Transcripts For BLOOMBERG Bloomberg Surveillance 20140919

People lining up . There were blocks and blocks of people. 3 32 a. M. Sitting peacefully around the chase manhattan branch. And, i will state this without any question radically larger audience than we saw for the iphone 5s and iphone 5. It is bigger and it has the wallet. Sam grobart was first in line. I am sure he was. I was there last week getting ready for today. There we go. Are you done with your brief . A data check. Markets do move out. Up. I am wearing my scottish bowtie for the second day in a row. Futures again advance. Euro is stable. Crude goes south a little bit. Lets go to the next screen. 03. Tility, 12 sterling with a big pop up. Dollar ruble, quiet in ukraine. What am i looking at with in these markets . Bob will join us in the next hour. It is yen, then over to sterling. This is what our friends look at in london. Beginning to come back here with the sterling strength versus dra ghis weak euro. This is the focus across the atlantic that we do not talk about that often in new york. We have a twohour from page. First is scotland rejecting independent. If the 5 voted no to an independent scotland. This is a much bigger margin and then the opinion polls suggested. We had great coverage on cspan3. You knew right away that small no than expected. Rally not a complete loss for the faction. Proindependence sanction. Proindependence faction. David cameron has promised them more opportunities. Stay in the union and we will let you tax your people more . That is not a victory. We will check in with anna edwards in edinburgh. My question is why do the polls get so confusing . It indicated that it would be so tight, when the end result wasnt . Good to see you. We talked the other day about the silence. They referred to this phenomenon where it came on a little embarrassing to admit that you might have the status quo you just do not want to admit to pollsters that you want to go for a. It seems that that is what happened here. The silent no vote was underestimated here. And that is something that will be debated. We have a lot to learn about how the feedback and voting intentions factored into decisions. This victory salvage the cameron Prime Minister . Doesnt what . Does it yes, sorry, yes. Yes if there had been a vote for independence, he was not going to step down. There had been rumblings from the parties that if there had been a yes vote if he had been the Prime Minister who let the union fall he would have been asked to go. There could have been a vote of noconfidence. Perhaps this does solve it. Vote that all of the major westminster parties prayednone of them wanted to see the union breakup. Thank you so much for giving us perspective. Our second frontpage story recordsetting 21. 8 billion ipo. They begin trading this morning on the new york Stock Exchange. So, we want to bring in our ipo reporter, linzie picker. She has been following alibaba. Leslie, you have been up since god knows what time tell us about the demand for this offering. There is an initial offering available as well. Was am told that there more oversubscription for this deal than any megadeal they have seen. Megadeals are usually 5 billion or more. That is pretty significant. Rate. Etings were 100 hit so, that is a very Strong Demand and these are positive signals. You mentioned the over allocation. That is dependent on whether the shares rise. They do not necessarily have to rise today. The underwriters will issue more shares. They will buy them back at the ipo price. They are selling short and there will may make money if the shares rise. So, they will not do that unless the shares rise. One thing about this ipo is it is marketed as a give us a sense of the valuation . Look at the price multiple earnings basedes on estimates. That is a discount. Those are companies that do have earnings we can compare them to. Amazon barely has earnings. Exactly. The reason for doing it is they had to discount for certain rates and encourage big investors to buy stakes. That includes Corporate Governance and structures. And, of course, just the overall china risk. It is a little uncertain at times. In terms of the size of this ipo, it is not the worlds biggest. Theres a lot of question about whether nyc can handle and ipo of this size. I spoke with an underwriter on the deal. He said that his number one concern this was before the pricing was set. Number one concern was whether the Stock Exchange could handle it. With every big deal like this, there is bound to be some kind of lip. It is just a question of whether that derails the ipo. We are member what happened with facebook. Leslie, thank you so much. Be speakingwill with their executive chairman, live at the new york Stock Exchange today at 9 00. Jack ma, on Bloomberg Television. We have a wonderful set of hosts to give you perspective and context. Tobias let mitch is with us. We will talk about the equity market. David kirkpatrick, in celebration of every big tech ipo, thank you for joining us. At that you had me because my last name was kirkpatrick . Happy scotland to you this morning. When i look at the alibaba experience, everyone will gain. Standpoint, what does fidelity or blackrock or Capital Guardian what do these big hitters do with their shares if we see the pop i think we will get . I dont know what you mean by from a tech standpoint . From your perspective, they are not going to sell . I would not sell. This is why the ratios are so favorable. They have tremendous prospect. On the other hand, we can talk about it, get it set of issues with a company that is truly chinese. They are trying to operate globally. And, this company has a lot of ssuesesting i about finance. Did fidelity did they acquire alibaba because of the chinese and asian experience . Or because they think theyre going to compete in the United States . I think it is both. China is a continuingly huge opportunity. The ratio of chinese to those who own the internet, is way lower than in the United States. Alibaba dominate ecommerce in china. We know that we will see this open. It will be some 15 of shares. This is a different beast to institutions than any deal we have seen. It is the biggest one. If that is incorporated, it will be the biggest ever. I understand from that point of view, the sheer size. What matters more . The fact that it is that big or the fact that it can grow from here . You obviously want growth if you buy stocks. Clearly, that is the most important thing. Dont think about this as a dividend play . No, this is a bet on the future of the Global Internet and connectivity is a driving force for the global economy. Alibaba is wellpositioned for that. It is interesting you say we have to own it. I want to bring in tobias. Chief u. S. Equities strategist at citigroup. The changes the shape and contour, the identity of the tech sector. I cannot talk specifically about alibaba. We are part of the underwriting group. In terms of it has to get into an index for that kind of phenomenon. If it is outside the s p 500, it does not have to be owned from a benchmark perspective. Any new company that comes out, if it gets into the index, you have this whole issue. How do i position my portfolio . I am massively underweight. Help me with your terrific perspective. Every bull market needs and alibaba. We have been here before. These deals have an intangible plusplus. When markets go up, you tend to see more ideas. The Public Market is worth more than the private market. When they are down market the private market is worth more than the Public Market. You get m a when markets are up as well. It is more about the confidence. Ginormous is not in the oxford dictionary. This is a ginormous deal. One word in the dictionary is unanimity. Everyone seems to be unanimous in thieeir view. Alibaba is ours from opening. 10 30, 10 45. Should you be skeptical or not . We also want to pose a twitter question of the day. What should people line up for . The iphone or alibaba shares . Tweet us. Good morning everyone. Steven joins us. You know him from office depot. He will be with us in the 7 00 our. Oneonly steve odland, ellison is stepping down at oracle. Looking forward to a ceo odland,ion with mr. Former ceo of office depot. Lets continue our discussion on china. The historic ipo of alibaba. We look past the hype to consider the symbolism and the questions that it inevitably raises. John joins us now. Economy seems to trump all investors. There are a lot of questions about the political affiliations. I think the fundamentals are fantastic. Jack ma has built a fantastic company. The international opport are better. There are questions of the ownership structure. What kind of regulatory changes might occur in the future in china that investors do not have any advanced notice of . And the rules of the road have changed. They did not have any say in these changes. And, there is a lot of uncertainty there. You also point out that the u. S. And china do not have an extradition treaty, which could be a problem. Sure. In the limit, disputes happen now and then. Usually they get resolved one way or another. They are not important unless you cannot get them fixed. If you cannot get them fixed come a do not really have that chance to countries, two resolve these disputes. That needs to be remembered. Have you ever ordered from alibaba . No, i have not. Who are the people who use this beast . They have a huge sea to sea business. And, b to c business as well. They take both platforms . They do own the high ground a giant market share in the consumer to consumer. The business to consumer part will grow even more. When you talk about these potential changes that could happen in china, give us an example. Am not an alibaba we understand that. There are still a lot of questions about the alipay split transaction, whatever you want to call it. I do not think there is any question. In other words, theres an aspect of the business that had been very profitable, but could get split off and investors will not have a say. That is correct. What about the establishment backing that they seem to enjoy from the political elite in china . They have this into corruption campaign. Should investors be worried about political things here . I suppose there are a few who are. It seems to me that they are wellpositioned. For now, though. If you go out 35 years. There are always these kind of risks. Lets bring up this archived photograph. This is in our museum. There is kirkpatrick on the side. He is happy because he loaded the vote on facebook at 38. I am a dork in the middle. Compare the froth of this moment versus what you would talk about. Help me with that date. That is an interesting question. I have been fascinated by the chinese internet. I have been to china a lot. For years, talking about it, people were like aliwho . It is astonishing to me that the world was focused as completely on this recently of your company, as they have. I do not think it is inappropriate. Comparing it to facebook it is not comparable. Ordinary americans were bananas. Most ordinary Americans Still have not heard of alibaba. Can i just weight in . First of all, Regulatory Risk is not the word i would use. Justu look at how 10 cent got a banking license to be a private bank one of the first guy that banks in china alibaba wanted one and they have not gotten it yet. Those are things you cannot predict what happens. Lots of unknowns. David and john, thank you so much. Scar, i want to point out that the new businessweek edition is on newsstands today. The cover story is about tim cook print apple, the exclusive story behind the making of the iwatch. This is bloomberg surveillance. Good morning, everyone. Futures up seven. Yen weaker as well. A lot moving in the market. We will have all of that for you. Lets get to the morning mustread. I want to share something in the Financial Times out of london. Frederick on middle east relations. Tehran plays an outside role in iraq and syria. Prime the deposed minister and having secured the s number oneisis sergeant irans approach opposes u. S. Interests. They need to decide whether to meet in the u. S. In the middle. Not an equity strategist, youre not necessarily looking at this yet, the market seems to be completely ignoring all of these geopolitical issues. Tour with the idea that there was geopolitical fatigue in the markets. We have been dealing with syria for over two years. Libya for almost three years. If you go to the middle east, you probably go back to 1947, before the established state of israel. And american interests iranian interests have hit loggerheads before. You have negotiations or some sort of negotiations over nuclear programs. This is a new event. The question is, does it flare up . And, it is not in anybodys interest to go there. I like that, geopolitical fatigue. When we come back, adam posen, from the bank of england. He speaks about the scotland vote. We will be right back. Out the door of our World Headquarters, over one block, there it is. I have never seen it before. The line is a larger than for the iphone a five. Tim cook is on the cover of bloomberg businessweek. Deep to left field, over the wall. They are still looking for the ball. Home run. 12t is the lineup, eight, blocks long. What should people line up for . Shares . Iphone, alibaba conversation with scarlet fu . Pick any of those three. Lets get the top headlines. The ebola virus is blamed several people died during writing in guinea. A crowde attacked by accusing them of trying to spread the virus. An arrest in connection with a Northern California wildfire. A man with a long criminal history deliberately set the blaze. 28 peoplehas sent from their homes. It is just 10 contained. Shocking. And, some terrifying images that we want to show you. This is a jetblue flight from austin, texas. Smoke filled the camera from some kind of ancient problem. 147 people were on board. It climbed before making an emergency landing. Those are the top headlines. Great job by those pilots. On scotland, joseph is wrong. A jumble of old wishful thinking. He suggested scotland could go it alone. The queen will speak. Its now, dr. Posen, at the peterson institute. Dr. Posen, wonderful to speak to you today. Why is the professor off the mark . Why did they vote no, to keep the kingdom together . I dont think either of us or Governor Carney were the decisive factors. I think it was the fact that you had 55 of scots. A majority in every age group realized it was in the right selfinterest of scottish people. A Peaceful Union to keep the economy together. Joe, as your colleague at bloomberg, he did a very nice article today. He has been an iconoclast who has been very brave. I admire what he does a lot. On this one the people were just wrong. Making a country smaller is not going to get you the kind of safety that you want if you are a progressive. It will just make it hard to provide a welfare state. The formations of the United Kingdom here they are in the darkest hour. Here is church hill, traveling to scotland to give a speech in the gloom of october, 1942. Among the qualities of which scotland is around, steadfastness holds the highest place. That is thet, then; message which i bring to you, that is my invitation to the scottish nation. What will reunification mean for london . What does it mean for the bank and the government in london . First, it means that they do not have to worry about huge uncertainty. They may get a bump in the pound. They can continue on the path they are on. They can continue on their basic path. For london, this is a good thing. It probably means a little less real estate. Ng from eden berg down to london. This means that it is better for the ecosystem from london and u. K. Adam, we are saying go ahead. One third thing is with all the devaluation of that the British Government is talking about, you will probably see the development of Municipal Bond markets in u. K. That is where i wanted to go. The concessions that David Cameron is prepared to make. What cost will that bear on the u. K. Economy . It is concessions politically. We could argue that he is getting what he wants. If hed evolved scotland and makes england of upper inlet, the tories have a majority in england. That aside, what will have to happen is they will have to move to fiscal federalism. It will never be like the u. S. Theres a lot of room to have each with its own bottom. And, for the u. K. This is similar to what we saw with tibet referendums. And Governor Carney and i both lived through this as canadians. It was really not that disruptive. The political concessions make that group of people feel more welcome in the broader union. What youre getting at is that you have to move on. The government of japan in the 1990s brought that economy out of recession. What is job one for David Cameron . He has this behind him. He is still trying to bring the u. K. Economy out of recession. What is his primary mission and now . The hope is that this is the peak point of division. It goes down from here. You can focus on the serious and necessary things. In terms of recession, u. K. Is on a decent path. As they have said many times, it was pretty poor. Not exactly a booming recovery yet. Bully looked about in at th in economic terms is the Housing Market and something about education. Adam, i look at all that is going on and i think about paul on austerity. You have been a harsh critic of austerity. If the United Kingdom moves forward, how do they extricate themselves from fiscal austerity . I think part of it is that you get growth back. That substitutes. That is what they have been arguing. I think the next point is to recognize that the u. K. Is a viable country that can pay its debts. It does not need to panic about the shortterm physical path like it did in 2010. So, you can ease up on a. To third thing is trying make a distinction between Public Investment and consumption. Lets come back with adam posen of the peterson institute. We will talk about the American Economy and generate yellen. Part of that effervescence this is a big deal. These are the transnational transactions going after rand . One of our Great Oil Companies . 6. 5 billion here. Siemens looking to make an offer remember, they lost out to ge. They are looking to have a plan by another european company. I know quickly, tobias, you cannot comment on specific transactions. This is the spirit that gets into a bull market. It is also one of those participants in the shale gas revolution, Oil Opportunity that the u. S. Has dominated for a number of years. We will talk about this. Were looking at this transnational transaction again. We need to point out that the stock just ran yesterday at 73. Nice pop here for an Oil Equipment company. We are not done it yet with adam. Theill get his thoughts on u. S. Economy and janet yellen and the fed. This is bloomberg surveillance. Good morning everyone. The nations capital. He had a wide set of news items. Including out of iraq. Theresting headlines on Islamic State in the first ever to attack them. A busy day, no doubt. This friday in the nations capital. Lets get right to our company news with scarlet fu. 56 million, that is how many payment cards were compromised by home depots data breach. They say hackers used custommade software. Glaxosmithkline the meantime is convicted of bribery in china. They will pay a fine of 481 million. Prosecutors investigating said the former chief in china ordered brides to doctors. Valley stepsilicon down. Larry ellison resigned as oracles ceo, effective immediately. He founded the company back in 1977. He will now become executive chairman. That is the latest company news. We will talk about him here in a bit. He is huge. Im a big fan of his work. This is truly a changing of the guard. We go back to adam pozen. The dollar is ascending. Not a worry from the sea to shining sea. Adam is an economist with an optimistic bent. Aware janet yellen are that it has been a 2014 of great discontent. Adam, it seems to be truly two americas. Ken Monetary Policy and our fed genuinely help the unemployed in america . Is the right question to be asking. This is a challenge for us. Overall growth of the season. It is not a clear question. My feeling is, yes. Monetary policy still has room. In addition to all the other wonderful things, there is no inflation pressure to be seen. Butmight see a slight blip, were not seeing any wage growth or cost going up. This is a pretty benign environment. The fed can afford to keep it easier for longer. And your expertise in the Monetary Policy for the inflation worriers, can the fed get out in front when prices go up . I think you can. I believe, what charles and others are saying. It is not that theyre saying the rational people. The question is, do you get behind the curve . I think the answer is that inflation is pretty inertial. That means it is sticky, not going to explode. They can raise a rates quite aggressively, as chairman yellen has said. I do not think there is a real risk there. Not to say that inflation does not matter. The fed can pull out if inflation gets out of hand. This is not 1977. It is not going to spike up. Can you clarify whether there is tension. On the one hand, janet yellen says considerable. On the other, he she increases her rates. I have to admit, i was surprised they kept the considerable time in the statement the other day. I thought it was long past due to get rid of it. Forward guidance does not make any sense. As you said, i think she has been very clear in her speeches. Even though there is no risk of inflation, we want to help the lateterm labor market. Re are dated to tenant data dependent decisions to be made. Even under a relatively dovish scenario, they are not deciding how much the fed is going to raise. Chief strategist at citibank i would probably push back on the wage issue. We are seeing tight wage pressures developing and a whole bunch of industries now. And, there is that structural unemployment issue. I struggle with how we are going to keep Interest Rates low enough to train people with a skills gap. I dont see those two linked at all. And, at some point, janet yellen and company will have to deal with the tightening Labor Conditions in a whole host of industries. Sorry this is factually untrue. There are a few specific places, like engineers in the auto industry, where we are short. Truck drivers can be trained in five minutes. Those are a skills gap that can be filled. If you look at a number of industries, i could cite a dozen, where there is there is data, as opposed to your anecdotes. I have a lot of data too. In september 2014, a hard debate. Alanposen and tobias says that you have to look at two americas. Dont you see that out there . There is some inflation in selected parts of the nation . In any normal healthy capitalistic economy, you want the market to respond to skills. There will be Wage Inflation for some jobs and to deflation for other jobs. That is why we focus the fed focuses on the overall trend. Does the wage in patient spill over . This goes to your colleague. The fed has a mandate to look at the entire economy. You cannot just look at welders in illinois. What i would say is not everything is hunky dory. I agree. We do have some places we have to worry about. Can we just go for 12 hours . That crystallizes the debate. We have a lot of guests to cover. Thank you so much. Wonderful to have you on, adam posen. When we come back, we will talk about the greenback. Is it a safe haven, is it not . We will talk about dollar strength. Two minutes. Good morning from new york. This is right outside the apple headquarters on fifth avenue. The line is long and it has become a very festive. Walking on his head, right . Some mcdonalds employees are handing out free food to the people in line. Theres a guy dressed up as a bag promoting a service. They will need a lot of big macs. 13 blocks and the line began around 2 00 or 3 00. Seriously, they are only getting one phone. Not the 6 . That is very popular with asians. I went in the store tuesday and they said come back friday, and you can hold it. I think this is an important clarification. All of those people brings us to our twitter question. What should people line up for . Iphone 6 or alibaba shares . Did david just cut in line . It is tooold a 6 , big for me. Small ipad. I want a mini mini. Our single best chart is on the stronger dollar of late. Dxy index has appreciated more than 4 . Our charge is from brazilian global markets. The rationale is there are fewer buyers of bonds. This time around, the dollar strengthening is happening before the official end of qe. Different explanations why here. Dxy is heavily tilted toward the dollar value versus euro. Qe1, it was seen as a safe haven. Then, the debt ceiling debate here in the u. S. At the end of qe2. This sets us up for why the dollar is moving so firmly. That much makes sense to me. We are winding down qe. Tobias, in your world of equities, what does that rising dollar mean for u. S. Corporations . From a stock market perspective, not a big deal. Strong dollars have led to a strong market and a strong dollar has led to a weak market. It is not a consistent indicator. Different sectors, it really depends. The companies with Large International exposures are going to translate back those sales. So, particularly areas like consumer staples. It is good for areas like autos. Say the last piece i would is, with regard to money flow, there may be more from the u. S. Simply because they see it as depreciated currency. What you buy in the u. S. Becomes more valuable. Lets bring up that term once again. Got an earlier, you pointed out when do you pinpoint the end of qe . Maybe the appreciation in the dollar was not a friend running incident. This would be the first time you would think about it. But, you know, one of the other factors here is the competitiveness of the u. S. Treasury for bond investors. Also an impact in terms of the strength of the dollar. It is the fact that you can get 2. 6 bond here versus 1 elsewhere. When you look at the appreciation of the dollar versus the yen, the different amounts here which matters more . Probably the euro . It is always viewed us the antidollar. It is hard to say. When we saw the first bank of program,e most recent everyone said at the yen would fall sharply and you have to get the money out of the country. With in this is the classic phrase, race to the bottom. Is the u. S. Antirace to the bottom . As a canadian, i probably cannot say that. 1. 10lar canada printed yesterday. You can afford to go to montreal. I have to work on my canadian tickets for the season. Call the what i would best way to improve your competitiveness. Focusing on restructuring your businesses, getting more efficient would be a better way. This is an easy and cheap way to do it. Thank you so much. Lets get a forex report. Sterling stronger today. 1. 09 printn earlier today. Emily chang will be speaking with alibabas founder, jack ma, at 9 00 eastern time. David kirkpatrick, what would you want to ask . I would want to ask, t worries about ten cent. We will be right back. This is bloomberg surveillance. Was a far greater majority than expected, scotland rejects independence. The Prime Minister says their country is for nations. Alibaba opens. Anything above 69, get me out. Lawrence ellison, a lousy ceo. How about 21 per year for 24 years . Good morning everyone, this is bloomberg surveillance. Were live from our World Headquarters in new york. It is friday, september 19. Joining me, scarlet fu and adam johnson. Our guest for the hour, steve fornd, the Committee Economic development. David kirkpatrick, and contributing editor on alibaba. We need a morning brief. This is a short break, i hope, right . Brief brief. Household wealth in japan rose. It is friday. Overnight. Household wealth in japan increased. Property values rose. Only one data point at home. That is a Conference Board leading index that comes out at 10 00. And the iphone. Not so little. 13 blocks snaking around midtown . A. M. , itg by at 3 30 is triple what i saw for the iphone 5. Mcdonalds came out and offered people free breakfast. That is a very costly contribution from mcdonalds. Some people are logged in to their bloomberg terminals as they wait a minute. Perhaps they are watching on their iphone. What does Stephanie Ruhle say . High 60s. The apple store is at 5th avenue and 59th. It goes up into the 70s. Crazy. What should people line up for . The iphone or alibaba shares . Smart question. That is the twitter question of the day. But could to our front pages. We have to talk about scotland. They say no to independence. 55 of those voting said no. We 5 said yes. A much bigger margin than expected. Heading into this, people thought dead heat. I was watching coverage on cspan last night. You could see the genuine a surprise over that gap. They were like oh, they are not all yes. You would think what do i know, i am not an an american. You would think in the smaller towns, that is where they would be more supportive of being on their own. Not the case. Lets go over to london. Jonathan ferro has been tracking this. The pound plunged in value as the yes side was gaining momentum. You are seeing a rally now . We saw it yesterday. Doing nothing now, scarlet. No. Y declared it was a equities, yes they are higher. I think the really interesting move is the move in spain. Spanish equities are of more than before. Bond yields are down several basis points bread the story in scotland spoke to a similar situation in catalonia. A key question for me is the a sterling. A criticaly in resistance. Do you just presume that this is a green light for stronger sterling versus draghis weak euro . It feels that way, tom. You have governor mark carney who has a box ticked now. He can get back to business. On the euro side, there was an option yesterday for those new targets. There was not a big take up from it. We have to listen to the december election as well. Up thats do not take money, draghi might have to get more aggressive. The guys i was talking to said that could mean more downside in the euro. You know what direction it could go in. We have to ask you how it feels on the ground there in london. We know that scotland is staying in the United Kingdom. The queen has not spoken yet, hashing . No. Let me bring you the investment perspective. They were up all night. About two hours, and the early hour of the morning watching your program, the guys in the city of london were ready for bed. Enqueue so much for giving us the latest out of london. Our second frontpage story, moving along. Alibaba, recordsetting ipo. Under a ticker baba. 28 billion dollars raised. That is the most ever in the United States. Tobring in leslie picker give us a sense of the demand leading up to this offering. Very high demand. Theyve are able to increase the range. They were able to post early. A couple days ago, that was the based on nonbinding requests. I just got off the phone with a source who said that that demand remained in for verytting sizable allocations of over 1 billion. All six did get allocations. Four make up the top of the book . That is much more longterm than the money and hedge funds . Are was told that there some not happy hedge funds this morning. Phones are ringing off the hook because they did not get anywhere close to the allegations they were hoping for or expected. So, what bankers are hoping is that that means they will buy in today and drive the stock price higher. David kirkpatrick is with us as well. Compare and contrast what you have learned. From facebook to twitter to alibaba. Ren;t learning, a we . I dont think you can compare. One of the things they have is jack ma himself. He is almost more like steve jobs than anyone we have had. Because he is a charismatic figure with extraordinary sense of Public Relations with an energy. He loves to be out there. He is a public person, adored in china. Richest man in town after this, likely. He does an amazing job. This loser was on set with me for the facebook ipo, he bought everything at 38. Within this action, they are learning. They boxsed out the ipo. One key way they did that was the conservative valuation. They raised the range. Still came out as a discount to their peers. But, not a discount. A lot of the mutual funds said that is too expensive for me. They had to go down the hierarchy to the hedge funds. Investors got burned. Asked leslie what she thinks the pop will be. Lets get her in trouble. The people i have spoken with they say that a lot of people are expecting between 80 and 90. Thank you. Anywhere between 20 pop 83. 26. Why did they leave so much on the table . Facebook was not a hugely profitable company. It was making money. They did not figure out the cash flow. Subsequently, it has figured out the biggest revenue source. Alibaba has gigantic margin. And, it dominates, almost monopolizes, the market. Why not price it higher . I guess because they won a big pop. Leslie, thank you so much for joining us. She has been following the alibaba ipo since the very beginning of the regulatory filing. We should mention that emily chang will be speaking to alibabas executive chairman, jack ma, also the founder. That takes place at 9 00 eastern time on Bloomberg Television. All right company news. There is another world out there . Is how manyon, that payment cards were compromised by a data breach. It was bigger than the one against target last year. Hackers used custommade software. This could cost 52 million this year. Glaxosmithkline is convicted of bribery in china. They will pay a fine of a 489 million. Investigators said that the former chief in china ordered brides to doctors. They have issued an apology. And a titan of Silicon Valley steps down. Asy allison is a resigning the ceo of oracle, effective immediately. He made a huge impact on the world of technology. Not disappearing completely. He will become cto at oracle. We will come back to the story with steve from office depot. I think mr. Ellison has been maligned over the years. I have seen people taking cheap shots at his wealth every day. They are flat out rowrong. He has delivered every year. You can count on fingers. His strategy was to keep buying up editors. So what . I have fingers left over for people who have delivered. That conversation to come. Keep calm and carry on scots voting to stay part of the u. K. It was closer than that some people thought, 5545 . Others would call that a wide margin. From get a little detail an edwards, who is joining us from edinburgh now. She is joining us with an investor. Anna . Thanks very much. I am pleased to say i am joined investor and a an backer to the yes campaign. How are you feeling . Are you deflated by the results . I was very disappointed. Our aspirations and hopes had really risen. After the initial disappointment past and we looked at what has been achieved by the yes camp, we started on 30 vote for independence. We cranked that number 245 . To 45 . That the promised formula will be continued. Very important to us. That is why we can maintain Free Education and some of the key policies. We have been told that they will continue that. Really, almost forever. Will there be another referendum . Will they be pushing for another referendum . What would devolution mean for scotland to stop the call for another referendum . I think they have these extra powers. If they deliver the extra powers that they said they would deliver and, they deliver them in the timescale that they have committed themselves to, that would also be a very good outcome for us. Democratics the gains from this. Another halfmillion people went on and that is a fantastic achievement. Get thed disenfranchised in the gauged. No one has achieved that. A great venture for democracy. To have the debate in the first place i think it is a great outcome. We have changed the face of politics in britain. Very positively as a result of the referendum. You taken by surprise by the extent to which scotland will not be the same after this and the rest of the u. K. Will not be the same . We have already had promises from David Cameron, the Prime Minister. Devolving powers to other parts of the United Kingdom. I think that this is something that has been bubbling away from longtime. There is no settlement with labor, for labor. There is all the inconsistencies that scottish members of parliament fought on english issues. Equatione use this needs to be resolved pretty it is very good were going to solve these problems. How has this debate damaged investment and collins . In scotland . I dont believe there is any evidence of that. Dont think there has been any serious damage to them. The Scottish Government is very strong this year. But we want to do now is, we want to send the message to the rest of the world that scotland is open for business. Were going to resolve these issues quickly. Once we have done that, these additional powers will give the Scottish Government extra levers to grow the economy in scotland. We want to develop a dynamic, highgrowth economy. We want people to, and visit our lovely country. You have seen all of these different ways. We want to get our arms around one another. You know companies have different views. We want to go forward. Thank you so much for joining us. You. Souter, back to we will continue this discussion on scotland. Poundtmus paper says sterling is back on the resurgence. This is a much watch must watch. Stay with us. It is bloomberg surveillance. Good morning everyone. It is a gorgeous day in new york city. The 48 thousand people lined up outside the apple store on fifth avenue and 59 street. Just extraordinary, the line. I have never seen it outside the iconic apple store in front of the plaza hotel. Has to be three times the size of iphone 5, at least. Good morning. I am tom keene. With me, scarlet fu and adam johnson. David kirkpatrick, really giving us great perspective on alibaba. Emily chang has a jack ma injury later this morning. And theok at scotland litmus paper of the global currencies. Currencies are on the move. Ruble and sterling make the headlines quietly. We have to look at a resurgence. Lets talk about the sterling first. You say carney cannot get a strong sterling policy. Why . I dont think he can get it versus the dollar. The dollar is the standout currency these days. In the u k, they have had their opportunity to get good growth and change policy. They squandered it . Now the economy is showing some signs of slowing down. I think they are comfortable where they are. Lets look forward to the imf meeting in october. Will Great Britain still be the poster child of Economic Growth . Or will that be the difference . They look at things on a yearoveryear into trailing basis. Theyre probably still the poster child for a while. The momentum is moderating for a while. The u. S. , the u. K. Laces like that will be in the lead. Bring up the chart of the yen, back a zillion years. This is a 40 year chart. Toyotas Worst Nightmare has been this amazing, strong yen. It is working, this is round two of yen weakening. Theres probably more to go. I would not be surprised if we see 1. 20 on dollar yen. They have lost their trade surplus. They dont have growth. They dont have a lot of capital inflows. Can they do that in a selfish continuum where they establish weak yen . To salvage their nation and crush the adjacent asian nations. Can they do that . They can continue to keep the currency soft. Whether that is a salvation or not is not clear. They do not produce as much as they did in the mid1990s. Theyre not the production powerhouse. The weak yen does not help the economy is much as it used to. All it does is weaken the purchasing power of a nation. I want to bring in steve odland, former ceo of office depot. You look at currency risk as a former ceo. How do you hedge currency risk in terms of planning the next strategy . To avoid a certain markets . Some people say it does not matter. If you are in the United States, and you are doing business elsewhere, currency moves and translates back. Ll incompanies buy and se their markets in the currency which they operate. It is decided by how they operate. It does affect how you invest. Member the 80s and 90s in brazil, they would devalue their currency every for years. We knew were trying to make money and make that investment pay out, they would devalue it. I think this is absolutely critical. We are doing strategy and hedging and derivatives. We have a guy in the real world who does not care what you think. What youre saying is that you take yourself out of the equation, either because you hedge or you move your manufacturing a broad. General mills 38 is outside the u. S. You sourced locally and take currently out that way . That is exactly what happens. You have to buy it locally. You buy crops and the raw goods locally. Then you sell locally. You isolate the currency risk by how you operate. You still have to translate that back. When you go back to brazil, you get crushed every few years. You dont keep putting your money there. Please. That is exactly what happened in japan. A few years ago, the yen matter to dramatically. All of the toyotas and hondas were made in japan. Now, there produced everywhere around the world. So, the impact of the currency on the yen is it is a significantly reduced. You just made the best case i have heard for why we want a strong dollar policy. All of those countries that want to sell into the u. S. Need to produce here. And, that way they dont have to deal with the currency risk. I think we are seeing that going on. And things like flexible labor markets, energy. Those things become more important. That is where the u. S. Has become a production powerhouse. Lets bring this down to the real world. Peak, outside the plaza hotel, there are a gazillion p eople buying apple phones to take back to asia. We have an experiment it is going on now two blocks from there. What does a strong dollar policy due to what we are seeing at the apple store . What it does is create some stability in the world. This is the worlds reserve currency. You want stability and moderate strength. Second, it increases u. S. Purchasing power around the world. That is not such a bad thing. We have baby boomers going into the retirement age. Thank you so much. Cy and volatility we brought together the theory. We will be right back. Good morning. This three blocks away from us storeine at the apple for the latest iphone. 13 blocks long. The shot we are showing you is on 5th avenue and 59th street. That is Bergdorf Goodman behind it. I goes all the way up into the 70s. From 59th and fifth, up to the 70s. Mcdonalds was offering free breakfast to people waiting in line as well. Our question plays off of all of this. What should people line up for . Iphone, alibaba shares . What should people line up for . If apple is one story, alibaba the other, we are going to dig into that. Emily chang is interviewing the man himself, jack ma, the and founder of alibaba. I will be happening at 9 00 today on the new york Stock Exchange. The man of the hour. Lets get to some company news headlines. Steve losing trading and employees. Several key staffers have left his company. Some went to ken griffins citidel. He agreed to pay fines to settle Insider Trading charges. Nike shareholders are thinking twice about endorsements. They are addressing concerns about the risk of these deals at the annual shareholder meeting. Nike recently ended or suspended deals with three athletes accused of domestic violence. And, a waste this pepperidge of russia will have a stake in pabst brewing. This is according to the wall street journal. The deal is set at 750 million. That is company news. I love it. This is for our guest host, ofve odland, the former ceo office depot. Office depot and to many others are over stored. What will become of 1990s retail . You are in the trenches on this. Give us an update. Will bricks and mortar survive . They will survive. It will not look like it does today. I have run grocery stores, auto parts stores, Office Supply stores. In every case, what is happening is that they are becoming bigger and bigger on the internet. Office depot was the largest internet retailer. At the same time, they were dealing with massive infrastructure. That infrastructure is going to shrink. The stores will becomes maller. They will become convenient places to pick up. When you look at all of this, my one reaction when i talk to realtors is we will bulldoze a lot of malls. Will we just end up losing . I dont know. You have all of this going out. You have the financial crisis from a few years ago that bankrupted 200 different retailers. We are going to redevelop. But, all of these stores are trying to find smaller spaces. Every store that is 25,000 is trying to become 5,000. Do you have a confidence . The permits or some such, can they seamlessly do both . The idea that i can win at bricks and mortar, when at internet is that a valid Corporate Strategy . For certain types of retail, it is. For the restaurant trade, highend jewelers, you have to go there. You have to touch it and try it on and wear it. That will never be intermediated. For commoditized products, there is no need to go to the store. There is absolutely no alternative. We have used that phrase for years. What is the alternative for leadership . What is the mandate for ceos now. You have to understand your customers needs. You have to sculpt your offering. So that various levels of consumers have a presence and make it convenient for your product there. Then, secure it. They are under attack. These are nationalist issues and security issues. Steve, we will continue in this hour. Lets get a data check right now. Stock indexes are at record highs. Futures up. 10 year yield, two points, has come back. Euro weaker versus the dollar. Only data point of note is the leading index at 10 00. Curious that we only have that one item today. Lets do some top headlines. Ebola against seven people died during rioting in guinea. They were on a mission to educate the population and were attacked by a crowd accusing them of trying to spread the virus. Connectionest in with the Northern California wildfire. 837yearold man with a long criminal history deliberately started the blaze. The fire east of sacramento has driven 28 people from their homes. It is just 10 contained and has consumed scores of forests. Dozens of miles. Some terrifying images to show you from a jetblue flight that was bound for austin, texas. They had a turn around after takeoff. They left long beach, california aboard. People those are the top headlines. And another top headline, alibaba. Hours away from its debut on the stock market. The new york Stock Exchange, specifically. 21. 8 billion raised. Emily chang arrived in new york and will be speaking with jack ma at 9 00 this morning. What is your first question . Cannot wait to hear what he has to say. Im going to ask him what he has to say to all the people who thought he was crazy. Even back in 1999, when the internet barely existed, he thought alibaba could be big. This documentary has been running on Bloomberg Television. In 1999, in his small apartment, he was filmed giving speeches about how big alibaba could be. He believes in his vision. People called him crazy. This is him celebrating that is him celebrating the 10th anniversary in lipstick and a way, singing elton john and lion king. He blesses couples in a wedding ceremonies. They give out cans of silly string on big occasions. They gave it tshirts to celebrate the ipl. He makes a don ledger look boring. That is incredible. There are a lot of challenges, though. A lot of skeptics. They say that they have not mastered mobile. There is a lot of competition they are not acknowledging. Ten cent is also a giant company. They are really the leader in mobile. Not doing too bad numbers looks good. 80 of ecommerce runs through alibaba. More transactions than amazon and ebay combined. Do you agree with my appraisal that jack is trying to he is unlike anybody in the global Tech Industry except maybe steve jobs with his charisma. He has incredible loyalty. I have seen him in china at the alifest. People worship this guy. Can you imagine a steve jobs in a lipstick and a wig. He is certainly in the league of his own. He failed his College Entrance exam twice. He became an english teacher. He is funny. He is not afraid to say what he thinks. What happens next with yahoo . It has become this proxy for alibaba. Yahoo was supposed to sell half of its stake. Now it will hold onto more of that and to sell about 70 million shares. s is unclear what yahoo ownership will be. Marissa mayer has talked about the relationship. So, they want to hold onto as much as they can. Emily chang, thank you so much. She will be speaking with jack ma live on the floor of the new york Stock Exchange at 9 00 eastern time. The other big story of course is the iphone. And, also the cover of bloomberg businessweek. At the newsstands today, so go and buy it. Good morning everyone. I am tom keene. Futures. Really not a bad day. Were going to the jobs report here. Already looking at early october . Rushing september. It was actually cold this morning. Cold for everyone waiting in line at the apple store. You paid a visit at 330 this morning . 3 32. I was our reporting in front of the crate and barrel building. I put some filter on to give it some pop. It was not nearly as beautiful as that photo. As you pointed out, this his, 13 blocks along, factors longer than the line that we solve for the iphone 5. With as is David Kirkpatrick there is clearly some iphone 6 effects going on here. What distinguishes it from what has come before it . Clearly, people have been convinced i the android ecosystem that a bigger phone is what they want. I am not even sure. I think it is surprising how much enthusiasm there is. If someone with an iphone 5 if the battery life is better, i will be happy. Maybe it is that. Battery life. I am not so far off then. The ones in asia are the ones that really like the larger phones and tablets. That is the market that apple and every other company is trying to i am surprised that model is selling faster. Mini. Is a mini ipad mini. Steve, you ran office depot for a number of years. My question for you is with the apple wallet, the i itlet, how difficult would be for retailers to actually put in the hardware that enables that to work so you swipe your phone . It is very easy to do. You just install it. That is the real innovation. It is interesting to see that android is still double the market share of apple worldwide. People do not realize that in this country. When you see lines like this, it is as much a fashion statement as a technology statement. You see that this iphone 6 has some cool things, but it is catching up with samsung. Heres the reality. ,evenue growth of apple, up 79 up 9 , up 5 . There is a trend there. From a big blue chip Revenue Growth which is important here, map and the size of the existing apple, or do they really need to get marginal growth out of these projects . This product is clearly remaking their image. For what ever reason, it is way beyond fashion. Fashion is an important part of it. Android is a gigantic market share. It really is a secondclass product. I think apple has reasserted its capability to be the dominant technology in the world. A lot of people believe it. They are lining up as well. Our twitter question of the day, last chance to answer. What should people line up for . Iphone or alibaba shares . I broke my iphone, it is broken good morning everyone. Tomorrowill join us from kleiner perkins. Monday, excuse me. 6 00 on monday. Looking forward to this report and conversation on the Technology Space into 2015. Right now, though, there are a number of ceos moving out. Jetblue announcing their ceo will move on. None more than a Larry Ellison. One of the nations Great Stories of ceo leadership. Is with us, former ceo of office depot. What a difficult childhood he overcame. Four or five times along the way before great success. With his management practice of acquiring competitors was that a legitimate strategy . He has delivered over 20 returns for 24 years. People talk about how much money he makes and there is a little jealousy about that. He deserves it. Look at the shareholder value he has created. He has taken these technologies and integrated them into an oracle suite. Backbones ares running because of Larry Ellison. I think of him like alan mulally. At the same time, he is not a guy who has been able to delegate authority. It has been a one trick pony, right . Do you shift the marker of space . You can. A lot of great to turn around at hp. I think oracle is a great company. They have all of these technologies. They have a great pipeline. Even if they did not, you have all these other technologies that they integrate. They have really been quietly a coo for a long time. I do not think Larry Ellison is stepping away that far. He is a guy who loves to sail and build a japanese houses. He has been a somewhat off the campus for some time. He is now going to be executive chairman and cto. He bought a Beautiful Island in hawaii. He is buying taiwan next week. The other ceo will be mark hurd. Is this a recipe for disaster . Deutsche bank has coceos and it has not worked out well. In this case, the company has two. I suspect they are going and understanding very clearly what the lines of division are in terms of who is going to focus on what. Larry is not going away. He will do to get if there are any issues. Oracle, John Chambers cisco and others. Make us smarter on this. This is the one thing you have to ask. They have done a great job of Getting Service revenues from the company that they acquired. In, the real annuity Enterprise Software Going Forward is longterm contracts, where the customer has away more advantageous position. They dont have to make a big upfront payment. That is where the industry has gone. Isnt that what we have always said . The way to make money in semiconductors is just a design the things and subcontract to other people. That is a good analogy, actually. Oracle is making the shift, but they are making it slowly. One thing that people dont understand as a ceo at office depot, i put in the oracle suite. You dont want to take that thing now. You are the business on these acquisitions. These acquisitions create this linear integrated system that is a very sticky. It is hard to move. Every year, you had to pay additional amounts of money to update it. It is the ultimate goal. I was preferable to having to go over to a new platform. These transformations are very expensive and very dangerous and hard. I want to rip up the script. I learned things on twitter. One of our listeners and viewers sent send in a brilliant twitter response. Why wouldnt alibaba and amazon do some kind of transaction . Why is jack ma here . Every major ceo is in town. Why is he spending so much time in america when it is a chinese ipo . I think the answer is his focus is not just on china. It is on u. S. Next. Not selling shares to people in china, by the way. I cannot even by this offering. I think jack morris the kind of isortunist i think jack ma the kind of opportunist who would consider anything. He gives bezos Immediate International expansion, right . Bezos is not i would be more surprised if bezos did it then if jack ma did it. Bezos is not the kind of guy to share the spotlight or let somebody else make decisions. Jack ma has always wanted to do everything himself. Your office depot, that you ran from 2006 what does alibaba mean for brickandmortar companies . But people dont realize is that the Office Products stores, office depot and staples, are some of the largest internet retailers in the world. So, bricks and mortars has increased to their business. Alibaba is an access point for bricks and Mortar Retail into china, like amazon have become an access point with their stores. Could be a big growth vehicle for american companies. Trends inthe bigger chinese internet is that alibaba and others are making investment in brickandmortar. Theyre starting to build infrastructure that includes offline delivery both alibaba and 10 have been doing that. They build partnership with crossownership. Not something that you hear about too much. And new fiscal space for these committees. Lets take a break and get to our agenda now. Tom, get us started. Scotland, i just saw it, it was fascinating. What does alex hammond to do next . I dont know the ramification. This is incredible. Steve, your thoughts, please. Everybody was focused on what would happen if stalin voted yes. I think the focus should be what happens now . U. K. Has indicated that they will give scotland greater control over how they manage things and how they structure their tax rate. You look at what happened to ireland as the celtic tiger. Restructurend to their Corporate Tax rate and start to suck in an incredible amount watch for tax inversions with scotland, right . Amazing. The banks up there, right . Lloyds . The amazing amount of money commanded in eden girl. Heres my story eli manning, for two reasons. On wednesday, you saw eli manning on daily news. He implored his fellow players to man up, treat women with respect, honor yourself, honor your teams. Number two, important to those of us who love the giants they are 02. The texans come to town and they are 20. Man up on the field as well. My agenda item is jack ma. He will be on Bloomberg Television at 9 00. Emily chang will be speaking with him a following the successful ipo of his company. 21. 8 million raised. We asked everyone what people should line up for . Apple iphone or alibaba shares. Lets take a look at some of the answers. Iphone because you know exactly what youre getting. You dont know if alibabas carpet ride will be easy. Next up we can all line up for iphones, alibaba shares, only a few representatives can. This is a sensitive issue. Retailf you are a investor finally, for alibaba if you line up for apple, youre wasting your time and money. Must be an android user. [laughter] i think its fascinating how many people from android will move over to 6 . No idea. Apple technology is so much better. Analytical,n quantitative, or qualitative i think it is both. All of the evidence shows they have better design systems. People like it better. The software is way better. That is the problem that android has. The hardware and software is not controlled by the same people. Steeple break into the apple store, because someone is holding his place. What a great set of guests today. Thank you so much. Are producers outdid themselves today. Coming up on Bloomberg Television, jack ma, founder of alibaba at 9 00 eastern time. It is friday,g, september 19 and we are live from bloomberg World Headquarters and you are in the loop. Day whichlibaba begins trading. Where will the stock open . Will join usck ma after he rings the bell at the new york Stock Exchange. Stay tuned right here on Bloomberg Television. York, they have been lined up all night outside the apple store. That is a live shot of the fifth avenue store. Theyre lining up to buy the device but in china it will be sometime soon so black market iphones are going up to 3600. Can you believe that . We are than two hours away from the alabama digg bait does big debut. Records,eady breaking raising nearly 22 billion in its ipo, making it the largest in u. S. History. They could still have a global record if it sells more shares to investors. For all things alibaba, let me bring in emily chang. She is traveling in from san francisco