Transcripts For BLOOMBERG The Pulse 20140325

I am. I am in holland park at an apartment worth posted 9 Million Pounds. Zes luxuryxury oo and there have already been three russian speakers visiting this property. The money is still pouring in from russia. The secondbiggest purchaser of London Properties after those living in the united kingdom. Agent short term, the behind this property says the money is here to stay. In fact, it is becoming larger because of the volatility. Interesting. Thank you so much. More from caroline a little bit later on. Money swishingn around west london. In terms of futures, a lot of data. As far as markets are concerned, it is the nuances of what mario draghi had to say. Quantitative easing, second half of the year. Much in thelling as first three months as they did in the whole of last year. Where is that money flowing to . The ifo, confidence or not . Can you hit the levels you saw in 2011 . We have not seen those since 2011 on the ifo in germany. That might just pull the euro back. Kingfisher, global reach in china, france, and the u. K. We will talk to the ceo later on. We have a packed show coming up. There is a lot of data, we have kingfisher, a little bit of breaking news in terms of the u. K. Corporates. Then we are watching the ukraine and russian money in london. A big note from Credit Suisse that and the top line very clearly identifies that you have got to adjust your Equity Portfolios specifically for those two reasons, the exposure and the ramifications of what might happen with russia and the ukraine. The second and perhaps more interesting one is what might happen in china. Those are the two big issues. Reddit suites is trying to adjust their overweight positions. Structurally, they are bullish and they say that European Equity markets are bullish. Your time to halve overweight position on equities. Opening a little stronger this morning. Manufacturing a little disappointing. What will mario draghi have to say . In the u. K. , you will get some inflation data later on at 9 30. Lets look at some of the companies that are making headlines this morning. When it comes to google i wear eyewear, they are getting together with the sexy designers. Ban, guys make oakley, ray and they will give us a little style and nash and pinache when it comes to google and how you use your sunglasses on the beach. Kingfisher doing quite nicely. I will tell you what the ceos message was about china when i speak to you later on. The stock up over four percent. Deicing ise cost of down. They say they will make a narrower loss than originally estimated for the first half of the year. It comes in at 55,000,00065,000,000 loss. Triptych ofword, a rising stock prices. Spots tych of rising stocks. What more can you ask for . Joining us for more is j. P. Morgan Asset Management Global Market strategist. His team manages about 1. 6 trillion worth of assets. Thank you for coming in. Need to talk about ukraine and russia and the world in general, but google glass is one of the most exciting things in terms of products to be launched. What does it mean for your investment portfolio . Is Wearable Technology where the money is going to be . Theyou look at retailers, have to be present online. The broader thing that strikes me is technology and the way we interface with it is always changing. If you were to tell me five years ago some of the things that i could do on my mobile phone today, it would blow my mind. I like this idea of not specifically wearing, but constantly pushing the envelope. The countries the companies that put money into research and development for those sorts of things will do better in the long run. The other thing that is important to recognize is the consumer in the developed world is looking better and better. If there is one thing Consumers Want to spend money on, it is personal technology, gadgets i got. It is a really intriguing thing. Gadgets like that. It is a really intriguing thing. Say they are technology companies. It seems there is a right to be seen as a Technology Company by analysts. Is Technology Something targeted towards the consumer . That is the kind of stuff that Consumers Want to spend money on. It is a really interesting question. Talk to me about the ukraine and sanctions. It seems like the screws are being tightened slowly, but at some point, they will bite. What does it mean for your european view . Away . Buy stocks or stay right now, we are staying away in general. You have to understand a Russian Company if you want to look there. In other words, the valuations are very attractive overall for the market. It is too early to touch it. What i would also say is these sanctions are significant for russia because the weaker that russias trading partners around europe get, the more it hurts russia when it comes to their fuel exports and things like that. It is in russias interest for things to calm down in the market. When things settle down, they do not settle down. They settle up. That is what russia wants to happen. One thing that i think is important from a geopolitical perspective is, historically, russian power, before the fall of the soviet union, extended far into western europe and it recoiled way back. I think it is important for investors to have the expectation that that will continue to be changing for a while. Interesting. Thank you so much. We will get more from Andrew Goldberg after this short break. We have an exclusive chat with one of russias biggest businessmen. He is the megafon chief executive. Welcome back to on the move. I am Francine Lacqua in london. We are on bloomberg tv, radio, and streaming on your phone, your tablet, and bloomberg. Com. Here is a stock that is on the move. It is the italian Eyewear Company. Oakley. Rayban and they are helping Google Glasgow mainstream. Mainstream. We understand they are setting up special teams that focus on Design Elements and engineering of this rut. We do not exactly know what it will look like and what brand if it could be a rayban google glass or Something Like that. We will get to the bottom of that. As the u. S. Targets russian markets, business is going for more capital outflows. Ryan chilcote joins us with the megafon ceo. Inside russian business. Are these sanctions having any impact or not . We will discuss that with the the countrys, secondlargest mobile operator. How many customers do you have . About 70 million customers, half of the russian population. How are the sanctions we have seen thus far, how is that affecting megafon . First of all, i do not think they are affecting us at all just because we have business in russia. We are not working in europe, other countries. More than 99 of our business is focused on russia. We have 70 million customers to think of, to deal with, and we are not worrying about it. Why is the share price down . Share price is not only our business. There is outflow of funds. Some funds are selling. Some are buying. This is the situation. The Economic Situation or the political situation . I think it is about what is lyrically out there. The fundamentals of our business are stronger. Look at three numbers about megafon. Our revenue was up 9. 2 last year. This is a mature business. Do you know a lot of businesses in mobile telecom which were growing almost double digits . Our Free Cash Flow is almost doubledigit growth. Youre controlling in megafon, which is londonlisted. There is a lot of talk about going after the oligarchs. If his namehat mean showed up on the sanction list . I do not think i should speculate on that. I do not think that is going to happen. Veryld just say that he is he is working with a lot of international companies. Megafon, 51 is owned by usm. The other half is owned by western companies. Why five percent is owned by tellis and era telesonera. , also about company half free float. About a third of the company is owned by a South African giant tv business. Half of it is owned by the walt disney company. American company. I do not think there is anybody more internationallyrecognized from russia. People say that the russian corporates are finding it more expensive to borrow on International Markets because of this crisis. But also at home because the central bank operates at 1. 5 . Is that an issue for you guys . Lex we are not in the mood of borrowing. 100 russianfocused business. 100 of our financial debt in russia is denominated in rubles from russian banks. We do not have eurobonds. Youre not borrowing abroad. We are not roaring we are not borrowing abroad. To your talk about risk bottom line, where is it . A lot of people say that the russian economy, there is the prospect of a recession out there. If the russian economy shrinks, does that hurt megafon or do people use their phone number at or what . Rex phones and mobile internet became part of a daily basket today. Evil are using it every day. People are using it every day. Bedo not see if there will less growth in russia, there will be less growth in our business. We do not see a recession coming out. We are very confident with what we are doing. Crimea, are you going to start offering your services to crimea . It all depends on the business. I think we need to look from the business perspective. What about the legal perspective . You already do that in one of these frozen conflicts. Nots under russian control, part of russia, not recognized by anybody, but you do business there. Is that tricky . Shares. On owns we do not see any tricks there. It is normal operations. Both companies are profitable. We bought shares of those Companies Many years ago and it of ournts less than 1 revenue, probably less than. 5 . Both of your competitors in russia are very exposed to ukraine. Are you happy that you are not there . It depends on the business. If it is profitable, it is good to be there, but we are not. You think they might be in trouble with their exposure . I do not know what will happy, but we are very happy to stay in russia. A very helpful and unique perspective. 70as the ceo of megafon, million users, giving us an upbeat view of the business despite all of the talk of sanctions and the threat of more sanctions. Was, i amrite line not in the mood for borrowing. Plenty have 20 more more exclusive interviews throughout the day. Caroline hyde gives us a preview. You are watching real estate in london. I am, francine. Lecture is, ornate, bling. Whatever you want to call it, this apartment has it. Theas designed with russians in mind. I will tell you why the sellers are not worried. They see the russian money still pouring in to londons luxury market. Back in a moment. Welcome back to on the move. I am Francine Lacqua here in london. Lets get back to our main guest , Andrew Goldberg. He is a Global Market strategist with j. P. Morgan Asset Management and helps manage more than 1. 6 trillion. We started the show off with you saying you would be very cautious in russia because we do not know what is going on. You have to be sure that the company you invest in is growing. Ryan had this great interview and he was very bullish. Almost too bullish. Is that the sense that you got . They say the recession is not going to happen. There is always the risk. The thing that is appealing to me is that there is a difference between macro and micro. What you have to do as an investor is determine if the valuation forget about an index for a second, but an individual security, if the stock was down because something changed in their Business Structure or be or because the entire index is under pressure. Investors have to differentiate between a companys specifics. He has a captive audience. Half of the russian population signed up for their service. One thing we were talking about before, if you are a consumer and you come on hard times, the last thing you cancel, probably, is your cell phone. That is why the difference between macro and micro is so important. When we look at valuation across a broad index, you cannot do that. You have to look at individual companies. Spilloverll have a effect in a lot of the emerging markets. Concerns about valuations and structural reforms. We are going through an Election Year in a lot of these markets. That is another huge thing. There will be political uncertainty. We have an interesting timeline of all of those elections coming up thomas so more volatility. The thing about emerging markets that always strikes me and i have had to change my thinking as a strategist as i have learned more about them. They are all lumped together as one big index. They are so different from one another. There are commodity importers and exporters. Importingdepend on commodities are going to remain under pressure. There are other components of the broader index that have gotten hammered. Probably due to no fault of their own. Those are the kinds of countries you want to start looking at. Such as . Mexico . Mexico is interesting because there is a good play on the u. S. Economy, which is till recovering. I think poland is interesting. One of the things we have looked at, valuations for the broad index are getting so attractive. Research shows that from current levels of valuations, i am talking around 1. 5 on pricetobook, about 70 of the , youon the next 12 months will get a doubledigit positive return. What about the other 25 . You have got to be prepared for some volatility. History shows that you can also lose. If valuations move lower, you have got to do it. I need a oneword answer and then we will take a break. Well list or bearish on china . I am bearish on china overall bearish on china . I am there is overall on china. Stay with us. We will have your final thoughts after the break. We will talk china next. Europes largest Home Improvement retailer reports this morning. Manus cranny joins us for a breakdown. How did they do . They did very well. Bright, givingn them the confidence to invest in the business actively and manage their portfolio. Have a look at the number. 774 Million Pounds. 744 Million Pounds. That is the start of a multiyear program. That is critically important for the ceo. Strategic partner in china, they find it tough to make money in china. The moneyt making more chinese. We need to have chinese partners to make the business even more chinese than it is today and make sure local expertise with International Retail would be the key. Couple of years, we have done a great job working and making the business stable. You know what . When it comes to describing what is going on with the Bigger Picture for kingfisher, they have a presence in france. 50 of their revenue comes from france. Here in the u k. Is the word in france. Teens are getting better. Broadk. Is not back to levels, but there is a new shift seeing movement away from repair and maintenance, which is about 30 of the business that they see. The u. K. Is not in a bubble. U. K. Implement data Employment Data is critically important. They are divesting themselves of their holdings in germany. Back to you. Thank you so much. Manus cranny with the latest on kingfisher. Still to come, hans nichols sits down with the president of the European Commission. We will bring you that exclusive conversation from the hague later on in the pulse. In the meantime, you can follow me on twitter. I will be back in a couple of minutes with Andrew Goldberg. We will be talking china. He is bearish on the country. Welcome back to on the move. Im Francine Lacqua here at bloombergs headquarters in london. Lets see how things are shaping up. I love these european stocks are actually rising. This is after their biggest drop in more than two weeks yesterday. Are waiting for a lot of data out of the u. S. Homes. Lly in terms of it will allow them to gauge whether the Worlds Largest economy has rebound from this harsh winter. We will have a conversation about how this Foreign Exchange currency thing is having an influence. These are the Bloomberg Top headlines. Europe lawmakers are said to have reached deals to end the nsas phone records program. A bill will be presented today that will stop the nsa from retaining phone data. Instead it requires specific directives to obtain records from phone carriers. G7 leaders officially canceled the g8 summit in sochi scheduled for later this year and instead planned a meeting in brussels without russia. Russiasconcern over troop buildup near the border of eastern ukraine. Leisure airlines say the company to done Everything Possible reach the nearly 1000 family members of passengers on flight 370. Yesterday they said the plane had gone down in a remote corner of the indian ocean. Meanwhile, Australian Defense minister David Johnson says his country will do everything it can to search for debris. Im not surprised about anything with respect to this. This is a mystery. Until we recover and positively identify a piece of debris, everything is virtually speculation. Situation, of course. Everyone is waiting for some type of finality or closure. He helps manage mother 1. 6 trillion. We talked a little bit about the pitfalls of investing in russia. We talked about valuation of emerging markets. Was told you were bearish on china. I dont think theyre hitting their target for growth now. If you had more transparency on the Economic Data you would see it is closer to 6. 5 . That is not the problem i have. The issue is, if i am china, i have some problems i need to tackle. I need to tackle corruption and pollution and credit. I need to tackle an overheated property market. I am letting my currency float now. The point is, all those things are things that we as longterm investors and citizens of the planet want china to tackle, but the impact on growth is going to be slower. That china isre going through an Adjustment Phase and that is going to represent slower Economic Growth. What can work in china how much slower . If it is managed correctly, it will be a success. , what can work in china is some of the underpinnings of why isple like china urbanization, people going from rural areas into cities. Into Investment Opportunities on the Consumer Trend side of the world. Ist i still like in china things like auto makers, travel, apparel, and things like that. There are still opportunities, but as a macro strategist, you cant look at china and say i am bullish. It is not, it is going to continue to slow as they start ein in on these types of things. You want them to fix, but it is too much. At what point do you actually turned completely bearish on china . Detour ofis first onshore bonds. The best answer you can you can keep an eye on right now, and it is tough to keep an eye on the gauge. Concerns, andig it is not the base case, but it is credit contraction. The slowdown in the growth of credit, not just in china but in other emerging markets as well. That is the kind of thing that if it becomes disorderly, if credit were to seize, then you could get a systemic problem. That is a five or 10 probability that is a five percent or 10 probability. Float testtarts to to slow down the Chinese Government has the power and resources to step in and fix it. But the big risk is political. If it goes wrong and they mismanage it, that is the sign you want to look for. Lets talk about europe. You have had quite a lot of earnings impacted negatively by swings. One thing that has befuddled me is currency. In the last year, i am surprised at the weakness of the dollar relative to the euro. A lot of people are surprised. This on your screen a minute ago, you have the europe that 1. 38. Thresholdto be a where the pressure expires for the ecb. If i put myself in the shoes of mario draghi and the European Central bank, maybe it is one dollar 45 or one dollar 47. Lets say it is 1. 45 or 1. 47. The other thing that is important to me if i am mario draghi is a recognition that exports are also important. You have this deflationary problem. One of the main reasons, from a macro if, that that is so important, is if you have a big mound of debt and you are able system, you can pay back that debt more cheaply. The opposite is true if you have a deflationary pressure. You dont need out right you know any prices to fall out, you just need deflation. If i am mario draghi, im probably under some political ,ressure from the countries from sovereigns, to act as well. Maybe it is that. The second thing i would like to is qb. How, legally . Especially if youre dealing with the germans. I think it is the completely unconstrained idea that really ruffled the germansfeathers. One of the key things in the european economy is small and mediumsized businesses. I grew up in the u. S. Economy knowing that, too. I was surprised to see that in europe it is even more important, the momandpop shops, Small Businesses with 50 employees or less. It is so critical. What the European Central bank could and should do is buy up hatches of small and enterprise backed loans, driving prices back down, making it more affordable to borrow money if you are a Small Business. It will also infuse banks with capital at of asset quality review. That would make it happen quickly then . If you are in spain or italy and yuri Small Business Small Business and you want to borrow money, five percent five percent or six percent. Goldberg, asset manager at jpmorgan. The tech company says it is itemborating with luxury root they want to show how glass can appeal to a wider audience. Internet entrepreneur is seeking to list is online Storage Company on the new you on the new zealand stock exchange. He will buy out the listed Shell Company trs investments in a reverse takeover. Megaat 179 million. Candy crush maker king will price its shares after the bell today. Now coming up in on the move, London Properties have become a safe haven among some russian rich. As International Sanctions begin to take their toll, well take a look at whos putting their money into real estate. Still to come, European Commission president speaks to bloomberg. He will be with us later this morning on the pulse. Welcome back. Im Francine Lacqua here in london. This is on the move. World leaders change the g8 in sochi to the g7 in brussels. Our International Correspondent hans nichols has been following the meetings in the hague. He joins us now. I guess theing, but milliondollar question is, does russia care . What we dont know is what is going to happen if russia act as again. We have threats from western, american, and other officials here that if there is an additional incursion from Russian Forces in the ukraine that there will be additional sanctions. Let me read it pretty clear quote from the deputy in the Social Security advisers. He said we will have an increasingly Significant Impact on the russian economy. F russia continues to escalate francine, that is a giant if. This is the conditional threat of sanctions only if russia takes additional actions. Those sanctions against 51 individuals will stand. Canceling a summit in sochi, that was the g8 summit in june, instead, they will have it here in brussels just around the corner at the same time. What we have here is a canceled additionalreat of sanctions, and quite a bit of crowing from u. S. Officials about what they have done to the there is a knock on effect and this is hurting russias economy. But so far no additional talk on what further steps you would do to further cripple russias economy. Francine . Hans, what is next . Something a little more concrete than additional sanctions . We will see how the day shakes out. Leaders will be in brussels. The next up is really from the russians. If the russians take an additional sanctions. Quo, whichthe status is Russian Troops occupying crimea, ukraine troops out of crimea, crimea being essentially part of russia, that seems to be the status quo. They doesnt seem to be a big effort to dislodge it. Francine . All right, hans. He will bring us any new developments from the field. Inthe pulse is coming up 15 minutes. We have some great exclusive interviews. We also want to talk about google glass. We both remember when we were much younger with the original ray bans, right . Will find out whether google will team up with them. I still have my original wayfarers. Im not sure how, but im not sure theyre ready for a technology upgrade. Is. Ooks like luxottica maybe another potential name in the frames, excuse the pun. Google looks to wrap up this product. It doesnt look cool the images you see in front of you, can luxottica fix that . I am back to what youre discussing with cons with han s. Looking forward to the conversation. How to deter more russian aggression is the name of the game right now. We seem to be drawing lines and the americans think they are doing damage to the ruble. Does mr. Barroso share the same view . Going to be an interesting show. Google glasses, looking forward to that one area i havent tried them. The User Experience is relatively good, but the look is still something they need to work on. A number of bars have banned them. You still do not going to be able to drive in them in certain parts of the world. Is maybe easier to get into other types of wearables that are a little less controversial. Google has decided this is the way to go, at least for the time being. Health bracelets. Guy johnson with the pulse just a few minutes from now. The Brooklyn Nets is going to fulfill president clintons request that russian owned overseas companies be registered locally. That it wouldys comply with the nba rules pro khorov says that it would comply with the nba rules. Sources, merck and kaiser have been the biggest bidder so far. Cloud Business Software companies have all surged since the Public Market debuts in the last few days. Up next, meet the goto guy for the worlds most exotic and expensive ingredient third he gives us a taste of the dream job that takes into the most remote corners of the earth for the sake of upscale cuisine. Welcome back to on the move. I am Francine Lacqua here in london. Said clyde the worlds restaurants are the most exotic ingredients. He shows us a day in the life of his dream job. The foods that most intrigued me are ones which we currently dont have access to. I travel the world to find indigenous foods that might be appealing to the chefs. Chefs are used to me proposing some odd ideas. My name is brett go to lanky and artisartisan all foods foods. Growing up i would hunt mushrooms in our yards in pennsylvania. When i was 13 i got the idea to start a whole website during the. Com boom. We would sell fresh white truffles and all travel products. Brought two of my passions together, food and business. , forll a lot of caviar foie gras. I was never able to find a legal pork platter in the united states. Usot of them will contact and say theyre working on a new menu and they need some inspiration. Berger that we can actually inspire them with the ingredients. That creates excess. That creates success. Kanzuri. Here is called they take red peppers that they grow and salt them with sea salt and laid out on the snow. Isnt pureed and laid out for a total of three years. I will show you something really special. The worlds most expensive coffee. It is expensive because it has been digested first by the civet cat which lives in the jungles of sumatra. This is the dropping from the civet cat eared the blue make this coffee action going to the jungle and collect the droppings that are then washed and roasted. And they come here to the united states. Japanese. The stake would cost 200200 50. These are freezedried sea cucumber. An animal that lives in the bottom of the ocean. We cant sell these yet. A bowl of soup with sea cucumber could cost as much as 250. My whole mission has always been to introduce new foods to the food system and have my small impact on it. What a dream job. Stay with bloomberg tv. Guy johnson and i are back with the pulse. In the meantime, lets have a look at one of the biggest market movers. We will be all over this in the pulse peter cook is luxottica and google glass. Company has formed a Glass Partnership with google to market, but also develop, design and distribute new eyewear for googles glass. Luxottica makes ray bans and also oakleys. We try to figure out exactly what these would look like it will go through that in the pulse. What fun. It has to look good. That is what investors say. We think that rayban and oakley will be part of this collaboration with glass. We had a note from saying this will give it a chance to dominate the technological frontier. That is why that stock is gaining so much. Overall, this is what european stocks are doing. They are on the way up. Every couple of really bright spots like luxottica. If you look at the ftse and cac and the dax over in frankfurt, they all gained between 0. 7 and 0. 9 . This is after they had the biggest drop in more than two weeks yesterday. We are awaiting where american data to see if the Worlds Largest economy has rebounded from the harsh winter. Well go through that in the pulse. We have always cared about currencies, but we now care about it even more, because over the last two weeks it started to have an impact on earnings. I was speaking to Andrew Goldberg, one of the Money Managers at jp at j. P. Morgan Asset Management. Atthinks the ecb will act one dollar . 45. The euro actually Holding Onto Gains before. We have sentiment data out of germany. That is a little bit later on. Hans nichols coming up with the president of the European Commission. Well bring you that conversation live from the hague later on this morning on the pulse there is going to be great. In the meantime, you can follow all of us on twitter. We will see you in a couple of minutes. It is back to the g7. Russia excluded from the group of eight as World Leaders warn of sanctions. We speak with the European Commission president , jose this hour. Oso, London Real Estate agents prepare for a surge from wealthy russians. How long will it last . Likes googles italian job. They team up with the Company Behind rayban and oakley, luxottica. 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. I am Francine Lacqua. This is the pulse, live from bloombergs European Headquarters in london. Just getting ifo figures. This is what we were suspecting. The forecast, the expectations are a little bit below what analysts told us. This has to do with ukraine. There is a link between the russian and german economies that is being felt. This is a survey of business. This is people with skin in the game, this is investors and guys who manufacture stuff that could be sent to russia. The euro under pressure, 1. 3 830 on the back of this ifo figure. Members, 35 f the of german gdp comes from exports to russia. Something to watch out for. Lets get to our other top story. Covered, russia has been suspended by the group of eight nations. Hans nichols is in the hague. Ryan chilcote is in moscow looking at the threat of additional sanctions and what that would mean. The eus biggest economy has a lot riding on russia. It is one of germanys biggest export destinations. David tweed will give us more details on the ifo number and the impact that the russia story is having. Hans, lets start with you. Guy, it is the potential of inther economic climate here europe hanging over this summit. One of the questions one of the reasons for conversations last night that they did not go further and imposing additional sanctions. We essentially have a slap on the rest towards russia. They canceled the g7 the g7 has canceled participation in the g8, supposed to be held in sochi. They will have the meeting in brussels. Until then is a wait and see approach. If additional incursion, they are telegraphing pretty strongly that what they mean is a troop incursion from russia and eastern ukraine, that would be a precipitous event to cause and to trigger new sanctions, absent that, we have what we have. Sanctions on the eu on 51 individuals, and visas and 31vel bans from the u. S. On individuals. Is the downward pressure on the ruble which u. S. Officials have been almost bragging about with happy enough to force Vladimir Putin to remove troops from from you from crimea . Whats next . Do we just leave the summit was a threat of more sanctions. There is a summit in brussels on wednesday with talk of what you can do to prop up ukraines economy. There is an imf package in the works. In terms of sanctions, i will be inssing Jose Manuel Barroso a few minutes, if russia does not do anything additional and go into eastern ukraine, we have travel bans on a handful of people is that the only response from the west. We have seen from the russians they do not seem to mind. Is always theere g20, the premier economic and security forum. Hans nichols in the hague. Lets get to Ryan Chilcote on the ground in moscow. ,alking about the sanctions maybe more to come. In terms of immediate effects, what are we seeing . Life is a pretty arguable point that economic sanctions we are seeing have had much impact. The threat of sanctions does appear to be undermining Investor Confidence a little bit. Russian money is leaving the country like there is no tomorrow. The Economy Ministry late last night said more money left russia the first two point five months of this year than in all of last year. Last year was a pretty bad year. Capital flight stance at somewhere between 65 billion and 70 billion. I caught up with the ceo of rushs largest bank. He said the economy was in less than stellar shape and if we see a little bit more money leave the country, russia could be looking at a recession. It is not only the question about the sanctions. It is also the Economic Situation. If it is higher than 70 billion or 80 billion a year, we can get a recession. Of nuance, bit russian money was already leaving the country before the announcement of these limited sanctions we have seen thus far in this geopolitical crisis. It has had some effect, more money is leaving because of this western pressure. It was happening long before that, it is difficult to quantify how much of the money is leaving because of sanctions. Hans was talking about the fact that russia is being kicked out of the g8, it is now the g7. Putin was saying it is more important to be a member of the g20. How much importance does russia put on being a member of the g8 . There is a bit of bluffs surrounding this, how important was it they were a member of that club . Look him it is prestigious, it is good for president putin, he was going to host it in sochi. It is more exclusive than the g20. But they find the g20 as more useful, it has more of their allies there in terms of emerging economies that are playing an important role. The real thing, without a doubt, is the issue of whether these sanctions are actually affecting things. The funny thing is, this is a contrarian view, the white house has a little bit of spin talking about how they are effective in bringing down the ruble. The ruble is up since march 3, the day couldnt sent troops into crimea. 2. 2 against the dollar and 1. 5 against the euro. Coming down was before the sanctions were announced. Ryan chilcote with the very latest from moscow. Germanys latest Business Confidence survey at the top of the hour. Us fromeed joins berlin. This survey gives an indication of expectations, which means we get indications of how german businesses are worried about the situation in russia and ukraine. Ts the blame on the andation in crimea emerging economies. Wey cite the decline that did see in the expectations the Current Situation rose from last month. But the expectations fell further than economists had been estimating. Those expectations are still well above the longterm average, sitting in with what we are hearing about the german economy. The economy will do pretty well in the First Quarter as we see some slowdown in the second half year. That slowdown could be exacerbated depending on what does happen in russia and with regard to sanctions and whether they ratchet it up or not. And a lot of it is wait and see, it is the uncertainty that german businesses do not like. One of the things is the situation in russia is already impacting german businesses. I will give you one example, one of the biggest retailers has been wanting to ipo off its cash and carry russia business. Looking to raise Something Like one billion euros, that would value its business in russia at 7 billion euros if they got the money they were looking for. They have had to postpone this sale. Ofkswagen is another example how much skin is in the game for the biggest automaker in germany. Last year they sold 287,000 cars in russia. It is really very important to german companies. It is. Up angelainging merkel and saying you have got to be cautious . Saying do not push this too hard, this is very important and we need to make sure the relationship stays intact. Two messages coming out of german business. One is the message, before you ratchet up sanctions, think. It is going to cost germany a lot of money. The next thing is from people and the foreign ministry, they are gratified by the flexibility of german business. Skin in thea lot of game but ultimately this is a political decision. And if you need to go ahead, we are going to follow. Thank you so much, david tweed from berlin. Family and friends of passengers on the missing flight 370 have been protesting outside malaysias embassy in beijing. And was turning to anger after malaysia concludes the plane went down in a remote corner of the indian ocean. Joining us on the phone from malaysia is a reporter for bloomberg to the malaysia. For talking to us. Clearly, there is a series of Unanswered Questions surrounding what happened to this flight. We still do not understand many of the details surrounding his disappearance. Protest, inthe terms of the issues surrounding the company, this is understandable. Is there anything more we are in terms of Development Related to the aircraft . Thank you. Basically, all the media in all still play a wait and see again with the government. Last night, the Prime Minister ended inhat mh370 the south indian ocean somewhere off the waters of perth, australia. It is assumed that all 239 people on board perished. He wants to avoid speculation that it was hijacked or crashed. It was a very rare that he wants to use a specific snapshot of where things stood in the investigation. Given. N the information between the hours of 1 00 and 8 00 a. M. It is clear that the Prime Minister is intent on leaving the details to be fleshed out by the ministry of transportation and a press meeting that should be happening very soon this evening. Thank you so much, randy salim of bloomberg tv malaysia. Here is what else we are watching. Double estimates for the number of deaths caused by air pollution. Airborne contaminants killed 7 Million People in 2012. That is more than the combined number of deaths caused by aids, diabetes, and traffic accidents. U. S. Lawmakers set to have reached a deal to end the nsas phone records program. A congressional aide tells bloomberg the bill will be presented today. It stops the nsa from retaining phone data en masse and requires direct is to obtain records from u. S. Carriers. Doubleteaming up with makers of ray bans and oakleys. Teaming up with luxottica to help the google glass go mainstream and appeal to a wider audience. Reminiscing about our ray bans when we were teenagers. Threatening to slap russia with more sanctions. Are economic sanctions the next step . Does couldnt care does putin care . We discussed with a russia expert. Welcome back, you are watching the pulse. For more coverage from around the world, check out the global video channel on bloomberg tv plus or apple tv. Free videos, check it out. Meeting in the hague have pledge measures against russia for its annexation of crimea. They canceled the g8 summit in sochi and plan a meeting in brussels without russia. We are joined by a Research Fellow at the russia and Eurasia Program at chatham house. Great to have you, talk to us about the sanctions. How much are we expecting them to increase and that what point do they start biting . Is russia risking recession . The first sanctions were taken in response to the annexation of crimea. It is mostly the close circle of people around the kremlin. With the exception of the bank of russia and two or three oligarchs perceived to be dealing with putin. That is not big enough, to paynt putin is ready that price. He said i will open a bank account in bank of russia, i am not afraid. What is the red line when the next year of sanctions will be introduced . The west has not communicated that. It could be putting troops into east of ukraine or the south of ukraine. It is linked to military escalation. If that happens, this could include economic sanctions related to access, finance, and oil trade. The threat of sanctions seems almost great as the sanctions themselves. Confidence is what determines how an economy operates. If i am a western business thinking of doing this is with a russian counterpart, i am thinking we may have sanctions further down the road and i need to be cautious. It almost makes a situation where the sanctions are having an effect, a slow burn that will take a while. What kind of duration do i need to think about in terms of the effect these will have an impact it will have on putins policy. One benchmark is president ial elections in ukraine in may. Iso not think putin withdrawing pressure around that time. Then we might have parliamentary elections in ukraine. This is a longterm game. Businesses should really plan longerterm horizons. The pressure that will come from screwst to tighten the on the russian economy will be a years time. Plan,not know putins this will determine the action the west takes. What is your take on what putins plan is . At what point does he stop . This is him gaining influence, is this the rebuilding of the russian empire . His goal is to destabilize the government of ukraine and prevent him from consolidating on the path to european integration. And it we saw g7 leaders endorsing the program of reform at the ukraine to rent and providing all the necessary economic and financial and moral support to that. That is not what president putin wants, his idea is to have ukraine integrated with the eurasian union. How much he can achieve without military escalation is not clear. He will play a game around the elections, i dont think there will be an open military he does not need it. He can still go around finding people to support in ukraine and then he will do it on the political level. Putting the military level on the back burner. Is made up of factions, the guys in the east, of guys. Ovych kind the guys in the west are more european focus. How does kiev keep all these groups together . We talked about maybe the need for a federal structure, that has risks. What is the best policy for kiev to pursue and keep the rest of the country on board . The best policy would be Economic Growth and stability in the country. If this interim government, we should not forget this is a government formed until the president ial elections take place. They have set priorities, putting back european integration to the agenda. They already signed the Political Part of this agreement. They have eu open borders for ukrainian trade, tariffs have been abandoned last week. Economy. Help the but also, i think, in a way, the european idea can unite ukraine. People see prosperity and people see investments will be driven if ukraine opens up its economy. This is the only capital that can help ukraine grow. They will not be imf that will bring growth. Imf will stabilize the economy but ukraine needs investments. Researchyou so much, fellow at chatham house. We will continue the conversation on the crisis in ukraine, sitting down with European Commission president , Jose Manuel Barroso, in the hague. Later on the pulse. Welcome back, time for todays hotshots. Ski and snowboard daredevils carved up the pallet or for world qualifiers in austria. Competitors from 14 nations demonstrated their skills and germany won gold in mens skiing. Looks terrifying. Quite terrifying. The opening stage of the Mountain Bike race in south africa was a grueling 108 kilometers long, racers biked up some sharp hills. Team was victorious, completing the race and just under six hours. Plenty of drama at the nascar 400 after Jimmie Johnson blew a tire with seven laps to go. Two other cars spun out in the final moments. Kyle busch clinched first place. Lets see how european markets, talking about final sprints, are trading. Manus cranny . Lets start ouff with a map. Equities with a steep fall yesterday, over 1 . D,nfidence in germany dippe first time in five months. Russia and china are the domino forces driving markets to the big house like Credit Suisse comes out today and says it is time to readjust your portfolio and step back from being overweight. The amount overweight you has in equities. They are readjusting and recalibrating positions. Back to you. Manus cranny there. Many businesses unprepared for outages and blackouts. A company that wants to help you keep the lights on. Follow us on twitter, guyjohnsontv, flacqua. See you in a moment. Youre watching the pulse. Breaking data related to the u. K. Economy. U. K. February inflation at 1. 7 . That matches expectations from the markets. Remember that we are dipping for mly below the bank of englands target of 2 , the pound and little higher on the back of this. The big story is maybe not the step and inflation. The Participation Rate when it comes to employment is higher now than the u. S. That is something to watch out for. And house prices, year on year, higher than expected. This is for january, 6. 8 increase. December was five. 5 . Does it point to a housing bubble . What you are now seeing is the rest of the country catching up. There is a spread between london and the southeast of england and the rest of the country. We will be talking about luxury housing shortly. We have got some unique access to one of londons top pads. A link to rich russians. Top headlines. At the latest briefing on the missing jet, starting now. Ines has saidl the company has done Everything Possible to reach family members of flight 370. Yesterday they determined the flight had gone down in a remote corner of the indian ocean. Australias defense minister says the country is doing everything it can to search for debray. I am not surprised about anything, this is a mystery. Until we recover and positively identify a piece of debris, everything is virtually speculation. Leaders meeting in the hague have pledged measures against russia over its annexation of crimea. They canceled the g8 summit in russia and decided to meet in brussels without russia. They expressed concern over russias troop buildup near the border of eastern ukraine. Can the crush maker King Digital Entertainment will price shares in the u. S. Later. Thanset its ipo for more 22 million shares between 21 and 24. King would be valued at the top of the price range at 7. 6 billion. Here is a pop quiz, if the lights go out, do you a, stop wo calm, panic, or c, keep and carry on . So british. What is really start up has found a way to make sure you always go for option c, the british often. We will talk to Elliott Gotkine from tel aviv. Over to you. Thank you. The company is nation e, its president and founder joins me now. Good to have you. Tell us how nation es businessworks. Is a company that basically is focusing on a niche market. I am talking about energy. Niche. Ly, today, it is a is that what that means everybody is spending money for i. T. I. T. Operation is basically our heart and soul. Billions of dollars are being spent in i. T. This is basically our heart and blood. This is not in the energy world. Nation e took the lead to take part and monitor energy in regards to data. That has never been done before. This data creates a summary of where you canand focus and analyze if there is good or bad news to expect. If there was a power cut because of an outage or someone hacked the national grid, a business has your system and place and should be able to get advanced warning and keep the lights on. Yes, our mission is not only to warn. To have an end to end solution. This is not only to tell customers we have an idea how to help you, to take leadership and give a solution. We speak to a lot of Cyber Security companies in israel and elsewhere. They say the number one fear is attacks on Critical Infrastructure like the power grid. It is not new for a company to target this area. What sets you apart . It is very funny what you are saying. The physical energy in the cyber area is new. This area is only being monitored now, we are in this area for many years and hopefully we have an advantage with our Data Infrastructure and our communication infrastructure. A network to prevent outages and to have security, you need an all network. This is helping our customer, it does not matter if it is a utility or a bank or whatever, to some salvage ahead of time and then have a solution. 6 hours, to5, or have an Energy Policy and be online. How big an issue is this . What kind of, impact does that have on business . Analysis and a report in the u. S. That just came out. 9 transformer stations need to be attacked from 55,000 in the u. S. To blackout an entire country for 18 months. I think you know what i am talking about here, it should create goosebumps. I am talking about a very vulnerable infrastructure. Is basically to keep this little part of democracy, what is still available, to distribute it to the infrastructure. Banking, gas, financial infrastructure are being attacked, our world will change in hours. The idea. Sically to work against this kind of infringement. Youre talking to some of the Biggest Energy Management Companies like siemens. When should we expect pen to paper and a deal to be sealed . We are already deploying products. We are in a very critical stage, we are growing. Our software and hardware is being recognized in the market from team players like ge,. Iemens it is a matter of time that our technology will be implemented. We are looking forward to it. The integration will be done as soon as possible. ,e have thought about it sometimes things do not happen, but you need to be ready to think bad and hope for the best. President ,ammer, ceo, and founder of nation e. Daniel used to be the biggest shareholder in the Worlds Largest thank you, ellie got him. Gotkine. , elliott food do you need korean black garlic or japanese snow pepper. Do you want to pay for coffee that has been digested by a civet cat. The most expensive ingredients you have ever heard of. The goto guy for gourmet chefs in vegas. The foods that most intrigued me are the ones we do not have access to. I travel the world to find indigenous foods that might be appealing to chefs in vegas. They are used to meet her closing out ideas they are used to me proposing odd ideas. We work with over 200 restaurants on the strip. I saw vegas as a desert and assumed they would need unusual ingredients. Growing up, i would hunt must rams and our yard. I got the idea to start a website. We would sell truffles. Of mypany brought two passions together food and business. Foiell a lot of caviar, gras, exotic meat. The most on foods doug tom duck tongue, pork bladder. When a new restaurant opens, a lot of us will contact us for inspiration to see what is new. To hear we can inspire them, that is a great success. Black garlic has been very popular for the last couple years. It is primarily used in korea. This is called kanzuri. It comes from northern japan. They take red peppers, salt snow. Lay them out on the it is then pureed and fermented for three years. This is very special, the worlds most expensive coffee. It is expensive because it has been digested first by the civet cat, which lives in the jungles of sumatra. This is the droppings of the civet cat. People collect the droppings, they are washed, roasted, then they come to the u. S. Steak. Japanese at a restaurant, this would cost 250. A higher price cause it to sell more. These are freeze dried sea cucumbers. An animal that lives at the bottom of the ocean. We cannot sell these yet. A bowl of soup with sea cucumber could cost as much as 250. My mission has always been to introduce new foods and have my small impact on the food system. Francine just told me she has had coffee. Mine was regurgitated. Not all the way through. Not sure if it is the same cat. It was expensive and did not taste that great. Ok, we will move on. Coming up, London Properties are a safe haven favorite amongst russian visitors. We go inside the booming Luxury Property market in london and ask how long it will last. Areood morning, you watching the pulse, live from bloombergs london headquarters. Russian oligarchs have been a fixture of the London Property seen for years. But with the threat of russia becoming more isolated, property is looking like an increasingly safe place to park rubles. Caroline hyde has more. Live at a 9 Million Pound luxury apartment in londons holland park neighborhood. Caroline, it sounds nice. It is nice. Lets run through what almost 9 Million Pounds will buy you. Three floors, four bedroom plus a mades room. Views over holland park. Marble in every bathroom, a sauna, a 3d cinema room pretty lavish. Security. Focus on they have video security in every single way home. That is targeted at the russian buyer. We were talking to the owner just now who bought this place off of a malaysian princess, renovated it and added the bling. Wants the russians to come in. They have had 12 viewings of this property in a month, three of those buyers have been russian speaking. This is where the trend remains. Russia is the secondbiggest purchaser of u. K. Property, of london prime real estate property. About thebeen worried introduction of sanctions and visa bans, money still flowing. The agents here are still seeing speakers. Russian amid volatility, this is a haven. Russians tend to buy . Central london, any pockets of growth . Particularly they seem to be now focusing on west london. In fact, we hear the bac have just bought. They would be the neighbors. If we look at some highprofile billionaires, Kensington Palace gardens is one where the owner of Chelsea Football Club and biggest shareholder in russias biggest steel company. Richesthave ukraines man, owner of system m is right. Hyde park. N russias most wealthy individual ampstead. H to hi london and be north west london. This area is tailored towards russian billionaires. Money still flowing from professionals doctors, lawyers, those with a cool 1 million or 2 million to spend. Looking at prime real estate to get some safety amid volatility. Back to you. Much indeed. Very Caroline Hyde joining us from west london. Some of the areas that the billionaires like to go shopping. Google teaming up with the maker of ray bans and oak leaves. The tech company says it is collaborating with luxury Eyewear Company luxottica to help the google glass go mainstream. Our bloomberg luxury reporter joins us from paris. They are designing and developing it, a great opportunity for luxottica. It has to look good. That is right. Opportunity for both companies. Google is partnering with the worlds biggest i wear makeup. It is getting real knowhow in making quality eyewear. Company has distribution around the world in retail and wholesale. Most importantly, it is partnering with a company that has licenses for a lot of the top names in luxury from chanel through burberry, armani, coach. This is a fantastic opportunity. It is a greater opportunity perhaps for luxottica to partner with the company that really is the leader in augmented reality eyewear. In smart watches, there is no clear leader with samsung also producing goods. Google is the leader in technological eyewear. It allows luxottica to partner with a company that could be a threat down the road potentially later to its business. Luxottica is the leader in eyewear. How big a partnership is this for google . Is there anyone else the company could tie up with that would generate the kind of style and have the same name recognition that luxottica can bring to the table . There are other players in italy. Companies two, other as well, eyewear makers. Luxottica has the scale and range of brands the others do not have. It is the clearly there, the same way that google is the clear leader in its field. Leaders inip of two their field. Joining forces in combining something that will extend through to luxury. Both from a peer luxury brand perspective and a test of logical and the technological aspect. This reflects the partnerships apple has been doing by hiring luxury executives. To teach them the magic of luxury. Thank you, andrew, our european luxury reporter. Back to the hate to hear from European Commissioner president , Jose Manuel Barroso. Stay with us for that conversation. Outcomemorning, welcome you are watching the pulse. Live on bloomberg tv, and bloomberg. Com. Now a look at what we are watching. We are joined by Ryan Chilcote in moscow. Sanctions and whether they will bite. I have got my i am brussels, that is where the u. S. Eu summit will take place tomorrow. Can president obama convince the europeans to strengthen their sanctions . At the moment, the u. S. Is a bit ahead of the european union. The second thing is that ruble,al, is the strengthening against the dollar and the euro. No one believes these sanctions are actually coming. We have heard a lot of talk from the white house about pushing down the ruble. Yesterday, the ceo of sberbank told me he thought this crisis led to the ruble being pushed down by about 10 . See suggests people do not greater sanctions coming. And little money coming back into the russian market. Back to you. Also watching what is happening in the headache. Hans nichols has an exclusive interview with the president of the European Commission, Jose Manuel Barroso. Asking him about whether these sanctions will be ratcheted up. The european response, and whether putin cares. At what point do they start hurting . Thend of what duration is critical question. Monitoring the press conference, the latest press conference out of malaysia. We learn more details about the search for the missing flight. The we have understood over last few hours is the way the , theaft was tracked Satellite Company using pauls pulsency using frequency. This technology is being used to work out where the aircraft was. Radar will a pinger be on location a little later, probably around april 5, we make it a better picture of what happened. Assuming the weather is better. For those listening on Bloomberg Radio the first word is next. For those of you in the u. S. , for our european viewers, a second hour of the pulse. Talking more about the relationship between google and luxottica. The implications of the product, for the new companies, and for us, the consumer. Engadgets european editor will join us to talk about all of those things. Follow both of us on twitter. Guy is at guyjohnsontv, i am at flacqua. We will be back in a couple minutes. Bloomberg surveillance. Thi 7. Sia tossed out of the g collection ofwide phone data but will continue to search for terrorists. Singledigit growth . Good morning, everyone. This is bloomberg surveillance. Were live from bloomberg World Headquarters in new york. It is tuesday, march 20 fifth. Getting right to a tuesday brief. Good morning. Here is what happened overnight, the face of migration. This is deepening the Economic Growth concern according to a government report. Have a lot. A, we the s p case shiller home index and all the housing data. At 10 00 we have in sumer confidence index, as well as Richmond Fed Manufacturing and new home sales. Earnings before the bell, walgreens and carnival and want crashe the maker of candy