Fluids, you have to be completely covered. That will be one of the things, the protocol will be finalized soon, but one of the things will be complete covering with no skin showing whatsoever. Health Officials Say in the u. S. , more than 300 people have had possible or verified contact with ebola patients. The World Health Organization has declared nigeria ebolafree. The u. S. Is ramping up efforts to keep Islamic State from over running a key syrian city. Dropped eight to go bonnie. Aid to kobani. Plates of been attacking Islamic State forces in the area. Ibm promising to make what it calls a Major Business announcement an hour from now. According to people who know ibm will begin be getting rid of a company that makes chips. Unbelievable. The chipmaking unit has been a drag on their earnings. There is a report that a group of investors plans to make a 2. 2 billion bid for reebok. Reebok is owned by a deed us. According to the wall street journal, and hong kong private equity firm will make the offer. Reebok but he does bought inbok for a most 4 billion 2006. The brand has fallen on hard times since then. Reebok is trying to reposition itself as a leader in fitness gear. For peytoncord manning. The denver quarterback broke the nfl record of brett favre. 509th touchdown pass. The broncos beat the San Francisco 49ers 4217. The west is interesting and football. That is a blowout. The redskins one. Is like westeast. Right now new orleans is celebrated because whatever any manning does anywhere, new orleans gets to claim it. That would be more than true. Tulane university and survived. Lets do a data check. Calm invades all. Crisis over. Correction over. Calm on a monday morning. The vix is almost average. , 2. 97. Yield lets get your scope and skill for monday morning. The dow going back to the beginning of this market. This is gloom. Cash, 2009. Remarkably contained, thank you, janet yellen. E have come down were not even corrected. It is just out there. And we have already bounced back a little bit. It almost looks as even as a heart rate. Breaking news. It is been confirmed ibm has agreed to pay global foundries 1. 5 lead all should take a profitable to making unit off its hand. 1. 5 billion. Get 4. 7lt, ibm will billion. All of this will come into play in earnings in an hour. Let me redo the math. What is it . 4. 7 billion. Keep the numbers round. 5 divided by 25. 20 of 90 days revenue. Huge gains it sees in cloud computing, but it is a little late to the party. Everybody does. Full disclosure, ibm is one of the things i hold. And shares are rising in the premarket. 184 is the current trade. Lets begin on a call or monday morning with two smart guests. David blue is with us woo is with us and alicia shalit. Lisa, did you buy on friday in which you acquired this morning . Absolutely. Our perspective is this is a gardenvariety albeit highly volatile, market correction. This is part of health and hygiene. I like that. We found some very interesting and much more appropriately valued spots. David, for you and me, lasted was fun. Everything was correlated. This morning, how correlated our markets and how correlated is when theconomics . Market closed on friday crowds a most people would say at least 15 and not 20 . And that persistent today. Lisa, you wrote about the growth scare that have mastered but it doesnt appear to be happening affecting companies all that much. Thise ibm paying to get chip maker off its hands. Do you see this to continue . We begin to see animal spirits emerge. That was at the beginning of the year. We had a very good m a year and ipo year. If you put it in historical context, we may be in the third or fourth inning relative to gel marketactivity versus capitalization. So we think we are plenty of her and ago. We have a lot of cash on the sidelines and cost of capital is low. The sidelinesh on to pay people to take their dogs. That is the new m a. So it is not a market correction, just a little loop happening . There are real geopolitical problems we are looking at. Can we say that on a monday morning . Absolutely. There are real geopolitical problems that are not just a summer correction. Ebola with no real and insight. Do you see any of these longterm geopolitical problems having a drag on equities . Absolutely. He after a member for a good portion of this year, these geopolitical problems were around in their market was able to shrug them off. I think what we are seeing, we are approaching change and Federal Reserve policy. That is really what the catalyst is here. I think everyone is throwing whatthing into the path of is this all about . It, butics are part of it wasnt the catalyst. The catalyst is potential change in central bank policy, and that is really what this is about deep down. I want to bring in our twitter question of the day we want to hear from you. , is this a david woo locomotive and theyre going to follow along . The u. S. Is the strong us to economy, no doubt about it, but the u. S. Is only 17 of the world gdp, down from 25 10 years ago. The share of the u. S. Is smaller. In the 1950s and 1960s coming out of world war ii, we were general rests. Over 30. Over 30 . So does china pick up the slacks . Absolutely. This is the problem. The problem is the was going faster hasnt been enough to offset the slowdown so far. A little geekdom. We clear markets like nobody else. We made the decisions, not perfect, but would you suggest we led on clearing the crisis . I personally think it is controversial, but it is not a coincidence at five years after the fed started printing money, all of these other countries from china to india from russia u. S. Exported its problems to all of these countries. Lisa, major points. Guests a terrific set of this morning, david woo and lisa shalett. Has released apple two new iphones, new ipad, new watch, and a new way to pay. You are buying them all. Is this enough to give apple what it once in its holiday stocking . We will discuss. This is bloomberg surveillance. Good morning, bloomberg surveillance. On the pulls of industrial america. Pulse of industrial america. This is bloomberg surveillance. I am tom keene with scarlet fu and brendan greeley. Brendan gets us going. Apples ipad launches on two of the 20,000 cash registers today 220,000 cash registers today. For apple, it still comes down to the phone. Bigger screens. Credits we sees iphone sales Credit Suisse sees iphone sells rising 40 in the next two years. Are you even interested in buying a new iphone . I can only speak for myself personally. I am going to wait a little bit. Im not really sure that im getting a lot more functionality. Im thinking the same thing. Im not really interested in buying. Is this market saturated . Can they keep getting blood from that stone . I was in the apple store with a sevenyearold and we had to leash around her because you are afraid of losing your kids with so many people there. A leash on her neck . A shoulder strap. Im sorry. The bottom line is, the place is jammed. And the bigger screen iphone central to people in emerging markets who what one device that doesnt that can take care of their tablet needs and phone need. Cost is really a factor. Apple hasnt shown any indication it is interested in driving that cost down. , you cannotett comment directly on apple, but so much of this is the geoeconomics of sourcing supply. We go into the stores and find a phone, but the reality is, it is a miracle how many they built, how quickly. This is something new that we have to adapt to, isnt it . Absolutely. Credit suisse also says through plate midcycle should speed up with the latest round replacement cycle should speed up this latest round. Because of these gigantic phones , goes up 3 to 4 . That will eventually mean 11 increase in revenue in 2014. And 26 increase in revenue in 2015. Bank of america and Merrill Lynch on an enterprise basis tilting to apple . Do you see within memos and infrastructure, your huge technologically laced firms . What werespeak for doing on an enterprise level, but increasingly, you have applications that will allow you get in a pricetype enterprisetype feeds whether your email or voicemail to your phone. Integrated. Folks used to carry three devices, now figuring out a way they all want it on their david, so much of this comes down to corporate spirit. Whether it is malaysia or the United States, profits . Productivity growth is still alive and kicking. That is a big driver of the next cycle. From that point of view, optimistic. Right now, mining gets the gloom. The same time, technology is fermenting. And with apple pay starting today, it is estimated the digital wallet will be worth 180 billion. Good for productivity . Absolutely. I met whole foods. What are you doing . Buying groceries. I take my phone and pay for it . You swipe your some. You put your thumb on this reader. Heres why two of the 20,000 cash registers have this on day one. It is encrypted at the point of sale. The Retail Operation doesnt have to know anything about your credit card. They dont have to worry about security. Every retailer was looking at what happened to home depot and target, all of a sudden says, our takes the problem off hands. Let the banks deal with it. Let apple do with it. You need to update to ios 8. 1. Really . You need to update your software first. Dont get too excited. We have much more to discuss here on bloomberg surveillance. He was big on japan a couple of years ago. Where deceased and on japan on the emerging markets . We will discuss in the next halfhour with david herro. This is bloomberg surveillance. Time for our morning must read. Minas from the financial times. The professor of economics at lisa shalett, you have been looking at russia and oil. What is your take on this . Our perspective, in terms of the geopolitics, is a phenomenal development. Recalled one of the things that is causing recession or into the vacation of the slowing in europe really has been the impact of sanctions. If we can get mr. Puti to come back to the tablen, except that ukraine is going to have its own sovereignty, that the willingness of europe i think to pull back on the sanctions and create a better economic environment for everybody increases. Give and would huge russian reserves to miss some of it from oil versus the currency. David, 21 percent appreciation in the ruble just in the last number of months. How does that hurt the people of russia . Clearly, import prices are going up. Russia produces very little consumer goods. I think this is a political problem for clinton if the ruble remains putin if the ruble remains weak. Maybe they have a deal with washington, the maybe enough of inutin exchange for u. S. Involvement to fight isis in the middle east. Do you buy that idea . Are we over thinking that . I think it is possible. The iranian side. This is very complicated. So far, this is good for the u. S. Consumers because we of sin collapse in gasoline prices, huge boost to the purchasing power. David, moodys on friday downgraded russian debt and cited the major problem, which is that russia is burning forex reserves in order to prop up the ruble. Read concerned they dont have enough are you concerned they dont have enough reserves . They do have enough reserves. They just reached a deal with the chinese. Probably know, theyre basically building more trade agreement with china and trying to shift their focus toward eastward. For the time being, i dont think reserves are major problem. To have a timeline for how long that could go on . I imagine for at least a couple of years. We will talk about this later with you david, and lisa, you can chime in as well, in reading history, it is all about currency depreciation. That is the short answer. Currency is one of those channels of transmission, if you will, of rebalancing. I think that is one of the things we have not spent enough time talking about is how much of what is going on is all about rebalancing. We talked about the u. S. ,mporting and exporting deflation or stimulus. That is really the role that currency plays in our world. It goes under, who is the adult in the room . Not vladimir putin. That has a much problem diversifying the economy. In the moods report, basically, saying up they are dependent on car drive and they are talking about how dependent they are on carbon. If you talk about where euros on eurozone has gone, there plenty of opportunities russia had in terms of liberalizing and attracting investment. That is the key issue. You want to attract dollars that are going to invest in something other than hydrocarbons, which have been statecontrolled. Lisa shalett and david woo with us. Futures of 26. Ow 2 00 p. M. , a conversation with one very sternly barry sternlicht. It is monday morning from new york city, it is bloomberg surveillance. Good morning, bloomberg surveillance. A colmar world this morning with the exception of some really issues with ebola. United states of america, still the engine of the Global Economy . We really appreciate your great responses. Lets get to our top headlines. The donalds is still under pressure in russia. Authorities are expecting more than 200 restaurants, night temporally closed with regulators deciding violations of sanitary rules. It is pretty clear this is a response to western sanctions in russia. Board,ng from ebay saying the separation of the online marketplace and its paypal unit make is the right time to step down. The Parent Company of bloomberg in a company he cofounded. Protest leaders and government officials meet tomorrow in hong kong. The talks are aimed at ending the prodemocracy demonstrations. More violent clashes over the weekend left dozens hurt. And those are your top headlines. Andrew davis is in hong kong for more on the ground. Blaming foreigners and foreign elements for inciting unrest is a triedandtrue tactic of beijing. At this really marks the first time hong kongs chief executive has made an accusation like this, isnt it . Yeah, i mean, the Whisper Campaign has been coming from beijing and the official chinese press, and now the hong kong to the executive kind of echoed it. A kinder standard trope they will let whenever theres any unrest. It did not help improve the mood for these talks. As talks get underway. Brendan told us about the scuffles, and arrest that left dozens injured. The protest on the hong kong site has been more peaceful. What is the distinction that keeps leading to these clashes . The protesters are on an eight lane highway, separated from buildings and business areas. Very spacious and isolated. In the other area, commercial district, one of the most densely populated neighborhoods in the world. The streets. Le on it will get in the way of traffic, get in the way a business. It is increasing tension. You have narrow sidewalks. People come flooding out to protest and it fills up pretty quickly. Tensions rise very quickly. They had hundreds of police last night, but the numbers of demonstrators swelled to probably about 10000 and quickly got very tense. Every time something happens with the police, it increases violence, the demonstrators come back out. Is there any since the government is Getting Better at figuring out how to use force . Well, they did have some successes last week. I think mom caught backfired. I dont think clearing it set off the renewed violence and tensions. Doing it on a friday morning, going into a weekend when people did not have to be there, probably wasnt great timing. They probably did not want to do it too close to the talks. After clearing some of the streets, they are reoccupied. It definitely backfired. The level of tension is increasing. I think there are hopes that even though the two sides are incredibly far apart in terms of the talks in their positions and what they bring to the table, but the talks themselves will be away for both sides to save face and figure out how to get the students off the streets. Andrew davis, thank you so much for joining us from hong kong. I want to do a data check. Not much data check, which is a good and beautiful thing. The talk of the weekend was not the equity markets, not even geopolitics. The was reviewed was stunning volatility seen in bonds, notes, and bills this october. Yields and yields for inflation price. Financial repression. As far as the eye can see, the ancient fear is cash under the mattress. That is the emotion we saw last week. From morgan stanley. This is what it came down to. Where do i put my money . Price up, yelled down. Im not sure that is what this was really all about. Our perspective was a lot of this was about Market Positioning. A lot of folks, particularly, to hedge their risks, were a little offsides. We really had some people taking aggressive positions, then some short covering. At the end of the day, we started about 10 days ago, the tenure was about 2. 28. Now were at 2. 2. You have to take a step back and take a breath. Rip up the script. What you said is we are now beholden to speculators of hedge funds. I dont think we are beholding. For investors who are going to buy and hold these things, this was just a blip. More than a blip. It was a blip. Unusual calm for most of the summer. Lisa, octobers tends to be volatile historically. Andriven by equities reverberates through other asset classes. That is not exactly what happened last week . Not at all. Corporate earnings were quite solid, is our take. One of our frustrations is no one was taking paying attention to them. We had Many Companies surprising on the upside. The action really was around Market Positioning and folks focusing on these headlines, whether it was the geopolitics, whether it was ebola, whether it was what a centralbank policy going to be. Can i translate Market Positioning . Im listening. Omg, im wrong, get me out. Do i look like a person who speaks like omg . Theres something that intrigues me. You were in a visor board member in the bronx, one of the best radio stations in america. Seem prettyou sanguine as a wealth manager about this volatility, but you have to look a year from now about the donation schedule is a board member at a nonprofit. Are you more worried as the head of a nonprofit than you are as a wealth manager . Absolutely not. Our perspective is levels of wealth have actually continued to increase over the last six or seven years. It has been a bit of a 1 er rally. Over the next 12 days two months, were looking this Economic Prosperity broadens out. One of the other things that was ignored last week amongst all the volatility was exceptionally strong labor numbers. We saw unemployment claims yet again hitting a 14 year low. Nobody seems to want to report the good news. Of bonds,your head she was in the trenches on this. The forecast has been the worst. We made note of that before you can in. Where it has gone wrong, we were too bullish. We were bullish for the right reasons, but we did not quite appreciate the u. S. Cannot escape from the implication of a global slowdown. I think that is the big story the last couple of weeks. Investors have an pricing in the decoupling theme and where starting to realize possibly were looking at some recoupling risks. We will talk about that in a bit. It also coming up, Health Care Workers continue to fight the spread of ebola, we will take a look at the potential Economic Impact of the virus are referring to some recent history. This is bloomberg surveillance. Good morning, bloomberg surveillance. Washington, d. C. , the sun rising in the west is being pushed out by the fighting Washington Redskins who escaped to victory yesterday. Washington, very much front and center, ebola this morning as the pentagon acts. Clocks are single best chart tries to quantify or at least chart out the fear factor surrounding ebola. Goldman sachs Economist Says the central negative macro consequences include avoidance of travel were Less Consumer spending and public forums. Our chart shows how previous pandemic scares like bird flu or or swine flu,s have had limited impact. Heres another scenario. Lets include 9 11. The white line. It is not pandemic, the disruptive. Goldman lays out the worst case scenario, the yellow line. That shows the sarts sars outbreak in hong kong. Pledging 10 from their people start they have rebounded ever since. How it couldof the play out potentially in the u. S. If the risk level of worsens. Sad truth about ebola, it is riffing and not happening as a place as economically important as hong kong. I think that is why you see such a delayed response and it got out of hand over the summer. And why the conspiracy theories have creeped up as well , why the government is not doing anything purposely and letting it fester. To me, the big thing is, are we focusing on the u. S. Or do we focus on western africa . We have to focus on both. Is bank of America Merrill lynch adjusted african gdp off of this . Any formal adjustments . So far, we havent. So far, ebola has been contained and the headline of nigeria this is why the credit markets, some of the larger african countries, have been insulated. The reality is, if the daily growth rate of ebola continues to remain between 2 and 3 , by the end of march, maybe one million cases. Had a pretty frightening chart in your report that sketches out how bad it could look. , thisa, to your work revalidate the Research Capability of our pharmaceutical companies. Your over will youre overweight health care for certain reasons, do you go ever more so with this . I dont think you do. Our perspective is, focus on the fundamentals. This is a development. While the had lines i think are very bold and it is very scary, the actual numbers remain actually relatively small. From that perspective, i dont think it really moves the needle for the Global Health care sector quite yet. The good news is, the who declared nigeria ebolafree. Lets go to our top photos on this monday morning. Number three, president ial candidate campaigns in copacabana, in the Runoff Election against dilma rousseff. So far, the developments in this election have been anybody but dilma. She had this tremendous spike. This coming sunday. Wondering, how do you see the election having an effect on the real . So far, the market is basically wait and see. Generally speaking, giving reformto possibly a postelection. I think most investors are sitting on the sideline. From that point of view, regardless of what happens next week and, you will see a big move in brazil. The number two photo, 100,000 people gathering for proindependence rally in barcelona, calling for early elections. The president of catalonia holding an unofficial poll. They are not giving up on this. Why did they switch . Im curious, is too. The trip was clear theyre not going to allow an independence referendum, so both catalonia and madrid were watching what happened in scotland very closely. What else do we have . Number one photo, this is a marathon runner in beijing wearing a facemask. Many forced to wear facemasks or gas masks due to heavy smog. And yet they hold the marathon anyway. There was a great piece in business week last week where they talked about chinese nationals buying a property in california because better air quality, better schools, just better quality of life in general. I think when you see this, you see why theyre so desperate to leave. All of the kids in hong kong grow up with some kind of asthma or respiratory. Thank you. You can see shout out. How about our twitter question of the day . Aboutl talk to david woo this when we return. Good morning, everyone. Futures up 4. Dow futures up 20. Stay with us. This is bloomberg surveillance. Good morning. What a weekend. A little bit of a tinge of november and december in the air to ever the less, gorgeous. Nevertheless, gorgeous. Arguably, the single best photo of the Freedom Tower ive ever heard. I will put it out on facebook and twitter as well. Spectacular lack and white photograph from one of our stuff. Lets get to company news. We start with ibm dumping its unprofitable chip making unit, will pay double foundries 1. 5 billion to take his business off its hands. Unit has been a drag on im sorry. Ibm says it will take a 4. 7 billion charge as result. Moving on. Microsoft could launch a rebel device in the coming weeks according to forbes. It would mark their Maiden Voyage into new device category. The gadget is a smart watch that tracks your heart rate and features more than two days of battery life. The strategy has been, ooh, ooh, we do this, too. What else . A key Earnings Call for yahoo . Morrison meyer will unveil thirdquarter results. She currently faces a number of challenges including what to do with the money that you who reaps from ali babas ipo. Im not up to speed on this. To me, this is a huge deal. Yahoo strategy is the Holding Company for alibaba stock. Now what . I feel like we keep reporting on john who out of force of habit. I dont know what they do or what they have to offer. The yahoo party was like a hot ticket. But isnt that a symptom of pathetic declined . Yes, i do. That was a great band in the 1960s, pathetic decline. With the u. S. Economy holding its own for now, the u. S. Dollar trend will likely persist but it has become crowded. Our guest david woo puts this into context to reconsider the recovering risk. Until last week, we had u. S. Dollar and stocks outperform at the same time. That is not normal, is it . No. The dollar and u. S. Equity used to have a negative correlation because the dollar safe haven status. In the last two or three months, we assume that correlation turning positive, which shows you there is an aggressive shift into u. S. Assets. Theres a strong fundamental rationale to continue going long for the dollar, but you say, try something else. Your recommendation is to go long on u. S. Small caps . Exactly. Small ays, it is the same traits. Caps are lower exposure to the dollar, to the outside world. If the dollar did well, we need the small caps to do well. You might as well be positioned as such. Talks that all works out if we are going to decouple. What about recoupling and getting dragged down by europe . One number of look at every single day is the rasmussen daily confidence number. Last week with ebola in the stock market falling off the cliff, and simmer confidence edged up. Consumer confidence edged up. I think that is very, very important. Are reusing the wrong metaphor . You talk about the last time there was decoupling. In the 1990s, decoupling was talked about as a permanent thing. Now you look at it like a bungee cord. Is that a better metaphor . I think so. People tend to focus on, u. S. Exports share of gdp low, only 13 . S pcorporate profit 500, 40 comes from overseas. Have lisa shalett here. K . At do i do with my 101 there is an efficient market curve and Asset Allocation offset. Is all of that old school stuff out in the way we approach International Investment has to change . I dont think so. Our perspective is, you still want to focus on Asset Allocation but you want to be global. Exactly what david said. You want to make sure you have exposure to where the growth is going to be. It really is from where we are starting. One of the things we talk about in europe, europe has been slowing but the question we pose for our clients, where is it going to be 12 to 18 months from now . Direct or through david woo has u. S. Transnationals . A little bit of both. Do you agree . I think so, yeah. Im confused. Looking at equities, is the u. S. Doing well or is it just the best bad thing . I think the u. S. Is absolutely doing well. Again, this is one of the stories that i dont think investors by and large have bought into. They have looked at a gdp number of 4. 6 the second quarter, and the gdp of about 3 this quarter. Were looking at earnings. People are not actually cheering for the fact that companies are continuing to beat, growing their topline about 4 , 5 and growing the bottom line it percent to 9 8 to 9 . Thank you. Let me do a report. Uiet on the currency front sterling, 159, back over 160. The return of france in the quad lecquay. Stephen king will be our guest host coming up. We will be right back. The military and medicine combined to fight ebola. The pentagon creates a 30person medical team there it over 4500 have died. , they repairkets Interest Rates. Should signal a punch bowl, filled to the brim. And carl icahn is on the edge of his seat. Apple will cell phones. Cupertino will create cash flow. Good morning, everyone. This is [laughter] this is bloomberg surveillance. Joining me,nd scarlet fu and brendan greeley. Right now, top headlines for the moment for the morning. Scarlet begins with ebola. You can blame current safety protocols for the spread of ebola. The protocol used by the hospital in dallas was not adequate because it does not require all skin to be covered. He says the government is issuing proper new guidelines. Dozens of people in texas have been told they are no longer at risk of contracting the disease. Had contact with thomas eric duncan. Numeral Health Organization has declared nigeria ebola free. The u. S. Is ramping up efforts to keep the Islamic State from overrunning a key city. Is kobani is on the border with turkey. Planes from the u. S. And its allies have been attacking Islamic State forces in the area. The Worlds Largest maker of Business Management software has cut its fullyear forecast. Sap positive earnings are taking a hit as more clients move to the cloud, meaning businesses are playing more paying more than at the start of the contract. Sap is also being squeezed by turmoil in russia. Obviously it is hurting us in the short term. It is a situation with russia. Russia is one of our biggest markets, and of course easing the political circumstances, they are coming back to a regular business as usual raiseio, which helps to growth in europe. It is a huge problem for companies. Crude is alsorent higher iran is taking steps for thefurther up price drops. Saudi arabia and kuwait have started cutting output. Of movies ine lack theaters. Brad pitt is at the top of the box office. Fury. D war ii drama 24 large as a box office. The series produced by sony, the movie brought in mostly a male audience. I did not attend, but there it is. Going girl, a thriller as well. Going girl last weekend. No surprise to me. Scarlet, what do you have . Canadian Pacific Railway has tominated it had offered buy csx. Csx rejected it. Warren buffett bought burlington northern. Pacific,f canadian hunter harrison, will be discussing this. Acquisitions, and the need for a more comprehensive north American Transportation policy. Saysesting to hear what he is the outlook, given the regulatory it is canada versus the u. S. , it is almost a duopoly. Are we entering a new age of railroad trust regulation . I really wonder. Pacificlien canadian coalbasedg a dynamo, you wonder where this is going. Not only did they confirm that they have ended exploratory talks, there are no further plans. One of our guests is uniquely qualified to discuss m a on an international basis. David arrow is with us. Legendarymed if not investor. And stephen king is with us. Seriously, david, this is a big deal, and it plays into the entrepreneurship of canadian have you come have you participated in a Railroad Boom . Hunter harrison, by the way, is one of the best railroad men in the world. Ackman act when bill brought him in. The whole industry got rich here. It really went up. There were fundamental changes made on the micro level with labor contracts and flexibly, and that kind of helps. To the spirit,es stephen king, the animal spirit of transnational corporations being part of the m a that keeps business and finance going. Absolutely. ,ne of the big issues in 2007 with the process of globalization, it is in danger of falling reverse. All caps off center dot sure harry impact of reid is keeping up with technology, as charlotte has breaking on ibm as well. They will pay global foundries 1. 5 Million Dollars to take their moneylosing chipmaking unit. When i give you earnings per share, i do not think it is comparable to the consensus out there. Operating, adjusted earnings per 10 . , 3. 68, down there is a 4. 6 billion charge. We also have revenue in the americas at 10. 1 billion. Billion revenue from continuing operations, and the stock is falling in premarket trade right now. David haro, help us. Herro, when you look at a ginormous company like ibm or toyota, how do you treat corporate earnings versus annual . Is notink quarterly data as important as we in the media make it. It is one small data point that can easily be pushed around by shortterm or seasonal factors. Lets go to the chart of ibm. Ir those of you on radio, will send this out on bloomberg radio. Oh u have paul masson discarding, they paid someone to take the Semi Conductor . Please, take our chips. Point 4 billion in revenue if that is the right number, that would be the lowest and i have keeps growing but scrolling back here. All the way to pass 2010. 2 adjusted. Stephen king, this goes to christine lagarde, whether it is ibm or scotland. Everybody is dealing with a subpar, nominal gdp. Absolutely. Talks about the u. S. Recovery next year. Becauser never arise the growth rate is much lower. So if you are sitting with ms. Roma day this morning is growth at 6 or 4 . The less capital investment, the growth david herro, you want just what dr. King prescribed, right . Some people do, of course, and dr. King is right, but what we do, when a company has that allocation decision, they can buy back stock and give it to the shareholders, they can buy a company that invests in their business to pay down debt. We want them to carefully, meticulously take the choice that leads to the best meaning in longterm value creation. If it means buying a weak competitor, do that. Ibm, 182, down to 172. 01. I want to speak with ibm for a second. When you look at what ibms plans for its future, they say the cloud, continued growth in the cloud, the continued movement to mobile, and they are in position to take advantage of that, the first two things are clearly true. Is ibm uniquely positioned to take advantage of two movements that almost any company can take advantage of . You are exactly right, it is a new frontier and there are so many little competitors nibbling at their edges, and this is what is happening with ibm and sap. I think they are going to go into attacking the cloud together. But the one thing they do have is a client base. If they can come up with a product, presumably they would be able to keep their client area 20 seconds. Very important the packers, four in a one day have four in a row they have won. Are they super bowl bound . We are seeing a refrigerant ace we are seeing a resurgent. Did you catch the premier league this weekend . Be quiet. That is what i am here for. Ok, enough english football. David herro with us as well, and we say good morning to all of you read let me look at the data right now. It is a better day than what we saw last week. The vix almost back to normal. We need your toward a question. Is the u. S. Still the engine of the Global Economy . It is bloomberg surveillance. This is bloomberg surveillance. I am brendan greeley, with tom keene and scarlet fu. Fedons taken by the influence Economic Conditions abroad. These effects spilled back on the u. S. Economy. We cannot make sensible choices without taking them into account. Stephen king, do you have to be aware of what is going on in other countries if you run a centralbank . All the time. Do impact what they other countries, then feeds back to other countries. One of the big issues currently in the u. S. Is not so much more what fed policy does but rather what European Central bank policy does. Looking at qe over the next several months and previous episodes, a stronger dollar raises what happens with inflation growth in the u. S. Automatically what the u. S. Does feeds back into the u. S. From abroad that simply assumes that what we have been debating all morning, that the u. S. Economy is coupled to the rest of the world is that true or is that just an assumption . It is more coupled than the u. S. Would like to think it is, and it does not always lead to the rest of the world. The rest of the world reshapes the u. S. Is a tether to all these other countries. I like that. It is like game of thrones when they climb the wall. That is what it is like. They are like a sherpa, not a locomotive. The problem is, all the other countries are tied to it, so when they get very weak, the u. S. Does not do well itself. Is a lotrecovery weaker than you would normally expect. To what extent is that set by policy makers, what you just described . It is increasingly acknowledged, but there is a broad range of opinion. Within the swirl, the impact to david herro and all his investors, is currency dynamics. When did the stronger dollar and the currency affect the currency effect begin to muck up my results. Finally what you will begin to see is what had been a currency headwind become a currency tailwind. Europeanbased multinational and japanbased multinational, fighting the week dollar and fighting the weak dollar, this is about to turn. This is actually positive if you are an international investor, and it will not become the headwind if you are a u. S. Investor. Look abroad, says david herro. We will be right back on bloomberg surveillance. Good morning, everyone. Bloomberg surveillance. It is a historic headline for bloomberg four jimmy rogers capitulates on the future for ibm. They make a huge deal in the first 15 pages about delivering, scarlet, what is it, about 20 . Eps in 2015,ing and now it is not going to happen. Under one. See well i will send it out on bloomberg radio. 184ish. Says that the it also points to a pace of change. And a shift. Cloud does not mean anything. Cloud just means it is only server somewhere. Cloud is a sexy way of saying it is on a server somewhere else. That is all it means. David herro, for the better part of a century you could say about ibm nobody got fired. Is that still true . They should if they buy it wrong. There is a price for everything, and this is the problem with our investment industry. People invest in things because they sound good, because they make headlines, because of the soro tailwind, so on and forth. Instead of buying companies because they represent a value based on the price you pay for a stream of future of cash flows. That is the way we look at it, and it makes sense that a company is worth only what he generates in future cash flows. I want to go back what you talked about earlier with ibm and sap. Has a huge effect on a number of companies that have a traditional way of making money, by selling software. Where else is that a problem . Sell it up front. Get the cash up front, and then the philosophy is that since i paid up front, i am not going to switch very often. I already have this money sunk into the software product. Over your sap is all business. And the cloud, instead of paying up front, your kind of renting every month or every quarter, and maybe perhaps they might switch quicker. If you are deeply integrated, its likely be just the timing of cash flow. It all depends on the product, the customer. We are breaking to a new low here. Percent down per cash percent range. Have,s is gospel that i and when we have a lot to talk about this morning maybe it is International Investment, including ibm. What we know for certain is david herro has seen his green row,ackers ace four in a someone like the trailing markets of the trailing emergingmarket stocks. Ect investments or trends or transnationals which is it, david . Do you want to buy stocks that are in malaysia, or the whole reason is based on price valuation. Done quitetocks have poorly because of their dmx or, and this is the dichotomy. The emergingmarket businesses have done quite well and are priced well, but the stocks that are doing business there have been hit because of what i situation inclical these emerging countries. I keep coming back to a study about about them traders domestically. Foreign fund as managers going to be lagging behind domestic investors and understanding what stocks can be valued . A lot of it has to do with time horizon. A lot of the local markets are trading markets in the short term. Noisenore that white guy and just hang onto them. Stephen, i think of dr. L erian whatelaria are the underlying economies right now . Is partly a china story, but not only a china story. A lot of it is latin america, brazil, facing a situation of very low growth, high inflation. Your hong kong and Shanghai Banking Corporation offices in hong kong are right in the heart of the protests we have seen. Do you look for them to expand into other geographies . The protests i dont know, it is difficult to say. At the moment there is no sign of them expanding. Linke Hong Kongshanghai that was supposed to happen in october has now been delayed. I do not know if that is a sign there wearing there will be business disrupted. That it isiculty is priced capital internally. They have no real choice but to open up to the rest of the world. Brenden, if they do that, the chinese will by the green bay packers. We although that is a beautiful accent we all know that is a beautiful example of a way to own a team three is the u. S. Still the engine of the Global Economy . Does the rest of the world have no choice but to follow behind . Ofthe most obvious example this is that you go back to the prefinancial crisis, 2009,inancial crisis, 2012, china is the engine. There is no doubt about that. The emerging markets did well partly because china was doing well. China has now slowed down and the emerging markets are not looking quite so good. Eighthouro an surveillance today with these two guys on the set . It would be great. Honeywell on ibm this afternoon. Stay with us on bloomberg surveillance. Coming up on Bloomberg Television later today, j. Crew chairman will be sitting down with stephanie rule. Thes coming to us live from robin hood Investor Conference right here on Bloomberg Television, mickey drexler, on bottom line. This is bloomberg surveillance. Lets get you company news. With a start resignation. Bloomberg lp, the Parent Company of bloomberg news. Andriys leaving the ebay board. Mcdonalds is expecting 200 restaurants. Nine are temporarily closed. The scope of the shutdown in russia is seen as a responsive western sections in russia. The company plus new Payment Service lets shoppers buy items using their thumbprint. Walmartailers including are not a get on board. Apple reports earnings after the bell today. That is the latest company news. Are guest host stephen king our guest host, stephen king. Dont forget japan. Serious experiment, japan has and is a field experiment. Why is it failing . Dr. The whole idea is that you had this massive momentary stimulus. And lots and lots of structural reforms. After the big fall in the the tradeate that, position did not improve much. He had the consumption tax coming through, the big increase, which was hefty. It does not create conditions that are the best. And think of england in the 1930s, or you could even look at creating inflation. If the society has a low Interest Rate and you have new big inflation, all of the site you have shockingly low rates. That is where japan is. Thats right. What has really happened over the last year or two, the fall in Exchange Rate has pushed up prices. At the same time, the response in terms of wages has been much smaller. Than was originally hoped for. Original idea was that wages did not rise. Wages are remarkably sticky. You can push of headline simplyon and wages, you squeeze spending power and you end up with a weak economy. How do you see the balance of the culture of japan with mumbojumbo at how does it play out . Part of the problem is that so much of japan as weaklings much of japans weakness is structural. Most of it is democratic demographics and an aging population. Thehe population ages, ability to create Inflation Expectations goes down rather than up. That is what we have seen over the last couple of decades. Also, japan is right at the outsourcing story. But we will invest abroad. What can the United States learn about this new push by japan to move capital abroad . We are right behind them, arent we . Yes. From a shareholder perspective, you want to make sure companies are holding the best returns for shareholders. One way they can do that, is export capital to areas that are cheaper. That hurt that puts downward pressure on wages at home, so you end up with what we have seen in the last few years, which is low labor shares. My civil framework is u. S. , germany, japan. Does that become u. S. , germany, china . Do we pushed japan aside and they drift off over five or 10 years . The difficulty is if you are growing at 1 or less, you will gradually go down the pecking order. If we go back to late 1980s, japan was the second biggest economy in the world, threatening to take over the u. S. Now it is the third biggest. Lets give you a quick update on ibm. Shares are plunging premarket, hitting session lows right now, off by 9 . Ibm says it will no longer deliver on a profit forecast made back in 2010. This is bloomberg surveillance. With tom keene and brendan greeley. Theyve to did not used to be a market for ebola vaccines. Everyone is moving toward movingl everyone is toward clinical trials. This used to be an orphan drug. What companies now actually see the potential for profit in developing ebola therapy . A lot of companies. You kind of have two categories here. There are these therapies that treat people who have been exposed, and then you have these vaccines that will prevent people from getting ebola. As far as the therapies, as part as far as the drugs, there are four big companies. That is map pharmaceuticals, the makers of cmac. Of zmapp. , and that ch mira lmiras drug wasnt it used to help people who had already had it . Yes. The thing to note is that monkey trials are probably the most talked about and most respected for fda officials and people in the medical world, and only two of these drugs have proven effective on monkeys. In here. We are talking a timeline of how long to where we have a thing in a bottle to deliver to the ivory coast. Most people are saying well into 2015. With the vaccines, it could be into 2016. Do you have a cost . Millions and millions of dollars. Any evidence that the fda will figure out how to move its timelines faster . We do not have until the middle of 2015, particularly for the therapies that treat people. If we are talking about tens of thousands of new cases per week. And you enter a clinical trial, the drug its more likely to be released on an experimental basis. So if eusebius drugs being tested on humans, may the tests have not been done yet so if you see these drugs being tested on humans, maybe the tests have not in a done yet. They are just trying to get to human trials, basic safety, move it. And they are doing trials but they are trying to get at the same time, so it is down the road we have something david herro, is something you would consider investing in, the pharmaceutical companies that have as of the country gets in the headline, whether the product is successful or not, the share price goes way up. That is what has been so interesting. Investors react wildly to these things. Somebody gets the drug in nebraska, and the stock goes up 10 . Fuji photo film, dont forget, they are in the photo film business, which was going like this. And they dont have monkey data. The monkey bar. If you cannot hit the monkey bar i wrote a piece about ebola, and ever since my inbox has been inundated with all sorts of ways to solve it. Everybody has a plan. A hazmat suit maker. Thatere are two companies have promising drugs. It is really difficult to manufacture these things. Zmapp has exhausted its supply. Hey are trying to enhance it a medicaling to professional last night, and he said when you change the way you make a drug, you change the drug. Using not be effective hamster ovary cells over tobacco. Ofthere is still some sort rampup in manufacturing capability as well, which is a whole different story. There is a lot to talk about here. Very good. The political battles continue. The governor race is the governors races are heating up. 5 00 p. M. Tonight eastern time on Bloomberg Television heard with all due respect. Stay with us. It is bloomberg surveillance. Good morning to our viewers in the u. K. That is a live shot of london, where it is overcast. What else is new . This is bloomberg surveillance. I am scarlet fu, with tom keene and brendan greeley. It is churchillian. What other english cliche are we going to use . Lets talk about snapshot with betty liu. The company has just released its first ever ad for its messaging app. A lot of people are wondering if this will drive away all the young people who made snapshots. Chat. Who use snap does anyone at this table use snap chat . Constantly. Snap chat to economists. Jobless claims, oh, my god. We are not going to get irritated by this, but apparently all of these young people will be irritated by snap chat finally saying they are going to have ads in their feed. They will try to make them feel better by saying that you do not have to watch these ads, it is your choice, but you cannot block them. You dont have to watch means you have to ignore your phone for the five seconds. I dont know if we have this screenshot of how it looks, that this is at the top of your feed, kind of like what you see with twitter and others. Ad, you havepop on to click into it so that it is your choice to watch it or not. I love how we are all handling this with our thumb and forefingers. We are loath to admit that snap chat exists and that we use it, but stephen king, you say that your daughter uses it. He doesnt even know what his daughter is using it for, right . I have no idea what she is theg with it here it second that you get on it, it will drive her out immediately. Completely. Snap chat wrote a blog over the weekend apologizing to their users for doing this. They said we had no choice. Why do we need to do this . We need to make money. They need to monetize their users. They are valued at 10 billion. They have to do something to justify that valuation. This has been going on since friendster. It started with myspace. Andace started advertising everyone drifted. Facebook may face the same thing. I guess it has not happened yet, but that is exactly right to they are all fine when it is the minute we start throwing ads in, who wants that . You are not confident as an investor that you can figure that out . It would be very difficult because it is a dynamic that you do not have the solid, consistent stream. When you add the other variable to it someone is not someone not afraid to throw ads in your face is tim armstrong, who will be joining us from dark and gloomy london. We love to hear what he has to say. Right back with more of bloomberg surveillance. Tomorrow on bloomberg surveillance, we are honored to bring you the acclaimed chinese pianist, lang la ng, on the future of Classical Music and concert. Good morning, everyone. This is bloomberg surveillance. Im tom keene. Scarlet fu has been scrambling. Brendan greeley as well. Ibm abandoning its 2015 earnings forecasts as the company deals with declining revenue because of cloud sharing. Ibm says it is giving it is getting rid of its chipmaking unit. Group of investors is planning a 2. 2 billion bid for reebok. Hong kong private equity firm boughtds reebok was for 4 billion back in 2006. In pro football, a new record for peyton manning. The denver quarterback breaking brett favres nfl record with his 500 night his 500 and 9th touchdown pass. Our guest host for the hour ondavid herro, and of course ibm we continue with this. , find it just extraordinary the blowup, widely predicted, i might point out. What does a Big Corporation wait for in terms of cutting costs . It should be something that happens continuously through time. The company should be getting more and more efficient. When we talked to management and they say we are going to do this whycostcutting program were you not continuously looking at ways to improve your business . Sometimes it is not the way they are wired. They just wait for something bad to happen, and then it becomes the impetus to react. Speaking of something good happening, and certainly this is ompany with scant profits my morning must read this morning, paul krugman writing on not monopoly, but minoxi onopsony. Ny . Can you do find monoso it is a british thing. Colonial. Stephen king passed the exam, i did not. Isyou are the person who buying all the stuff rather than selling all this stuff. You can basically get take the price to all of the producers. I am curious about this because there has been a shift in u. S. Regulatory policy. It used to be that we were really worried out monopsony. Early 1980s, we just focused on consumer benefit. Lower prices, the merger was ok. If they will be will they be shifted away from that in the future . Products that you get from amazon in some cases are rather useful, like kindle, for s. Wnloading books here there are certain advantages. , for ae consumer wants while you have a monotony. A oneoffsunny they have the same issues that walmart does, or did. And that is something that we are watching in the months ahead. Monopsony in my car to disable it demonstrates a good cash flow machine, absolutely. Anything that creates stability control is something you can price and analyze in the present case. Isyou would not say this something a Value Investor would look at. There are two parts to amazon. One is what they are currently doing and what amazon says, if we are stopping growing, we are making lots and lots of money. Lets go back 20 years. The sameevision was promise, and to an extent comcast delivered with that same investment to cash flow. Will they someday make that shift . Have the infrastructure in place that if they would slow down their rate of low investment, there would be a lot of profits. That is interesting. I had not appreciated that Value Investor look at amazon. No intention of slowing down investing. I want to get started on ebola, front and center. The World Health Organization declares nigeria ebola free. We saw that at the beginning of the 6 00 hour. The pentagon puts ebola front and center. They will bring in medical experts to delve into the military. This goes to the uproar over the klainnd with mr. Being selected by the president. The fact that they are changing the protocol, that is a Doctors Without Borders protocol, not ac dc protocol. The pentagon is front and center. A company that was also going to report earnings after the bell but instead did so before the bell was ibm. Shares are down six. 5 , seven. 5 after ibm says it is abandoning its forecast are after ibm says it is abandoning his forecast. They have a cloud, clouds of employees at ibm. My agenda item today, i am looking at data coming out of the brazil elections. To see what effect the poll has on the Capital Market and the stock market of brazil. Stephen king, it seems that through the entire local the entire process, the mood seems dilma. G to anybody but is that justified . That furtherthing slow down with high inflation. Big current accounts and balance of payment deficit. It is vulnerable to a china slowdown. But all of these things kind of matter. They have a big mess that is created over the past couple of years. And for that reason, you do not like brazil right now, do you . Petrobras is ake perfect example. Whoever gets elected will not be able to snap their fingers and change all of these prohibitive factors hurting petrobras. Petrobras faces Government Intervention at every turn. Whoever gets elected is not going to change that overnight. They will not have that much power to do so. Lets get to the twitter question of the day. U. S. Ked you all, is the still the Global Engine of the economy . Stephen king . I disagree. It is a huge impact on financial markets. Payroll Still Matters enormously. Part of what big has happened over the last few years. Answer number 2 the u. S. Is one of several engines in a long, heavy train of global economies. I love your idea earlier of climbing a mountain, tethered up. Think you are getting going in the u. S. And things are improving, something goes wrong somewhere else. This is ultimately what economics is all about, who can create the best metaphor. How about this one as a metaphor yes, the problem is that europe is a parking brake. The engine, europe is a parking brake. Is europe a parking brake . I think the key thing is that Angela Merkel is doing a deal. Very good. Stephen king, thank you so much, from hsbc. David herro, nice to see you. A little data check. Futures, negative six. Dow futures, scarlet, 90. In the loop with betty liu is up next. Good morning. It is monday, october 20. You are in the loop, and i am betty liu. Snap chat needs money to grow. It is diving into advertising. This follows googles poor numbers on friday. Also, all the rumors about a i will check in with a formal official who knows plus, amazon, plus Sameday Service comes to new york city. I will talk to Jason Ackerman about what it means to go up amazon. A behemoth like and a Success Story in the fight against ebola. The World Health Organization threeigeria is now ebola ebola free. The country has just 20 peop