Transcripts For BLOOMBERG Bloomberg Surveillance 20150128

The new greek government complained that it was not consulted about the possible new sanctions. It is decision day for the fed. The fomc releases in new statement today. Policymakers are pledging to be patient on the timing of rate increases. Im going to use a tom word. Another stunning quarter for apple. The Company Posted a 30 jump in revenue to 74. 6 billion. Here is ceo tim cook on a Conference Call. Interest in apple products is at an alltime high, with over half a billion customer visits to our physical and online stirrers stores during the quarter. We had sales of over 74 Million Units driven by the unprecedented popularity of iphone 6 and iphone 6 plus. Up next for cook and the company, the apple watch. Tiger woods is back on the golf course. He is showing off a full set of teeth. Last week, he lost a tooth in italy when he was hit in the face with the camera while attending his love, Lindsey Vonns world cup ski victory. I still had my mask on so no one knew who i was. I was trying to blend in. There are not a lot of brown dudes at ski races. [laughter] tiger woods keeping it light. Lindsey vonn the most world cup wins and womens ski racing. Is he now a trophy husband . That is a good question. We will have to see what the golf course says. He is 35 or something . Agent. I think he is my age. Ancient. I think he is my age. I am a lindsey vonn fan. So i say he is a trophy husband. Olivia sterns. Oil is turning a little bit. I dont want to overplay it. On to the second screen. The resiliency in equities. Switzerland, the 10 year the positive news is that it is positive. A little bit of an ease up on the swiss carnage of a week ago. I made a mistake. This is been a lot of good work there has been a lot of good work. Give the website a try. We have tried to revolutionize the clutter that is out there. It is clean. I have a surveillance correction. Tiger woods is 39 years old. I did not know that. Lets go to the bloomberg terminal. Yellen and draghi. Draghi has had struggles in liquefying the balance sheet. That is the difference the janet yellen faces today. We will see whether it has the desired effect. This is just a things the central bank can do. Whether it will have an effect that will be interesting. We will have full coverage through the afternoon on what your Federal Reserve does. To apple. They simply made history yesterday. Brian weiser joins us from portland oregon. We will talk about the cupertino cash machine in a bit. The fed. It is the first do no harm type of fed meeting. The could just make slight upgrades to the Economic Assessment and walk away and that would be a successful meeting. We are growing at a 5 annualized rate over the last two quarters. Lets look at the debate. Simon kennedys quote. The basic idea is that Morgan Stanley says, we are going to delay. The lowflation expectation presents a persistent Downside Risk to the u. S. Outlook. She is front and center, isnt she . Absolutely. The fed is trying to be patient. Financial conditions are already tightening given the strong appreciation of the dollar. The stronger dollar is going to weigh on the export sector and different profits. It is already starting to create down drafts and slow the economy down. I have been chewing on the word patient. It is the feds way of saying, were still figuring it out. They are still looking at the data. I think what the fed might be missing and this is going to be the critical thing to watch the minutes of the december meeting indicate that they were starting to have some doubts about the inflation outlook. They know Lower Oil Prices will weigh on headline inflation. What happens to the core . Well it strips out food and energy, it is still sensitive to energy. If we look at previous episodes were oil and gasoline prices fell as much as they have core inflation decelerated significantly. The fed is not going to have the confidence that deflation is going to hit targets if core inflation decelerates by 40 or 50 basis points. Is janet yellen going to talk about mario draghi . They are going to talk about that, but it certainly wont show up in the official statement. That will be more when we see the minutes in three weeks time. It will be more about the strengthening of the dollar. You said it is already hurting the economy. A lot of economists say exports are 13 of gdp. Corporate earnings are an important driver of economic activity. All of these multinationals are being hit by the stronger dollar and they pull back on the pace of hiring and that would be a problem for the fed to continue on that meet your trajectory. Your job as a fed watcher has changed. It is the minute stay that is exciting now. Especially when we dont have these postmeeting press conferences. That would be the one left Field Development today is of the fed comes out and says, this is the year we are probably lifting off we are going to have a press conference after every meeting. That is something they are looking to move toward but there is no reason to expect that. Brian weiser is with us as well. You dont follow apple. I dont, but it impacts everyone. I have never seen this. I have never seen a company mint 255 million per day over 90 days. Have you ever seen anything like this . Standard oil . [laughter] that is the point. It is the most profitable quarter in corporate history. 18 billion per quarter. This is not about gap earnings. It is about cash generation. Have you ever seen this . Not specifically. This speaks to how apple is slightly outside of your world. Silicon valley is looking to turn eyeballs into analytics. Apple makes pretty products that exist in the real world. Olivia has great charts to get is going. Can you imagine what they are going to do with the dividend . Your kids should own apple. Await, they do. Oh wait they do. [laughter] Perfect Question to the twitter question of the day. Does apple has apple p question has apple peaked . You can now see the brandnew bloomberg business. I cant tell you how thrilled i am to make the post first public phonecall with the iphone. Ancient history. Who would have guessed that apple would be boasting 75 million iphones sold in just one quarter. It is the gdp of yemen. It is the population of turkey. 18 billion. That is the dominance of it. It is extraordinary. It is driven very much by the iphone. 70 of the revenue comes from the iphone for apple. Every other Products Group at apple is in record territory. You are looking at the yellow line. That is the dominance of iphone. Is it a good thing that apple is so reliant on its products . They have been consistently proving every tech journalist wrong. We talked about how terrible the at t network was and it has been fined. Who needs an ipad . It turns out everybody does. Brian weiser is with us. The world that is talked about is ecosystem. What is ecosystem . It is all interrelated participants. It is media owners, advertisers developers of apps. To the extent that everyone has to think about apple first one they are building something, whether you are going to design and add that is just an example of how they catch everybody. Apple is the new html. They have a lot of power. One of the things a lot of investors are hoping for is that yahoo becomes the default search engine. How . That is what yahoo would like. I would like a pulitzer prize. [laughter] in their dream. Is there anything but apple . Who is designing for android . To be clear, this is a duopoly situation. You cannot ignore samsung either. Poor microsoft and blackberry. Here is a number. Scope and scale. This shows the dynamics of what they are doing. They made 60 billion in Free Cash Flow. That is double what they did forfive years ago and that is off capital expenditures. I have never seen this. I have truly never seen this. They are sitting on a cash pile of 178 billion. Second by buy all but 19 companies in the s p 500. Has apple peaked . How can this growth cycle continue . I have a quote from piper jaffray. They say, apple will definitely keep cooking for the next couple quarters. Get it . [laughter] cooking . A mention of google decided not to focus on things outside of advertising. Imagine if google decided not to focus on things outside of advertising. They are spending so much money on things unrelated to their core business. Google. The contrast. Apple is very focused. That is a huge difference. Give me another factoid. How about this one . 556 per every american. Apples biggest market is china. They have less than 10 of the market in china. We will show you how apple stacks up to competitors in china. The only tech company that is actually growing is xiaomi. This is about a premium product with premium products. Rignet china choate chart bring that china chart up again. They are stealing samsung. Apple is tooling along at 7 . What does this say about doing premium . They own it. That is safe to say. You need the mass market if you want to drive it totally. Does apple have a massmarket . They are on the edge of it. There is still a massive opportunity for one or two other players. Wait until xiaomi starts producing in the u. S. Does Apple Software need to be fixed . I dont think so. The app store had recordsetting profit as well. Tim cook said, nearly one billion apple products are out there on the market. It is totally unprecedented. Tim cook said this volume is hard to comprehend. That is correct. It is not about product or fan boy or fan girl. It is economics. The cash generation of this we have never seen. Not at exxon, not at standard oil. s apple is serious about research and development this is like a cold war arms race and they cannot compete with apple is dumping this money into r d. This is the discipline they have versus google. They are investing in totally unrelated. Im wondering if apple can afford to buy greece . [laughter] what we are struggling with right now is comparisons to describe the scale of this. We have the cold war, standard oil. That is our twitter question of the day. Has apple peaked . As it reached standard oil proportions . Will it be broken up . Good morning, everyone. Im tom. I use apple. Olivia sterns uses apple. Brendan greeley uses apple. Victor, the camera guy, uses apple. Can i not talk about apple . [laughter] in europe, there is this strange notion that all the grasshoppers live in the south and all of the ants live in the north. To grasshoppers eat ants . The ants saved all summer and the grasshopper fiddled all summer. Here is his point. The ants live all over europe and the grasshoppers are the bankers who colluded to create a bubble and now it is the answer were paying it off. Does the north get europe right . I think they need to think about this differently. Austerity in a time of economic recession is not the right prognosis. They are forcing the spanish, greek, italian economies too slow. The one point that greece wants is debt restructuring. Is there a precedent for this . I think we will see this in the near term. Greece needs to clean up their tax code. The need more revenue. They do not have more revenue. More revenue means more austerity. They are really in a catch22 here. I am pretty sure i had to read a baudelaire poem in praise of the grasshopper. That probably says a lot about french culture. [laughter] you should take that to brussels right now and give a performance of it in front of the collectively assembled finance ministers. Does greece have it right . Or can germany survive without greece . Germany can certainly survive without greece, but the real problem is that germany is holding back on any type of stimulus including tremendous resistance to the latest round of qe. They are forcing their neighbors to have significant problems. There can be a lot of unintended consequences. German austerity is a lot like what we saw after world war i with the west forcing reparations on to germany. Interesting. We will be back in just a moment with more on bloomberg surveillance. This is different. Good morning, everyone. There is not much going on in the markets. That is the first time in days that i have been able to say that. It is pretty quiet. In top headlines, that is not the case. Boring old earnings news. At t beat profits in the fourth quarter. Revenue rose to 34. 4 billion. That is 200 million above expectations. Nintendo is raising annual earnings forecast. The slumping japanese yen is cushioning the impact of the stalling sales. Annual net income will be 254 million. Harvard university raised a record 1. 2 billion in a single year, beating rival stanford and a decade. Harvards hall is the largest in Higher Education and represents more than the entire endowments of all but 70 u. S. Colleges. In at t, their Free Cash Flow growth is flat. They are also struggling with competition. Apple is alone in its class. Olivia, what do we have . We are turning to russia. Putin is skating on thin ice. The s p downgraded russias Credit Rating to junk. Chris, thank you so much for joining us from moscow. The eu and the u. S. Are talking about another round of sanctions against russia. What kind of economic and political impact would another round have . Is sanctions come, they will add on to the existing stock of sanctions. There had been a fear that we could move to something far more serious like the banking system. What we are really expecting is that the sanctions will be adding to the sanctions we already have. It does not really make the situation that much worse. The more serious sanctions to hit russia were last august. That remains the most serious round of sanctions. Some embellishment of that. Is the junk rating the game changer . Or does putin shrugged this off . In the long term, it is a serious issue. It will make it a lot more difficult for russia to pull out of the crisis once we get through the politics. It is a lot easier to use to your lose your investmentgrade status than to get it back again. It does not materially change the difficult situation we are already in. Russian banks and companies have not been able to access foreign Capital Markets since last august. It is immaterial what the rating is to some extent. It does add some extra cost to companies with existing debt. Some extra cost. If moodys and fitch follow this it is going to be a lot more expensive and difficult for russia to pull out of the crisis later. You write in your february outlook that they may have to change their commitment to letting the ruble float if they experience further downgrades. Do they have the reserves to do this indefinitely . Russia does not have the reserves to keep defending the currency. That is for sure. We do say in our report that it is a deliberate policy of the kremlin to allow the ruble to keep going down with the Falling Oil Price because it protects the budget in local currency terms if the budget has enough rubles to raise pensions, publicsector workers salaries. If you protect the broader population from the effects of this downturn. Last year, we saw the central bank intervening on a number of occasions. That was more to stop a freefall and preventive panic. If the Oil Price Goes down to 40 than i would expect to see the ruble go back up toward 80. I dont think they will try to stop that. If sanctions were to move to a different level you guys have been talking mug global currency wars. If that were to change the picture, that might provide an excuse to be more defensive in terms of capital controls. I do not see the central bank or government wasting reserves to try to match currency and oil prices. I want to play some sound from Maurice Cramer when they made the downgraded to junk yesterday. There are some businesses that have been built up during the oil boom years. The buildup of assets is the rainy day fund. Theyre probably rather puny. Do you agree with that . No, i dont. I think that russia has enough reserves to carry it through its existing situation. Russia has enough money to carry it through for several years. Not indefinitely. Russia runs a very large trade surface. When you do the calculation idols who russia having a problem for about three years. Just a final question. You have been living between london and moscow for years. When you hear us in the west debating the russian economy, what do you think we are missing . It is not a question of understanding. I just think people are making assumptions of continued deterioration. That is one of the things that western observers miss. How important keeping the economy stable is for the kremlin, for president putin. That is the whole basis of his popular support. If the economy or to go into deterioration longterm that support would weaken and would undermine his position. I think people in the west underestimate how important the economy is, getting back to longterm growth in the economy is. Therefore, last year, the measures the kremlin took to try to mitigate the effect of sanctions these things are important. It means that you are not going to get any unusual actions from the government. They will try to mitigate the effects. Got it. Thank you so much for your time. Coming up, there is a new normal in the business of pork picks. We will explain what it means for china. This is Bloomberg Apple surveillance. Good morning, everyone. The most anticipated interview of the week. Ellen zentner. We really looking forward to that. I think we need a chart that is single and porcine. Did not use that word. [laughter] we talk about conquering production, shadow bank liquidity. Today, we offer chinas poor kurds. Opork herds. You have the hog herd and the port sow herd. Sows are girls . Yes. Thank you. [laughter] port consumption pork consumption in china is correlated with wealth. Farmers in china are not making big plans for the coming year. The general Economic Outlook and the crackdown on corruption. These are not independent developments. The crackdown on corruption is of the slowdown. Why does our control room always have to show cute little pigs . I am a vegetarian. What makes you think that the chinese economy is not turning vegetarian . [laughter] seriously. There is not a lot of cultural precedent. [laughter] there have been so many chinese chicken scandals. I know. They are looking for specifically hog production in the u. S. Those supplies are less likely to be tainted. That is what you see from the acquisition of all these companies. Smithfield. This does big to the cultural part of any economics. Did you just point at olivia when you said pork . No, i said chicken. When economies become wealthier, they increase protein consumption. Poor chinese are forced to be vegetarians because they cannot afford meat. As people become wealthier, they eat more protein. You can become more wealthy and still remain a vegetarian. [laughter] im not sure if that shows it. Chicken, pork, stake, rice cakes. Is this the hierarchy . Lets go to brian. Combo jeff komnbucha. The real problem with the pigs is what is coming out the back. The methane. I will leave it at that. [laughter] a view of destroyed call bonnie kobani streets. 1600 people have been killed. Kobani is in iraq on the border of syria and turkey. Turkish troops can see it from over the border. They can see the smoke. There were so much resistance within turkey to get involved in the ground fight. You can continue as an insurgency only if you are supported by some larger power. In ukraine, there is a larger power funneling money into the insurgency. You cannot combat a movement with a ground force. President obama and Michelle Obama visiting and saudi arabia. Many Saudi Arabian officials did not shake hands with Michelle Obama. They gave her a head nod. She did not wear an optional headscarf. Im curious why we are calling it optional. I guess it is optional if you are the first lady head of state. The woman behind her seems to not have a headscarf. It was a significant snub that they did not shake her hand. When they had chosen to wear a headscarf, they were more cordial. The politics of this are amazing. All over the world, as other economies adopt western Business Practices they have an extraordinary power to show up and have the american president hold their hand in texas. They should just take the king for a ride in her car area women cannot drive. [laughter] kobani is in syria. Excuse me. It is in syria. This is 3rd avenue yesterday. Do you think this is a real polar bear . No. That is a mechanical polar bear walking across the millennium bridge from the tate modern to st. Pauls. This is part of a stunt. Fortitude is a crime thriller which follows a community after a savage murder and takes place in iceland. I simply this was a greenpeace plug about global warming. Polar bears are always hungry. There is no such thing as a fat polar bear. Even when they are fat, they are not fat. Fascinating. [laughter] there it is. The wildlife report. [laughter] watch out. Coming up nato discussions. Good morning, everyone. Bloomberg surveillance. Headlines out of ukraine. We will get that deeply in the next hour. Jp morgan chase reportedly made as much as 300 Million Dollars after the Swiss National bank abolished its cap on the franc. Jpm was among the few winners to emerge from the turmoil. Others lost a combined 400 million. Sony plans to eliminate another 1000 positions as it tries to slash costs and return to profitability. Yahoo announcing a taxfree spinoff of its stake in alibaba as Ceo Marissa Mayer tries to hang onto her job and give activist investors part of what they want. This he to maximize the return of cash to shareholders. Spinco will own all shares of alibaba which are valued at 40 billion. Those are your top headlines. Spinco . Is that because it is being spun off or because the spin they are using surrounding it . Because it is being spun off. Brian weiser. We understand Digital Advertising better than we had before whenever you come on the show. I want to start from scratch. I am a company and i make widgets. How do i go do that . You would start with the inhouse Marketing Department and figure out what your Marketing Department could do themselves versus what an agency could do. What is better than what we are doing now . It is always a process of what is better than what we just did to sell what we are trying to sell . If i say there is data out there. You talked about salesforce. Com. They offer a software solution. But your point is that these Software Suites are not worth anything unless they include customer analytics. Right. The most important layer of data is the analytics. Salesforce. Com, oracle, adobe are really focused on that. That is the most important thing to start with. Who is getting it right . Everyone is figuring it out. It is such a greenfield environment. We keep hearing about big data and cloud data. I dont know anybody everybody is like, ok, now what . Give me an example. One of the best in class players was just bought by oracle. What do they do . They match data between consumers and sales. Trying to correlate the fact that you went to a store to buy a vegetarian food product and that you went to a website, say facebook they can correlate the activities. Realworld data and web data to correlate how to get in touch with olivia. Nice. I met with the force behind the advertising effort at facebook. What are we going to see from them out of earnings . We are going to see more ball hitting out of the park. They barely got going when it comes to mobile apps. I spend money on facebook promoting stuff and interviews we do. Our Big Companies doing that . That is the Money Company question, isnt it . The bulk of mobile spending has been an App Developers and not big brands. What is facebook doing right that yahoo is not . They tackled usage first. They have more usage than yahoo ever did. They built add products to support. They are sitting on behavioral data and yahoo is not. They are cheap. Yahoo is not. Thank you. Facebook is stunningly inexpensive as an advertiser. We could go an hour on facebook as well. Brian, brilliant. Thank you so much. Look for carls analysis at 2 00 p. M. This afternoon. How about a forex report . The ruble is a little better, even with the ukraine grim. Still south of 70. European leaders are expressing more support for another round of sanctions. We focus next on ukraine. Stay with us for that. Dell futures, will they go the other way . Stay with us. Again, ukraine, as the United States provides billions in loan guarantees, fierce fighting continues today. Fortress cook trade 10 times earnings. \is deal. And there will be no press conference as the fed considers 2015. We are live from our old headquarters in new york. Its wednesday, january 28. Im tom keene here with olivias turns and Brendan Greeley. Fighting once again spreads in ukraine. The u. S. And europe are worrying about additional warning of additional sanctions after a rocket attack over the weekend. And greeces new government is questioning more sanctions on russia. The Prime Ministers sir reza Led Coalition syriaza Led Coalition complained it was not consulted about the new sanctions. Policymakers are expected to retain language claiming to be patient over an Interest Rate increase. Officials are said to raise rates this year for the First Time Since 2006. Another storm the stunning quarter for apple. It boosted its sales to the highest in three years. Company revenue rose to 74 74 billion. Here is tim cook on a Conference Call with analysts. Interest in apple products is at an alltime high. Demand for iphone has been staggering, shattering our high expectation with sales of over 74 Million Units driven by the unprecedented popularity of iphone 6 and iphone 6 plus. Tim cook is just bewildered at this success. Up next, the apple watch, the companys first new product category since the iphone. Shipments begin in april. Tiger woods is back on the golf course yesterday in arizona. He showed off a full set of teeth last week. He lost a tooth in italy when he was hit in the face with a camera while attending girlfriend Lindsey Vonns world cup event. He said he tried to stay low during the event. And tried to blend in, because there are not a lot of round dudes at ski races. [laughter] help me with this. I dont know how far behind you are. Did you know he was dating lindsey vonn . She is the most successful woman in skiing. Are not sure he deserves her. Not that my opinion matters. Im not sure what he was trying to hide. Ease 10 years older and not really experiencing the same level of success on this. I think i may be with olivia on this. But i feel like im on dr. Phil. I feel like im on dr. Phil. Lets get a data check. Its very quiet out there for the first time in ages. We will focus on ukraine. We have really avoided this story, much to my regret. And my fault, i might add. Lets go to peter cook. The secretary of the treasury will make some noise today on what the u. S. Will do on ukraine. What will secretary jack lew do . He is showing support for the Ukrainian Government and bringing the promise of more u. S. Money to help ukraine through its current financial rice is, much less crisis much less military crisis. Another 2 billion in loan guarantees is the offer from the united date, one alien dollars in the first half of 1 billion in the first half of the year and the second billion in the second half. And once again talking about nothing of sanctions on russia. There will be a meeting of the eu ministers on thursday. What is the likelihood of furthers sanctions . I think they are excellent at this point. You had the u. S. And german chancellor merkel talking last night. There is little else to do to show discomfort over what russia is doing other than sanctions. And there are more arrows in the quiver. The u. S. Can step up sanctions. I would not see sector sanctions just yet but there can be targeted sanctions in the energy the energy sector. Is the u. S. Freelancing year . Here . The u. S. Is part of the imf so its on top of what they are ready have, but the ukraine needs 15 billion on top of the 17 billion bailout from the imf. Its financial situation is in rough traits right now. Theres the threat of default and to some extent, there is concern that what Vladimir Putin is trying to do is turn up pressure and bankrupt ukraine and force it into default. A lot of things are happening in ukraine and this has come back on u. S. Foreignpolicy in a big way. Awaiting the fed statement patiently later today. I say patiently on purpose. What are we waiting to hear from janet yellen . I dont expect to hear much that is different. There may be focus like a laser on language with regard to inflation. If there is any hint that inflation will be moving back up to the target and they reflect that in the statement, then that will be sending a signal that the liftoff will be pushed back. I spoke to the former vice chair vice fed chair emailing this week. Yes and traveling. He is convinced its more like september this year. Tomorrow on the program Alan Ellen Xander will be joining us. We will talk about the aggressive call for 2016. Right now, we want perspective from anders corr and dan alpert. Dr. Corr it is wonderful to have you. Is this new or the same old script . It is the continued arrogance and aggression by prudent. By putin. And i think we are seeing a matching answer by the United States, and increasingly from the eu, in terms of trying to stop what putin is doing. Increasingly, the United States is militarily more involved. We actually have advisers on the ground. And the headlines is there a decision serious casualties and prisoner news in ukraine in the last 40 minutes or so. Prorussian rebels hold more than 600 ukrainians in captivity. This is a war, isnt it . It is, but its also a mess geopolitically. The one thing the eu does not want to do is over recognized putin as a threat. That plays to his hand. He wants to be viewed as a global threat in an economy that is, quite frankly, melting down. I watched obama at about half the u. S. Government show up in saudi arabia yesterday for the kings funeral simply to basically keep the saudis on board. The saudis actually have a great deal of control of what happens to oil prices, and therefore the russian economy going forward. You have done so much work on insurgencies and how they flourish when they are being supported by a larger power. Can we pretend this is an insurgency anymore . No, it is an invasion by russia. It is a rebel group that is being reported by russia on the outside. Just in the past couple of weeks, youve seen 200 Armored Vehicles come in from russia in the ukraine. Youve also seen over 2000 troops come in from from russia into the ukraine. Its a serious issue and we have to deal with it seriously. I disagree that putin does not want to be seen as a threat. He does want to be seen as a threat. Putin actually does not want to be seen as a threat. He desperately wants to be part of the world economy. His economy depends on the world economy. And he would very much like to be seen as a member of the world community. He wants to be taken seriously. Buddys not someone to have lunch with. But hes not someone to have lunch with. If there is a ground invasion, and there is antiof evidence from at least from u. S. Intelligence. What should the response be . Is the rest going to equip the ukrainian rebels . Is nato going to go in . We should definitely take a strong response in ukraine. I think ukraine has asked for missile technology. We need to supply that. Ukraine has asked for more nato advisers. We have a few for the National Guard in the far west of ukraine. We need to put a lot more divisors and there. I would argue we need to increase heavy armor in the area. That is something we will be talking to the europeans about. Still to come, we will be talking about yahoo will stop did Marissa Mayer talking about yahoo . Did Marissa Mayer just save her job . Good morning, everyone. This is bloomberg surveillance. Here is olivia sterns. This mornings mustread comes from the wall street journal and Mitchell Daniels writing that from 201013 according to young people, the first the percentage of younger people owning a part of a business dropped to 3. 6 from 6. 1 . Educational debt has cap has every other category, regions and 1. 3 trillion this year. He is arguing this is severely negative Economic Impact to my because we are seeing less and less entrepreneurship because students are crippled by this debt. I do this is such an important dog whistle, because Mitch Daniels a republican governor, the fact that he is taking this on his that he is slowly forcing the party in that direction. This is a serious problem that in one way or another needs to be recognized. I spoke with the chairman of the board of purdue and he said this is clearly a headache. Like how big of a burden is student debt . It is a shifting of a debt from one pocket to another. Right after the crisis we saw a buildup in auto finance and then subprime auto finance. That led to very good numbers in the auto industry. We have the educational infrastructure affected, and household as well, shifting from saving for school to financing school. When you add it all up Household Debt has not fallen phenomenally by anything more than 4 since the crisis. Yet, as a percentage of be it is lower, and as a percentage of Household Income it is lower but as a practical matter, its still there. Does Financial Assistance for student debt contribute to the problem or fix the problem . It introduced the problem insofar as any thirdparty payer system create limitation on rates. Creates very little limitation on rates. The amount of the bill how much are you at your idols your eyeballs in debt . You have, what, 14 degrees . [laughter] creswell, i actually managed to pay it all off. I think Community College well, i actually manage to pay it all off. I think Unity College is a wonderful idea. I actually went to Community College or i went to university. We will come back and talk about anders corr Community College to yale university. That is extraordinary. The fed will wait. Stay with us. Good morning, everyone. Olivia sterns and Brendan Greeley with me. Brendan has our top hits this morning. At American Airlines to the list of carriers that want to take you to cuba. The Airlines President s says American Airlines is anxious to start serving pubescent as it is legally allowed. It wants to add regular flights from miami. Delta, united, and jetblue have also expressed interest is president obamas announcement last month that the u. S. Would move to normalize relations. Fullyear profits was hurt for growth. Roche has no plans to move operations outside the company the country to mitigate its impact. And announcing a unicorn today, a taxfree spinoff in its stake in alibaba. Ceo Marissa Mayer gives investors of these part of what they want. This puts Alibaba Holdings into a newly registered firm called spin go spinco. Those are your top headlines. Quick Brendan Greeley is Brendan Greeley is going to get into a smart conversation on the future of nato, but this first. The president has come out and said hes in support of Community Colleges in a big way. What is it like to speak to the money went from city college of San Francisco to yale university. Anders corr what was your first if school at yale light compared to the last day at city college in San Francisco . Both inspiring. The move to make city college and Community College is free is a very elegant move. If you provide free college to a lot of these folks you can see Educational Opportunities increasing for them and better job opportunities. We need to get you back here for a complete show on this topic at a later date. Is a way to drive down College Costs as well. Were going to talk about nato. It was built to protect the interests of north america and democracies. Anders corr advises the u. S. Special Operations Command and he thinks that nato is not merely in our not merely large a lot of not nearly large enough. The last week in ukraine shows Vladimir Putin is on ambivalent about what he wants there. Do we need to also be on ambivalent about what our goals are . Quick our goals need to our goals need to be to protect democracies globally. We have some democracies in europe, but we are not including other democracies like ukraine. And we are not even fully including some of our nato partners. We need heavy armor to protect our nato orders like poland and the baltics. But we need to expand that because we are also seeing incursions from china into philippine territory, maritime territory. Those that are occupied by china since 2012. You also right that we should hold up to the treaty that we have with the philippines, with ukraine. Why not just draw a line around these guarantees in the already made instead of creating bigger ones with nato . I think we can do both. We need to honor our promises to the philippines, and our defense treaty with the philippines. But we also need a stronger and more united right as a Global Community of democracies. Currently, we are not united. Japan has bilateral treaties with united straight the United States. There is no real support from europe to the asian democracies. There is no multilateral formal Alliance System where asian democracies can help european democracies in crisis with ukraine and european democracies can help asian democracies in crisis in the south china sea. Ive got to bring up tom keene Favorite Book of 2014 new world order and he specifically speaks to this, that is the reason that nato was formed. There is no historical precedent that is what the book is about, that there is no historical precedent for a Security Organization like this globally. I think nato is a great historical precedent for a Security Alliance that takes on Something Like russia. Russia is collaborating in the east china sea. There are records of military flights against japan. Lets bring dan alpert in this. Is this feasible . Is not only feasible, but evidenced in part by what happened this week each ring modi and obama on by what happened this week between modi and obama. I hold on. Are you going to hold on. Are you going to recreate the hug . I dont know what just happened. But tom keene hug me. The idea makes sense. We sit around the table and we lay it out in cold blood. But it seems implausible that i could ever happen. But it is not implausible at all. It is not implausible at all. Democracies have never gone to war against each other with the potential exception of the falklands dispute between argentina greg we will be right back. For those of you on radio, Brendan Greeley and i just hug. It was a good moment. Apple sold record numbers of iphones. How long can they keep it up . Tweet as. Good morning. Im olivia sterns. Time for the top headlines this morning. We start with alibaba. They have a credibility crisis, that is according to the Chinese Government that says the online retailer has failed to crack down on shady emergence, counterfeiting, and shady promotions. The company has a recordbreaking 28 28. 5 billion ipo in september. The secondlargest u. S. Wireless carrier lured in more customers with promotions and tablets than expected. At Harvard University raised a record 1. 2 billion in a single year, leading rival stanford for the first time in a decade. That is, according to the council for a two education which tracks university giving. Harvards hall is the largest ever harvards haul is the largest ever. Stanford came in second place with a mere 228 million. Our guest is most skeptical of the word of the moment, diversions. Divergence. But japan thinks, we stink, and others are growing. I dont know how you keep that going. Beyond that, you have extraordinarily unit price breast are bearing down on u. S. Producers. One of the major unit highs unit price bearing down on u. S. Producers. It is the total number of producers. We bring in like whats we import it. What should be setting off alarm bells in everyones mind is how do you have a country like China Growing at 6 or whatever with inflation only 4 yearoveryear . That should be alarming everybody . That should be alarming everybody. Its not just oil doing that. It was already heading that direction. When do we go back to the land of arthur burns where we look at to cpi and not core cpi and we go back to the study of the animal spirit, nominal gdp, which isnt there with the lowinflation wherever you look . We have really been ignoring nominal gdp. Lets juice it and try to get it up as high as we can but the reality is, when you look at nominal gdp, the contrast is amazing when it starts to fall. You get these real gdp numbers that everybody claps over and then you look at nominal gdp and it hasnt really moved. The only thing that has moved is that in elation is lower and the real number goes up. Do you agree with her work that the fed is overcome by events, that they are vigilantes and forced them out in 2016 . As a practical matter, i dont understand how the fed, other than as symbolic saying they still have their hand on the till and are under control, i dont see how they avoid inflation. And then the currency wars and the strong dollar back them up act, do you get to a sub 2 30 year bond . You could. A lot of it will have to do with race elsewhere. We are still dealing with the capital bubble that caused the crisis and sluggish growth afterwards. There is too much capital and too much labor and too much production relative to aggregate demand around the world. Olivia, we need a data check. Futures are trading higher right now, getting an impact from boeing that is trading higher right now. The 10 year has little changed. We are looking for the fomc statement coming out at 2 p. M. The 30 year, still trading at a record low. The euro is ever so slightly down against the dollar. And nymex crude moving another leg lower on this record that u. S. Inventories are now at a three decade high. Good morning, everyone. Im tom keene. Olivia sterns Brendan Greeley with me. Brendan, get us started on airplanes. 4000 flights were canceled yesterday alone. Now all of those people need to get on the telephone and get a refund. Brian kelly, editor and founder of thepointsguy. Com. What do i do if im stuck at jfk . If you are actually at the airport, i actually recommend if you have lounge access, or even springing 50 to get into your airline lounge, those agents are generally the the best agents to rebook you and can look at options that others may not be able to offer. You are a 1 , you pay for better agents. With paying a little more for better perks can pay off. Paying a little more for better perks can pay off. But with this storm they knew it was coming. I called through to delta yesterday and got right through, although i am that 1 . Youve got to be your own advocate. If you are trying to fix at the last minute, then you are fixing in the wrong way. You should have fixed in a certain way. What do i need to do the next time i book a ticket to get it right . This is why we say it may make sense to give your loyalty to an airline. Even if you are a silver lever silver level flyer, you will get status over others. Times like this are when you need those perks even if you are not getting the upgrades anymore because the airlines are selling first class seat. We have a guy that just went to havana and survive. What did you learn . I was hoping you would ask because i was hoping to get on americans nonstop flight. It is extremely difficult to book travel. I actually booked the day that obama made that announcement. I had to fly through grand cayman, because those charters that you can now get on if you are a journalist our book for weeks in advance are looked for weeks in a dance. Do they know who the points guy is into by . In cuba . There were thought throngs of people. I was signing autographs. [laughter] when are they going to expand businessclass . Are they taking more rose out of a given airline to businessclass now . Absolutely, its about the premium travelers. They Just Launched a Business Class on the way to l. A. And San Francisco. First class on International Strike International Flights are shrinking and Business Class is growing. Olivia, where are you going this weekend . Im staying here. My next trip is aspen and dear points guy, would you please tell me how to do that . I will ask you during the break. In my the was, is premium economy the new business . It not the new business. Airlines are giving that to ely travelers because they are no longer getting upgraded. Its kind of the consolation prize. The Airline Still want to reward you with loyalty, but not with that flatbed. You got to pay for it. Every piece of advice youve given this morning is be important or cup be important. Exactly come and you dont have to spend a ton to be important. That is why youve got to read my site. You have an entrepreneurial spirit. You even invented this industry. Are you chase his friend . Are you barclays friend . Are you star with friends . Or are you the enemy . I would say everyone can win in the fourth game. In the loyalty points game. The Credit Card Companies want the consumers to get the most out of their points. The Credit Card Companies are paying the airlines. If anything, i think the airline id be a little uh but im everyones friend, tom. Thank you so much. You went to have on a with like 89. I will be calling on you. This takes us to the twitter question of the day. Has apple peaked . 75 billion, the most profitable Earnings Report in the history of the world. Tweet us. Good morning. It is time now for earnings edge. Boeing just reported results. A nice pop in early trading up 4 . Boeing came back and beat expectations, reporting 2. 31 versus estimates of 2. 10. There are lowering their 2015 geithner they are lowering their 2015 guidance. That is something we saw come through with Procter Gamble yesterday. We are seeing a lot of strength in the 737 max, one of boeing most successful model orders today. A nice job in early pretrading for boeing. The Housing Market recovery seems to be recovering, so why are home stocks not doing well . Betty liu will be discussing this on in the loop this morning. I is right. Why are that is right. Wire home stocks down about 4 this year . We are only about a month into the year, of course, but what is going on . Weve had so much help from the government. Without homeowners lowers we have had homeowners lower the Interest Rate. Fannie mae and freddie mac working with homeowners but its still a buyers market. We will figure that out. A new book on how to get an edge right now in the Housing Market. I have one solution for you guys. What is it . Why dont we just let the chinese come in and by the Housing Market . And buy the Housing Market . Seriously, shares in their markets have gone from 5 to 16 . Guess how much they pay on average . 500,000 almost four times of the costs of a house in the United States. It got a lot of money. Why not open the market to them . And ive been hearing about these chinese Corporate Partners buying up which will buying up bushwick. Its incredible. Then come the chinese. But they are the next trend here. What they are the next trend here. And another indicator, by near a starbucks. With i would never i would never buy based on proximity to a starbucks. Which comes first, the chicken or the egg. Collect the good news is, there are two on every block in manhattan. Make sure to tune into that hes interview with Spencer Prescott spencer raskcoff coming up. Good morning, everyone. There is a new voice in greece a new finance minister. Brendan will have much more on that in a moment. The single set of headlines is that greece renews their dialogue with the developed economies of europe. This is a huge deal. It moves the greecegermany spread. But the three year is moving right now the three year is moving right now, and its moving in realtime as jan is our pocket is talking. Yanis varoufakis is talking. Hes saying a couple of things, that greece needs trust and honesty with the eu. Heres what hes saying. That greases that greeces debt was treated like a liquidity problem. That greece was never going to have the money and will never have the money. Is this the new contagion of 2015 . The greek Prime Minister is actually prorussian. Hes not playing ball with the europeans. I think they see him as a bit of a problem. What where does his plane and right now . Is in trouble. You are saying, as predicament that he will look to moscow. When all of the leaders get like get together like that, it works a lot like the senate, except that everyone can filibuster indefinitely. I guess greece could blow up again, but the issue is that everyone sees greece as discrete and separate. You agree or is there a knock on effect . This is hitting the eu at a particularly bad time in general. The eu economies are not doing very well, with the exception of germany. When you look at the greek problem, and i think there are two issues that are relatively simple. You can stretch out the payments. You can lower the percentage of gdp that is used to make the payments. The problem right now is that somebody else prints the currency and they need that currency for at least the shortterm. This should be able to pay the bills, but right now they cant. Does a weak euro benefit greece . Or does it matter . A doesnt really matter. They want to go back and renegotiate what happened three and four years ago. I think we will watch a buddy cop movie between Michael Neuner Michael Noonan the finance minister in ireland, who as a conciliatory things that greece, and the leaders increase. Although ireland was able to cut their deficit significantly in an environment of very low growth, in fact, in an environment of contraction. There is lies the contagion. Yet the population that has risen up and that, no more. Then you have spain, even ireland, although ireland is pretty much out of it. And they have pulled that string in the ballot box, not the street. And they have said, we want a better deal, too. Maybe this will be healthy. Maybe this will be healthy. Maybe there will be healthy renegotiations. God knows the others were not sustainable, because look at unemployment. Jim suva from citigroup, and there are a zillion reports and they all say the same thing but here is a stark reality on this juggernaut. This is from any corporate story that we would give you. Apple stock is not expensive. It trades at 13 times forward or 10. 4 times excluding cash. This is a 37 discount to the s p. Ive never seen it. It is an incredible cash producer, but moreover, look who they are selling a product to. They are selling their product into china, emerging countries. Everyone wants a piece of that phone. If you look at the percentage of sales were of sales represented by the phone, its actually the phone. To a certain extent of apple is a chinese company. They make stuff in china and sell stuff in china, and they are making a lot of money on offshore tax havens. I want to pull the chart on growth in china for apple. Iphone sales doubled. But xiaomi and lenovo are the only two companies with any kind of sales growth in china. Its true. When you look at the potential going forward, if you want to invest in a u. S. Domicile company that will actually have the benefit of growth and Consumer Spending elsewhere this is not a bad bet. I still cant get over the scale of some 18 billion in quarterly profit. That is the gdp of yemen. That is an important point. This is critical. That is the status point the static point analysis. Tim cook does not think that way. He thinks flow analysis. Ive never seen this with anything in the cfa. There is no equivalent to this ecosystem and juggernaut. If it almost feels monopolistic. Well said. It is like rockefeller and oil. For affairs, foreign policy, all of the International Relations people have to adapt to that cell phone, dont they . [laughter] collect you know, sometimes you know what sometimes the man with the bow tie said to you things you have no idea. In china, they asserted Indigenous Production for the chips to protect in cyber security. They are worried about americans and others spying on their system. They are developing their own process. With all due respect, i totally disagree with the monopolistic thing in hardware at least. In no market does the iphone have more than a 50 market share. They are monopolistic in the same way Christopher Walken is monopolistic. He has a lock on chris for walk in roles. When a knee Christopher Walken, they can only call me, he has said. We will have to talk about Christopher Walken. But this does bring us nicely to our twitter question of the day. Has apple peaked . Currency at a win, minimal innovation. I yet i have yet to see endnote flagging the innovation. I think tim cook did a good job of hedging his fx. Our first answer, market saturation, currency headwinds minimal innovation and this brings us to the issue of price point. Lets go back to whatanders was saying to minutes ago. Two minutes ago. They dont come from the united from china. They come from korea and you will the u. S. And elsewhere. Its not just china. Dont stop there. The next answer, apple has secured its place in history. Certainly, that is true. The most profitable quarter in corporate history, taking the honor from gas from in 2011. We have been having to reach into history all day long to figure out the best form. The model t ford, for example. Another word that Steve Jobs Used which is a fedex. Its not only the physical aesthetics which is aesthetics. Its not only the physical aesthetics, but financial aesthetics as well. It is truly historical what we are seeing. It has shifted from fan boy to juggernaut. Maybe they need to different kinds of ceo. They have the innovator and now they have the distributor. We will go back to bread and butter. We are fed watching today. We dont really care about the rate decision, because it doesnt change. We will look at language and what it might mean for the future. X in ukraine, huge escalation in violence since the rocket attack over the weekend. U. S. Officials are in europe trying to garner support for another round of sanctions against russia, who the u. S. And the west accused of being behind the conflict and the backers of the separatists. It will be interesting to see how that plays out. Sanctions coming as soon as thursday, they are saying. Thank you so much, dan alpert, as always. Anders corr thank you. Stay with us. Tell the truth. How often do you use zillow at home or at a friends house. We will talk about why with all the government Housing Markets, it is still struggling. Plus, president obama offers a compromise on offshore drilling years after the bp oil spill. Will it be enough . Well ask a longtime advocate republics meant a republican congressman who says no, is not happy with what happened yesterday. And technology will make it tough for american countries. The strong dollar is helping other countries, including nintendo, cashing in on the wiki engine. First, a look at our top stories. Policymakers wrapping up today