted by the recall program. Liu. He loop with betty there have been a ton of earnings over the past morning. After the bell, visa, amazon, and tomorrow morning, moodys, tyco, and xerox. Amazon is perfectly important because it is such a different company. The company has shifted as jeff bezos said we sell products out the front door but what we really do out the back is provide infrastructure. Are you using it more, scarlet . Not in a drone, but it might. A day later it was there. You saw three major companies. Of makes Jonathan Golub makes clear, sums up in earnings. Why should we be surprised . We shouldnt be. The economy has continued to improve. A continuation of that look at the initial and employment claims. Comes out this morning. That number is at a new low as of last week. We talked about the calm that is taken over the markets. I have no doubt that it will because it always does. It is the reallocation of institutions back into stocks ar, and it should come back. Im not saying it is wrong. Look at these jobless claims coming down, down, down. Do you see in optimistic from the market optimistic froth in the market . Certainly there are going to be pockets where there is some froth. Not large biotech, but smallcap biotech, certainly. Looking at yellens comments. The answer is no. That will come, we will see that before the bull market is over. Media isocial certainly an area that is going to be right for that, and probably some health care, the smaller biotech names. The hour. St host for this is bloomberg surveillance. Im scarlet fu come here with tom keene and adam johnson. Our guest host, howard ward. We told you about how an air algerie aircraft disappeared. We have more details. Flight faso, where the originated from, said the flight had to to diverge because of a storm. This was according to the transport minister of burkina faso. The flight has 50 french people. In total, 116 passengers and crew disappeared en route from burkina faso to algiers. No contact made, and never let it, but it did ask to be diverted because of the storm. At least for now to does not look like the result of any kind of violence. But if in fact it is whether we want to be clear, we dont the yet that would be second whetherrelated incident involving a large commercial airliner in the past 24 hours. We will continue to monitor these headlines and bring anything we got on this air algerie flight that is disappeared. Aboutot happening to talk this morning on earnings and staying with airlines, american Beat Estimates as a new company merged with us airways. This is the key take away, one billiondollar buyback, also initiating a new dividend. Joining us is the man leading the charge, American Airlines Ceo Doug Parker. You and i were together the day you announced the merger. How vigorous was the debate with the cfo and the board as you decided to deploy capital so soon after the merger . It wasnt a vigorous debate. The earnings today were record earnings, 1. 5 billion. Our prospects we feel strongly good about. What we said from the start is for,derstand who we work our shareholders, and to the extent we have enough capital to invest in the business to improve our product and invest in our employees and still have excess cash, our job is to return to shareholders. We are happy to be doing it. You are living the Airline Business right now. Time, 1980, a guy named crandall ran the shop and you were part of his rat pack brat pack. You were a young kid, you still are a young kid, but things have changed, or have they not . I want you to sell me on the idea that this is a new aviation industry. Is this a change to structural profits . It is, thanks for asking. We are at a time when most families are not bruising be profits, record profits, or certainly not all of them, but here we are at American Airlines producing by far the best in the companys history. We have done a much better job through a lot of pain of getting to a point where we can produce returns for our investors and were doing it. Our share prices have done extremely well. The company is doing very well. The team is doing a nice job of getting integration done. The company was in bankruptcy 8 months ago and we brought it out through the merger and we are producing record profits in announcing dividends. The first was in 35 years. It absolutely is a transformed business. It absolutely has been. With 3 legacy players in the air, what is your main goal, market share or profit . The goal is profit, as it should be. Returns for our investors, making sure we have a business that can produce consistent profits that customers want to fly, where employees want to work, that provides return for our investors, as it should be. T duringook some hea initial talks about the merger over airfares and you said no, we want to lower airfares to go headtohead with the other majors. Where are we on airfares . What we said was fares will move for all sorts of reasons but the merger wont be the reason, and i believe that is the case. We have provided a solid third competitor for united and delta who had Bigger Networks and we are using that competition to be very aggressive on things like corporate contracts. We are winning back corporate contracts on american and us airways and were being very aggressive in that regard and i think that is good for consumers and it is good for the shareholders of American Airlines. Us throughou to walk the last 24 hours. Mike bloomberg, our founder and owner of Bloomberg Television and bloomberg radio, flew to tel and the faa this money brought back the ability for you to fly to tel aviv. Can you fly safely to tel aviv this morning . We are in the process of assessing that. Assuming we do, we will resume flights, but not until we do. Elimination of that restriction on flying is certainly important. We have been working with the faa and other airlines to address the situation. We dont have our next flight leaving until late this evening out of philadelphia. We will work to see if indeed we believe it is the conditions are right for us to resume flying. We are not going to do it unless we are absolutely positively certain that is the case and that employees are comfortable with that. Will resume we flying. It has nothing to do with politics and never having to do with ensuring that we have everything to do with ensuring that we provide safe transportation to our customers. We hope that is the case. We are working to that assessment. Which outside resources are you using to monitor the stickiness of bengurion airport . Our own people, the intelligence, u. S. Government and working with other airlines. This is a situation we have been monitoring for weeks, not days, from the outset as we do in all situations like this. We are regularly monitoring and continue to regularly monitor. We canceled our flight prior to the faa instituting its ban. That is what we do, make sure that the situation is safe enough for our employees doug, this is critical correct me if i am wrong. I believe i heard you say you are listening to your employees. Is your decision to fly to israel based on the dialog you have with various unions . Well, look, that is our family, the people that are going to be flying those airplanes. We want to make certain they are ok, of course we do, and that they have the information they need, because they are the ones that are responsible for all those passengers and for their livelihoods. We are going to make certain they are ok as well. Of course we should. We are working through that. Thatieve i am hopeful by the time we work through this we are going to come to the same conclusion the faa is, that it is entirely safe to fly out of tel aviv and if we come to that conclusion we will resume Service Later tonight. To the extent we dont, we wont. Upon what we based know now, that we will be resuming that service today. Before we say thank you and let you go, you have had a long and storied career in the aviation industry. You were running northwest airways right as 9 11 happened. How much safer is the industry now than it was back then . Well, look, first off, this has always been the safest means of travel in the world. Thatwe learned on 9 11 is as safe as the industry was, that was a situation that the systems werent in place to stop. That is certainly not the case now. That type of event cannot happen again. Industry that is built around safety. It is not something we compete upon. It is something everyone in this industry views as their top priority and always will. I feel very good about the safety of the airline industry, because i know how important it is to everyone involved. Doug parker, ceo of the new American Airlines. Thanks for joining us, doug. Tom, you need to get to radio. Bloomberg surveillance continues there. Adam and i will go to our twitter answer, because our question melded the geopolitical situation with investing. Here are the answers. Ok, that is like a mark mobius kind of answer. Mark mobius saying he is putting capital into russia. Howard ward of gamco, is this money purses shameless plug, i managed to the gamco Global Growth fund and it was number one in the category of global largecap growth, the last three and five years. We have had no investments in russia during the 10 years i have managed it. As with the second group, there was no rule of law support sanctions and look elsewhere to make money. Thank you for joining us today. In the loop with alix steel is up next. Good morning. It is thursday, july 24. We are live from bloomberg world headquarters. I am alix steel, in for betty liu. We have a fantastic show for you today. Of Chipotle Mexican Grill and General Motors will join us. We will have the latest on ukraine and the global backlash against russia with ian bremmer, founder of eurasia group. Aircraftto malaysian could bring new sanctions against russia. Rebels backed by russia are suspected of doubting the airliner over ukraine. Earnings are in from the airliners, really led by american, who is paying its first shareholder dividend in 34 years in credit gained from the merger with us airways. Jet blue matched estimates. Detroits carmakers are going in opposite directions ford posted