Transcripts For BLOOMBERG Bloomberg Surveillance 20150225

New economic policies are just a starting point. Alexis tsipras got praise for a fourmonth extension of the bailouts, but the central bank and others say actions speak louder than words. The head of the euro finance minister groups says greece has a turn those actions into those words into actions. It has to be happening in the next weeks or months, then there might be new money available. The question is what should we do with what has not been decided yet . Olivia imf chief Christine Lagarde says the greek proposals do not offer assurances of those reforms will happen. Brendan ukraine has shifted to a diplomatic front. Paris russia, ukraine clash over who is violating the ceasefire. The government says overnight rebels attacked Government Troops in the area near the port of mariupol. The veteran who killed chris kyle has been found guilty of murder. A jury rejected Eddie Ray Rouths insanity plea. The judge has sentenced routh to life in prison without parole. Kyle was a former navy seal who was trying to help routh cope with posttraumatic stress disorder. Tom the president in miami today, but before that, he said the controversial Keystone Pipeline built back to congress. He vetoed the bill affirming keystone the pipeline stretching through canada, nebraska, through the United States. Congress does not have enough votes to override the president s the tell. Obama said the pipeline will not create many jobs and will not reduce u. S. Oil prices. There is Something Different about tonights episodes of abcs modern family. Producers put away the expensive cameras and shot the entire show on iphones and other apple toys. Cocreator Steve Leviton talked about how he got the idea. Steve this just came from my life. I was faced coming with my daughter in college and i was looking at my screen, and there were some emails in his crib i was working on, and i could the her and i could see myself and my wife standing behind me and some webpages open, and i thought well, this really creates an amazing picture of my life. You can tell a lot about me from this amazing this one screen and that is where the idea started. Tom there is mr. Levitan. We could do this. Brendan heres what i want to know from Steve Levitan how do i manage that footage once i have shot it . Oh i am not olivia they have a production studio behind them. Tom i would assume apple flew in like, 45 people to be sure that they got it done. Lets do a data check. We will not use our itoyrss on this. What an interesting response to Janet Yellens comment, yields come in dramatically, euro stronger, dollar weaker, nymex crude now solid below 50 49. 49. The vix 13. 69. That is a big change. This is the flatness of the yield curve ever flatter off the yellen testimony. Yen below 119. Jon ferro with a nice job on this in ireland as our london team spoke with irish authorities was up under 1 . We should stop there and say that its really something after ireland truly fell on the sword, unlike so many others. Brendan i also think michael noonan, who is the irish finance minister, can do a great job of teaching yanis varoufakis. You do not ask for things in public, you ask for things quietly, you offer things in return and you participate in all of these boring meetings when you do not need tough in order to earn goodwill when you do. Tom ok, lets go back to the United States. This is fascinating. This is nominal wage growth in the United States back to lbj, nixon. This is the money illusion, the wage illusion. We all got pay raises back here, and then we have a lovely cyclical move of 4 topline wage growth, and it is not happening. This is what janet yellen is pausing for. This just has not happened. Brendan this is something economists have had a hard time accepting. People do not calculate inflation. They look at year on year, and if so, they get a raise. Tom it is all quite or mostly quiet on the ukrainian front and that is the main fronts, kiev and the west base we will discuss the parlor game of Vladimir Putin but after months of prorussia success after months of stare down merkel, hollande, and indeed obama, who in russia actually supports putin . David servo is chief Market Strategist at christopher granville, who leads a team of trusted sources, we are thrilled to have you here this morning. Who has Vladimir Putins back in russia . A large part of the public. He has been extremely popular because they sense of national security, national respect which was entirely lacking in the chaotic decade. Tom when did he earn that respect . Christopher he was president from 2000 to 2008 full stop in that period gdp doubled, Living Standards were never higher than they had been before. Tom is he perceived as a kgb guy who is running the country or sec and other different way, as a government official, as a leader, as a czar . How is he perceived . Christopher a czar. He is associated with stability and respect, but like any longlived incumbent and power his rating has been going down from a high base a base which western politicians would dream up, but it has been going down until last year. Brendan he is a master of using the russian media. He said basically Vladimir Putin tell the russians what to think and then he uses what they think as further evidence that he has to do what he wants. To do. He knows how to run a cycle. Tom do you agree with me Brendan Greeley, that this is a putin we relate to sovietera politics, and what i hear from mr. Grenvilleanville is no, it is a presoviet russia. Which kennedy . Which can it be . Christopher he is a National Leader and is perceived as such. Under the propaganda, todays financial times, i think the Crucial Point to make is the russian people have been propagandized throughout their history, especially during the long communist period and they can spot when the propaganda is completely false. They used to talk about doublethink, where you have one compartment of your brain that deals with ordinary like him and the other part that deals with propaganda from the communist party, but it strikes a chord with the people because they believe crimea is russia and should be russia and the people outside ukraine are being shelled by the Ukrainian Army and they are. So it goes to a grain of the certain truth, even though like all propaganda it distorts and in sizes one and emphasizes one part of the information. Brendan going back 100, 70 years in russian history. Christopher it is useful up to a point. I am british myself, as tom said, and if you are a british person, you should bank of ireland and the division of ireland up to 1920. Tom lets bring this conversation over to germany and we will do that later this hour with christopher granville. Translate to birkeland, there are some nuances in the yellen testimony. Why are the paper such a jumble this morning . Some are looking as she is waiting and waiting for wage increase, others say markets spoken there will be a delay. How do we get most stories . David she is as opaque as she has ever been, and that is probably what she wanted to achieve. The first testimony was to transparent. He First Press Conference back in march of last year when she came out, he one of last year, she came out and gave specific times and the market sort of flipped out on her. She realized opaqueness works much better and giving them the flex ability they need to go forward and look at the data. Everything was about data dependent. June is probably on the table but very close to the edge of the table, and i think the markets are focusing on the fact that sort of push to the edge was a slightly more dovish tilt. If we get a great payroll report at the end of this month, the market will be back to a 10year note before you can blink and they will all be talking about june again. Olivia the interpretation of the newspapers has been a bit muddled, but dont you think janet yellen did exactly what she set out to do you cope she said nothing. David exactly, the old greenspan technique. Brendan it is a little bit like a president ial press conference. Success is if you come away with no news and complete performance. David right. The s p moved a quarter of a percent, the big move was only b the bond markets. Youve seen the in a lot of statements from these guys, and they did manage to kind of stopped the Dollar Strength that has really been a big move to start the year, and they have got that kind of nipped a little bit in the bud and they are happy about that. Theyre are happy that the Dollar Strength is not going to derail. Tom christopher granville, when a sterling too strong for the British Government . Excuse me, let me rephrase that when his sterling too strong for Olivia Sterns on her next shopping outing . Olivia i paid my tuition at 1. 8 , so it 1. 6 i do not think it is overvalued. I do not want to put words in your mouth. Christopher i cannot speak to our canadian tom surveillance exclusive ill will. Christopher i think it is much better than is let on in public. Tom thank you. Brendan coming up, europe gives greece leaders a lifeline. It is a very short one. We will discuss what is coming up with great leaders, with high hans nichols, this is surveillance capital the world, string on your tablet your phone, and bloomberg. Com. Tom good morning, everyone. Bloomberg surveillance. I am tom keene on this morning. Remember, yellen testified yesterday. See that on bloomberg television. Brendan a quick recap of two stories janet yellen pays a visit to the Senate Banking committee and the Federal Reserve chair indicates that patients has its limits when it comes to higher Interest Rates. Greece gets a warning from its creditors. The new economic policies are only the beginning. Athens is earning praise for new reforms tied to its bailout extensions of the imf and ecb say actions speak louder than words. Also pressing the bloomberg terminal run out, president Obamas National Security advisor criticizes benjamin netanyahu. She talked about the controversy with our charlie rose. On both sides, there has now been injected a degree of partisanship, which is not only unfortunate, i think it is destructive of the fabric of the relationship, and it is something charlie destructive of the fabric of the relationship. Ms. Rice we need to keep it that way. Brendan elections will be held in israel two weeks after the speech. A long fight over the regulation of Internet Service looks like it is over. According to the new york times, tomorrow the fcc is expected to approve regulating the internet like a public utility. It will prohibit companies from paying for faster lanes on the internet superhighway. It is a victory for president obama and internet activists. Tom i have to admit i am not up to speed on the israel story. This is a huge deal. John boehner invited mr. Netanyahu. Brendan and it has blown up. Tom Vice President biden is snubbing the event, just to put things in perspective. Brendan it was clever for their own best interests. Tom im not up to speed, like red sox middle relief. This is one of those things. Brendan work we going to get a thing to put on the screen , things tom keene says . Im not up to date like the red sox middle relief. Olivia one thing you are up to speed on his germany has greece on a short lease, about four months long. Hans nichols has been following every twist and turn of the greek debt drama from the heartland. He joins us now from berlin. Hans, it looks like we have got a bandaid solution. How is is going down . Hans well the german press has been disappointed in a way, not with the overall deal, but disappointed that europe has come to this. Let me hold up the front page of this one for you, this shows the flag over the greek finance industry, the european flag in tatters here. That really captures some of the mood. It israel challenging here come even notice past noon. It really challenges the mood going forward. Some will be as turbulent as the last four weeks. You still do not have any promise to dispense new money to greece unless they complete the reforms unless they show progress on reforms, and they will face a cash crunch pretty soon, so the bad news is you guys are going to talk to me as much in the next four months as he did in the last four weeks. Olivia it is good news to me hans. We always love having you on. Tom we do . Olivia any reason to hope in four months we will have a conversation any different than this one . Hans if trust is built. If you take varoufakis at his word that he wants to build trust, by wishing me detroit got, which we cannot say anymore, and the new greek government by trusting the troika, which we cannot say anymore, new greek government, maybe you calculate net value because you look at the net overall payments, they are a lot lower than what the that level the debt level suggest, but there we heart pills to swallow by the athens government first. Brendan are these new promises they are making, or is it just another way of saying no seriously, what we said in 2010 we are definitely going to do it this time . Hans it is even less than that brendan. Maybe we will do some of it, and we will not halt the things we talked about halting during the election campaign. That is when you saw madame lagarde being so start on this because clearly you read this letter, this argumen document, and there are things that counter being the package. We do not know what they will do with the value added tax, what they will do on privatization, that will fuel lagarde as well as draghis concern. Olivia i think we need to do is get alexis tsipras, merkel, and although to burn time together. Hans that would not be friendly familyfriendly television. [laughter] tom coming up, Richard Clarida will join us in the next hour and david herro will join us of herros associates. A welltimed interview. We will get out front with david herro. Stay with us from new york city this morning, bloomberg surveillance. Tom good morning, everyone. Bloomberg surveillance. I am tom keene. Lets get to a morning mustread. We were having a fist fight over this today, so many good ones. Olivia won the fistfight. Olivia id did indeed, mine comes from the new york times, this is qatars message to the u. S. He goes on to say that it will also require tyrants to be held to account. This all sounds great, but it also brings a little bit curious from a country, a monarchy heat at inherited from his he inherited from his father for stability critics in america say the qataris are also bankrolling hamas and funding extremism, particularly how nusra alnusra. We are, on the face of it allies, or very much allies with the qatari government. We have an american air base in that country, but at the thing time, this is a country that is affecting. The blame game is what you always get when there are confrontations and every but is out to prove the other side wrong. It was nato that it attacked the sovereign states and attached part of it known as kosovo and who are they to criticize anything we do . What this says to me is the need for everyone to put the past behind them and talk to each other. The qatari monarch basically saying encoded language in syria there has got to be an all party conversation, and russians and americans and europeans have to talk about European Security and people in ukraine have to talk to each other. Tom does this mean that Henry Kissinger wins the debate that we have to engage with our enemies . Christopher exactly. The wisdom of Henry Kissinger should never be debated. Brendan that is an admirable solution but we are dealing with somebody who talks often about history and the historical attachment of time you to russia. Olivia of crimea to russia. Olivia yeah, he called a historical homeland. Christopher it is now called a terrorist moved by the Ukrainian Government. Well, all conflicts end with people who are called terrorists. Hes out there. Theres a guy out there whose making a name for himself in a sport where your name and maybe a number are what define you. Somewhere in that pack is a driver that can intimidate the intimidator. A guy that can take the king 7 and make it 8. Heck. Maybe even 9. Make no mistake about it. Theyre out there. I guarantee it. Welcome to the Nascar Xfinity series. Tom good morning, everyone. Bloomberg surveillance. Tom keene here. Do not forget, janet yellen later this morning with possibly acrimonious testimony and q a with the house. Lets get to top headlines. Olivia fed chair janet yellen is back on capitol hill today and will testify before the House Financial Services committee for stuff yesterday testified before a senate committee. Yellen strongly criticizing proposals to allow congressional audit of federal Monetary Policy. Chair yellen it is a bill that would politicize Monetary Policy, would bring shortterm political pressures to bear on the fed. Olivia Senate Banking Committee Chairman Richard Shelby says he is not interested in creating Monetary Policy but he told bloomberg that there is a role for congress involving the fed. Senator Shelby Congress should not run the fed, some people think otherwise but we should have strong oversight over the fed, what they do, because the fed should not be so independent they are subject to no one. Olivia senator rand paul introduced the socalled audit the fed bill, 29 republican senators and one democrat are cosponsors of that bill. And graces creditors say talk is cheap, now they want to see action. Ecb, imf, and others say greek proposals are just the starting point. The finance ministers and signed off on the greek reforms that clears the way for a fourmonth extension of the bailout. Frances president press while Francois Hollande sounded optimistic that president hollande it also respect the rules of the european union, and particularly the eurozone is charged with safeguarding. Olivia meanwhile, investors who did hold onto their greek bonds are reaping rewards. The greek sovereign bond index is up 11 right now, the best performance in the world. Brendan and ukraine, fighting with prorussian rebels has subsided. Still, Authorities Say the full ceasefire has not taken effect. Ukraine and russia have battled over the diplomatic front over which side is breaking the truth. The ceasefire came february 15. Both sides have until march 1 two with draw heavy weapons from the combat zone. In chicago, mayor rahm emanuel has been forced into a runoff in his bid for reelection. Emmanuel will face cook county commissioner garcia on april seventh. You warmer white house chief of staff under president obama that 45 of the votes, garcia got 35 of the vote. The city is threatened by insolvency because of 20 billion in unfunded pension liabilities. Tom a federal jury has ordered Apple Computer to pay a texas company. Apples itunes used patented inventions without permission. The trial was held in tyler texas. Smartflash is based there. Apple says they are seeking money for technology that apple created. Nice episode of abccs modern family will have a new look to it, they shot the entire thing on iphones. Cocreator stephen levintan said yes the idea while he was cocreator Steve Levitan that he got the idea while he was facetiming with his daughter. Janet yellen, not in the textbooks books, washington university, university of rochester mud the cacophony of accommodations wrought by major central banks, they make the heads spin and creates major insurgency for investors, even those brave enough to enjoy the bull market. David zervos is chief Market Strategist at jefferies. The basic idea of yellen, you would suggest she looks to frankfurt. Is the testimony with her yesterday adaptive or amended because of draghi economics and frank for . In frankfurt . David probably not enough, actually. I think that is going to be much larger, friendly, then the fed is at least telling us in the minutes or telling us in these testimonies, but i think it is a positive. It is just a question of magnitude. Tom we notice a jpmorgan saying do not give us money, do not give us money, for whatever reason, ethan harris on yesterday with bank of America Merrill lynch talking about a Global Deflation. Does david zervos think deflation can become a problem . David i think the fed is concerned about that. I am not as concerned. I think the fed is concerned about the strength of the dollar. It is not that long ago that the euro was at 1. 40. Now what is flirting with 1. 10. That strength brings on pressure. Your ways, my ways looks different than it did a year ago. It becomes an interesting tom they will not replace as over there. [laughter] david i am just throwing that out. Tom jon ferro, are you my friendenemy or enemy . Brendan you make banking sound so exciting, like they are out downing jello shots. I thought that was in berlin. David it is, but frankfurt is where draghi is. We have got to entertain and inform. It has been a great run in the u. S. We learned a lot about qe. The europeans have turned a lot about what we have learned taken the mistakes weve made adapted in their qe, and that is a phenomenal thing. Tom chris granville, one thing i noticed when governor king was in scotland and gave a speech on level, it was one of the most profound speeches on the crisis for the england central banker went north and said forget the movement and the dynamics, it is about where we are. Where are we right now . Christopher in Monetary Policy we are in a bind between Global Deflation and essentially currency wars, that everyone is trying to devalue against each other. My recommendation, if this doesnt sound too presumptuous for the congressional for dispute, would be for the congress to set inflation and let the fed pursue that in the finale. Tom he is on the edge of new zealand. Olivia we had a guest on earlier this week who is long new zealand. The Economic Cycle will be brought down by asset bubbles bursting long before tight policy has any effect. David that is a reasonable quote from kit. He is a smart guy. He is probably right, the dollar seems to have scared them. They are going to keep bringing those jello shots out and giving the rounds to us, and the likelihood is that you do create some asset bubbles before the strength of the dollar somehow strangles. Tom Brendan Greeley, and is conversation, we have spanned a Balance Sheet analysis by mr. Juckes at socgen over to monetary law with mr. Granville. Brendan we are all pursuing this 2 inflation, nobody really knows what inflation should be. Tom congress should help that. Brendan chris granvilles modest suggestion that congress should come up with an inflation target there would be fistfights over what that inflation target should be. There are people that in a by the fact that you need inflation. David the fed looks at a forward exultation of where inflation will be in two years was that they missed the target for a while. Even the u. K. , that had kind of an inflation target, how many letters did there have to be written to the chancellor . 45 or Something Like that sorry, i missed the target, i will be better next time. That was the benefit of the benefit of the u. K. They sort of targeted a higher level of inflation, temporarily, they weakened the pound, they got out of this mess a lot faster than a lot of other countries precisely because mervyn king was more aggressive and not keeping that inflation target, whereas the europeans sat there and that oh, my god, we cannot have inflation, and look at what their economy did in 2012 it went into the ground. Brendan we are constantly undershooting the inflation target as well. We have got to move on to the next block. New numbers from the said give us a protective on the student loan situation. The perspective is things do not look good. We will show you in todays single best chart. This is bloomberg surveillance. Tom good morning, everyone. Bloomberg surveillance. I am tom keene. Lets get to Brendan Greeley our single best chart. Brendan new york fed has been looking at student loan defaults. It may get worse. That is the single best chart. 2009 graduates have not yet seen the end of it, so what you are looking at is a cohort of graduates by graduation year. You see 2005 2007, there is a protectable pattern. They are both living the same direction. That scary white line has that a different slope and the others that is 2009 graduates, and what the fed has said is the ultimate nineyear default rates for Student Loans tend to be about twice what they are at five years, so that line, the 26 right now for default for 2009 graduates is going to get much higher. With the economic recovery, this student debt overhang is not going to get any better. Olivia can we just have a moment of silence for the fact that the rate of default is around 25 . 1 in 4 college graduates. Tom what is the average loan . Do they say . Brendan i do not have the average loan number, but the other thing the new york fed pulled out of the data is the larger your loan, the less likely you are to default, so if youve got 4000 40,000 in loans, you likely got your mba or your md and will pay it back. If you did less than 5,000, you likely did not finish school and left. Tom if i get a phd in economics cannot go to david zervos. People looking at graduate school go, do we pony up . Not you specifically, i mean, you know. David i had to do it for sure. Look, it is sort of a problem but it is not a macroeconomic problem. The mortgage market, when it went into its defaults been of 20 or almost 20 at times, that was a 10 trillion loan market. This is a 1 trillion loan market. It is just not that big. Brendan new york does not agree with you. David i know they disagree with me on a lot of things. Brendan the real problem with the debt overhang is those in severe debt do not buy new homes. David maybe it is good that kids do not buy homes with their 25 years old. Olivia why . David they are going around the world. Why tithe themselves up . They can have a nice condo wherever they are. Tom christopher, do they do this better in the United Kingdom . Do they do the expense of Higher Education better . Christopher Higher Education is expensive, but it is a little bit less lower. For a first degree now, you pay 9000 pounds sterling, and then you borrow the money from the government. The problem is going to be the same always. Tom but you do not have college football. [laughter] there it is. Photos. Are we in debt for our photos today . Olivia we are not come of it usual, we have space. For the first time a nasa satellite produced a 3d rendering of saharan dust traveling to the amazon. Isnt that cool . 1 182 Million Pounds of dust, like the trade winds, blowing off the Atlantic Ocean to south america. Tom this is like the thing in central park. Olivia this is equivalent to nearly 700,000 civil trucks worth of sand wow floating through the air. No, this is not causing the drought we saw yesterday in sao paulo. This is actually good for trees. Brendan sailing through the south atlantic in a trade. Thousands of miles offshore, you get dust on your sails. Tom are you like crosby, stills, nash, floating on a boat, you look at the stars in the Southern Hemisphere . [laughter] brendan sometimes i have no idea what he is talking about. No idea. I have not sail we will get there someday. Ed there. Olivia number two melbourne. The International Air show pays tribute to heroes in the military is the asian. It features sonic air fighters and vintage aircraft. All of those explosions were state. Over 180,000 patrons are excited to attend. Show runs until march 1. Pretty cool. Number one photo of the day, this is a Pretty Amazing video come in new jersey, a home under renovation is loading after a natural gas leak was reported. Fortunately, nobody was seriously hurt. Tom this is Chris Christies fault . Olivia presumably. Tom no one was hurt in this. Olivia no one was seriously hurt. Authorities were called to the scene, 15 were injured in the inspection when the explosion occurred. He causes being investigated but they suspect a gas leak. But look at that, this is the dash cam. Brendan all right, do you know the real Vladimir Putin . Does Vladimir Putin even know the real Vladimir Putin . Coming up, we will ask chris granville, a man who spoke years working in the british and the sea in moscow. We will ask them who putin is and what that means for russian politics. That brings us to our twitter question of the day. Can there bps withe peace with putin. . Tweet us bsurveillance. Tom good morning, everyone. Bloomberg surveillance. I am tom keene. Olivia janet yellen facing the Armed Services panel. Yesterday she paid a visit to the Senate Banking committee and the Federal Reserve chair indicated that patients have the limits on it comes to higher Interest Rates and greece, severally, gets a warning from its creditors. Economic policies are only the beginning. Athens is urging traits for new reforms tied to its bailout extensions. At the imf and ecb say actions speak louder than words. Also on the bloomberg terminal right now, a jury in texas convicted a former marine in the killings of american sniper author chris kyle and another man. Jurors rejected the insanity defense, and convicted eddie ratey routh. Here is chad littlefields mother, judy, after the verdict. Judy littlefield we waited two years forgot to give justice to us on behalf of our son, and as always, god has proved, and we are so thrilled that that we have the verdict that we have tonight. Olivia routh was sentenced to life in prison without parole, but he could appeal the verdict. 1 5 of all Southwest Airlines jets meet a key safety inspection, but regulators say they may keep flying anyway. Their backup writers have not been checked. Southwest must finish these test within five days. Will this make people leave home without it . American express is raising rates on more than one million cardholders also annual rates are rising to nearly 13 , but the change affects only a fraction of its 42 million customers. Those are your top headlines. Brendan in this busy month in europe, one quote went overlooked. Once we resolved the done back conflict, we must search for a new overarching Security Agreement with russia. That is rankwalter steinmeyer. The quote was flagged by chris for granville. He has worked as a criminologist for the British Foreign office in moscow. You propose a kind of test that Vladimir Putin might actually be speaking sincerely about his need for his own security around russia, and that the only way to figure out whether he is again sincerely is to negotiate with him as if he is stopped christopher if he is. Christopher all you have to do is pay careful attention to what president Vladimir Putin says and other russian people. Our russian friends are great talkers. You dont need to infer dark motivations. Just listen closely. Anyone who announces they know president cputins motivations and plans and should be treated skeptically. He does not know himself. In his youth, he was a judo star, they react to put their opponents on the floor. Brendan we can go back and say we should take their security concerns seriously, but isnt it too late to do that now . Perhaps in 2002, we should have handled nato expansion differently, but is it too late now . when people christopher when people are dying, it is never too late. I think your point, that is much more difficult to rectify in present circumstances, but as chancellor merkel likes to say, you have to try, you have to persevere. This is why policy is in my opinion to be commended and supported. Olivia a growing chorus in the west thinks that Vladimir Putin is out to recreate the granger of the soviet union. Why is that wrong . Christopher you can only test such assumptions by accommodating the stated goal which is that nato should not advance to russias borders, that ukraine should not become available for the u. S. Military to deploy at will, and is a goodfaith negotiation rights down, then you know for certain. Olivia how can you look at what happened between minsk i and minsk ii and say we should have more good faith . Christopher after the minsk i ceasefire, most of the fighting was around the airport, just on the western suburbs of the town of donetsk which was where there were some very brave ukrainian fighters holding out. The thing is that airport was defined in the minsk i agreement as being within the rebel controlled area, just their side of the line, so they would claim of course they were trying to establish their own territory. The reason why i think the temperature has risen is the latest rebel victory with Ukrainian Army occurred in the official Ukrainian Government controlled territory, so people are understandably worried ok, does that mean they will grab more territory, the russian backed rebels . My view is no. The whole point is that putin wants to have this enclave as a lever within ukraine to pursue his Strategic Interests rather than as a program of territorial acquisition. Olivia is he going after a land bridge to crimea . Christopher my firm answer is no, if im proved wrong, i will have it on my face in a few weeks time, but ultimately he is reacting. He gets to be a major american craning attack on the rebel area, then you do not know what putin might do. Brendan he has turned his blueeyed gaze to you personally. Christopher i was introduced to him as a former british diplomat who went into the Capital Market in moscow, and he said yes, you cannot do as soon as all your life, look at me, pointing at himself. [laughter] tom chris granville, thank you, please come back. David zervos, as always, thank you as well. As we get ready for Richard Clarida and david herro, the yen comes in at 1. 1383 and the russian ruble doing better than good this morning. Stay with us. Another hour of bloomberg surveillance. This is bloomberg surveillance. Tom Forward Guidance instead as janet yellen guys market to a later rather than sooner rate increase. By america is the rage buy america is the rage as we consider investment abroad. And heading to miami to defend more open borders. It is wednesday, february 25. Im tom keene, joining me Olivia Sterns and Brendan Greeley. Olivia jenny on has made it clear that an Interest Rate hike is not imminent janet yellen has made it clear that an Interest Rate hike is not imminent. But began groundwork for a rate hike later this year. The modification should be understood as reflecting the committees judgment. The conditions will improve to the point where the target range could be before any meeting. Olivia and the creditors that have been keeping greece a float want to see more than just proposals. The Prime Minister got praised for new reforms that could weigh for another tension of the bailout, but the imf and others have said that actions louder than words. The head of the finance group said greece has to turn words into action. We must move quickly now and next few weeks and months. The programs are implemented and then there may be an money amenable new money available. Olivia there are skeptics. Christine lagarde said does not offer clear assurances this will actually happen. Brendan Authorities Say a tax on ukrainian troops have fallen off in the last couple of days. Ukraine said attacks on ukrainian troops has fallen off the last couple of days. Ukraine said it will not go back from the front lines. The former white house chief of staff rahm emanuel got 35 of the votes, garcia under emmanuel. Tom and the president has sent the controversial pipeline bill back to congress. He has vetoed the 8 billion pipeline from canada through the u. S. And it appears that republicans dont have enough votes to override the veto. In the past republicans have said it would create jobs and reduce oil prices. Put away the expensive cameras. A show tonight on iphones of every kind. Mistress came from face timing with my daughter a college and i was looking my screen and there were some emails and script i was working on and i could see her and myself and my wife standing behind me and some webpages open. And i thought, this paint an amazing picture of my life. You can tell a lot about me from this one screen. Tom cole in the episode airs tonight at 9 00 p. M. Eastern. Tom the episode airs tonight at 9 00 p. M. Eastern. The euro is weak or off of the comments yesterday. Chair yellen was decisive yesterday the punch bowl remains filled to the brim. We will talk to Richard Clarida about the language of this Federal Reserve. But first, how do markets adapt to our total fixation on every word, indeed every syllable from the chair . Dr. Herros chief Investment Officer at Harris Associates. Not much fun yesterday. Do you care what janet yellen says . David clearly, shes in a policymaking seat. The Monetary Policy shes presiding over is important, especially when you look at exchange rates. We have seen for a long time ever we tolerate it certain to strengthen. Tom you are consulting at Harris Associates today. Are you going to tell mr. Herro that he will see currency disruption and Interest Rates up to his eyeballs . Richard other than the fed everyone is you is easing policy. We are not really in a currency war, because the u. S. Is not resisting the stronger dollar. Weve had big moves against the yen and the euro, but so far not a currency war. May a skirmish or pingpong match. Olivia the rocket allegory that we apparently like to use about the fed, did you hear jenny ellen countdown did you hear janet yellen countdown . Richard i think she was trying to optimize perm her rationality. And i think she wants to be on a course in june to do that. Tom brendan, did you optimize your maximum hourly did you maximize your optimality with your children last night . Brendan i think i got some sleep. In europe, we look to berlin the de facto capital of europe. Now that we can stop talking about greece for another couple of months at least, how do you approach europe as a cautious investor . David looking at the companies themselves. They are based by postal code, but they do business all over the world. Look at the business and where it earns its cash flow streams from and pressed the business as such. And you have this market imperfection that develops. People like to say, im out of europe because of what happened with reese and their dysfunction, etc. And for us, that becomes an investment opportunity. Olivia, it is not about Economic Growth in europe, but a debt on olivia it is not about Economic Growth in your, but export of business. David what we are seeing today is a huge benefit from a huge stimulus to corporate europe with finally a weaker euro. It was understandably strong for quite some time. Brendan we are still talking about germany as the industrial heartland. David certainly, germany is the key industrial house powerhouse of europe. However, there are some Luxury Goods Companies and other companies although switzerland has been hurt by this. But there are other Companies Like cartier and others. Olivia i looked at your portfolio and it seems like the visas overall is that the rich are getting richer. David or the poor are becoming middle class and the middle class are becoming uppermiddleclass and the uppermiddleclass are going rich. Brennan wait a minute. The economics statistics that we been looking at for the last 20 years do not see a rising tide that is lifting all boats. David we are not talking about just america, but if you look at the world. In china we have this upward mobility of the glasses and you see it in the classes and you see it in the sales of gucci and product etc. Olivia do you want to get into british equities . David you want to get into british equities because you are able to find Good Companies that are selling at low prices that are good stewards of shareholders capital, etc. Again, the disconnect and trying to make here is you just dont look at what is happening on the ground in the local economy. You look at the business from our consideration to characteristics, price and quality. If it is a low price and quality business, you buy it. Richard i think it does depend on the business. Hes exactly right to my in china, you have those that were operating on subsistence that are now entering the class. It is country by country, i think. Olivia a quick right turn we want to ask your twitter question of the day. We are asking you, can there be peace with putin . Tom good morning, everyone. Oil over 50 just barely. Here is Brendan Greeley. Brennan yesterday the brendan yesterday, the present looked up his veto pen and said oil will not come through the u. S. From canada. Yesterday, we spoke with a guest who said that wilson has to get her america somehow. I dont expect you will see any shortterm impacts, but those are all factors and variables that play into the market. Brendan rich clarida, with your macroeconomic experience, its hard to figure out if this is politics or macroeconomics. Or economics. Richard i would say its both. It does seem that both sides are trying to score political points on this. But i think we should look at the big picture. What is happening energy the last 10 years is truly transformational. As recently as 10 years ago people were saying in fracking and access to natural death is not a big deal and we see that the increase in the u. S. Supply is responsible for this collapse in Global Oil Prices with huge macroeconomic consequences. Energy will be the big story for the foreseeable future. Olivia is 50 per barrel crude pushing back on rate hikes . Richard great question. I think the following oil prices gave the bank of japan and the ecb more of what they needed to do for easing. In the case of the fed, yellen has pushed back on that idea. She said this has transitory effect on inflation. It is a positive for the consumer. Dudley has said the same. Thus far, the fed has not indicated it will push back the rate hike schedule. Brendan do we look at the top measures or do we adjust for oil . David i think you do have to adjust for oil. What people by matters. With all with lower oil and energy prices, that becomes a smaller and smaller index. Tom you are one of our lead economists on this in the nation. Should we look at as a normal look at this as a nominal topline . David richard my focus has been on nominal. We can measure the matter of money people spend on goods and we are in a global economy. Tom we will come back and talk about this. Rich clarida was a very important point on nominal versus later. Stay with us. Tom good morning, everyone. A look at the top headlines this morning, heres Brendan Greeley. Brendan janet yellen faces the House Financial Services panel today. Yesterday, she faced the Federal Reserve banking chair. Griese says new economic policies are only the beginning. Athens is earning praise for its moves tied to the bailout extension, but the imf and ecb said actions speak louder than words. More than 2. 5 milling copies are bring printed of Charlie Hebdo being printed of Charlie Hebdo. The magazine is being produced under heavy police protection. President obama is strictly sharply criticizing benjamin netanyahu, calling his speech to Congress Next week destructive. On both sides there has not been injected a degree of partisanship, which is not only unfortunate, but distractive of the fabric of the relationship. It is destructive of the fabric of the relationship . Take my point. It has always been bipartisan. We need to keep it that way. Brendan netanyahu is expected to speak out over negotiations with iran. A long fight with the Internet Service looks like its over. The secs expected to approve regulating the internet like a utility. The decision is a victory for president obama and internet activists. Olivia, inflation and audit the fed, two important topics covered in Janet Yellens testimony to the Senate Banking committee yesterday. She faces members of the house for another member marathon q and day. We can expect this to be a bit spicier. Another marathon q and a. We can expect this to be a bit spicier. What do you expect to hear . Richard clarida ultimately what they wanted yellens take on the economy and the outlook on the economy. I think there is concern about the audit the fed legislation and they are publicly pushing back on that. That story has legs. There is some sense that this is very bipartisan. Olivia before the audit the fed issue, what are the limits to jenny ellens patients . Richard she will eliminate the word patient from the statement and she will consider a rate hike that is infinite this year probably by september. Brendan what should the right rate of inflation be . Should it be 2 , or is that just a mere number . What is the right way to approach it . David its the way burning chelated out years ago. Bernanke laid it out years ago. The fed has always been of the view that it should be symmetric around 2 . The fed has fallen for three years short of that 2 target. Tom i know this is really delicate. You have supported Republican Party politics over the years in quarters. How bad is rand paul economics when you your this guy talk about the microeconomic, the macroeconomic, the monetary theory . How bad does the former chair of the Economics Department want to throw a chair at the tv set . Richard i actually dont follow in that closely. Im more aware of his fathers view. Tom but this is pseudoaustrian economics. Discuss. Richard i think he has gains in current seasons the financial crisis and we used to become very involved in what we call fiscal policy. It has generated attention on the hill. As for the measures that he and others with support to subject Monetary Policy actions themselves to an audit, i dont think that tom has Congress Backs the fed into a corner where we risk fed independence from 1951 and 1952 . Richard i dont think its a serious risk but its on the radar screen, just because the actions that the fed and other banks took. Tom we are forced to do. Richard absolutely. Tom cole and brendan, this is a Straight Talk about why they want an audit tom brendan this is Straight Talk about why they want an audit. Brendan is this really what he wants to pursue as fed policy . Or is this just to follow in his fathers footsteps in the last two elections . Richard what im picking up in my conversations is there are some democrats that could support legislation like this as well. I think the story will be with us through the year. Tom we have to rock stars with us today. You grew up in the middle of nowhere in wisconsin and you grew up in the middle of nowhere in illinois. Rand paul is talking to others who feel disassociated from the leads in washington. Thats what janet yellen thinks right, professor . Richard absolutely and the audit is focused on Balance Sheet issues and the like. The issue is that the fed could actually monitor policy decisions, which would be a big mistake. Tom we will come back into about this with david haro. I would mention that i grew up in the middle of nowhere in new york. You grew up in the love nowhere in manhattan. Olivia and look off far ive come in life. Coming up next, townhall immigration. Tom good morning everyone. Olivia sterns and Brendan Greeley with me this day. Right now, a look at the bloomberg terminal. This is wage growth back to lbj nominal wage growth. Im going to get a raise this year. Im going to get a raise this year. And then down we go into a cyclical 4 nirvana slowdowns wages get lower, and we never come back. Bringing and it has taken some time for economic advisers to recognize this. People look at the size of their paycheck. Richard and some of the best work on this was done by janet yellen in her professorial days. One of the things im looking at is, in fact, are we going to get the real wage increases for workers this year . In the last three cycles, wage increases to workers did not lead to overall inflation. It was a zerosum society. I think we will all be looking out for that this year. Tom david haro from Harris Associates is with us. Weve been talking about a bimodal society. Have you changed your investment approach because of this Middle America . David no, what i look at is prices. Buy low, sell it here. Its never really stable. We look at those as exogenous force. And we have to understand how those exogenous forces impact the company we are investing in. That is very important. For example, in retail, you have what appears to be another tweak of the retail revolution. When online came, it was enough it was a threat. And in highspeed internet came and it was a threat. You have to understand how these impact your business. Olivia i want to know how that moves went 5000 walmart workers get a raise. Back to janet yellen she will testify before the House Financial Services committee. Yesterday, she spoke before a senate committee. She was critical of audits of fed Monetary Policy. It would politicize Monetary Policy and bring shortterm political pressures to bear on the fed. Olivia the Senate Banking Committee Chairman said hes not interested in creating Monetary Policy, but he said there is a big role that involves for the congress that involves the fed. Congress should not run the fed. Some people think otherwise, but we should have strong oversight over the fed and what they do. Only because they should not be subject to no one. Olivia and as we have been discussing, senator rand paul and several other cosponsors of that bill, both republicans and democrats. And greek proposals for the financial reform are just the starting point. European officials have signed off on the bailout funds. Francois hollande sounds optimistic. I think a good compromise has been found which respects what the greek people have expressed but also dresses respects the rules of the european union, and in particular the eurozone what the eurozone is charged with safeguarding. Olivia meanwhile, investors are reaping the rewards. The grease sovereign bond is up 11 this year greeces sovereign bond is up 11 this year. Brendan Authorities Say full ceasefire in ukraine has not taken effect. There is been a battle over which side has been breaking the truth. Both sides have until march 1 two which heavy weapons from the combat zone stop in texas, from the combat zone. In texas, the jury has delivered a verdict of the man who killed sniper chris kyle. The jury rejected eddie brits claims that he was legally insane eddie ruthalphs claims that he was legally insane. Tom apple was ordered to pay one half 1 billion to pay 500 million. Those are your top headlines this morning. An incredibly smart note this morning on this Homeland Security debate as to come up to the end of the week here on the level of livid that people are. Brendan they have a problem on their hands and have to figure it out quickly. Tom something we have not touched on it today. The euro 1. 1355. A bit stronger euro. Im tom keene. A live with me Olivia Sterns and Brendan Greeley. Rating 11 million plus, the estimate a of Illegal Immigrants living in the u. S. Brendan 11 million plus, the estimate of Illegal Immigrants living in the u. S. Peter cook is in miami. There will be a townhall there tonight. Why is the president on the road right now . Peter like everyone else in washington he wants to get into some better weather. No, the reality, as you know, is that this president is battling immigration right now in the courts, battling with congress. And hes coming to this majority Hispanic Community to remind this community and folks across the nation that he is still fighting for Immigration Reforms and trying to reassure them about what is happening in the Court Systems and, basically drawing attention to what he and the democrats are doing on this issue. Brendan you talk to people on capitol hill so we do not have to full to what is the current do not have to. What is the current deadline in the dhs and immigration fight . Peter the deadline is friday at midnight. Several thousand employees will remain on the job because they are essential employees, but they will not get a paycheck. That townhall will air tonight on telemundo and msnbc. The white house and the democrats think they have the upper hand here, that it is the republicans in disarray. And this is the moment to draw National Attention to this issue and put republicans on the defense. Right now, no clear solution in sight. A lot of pressure on john boehner and Mitch Mcconnell to resolve it, but no clear path out. Olivia and if they do success fully if they do successfully attach Immigration Reform to the dhs funding bill, wont the president just veto that . Peter there is not enough support to do that, but yes, it would just get vetoed by president obama. I would not be surprised to see the funding expire on friday and is going to the weekend, and then at that point have cooler heads prevail. In the meantime, president is making his wife that he is standing up for Immigration Reform and steny of for the 11 million or so that are here standing up for the 11 million or so that are here. And he could say some questions from folks about why he has not delivered on promises from 2008 when he was a president ial candidate. Tom i recall there is a cuban vote in florida as well. Who will greet the president as he travels to miami . Peter the audience today is going to include a whole host of folks, local folks as well as national activists. Its a handpicked crowd. There will be members of the business community, the Hispanic Business Community in particular. The mayor of miami will be year. And he will also will be here. And he will also be getting questions directly from some of the 5 Million People who would again, be shielded from deportation if his executive actions had been allowed to move forward. We spoke to one here in miami who is eager to challenge the president to keep fighting for even more executive actions, even in the case the face of the court fight. Tom but you are telling me that it would be historic decision in have on a in havana that this will not come up in the strip . Peter oh, it is not come up in this trip . Peter oh, it is sure to come up. Two birds with one stone for the president. Brendan it is 5 00 somewhere. Grab yourself a fancy cocktail down there in miami. Peter its a Disney Cruise ship. Olivia its the first time ive ever seen peter cook with his top button unbuttoned. As we head into the break we want to get to our twitter question of the day. Can there be peace with putin . We would love to hear your thoughts. These tweet us. Please tweet us. Olivia good morning. Im Olivia Sterns here with tom keene and Brendan Greeley. The oracle of omaha is marking 50 years as head of work sure hathaway. He is expected to release an extended version of his annual letter this weekend. Betty liu joins us now. She something of a Warren Buffett expert. She sticks to them all the time. Betty 20,000 words is what is expected. Normally, around 14,000 words so this is a book in itself. It is really the bible of investing. People will parse his sentences and what he means by this and that. There are a couple of aspects that are unique. Number one, you mention it is his 50th anniversary. It will be a longer letter and will he shed any light on his successor . Might this be the moment he talks about that . And for several years hes been talking about looking for a very big acquisition. Its now at 63 billion dollars, so where it might he finally deploy this cash . Brendan 20,000 words, thats a short book. That is 50 shades of grey value investing. How do you read the letter . David there is a consistent thread that runs through it, the whole notion of quality and price. Clearly, buffett is if not the best Value Investor that has ever lived and its because of plain, simple sense. Brendan what is the negative you have pulled out of one of these . The nugget you have pulled out of one of these . David i think cash flow streams is something we should stay focused on and patience and volatility as your friend. Olivia one of the big worries for any investor, longterm investor in Berkshire Hathaway is what happens when hes gone betty one of the big worries for any investor, longterm investors in Berkshire Hathaway is what happens when hes gone. Can other investors live up to that same legacy . That is on the mind of any longterm investor in Berkshire Hathaway. Olivia david, taking a page out of your playbook or something you might agree with Warren Buffett heads to europe. What should be on his plate . David go with distress prices. Unless you think these businesses are permanently disabled or impaired, its a good place to look. He likes certain Financial Services. He has an investment in swiss korea swiss three for example. Olivia he has an investment in ali on. Brennan no comment. Olivia, this brings us to the twitter question of the day. Can there be peace with Vladimir Putin . Will the security troops actually hold the security truce actually hold . Tweet us. Tom good morning, everyone. Olivia sterns has our top headlines. Olivia a quick recap of two stories we are following. First janet yellen facing the Financial Services committee today. Yesterday, she was before the Senate Banking committee and laid the groundwork for later Interest Rate hike this year. And in greece, economic policies are only the beginning. The imf and ecb say actions speak louder than words. Also crossing the bloomberg terminal this morning, indonesia says preparations for the executions of 10 drug felons are 90 ready including two australians convicted of heroin smuggling could die by firing squad as early as this week. Attorneys are in a desperate race against time to save their lives, but indonesia has defiantly resisted International Pressure to rethink its plans. It says such overtures are an affront to his sovereignty. And investigators say a natural gas leak caused an explosion in a vacant new jersey house. It happened near the jersey shore. The explosion was caught on a camera of a dashboard of a police car nearby. 15 people were hurt, two quickly. Two critically. And taking a stroll as of the International Space station. This is the second of three trips outside the station getting the orbiting lab ready for future commercial spacecraft. Tom there is a shift in the surveillance wind. Interview after interview, we notice that ever so quietly, the buy america crew is considering investing abroad for some maybe it is because of currency wars or that other thing. David haerro has seen this before, acquiring shares when they are unloved. Honda with Management Changes this week, honda with a challenge plan. How does an International Guide like you with a shortterm view of three to five years deal with the changes at honda . David clearly, this change was warranted. They have stumbled a little bit in the last two or three years not catastrophic. They took their eye off the ball. They have a good global brand. In india and indonesia, they are very strong in those markets, but they lost their way. Ive met with the management of that company a number of times. You look at the top 50 managers, everyone of them is japanese. And you say, how could you be a Global Company and manage most solely out of japan . Toyota had the same problem and they rectified it. Tom you want honda to be more like toyota. David in their attitude. The new president or ceo is someone with a lot more global organization. Tom it is all starting to happen now. It is a value in the buy america . David it is good value. I think, perhaps more so in the u. S. , but you can find value everywhere and you can find overvalued businesses everywhere. I dont think the u. S. Is systematically overpriced. It is pricier than some of the overseas markets. And what happened last year with the strengthening dollar meant that returns were smaller. Look what happened last year. This was the big mistake investors make this is the big mistake investors make is they focus on the review mirror. Tom in currencies. David yes, and last year currencies played a big role in underperforming u. S. Internationally. Olivia you favor rocky. Are you holding on to it . David yes, everyone is fixated on their mobile phone business. Tom i want to go to your views on business in germany as well. His parity good for david hill is parity good for david hill . Richard i dont big we will get you parity this year. If anything, the news on out of europe it has been surprising on the upside. Of the interesting thing for germany come as much as they often complain about the challenges in the eurozone, were they not in the eurozone environment, their currency would be skyhigh and they would be uncompetitive. Germany first among equals benefits in this environment. Brendan how do you deal with that . David you look for companies that benefit from the euro. The euro has been too strong in the last four or five years. It was trading at sometimes north of 1. 50. And really did not justify the fundamentals. Brennan weve been talking about the industrial heartland of europe. Look around to the periphery. Robert schiller said its a good time to be buying in greece and portugal. Are you looking at that . David i would say look at the periphery, places like an and ireland that have really undertaken structural reform. The big message this year, they are getting benefits from Lower Energy Prices and lower Interest Rates. That will get them into this cyclical downturn. But structurally they are still john because of microeconomics because of labor rules and regulations that are absurd and it discourage people from hiring and firing and investing. Spain is at least taking a step. Italy is talking about it, but has not passed it. And france does not want to talk about it. Richard it very well said. You have 19 members of the euro but not all of them have gotten religion on this. And in italy in france they are still talking about it over coffee. Tom its good copy, though. Olivia i could use and copyright now. Our twitter question of the day can there bps with prudent . With can there bps with putin . David, i know you are not in russia now. What would you have tos to see to get into the russian market . David a proper rule of law. It businesses within russia get backstabbed, then what about us . As Value Investors, im willing to deal with economic instability, but i need rules and regulations and rule of law and russia doesnt have it. We have never invested in russia for that reason. Tom what is the dynamic right now in ukraine . Brendan according to our guest from the last hour spent time looking at the British Embassy in moscow, it is stabilizing that there is good communication between the Ukrainian Army and the russian army. We dont see those reports. But to what david is saying, it is interesting. There was an article this morning where a promise which opened an office where a bramowitz opened an office in moscow and nobody wants to be there. David im sure hes twiddling his thumbs. Bringing ive brendan i learned a little bit from our guest today. The minsk accord, i had assumed the answer would be no, but it may be more complex than we thought. Tom i agree with you. We will have to see. Janet yellen, this is a more nuanced day, day two. It will be interesting to see how she handles questions from the select committee of the house. Olivia really interesting to see what target puts out. We are looking for . 90 a share for the fourth quarter. Im very excited about it. Sorry, im looking for my target notes. Brendan its hard to figure out where they are on the scale. We have this bifurcation of luxury and value dollar. Tom Richard Clarida, we greatly appreciated. David herro, come back when the packers win. In the loop with betty liu next. We leave you with futures absolutely flat. Janet yellen at 10 00 a. M. Betty good morning. It is wednesday, february 25. You are in the loop and i am betty liu. Markets are record highs. Date two of testimony from janet yellen. She goes before a House Committee at 10 00 a. M. We are joined by a consummate who be checking this questioning the fed chair. Comes the bill his zyng huizenga. Kevin ryan is the founder and chairman of guiltilt groupe. How he is navigating a challenging retail environment. Heres a look at our top stories. President obama vetoed the ke Keystone Pipeline. The administration does not think the pipeline would cut oil prices or create many jobs. The white house is waiting for a review of the