What is the white house strategy . . Hat are they doing this has been a threat all along and the president is pushing through. The white house has announced the president has imposed visa b ans with certain individuals involved with undermining ukraine. That means they could be applied to both ukrainian individuals as well as russian individuals. We do not have the actual list of people. This follows action by the European Union. 18 were targeted by the European Union. The president has also authorizing additional sanctions against individuals and entities seen as undermining ukraine and ukraines sovereignty. Asset freezes could be some of the things we are talking about in terms of targeting russian banks. The president is moving on his own and at the same time encouraging further economic action, eight deescalation of the crisis. Of thisescalation crisis. What about congress . Are they willing to go further . Of congress, including republicans, are critical of the resident for his handling president of this, but they are going ahead with the exact same sanctions. We will have the house of voting totives authorize loan guarantees for the ukraine, what the president had been asking for, and the House Foreign Affairs committee givingnsider authorization to the sanctions and even broader kicking the russia out of the g8 if necessary. Here is majority leader eric cantor. Be moving hopefully forward expeditiously, as the speaker said, to give the administration and necessary tools it needs to tell mr. Putin to stand down. The senate is moving in much the same direction same sort of thing. Lockstep, basically, congress and the white house, despite the criticism you hear from republicans. They are giving the president a ick he can use in negotiations. Thank you, peter cook. Peter cook will be joined by chairman ed royce. You can watch that interview at 2 00 p. M. Eastern time. Joining me for more is anderson addon, an adjunct professor at georgetown university. Diplomacy works, what will the ramifications of russias actions mean for the country in a longterm. It is costly for russias economy in the short and longterm. Russia was heading toward stagnation. We know the decline the economy is likely to decline rather than stagnate this year, and monday, we saw a big decline of 12 in the stock market. Today, again, the stock market in moscow falls by a couple of percent. Russia is too dependent on economic globalization to pursue such a reckless policy. , are sanctions a good idea . I think they are a good idea and they are focusing on the Financial Sector where russia is weak because russia is pained to develop a Strong Financial market because of massive red tape and corruption. You have to behave. You,want to play for repressor, one comment from roger altman, the chairman of evercore partners, former deputy treasury secretary under bill clinton. He talked about the russia positionit former about about the russia position. He said about the cost, he does not think it is clear. What do you think what is the bottom line, or the red line for putin . The red line is when the russian economy perform so badly that russia is politically unstable internally and that could be the result of the financial sanctions now. Europear option would be immediatelyline taking away 1 5 of russias exports and that would put the economy real trouble in real trouble. Europe, the ukraine is a big issue. The mood isington, in the middle. Option, thatr would hurt the eu itself. What would drive the european leaders to do Something Like that . Gas was cut off in 2006 and 2009. Europe has developed lots of liquefied natural gas. Norway sends natural gas to europe. Russia already lost one parent in 2000 one third in 2009. Europe, and in the u. S. , gas is plentiful. That is true. We have an exporting that to other parts of the world. Professor, the president , as peter cook was mentioning, there has been criticism, particularly from the republican side on how the president is handling the situation. Is there anything he could be doing differently . I would put it like this there is now a sound bipartisan momentum where you have movingtion on the hill very fast in the same direction. I think it is coming together. , all right, Anders Aslund thank you for joining us. A senior fellow at the peterson institute. Hotbed for startups. Cory johnson sat down with the minister,prime benjamin netanyahu, asking them how he plans to keep israel on the cutting edge of development. I would like to get the Venture Capitalist, investors, to come to israel and see how they can find, not only soulmates, but also entrepreneurs and technologists to cooperate. You open up in this global world , and preferably to the smartest brains you can find on the planet. It is what i think we have in israel and we know there are other places like that. California and israel are awol the greatest hubs. Lets make our work are two of the greatest hubs. Lets make our work better. We have seen little Companies Get acquired before they make it to any size. Is that good or bad do you like them to be a giant google behemoth . Small googles, but that requires marketing reach. The are smart people. He used to be that if they sell million, they were wildly excessive successful. 1 billion. L at i will not legislate and tell them you cannot do that. To keep to be our lot on producing these mushrooms after the rain, but somebody else picks the mushrooms, and that is ok. We might develop a marketing reach eventually of big companies, and it has happened in several of our companies, but overall, israel is, i would say, the laboratory of the world, the laboratory of innovation. Andatch the latest in tech media every day at 1 00 p. M. And 6 00 p. M. On bloomberg west peter cook we have quite a shock for some businesses in new york. Westlearned bloomberg. We have quite a shock for some businesses in new york they learned their landlord is Warren Buffett. We also hear from eric schmidt. Stay in the loop. We are just Getting Started on this thursday. First. Bloomberg. Moving and shaking this morning is billionaire Warren Buffett. In his annual letter, the Berkshire Hathaway ceo praise the virtues of longterm investing by disclosing that he bought a piece of new york City Property some years ago and found out he is the landlord to a string of retail shops in Lower Manhattan between a and eighth and 9th street near nyu. Warren buffett invested 1 million in 1993. There is Something Else that we land. Who was the family that helped to lead the purchase of the family project . A mall can family, the the malkin, the same family that operates the empire state building. Groupew this nondescript of stores it be a Meeting Place for titans. Talk to us about this investment is noah who covers Berkshire Hathaway for bloomberg news. I was talking to other Property Developers and they said there was nothing remarkable about the deal. Do, buy and what we hold investments, and a payoff. The other interesting thing to notice is when they bought, and that his 1993, and who they from, bought from. That is a key component. If you go back to the letter and what he said there, he really highlighted how the property had not been managed terribly well company, and what happened was through Good Management they were able to bring the rental income up. They were, and i asked Warren Buffett about the tenant, and he said it was well worth. That will worth. Th, a tenant that was paying far less. The back story to this is how the two, larry and Warren Buffett met, which all went back to the days of solomon brothers one Warren Buffett was ceo of the firm. Solomon was the largest tenant at seven world trade center. This is the way billionaires work. Goes to larry and says find an investment you would want to invest in and i will put my money in. In many ways, it is classic Warren Buffett. These investments born out of personal relationships, and if not that, casual conversations. One more recent example is Warren Buffett it up the phone and called Brian Moynihan in 2011. He thought of the idea in a bathtub. Radcom exactly. [laughter] right, exactly. [laughter] you can see the affection between the men. I want to read some comments that were emailed to me. Warren buffett, to your point, noah buhayar, emailed me yesterday, and said i have given Larry Silverstein all of my various phone numbers and told him he could call me day or night because he felt the investment paid off so well. Larry silverstein emailed me and said considering we are both in our 80s he thought it was important to express his gratitude while he could do it and i could hear it. These are longterm friends. Right, answering i have a sense of humor about this, which is fun to read about. [laughter] right. Lets look at Warren Buffetts portfolio. ,e buys and he holds forever for example, like with cocacola. It was one of the things he wanted to highlight this year. The market, if you are looking at the valuation or the price quotes every day, it will throw out crazy numbers, but if you are in the mentality where you are thinking about what an investment can produce rather than what it is worth on any given day, you can do well here it you can do well. You can do well. You can do well. That is one of the points he was making. When you read the letter, he is looking at what is berkshires share of cocacolas earnings, ibms earnings based on the stockholding in the company . He thinks about the stockholding as ownership stake. Which is similar to this little deal. Only owns 5 of this retail space, but it also goes to the point that he has talked about invest what you know. If you can understand it, invest. He has not actually ever seen the property, but it is in a good location, manhattan. Next to nyu. Studentso nyu, College Going to the stores, and he said it has to be a good investment. That is what other developers in new york say. Location is important and it is simple, if it is a good location, it will make money for you. That is what Warren Buffett has said, know what to invest in. Know how it works. , ofk you, Noah Buhayar Bloomberg news. Here are our top headlines the European Central bank cut rates unchanged. That ensured economic output and inflation had gotten stronger. The threat of deflation had many speculating the rate would be cut. Earnings andted forecast that fell short of estimates. They announced they are closing up to 225 stores. This staples ceo says with nearly half of sales generated online, the company is taking aggressive actions to meet the need of customers and improving efficiency. Stco posting a 15 decline in quarterly profits. The company said discounts were meant to attract Holiday Shoppers and back cut into sales. Still ahead, we go behind closed doors in one of the worlds most secretive markets and show you 30 million worth of copper just hanging out in a giant warehouse. Also, cities have been cracking down on decigarettes. Ew you cigarettes cigarettes. We will talk to one of the biggest makers. Stay in the loop. You are watching in the loop , live on Bloomberg Television and streaming on your phone and bloomberg. Com. It is 26 minutes past the hour and bloomberg is on the markets. Equity futures are again just a little bit of ground, up. 2 on futures. We are waiting for economic data. It is jobs week. Jobless claims will be out in a few minutes. The European Central bank kept Interest Rates unchanged. The governing council held rates at a record low 2. 5 , and the press conference will begin in just a moment with mario draghi where he will be Answering Press questions. I want to get inside with economics editor Michael Mckee because there was speculation they might cut Interest Rates. There was some speculation, but what analysts were saying is they are more likely to announce something that would stimulate the economy, push Interest Rates down, but not be an official in the senseot qe that we know it, but something similar outside of the bounds of traditional policy. Alice were focused on ending the sterilization program. It sounds complicated, but here is what happened when Central Banks buy bonds from other banks to influence the money supply, they generally pay those banks cash, their local currency. That goes into the bank, increases the money supply, and it could increase lending. The European Central bank does it differently. They bought all of these government bonds in 2010 to bring down yields one italian, spanish, and greek bond yields were soaring, but ever since then, they have been draining money from the system, taking money out not to increase the cash supply because they have a rule against monetizing debt and he did not want to be seen as stimulating the economy. A member, their job is only to control inflation. They might and that. It would be a reviews reverse qe, and as the money supply rises, maybe it is a minor step, a toe in the water. Thank you. We will be monitoring headlines coming up from that ecb press conference. The, key will be back when those numbers come out in a few moments Michael Mckee will be back when the numbers come out. There are hundreds of warehouses that guard and deliver metals like copper, but it is rare that you will get inside one. All day long alix steel will be pulling back the curtain on the metals market, how it works, starting with how it is stored. Desert,in the arizona behind a chainlink fence, pass the guard dogs, motion detectors, lies a mother load of one of the worlds most hottest commodities. Worth . H is this about 100,000. Standing next to 100,000 worth of copper. Pretty much. Next he is charged with protecting he is charged with protecting the copper in this warehouse. Used in almost everything we use in modern society, your telephone,. Omputer, car, pots and pans it is literally the most useful model man has discovered. Why is it a useful item . It is recycled. Copper that is stolen can be resold anywhere. Copper theft is a big business. Between 2006 and 2012, 15 million worth of copper was stolen from an arizona mind. Warehouses never let people inside, but he let us have a look inside. The copper is held until somebody wants it. We use 6000 pound forklifts to move the copper around. We can load the copper as soon as the vehicle arrives. Eightglas smith charges dollars per ton per month. Soaredlly, copper sales from a leading into a full well house warehouse. As production ramps up, there will be more of a need for copper. That is good for the economy, but it is tough on us when we have seen copper go from roughly 30,000 tons in may to about 5000 tons now. We are watching money walk out the door. Alix steel joins us live from the nymex and Michael Mckee is with me because jobless claims numbers broke 323 jobless claims a little better than what economists 326,000. 0 36 we are little bit of better weather, which is good news. It suggests companies are not cutting back. It does not look like there is a secular slowdown in place that we have not accounted for with the weather. It does not mean that things are getting a whole lot better. You will not figure these into the february numbers because they were compiled a couple of weeks ago. Nonfarming productivity and unit labor costs were revised down because gdp was revised lower. Code activity, only 1. 8 . Productivity, only 1. 8 . The good news for business is bottom line line will be stronger because they are not paying employees as much, but it might not be as good for the economy because we do not have as much to spend. Michael mckee, thank you for going through that. I want to bring back alix steel, who is at the nymex. You gave us a rare glimpse inside of this copper warehouse. What are the biggest concerns there with warehousing the metals in those big Storage Units . It really comes down to lines. No lines here, just traders. At the london exchange, it is a different story. Ordere this you something from amazon and expect 7 days. It in 5to imagine that it took one year. That is what happened. Why does it take so long . There are a couple of reasons. The first reason has to do with inventory. Metal is not always available. Inventory has always been on the rise, but socgen estimates 80 is tied up in financing. No matter how much you want it, you just cannot get it. The other reason brings us to a gray area of the warehousing business, and that has to do with fees, because for every day that metal is stored in the warehouse, the warehouse makes money. The lme makes money for that. The cme does not. One of the biggest warehouses is in detroit. Detroit currently owns 1. 5 million tons of aluminum. A charge about . 48 per ton per making 700 20,000 a day, and the longer it stays, the moneyoney it makes, and can be a powerful motivator. What kind of disadvantage does this create for the buyers . Allegedly, it wound up raising prices. If you look at premiums, they have really soared, up like 90 since december. Buyers will tell you that has left them at a huge disadvantage. Tim wiener is the global risk manager and miller coors. He testified before the senate. Wait,d we are forced to in some cases, over 18 months to take physical delivery or pay the high physical premium to get aluminum today. It has cost miller coors tens of millions of dollars. He said it might have inflated global Aluminum Prices by 3 billion in 2011. Thank you, alix steel at the nymex on the copper markets. Ecb president , a speaking right now. We will keep our eye on breaking news. Theyre easy futures in reaction to the jobless claims. Vicki much muted, still up about. 2 vicki much muted, still about two. 2 . Los angeles is getting ready to. An cigarettes from smoking to drinking, jack daniels is out with a new whiskey, but it is as hard to find as a place to smoke cigarettes. They in the loop. Tol. A. Is the latest city ban the use of electronic furtheres as regulations or contemplated at the national level. We are joined by the president of logic technology, the secondlargest Electronic Cigarette manufacturer in the United States, and you say it is anisnomer to say that Electronic Cigarette manufacturers are opposed to regulations. You want to work with the regulators. We do not want children to get products in these hand in their hands, we support the ban of favored flavored products. We support the ban of Internet Sales and of using television and paid spokespeople. Arereality is our consumers adult smokers. We want to correct connect with them. They the u. S. Cigarette businesses 70 billion, and our business is to billion dollar area it is growing fast. Criticism one is that it will encourage people to smoke. Right. It can lead to an addiction to nicotine. And the second thing is it is targeting consumers no matter what because there are other products on the market, vapor electronicre not cigarettes, but they look just like them and they are being smoked by teenagers. That is why the fda needs to take action. We would support the sale only in Retail Stores where there is age verified. Andtalk about those pens what we would call a hookah, we would support the ban of flavored products. Our products are intended and soul to adult smokers. We have no interest in that business. What will you do that others are doing . Wont you do that others are doing . We would like sciencebased regulation. It is different from a cigarette. To carbon copy cigarette regulations, we would disagree with that. Those are the things like taxation, usage prior to science. We think the fda, the cdc, and the nih are the organizations that should at her and communicate to adult smokers what are the differences and then let the regulations follow. The piecemeal approach by the sensibilities prior to the science and fda you mean banning the e cigarettes. Banning them. You are a small portion, but are you not taking market share from cigarette makers . Clearly. People treat them like a different version of smoking. Product use might be the same, but regulation must be different. It is not determined what is the harmfulbenefit the aspects. Quick to are saying there is no youom being around are saying there is no harm from being around an Electronic Cigarette . We are not saying anything. We would like the fda to weigh in and then let that guide the regulations. The fda is looking at these products. What is taking so long . Have they not been studying this for a while . Respect to the fda, i think it is a complicated product. They have had decades to look at cigarettes. I cannot speak to what is happening. We want to work with them. Misnomerarted, it is a do they want you to work with them . They have had listening sessions. I think there is progress there, but on common issues like youth access, flavor, Internet Sales come a we are clearly in alignment. Lets say they do find a publichealth effect is as harmful as regular cigarettes, you would be ok with being banned in restaurants and Public Places . I would want to look at the science, but if that is how it shakes out the reality is our consumers are smokers. I do not think it would be detrimental to overall business if they had to face some of the issues that cigarette smokers face today. Miguel martin, thank you for joining us. The president of logic technology. You will pay for a sinatraf jack daniels select. It was his favorite drink and he was buried with one bottle of it. It is appropriate that they designed the boxing in the shape of a coffin. How about the tagline they were inseparable, and it turns out they still are. It is being sold in limited quantities and you can read about it in the new issue of numbered as this week bloomberg businessweek. Do you want to buy a soccer team . Ac milan might be for sale. Stay in the loop. More and more companies from banks to advertising agencies are starting to Pay Attention to the millenial generation. A new brand has been designed with smartphones in mind what emphasis on going out. We are joined by the food and editor. Ital futures great to see you. Thank you for having me. This is nothing new in that we know the millenials are a hard group to capture. Respects,add in many bombarded with information right. How do you plan to capture them with your product . We are excited to create a site that is approachable, fun, and easy to access. A lot of our posts bridge the gap between entertainment and service. We might have content what does that mean exactly . We have a full spectrum of content where we have actually researched comedians to write for us. Whose alias is boobs readily, she wrote a piece about how to become friends with your bartender. It is sarcastic. Dying inight be chicago. A lot of the posts are short, quick, easy to digest. Seconds, so5to30 they work well on instagram and they can be shared on social. What are Companies Getting wrong with millenials how are they not targeting them correctly and what are you doing to solve that . Every successful brand wants to target this age group. 25to35. Every brand wants to expand their reach and that is what food and wine is doing. Do they spend a lot of money . What they do spend a lot of money. There have been stories do they spend a lot of money . A do spend a lot of money. There have been stories about millenials going out and having a good time. Is that different from y is a x, different of this many more the disposable income than others . Movement of the food has tried to convince people that spending money on good food, highquality food is important. Usedations in the 1950s to be ok with that, and that we gone to the idea of where you did not have to spend a lot, food should be cheap and fast. The Younger Generation is starting to think we can have great food and enjoy our life as we are living in. Others have had on this. Marissa mayer, ceo of yahoo is launching a digital magazine around food. How will you compete with that . To be honest, we love yahoo food and we partner with them or a lot of content creators like weinery 29, and yahoo food, synchronize content with them, and we feel we are doing something different. There are lifestyle sites for men and women and a lot of food sites trying to create sites for people that love food. It is not just about recipes. Definitely not. Vallis, thank you. Mogul up, real estate joseph stitt josephs it is in. In bloomberg sports, one of the worlds most valuable soccer teams, ac milan is up for sale and you will probably not guess who the seller is. Is here. Alesci it is silvio berlusconi, the former Prime Minister. It has been in his family since 1986. At the end of the day, we had heard the team was up for sale for quite some time. The news here is that lazard, the investment bank, is actually sending out what is called in the industry and extended teaser that has detailed Financial Information about the team and talking to prospective buyers. Who could be the buyer . One thing i have to say about milan is it is a great brand, a seventime european champions. It is a very valuable brand. It has to be somebody with very deep pockets pockets. Some people close to the say would have to come from an asian buyer that would have an unlimited checkbook because the sport is very expensive and for milan has been trying to turn itself around and it is part of a troubled league that has fallen from number one to number three behind spain and englands leagues. Part of it is the businesses on a modernized yet. Investors want to come in and think they can modernize them, brand them, and extend them into other parts of the world like asia where true growth will come. Thank you, or senile ashy. It is 56 minutes past the hour, cristina alesci. It is 56 minutes past the hour. Bloomberg market is on the market. Watching in brussels. They are looking to solve this peacefully. We are on the markets again in 30 minutes. Welcome back. You are in the loop. It is 30 minutes to the opening bell. Stock futures indicate opening higher. British Prime Minister David Cameron says russias moves are unacceptable. HasEuropean Central bank decided not to cut Interest Rates. Policymakers are concerned about deflation. Prices have been rising since inflation hit a fouryear low in october. And it is a Warren Buffett weve never seen before. It turns out he has employed his buy and hold strategy right here on a piece of real estate in new york city. Once talked that we are watching his kroger. It just reported fourthquarter earnings a few moments ago that talked estimates. Topped estimates. Mike is here on the outlook. On thegreat to have you program. First, tell us about the kind of traffic you are seeing through your stores. Exit was a great quarter and just a fantastic year. It was a great quarter and just a fantastic year. The number of households we have continues to grow. Our Customer First strategy continues to resonate very strongly with our customers. Theyre giving them Friendly Service and fresh products, and our checkout lines continue to be very efficient. You get people through our stores at the front and in less than 30 seconds. Based on the traffic we are having in the stores, our customers seem to like what we are doing. What about budget cuts . How big a hit have you taken on that . When we look at those households, the way we can analyze consumer data coming through our stores, we can actually understand the snap households and what theyre buying habits are. Obviously, those folks have fewer benefits from the snap program, but what we are seeing from those households is that they are spending a little bit more in our stores than they were before the cuts, and they are making that up with cash from other sources. Of fuel is down and that has helped them to be able to stretch their budget compared to last year. But so far, just three months are upis, our sales slightly. Maybe that is just a temporary way for them to offset that . The problem could go grow worse through the year. We offer great price points to all of our consumers, whether you are on a budget or at the highend looking for all natural and organic products. We believe we offer a great value to the customer. When they shop with us, they get a further does downs on our fuel centers, which are sneaking up on almost half of hours doors. Our stores. We would expect the customer to continue to like what they get from kroger. You and i spent the better part of last year talking about the acquisition of Harris Theater harris cedar and how that fits into the portfolio. Safeway is little bit higherpriced Supermarket Chain. Are you interested in parts of safeway, or maybe even purchasing the entire Supermarket Chain . We dont comment on rumors. It does not do any good to comment on rumors. You did mention harris jeter and that transaction closed on february 28. Now we can roll up our sleeves and start becoming one big happy family. Lets take Harris Teeter then. It was a pretty big acquisition for kroger at a time when you had been pretty quiet on acquisitions. What is it you have found has been to been the biggest benefit to kroger . It was about a 2. 5 billion acquisition. They got us into some great fast growing market along the eastern seaboard that we were not in. We were not in charlotte, washington, d. C. , baltimore, delaware. In thosence they have fastgrowing markets was very attractive to us. We do a lot of research. We have a little bit of overlap with Harris Teeter. Theyve always told us that they do a little bit better on the friendly and friendly associate and fresh product. That is something that we will dig into and try to learn from Harris Teeter. They have about 160 or so stores where consumers can order online and drive up and have it put in their trunk on the way home and not even have to get out of their car. It is our answer to Home Delivery. You mentioned about what you have learned from Harris Teeter. Im sure you look at your rivals and competitors, safeway now being one of them, and as an Industry Leader what do you look at with safeway . What about what safeway does at how safeway does its business that you take away from . We spend as much if not more time in our competitors stores as a management team. There are things that we have competed against with safeway for a long time. From the rockies west we have competed with them for a long time. They have had a strong organic organ they have had a strong organic label program. We think we are closing that gap. We actually like the solution that Harris Teeter has little better with worrying about the Home Delivery. When is always something you go inside a competitor. A lot of people go inside to pick them apart and say you are better than them. In to see what we can learn. Did safeway go too far in Home Delivery . No, they are very early into it. Weve had a Home Delivery test in denver, colorado, for quite a while. In new york city, i get it. Not a lot of people have cars. The dwellings are set up to accept Home Delivery. And in San Francisco, for instance, where they are headquartered, that appears to me from the outside looking in as a market that could work. But here in cincinnati, ohio, our average Customer Lives less than two miles from a kroger. They probably drive by on their way to and from work. To be able to order online and ife it put in to your trunk youre in a hurry is a good solution. Getting those 10 or 15 items that you need can save the customer time. That you andned your team spends ought of time in your competitors stores. Spend a lot of time in your competitors stores. You observe how they work. They be spoken to the ceo of safeway, have used open to . He ceo of safeway we spend time both nationally and internationally and we see as well. That aspect thank you for the bloomberg exclusive interview. Some of the big names in tech are in california at the oasis summit. Emily chang moderated a discussion with eric schmidt and google ideas director jared cowen. They were talking about how the industry has evolved in the last 20 years. We talked about this, or i talked about this three years ago. Observation was that in my career theres always been one dominant platform. It was originally ipm ibm, which was threatened with breaking up. Microsoft, the sentence was revoked, bital to me there was an agreement to their tactics. But ultimately there was an agreement to their tactics. The raw weights to models. I felt a few years ago that if we just had a couple of those that were beyond belief, it would be better from a regulatory perspective as well as our perspective, and we are clearly there now. If you look at apple, amazon, google, and facebook, they are different companies. Reach andhuge market brand value. We could debate if there is a fit or a six, but lets just talk about before. Each has a different philosophy ad revenue and Customer Service differently. When i say platforms, there are very large numbers of companies that are built on that. There are Many Companies that use amazon for distribution. An apple, we all understand the notion of apple stores and the music industry. Google, you understand. Facebook is done very well, specially in the mobile platform. Seriously does google take that . Make internalt to assessments of google. There are emerging major platforms like whatsapp. How likely is it that an upstart like that could upset the balance of the horsemen . In the tech industry, you worry a lot about the startups. I think, using the four companies that ive described, each of them has strong Market Positioning with respect to what they are doing, lots of engineers, and so on. The competitor that will be a real challenger will come from a different angle. You always have this different debate this debate of whether you buy the companies. And you saw that with facebook, for example. We should see more of this. The power of connectivity is so great that you have start up after startup talking in conference and they are busy billing on top of these things and there are huge problems to be solved. Health problems, knowledge problems, social problems, how do i learn. Think about the sum of big data , and in insurance, banking, energy management. These are enormous businesses yet to be built. That was eric schmidt alongside google eric shook eric dachshund jarret cohen. Eric schmidt alongside googles jarret cohen. Coming up, josephs it will tell me whether he has anything to brag about. Earlier in the program, we talked about a Real Estate Company Warren Buffett body 1993. He still holds it today and it is one of the examples, he says, that buying long pays off for investors. Supermarket, a sandwich shop, a bank them a staples nearby. But the way came by is anything but typical. Larryary investor silverstein handpicked the investment for buffett. And the malkin family, the operators of the empire state building, along with the late fred rose, they did the property deal 20 years ago and they still comanage it. Buffett spoke fondly of silverstein and his tip on the deal when i reached out to him, buffett said, ive given larry all of my various phone numbers and told him he can call me day or night. To talk about the investment and how handsomely it paid off is the ceo of the Real Estate Investment firm that specializes in highend properties in new york. You had no idea that buffett owned this piece of real estate. It was a complete surprise to me. It got me all excited. I went to school at nyu. You gone into some of those stories . Yes, and that is a sixpack of beer location. It definitely brings it all home. Career as ay entire student of the Real Estate Industry and my number when teacher has been Warren Buffett. Its funny how he picked up real estate parables and applied them to stocks and equities, and ive done just the opposite. Taking his discipline. Like what . Things they say is time is the friend of a Good Business and the enemy of a media row core one. Of a mediocre one. If you buy quality assets and hold them for the long haul, you will never regret it. No matter how high of a price you think you got, if you sold an asset of quality location, almost five years later you will look back with regret. Andof the problems challenges people have as Institutional Investors is that they feel that treasure to sell, to trade. It is a mistake to do so. As you say, you buy and hold it as long as you can. Were surprised by the players involved in this, how it all came about with a tip from Larry Silverstein . Is that the way you guys operate . Often, it is. We invest for institutions and we invest for High Net Worth investors. Sayomeone will call you and , here is something. As they say in latin america countries, you are invited into a deal, so to speak. Worthat is behind the net investor the High Net Worth investor, it is appreciation. There is a taxi will pay on the game. A tax you will pay on the game. It is inefficient to sell. If you buy it and hold it for the long term, you will never regret it. And as foreign buffett says, your children and greatgrandchildren will thank you. The biggest thing for you . Obviously, Everyone Wants to buy good, quality real estate. The biggest thing for you come how you know it is the biggest thing for you, how you know it is . Dont focus on the macroeconomics. Focus on the quality of the earning stream and a likely earning stream. That youhallenge is a pricebeing shouted at everyday. If you hold on, you are less tempted to sell it and you just close your eyes will stop the people that did close your eyes. The people that did during the downturn in 2008 are glad. Hang on. We will be back in two minutes. 10 minutes away from the open. But moving and shanking, donald mcdonalds see the oh moving and shaking, mcdonalds ceo don thompson. We will be back. Welcome back. It is 26 minutes past the hour, which means Bloomberg Television is on the markets. Scarlet fu has the latest. We have the euro lets start there, because its climbing to its highest level of the session against the dollar since october of 2011. Mario draghi says inflation in europe will pick up over the next 2. 5 years to get to the target of just below two percent. As for the futures, they are opening higher. The s p 500 is right around a record high right now. Jobless claims is coming are coming in at a threemonth low. That is the direction you want them moving it. On the market again in 30 minutes. The only trade you need to know about today, scarlet stays with us and julie hyman joined in as well. Number 10, metlife. The u. S. Life insurer is looking to increase in an apartment buildings in new york city. Metlife is turning to real estate to boost profit and support longterm obligations amid low bond yields. Number nine is the foods ,istributor behind duncan hines Pinnacle Foods said retail sales were up six percent held by the recent acquisition of wishbone. Olive the parent of the garden and red lobster chain canceled its investor meeting and will instead meet with individual analysts. Darden is facing ongoing pressure from activists investors to improve the performance of the restaurant chain. Number seven is the childrens place, fourthquarter fiscal earnings dropped 18 . Winterlaming severe weather. It has also closed 125 stores will close 125 stores through 2016. Five number six is the book on. In russiaa revenue and ukraine jumped 25 . Five, fiscal earnings were down and sales were down at joy global. Metals prices were to blame. Did reiterate its revenue outlook for the year. Number four is the yen. Siena. D it it has said it is wellpositioned for the decisions it has made. Number three, costco. Percent l three 15 , missing analyst estimates for a third quarter. Revenue from ever should fees gained four percent. Number two at staples. The Office Supply chain announced plans to close as many as 225 stores in north america and cut costs as much as 500 million by the end of 2014. Sales have dropped for a fifth straight quarter. Reported just supermarket results that topped estimates. It is said to be considering a bid to buy safeway. As we await the opening bell, i want to bring back joe fits, the ceo of equities that invest in real estate in new york and around the world. We were just reporting on one of the stories in metlife, a a Company Going into apartment buildings in places like new york city. [opening bell] just another example of companies, you say, that want to buy long assets, right . Buying quality assets and holding them for the long run. It is not something that is a fashion statement. You are supposed to buy and hold. You are doing the same thing. Very much so. I think there is still value to be had. There are four different Residential Projects here in manhattan. We are still a believer in the market and the value of buying and holding those things for the long run. There is another big trend here in new york. The Tech Companies that are moving here, they are either headquarter inc. In new york or putting a Satellite Office here. You are seeing a lot of companies saying they will build the next tech campus here. Will that raise the rent as well . I think the tech wave will dramatically change the landscape in so many ways. When you see a company like 19sapp get sold for billion, every kid with the dollar and the dollar and a dream is tempted to be the next, or hoping to be. One of the things you will see is a big change in the landscape and where is prime real estate and where people want to live, work, and play. What will be different . The financial district in manhattan. Brooklyn is being called the tech triangle. Silicon beach, it is being called. Spittle field outside of london. I think the tech wave and the tech dollars that are moving toward it will change the landscape in terms of where the particularnd is, in in so many markets around the United States and around the world. And you were trying to play in this space as well. How will . We are focused on silicon beach, as i called it. We have purchased a property across the street from the Mayors Office to play on that wave of tech businesses that are opening up. It is a phenomenon that is only just starting. Wealth that is being obtained by either by the megacompanies, the google and facebook in terms of valuation to go out and buy tech is mrs. As well as nick to buy tech businesses as well as new Venture Capital money will provide greater demand in the market. When you are reaching out to the like, yous or kind of think it will be around for a long time. Whatsapp is a 19 billion valuation, but will that company be around . How longterm are some of the companies echo first, are some of these companies . First, a company like goldman sachs, you are never going wrong with that. Youre the gold standard. If tenant like that is a dream for someone like myself. But i think the days of thinking that the bubble happening again are starting to have to come to an end. So many around the states and even globally are saying that we badlyrd suffered so that we want to allocate assets. The wave now is to reverse cross, regret every property they sold and chase those markets. It is no longer just a risk phenomenon. It is something that is here to stay. Risks because it is similar to the Restaurant Industry or something less risky. I think there will be Something Else chasing it. There will be companies in San Francisco in particular where we have had them over time as our tenants in our building, and yes, we have seen them leave, but what happens is another tenant covenants comes in and they pay more rent than the previous tenants because of the increasing propensity of the tenants to want to be in the right location. And there is that momentum. What about the retail, though . What about the struggling retailers like sears and jcpenney . Will we see a lot of action . You know these guys pretty well. What should be done with these assets . Sears, that or might be their most valuable asset, not the merchandise itself, right . As i said, four years ago, a lot of those businesses are dinosaurs. Unless they make the changes they need to make, they will become forgotten businesses and someone else will come along and eat their lunch. And we see that already. That is happening already, right . So much so. The place foro be you thought of as the melting pot of creativity, but a place to establish merchants. I think Many Companies fell asleep at the wheel. Come in andpanies are starting to eat our lunch. They are with it, they are specialty, they are fast. And turning their inventory over. One like that art taking the business are taking the business from companies i jcpenney. What do they need to do . Get rid of bad locations. By mail. Hipping and get with what the customer wants today. Joe, you are always with it. Joe sitt, the ceo of for equities. Coming up, investing in merrill metal warehouses. X all day today, Bloomberg Television is playing back the veil on the secrecy of metal have metal warehousing, which is riddled with long lines of customers to get the metal. Us. Steel joins you have spoken before about the for prices that can be metals. The real issue has been with the London Metal Exchange and its warehouse facilities. All youve got to do is follow the money. Where there is opportunity, there is always goldman sachs. Metal warehouse can make hundreds of millions of dollars a year. In 2010 as the lines got longer, as the premiums got longer got higher, and as traders started to use them for financing, banks ought in. Goldman sachs currently owns 17 warehouses run by metro international. Its detroit facilities are accused as of some of the as410 410 days. Ome as long jp morgan bought in 2010. They also use some henry baath warehouses, but they are not accused of any long lines. We also saw some big trading with glenn clore glenn core and others. Aside from making a couple hundred Million Dollars a year, what is in it for them . You could argue that is not a lot of money for the bank. When you talk to it industry insiders, here is what they said. First, banks just took the normal bottlenecks in the commodities market. Tight supply and Strong Demand and banks will profit. Is kind of like trading a stock or a bond. It also gave them operational information. They got to see the physical flows of where the metal is going, when, how much of it, and got to trade against that. And third, someone will have that information. The question that many industry insiders have is whether that leaves banks in an unfair position of power. Flows, not just see the but are they creating the flows deck are they orchestrating the bottlenecks in order to turn a profit . Are they creating the flows . Are they orchestrating the prophet by orchestrating orchestrating the bottlenecks in order to turn a profit . Are they tying up equipment, preventing other metals from leaving the warehouse . Alix steel, reporting from the nymex. Says the saleecom of tmobile is not likely anytime soon Deutsche Telekom says a sale of tmobile is not likely anytime soon. Because of regulatory hurdles, according to people for lily with the matter. Thewo people familiar with matter. Brackets and a rakuten plans to expand its online marketplace. Speaking at a conference in san monica california yesterday, a google representative said it will replace a lot of automated behavior in our lives. Lets stay with silicon valley. A recent search of Public Offering and firstday trading john has created quite a buzz, but not the good time good kind. Fears of a new bubble are alive and well, but are they unfounded . Leslie has been looking into this for us. Before we get down to business, i want to say congratulations. Thank you. You were working on behind the scenes of in the loop for years. You graduated to become an excellent reporter and now you are in error with me. You will have my job in a few years. No, no. [laughter] tell me, why do people look at the ipo market and say it is frothy echo frothy . People look at that and say theres hot demand for the these stocks, but is a grounded invention in valuation . Is it in a scary bubble . Does the data. 2 right now . In terms of levels, valuations are coming out on a price to sell basis like in the 1990s. People would say that means we have a lot of room to run with these i nations. That is a psychological measure, because if you compare it to 2009, 2010 is a lot higher. Thes still well below frothy numbers of 1999. This idea that we are not in a bubble, where does i come from . It comes from this idea that companies are bigger and more mature that as they come to market these days. They have 100 million or more as the median revenue. Bigger and more stable. Adjustedy, and that is on inflation basis. They have more of a track record and it is easier to value these companies and come up with a price that is based on historical measures as well as forward projection, because they have a longer track record. How have things changed on a regulatory front . Lothings have changed a since the 1990s. That was a scary time and one of these is sarbanesoxley. It is the financial standards they came out in 2002 after a bunch of corporate scandals. Those have increased the cost it requires to go public, tree . 7 million are what 3. 7 million. That is what companies have to pay. Toviously, they made it where analyst kendall longer attend roadshows. Attendno longer roadshows. Eliot spitzer. Thank you so much. We will he back in just a few moments. Time now for the global outlook. The eu is wrapping up its torgency meeting in response russia the plane trips in crimea. David is in brussels where the meetings are taking place. What have we heard so far from the meeting, david . Meeting, as they normally do, betty, is still going on. I change my plane ticket home tonight because who knows how long it will go on for . T we have just had his 80 is a News Conference from the you came president. A u. K. Andhere is struggle against russia and he is pleading for European Union support in this struggle. Its very interesting, because if you listen to what he had to say, you could say he was channeling while reagan. Mr. Pruden, tear down this wall, the wall of intimidation, the wall of military aggression, and lets build a new type of relation between ukraine and russia. We are ready for cooperation. We are not ready to surrender and be the subordinate of russia. And that is the key point. They are ready to cooperate, but not to surrender to russia and not to support to be subordinate to russia. What has the reaction been like, the russian reaction . From the russians, we are really going to have to wait and see. But there is another thing that has happened today in crimea. Because of course, crimea is a Southern Province of ukraine, but it has been overrun by these prosoviet forces. The renegade parliament in crimea has today decided that it wants to secede to russia and it will hold a referendum on that on the 16th of march. That is next week. Illegal, according to the ukraine president , and this will be the next area for the ukraine and russia and the European Union. It will be very key to see how the European Union eventually response to this. Response to this. Were there any signs of conflict between the eu leaders . The big story today has been about that conflict. Youve seen a conflict between countries like poland and the baltic states, which won the European Union to take a much tougher line and then you had a much more conservative reaction from angela merkel, from germany. Thing iny interesting the last few hours is the announcement by president barack obama about plans to introduce bands and lay the groundwork for threatenanctions that the ukraine. This is what poland has been asking for, basically travel bans. It will be interesting to see whether the u. S. And poland get their way and we get the decision to put those travel bans in place for on the union the European Union. Thank you, david. That does it for in the loop today. Tomorrow, we will have jason furman, they head of the u. S. Council of economic advisers. It is 56 past the hour and that means Bloomberg Television is on the markets. Im scarlet fu. Heres where things stand about half an hour into the u. S. Trading day. The s p 500 at a new record high, 18 81. Nine out of 10 Industry Groups in the index are gaining. Utilities are the only group that are declining. As for treasuries, some selling going on there with a 10 year yield now at 2. 74 , a oneweek high. Jobless claims this morning came in better than anticipated. That puts us in a good position ahead of tomorrows jobs report for the month of february. People are respecting a weather impact as well. The British Parliament the british pound currently unchanged. Shy of a four high versus the dollar. The bank of england keeping Interest Rates unchanged. In keeping with the currency, the euro is strengthening to a twomonth high against the dollar. Mario draghi, the ecb president , said inflation is expected to rise gradually. Bets thatn some policymakers will introduce further stimulus, such as an Interest Rate cut. The eurodollar is close to a 2. 5 year high as well. Lets talk about life prices. Up 30 sincere december. The biggest winner on the index of 24 commodities. Cal cattle futures increased as well. Joining me with a look at what is driving the meat market is bloomberg newss Elizabeth Campbell in chicago. Good morning to you. Hi, scarlet. Set the scene for us. What is driving the meat market . It is shrinking u. S. Meat supplies that are fueling this rally. The u. S. Is the Worlds Largest beef producer and the top exporter of work. Example, aket, for spreading violet virus has killed more than 4 million. Iglets it can be 100 fatal in young pigs. That is why the usda last month lowered its outlook for u. S. Pork production by about 0. 7 for this year. Analysts i spoke to expect these declines to accelerate, especially in the summer. These tight hog supplies. What about the Cattle Markets . Is there a disease factor as well . Not a disease factor, but a recovery factor. Beef production is expected to be down this year. We started with the lowest u. S. Cattle herd since 1951 as radel cattle ranchers are struggling to rebuild the herd after drought, especially in texas. The u. S. Is projecting the lowest beef production since 1994, a 20 year low. That means tight supplies and higher prices. How are investors reacting . Investors think these high prices will continue. Hedge funds and other large speculators have increased their long positions in hogs to the highest in november. They have raised their bullish bets in that market by about 60 since the start of the year. Cattle are similar. A list bets on rising prices in the Cattle Market bullish bets on rising prices and the Cattle Market have risen 30 since december. What does this mean for consumers . Will we have to pay more for our hamburgers . Unfortunately, yes. The usda is projecting meet cost to be up about 3. 5 this year. In january, boneless round steaks cost the most on average at the retail level since 1980. Pork, for example, consumers pay about seven percent more than a year ago. It looks like it will cost more at the grocery store. Thank you so much, Elizabeth Campbell in chicago. We are on the markets again in 30 minutes. Market takers is up next. Live from bloomberg headquarters in new york, this is market makers, with Erik Schatzker and stephanie ruhle. Admitting failure. The College Board changes the sat again. Collegehis part of the Business Needs another look. Football frenzy soccer. A new shoe to
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