Transcripts For BLOOMBERG The Pulse 20140226

I am guy johnson. Francine lacqua is off today. What do we have for you on the show today . It is all a board brand italy. Monocle magazines latest issue is all about the country. We are live with the editorinchief tyler brule. Were going to cover a lot of ground. Italy, beautiful but problematic. What do we do with it . Lets begin with our top story of the day, and explosive report by u. S. Lawmakers on Credit Suisse. According to a Senate Committee, the bank helped american customers hide as much as 10 billion in assets from the irs. That is more than double the amount previously known. Hans nichols has more on the findings. He joins us from berlin. The numbers are shocking. More so than the numbers, the details, the salacious aspects of this report. You had secret meetings in secret elevators. You had false visa applications that were submitted by the bank. You had one Bank Statement that was handed over hidden inside a Sports Illustrated magazine. The basic question that brady dougan is going to have to account for will come down to the numbers. They have said there are some 238 names they have turned over. The numbers in this account, 10,000 u. S. Account holders. 1800 employees of Credit Suisse. If you have 1800 employees, only 10 of them have been disciplined. None of them have been fired. This is what brady dougan is going to have to account for. He faces two tough interrogators , carl levin and john mccain. Levin gave us a taste of what he is going to say. He put out a statement saying they owe uncle sam. They owe the people of the United States. We are talking about 22,000 accounts potentially set up by u. S. Citizens. That means lost revenue of around 85 to 95 . The numbers dont make sense. Did the bank know about it . Was there a culture of secrecy . The Justice Department doesnt come across great on this. The Justice Departments number, 4 billion. That is how much they thought was stashed away here. Says itte committee could be as high as 12 billion. You almost wonder whether brady dougan is going to be the main event this afternoon, whether or not the investigation will take center stage. The Justice Department doesnt come out of this well. What happens next for the sec . A possible program as well . The sec is looking into it. It appears it is based off of the information in the senate report. Senate committees make great theater. I am not taking away from Senate Committee hearings but they have very little enforcement mechanisms. They prefer things to the department of justice. One of their allegations is that they were not accurate on what sort of Bank Accounts they were setting up. And that they fudged some of their security registrations. That allows the sec which is frankly more aggressive under mary jo white, that allows the sec to get involved as another front. Brady dougan has been clear on this. He wants to settle all these claims. He wants to put this in the past. It is hard to do that when you are in front of a Senate Committee and the sec is opening up a new investigation. We are going to stay tuned. Thank you very much indeed. Hans nichols joining us from berlin. From berlin to beer. An improvement in the United States market. We are talking soccer here, football to uma. The worlds biggest brewer posted estimates this morning. Caroline high us now with the details. They have beaten. We have seen almost 5 growth in terms of organic sales earnings, up 13 . A beat in both respects. Beer volumes just falling off a little bit for a. B. Inbev. Stella, backs, budweiser, these are the beers we know. They are big players in mexico, brazil and the United States. Those three countries alone make up 80 of this companys revenue. Good that it is sounding so optimistic. Mexico, brazil, they are going to return to growth we are told. The world cup is going to be prominent in everyones mind. U. S. Improving also, though it was hurt by a cold winter. The u. S. Economy is going to help bring up beer sales as well. Also positive on emerging markets. They are returning to south korea. Oriental breweries, five years ago they sold it. They just bought it back. It looks as though they are sounding pretty positive in developed and developing markets. We all know the names. We see them so regularly yet what consumers are increasingly looking at our microbreweries, craft beers. This is the trend that is taking the industry by storm. How are they responding to that . Quite cleverly, they are adapting. They are bringing in their own socalled craft beers. It is reaping the rewards from this. They have a number of them. They have a belgian style wheat ale, shock top. They have goose island beers. A Bourbon County stout, apparently it is a mix of chocolate, vanilla, caramel and smoke. Apparently it goes with flourless chocolate cake. Seems like a dreamy combination to me. They are making inroads to these craft varieties, helping to keep ahead of the game in the u. S. They also have other tastes. They have stella seiter. That is prominent in the united kingdom. Also, bud lite lime. Is winning consumers who would rather perhaps go for something else. It seems as though they are keeping up with the trends and managing to stay on top of the craft beer. What did that bourbon beer go with . Flourless chocolate beer chocolate cake even. That is if you want a bourbon chocolate stout on top. Thank you very much indeed. Lets stay in the United States. The retailer j. Crew is interviewing banks for an ipo later this year. The brand whose customers include Michelle Obama may fetch a valuation for as much as 5 billion. Rick david joins us now with more details. All of this . The process does sound like it is pretty much under way. It is a great time to be a private equity seller. The u. S. Had the best deal for ipos last year. If you get returned in the ipo market, you look at doing that. Demand to price at the top end of the range. What do they pay . They bought it in november 2010 for 2. 6 billion. They are looking at an evaluation of around 5 billion now. What does drexler get out of it . The guy that has always been synonymous with this business. If he is selling shares that will see a jump. In terms of what this tells us about the state of equities , elevated levels, whether that is realistic we dont know is there a rush on at the moment . Are we going to see a flood in 2014 . It seems like that right now. Any private equity asset which was bought in 2010 or earlier, you are hearing something around the seller starting the process. Whether they come to the market or not, you dont know. We had someone tell us that only 10 of these deals might get done, might get to the finish line. But they all wants to do it. We have seen that in europe and the u. S. Youre going to have a busy year. Thank you very much indeed. Ruth david joining us on the latest from j. Crew. We are getting headlines coming through from Credit Suisse. Let me bring these up for you. This is the written testimony. Dougans written testimony is being released. The company is saying that misconduct centered on a small group of bankers. It does acknowledge that there has been misconduct in the u. S. Tax case. We will have more details as they come. Hans nichols is covering this story for us this morning. To keep youinue uptodate as we work our way through the written testimony that is being released. Airbus shares are rallying. Profit jumped in 2013 and it predicts and Earnings Growth this year. This as its Aircraft Division moves to boost production of its bestselling single aisle planes. Later today, we are talking to the companys Group Finance chief. That is coming up a little bit later on. A 5 billion deal with argentina over the agreement ends a twoyear international dispute. Settlement may help attract investors to argentina for the Worlds Largest shale fields. A range ofithdrawing sexually suggestive teacher to tshirts. They had been promoting the tshirts ahead of the world cup. One of them shows a woman in a bikini with the words, looking to score. We will leave that without comment. Up next, how to reboot italy. Fresh off the back of Prime Minister renzis second vote of confidence, we are speaking to monocle magazines editorinchief, tyler brule. Good morning. Welcome back. Youre watching the pulse. We are live on bloomberg tv. We are now on any windows phone. The italian Prime Minister matteo renzi has breezed through a final confidence vote in the lower house after clearing the Senate Earlier this week. This paves the way for his new administration to begin economic reforms. Renzi really plans to shake things up. At 39 he is italys youngest leader since the second world war. He wants to breathe new life into a flatlining economy by slashing labor taxes and improving public finances. He says italys finest pages yet to be written. Our next guest has a few ideas of his own. We will discuss it in a moment. Tyler brule is monocle magazines editorinchief. His latest issue is devoted to all things italy. Good morning. We have a 39yearold Prime Minister, young, dynamic, clearly going somewhere. I read the magazine. All of it already . Most of it, yeah. I wonder what happens to your italian coanchor this morning. That is a very good point. She is watching in anticipation of what you will be saying. Italy is not such a bad place to be in semi retirement. If you look at what italy has achieved over the centuries, it can coast a little bit. If we look at renzi coming in at this time, it is extraordinary. It is not going to be a beeline to brussels or berlin but to north africa which i think is quite remarkable. Obviously a lot of question marks about this leader. Nevertheless, semi retirement condors of all types of images. You have a few of those images in your piece. Italy is pretty much horizontal on a sunland. It drifts occasionally over to the bar. Is that really italy . I think that is italy in part. It is certainly not northern italy. That is the point we make in this issue. Northern italy is very much it feels more election very much like germany by many ways. I think there is that sort of middle part of the country south of rome is probably more like that. Even though we give a few high marks to naples as well. Renzio me about clearly has ambitions. He has a 100 day plan, very jfk. Some people see it more as tony blair. There is a lot of potential in the country. You highlight the Industrial Base in the north, the links with austria and germany, it feels very different to the rest of italy. What should renzi do in your mind . He has all kinds of plans but if you were sitting at his side advising him on what he should do and how he should make the italy has, what would it be . Look back at the Industrial Base. You have to play to the strengths. Everyone talks about creative economies. Here is a country which truly has a Great Foundation for one. He has got still an extraordinary design heritage. We are not just talking about fashion, but furniture, aviation. I would build on those centers of excellence. I would look north to austria, to germany, to switzerland. One of the things the country does need when you look at the youth unemployment rate, it needs a proper apprenticeship culture. The you see with all of teutonic neighbors. That is key. If you look at the industrial heartland of the country, it is there. That needs to create south as well. Family ask about the being a big part of the Industrial Base and. Families can be an advantage and a disadvantage. They are clearly an advantage in as much as you have continuity and you have commitments. At the same time, there is an inability to grow businesses when you have a shareholding structure that is very fixed. An inability to maybe raise capital in the way that you would be able to if you were a different structured company. You talk in the magazine about you have a piece on a bank broader bank, yeah. He is raising money, local investors coming in and that sounds great. Still aness, there is edit ability of private companies to scale up in the way they need to. That is absolutely crucial. Needs toto that be a bit of a business 101. I think there needs to be a level up if you talk about starting a culture of apprenticeship as well. Perhaps that sense of entrepreneurialism in the sense of how we maybe see it in this economy across the atlantic as well. One thing i would certainly do as well is maybe, he has to go on a road show. He has to maybe do a bit of a charm tour. We have seen an enormous brain drain as well. He has to come and spend a bit of time in london, has to go to new york and elsewhere and bring some of that brainbased back to italy as well. That is the ultimate test, isnt it . If you cant convince people to come back and you have a real problem. ,ou talk about the little tour a nice piece in there on the Aircraft Carrier. Thought,d this and i they are using an Aircraft Carrier as a maserati dealership. That kind of makes me wonder whether that is the best use for a vehicle that is capable of doing what it is doing. There. T that over it just struck me as being slightly symbolic of italy, using this incredible asset as something that really, it could be made more use of. You wonder whether or not the great assets they fully understand how to make the most of what they have got. Theyre getting the business to pay for the fuel for their Aircraft Carriers. Some of their allies would think that is quite savvy as well. This issue already came out and irked the royal navy. You take a few pops up the royal navy. Basic, we have two fantastic Aircraft Carriers on their way. We are making the point that italy does have a functional Aircraft Carrier. The italians use them as maserati dealers. It is interesting when you look at diplomacy. Italy has been very good at playing the card as of late. Is that the best use of the Aircraft Carrier . Maybe not. There are a lot of people on the gulf who do want to drive very fast cars. We forget that the italians also make a very significant contribution to various deployments in rather hot dealers all over the world as well. Stay with us. We have lots more to get to. We will dig into some of the companies that are driving italy forward. Still to come, beer goggles. A. B. Inbev is in business and the United States even as americans get a taste for craft brews. Why smallscale can be big business area we will see you a little later. 25 minutes past the hour, welcome back. You are watching the pulse. It is time for a look at todays hotshots. Daredevils decided to get unconventional. This frenchman flew by the giant statue in a dramatic fashion. One went over and one when under. Quite a view. New images from space show that north korea is almost entirely in the dark. Only the capital pyongyang showed a tiny speck of light. Marketsnd out how the are trading this morning. Jonathan ferro at the touch screen with more. Equityinutes into the market trading session in europe, stocks moving lower, down by 0. 4 on the ftse 100. The dax down by 0. 2 . Cac 40 not doing much better. Tyler brule says italy is basking on the sunland. Italian stocks are the only ones to climb today. The weak data is the theme. Consumer confidence, housing data out of the United States failing to inspire. We will four minutes, get u. K. Gdp expected to come in at 0. 7 . , one pound now buys you 1. 62 1. 66. Several officials out of the moment talking about Interest Rates. That is one to watch. Thank you very much indeed. As we head into break, a reminder, you can follow me on twitter. We will see you after the break. Welcome back. Youre watching the pulse. U. K. Gdp is out and in line with expectations. , a relatively strong output growth from the u. K. Continues. All sectors of the economy are growing. Funnily enough, the pound dipping a little bit on the back of that. I think it is beginning to cover recover. Let me run you through the top headlines we have here at bloomberg this morning. We are getting written comments from the u. S. Senate testimony expected later today from Credit Suisse ceo brady dougan. He is going to be answering allegations that the bank helped american customers hide as much as 10 billion in assets from u. S. Tax authorities. Credit suisse acknowledges that its conduct centered on a small group of bankers. We are getting some new details from ukraine in the last hour. The acting president says he has assumed the powers of Supreme Commander of the armed forces. He has also disbanded a police unit accused of deadly violence. Parliament is expected to appoint a new government by tomorrow. Regulatorsn union say the Facebook Whatsapp deal may trigger investigations across the region. Find out how the mobile messaging startups client data will be used. Facebook is buying whatsapp for 19 billion. Staggering numbers. Still with us is tyler brule. Get your taked to on technology at the moment. It feels like that deal . That deal and plenty of others at the moment. Of have tesla, sort incredible market valuations, facebook paying 19 billion, technology is clearly going to be a massive part of our lives. It is going to continue and grow. We go through sort of cycles. Give me your sense of what you are seeing in front of you at the moment. The design we are seeing at the moment, the capabilities of the devices in front of you, what do you make of the landscape . Ask i think it is interesting to acrosss premiumization all sectors and none of the Major Companies have been able to crack it. Everyone has talked about what is going to happen with the wrist the vice, etc. One of the Big Companies in korea is saying, why cant we get there yet . All of the money you have, shouldnt you get yourself on a plane to geneva and go buy a watch company . There, you have that sense of craftsmanship. Are the two things the same . I think there can be a merger of the two. If you are a tech company, whether youre sitting in japan or korea or the u. S. West coast, it is going to be hard to build in all of those elements of authenticity. All the things people expect when they buy a luxury product. That is the great challenge for the marketplace, how to get more for a device. At the if you look content providers, the major media companies, you have a screen in front of you the next thing is, when are you going to have also a screen on the other side . So i know that you are a Bloomberg Consumer at the moment. Then maybe you are a netflix as well. That actually says something about you intellectually or the handset might be i think that is a really interesting area. Mostis the value for brands. It is still something which i think a Smart Technology company will crack. We can almost draw a line back to italy. Made in italy, the design that comes out of italy, the crap ship the craftsmanship of what the company delivers, europe is seen as being italy, france, beautiful countries. How do weeds make this work . Technology needs to figure out how to make its product beautiful. Do you think the europeans have something here . I think they do. You can look at the automotive sector, any number of the major tech players, a lot of them have Design Studios. To the south of spain, southern france, you have Design Centers which are full of new engineers from all over the world. If i was italy, i would try to , it isown that and say great that you have all these people on the u. S. West coast, but wouldnt they be happier in a nice villa in tuscany where they can go and what is stopping them from doing that . Doing business in italy is difficult. Getting the phone lines, all of those things are tough. That is another thing for renzi as well. Highspeed italy. Aside from the trains, youre absolutely right. That is one of the things that is blocking them. If i was going back to being in any number of italian diplomats around the world, i would be saying to rome, we should be talking to people about maybe not investment in huge factories, but the starting point is to get some great Design Centers. Lets get 50 or 60 people in here. What are the incentives we can build into attract those people . What can we do to enable Lowes Companies when they get to the country . You look at europe at the desire toere is a have a startup culture. Do you think italy has the same desire . At the moment it doesnt feel like it. You talk a lot about the family culture, the history rather than the start up element which is such a big part of the u. S. West coast economy that london wants to have. Berlin definitely wants to have a bit of that. Why is that missing in italy and france . This is one of the things we wrestle with. Why do we all love italy . We like italy because it doesnt really change. You have goneoria to forever, the same winners are there. The same waiters are there. Person wanting to open a challenger down the street . It is still not happening. I think part of it is also getting people to go abroad. It is not just six months ago to study english. People are venturing out into the world for a good two or three years and going back. This is the problem, getting italians to go back. You come to london and italians wind up in this city or any number of other capitals and they dont go home. What are going to be those forces, whether it is the banks, startup programs not just inspiring people but some degree of capital. It would be a huge mistake to just go down a tech channel. So far that has not been the legacy of the country. It should be sort of playing to the strengths. One story we do in this issue is, we look at florence and how it has become a beacon for the japanese. The japanese want to launch the next generation of luxury goods companies. You see a whole bunch of really talented young men and women. Taylors, cobblers, they are starting businesses which might be the next acquisition target for mr. Arnault. I would play to those strengths more. That is maybe not going to make you deliriously rich like the u. S. West coast but it is a start. How do you get the value . Attaching valuations to things is very difficult. Maybe lvmh can ascribe valuations to the assets it buys. Ascribing valuation to style and design is something that italy needs to do. It needs to figure out a way of making its core values more valuable. I am wondering if that is the challenge that italy now faces. Market in general, just walking on cassette, youre talking about the 19 billion whatsapp deal. Suddenly, mickey drexler, a potential ipo for j. Crew only 5 billion . Here is a brand that is touching peoples lives every day. I think it is sectorwide for retail. We see a premium when brands go to market but i think it is not just down to those people sitting in rome, paris, the city as well. We should be looking for perhaps a slightly higher drive to get some more sensible numbers. Your colleague yesterday were talking about a potential bubble intact. Ask you keep pumping the bubble until it bursts. When that happens, we will see. Tyler, you will be back with us in a minute. Up next, blue skies ahead. Airbus predicts better results in 2014. We will look at the wind the neat its wings. Later, we are live with the groups finance chief. That is coming up later on surveillance right here on bloomberg television. Welcome back. You are watching the pulse. Shares are rallying this morning. In companys profit jumped 2013 and it predicts earnings will grow this year. Later, we will be live with the airbus finance chief. First lets run through the numbers. Jonathan ferro joins us with details. Some decent numbers this morning, profit up over 20 for airbus group. It is about the commercial unit. The top line is this, after delivering a Record Number of the last year, they are ramping up production. This is where two thirds of the revenue comes from. The company says they are going to focus on this and particular. They are to go from 42 single aisle planes a month to producing 46 a month by the Second Quarter of 2015. These are the workhorses of the sky that might fly you across europe. That is where the real money is made. Yeah, talk to me about the charges. There clearly was always going to be a charge associated with the restructuring of the defense business. More importantly, the 350 numbers looked lower than anticipated. This is the new twin aisle that is going to the dreamliner, that looks better than anticipated. Lets start with the a350 number. 434 comes in at around Million Euros. The charges relating to the development of that lane, this one is set to go headtohead with the dreamliner. It is meant to go into service this year. The dreamliner is already in service. The other number is on restructuring. After making the commercial blaine plain business the focus, they are cutting jobs in the defense unit. Putting those together is costing them money, weighing on profit. There was a 292 million euro charge. There was a ride range of forecast for these numbers. Shrug it off to some extent, down about 0. 6 right now. Three. 5 inh as early trading. Thank you very much indeed. John ferro with the latest on airbus. The Group Finance chief is on surveillance later on. Tom keene and the team will be interviewing him. Lets get a related take on this. The editor in chief of monocle, something of a plane buff i would say. There are a few little models lined up. Airbus is in a great business. It has privatized. Government has taken a step back. Travel, as you see it developing from here, how does it work . Ultimately it is the consumer and what it demands goods dictates everything. Where are the weak points . Where could this industry be doing better . Where is the design advantage that going could leverage over airbus or vice versa . The airlines often get beat up he goes people arent happy with the cabin configuration, the lighting, etc. That was a big selling point with boeing with the 787. A very wealthy airline will keep their planes and sell them on. They want to have a standardized configuration. ,f you are loyal to one brand it feel special and unique. There needs to be war flexibility on the assembly lines. I think airlines have to fight harder in differentiation. Atlantic,k across the we all used to beat up on the u. S. Carriers. It was really just very lackluster. Takenerican airlines have an airbus a321 and they are putting that into service on a transcontinental flight. Business class, a lie flat first class and and against the economy as well. That is for a four or five hour flight. If you look at the european characters, and you have to take an airbus to the middle east from london, with a european carrier it is not a very nice experience. Is that down to the airlines though . They could put whatever seats they want in it. There is a big push right now and this goes back to the standardization approach. It doesnt matter whether you are lowcost or legacy, you get into that same box and it is the same seats. Maybe someone sitting beside you. It is not a very interesting experience. That is one of the big challenges for carriers in europe right now. Why would i fly ba versus easyjet right now . Maybe convenience of airport. I think there is room to premiumize the front of the aircraft. It doesnt mean you have to have 20 rose. You may follow what qantas is doing in the u. S. Who is doing it well . Internationally, i think isahy is doing cathay doing every good job. It is also interesting to look at airbus. Everyone was stunned that japan breakingwas really with tradition, always having been a boeing customer. They will be flying the a350. Ana out of japan does a really fantastic job. In europe, it has become a pretty flat Playing Field right now. I am a fan of thin air. Very stoic, solid, you know exactly what youre going to get. That is connecting through helsinki. It works quite well. Alitalia . That would be a dream assignment. This is but i didnt see in here. I was surprised you didnt have any ideas for alitalia. You always have a few ideas for airlines and how they should run their businesses better. Talk to me about one area, we are smitten with the region in italy. They have an airport which on many occasions, they have tried to make various carriers work out of that airport. We did a bit of a provocation. We created an work with a very interesting Design Studio to tirol whichr sud would be a nimble regional carrier. Hopefully that will make people at alitalia snap the italians should have a fantastic airline. Of course there is a few legacy complications to go with alitalia. Think alitalia think italy at the moment . Think alitalia, people dont even actively think about it. No matter where you are flying in the world, is that the airline i want to jump on . Probably not. Always a pleasure. Thank you very much indeed for stopping big stopping by. Up next, the uks slips down the renewables ranking index. We are going to find out which countries are doing better. Details on that up next. Welcome back. Down in a new index of countries on track for renewable investment. How can we grade more appealing . Your to tell us more is our Environmental Finance leader. Good morning to you. Has been clinging on to the fourth spot globally for some time, propped up by a promising wind sector. We cant any longer ignore the policy and politics that seem to be affecting the u. K. Rinne levels sector. What we are looking at is stagnation. Is this cyclical . I dont think it is somewhat cyclical, it is the u. K. Policy centers trying to grapple with ewablese that the ren has to play. There does seem to be increasing concern among politicians that we have pushed renewable too far, that the impact on bills is too great. The u. S. Is taking advantage of shale and low energy cost. Does europe need to be more competitive . Policy centers not just in the u. K. But across the globe are zoning in on value for money and affordability. What can we get out of our investment in renewables . We are seeing very Different Things across the globe. In emerging markets, renewables is playing a fundamental role. Markets,ature renewables focuses on price. One of theent things that we see in this industry is the need for clarity. If i am making an investment for a long time, policy cant be changed every six months. To what extent our policymakers in the u. K. And elsewhere flipflopping on this issue too much . It is a real issue. Maybe if you we bring that back home, at the moment, for developers of new projects, they dont know what regime theyre going to qualify under. They dont know what value they are going to be producing. They dont even know now whether they are going to qualify for a contract or not. That is the challenge if there was more clarity, how would it change the impact . Could look to another market, probably japan is a good example. It is zooming its way up the index. They did have a nuclear accident. And in that market, you dont and japaneses people complaining about Renewable Energy developing. The technology has been embraced. It is a very clear regime for investment. Ofare seeing billions dollars worth of investment and rental bowls in japan. Thank you very much indeed. For those listening on bloomberg radio, the first word is up next. For our viewers, it is a second hour of the pulse. Were going to talk about the rise of craft beer. The cofounder of craft beer rising is talking to us on a day that a. B. Inbev comes out with numbers. Under the hammer, on the hill. Credit suisse ceo brady dougan faces Congress Later today. We will discuss the impact for his business when we come back. You can follow me on twitter. See you after this short break. Hill. Er the hammer on the the Credit Suisse ceo heads to washington to face questions about billion dollars billions of dollars in offshore tax evasion. V in the u. S. As americans get a taste for more craft brews. J. Crew said to be interviewing banks as it mulls an ipo. The retailer may be valued at 5 billion. Good morning to our viewers in europe, good evening to those in asia, and a very warm welcome to those just waking up in the u. S. I am guy johnson. Francine lacqua is all. This is the pulse, live from bloombergs European Headquarters in london. What have we got coming up . Airbus sees blue skies ahead. Profit surged last year as the company produced better results in 2014. Its wings. Neath an explosive report by u. S. Filmmakers on Credit Suisse. Americanhelped customers had as much as 10 billion dollars in assets from the irs. That is more than doubled the amount previously known. Hans nichols has more on the findings, he joins us from berlin. Incredible. Rs are the sheer size and scope. The challenge for brady dugan will be to get ahead of the narrative. It is never good when you have to explain why employees from your bank were flying to the states on tourist visas to drum. P business for the bank when those customers would come to switzerland, they had a secret elevator for them. They had a branch at an airport that served 10,000 clients. The issue is that the numbers that Credit Suisse has admitted to are quite low. They paid last week 197 million, that will not cut it. You look at what Credit Suisse has on their side. They have a good team of lobbyists in washington dc, they will have to be worth the penny they are paid today. We will look at how much Credit Suisse has spent on lobbying. It spiked in 2010 at 2. 5 million. What were going to have, last year they spent one point 5 million. We will have a test of pr and a test of optics. Brady dougan will have to say this is all behind us. Senators are going to say what are you going to do anto make amends and make the u. S. Government whole. I will tune in. Hope you do. Viewing, brady dougan and the further settlement later. Who do you lobby is the big question . Bunch of government arms that are going to be involved. Now it looks like the sec could they getting into the game as well. Sec ash to lobby the well. Most takes place between lobbyists and lawmakers on the hill. The chief lobbyist for Credit Suisse is a former hill staffer. The challenges in the senate, they might not have as good inroads on the senate side as they do on the house. Hard to lobby the department of justice. You tend to settle, that is why we saw the settlement last week. There might be a new sec probe, another challenge for brady dougan. Interesting day. Thank you very much, he will be back a little later, hans nichols, International Correspondent. The retailer j. Crew said to be interviewing banks for an ipo later this year. The brand, whose customers include be first lady Michelle Obama, made a valuation of as much as 5 billion. Equity firmrivate involved looking to exit . For a lot of private equity owners, they have not had a chance to vision the ipo market. In the u. S. , they have had the best market globally. Private equity is looking at getting out. An ipo for adoing russian retailer. They want to rush this through, what is the coming is the timing . The equity markets feel for the moment. Yes. Is there a sense they want to get this done quickly or do they have time . Every stakeholder that has these companies and wants to sell them is thinking why not go now. You never know when sentiment turns and then you do not have these chances. They are probably thinking lets try soon. In 2010, double the value theyre looking at selling for. Thank you very much, our deals reporter ruth. Into the beer market. Bev says it sees an improving trend in the u. S. Beer market. Soccer for our american audience. Our European Business correspondent Caroline Hyde joins us with more. Up 13 , sales, if you strip out m a and fx issues, almost 5 and ahead of estimates. The seller of budweiser is on a bit of a role, they are sounding optimistic. They are saying in the future we expect mexico and brazil to return to growth. Rozelle helped by the 2014 world cup. The u. S. , despite being freezing in the First Quarter in many states, there are still thinking the stronger economy will help push sales forward. These are crucial regions. Mexico, brazil, the u. S. , make up 18 of sales for ab inbev. Stock trading that much higher. Nicelooking beer. We are interested in craft beer. It seems to be a trend ab in on. S trying to cash unbeknown to many, they own a number you may half that were independent. And have goose island ale auburn county stout, a Perfect Match for flourless chocolate cake. Sounds pretty dreamy. It is about craft beer, 7 of the market share in the u. S. We see it in the u. K. As well. We will be speaking to a man who held instigate a festival around the revival of craft beer in london. This is a company tapping into will be boosting sales and marketing spends as a tries to cash and on the world cup. Optimistic all around at ab inbev. Thank you very much, Caroline Hyde. Carlsberg, one of the biggest brewers in the ukraine, is monitoring the situation carefully. Lets find out what is the latest. The acting president says he has assumed the power of the Supreme Commander of the armed forces. The Parliament Expected to appoint a new government later today or early tomorrow. John joins us now on the ground from kiev. Too early to talk about a sense of normality returning to kiev . Much too early. If you walk through the streets is relatively peaceful. At the same time, almost every second person you walk past in the main square is wearing some sort of militia, camouflage, or combat gear. It is a pretty surreal situation when you walk around. Streets form in the now. Some concerns expressed by some militia volunteers that law and order will become harder to guarantee and maintain the longer this power vacuum goes on. Power vacuum obviously feeding into concerns about the financial situation the country faces. There now five days after ousting of the government. How serious is the financial situation becoming . Even justserious, looking at the currency this morning we have seen another 6 decline in the currency this morning. What you are seeing at the central bank is running out of money to defend the hryvnia. Yes, there is talk in european capitals and in kiev about the 35 billion dollar bailout ukraine claims it needs. None of the hard work on getting that money can be done until we have a government in place. Some optimism we will get a finance minister announced and the next 24 hours. The longer we do not have a finance minister, that is more time ukraine has to battle for ale and try to avoid default. Fraher, thank you, joining us from kiev. 1. 1 billions added dollars to his fortune yesterday, shares of tesla closed at records on investor optimism over his plans to build one of the biggest factories on earth. He is the biggest shareholder of tesla. Pulling a range of tshirts Ministry Says it led people to sexual activity. A regulator says the leadookwhatsapp deal well to privacy probes. Facebook is buying whatsapp for 19 billion. Under the hammer on the hill, Credit Suisse has a couch to misconduct in the u. S. Tax code Credit Suisse has acknowledged misconduct in the u. S. Tax code. We discussed that after the break. Morning, welcome back. You are watching the pulse, live from bloombergs European Headquarters in london. Currency markets let me show you what is happening with the pound. Trading near the top end of the daily range, 1. 6691. On gdp thisread morning, in line with estimates. The thing you can take away from date of this morning as that they are showing some really decent pickups in key areas of the economy that are now crucial to the recovery becoming selfsustaining. For instance, net trade, a big area the governor is concerned about. George osborne talking about this starting to pick up and adding a portion of that 0,7 to the growth number. Good numbers coming out of the u. K. , not better than expected, but the composition of the gdp read is slightly better than anticipated, hence the rebound in the pound versus the u. S. Dollar. Lets turn our attention to one of our main stories, Credit Suisse, a u. S. Senate Committee Bank held american customers hide as much as 10 billion from the irs. Bank for failing to discipline executives associated with these revelations. Joining me now is deputy head of German Research derek becker. How big a blow is this two brady dougan and the Shareholder Base of Credit Suisse . Think it is a little disappointing, it is not coming as a complete surprise. That these investigations have been going on for a wild. The paper that emerged yesterday is a political paper, i talked to Credit Suisse this morning, they can confirm the numbers they stand by the numbers they indicated earlier. I dont think it comes as a big surprise. Impacts moving forward . Are they going to have to change the way they do business . They have already changed the way they do business in the u. S. In the past, it was more or less to allow a u. S. Citizen to have a bank account in switzerland and not declare them. This has been stopped in 2009. The business Credit Suisse is running today is already without this. The most tangible impact will be a financial find able software. Speculation is wide, it is centered around 1 billion or so. How much reputational damages there . Reputational damage for swiss banks has been done. We had a case with ubs a couple years ago, ubs was twice as big as Credit Suisse and received a 780 million fine. They suffered reputational issues in the u. S. And beyond. Credit suisse is in the same cap, their business was half as big but the damage will be very much the same. To what extent will Senior Management be exposed here . The allegations coming out of the committee are that this went right to the top. Theres clearly no evidence of that at the moment that has been made public. Gettingcould be involved, there is maybe a little bit more room to run on this story. How exposed is brady dougan personally . Sec related part of this last week already. That is more or less done. The Senior Management is always difficult to say. Do and only became ceo of Credit Suisse in 2007. Shortly before the whole business was stopped. Thatnot necessarily think he will have a big personal involvement in this case. In terms of what else we can expect for the rest of the Swiss Banking sector, we have had ubs and a much smaller swiss bank, we now have Credit Suisse. This is really driving on for. He Swiss Banking sector absolutely. They used to do a lot of this business in the u. S. And in europe. They will have to walk away from this business and this will have big implications on the cost side of the business. Thesibility of popularity of swiss Private Banking will fall, it has already fallen before the crisis and will not necessarily recover. This is a big change with Private Banking. In terms of what Credit Suisse does next ubs changed its business model. That relates to Investment Banking. Are we going to see changes in the way that Credit Suisse is structured . Do you think they go the same way as ubs . What is the future for this bank and the environment you just described . I think it is not necessarily a great idea to focus the entire business on Private Banking. Profitability and margins are under pressure. For Credit Suisse it is a big advantage they have managed to preserve such a large part of their Investment Banking. It is comfortably covering its cost of capital. Count himselfcan lucky that they still have this Investment Bank and that they have more diversified earnings. Credit suisse is not in such a bad position. It is cheap compared to other swiss banks. Thank you for your analysis, joining us from Kepler Cheuvreux from frankfurt. Crime pays. Brazil may have some of the worlds best beaches. It is the king of car crime. Auto theft revving up business for one company. It is coming up next. Welcome back. G, you are watching the pulse, live on bloomberg tv and streaming on bloomberg. Com. Lets take a look at todays hotshot. To get anvils decide unconventional tour of rio de janeiro. Hey flew by the giant statue check out this shot, it shows you how great this is. Amazing. New images from space show that north korea almost is entirely in the dark, between the brightly lit glow of china and south korea. Only the capital, pyongyang, registers tiny specks of midst of the dark void. Side of to the other the world, brazil might have the best beaches but the nation is also the king of car crime. Bad news for owners, good news for businesses. For a Company Called ituran location end control. The Israeli Company reported an increase in earnings thanks to mozillas thanks to brazils auto theft. Elliott gotkine . Is really used to be the companys biggest market, it is now level with brazil thanks to growing car crime. 140 out of every 10,000 vehicles in brazil are stolen. That is 40 worse than the number two country, which is south africa. The ceo reckons brazil will still be an excellent source of growth for his company. Brazil is very attractive because of two reasons. Much more of ame western country. More Insurance Companies are involved in the market, more Car Manufacturers are involved in. Razil, more people using cars it is still emerging markets. A lot of scope for growth in that country. Technology got the fitted to the car, you still have to get the car back even if you know where it is. Here in israel, they have 25 minutes when a car is stolen before it disappears into the west bank. In brazil, things are different. And brazil, it is hijacking. They throw out the driver or route the driver and leave him on the road. He calls us and identifies himself, we shut down the engine from our control center. The thief usually goes, then we send the police to recover the car. We do not have to chase the car. In israel, it is not allowed. We have to chase the car. A small disability. A small difficulty. It is a little bit of a currency hedge. Als weakening against the dollar, israeli shekels strengthening against the dollar. Half it grew last year. What is driving this company hire . We will find out after the break. Half past the hour, welcome back to the pulse, live from london. I am guy johnson. Francine lacqua is off today. Lets talk about the Bloomberg Top headlines. Christine lagarde says the imf is likely to send a team to the ukraine soon. The country is seeking Financial Aid following the ousting of president viktor yanukovych. Readyector says she is to engage. The eus regulators say the facebookwhat that deal might investigations across the region. Watchdogs will find out how the startup uses client data. Facebook is paying whatsapp 19 billion. Credit suisse ceo brady dougan will answer all your nations will answer allegations his bank helped americans hide as much as 10 billion from tax authorities in the u. S. Credit suisse acknowledged misconduct but says it centered on a small group of bankers. Our eyes to the heavens. Airbus is predicting higher profits this year. Jonathan ferro has the details. 2013 was nice, 2014 is better. Profit jumped over 20 . The top line, talking to our berlin, theyrt in are ramping up production. Aviation unitcial is at the forefront. We could see 46 planes every month reduced by the Second Quarter of 2016. 42 per month at the moment. Planes a month is a big deal. A lot of logistics. This is where the big money is made. If you dont know what the a320 is, when you board a flight from london to paris, you get on a single aisle, that is the one. That might be the 350 we are seeing right now. I think it is a350. What do i know . Anyway, when you look at this company, it is going through changes. Making big changes, taking the government out and turning it into what the company has wanted to become, a normal company. They are having to take significant charges. We did not know how big they would be. We got some pretty big numbers, 434 Million Euros before the a350. This is the double aisle plane used for longhaul flights. Pretty normal. Of this size,m you will get some charges. The other charge was restructuring. Spaceere minimizing the and defense unit, they have shed 6000 jobs or have a plan to do so. The charge there, 292 Million Euros. Pretty hefty numbers. Saying they are not happy about it. The contributing factor is load military transport aircraft they have that problem with. Through 20 ng 350 one ramping 320, scheduled. Remember what happened with the reminder. They say it will get delivered this year, if it fails to do so, you might see disappointment. The fact they have ramped production is promising for investors. The stock this morning, equity markets lower today, dont read too much into a stock trading lower this morning. The numbers are pretty good. 380s. To sell a more a we have an airbus interview coming up. The cfo will be joining the Surveillance Team later on. 20 minutes to go until that Program Takes to the air. Tom keene joins us from new york with a preview. Else . , what the battery issue with boeing is front and center. We will compare and contrast the american economy, talking to Robert Nardelli about use of cash in america. T, jpmorgan with billions of dollars of money they do not know what to do with. Front and center, judging the market higher. A new book on american exceptionalism. It is a quiet news day, but underneath there is a lot going on. To hans nichols and berlin and talk to Erik Schatzker about the testimony of brady dougan of Credit Suisse before a Senate Committee today in washington. This is likely to be a heated, local moment for mr. Dougan as he goes up against carl levin and senators upset about the same kind of Swiss Bank Account you have. Ok. Yeah, i have lots of swiss bank bunkers hansspecial nichols has visited. Thank you very much indeed. Looking forward to surveillance in just over 20 minutes time. How are the european markets . Manus cranny at the touchscreen. Markets. Ly has been you are looking at equity markets that hit 60 or has yesterday around europe. Growth hit six year highs estimate iran europe. 6 year highs yesterday around europe. You have chinese authorities lowering Interest Rates and banks being more cautious in terms of lending to property developers. Cusp ofina be on the what we saw in the u. S. In 2008 . S p futures indicate. 25 higher, housing data. Hump of badthe weather. Home sales, footfalls always har 3 . Expected to fall over in europe, a couple stocks. Day. Taking a fairly tough they gave us their strategy yesterday which is all about convenience. Lower by 4 . They are going for convenience, this is our major discount airliner, down over 400 down over 4. 8 . Coming up, fancy a pint . Discussed thee latest brew capturing beer drinkers hearts. That is up next on the pulse. Back. D morning, welcome youre watching the pulse, live from london. Ab inbev has seen positive trends in the u. S. To keep upstruggling with americans growing taste for craft beers. Caroline hyde joins us with more. The u. S. Market is looking good for ab inbev, tastes are changing. Itthey are trying to make their own and embrace it. We are seeing the dividends. Fourthquarter Sales Beat Estimates for ab inbev. We know the main beers still artois, becks, budweiser. They are making a foray into more crafty beers. Goose island ale. I love how they name these things. Auburn county stout. It is a Perfect Match to flourless chocolate cake. Chocolate cake. I love the other names, they have tried to place themselves to the female variety. Many are going off of the calorie count. R wasa artois cide announced. Also bud lite lime is straw berrita. New and diverse tastes and a more optimistic ab inbev. Mexico and brazil returning to growth, these u. S. Improving despite cold weather. You have got the world cup adding to that. To enter a far more optimistic stage in general. At the Earnings Growth driven by the capitalizing on craft beer. Craft beers grew more than 7 in the u. S. Market. But who really owns your favorite pale ale . A subject they should spend more time talking about. Lets bring in sam lloyd, cofounder of craft beer rising. An annual festival in london that showcases some of the worlds finest brews. My first question what is a craft beer . Tea oru drink a pint of some of the beers coming up in london, i am curious as to know what is the definition of this upandcoming category . I dont know if i have been drinking craft beers for years or if i have never had one. It is a term that has come from the u. S. Something they coined in the 1970s. They actually took inspiration for that movement from british brewers. Had prohibition and an influx of rubbish beer in the u. S. A lot of disgruntled brewers came over to the u. K. And realized traditional brewers were making more interesting beers than they could get in the u. S. So we just call it beer . Now, it seems to be summing up the micro brewing. Nown the u. K. , we have flipped it back and had a group of brewers who have taken the lead from the u. S. Starting to brew beers that are much more exciting and flavorful than traditional b rewers. Taking it a step further. How fast is this thing growing . Very quickly. Growth ine saw a sales of 17 compared to 2012, up to 225 million pounds. This morning, the society of brewersdent announced that 7. 9 increase in sales volume for this year four 2013. Own festival, we have seen a 70 increase in the amount of brewers involved. Who is drinking it . Is it an equal balance of men and women . I like the sound of some of these. The names are hilarious. Beer. Win hipster i like the sound, i am stunned as to where they come from. Beavertown get their name for the cockney name the area they are from. At theone of their beers festival, a blood orange ipa. Used to be there was a bar they madendon where beer downstairs. That disappeared 15 years ago, that trend is back. Pubs, breweries, the link between the two is now reestablished. Of craft beer bars and pubs in london is amazing. Even down to bristol and manchester. Brew pubs. Withlike the earl of essex a beret on site. With a brewery on site. This is being broadcast in the u. S. , can we teach the americans a thing or two still . We can. I think the interest from america, we saw american breweries coming to our event. Taking a look. Wasfeedback from them amazing. In many ways, it is exactly what the u. S. Did do as well. We are making some exciting beers. We have got the history and tradition that america did not have. What about the bigger brewers . Are they thinking they are going to buy smaller startups. We have ab inbev, could they have already been bought up . Does that change what you are talking about . I dont think it does. Thee regional brewers and u. K. Have been crafting beer for hundreds of years. Openinge now breweries up their own microbreweries. They are brewing really good beers. Geeks take a look and say they deserve to be listened to. They are not just trying to theyre trying to appeal to the new market. Beer geeks. I have heard other names. Thank you very much. We will leave it there. Sam lloyd, cofounder of craft beer rising. And of course, Caroline Hyde, European Business correspondent. Ceo brady dougan has to capitol hill to face questions about billions of dollars in offshore tax evasion. And what you need to know for the rest of the day. See you in a moment. Good morning, welcome back. I will show you but has been happening with the british pound. Gdp data out a little earlier. Pretty good, in line with estimates. 0. 7 number four the Fourth Quarter. They key contributor to this was trade. Trade contributing to u. K. Gdp . Is, maybe the economy starting to rebalance. Good news for george osborne. I guess the point to make is that trying to keep this going is going to be a big challenge inasmuch as we have got a strong pound, showing it to you. And we have got weakness in the eurozone. But of those factors could provide problems with the trade story moving forward from here. You dont get much for free these days. If you are in the market for a new vehicle, call up the u. S. Army. Giving away 13,000 armored trucks left over from iraq and afghanistan. Take a look at who is getting their hands on these highly powered military surplus vehicles. Nice ride. Hans nichols is back. He is here to look at what you need to know about what is going to happen and the rest of the day. The main event will be happening on capitol hill. Brady dougan facing the full force. We have a little of what we expect him to say. Basically, their argument is going to be that members of the bank, employees, went to Great Lengths to hide their own conduct from their supervisors. So, this will open the question both of the senators will be leading question and. Senator levin and senator mccain, theyre going to challenge brady dougan on what kind of culture is at the bank. How could a culture allow people to fly over on tourist visas and then do business to try to help americans avoid taxes . It will be a bloody day on capitol hill. Had a little further south. Hillary clinton looking for a tan. Everything Hillary Clinton does is seen through the prism of 2016. I apologize as an american on behalf of this. Already talking about 2016. I wish we could wait a little longer, but whatever she says is scrutinized. Talk to me about the results we should watch as well. Target results going to be very interesting, target at 10 30, they have a big data set. We will see how much data theft took place there. Thank you very much, our International Correspondent hans nichols. That is it for the pulse. Surveillance is next. The American Housing recovery. We look at the rent or buy calculus. The blown crew has it wrong. The 21st century is america ascendant. And brady dougan of Credit Suisse goes before the secret the Senate Committee. Good morning, everyone. This is bloomberg surveillance. Is wednesday, february 20 six. Im tom keene. Joining me, scarlet fu, adam johnson with us as well. I had a Swiss Bank Account m a million years ago, like a little fun one. And then the government seized it. It had, like, 46 on it. It is the hollywood movie. What is the trashiest part you have seen so far . Effect that their accounting was tucked inside Sports Illustrated magazines. You might not have been worried so much about what was inside. Lets go right to our morning breeze. The bank of englands chief economist spencer dale says no plan to raise Interest Rates anytime soon. This is coming as the Fourth Quarter gp held constant. No change