Business in washington, incredible. The house found another way to kick the debt ceiling can down the road. Janet yellen has passed her initiation. What i really want to know is what was for dinner last night at the white house. There was ribeye for the main course. A dozen variety of potatoes around the country. I like it. A dozen variety of potatoes, seven wines, must be a very important dinner. Ah, but of course, a state dinner. President obama welcoming a solo french president francois hollande. State dinners do not happen very often. The number has fallen off, look at that, maybe it has to do with the price tag. Cbs found out these dinners can cost about 500,000. They got the information through the freedom of information act. That is enough to buy a house in virginia. This must infuriate the deficit hawks. Paul ryan was there after he had voted against raising the debt ceiling. He stayed until the very end. Paul ryan closing down the white house. You go. Who could blame him . This is a state dinner. Julie louisdreyfus and her father, bradley cooper, mary j. Blige, stephen colbert, jj abrams, and mary j got to sing. I must be dreaming i want to stream to the real i made my wish upon a star hope this night can last forever come on yeah, kicking it on the south lawn. I like it. There were some big names in business on the guest list, you had jim chenos, elon musk, just to name a few, united under the banner of francoamerican relations. We americans have grown to love all things french, the films, the food, the wine, especially the wine. But most of all we love our french friends because we have stood together for freedom for more than 200 years. To all of our friends from france here today, vive la france, god bless america, and long live the alliance between our great nations. Cheers. I raise my glass in honor of the United States of america, of the president barack obama, michelle, long life to the United States, viva la france and les etasunis. Dinner is done. Time to get to business in the house of representatives. If they pass this clean debt ceiling, this moves this until march 15 of next year. March of 2015. That is more than a year from now. In the house, passing a clean bill was something they said they would never do last year when congress was trying to pass the ledger. I doubt if the house or the senate is willing to give the president a clean debt ceiling increase every time the president asks us to do it. That is a good time to try to achieve something important for the country. Sometimes things change. The last time we had this debate, people were debating John Boehners future but clearly not the case this time. John boehner is strengthened by this. The fact he brought this bill to the floor gives you a sense of how confident he feels in his own position right now and he basically has gotten the conservatives and the tea party folks, he has given them a break, if you will. They are not going to blame for another crisis situation and it means the prospects for republicans doing better in the midterm improved. There is no crisis they will be blamed for. They get to focus on obamacare. This is a net plus for john boehner. So now the bill has to go to the senate. Some senators want a 60 vote majority to pass the increase rather than the simple 50 vote majority. Ted cruz will stand like the conservative, you know, brand, if you will in the republican party. It means a small number of senators today, most likely later this week, by friday, they are going to have to join democrats to pass this. It is going to happen. Conservative republicans can vote no and say i held my ground and they are not blamed for a crisis. It is probably the best of both worlds for ted cruz as well. Blackrocks chief larry fink is going to give us his outlook for 2014. And we will hear from sally on the big opportunity she sees and Financial Services. We will be right back. This is lunch money, we are also streaming on bloomberg. Com, your tablet and smartphone. I am adam johnson. Larry fink has a unique perspective on the economy having visited 20 countries over the last four months alone. He shared his outlook for the year ahead with charlie rose. The world has many issues and i do believe 2014 is going to be a hairier market and we will have more volatility but i believe the outcome of 2014 will be higher markets. For most of our investors in the world, we should not Pay Attention to these inner movements because if you are focusing on 30 or 40 years, these gyrations should not impact your overall need to protect your retirement and build an outcome that will give you the nest egg. Im coming to retirement and just a moment. Are we seeing a shift from equities to bonds . We saw it in the Fourth Quarter. People made such huge profits in equities, they rebalanced into fixed income. We saw that in the Fourth Quarter and a little bit in the first quarter. Much of it is a process. You are a Large Pension Fund and you have an allocation of 50 of equities and 30 of alternatives. Equities rallied so much, you needed to rebalance. Unless you wanted to keep a higher equity balance, you needed to do that. We saw quite a bit of it in the Fourth Quarter. This is why we were not surprised that the market crunch. What is surprising everybody is how attitudes have changed toward china and the emerging world. As i said, the developed markets more than doubled. The developing markets are down in the last few years. We have had a real change in attitude about the prospects for the developing world and the opportunities. Why it is a good time to invest in emerging markets . If you look at the companies within those countries, they are trading at relative to the potential growth rate, they are inexpensive. They are lower p e ratios than what is happening in the United States. And we have memories of what happened in 1998, when you have a revaluation, the issues you had with mexico, this is a different world of emerging markets. You can watch the full interview on charlie rose at 8 00 and 10 00 p. M. Eastern tonight. Staying with wall street, a former ceo of Merrill Lynch is one of the highest ranking women and is now the head of 85 brought helping other women follow her path. Matt miller and Stephanie Ruhle spoke with her about gender inequality on wall street. It is not that we have gone sideways, we have gone backwards. This is what happens during crisis. And what i saw when i was on wall street is that it is not, lets get rid of people who are different from us, it is more, yes, i know the numbers around diversity and diversity adds to results, in theory. But we are in a crisis mode and i need that person who i can trust today. They will have an africanamerican ceo. They will have an indian american. They understand the advantages of diversity. Unless it comes to gender, in which case it is off the table. The numbers speak for themselves. I do not know it is off the table, what i have seen a lot of, i have to have this person in this job because it is so important. What we find, when we are under stress, that person who you feel like, i see how that person can do the job is typically somebody who looks like you. Every bank has women on wall street, this diversity committee, this initiative, all of them asked Sallie Krawcheck to be the keynote speaker at their conferences. Are they bunch of bull . I would not go that far. I think there is a genuine understanding of the importance of diversity. When i think things are going to change is when the industry recognizes the Market Opportunity in women. Women are responsible for 100 of the change in income over the past decade. Women are going to college and graduating from college at a greater rate than men. Women are starting businesses at a greater rate than men and women are unhappy with a Financial Services industry. We were talking earlier, stephanie, there is a stunning number, when women, husbands die and we live longer than you gentlemen, i am sorry to tell you. There are a lot of reasons for it, but we women leave our Financial Advisors 70 of the time. Because youre not happy with the job they are doing. Why wouldnt they have changed before their husband died . Because the two of them have the financial advisor. When i have done research on this, she will feel like the two of them are talking to each other and she feels she is outside of the circle. There is an enormous opportunity Financial Services, speaking to and solving problems for women. More with Sallie Krawcheck, including what she did with her first paycheck, go to bloomberg. Com or our tablet app, boomer tv plus. Bitcoin biting it. We will discuss the latest outage. A secret room where you can channel your inner batman. I am serious. How is this for a trap door . A beer fridge in the olympic village. We have plenty of beer but only one catch, you have to have a canadian passport. Here is how the good folks actually built it. It is very simple. It is based Spring Loaded flap. There is a switch. This tells the computer, and im using this modified webcam. This is lunch money, streaming live on bloomberg. Com, your tablet in smartphone. I am adam johnson. In wildcard, a bad week for bitcoin got worse. The company says balances are safe and no funds were lost. It blamed programming issues and denied any service attacks but this follows a similar problem a few weeks ago that sent prices down 30 . What is going on with these exchanges . The in the loop team sat down with adam waters. This bug is more of an implementation issue. A lot of the businesses that operate with bitcoin have customized software. Sometimes that does not flush out the specs and reference implementation. This is something that has existed since 2011. This issue we are talking about. It is now coming to a head. They have been working on it for a while. They are working on some changes to adjust it. It is more of a hiccup than it is a bug. Because of these websites have had to go down does it concern you as far as the future of bitcoin . Is it a problem to worry about . I dont think so. We see this before. Usually it is fixed in a day or two. A ton of people will jump on it and fix it. It is like a community thing. It is a cool moment. Do you feel like people in the broader markets care about bitcoin or is it for this tiny universe of bitcoin. Enthusiasts . Nothing wrong with geeks. My impression is people are interested. They dont think they understand it yet and are wondering if this is the next big thing. What are you hearing from regulators . There is a lot of learning curve with bitcoin. We have been down to d. C. And the state hearings, and since 2012, it has gotten better. There is a lot better understanding, the regulatory issues that go with operating the business, and businesses are becoming educated as far as this is not a traditional tech company. This is tech finance. There is greater implications as far as regulation and legality. Is a coincidence governments are outlawing bitcoin . Governments freak out when they cant. I think there is a lot of posturing as far as their political leaning toward going. I think there is a lot of public statements where people are very probitcoin. As a bargaining chip, it is early stages. Lets say you have a few extra bitcoin, the bitcoin shop can help. Our firm was started by nasa engineers. They realized it is great to have a currency, but if you can spend it, what is the point . Bitcoin as a mean of speculation is not what we believe in. What we believe, if you have a currency that can be spent on goods and services, then you can do something. What is the advantage of having to acquire these bitcoins and then go to a specific location on the internet in order to buy products . The convenience will be built over time. Right now you can with a digital wallet on your phone, you can scan a qr code and pay for something that way, with your phone. Because it is a global currency, you can go to another country and buy a cup of coffee. As more stores and more companies accept bitcoin, it will be more widely accepted. We came out with the idea, there are no products you can buy, so we have over 140,000 on our website. If you want to buy a flatscreen tv, you can do that on our website. The bitcoin shop is small but it is growing. Registration jumped from 106 since september. The president of the st. Louis fed on janet yellen. A bloomberg exclusive, next. And why pimco is bullish on housing. That is coming up in property. This is lunch money on bloomberg television. I am adam johnson. Todays moving pictures where the video is the story. A military jet carrying members of the Algerian Air Force and their families crashed. There are conflicting reports as to how many were killed. One report says there was just one survivor out of 103 believed to be on board. The Defense Ministry is blaming bad weather. Protesters in yemen are calling for the resignation of the government following a decision to divide the country into six states. The demonstration coincides with the third anniversary of the revolution, an uprising that forced the president from power. Thousands are without power in the south as a strong winter storm barrels toward the east coast. The storm is forecast to leave ice across parts of georgia. Be careful out there. In property, Mortgage Applications in the u. S. Fell two percent. Refinance applications also fell. Bottom line, higher rates are making borrowing more expensive. Our we going to go from here . We asked the ceo of the mortgagors association earlier this morning. We are seeing household formations coming back to the million mark on an annualized basis. We are not seeing the buyers on the low end. Firsttime homebuyers are well below the normalized market level, which is about 40 of the market. A lot of this is due to credit conditions, lack of down payment, lack of wealth in the marketplace. So we know there is great demand in the multi family area and in rental, and the question is, how do we get firsttime home buyers back into the marketplace . So many mortgages are underwater. We have some data showing that, just how bad it is. There are a lot of people that are underwater. Their mortgages are underwater. What is the carrot for them . What is going to make it better . Jobs is the story behind all of this. We look at housing is three legs of the stool, interest rates, Housing Stock and supply and then we look at jobs. If you look in negative equity in terms of where we were just a few years ago, it is better. We are halfway back from the peaks prerecession in terms of overall home prices. Nine percent below, not even across all markets, so if you go into nevada, you have impact. Nevada was over 70 underwater. They are down about half of all homes underwater. The inland empire, those markets are hurting but as you know, other markets in the country, there is a lack of inventory. The idea is that households with negative equity are following, we are halfway back, will aim to be more willing to lend or has too much changed . The answer is the Regulatory Framework makes it difficult for banks to take the kind of credit risk they did in times past. So i actually believe that depression impact is going to last a longer in this recovery then we may have seen in previous markets and the Regulatory Regime makes it such it is difficult. Pimcos deputy cio was one man who actually predicted the housing bubble and he took action. In 2006 he sold his home and became a renter and in 2012 he took the plunge and bought again, figures he saved himself 30 . Now he is bullish on housing. Inventories are at 13 years lows. The fed came out yesterday and said now only one in a quarter are underwater versus one in excuse me, one in eight versus one and a quarter. As home equity rises, people have more incentive to remodel and you are only building one million housing units. So there is a significant recovery. As the Housing Market improves, here is one option when i started this, there was nobody. There was nothing. I googled secret door, hidden room, you could not get one. There was no anywhere that could build one. Not like what i had seen in the movies. That is when i started thinking, i could do this. People would, he and say i want something just like i saw in goonies. I did not realize how many movies had a secret passageway. It is like half of all movies. 70 of them are for some sort of security application, either a panic room or a place where they can store valuables. I do occasionally have ethical concerns, like, can i have a secret door that is so good the cops wont find it . Every so often somebody says i want a shakespeare bust from the original batman show to be my triggering device. So we always have a few shakespeare busts on hand ready to be converted into secret switches. When i started the business, i talked to one of my professors. One thing he told me was, it is not scalable. Youre never going to become a billionaire. He shrugged it off. I started the business anyway, but he was right. These are not mass producible products. Every project has to be a unique, custom, oneofakind project, which means it takes a great deal of time and attention to detail. I consider myself somewhat of an artist. I dont want this business to be a factory. Each project is a labor of love for me and i want every project to be such that is a steve humble original secret passageway. No secret escaped members of the fed, jim bullard talks about janet yellen and the taper. This is a bloomberg exclusive and we will bring it to you next. Dont park your corvette at the National Corvette museum. Eight cars were swallowed up in a sinkhole inside of the museum. Six of the cars were donated by private donors, two were owned by gm. This is inside the museum. I cant even imagine. This is lunch money on a bloomberg television, streaming on your tablet and your smart phone. We are everywhere you are. I am adam johnson. Janet yellen made her first appearance as the fed chairman in front of congress. That happened yesterday. The reaction was positive, even from those who have been critical. Today we decided to speak with the president of the st. Louis fed. He joined Stephanie Ruhle on Market Makers earlier. I think she had it just right. We are buying a lot of bonds. Not quite as many as in december, but we are buying a lot. The economy is improving. Things are getting better. If you look at Fourth Quarter jobs, about 195,000 a month, including the bad december report. Unemployment down to 6. 6 . Gdp growth in the second half of last year, 3. 5 on average. You know, i think we are looking at a stronger economy. I think we have momentum for 2014. I have not seen anything to dissuade me. Is it fair to look at the jobs number as a good data point when it is not factored in . Labor force has been declining but that is mostly demographic factors. Janet yellen was grilled on that in her testimony. I think she gave a balanced view of that. I think a lot of this is demographic factors. If you look at the longterm picture on labor force participation, 70s, 80s, 90s, going up, 2000s, coming down. You have to have a theory that is going to give you the hump shape and the demographics is the best theory. What would cause you to change your mind on tapering, either the pace of it or the direction . I admit i do not have a model but i have to think it is partly the weather. Really . Isnt it always cold in the winter . Here is the thing, we are working with deseasonalized data. We take seasonal stuff out of the data. It is always adjusted seasonally. In some sense you should never be referring to the weather, but we are. I think that is because it is sensitive to exactly where the weather is, exactly what parts of gdp, what kinds of shopping are affected. All of this stuff is sensitive to the weather. And we know that. That can have a big impact on some of the numbers. If it is the weather, you could think of that is being noise in the data. That will all come out. There is nothing that would tell you you would want to change your mind or change at least the pace of tapering . I think we are on a good course right now. We have been reducing it. We can make a decision as we need going forward. It is not a preset course. We can adjust. I think if we did adjust in either direction, it would be a powerful signal. For that reason, we want to be careful about using that tool. But we can, if we have to and i reserve the right to take that up, if the data comes in either way. You can watch the full interview with the st. Louis fed president on bloomberg. Com tv or on our tablet app. Shaun whites rough ride is another blow to the u. S. Medal count. And the handler behind the handlers. Meet the Unsung Heroes of the westminster dog show. That is coming up next. In sports, the olympic snowboard competition turned into a shocker. Shaun white was the favorite, but he did not even get a medal. He was attempting a trick called the yolo, short for you only live once, a crazy move. So you have to do two vertical flips and two 360 degree rotations. Last night, it was not pretty. He completely missed the landing and then to get back in the groove, it he attempted another trick but that went worse. Painful. You have to admire the effort, but it was ugly to watch. He was fourth, ipod took the gold. The outing did not help the u. S. Medal count. Norway leads with a total of 12. The u. S. Has seven. Here is matt miller on the money behind the medals. Norway is winning but they have a gdp of 274 billion dollars. This is a small gdp in comparison to ours, but they hardly have any people. Gdp per capita in norway is massive. I would have thought the u. S. Would win because we have so much money. It is snowing here, we have the rockies, but all time, norway dominates as well. Then the u. S. Germany, austria are not beating norway at alpine sports even though the alps are there. The soviet union, which used to tower, when it was the true soviet union, has crumbled with the followup communism. Maybe communism was good for one thing. And at the westminster dog show, a little guy with a big attitude took the crown, beating out six other breeds. His name is sky. This is the 14th time a fox terrier has claimed the top prize. Ok, now for every winning dog, there is a handler and even a handler needs a handler. Just ask this pet supply vendor. It something breaks, it could be a comb, they lose something, whatever it is, many of them have accounts with us. They will grab the stuff and come back later. They have added an agility test as part of westminster. Tell people what that is. Agility is a growing area. Many of these events are sponsored by the american kennel club. That allows for all dogs to participate. Not only the purebred, but also mixed breed are able to participate. It is various courses, you have something on the backscreen. It is exciting and brings a different type of event to the dog show. People spending on grooming. Any trends you have been able to spot . I do not know there is spending trends, but i think people are spending anywhere from on a brush, 20 to 150. Is there any big difference . There are big differences. The finer brushes are made out of brass pins. It does not conduct static electricity. The brass pins are on the higher end. Are there other details you can reveal about the grooming habits and patterns of these animals . Some of them look like they have been primping several hours. Some take even longer. Poodles take a lot of work. There is a lot of scissoring involved. A nice trick is we have a product that is a silky product when they do not want their hair to fly. They put that on the coat and then the hair will not fly. Todays mystery meat, a falling go pro makes a Happy Landing and finds a friend. Approaching 56 past the hour. Bloomberg tv is on the markets. Lets get you caught up on where stocks close this session. We did have a late day slump but still ending the day mixed with the s p down half a point. The dow ending the war by about 0. 2 , the nasdaq up a quarter of a percent. Stockssome notable decline like Procter Gamble and amazon that helped drag down the major averages. In terms of what happened in the treasury market, the tenyear note yields at a high. Peopleyear at 2. 76 as still looking at Janet Yellens testimony and thinking it means that tapering is going to continue. Lets turn to commodities. Oil is trading at a six a fourmonth high. Inventories declined and that is pushing the price higher. If you look at what is going on in the gold market, gold is at a threemonth high. It is up 7 this year, really bouncing back from that terrible year for gold last year as some investors are getting back in. Lets take a look at the currency markets, not team a lot of action in the dollar today after we have seen a number of sessions of declines. The dollar finishing up slightly higher. Speaking of the u. S. Currency, adam johnson did some investigating into whether or not cash is still king. That was in todays insight and action. Cash is king, provided you put it to work. Time for insight and action. We had a conversation yesterday with a man yesterday, the ceo of rbc wealth management. He said if you deploy cash wisely, stocks will perform. If you are paying down the debt, if youre growing the dividend, he said you tend to outperform. So we actually wanted to put that to the test. We screened for all of these, paying down debt, 10 reduction of your debt as total capital and growing the dividend over the past three years. As it turns out, he was right. Look at this. We found 19 companies doing exactly that in over the past year, these companies are up 36. 6 , double the s p 500. Cash is king, if you put it to work. Here are 10 of the companies. They are companies we know, capital one, dow chemical, hasbro, t. J. Maxx, etc. Im going through them quickly. I have posted all of them on twitter. Cash is king if you put it to work. That was adam johnson talking about what is going on with cash and the dollar. I want to run through some of the companies that were out with numbers after the close of trading, some notable companies talking about among them, cisco. The company did come out with revenue and profit that beat analyst estimates. Customers upgrading their Computer Networks to manage, they increased data traffic from smart phones, tablets and laptops. That benefited cisco. The company also boosting its dividend. All of that in theory would be good for cisco. In addition, we are taking a look at whole foods. Profit their trailing estimates. Sales growth has been slowing and the company cut its fullyear forecast in terms of sales and comparable sales. One of the things affecting whole foods has been competition. Also, customers just not wanting to spend as much. Margins have shrunk a little bit as it has tried to offer more value. For on the markets, i am julie hyman
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