Transcripts For BLOOMBERG Bloomberg Surveillance 20140821

U. S. , so bright spot in europe, u. K. Obvious here in the u. S. , we have got a number of points, today initial jobless claims at 8 30. 9 45, loomer consumer comfort index, and at 10 00, the remember,ia fed, today is what, thursday, it is already thursday. Building permits and Housing Starts on monday came in very strong, a lot stronger than excited, so we will see what happens at 10 00. Earnings before the bell sears, dollar tree. Sears just came out with a loss per share of 5. 39. Loss share would be bigger than the one estimate we have somewhere in the neighborhood of a two dollar deficit. Mia more on that i go right to equity on the bloomberg terminal . Where is my catalog . A 79. Ectric guitar is the ken low washer, right . Comparable sales of fullline stores in the Second Quarter up by. 1 . It is yet another loss. That is again if i am counting here the sixth consecutive 11 out of 12s, and like yeah, it is ugly. When you adjust for onetime items, it is two dollars . 87 per share. Never less a deficit. Other earnings coming out, dollar tree again, we mentioned, before the bell. After the bell, gap, salesforce, and gamestop. Lets do a data check. Equities, bonds, currencies, commodities. We want to get onto our bloomberg terminal chart. The euro turns 1. 3263. American oil 92. 79. This near dow 17,000. Old sell 14 massive support at 1200 come as we have a ways to go, brent crude not near 100 yet. Sterling off the mark over the last two weeks. A little calculus here. August calculus. He or is the vicks over the last couple of weeks. This is the complacency. Wet is the correction are all going to die. 17,000, s p 2000, under the 12 mark there on the vexed, suddenly it is quite as complacent. All is well again. All is well, unless you read the fed minutes yesterday, which we will get to. Lets get to front page. We looked at the newspapers, and the webpages. Here is scarlet fu. We had overseas. The u. S. Had tried to rescue james fully come of the american journalist who was killed. He white house disclosed that special Operations Forces mounted attempts for foley and other americans held by islamic extremists in syria. Several dozen u. S. Troops landed in syria. They got into a firefight with members of the Islamic State and found the hostages had been moved. It is believed the Islamic State is Still Holding two dozen or more foreign hostages and we know they threatened to kill another american as well. What is also clear to me is one thing that was not made clear is when this mission occurred. Yesterday all they said is that a some point earlier this summer. Not clear exactly when, and there were kind of forced to disclose it because newspapers were getting ready to report. Thely, let me quote administration changed course after news organizations were repairing reports on the matter. Well, the president says fullys killing will not return him from continuing airstrikes the whole campaign in iraq. This is apparently what the Islamic Forces were pushing for. We will go to our Phil Mattingly in a moment in washington, a most sober story. Comer second story, could as early as today. Finally, we have been hearing about the percolation of this. According to people familiar with the matter, be of a would pay about 17 billion including about 9 billion in cash. That is pretty much what the government had been pushing for all along. And more than what bank of america had offered, that was somewhere around 10 billion, as high as maybe 12 billion . They were very resistant to moving up to 17 billion. I got this wrong. I was like yeah, bankamerica and others, fine. Much bigger than jpmorgan. Can we say largest ever . Is certainly seems like it. If you want to phrase it as the largest single ever, fine, but if you want to add up all of the jpmorgan finds together, the london well, the housing, etc. , somewhere up north of 20 billion. Be of a has already paid 55 million in legal fees tied to 55 billion in legal fees tied to home loans. Where does the money go . I am glad you bring this up. Keri geiger of bloomberg in the 7 00 hour. One quick note as well. Federal prosecutors were putting a lawsuit against countrywide founder angelo mozilla. Check in with Allison Williams later on on be of as troubles and how it stems from the countrywide purchase. Carl icahn at it again. The activist investor taking another big state in the company, this time it is first, the car rental company. He wants to meet with the company, may look to get a place on the board. He wants to discuss accounting issues and operational failure. What was the difference that you just said between kirsten avis . Hertz and ght dollar thrifty, sailed up 6 since then, avis by contract up by 71 . X i do not have a drivers license. Why not . I live in new york. Can i ask a dumb question is brand . He number one it is still up there with avis, but so may people are using uber, lyft, zpipcar. Is cool. Car did give a profit warning. Those are frontpage stories. Dow futures up 37. April 20 fourth, 1980, for those newsu a bit older, the that night of a failed u. S. Mission in iran speaks volumes. Bring us forward to 2014. James foley and others in syria. Well, that brings to mind what happened in 1980 with jimmy carter and 52 diplomats not rescued and iran. Iranyrias 2014 is not the of 1980. Our White House Correspondent so mattingly is in washington and considers an administration doing with a caliphate and also dealing with tghe whole media. Did the media forced the administrations hand in this matter . No question about it, tom. It is unnerving to some Defense Department and Intelligence Community officials that i spoke to. From the white house perspective, look, you mentioned when did this actually happen. There is no firm date on it, but i am told it was months, not weeks ago, when this actually occurred. They stated there were multiple other u. S. Hostages on the ground there. There is almost certainly planning for a second operation or some kind of followup operation going on. There is major concern inside the in administration, and i think vocalized concern. They have seen a lot of news reports that any operation i might planning is now in big trouble because of these news reports. When we look at the caliphate and the caliphate without borders, did the in administration look at the Islamic State as in syria, in iraq, or is it all one together geographically . , there are not willing to grab that it is a caliphate or a state. You will notice they only refer neveras isil, they will collect the Islamic State. It is also a rhetorical move on their part. They do not want to give it that credit. What is interesting about this operation coming to light, what is interesting about the assumption within the u. S. Intelligence community, that the execution of james foley actually occurred in syria is up to this point the 80 plus air strikes that have occurred, they have been resigned to only being in iraq. They have never expanded to syria. Now we know u. S. Troops have been on the ground in syria, now we know a u. S. Citizen has been murdered in syria. There are a lot of calls from both parties to expand those airstrikes to syria, and that pressure is going to grow, tom. Wife i want to as a question that may strike some as awkward or uncomfortable. Secretary kerry try to work behind the scenes. Has there been any discussion of ransoms paid or anything like that . Youdam, it is interesting bring this up. The administration has become frustrated, and i think you have heard from families of hostages that have been frustrated on the other side of this. The u. S. And the u. K. Are the only two countries that dont pay ransom. There is negotiations that often occur, but they will not pay ransom. What youve seen with the Islamic States, what you have seen with these militants in syria is they have made a lot of money over the last 12 months to 16 months off of European Countries that do pay for hostages. The concern right now within the u. S. Government is basically the thatis faced with the idea european hostages are being released because people are paying ransom. Now the Islamic State comes to the u. S. And says well, obviously you are going to do the same thing. Ps my to continue to fund our operations. That is not u. S. Policy. The u. S. Says no. U. S. Hostages are an infinitely more danger because of that. It is a really big problem both on the countryside with the policy but also these journalists. The vast majority of them are freelancers. They do not have large media organizations that have insurance policies or the ability to go negotiate on their own. These guys are really left on their own out there. Will mattingly, from washington, thank you. This story will no doubt continue through the morning. New indications the federal initiate a stimulus sooner than expected. Nearing an agreement on an on an exit energy strategy. What does it mean for investors, especially on a day when futures are actually up . Our guest toes for the hour is ceo our guest host for the hour is ceo of asset management. Futures upur take on on sooner than expected removal of fed sugar . Yesterday wasw beginnings of dissent. I do not think the fed as a whole really came out and said for sure they would move quicker than expected, and in fact the first part of the minutes, they were talking what the needs to get the market tons and tons of warning before they go do anything, so it was a somewhat schizophrenic document. What i thought was the most interesting thing is that main street, the main street contact that the Federal Reserve keeps, which is like the beige book and anecdotal comments in the isnutes, main street and signaling significant strength. What about slack in the labor market . That has been the issue for terry yellen. Four chair yellen. Have cap utilization, which is fairly useless. My concern, and i think you are beginning to see evidence even in the fed minutes, is that to the extent that slack in the u. S. Economy is not very useful, it will be in the long part of the country, it is a large country, you have a large degree of available labor in one space and a large degree of demand in another space. Very quickly, michael, what would be wrong if they raised Interest Rates just a little bit to get some discipline and here . What would happen . I think the bond market would have a hissy fit. I cannot think of a single sensible decision that would be derailed by the fed raising basis points. They created the problem himself. This is a massive theme here. When do you move . Wife i am interested in hearing what qualifies as a hissy fit. If the equity market had age rock and then you find the earnings are ok. I do not think the fed can micromanage the equity market. The short and end of the curve is mathematically tied to where the fed is. I am not sure what you can do about that. Very good. And hissy fit, i went to the bloomberg terminal, and the Oxford English picture, hits, 1905is the first hiss, is the first. When we come back, we will talk like a hissy fit over a bank of america, what may be the largest fine ever paid by a bank. Much to bes discussed here on bloomberg surveillance, on Bloomberg Television, streaming on your tablet, your smartphone, and bloomberg. Com. Maybe you even walking on the street watching, listening on your iphone. We will be right back. Good morning, everyone. Bloomberg surveillance. Later this morning, in the loop, 9 00 a. M. , Richard Haass with the council on foreign relations. Good morning, everyone. I am tom keene with scarlet fu and adam johnson. After months of negotiations, bank of america may agree to a record settlement in a cell of mortgage bonds in the runup to the 2008 financial crisis. For a perspective on this projected 17 billion settlement, we are joined by alison williams. Bloomberg intelligence provides a unique Realtime Research and context on all the marketing government factors that impact business. I want to talk about the distinction of be o bank of americas situation. Why was it so difficult to resolve . Lets start with the number. This will probably be the biggest settlement with the u. S. Government had by any Single Company in history. Look at some of the comments that have come out related to some of the other cases, it is about number one market shares, so bank of america when you look at its acquisition of countrywide, it certainly has by far the biggest market share, see you expect them to have the biggest fine, at there is also potentially message that is meant to be sent. Bot countrywide back in 2008. Were therchases purchases worth it . When you think about the amount of money that bank of america has paid out, that certainly increases what is the time seemed like they were book value,ction of but that certainly did not encompass the tremendous liability that they have faced. Not just in terms of the dollars paid, but just the long tail of this risk, so it is to weigh 14 and we are still waiting to hear about more payments. Alison, i was talking with adam johnson earlier this warning about this. Explain to mere mortals how profitable these businesses are for big banks. They are paying a gazillion dollars in fines, but they are still making mounds of money, arent they . It is a little bit like apples and oranges because all of the money that the banks are paying out right now relates to a boom that was sort of unprecedented in the mortgage when you think about the money paid out and the money they are making, i think you need to look back to the money that was being made at that time, and when you think about was in theat this biggest financial crisis since the great depression, it should not be surprising that the bubble and the cost of that bubble are also unprecedented. All right, alison williams, thank you so much, Bloomberg Intelligence a senior bank analyst. Coming up, stephen sadove, the joins uso of saks to do with the state of retail, the state of the consumer, and the state of the economy right here on bloomberg surveillance , on Bloomberg Television, streaming on your tablet, your smartphone, and bloomberg. Com. What good morning, everyone. Bloomberg surveillance. I am tom keene. Futures up 4. Lets get right to top headlines. Holderrney general eric met with Community Leaders in ferguson, missouri. A week of violent protests erupted as you know after brown was shot by a white police officer. Browns funeral will be held monday in st. Louis. Major blow to militants in gaza. Hamas says three military commanders were killed in an airstrike. The attack leveled a fourstory house. More than 2000 palestinians and 60 israelis have died. And finally, in american doctor who is infected in the ebola virus is expected to leave an atlanta hospital today. Can brantly is well enough to leave Emory University hospital. At morning must reads. I chose this one for you because i know you like photographs. Scientists at berkeley have already made progress in photographing our thoughts. The professor at City College New York says although the technology is still in its infancy, there may come a day when emotions, sensations, memories, and thoughts are sent over the internet. It is weird to think about that, but is that trunk tweets . You dont think about mr. Zuckerberg buying oculus, that thing that sits on your head, is that worried is going . Is that where it is going . A lot more personal experience being conducted over the internet. You saw the world cup in result where a man who had been paraplegic was using his mind to control and so skeleton, right . So if you can get the mind is to tell a robot how to move, can you get the mind to tell a computer how you are feeling . I dont know. Fascinating stuff. What everything looks like in 10 years is a big mystery. Coming up, where is the inflation . There is one indicator out there. We will show you in our single best chart next. Good morning, everyone. Bloomberg surveillance. For lets get right to our twitter question of the day what will Department Stores look like in five years . It is a mystery in new york. Perhaps it is a mystery in your community as well. From bergdorf and saks fifth avenue to kohls and the rest. It is out bsurveillance. Gold is south. I think that is worth noting. Other than that, a churn is equities are resilient and move ever higher. 6,979ow closing 16,00 yesterday. Berkshire hathaway fined for breaking a federal rule. Berkshire hathaway is the largest shareholder in the Building Materials company. Warren buffett says his company made a mistake. Germanys largest chipmaker making a 3 billiondollar acquisition to expand its Power Management business. It is the biggest purchase ever for the company. And call that a cold war. Fast food style. Mcdonalds is ordered to close four moscow outlooks. An agency said sanitary rules were broken. Mcdonalds him under attack earlier this year when russia was hit with sanctions. That is the latest company news. Axis sanitary rules were broken . Sanitary rules were broken . Shots. Time for our single best chart. Ask our single best chart is on the one ports and of one portion of Consumer Confidence that is in housing. Host our guest host published a note on this earlier this week. Showseen shaded area equivalent of rent, part of the cpi report, and it rose 2. 7 year on year, which is the fastest since early 2008. The white lines smoothed it out a little bit. Now at 2. 5 , the highest since late 2008. Michael, do you believe this is a leading indicator . Itit is to 11 of cpi, so has an effect. If you look at the actual component of cpi less than 10 , 3 . Is over this clearly is the easiest portion of the Consumer Price index to really move out there. Health care cost added as well, when you take oer and out on our basic 16 cost of health care, that is a impulse higher, isnt it . There are components moving higher. It is not the only price index. The fed has looked at other price indexes. I think the idea six month ago that we had a fed at dissolution at deflation is out of the window. Did they tell you the central price . Uld ignore no, i was in the college in the late 1980s when we were told what the problems in the 1960s. It does feel like we are at the mid1960s point, that the cycle is getting out of control in the Federal Reserve seems more focused on social policy than inflation. 6 , 7 you looking at inflation or can it be more moderate . I think sustained inflation anywhere above 4 would be shocking to people. Are you predicting 4 inflation . I think it is very achievable. Is that achievable before you get wages rising . Will rise. Wages i think the fed puts Wage Inflation at the center of its policy. I would expect jackson hole this week and not to have a lot of policies but it will have a lot of excuses. If that is the case, we have not seen any Wage Inflation, so is the fed getting ahead of itself to talk about talking about. You have not seen Wage Inflation. It should be one of the last portions of Wage Inflation to get going. The danger for using that of your target is by definition you will be very late to the party. We are discussing inflation in the u. S. , and europe theyre talking about deflation. Is there any risk we could import some deflation from europe . No, i do think so. I do not think europe will go through a genuine deflation. You do not have the kind of credit issues that ben bernanke said in 2002 really defined as deflation. I think europe has issues with growth. Michael, one place we are not seeing inflation is the restructuring of bhp billiton on this week. You have been way out front on commoditynges of the business. Does inflation save commodities . I think so, yes, and i think the underlying demand does as well. I think it is good when you see the mistakes of the loss cycles getting unwound. In the commodity space, you did have a lot of aggressive capital spending. The bhp billiton is basically undoing a bad deal or unnecessary dealer did. That tends to be the very good sign for a sector when you start to see corporations get more serious. Outside the united states, ing markets are the preferred investment to venue when you look outside the u. S. Borders. Where would you want to be there within the emerging markets . Brazilike latin america, in particular. That market has done nothing but go up for six months. The election does not sway that . Know, most of the people scared about the election are already out of the market, so even if you get the wrong election result,not think it will matter. So latin america will continue thriving even with china going through this churn . Even in china, you have a very difficult Property Market, and there will be damaged, but oddly enough its equity market might start to do better. There are signs that it will focus, the equity market was really starved of local capital, local chinese investors have no interest in the equity market while the Property Market is going crazy, and it is not impossible. I think least likely that the chinese equity market will mount something even as its Real Estate Market comes under tremendous pressure. Emerging markets late to commodities here. 18 ,d in 18 cotton, copper a percent, how do you. Ave copper 8 we have had a tremendous growing season in the united states. We are drowning in corn right now. Yeah, you put that to the side, copper 8 . Metals lookrial really good. Look at zinc, look in the coke on a look at tin. As far as crude oil is concerned commodity think it will go a Long Distance either direction from the 100 number. X it is kind of stuck where it is. Michael shaoul, ceo of market filled asset management, it are guest host. We will discuss the state of the consumer, the state of retail, and the state of the Global Economy right here on surveillance. We will be right back. Good morning, everyone. Bloomberg surveillance. I am tom keene. Scarlet fu and adam johnson with me. The yen weaker, 1. 378 off the bloomberg terminal. Lets get to top headlines this their stay. Here is scarlet fu. The death toll from a mudslide in japan reaches 39. Rescuers are searching for seven people. Piec nine inches of rain fell in just three hours. Fighting intensifies between Ukraine Forces and prorussian rebels. The latest battle near donetsk injured 29 people and killed civilians. That is one of the last strongholds of the separatists. Is superstar kevin durant considered one slamdunk of a deal. He has an endorsement offer from under armour sportswear that could be worth up to 285 Million Dollars over 10 years, more than what he is paid by the Oklahoma City thunder. Those are your top headlines this morning. Tom . Under armour. How could he possibly be worth 285 million . Think about how many under armours shirts and shorts you have to sell to be able to pay do you know how much under armour makes according to this . 204 million, and they are going to pay one guy 285 million all of this years profits i had a lengthy conversation with kevin plank, their ceo, melt was at a jeff im thing in cincinnati, we were in columbus, and the guy started this on his grandmothers kitchen table, and it has been come a force whatat does not take away what i love the products, i use the product i dont. Ask would you really pay a year and a half worth of profits to one guy . I think it is crazy. X do they make a bow tie . If they did, it was certainly dry quickly if you got it wet. [laughter] first place, baltimore orioles. Lets go to a firstplace set of photos. Eric did a great job today. We will start in lake orville, california. This will blow your mind. We are looking at the lake, which is at 32 of capacity. Now in its third year of drought up there. This is the northern part, right . Yes, butte county specific way. I notice there is drought everywhere, and in northern california, the color is darker on the map. My inlaws have given up trying to keep their lawns nice. It is just brown. That is sad. Within thendustry imperial valerie. The product of forest fires as well as a to those watching as well. To those watching across the nation, i cannot say enough about the beautitude. The beautitude . Is inr balloons, this france. There is some sort of a championship race, which is going to occur this saturday. There will be 47 balloons there. In western warmup france. I will not even attempt to pronounce. That was the dry run for the actual championship . With us ofshaoul Marketfield Asset management. These are held up by the hot air of markets arent they . I would say so. They can go higher and higher. Have you been on one . No, my wife will not let me on a hot air balloon. She says they are very dangerous. I thought she was crazy, but two days after she said that, you had the terrible tragedy in egypt where the guy jumped out there you go. Ready for our number one photo . This is a protest in front of the Brandenburg Gate in berlin. Laidave peta protesters out in the shape of an elephant. I know it is not totally look like that. On the left side is the trunk, ok. Anyway, they are protesting the use and abuse perhaps of circus animals. They dont feel that wild animals like elephants, tigers, etc. Should be held in cages and used for circuses around the world, and they are trying to gather signatures. They have i believe well, they are trying to get up to 600,000. I would assume we have regulatory bodies that monitor our american circuses. They go to florida still in the winter, right . I dont know, i think you need to monitor human safety at circuses. The tight will report or who fell. X and the safety net crashed and they broke their neck . Animals and people. You were just at the brooklyn zoo or the bronx zoo . Bronx zoo. Ask how did that strike you when you walked around and saw the animals . A little bit depressing. Space. Ers had a little they need to spread out. What makes me sad is a parrot in a cage. It bums me out to see a parent in a cage. But that, yet ok. One of our photos from the day out here at bloomberg surveillance, how about our twitter question . Stephen sadove will join us from sex with avenue. From sex with avenue. How will Department Stores look in five years, what will change . Cosmetics will still be expensive. Cosmetics . Buying i go what do you want, she goes that is where they have a balloon race in france. Wife that we will be right back on surveillance. This is bloomberg surveillance. I am score is so here with tom keene and adam johnson. Lets get you some company news here from the files of bloomberg west. Use itge for samsung or lose it. The Korean Company is sitting on almost twice as much cash as apple. A 10 tax on what it calls excesses funds. Something had the equivalent of 60 billion in cash at the end of june. Even though pandora is based in oakland, one of americas most diverse cities, the streaming American Company says its staff is almost two thirds white. Asian men and white men are highly represented. Startup thumbtack is getting a big boost from a big name. Google capital is leading at 100 Million Dollar investment charge. The San Francisco company says it has now raised 150 million. That is this mornings coming is from the files of bloomberg. St are l stands for extraordinary lives. Think of alibaba opening up and doing business in a different way. We are talking about roger hamilton, the founder. He is joining us. Great having you here. Im curious to know, what to sing which is doing business and successful startups in these communities in asia as opposed to Silicon Valley and wall street . One of the biggest things is timing. A lot of people say out in asia offeels like the beginning Silicon Valley. Things are growing so quickly out there that as a result of being in that market, you have the ability to have a different attitude about entrepreneurs you want to work with and investors as well. Is there a different attitude and openness . Help us understand. We do not do business in asia. Lot more there are a of them, so at the moment, there region, 600 in the million in china, about double the people online in america right now, and that is growing very, very fast, so that will grow up by another 50 in the next 10 years or more, so just the speed of growth made you have much more disposable income and at the same time those getting into mobile phones and seeing a much bigger kind of global market. Is other thing about asia that it feels very connected. If youre in japan, they are already looking at china. If you are in china, you are in bali and there are people coming out to bali all the time on holidays, so they are very connected to each other. Ask you talk about timing and interconnectedness. What about the appetite for risk . Is the willingness to take on risk greater for those in the u. S. Or europe . I think america has always had very gung ho entrepreneurs, and that is really why American Companies have been one of the first to be able to grow around the world, but that is definitely changing. People like jeff marr are the kind of people of alibaba. Absolutely. When you see that happening, that makes you want to be more entrepreneurial. That is what is so fascinating about your work is this idea of how capitalism is being treated and assessed by the new people of asia. They do not have the framework britishof john locke, capitalism, and david hume. When i say to you tell me capitalism, how do you respond . On the one hand you have financial capital, and then you have social capital. But you have the emotion of it. Your Different Enterprises deal with the sweat of it. What is that like in asia in the 14 . 2014 . In there is a huge work ethic in asia, and then you have countries like china seeing themselves being the dominant players. If you go back 10, 15 years, everyone saw japan grow and so it have challenges. Now it has changed. Surveillance of Marketfield Michael shaoul of Marketfield Asset management, are you optimistic about the transfer to asia . I think japan is the big question. Can japan really reinvigorate its markets . I think it can. I think china can decide what good is and japan, you have had an entire generation that is basically sat around and deteriorated and given up hope of growth. I was in tokyo last summer and cap good contacts with some japanese institutions. I think there is finally some signed the new generation of japan what to do things differently. X we have a lot of people in japan who we see is entrepreneurs who are doing business around the region and we come out and actually take all of the networking and the connections they can get in the area, so certainly on the ground a lot of entrepreneurs are focusing at what can they do, not what can they do to build their business and do more trading with america or europe for example as much as what can they do to actually do more business within asia itself. In ager, i want to bring story that Bloomberg News published about how women make asone third of alibab management. Its cfo is a woman. Track that with facebook. They only counts 23 of their Senior Management as women. As alibaba typical as a chinese or asian based company with the representation . There Something Different around a culture of tech and women compared to men in asia. They are some of the Biggest Companies in japan, for example, companies have actually built an entire army of women entrepreneurs, but seeing that and experience and that im in, we usually see about half of the entrepreneurs we work with our women. What does that compare within the u. S. Or europe . On the tech side, very different. Certainly in both Europe Europe is a little bit different, but certainly emerging countries are different, and i think that is because women generally have driven a lot of activity entrepreneur really. Would you buy shares in alibaba . Absolutely. This year, what, bigger Sales Volumes in total then ebay. Michael, would you buy shares in alibaba . Not my decision. Imb micro guy. Adam johnson, would you buy shares in alibaba . It depends on the shares. I would definitely buy it. Roger hamilton, thank you for joining us. We want to thank michael ceo of Marketfield Asset management, for joining us. Even with a newborn at home. Thank you for joining us. Congratulations. Risk on three days in a row, 104. N moving in a weaker pound sterling over the the rubleh, and elevated today, of course significant unrest in eastern ukraine. Were awaiting jobless claims that come out a 30 a. M. Existing home sales and that, out at 8 30 a. M. Existing home sales at 10 00 a. M. This is bloomberg surveillance. Day as bank of america is punished hardest by regulators. The tab is 9 billion plus 8 billion plus a previous 9 billion. You do the math. The white house announces that attempt is made to rescue hostages in syria. James foley and others were not rescued. A conversation with the president of the kansas city Federal Reserve in her jackson hole. Good morning, everyone. This is bloomberg surveillance. We are live from our world Head Quarters in your. It is thursday, august 2 1. Our guest host for the hour, stephen sadove, license my wallet as a former ceo at sak fifth avenue. Here is adam johnson. We have week data coming out data. European this comes on the heels of very weak gdp data we got last week and earlier this week out of europe. The euro kception of where retail sales rose more than forecast in july. Meantime, data of our own. 8 30, initial jobless claims. At 10 00, the Philadelphia Fed business outlook, as well as existing home sales. We got housing data earlier in the week. Earnings before the bell, sears less money again. That was last hour. We are also looking for dollar tree. Salesforce,ll, gap, there you have it. Berkshire start with hathaway, breaking a federal rule. Warren buffetts committee did not report buying stock in usg. Berkshire hathaway, the largest shareholder in a buildings material company. Buffett says his company made a mistake. Made a mistake. Infineons biggest purchase ever. And you can call it a cold war fast food style. Mcdonalds is ordered to shut down four moscow our lets. Outlets. Mcdonalds came under attack earlier this year when russia was hit with sanctions. That is the latest company news this morning. We also want to bring up another big story were following, which is bank of america. It may agree to a record settlement over the sale of mortgage bonds in the runup to the 2008 crisis. 17 billion settlement, we are joined by Bloomberg News keri geiger. Is this it for b. Of a. . Does this clear the deck in terms of the lawsuits and other investigations that b. Of a. Faces from state governments . That looks like the case. Bank of america has already paid 55 billion dollars related to mortgages and other types of loans. Largely relating back to countrywide and merrill lynch. They are going to pay an additional 17 billion dollars lightly today or tomorrow. We are exciting that settlement to come down. 10 billion of that which is going to record to the u. S. Government. The rest will be used for consumer relief. I think it is a big sigh of the asief in the markets investors are ready for bank of americas morgan slows to be over with the government. This looks like it is the final push. Is mr. Moynahans job threatened . Is someone who is seen as came out afterwards and was able to clear the deck. When he came in, these legal issues at all of the settlements they that to deal with were stacked and stacked and stacked cup and he came into a company that already acquired countrywide, which was really the bulk of the problem for bank isamerica, so Brian Moynihan looked at as a guy who is able to get the coming back on track with profitability. You mentioned already 50 5 billion. You add the 17 billion dollars, you get to 72 billion. I thought jpmorgan was the biggest this is like three times jpmorgan. Paidah, jp morgan 13 million, a civil statute, ong statute of limitations that the government reached back into the bank and basically pull finds out of the financial crisis because there was so much curtis of them about washington so much criticism about how washington was not able to adequately punish the banks. J jp morgan paid 13 million, citigroup paid as well. The bank of america is paying the most for this type of settlement. Ask speaking of speaking of punishment, Angelo Mozilo had to be dragged back into be the poster boy. How the fed isut facing a lawsuit over subprime loans. Why is it a lastditch effort . Angelo mozilo was under investigation for a long time. Investigators were trying to figure out how to charge them for his role in the financial crisis. That investigation died in 2011. The statute of limitation on a lot of those criminal issues that he could have faced at that time is now over, so going back to this same statute that theyre using with the bank, 10 year statute of limitations, so they are able to actually use that against mozilo now and likely bring a case against him. The statute of limitations on a youngster making the bank as i have to make money to pay rent. What is it about the trend of the junior employees all getting junk condition raises . Base salary. Fax it is an issue of talent and it is an issue of i think banks bestrying to pull the talent forward. They are trying to reset. They have gotten a lot of criticism over conditions for younger workers, so jumping that base pay might be a way to offset that. Are they losing people . It is a competitive market. It is a hyper competitive market right now. It is not only competitive to get the job, but it is competitive to find the right candidates. All right, keri geiger, thank you for your perspective. Keri geiger will be following this bank of america settlement when i comes out sometime today or tomorrow. 17 billion. We will be watching that and bring it to you. And of course, jackson hole, the Kansas City Fed later in this hour, after a july of 70 off, the Retail Industry is enjoying the back to school season. Maybe the fed is as well. What used to be a three day assault by your mother has become a week long consumption by children. Stephen sadove used to make sure you spend the money on cosmetics sakse you got the kids fifth avenue elevator. I have done this back to school thing. You guys are criminals. It is terrible. What is the state of the American Consumer now . I think it is gradual. You are starting to see some decent numbers being put on the board in the last month or so, but it is off of a weaker base last year. The high end is holding up pretty well, but the middle and lower ends of the market are very tough. Is there a metal . Sa middle . I think there is a bifurcation as we speak. A sure, there is a Middle America that is struggling. They are having a tough time making ends meet, and they are looking for deals and value and discounting is prevalent. Thesaw it and all earnings numbers. Who is trying to own a middle ground you are talking about . Depending on how you are finding it, macys is doing a great job in the middle, even though their earnings are a little tough this quarter. They have been getting quite a bit a share over time. Youre starting to see a comeback on things like jcpenney. Target is being squeezed. Nobody is owning that customer. It is very fragmented. Ask do you think do you think amazon is doing a better job . Amazon is winning the revenue game clearly. They are setting the standards for everybody in terms of behavior, in terms of shipping, and the transaction knees and features functionality, so absolutely they are winning the game. All of this runs on money. Our retailers up to their eyeballs and opportunities because of money from keri geigers world is dirt cheap . I think there is a lot of opportunity in retail. Retail is going to her what i would call the biggest disruption is that leading to m a . Part of the m a process. M a is being caused because of a need for consolidation. There is not growth in retail. There is a lot of cost going on because of the need to invest in the omni channel, the internet, all of the requirements. You are seeing m a activity, but you are also seeing a lot of change going on. You talk about disruption. Your friend through the National Retail federation many grossmann commented we are now moving to a world in which it is an uber world, not an amazon world, you want it right now, and you wanted exactly how you want it. That is disruption. Define what that means for you. Anywhere, anytime, where i want to come how i want it. I want impulse purchases. I want to be able to i think technology, for example, you can take your app, click on a product, and it will buy it and ship it to you directly from the print page. Should a child have a new backpack every year of back to school . Why not. You are not helping him. I think there is nothing wrong with conception. But backpacks from the year before is fine. It is fine to you, mr. Keen e. It may not have the features and fungibility. That is the lifeblood of consumers, you need some new every year you do not necessarily need. Next is to let you in on a little secret, tom. Time for our twitter question of the day as we are here with mr. Sayedover what will Department Stores look like in five years . Please tweet us bsurveillance. Coming up, words can move markets, but nobody knows what chair janet yellen will say in jackson hole. Global market anticipations next. Could morning, everyone. Bloomberg surveillance. Futures up 4. Lets get right to scarlet fu as we continue our discussion on the American Consumers. Our guest host is steve sadove. He says retail is disrupting business as usual. I would like examples of these changes, especially if it comes to impulse buying because it is so easy to do at a brick and mortar store. Not so easy to do online or with everyone staring at their smartphone. There are so many innovations going on. I will give you a couple of examples. One, lets say you are on a website or magazine. Out,. Nast has bowed this is not real because they may or may not do it. You will be able to click on an editorial or on an app in the website, you will be a will to get the features of whatever the dress might become a click on address, you will be able to buy it right away, and have it shipped directly to you from the website, and you will be able to do that if one came from saks, when came from neimans they will be able to aggregate them all to on single shopping cart. Go ahead and click and buy. What does that mean for the saks of the world . They would get sale credit. They would be able to work with the magazine or the website. Another one, which i think is app where, is an you are just putting your data. You look at an ad in the new york times, may be a saks at for estee lauder perfume, you will be able to click on the ad itself, it will buy the item in ship it directly to your house. Can technology do some and about the inconsistent sizing for women . Absolutely. You see companies doing fit technology. One Company Creates an avatar of yourself, which you are then able to look at what different products look like on you by size, and it will tell you which item is going to fit you in which size. Ask how about Cyber Security . There needs to be more disruption there. Absolutely. The concern on the part of the customer is in or miss. Look at the target implications and the dollars it has cost them. Ive seen new technologies which or ase either your iris fingerprint or sonogram of your finger to swipe the critical, swipe the iphone, and it will register by the iphone, approve your critic or, things like that. What is the biggest problem that faces the consumer with all of the change . Right now it is a confidence issue. Our guest host, for the hour, current chairman of the National Retail federation. Speaking of the macro economy, labor slack. It is the focus of this years said meeting in jackson hole. We will speak with the president of the Kansas City Fed as she greets janet yellen and mario draghi. From new york city this morning, this is bloomberg surveillance. Good morning, everyone. Bloomberg surveillance. I would order question of the day what will Department Stores look like in five years . Or even 10 years. What will Department Stores look like in five years . The challenges they face. Do that out bsurveillance. We will talk set up at the end of the hour. With me, our guest host, stephen ove of the National Retail federation, of course, associated forever with saks fifth avenue. Right now, associated with our top headlines. Here is adam johnson. Rescueu. S. Try to american journalists, but they could not find him. James fully and other hostages were moved before the special forces team parachuted into syria. Militants showed a video showing the beheading of foley. A major blow today to militants in gaza. Hamas is an airstrike killed three military commanders. The attack leveled eight four story house. More than 2000 palestinians and six the seven israelis have died in six weeks of fighting. Dr. Ande, american doub infected with the ebola dallas here at home, an american doctor infected with the a bowl of iris has he ebola virus has healed. Becameson hole, a few many. Many fed president s and governors are now suggesting that the labor market is improving. The data showed it, and they must prepare for higher Interest Rates down the road. It simply surprised the experts. Markets moved as increasingly uncomfortable group pushed against chair yellens worries of slack in the economy. Someonerosshairs is from pimco. Good morning. You and bill gross have a more cautious view of our Macro Economic recovery. T yellenight jane or worried president s . Our view is that there are still quite a bit of slack in the Global Economy, and her emphasis on employment in my view is really thinking about sustainability, and the fact that we have had an on evening n, the underlying economy slowly picking up, but in europe, for example, or any asia, you can see that things are uneven. When we see higher rates, whether it is sooner of the many or later, according to chair yellen, what will that do to well, id market . Think clearly it depends on the pace, and it depends on the timing, but also it depends on thehayek goes, and i think notes they gave us yesterday is this really emphasis on focusing on communication, and i think that is what jackson hole will also do. The munication very much ahead of time to the market the path. However, i noticed yesterday, couldnt did not give us any timing, so not much change from that perspective. Virginie, all of the Central Banks have been lockstep. Now we have the fed saying well, we may have to raise rates sooner than expected. What does that ultimately mean for the decoupling of markets around the world . That is a very good question. That is something that i call the multiseat economy in the sense that under phase three i would say of what is going on now, you could say phase one was really when the crisis happened, phase two, we all worked together to try to loosen Monetary Policy. Now phase three, there is a disconnect or a slight difference in timing with the u. S. And the u. K. Being ahead of the curve while in europe, japan, and possibly more in china, we have more qe coming. I think it is understanding how this multispeed world is going to Work Together within that Global Citizenship and awareness of geopolitical risk that hopefully will partially be addressed. And scarlet, within the conversation is a europe that simply cannot get it done. It will be a big topic of concern at jackson hole. Paving the way for some kind of change in policy in the subsequent months. Back in 2010, we had the jackson hole symposium. Qe resulted. Qe3, 2013, tapering eventually began. In with markets pricing the 2014 jackson hole when it comes to potential policy changes . I think the market is really butcting a big slash, again, more comedic and guidance in addressing what i would like , one, how do we deal with this uneven recovery and the structural issues around labor. The world isround still quite weak. How do we address that structural challenge . Three, this multispeed world looking forward in phase three of Monetary Policy changes. What equity strategy tends to do well in the low rates environment that we are currently stuck in . Equities should continue to do well in the sense that overall a are quite fair. Were not talking about a rapid increase of rates. We are talking about well flagged ahead of time, and then a very slow increase. I think that is actually synonymous of the healing of the Global Economy, quite positive. Virginie, thank you so much. Virginie maisonneuve is with pimco. And of course this important interview with Esther George with our Michael Mckee coming up. Eye with a wiley. X we got the say quietly. She is not as boisterous as mr. Plosser. Next coming up, we will go to jackson hole. We will hear comments from Esther George of the Kansas City Fed. This is bloomberg surveillance. On Bloomberg Television and radio. This is bloomberg surveillance. I am scarlet fu with tom keene and adam johnson. Time now for some company news. Activist investor carl icon at it again. He has taken another big stake in a big company. This time it is hertz. In the car. 5 stake rental company. He may seek a place on the board. Not outozilo still is of the legal woods. The countrywide financial co finder will face a civil lawsuit according to people with knowledge of the matter. Prosecutors claim to pursue mozilo over his risky lending. Armour sportswear makes a slamdunk offer to kevin durant. He is now looking at a 10year endorsement that could pay up to 285 million, more than what he is paid by the Oklahoma City thunder. That is the latest company news. , former saks ceo, this number does not surprise you. A it is about 28 million year. Nike is paying 20 million right now. He is the hottest player in basketball, the m. V. P. Mind blows my nike sold 107 5 million of durants shoes and apparel last year. I had no idea that the guy could sales. 175 million in absolutely. The hottest player in basketball. Think about what Michael Jordan did to nike. These are the foundations of the business, and if under armour, which is the hottest brand out there, can do it, it is wonderful. All right, kevin durant, tens of Million Dollars off the under armour deal. By the way, that is over a years worth. Over a years worth. In focus at this years fed meeting in jackson hole, bloombergs economics editor Michael Mckee sat with one hot, Kansas City Fed president Esther George. Thank you for having us. Ere this is your third year running the conference as president. What do you want it to be under your administration . That is a great question because the conferences have been successful for some basic reasons, which is to bring together relevant topics, to have the right people in the room to discuss those topics from different vantage points, and my goal is to continue that form to bring relative issues to policy matters that central bankers around the logo have to deal with. When you set up around the globe have to deal with. When you set up originally, for three years ben bernanke used his keynote address to talk about that policy actions to come. Did that change the conference . It was nevernow, intended to be a policy platform. It was not built into the program. The program was always focused on what is an issue that is relevant to global central bankers today and to really try to focus in on that. The people on wall street who follow it so closely, do you think they expect too much out of what comes out of here . I dont know. I am delighted that people find value, that there is attention to the program, and i hope that is because it is bringing insight to issues that are in the current dialogue about Monetary Policy issues and other central banking topics. If we can turn to Monetary Policy issues, the minutes that just cannot of your july meetings suggest the members of the fomc, we are not surprised by the speed of the drop in unemployment but by the fall in other labor market indicators as well. Do you get the impression that the ducks are nervous . Are doves on nervous . I dont know. I speak for myself. They have been broadbased, and that is a very encouraging sign. You dissented seven times last year as a voter. Wanting to raise rates sooner. Would you vote the same way this year right now, or are you on board with the consensus view of may be mid2015 for the first rate increase . 2013 wereerns in around the largescale asset purchases or qe3. Well into not only that program. We are beginning to decelerate the purchases each month, so there is a process to working through that, and i believe the economy will be ready. If it continues the progress we see to begin to lift off of zero and to begin to have more normal Interest Rates as we go forward. X the chair has suggested you wait a while because labor markets are not healed enough. Many of those who would oppose her argue that it is on inflation danger, but what is the inflation that we should fear . Beinflation today looks to stable, but you have to look ahead. We have to be prepared to see where the economy is going and not where it is today. I think in that sense as we see the progress being made, 6. 2 unemployment, not far from what may be full employment, inflation looks to be stable. I think there is every reason to think we should Start Talking about normalization. Are you worried about an overshoot of inflation at this point . Inflation can move in funny ways. We see components of inflation that are particularly healthy now with food and rent, even though the overall measures look calm, but as we know from history, those can change depending on the momentum of the economy. X janet yellen can make a reasonable case that the fed increased aggregate demand with its extraordinary policies, but as those policies are withdrawn, is that demand going to be selfsustaining . Well, that is one of the things the committee will have to judge at the point of its decision to lift off of zero Interest Rates, and as we have looked at the performance of the economy over the last year, i think there are encouraging signs with both the job market, with how Consumer Spending has held up that would lead us to think we might be getting close. Of the fed did maybe contribute to aggregate demand, but that demand has been weaker than the previous recoveries. The labor markets remain weaker than in previous recoveries. Does that tell you the fed has premuch done all it can do to stimulate the economy at this point . I think we have seen i mean, this recession was not like some past recessions, either, in terms of its consequence to the economy. So the transmission of monetary different this time in an economy where there was too much debt. The appetite to take on debt has been different. And i think now as we look at the healing we have seen in the economy and that progress, we are in a good place to begin talking about normalization. One of the concerns you raised in your dissented last year was about market stability, Financial Market stability. A lot of people worried about whenhappens when qe ends, the fed starts talking about raising rates. Is that still a major concern for you, or do you think markets have absorbed that the process is coming to an end . It looks like so far that between two medications from the committee, the market has responded, and the fed has not reacted to some movements in data we have seen. They have kind of kept a more longterm focus, so so far, so good. When we move into the next phase of our stance of Monetary Policy, there could be some volatility. A long been at low for time, so it would be important to communicate and to be communicating how the the path of Interest Rates will go. Where are you on the debate over whether the fed should sell off parts of its Balance Sheet . Well, we have a very large Balance Sheet right now, and the process of unwinding is something the committee has been talking about, and it has complicated the process of Monetary Policy. The issue about whether to reinvest the maturities on that bond portfolio have range from whether you do it before liftoff, whether you do it after. My objective and the principles that were laid out in the minutes is to return the Balance Sheet to the smallest size we can, to conduct policy, and to return to an all church and all treasury Balance Sheet. Bloomberg television will have continued coverage of the fed meeting in jackson hole. E into more with Michael Mckees interview with Federal Reserve bank of kansas city chair Esther George. Fabulous interview, and i think it really discloses for people the difference in emotions between different president s and governors. This is an operational president. Miss georgia is kneedeep in the agricultural influence, Kansas City Fed. What she said only Balance Sheet there at the end i thought was critical. She minces no words about it. A return to normalcy. And reinvesting being central to that debate. Do you reinvest, or du just let it spin off and shrink at . She mention inflation, and that is obviously a big source of concern, whether we have enough information to actually start normalizing Interest Rates. Steve sadove, current chairman of the National Retail federation, do you see inflation in retail . I think it is a real concern. You are starting to see inflation and the cost of the goods coming overseas. That is what you see manufacturing shifting from country to country. You have this cost pressure coming in from the variable cost stages. The consumer is not willing to pay more. There is very little Pricing Power i think because the consumer does not want to pay, so you have got the cost going up, but the price is coming down, and it is squeezing the retailer and the manufacturer. X and the margins are squeezed. X absolutely. X we see that with names like target. Yes, we are. We will continue to monitor these headlines coming out of jackson hole, wyoming. Again, Michael Mckees interview with Esther George, president of the Kansas City Fed, she is talking about how the job market could signal that Interest Rates should be rising. Our twitter question of the day wraps up economics and retail. What will Department Stores look like in five years . The middle part of the market is shrinking. What happens next . Tweet us bsurveillance we want to hear from you. Tom, aj, and i will be right back. Good morning, everyone. Bloomberg surveillance. This one, welltimed on in the the, Richard Haass, president for the council on foreign relations. Not 00 a. M. This morning on iraq and ukraine. This is bloomberg surveillance. I am tom keene. With me, adam johnson and scarlet fu. Speaking of iraq, ramping up airstrikes in iraq following escalated tactics by islamic militants with that videotaped beheading of american journalist james fully. Willem marx is on the ground in erbil. Does it time with what you have heard from people there about the behavior . Good morning, scarlet. West of here around the most old am, villagers ive met are terrified of this group. The only chance they have given that this group all praise and four by fours is to get up to the mountains. We have seen that with a lot of yazidi groups. I had a chance to get to trucker to get to a frontline city against i. S. I. S. They do worry that when these areas get overrun, all the rumors and circulating are about their brutality. A lot of brutality and the flight to safety, we have seen what that has done. From what you have seen some of who you are talking to, is anyone there benefiting from all of this chaos you are describing and all of this violence . One of the things i was looking at yesterday, scarlet, was oil and refinery capacity in particular. The major oil refinery here has been shut down, i. S. I. S. Has taken over that territory. Kurkik, when the capacity comes back online, this morning, i was at another small refinery south of here, opening up tomorrow, the owner says a 5 Million Investment over the last two years will be repaid in five months of payment. There is that much demand for gasoline down here. As you are traveling around the country, are you aware of armed Kurdish Forces patrolling and trying to keep the place safe . Yes, most of the cities here are ringed by checkpoints. There is nothing new there. They will check your id, your password, let you go through. When you get near the front line, they become more concerned about your safety and make a few more checks. All right, willem marx, our Bloomberg News reporter out in erbil, iraq. Stay safe, willem. Coming up, i have got to give my eyes focused on bank of america. It is set to announce a settlement with the u. S. Government 17 billion. Bank of america caving into what the government wants. It is another 17 billion dollars. That brings the total that bank of america will have paid to 72 billion. I had no idea it was that much money. Ask you really wonder what is going through Brian Moynihans mind to this morning. He came after the fact, but . May goes back to that countrywide purchase in 2008, which looks so good at the time because it was cheap. Things are cheap for a reason. Yet. This is bloomberg surveillance. Good morning, everyone. A good friend of bloomberg hormatsance, roger will be with us on Bloomberg Television and radio, i left number station with the former undersecretary i should say for state was just absolutely scintillating on the summer of 2014. This is not to be messed tomorrow, hormats on bloomberg surveillance. This is bloomberg surveillance. I am scarlet fu here with tom keene and adam johnson. Our guest host, steve sadove, formerly of saks fifth avenue. The taxman has a message for samsung it is use it or lose it. The company is almost sitting on twice as much cash as apple. Of 60g has the equivalent billion dollars in cash at the end of june. Even though pandora is based in oakland, one of americas most diverse cities, the streaming Media Company says its staff is almost two thirds white. Statistics from Silicon Valley companies shows a similar lack of ethnic diversity. White men and asian men are posted very well. Thumbtack is getting a big boost from a big name Google Capital is leading a 100 Million Investment charge. The San Francisco company says it has now raised 150 Million Dollars. That is todays coming in from the files of bloomberg west. And arlet, it was a time different place. I remember it clearly. You would wonder through the revolving doors, fight your way through the perfume, cosmetics counter. None of that is there any more. Department stores are forever changed. Stephen sadove is the chairman of the National Retail federation, and he was the ceo and defined exclusivity for saks fifth avenue and joins us on the future of these wonderful storms. Now there are no elevator guides to the eighth floor to buy shoes as quick as i can. Where did the romance go . There is still romance. Department stores, especially highend like saks or nemeth, the expenses wonderful, people can see the great products, so i think there is still romance. The exploration is therefore the American Consumer. How does a gap or avery crombie do this or abercrombie do this . It is hard for them to do it in that level. I think there are some brands and examples where it is exciting. I looked at a Company Spending in the u. S. , and they bring romance and excitement to fashion, 50 colors of leather and stuff like that. Scarlet, louis vuitton. Oh, yes. I think about the trouble that target faces. I want to bring in my morning mustread from megan mcardle. She says signs are slowing down because of the cup edition. As competition grows, more and more of the stores do not turn into the red. The big Department Stores may end up running those areas as loss leaders, but that meets in her margins, always in danger of turning negative if too many departments convert to loss leader status. Loss leaders. Is that an antiquated concept . You still have loss leaders at thanksgiving. Black friday, you know. You have all of that, still have the loss leaders going on, and you want to drive the traffic into the stores. The problem is the internet has changed it because you have got Price Transparency all the time, and you will be able to get the best price anywhere anytime that you wanted. That is throwing the loss leader concept out of driving the traffic into the store. Our cory johnson has reported on all of the Distribution Centers that amazon is having to build. It is almost that they have to build stores because they are having to build so many, a couple of hundred around the country. You has to spend more the amazons or the saks fifth avenues on just infrastructure . I think everybody is spending a lot and capital. The amazons, to be able to provide the kind of service they want to provide, have to spend, but the brickandmortar stores are having to spend on keeping up the quality of the stores like tom talked about, but they also have to spend on the internet to keep up with the requirementsapital in this industry are going up. I do not know that we have really focused enough on what are going to be the Capital Requirements in the future. Where is mergers and acquisitions . Remember the Marshall Fields uproar . Is that the future to come . Macysindsight, the changing the name to all under macys was brilliant. I think in hindsight why branded under one roof . Why was that a success . The ability to capitalize on the thanksgiving parade or the fireworks, have National Advertising and the efficiency i think is where the action is. But i think you are going to continue to see mergers and acquisitions in this business because there is no growth, and you have to have the efficiency. Scarlet, nordstrom is digging a hole south of central park to build a join or Miss Department store to open in about to build an in normans Department Store to open in about five years. Target made a foray into canada that has been very costly, and i think they have lost their muster. It used to be fashion forward, and i do not think they have that cool factor. Brian cornells role has to be to bring some of that back. Can one person make a difference . Absolutely. It is all about leadership. Insightbring in fresh is absolutely right. I think he has a lot to go, but im sure he is a very good executive. That is a start. Outward or question of the day brings this all together. We asked everyone what will Department Stores look like in five years . Steve, we want you to weigh in on the end. My guess is the worlds oil reserves diminish and we go to local stores up i in local items, thus ending the corporate chain. I am not there. Oil reserves . Im not sure you can connect sf. People in california still order stuff online. How about this 1 on money, this is one of the biggest things that will influence commercial real estate in the coming years. I agree with that. Saks is in the crap are i think malls are going to get killed, the less performing malls will get killed. Final answer what will Department Stores look like in five years . Anti. I do not agree with that. I really dont. Look at what nordstrom did. You will see this emerging of the internet and the stores and bringing the internet into the stores. I think you will see more activity. You have got to say this statistic. About on what we talk commercial. What portion of retail is still down in Department Stores . 80 , 90 . You have got to keep that vibrant. How much money do you make in cosmetics . You make a lot of money in cosmetics. More than in clothes. We had good conversations during the commercial break. Newsaid that 40 off is the 20 off. A friend of mine told me that. The consumer is about discounting, and you will see a pressure on margins. You are already seeing discounting for backtoschool, and the Holiday Season will be competitive, and you will see a lot more the consumer expects a discount and they expect a bigger discount, and 40 off is becoming the 20 off that it used to be. The starting point will be 40 off . I do not know if starting will they just raise prices initially . The consumer never saw the value in the high price. Lets get to our agenda before we end the program. Tom, get us started. We will continue to hear from president george of the Kansas City Fed on bloomberg surveillance, but no question the minutes yesterday change the dialogue in jackson hole. Tom, you have to head over to the studio. Aj and i will hold down the fort. Existing home sales are coming out today at 10 00. We are looking for a slight downtick. The reason i am focused on it is earlier in the week we got Housing Starts and building permits. They were anywhere from two times to three times above the forecast. That was huge. We talk about a change at the fed any notion of growth. Steve talking about the health of the consumer coming back. I think this is just another signal. Absolutely. X my agenda is they give americas record u. S. A settlement could be announced 17 billion. That is what bloomberg is reporting. Also an interesting side note is bank of america and other banks are raising pay for junior salaries by at least 20 . That means more sales of oh ties and other banker gear. It does, but i think they have to raise the salaries because these bankers are leaving, the talent is leaving to go to the hedge funds, the private equity groups, and i think the banks are forced to be doing it. Your head of the National Retail federation. Obvious a not a banker. But as you look from your post, do you think there is too much regulation . Oh, gosh. I think you need some regulation. See too i hate to much regulation in general. Ok, bloomberg surveillance on radio continues, our thanks to steve staye sadove. In the loop on Bloomberg Television is up next. Have a great rest of the day. Good morning, everyone. We are live from bloomberg world headquarters. You are in the loop. Im trish regan in for betty liu. Bank of america is said to reach a record settlement with the u. S. Over the sale of mortgage bonds ahead of the crash. We will bring you all the details as it comes out. The comcasttime warner deal could be in jeopardy. U. S. Airstrikes in iraq continue. We will hear from Richard Haass to get his take on president obamas next step after the execution of journalist james foley. We will also be talking about jackson hole. Here is a look at our top headlines. Ready tomerica is agree to a record 17 billion settlement over the sale of mortgage bonds. The deal may be announced today