that the rate may have been manipulated lower, which at the surface says people are getting lower mortgages. but remember, it is a zero-sum game here. a continuing story. >> the three banks need to respond to the antitrust complaint in writing and at a hearing. >> let's get our morning brief. overnight, u.k. inflation accelerating faster than forecast on a higher airfares and shipping costs. that is a little bit in the weeds. no economic data to speak of in the u.s. earnings.number of >> home depot just reported. earnings per share is a little bit lighter than what analysts were looking for. nate -- net sales coming in a little bit light. analysts were looking for $20 billion. in terms of full-year forecast, it terms -- looks to be a little bit higher. additional buybacks over the rest of the year. early to say if there are any shares trading. we will you know if they move. goods,, dick's sporting and tj maxx will be reporting before the bell. into it is coming up after the bell. what do you make of salesforce.com? >> i look at the bug stocks and what they mean for the american economy. -- big stocks and what they mean for the american economy. the fcc chairman was at the house energy and commerce subcommittee. week,ad the big vote last earlier this week -- it is all a blur. 3-2. >> it is a proposal. the debate will go for another few weeks. >> moving on, microsoft is expected to unveil its surface pro and surface many at an event here. this is in new york today. you are not a buyer, are you, tom? >> no. >> it is up against the ipad. here is one. nfl owners are meeting today to vote on where to hold the 20 18th super bowl. -- 2018 super bowl. >> minneapolis is the old me cold weather -- only cold-weather option. >> let's do a data check. and little quieter day than what we saw yesterday. euro was at 1.36. weaker euro all in all. hydrocarbons elevated. you can see the vix. the euro recapitulates. gold itself. that is your data check here on "bloomberg surveillance." at the front pages. it is a criminal list. >> we did not have to look that far. our top story is credit suisse. after the banker pleads guilty to helping americans evade taxes. it has agreed to pay $2.6 billion in penalties. not identify the thousands of americans who cheated on taxes because they are protected by swiss bank secrecy laws. >> what it we have names and answers? that was a basic back story theme. >> brady dougan says the firm regrets its past misconduct. we will check in with jonathan ferro whose -- who is reporting live from jonathan's -- cirque. -- zürich. >> there is no u.s. equivalent to these banks. when tome a pan am hanks blewett or ran it or whatever. -- flew it or ran it or whatever. pfizer's bid for astrazeneca is likely to fail. according to people familiar, pfizer is expected to announce that it will not make a formal bid. >> as we went to air, the big buy site institution in london is out. here is the move up. further down for astrazeneca. >> still elevated compared to where it was before the discussion started. >> here is the headline. schroeder posta's appointment by quick rejection of pfizer offer quick rejection of the pfizer offer. >> everything has its price. it is a matter of coming up with its right price. --the third and final bid the price up to within one percent of the breakeven for pfizer. you pay more, it is no longer additive to earn it. >> proposal and offer. >> proposal gives you wiggle room. offer is binding. >> just by the thing and move on. >> [laughter] you speak on behalf of shareholders. >> i am there for shareholders. >> they were within three pounds on price. the issue is jobs. with the u.k. really wants is a guarantee that they will not -- there will not be layoffs. >> the russian president will be visiting china today. the two plan to complete an agreement on natural gas supplies. meanwhile, the prime minister of russia sat down with bloomberg. here is a man headline from his interview. >> we are slowly but surely approaching a second cold war that nobody needs. >> nobody needs. we will find out a little bit more about what he set out -- said. >> lavrov's interview. i do know about this one. >> their talk is changed so much in the last couple of months. >> as we give you the conversation, economics, finance, and investment. our guest host is the asia director of the lesion -- ian bremmer costs -- ian bremmer's eurasia group. i love the council on foreign relations comments. it is a remarkable monday. what was remarkable for you? a relativelyory is positive story in u.s. china relations and it has become negative. if you look at the hacking scandal. the trajectory is a little bit more concerning than it was a few weeks ago. >> what actually follows on from these five charges? what do we do? pick them up in shanghai? >> i don't think the chinese are going to overreact. people are talking about targeted sanctions from u.s. firms. i think that is a -- quite a stretch. the chinese have seen this coming for a number of years. this is picking a backup after the snowden revelations. the u.s. was headed in this direction. >> why now? to u.s. seems to be ready make charges against a number of countries. why start with china? i think it is a timing issue. 2010, the obama administration intended to go down this path and they were wrongfooted by the snowden story. now it has come back. >> that is the back story. the continued ramifications. that is the whole back story. >> it begs the question and i put the question to you, does credibilityk effectively charging five chinese members of the military for espionage when we have thousands of people called the in one form or another, are doing a little bit of snooping on their own? are going to make that argument, but i'm not sure if they are going to carry water. is there palpable proof? >> i think there is. we will see more over the next few weeks. we will talk about china in a few minutes. a terrific conversation coming up. our twitter question of the day. what is the white house and game for charging chinese officials? endgame for charging chinese officials? >> bp has lost another court battle in claims for the oil spill in 2010. bp has already taken a $42 billion charge. opening its first stores in asia this week. they're looking to expand in europe. mickey drexler will go to paris to scout locations soon. they did open a store in london so not -- not so long ago. russell is owned by northwestern mutual life. russell has two units. that is this morning's company news. leading an american ceo a swiss bank, helping a swiss bank help americans evade taxes. can brady dougan keep his position? dutchl discuss it as cs -- hsbc and credit suisse face criminal charges. ♪ >> good morning, everyone. later this morning, chad on "bloomberg west." i'm tom keene. fu and adamrlet johnson. scarlett is on the criminal watch. it is like judge judy accepted his judge scarlet. >> it has finally come to a head. u.s. attorney general eric holder announced that credit suisse pleaded guilty to helping americans evade taxes. that nocase shows financial institution, no matter its size or global reach, is above the law. the department of justice conducts investigations, we will always follow the law, and the facts, wherever they may lead us. we will never hesitate to orminally sanction a company individual that breaks the law. profitability or market share can never will never be used as a shield from prosecution or penalty. >> a lot of mentions of the word never. joining us now from zürich is jonathan ferro. jonathan, bloomberg has been reporting that brady dougan's job is in jeopardy because of these charges. what is the timeline in terms of when he might step down? i don't think there is a specific timeline. the man wants to keep his job. he remains in the hot seat. there is significant pressure. the debate is as follows. get a smaller fine back in 2009? why did they get away without a guilty plea? on the subject of credit suisse's dealings, you have to say that eric holder's language was pretty punchy. brady dougan went to the u.s. back in february and said that this was a small group of swiss bankers. eric holder said it was extensive and a wide-ranging conspiracy. nobody on the executive board a credit suisse new what was happening. yes, they got a guilty plea. but who is taking responsibility? >> we will see how that all plays out for brady dougan and the chairman, as well. what about the ability of the bank to operate and its counterparties? i think there is big risk for the business impact. brady dougan was on the conference call this morning. he sounded up to mystic. -- hed there was no sounded optimistic. he said there was no impact on the business. they would've called clients, called pension funds, look for fallout. the point is that many of these crimes will have internal rules that prohibit them from doing any business with any entity from pleading -- two in business with any entity that pleaded guilty to a crime. ask what the fallout is, they cannot give you an answer, because nobody knows. >> we are in uncharted territory. jonathan ferro from zürich this morning. i can check with all the lawyers they want, but it ray manes to be seen -- remains to be seen how this will play out. >> why haven't we heard from the board? >> silence. >> i totally agree. where is the board on this? it is a different template in europe and the germany -- and germany. we have the train wreck of credit suisse. we have the train wreck of deutsche bank. range ofa wide skepticism on deutsche bank. here is your reading assignment for today. you go to bloomberg review and matthew levine. read it and read the footnotes with a sharp pencil. what the hell is this, adam johnson? are you kidding me? it is the same hot air. we heard it yesterday. tell you, read matt levine. i cannot make it that clear. huge skepticism about this dual rights deal with the qatari government. -- royal family. >> bottom line, deutsche bank says it needs more money. also, this is what i cannot wrap my head around, deutsche bank said it wants to target a 13% or 15% return on equity and yet it is diluting its share base by 25%. that makes it that much harder. >> it is the second cache call in recent memory. this is very different than how the u.s. banks do things. >> it certainly is. you have to keep in mind that the co-ceo said they were done with capital raising. they have had to backtrack on that again and again. >> matt levine is a must-read if anyone cares about global wall street. >> certainly something we will be talking about in the days ahead. about up, we will talk the state of the economy. what happens in the second half of the year? this is "bloomberg surveillance." ♪ >> this is "bloomberg surveillance." what goes on here when we are on commercial breaks. scarlet fu and adam johnson. headlines. top headlines this morning. army hasiland, the imposed martial law. months of political turmoil have brought down an elected leader and the economy. the head of the army says the military wants to restore order. he has asked political groups to stop the protests. he has made very clear it is not martial law. in the nhl, the playoffs. look at this. the new york rangers beat montréal 3-1. that gives the rangers a 2-0 lead in the eastern conference finals. m3 is set for thursday night. game three is set for thursday night. >> 20 years on, baby. >> bring it back. >> it has been a longtime since mark messier carried the stanley cup around the streets of new york city. russian troops are preparing to move back to home base is from ukraine. the u.s. and nato said they have seen no sign of withdrawal so far. those are the top headlines. putin is in, mr. russia as we speak. -- china as we speak. with the russian prime minister. here is what he had to say on the castile. -- gas deal. >> i believe it is very likely that there will be a contract. that means long-term agreements. it should be robust. the awarding will be finalized very soon. i think it is time we reached an agreement with the chinese and asia. >> no deal just yet. something is expected to be announced at any moment. >> you look at the timing of this. on the one hand, you say we have problems with russia and china. sift through all of the nuance. how long do you imagine there has been something under the surface brewing between russia and china to do a castile -- a gas deal? >> this deal has been in the works for 10 years. this deal is a must-have for the russians. but not for the chinese. this puts the russians in a difficult spot. >> there are five nations with northern asia trying to frame an alliance. how cohesive are they? not the case. there is bad fragmentation, particularly on the security side. big role to play with korea and japan. the real alignment is a long way off. >> how concerned should we be about tensions between china and japan over the south china sea islands? >> that is in improving story. >> really? >> yes, i think so. the diplomatic thaw is on. you see high-level business between the sides. all signs point to improvement. >> we will definitely get to that. >> we are pivoting. >> we're going to pivot to more of the interview with the russian prime minister in the next hour of "surveillance." coming up, we will discuss what charges against five chinese officials on cyber stealing does to u.s. relations. ♪ >> good morning, everyone. the snow has finally melted. a gorgeous day in manhattan. up into the 70's. we welcome all of you worldwide as we get to the markets here in a few hours. cheers on "bloomberg surveillance." to talkck, not much about here, 10 years backed up in the 2.4 handle. the euro is at 136, trying to work lower. of course, europe needs a much weaker euro as well. in the tumbled yesterday we had some gainers and losers. somemult yesterday we had gainers and losers. >> pfizer's -- pfizer made its offer for astrazeneca, the deal was rejected, shares plummeted as a result. campbell soup is also down after the company cut its annual forecast. shoppers are not buying enough soup. >> you really want to buy something out of a can when we are all going organic and fresh? and now we have all learned to juice. although my energy level from a few weeks ago when we do the juice thing? >> how long did you go for? >> it is about to commercials. serious,ina, this is the norms of international relations have been violated as china threatens further retaliation after five military officers were charged by the united states with stealing trade secrets. adam smith is the senior fellow from the eurasia group, our guest host of this hour, nick .onstant harry adam, wonderful to have you here. i want to go right to your wonderful essay. here is the heart of the matter, from where i can see it. , his revelations make it hard to build support on diplomatic efforts. the administration does not want to further complicate the relationship with beijing. all of what we are seeing goes back to edward snowden. was pushingd states really hard on china last year at this time. snowden shows up in hong kong and the diplomatic effort gets derailed. >> how does that affect the relationship between russia and china if they reacted to the actions by the attorney general? >> china and russia have a view of cyberspace as sovereign space, not open space, they see it as a place to enforce their own norms. >> what is the next shoe to fall? >> the chinese have called in the u.s. ambassador to complain. they have announced that government computers will not be running windows eight. there may be some further sanctions against u.s. companies. but i don't expect it to go much further than that. >> they are using apple. >> like the rest of the world. >> and apple is assembled in china. why would the u.s. officially charge rather than do something that is less high on the escalation ladder? >> as mentioned earlier, this was set in the works one year ago. one year ago this was part of a much larger, broader strategy. we had tom donovan criticizing the chinese at a speech at the asia society. we had a defense department release report that specifically were -- specifically named them as a hacking group. this all fit into a much larger of last during may year. >> this conversation is about what? i need to get smarter on this. >> good thing nick is here, the asian director of the eurasia group. >> on the judicial channel you have to think longer term and think about leverage. what we are talking about as ther economy develops, exposure that they will have over the next several years is huge. the u.s. is building it. >> are we building leverage? >> that is the hope. we have not seen it traditionally, but right now it seems like we have less leverage. >> nick, help me understand why charging creates leverage as opposed to simply just being empty charges that cannot be pursued? >> this is about using the judicial channel over time. todenly they are susceptible legal cases surrounding the i.t. set. >> these two experts here, i go back to the required read from el university. we have come so far from the granger and political international relations debate. >> absolutely. as you say, this is laying the groundwork or the next couple of years. what are china u.s. relations going to look like from now on? >> that is a tough trajectory to call right now. there are big incentives in both countries to sustain the trajectory, but look at what is going on in the south china sea right now. we are starting to see more tension than people expected. >> earlier you said that you did not think the china japan dispute over the islands in the south china sea were going to be as big an issue this year as people might have thought. why is that? >> domestic and political incentives are changing in both countries. environment of political transition, trying to get popular support ellen now focused on reform. >> adam, you have been on the china watch for years. how should our viewers in the united states treat the new china? >> we see increasingly confident and somewhat brash china. perhaps less optimistic that the return is positive. i think i see china increasingly willing to throw its weight around. i think that domestic politics increase the politics -- pressure. >> there was a u.s. general and chinese general that started arguing? >> we have these yearly visits. these are supposed to help relations. but the general, the visiting chinese general said that we have these risks and we want the u.s. to recognize them >> this is certainly a positive development in military to military communications. the extent to which we see this play out is totally expected and pretty reasonable, i think. >> forgive me. i just want to turn this thing upside down. what if a stronger china and stronger russia paired with a strong u.s. is actually good. now you have three world powers rather than just putting the burden on the u.s.. >> the question is the trajectory for russia. post ukraine, their outlook is deteriorating, not improving. this is going to be a u.s. china story. >> going back to what adam said earlier about the u.s. looking hypocritical, should the u.s. have been prepared for the prospect that china or russia might have tried to indict keith alexander? but verypossible, unlikely. indicting a former high-level administrative official would have been extremely escalate tory. -- escalating. we will be seeing things at the company level. >> i would love to have you both back to explain what it means. >> effinger white house is still working on that. >> the to it or question of the day of not what was give it, it is more like what is the endgame for charging chinese officials? you so much, adam segal. our guest host for the hour, nick consonery. king, live sporting events reign supreme, then why isn't world wrestling entertainment winning big? we will take a look in our single best chart, next. ♪ >> good morning, everyone. this is "bloomberg surveillance ." time for a single best chart. scarlet? >> it has been a rough couple of days for world wrestling entertainment and the ceo, vince mcmahon. the stock has lost about half of its market value in the past three trading days. the reason is while content is king, their new programming deals do not reflect much of an advantage. investors were specifically disappointed with the terms of their new online tv network. thesingle best chart shows value and difference between a wwe fan who pays for individual pay-per-view events on the left versus the terms -- >> are you telling me that someone pays $675 per year to see gorgeous george in the chic? >> that's right, they do. >> inc. about my time warner cable bill. 170 five dollars times 12? what is wrong with me? it gets shared with the distributor, like directv, in this case. their annual network price goes straight. >> we go to our wrestling arert, nick consonery, you actually into this? >> absolutely. my brother and i used to watch monday night raw every week. >> the undertaker. at georgey know this washington? >> where i got my masters. >> did they know this? i did not put it on the application. >> did you ever think that it was real? >> i did not. i grew up -- i did not. >> i grew up in rochester, land of gorgeous george, i thought it was real until i was like 22. >> did santa claus and the tooth fairy -- >> [laughter] >> that was last year. >> oh, my god. pop culture and tom keene. >> the guy that runs this farce, his wife ran for senate? >> governor of connecticut, right? like daughter. >> our wrestling fan knows. [laughter] >> just to add a little heft to the conversation, if i look at the earnings forecast for wwf, expected -- wwe, i should say, expected to lose money every quarter this year. >> they are willing to give up the short-term gain to make a bet on the future. maybe this is the beginning ofàa la carte. >> we do it all. deutsche bank, international relations. >> as well as disney musicals and franchises. you are a big fan. you know the movie, you have are the songs. tom? >> ♪ let it go, let it go ready for frozen on ice, disney is developing and ice spectacular. >> of course. >> a disney on ice production of frozen goes on tour in september. get ready for a lizard created by -- blizzard created by 20 snow machines. it is still playing in japan, by the way, where it has topped the box office for 10 weeks. >> in july, remote, we go to the kingdom of isolation. >> we are the only ones who knows what that means. kingdom of isolation in madison square garden when you have 5000 little girls running around. >> this is part of it. i have no idea why. what's the line? >> the cold don't bother me anyhow. anyway. [laughter] i might take that rendition to china. when does this end? photos, save us from "frozen." >> i shall. rodriguez, a new york city police officer in the officer since a -- in the hospital since april after receiving severe burns at coney island. she was cheered. >> the medical people behind her, all of that. >> it really is. >> her fellow officer passed away in a fire. up in boston what, three or four months ago? this is tough. >> we come to work, we have our conversations and we talk about what is happening in the world -- imagining go -- imagine going to work and not being sure if we will come home. >> our biggest problem of the day is the coffee in the food court. >> so many of us have it so good. an unexpected hailstorm in são paulo. >> just weeks ahead of the world cup. >> can anything else go wrong down there? eight inches of hail. >> that is made, so they are going into the winter? >> it is not supposed to be white in san paolo. >> is like two weeks until the world cup? >> some of those things have not even been finished. about theina care world cup? >> unfortunately for them, their team is not playing. >> so no. >> number one photo, the red flying intoce manhattan. the stunt was performed by these guys, trying to promote the air at jones beach later this week. there is a rumor afloat this is how one tom keene was able to get his photos -- >> that is me on the left. greattoshop to this with artwork from joan. our art director only has one name, joan. like cher. there i am. there's matt miller. that's matt right there. matt had the camera thingy. seth, over there to the right. are you kidding me? >> that is out of control. putting on a flying suit? >> your contract allows you to do this? interesting. >> they get away with it. steph did not need a waiver, it's in her contract. >> that is amazing stuff. our photos for the day. >> great selection. coming up, skepticism back in style? we will discuss that next, on "bloomberg surveillance." ♪ >> this is "bloomberg surveillance." let's get you some company news now from the files a bloomberg west. the camera that everyone from bikers to skydivers uses to take action videos. they now plan to file for an ipo. the plans double blast year into $1 billion. now a camera that lands to position itself as, guess what? a media company. twitter is having talks to acquire or partner with several music related startups according to people with knowledge of the matter. one of the companies they may buy is sound cloud. >> i have heard of that one. >> a german startup that lets people share their music. apple and samsung in a dispute, each company says that the bad side is the other guy. according california each said that the opponent was making the settlement more difficult. they fight the three-year long over smartphone technology. apple and google set aside their differences. inc. that apple and samsung can do the same thing? >> there is actually a partnership between them in some ways. it is absurd. figure it out, guys. jobs,the legacy of steve he was really worked up about this. >> he had that same japanese mentality from the 80's, own everything at all costs. >> is this a preparation for bloomberg surveillance? >> go pro our 5:00 a.m. meeting. >> as i put my tie on. >> walking to work in the dark? good idea. >> that would be fun. but i am not sure that anyone would care. >> we could have a beverage of our choice. >> all kinds of possibilities. >> speaking of which, hiring, manufacturing, capital, all up, with investors pulling $10 billion in equity this month. perhaps more evidence of -- >> outflow. >> yes, $10 billion in outflow. this thejust called least believed bull market he has ever seen. we are joined now by chris -- nick consonery. -- joined by chris. should we follow the data in? >> we should follow the data in. everyone has a straight on the worst sale, looking at the acceleration in the second quarter. the u.s. may not be the ambassador for the market or for of 2014, but they definitely will have something to them where the markets are expecting acceleration to materialize. >> where is the opportunity? busted momentum stocks? small caps the large caps? >> the companies that are going to show that they want to invest and do more. the markets will reward the companies that do more. the first quarter will come exactly from capital investments. >> global expert -- global economics, a decided global view. everyone is focused on that. are we wrong? should we be looking at china and europe? >> it depends on what you have in mind. growth,re looking at they will be the driver for proper growth. if you are thinking about where to put your money, i think that emerging markets will outperform. >> as a cheat. >> evaluations, at some point. there is also an element of growth that materializes. >> nick, you follow china and the economy. >> we have posted elections in a number of big economies right now. if you lookn india, at returns, the markets tend to look favorably on that kind of positive thing. >> do you have a trend on those elections? are they tilt to the left? are they more pro-business? >> certainly, all of these governments are grappling with middle-class expectations right now. there is a more populist bent now, little classes grow, -- >> this is part of the consumption value in the stocks of the emerging markets. it is not about steel or concrete. >> large, populous economy, huge potential for consumption, no question that is a huge element for growth. >> the emerging middle class globally, not just china, is one huge theme, you both agree on that. as is my morning must read. princetonblinder, my one 01 profit -- "we are in the dog days of fed watching, but the boredom won't last long. they will shrink the balance sheet by selling. not exactly rocket science. fortunately we have a smart, a political fed to. your take on this line from the fed? >> i don't think the fed will sell assets. i think that they are going to buy assets. they will be assembling the portions. just let the balance sheet unwind. >> but that basic caution -- i just did an hour with him at the harmony club. when you wrap that economic view over yours on equities, is the fed what keeps the market going up? >> i think there is a switch between yields and growth. i think that we actually push the market into growth going forward. >> this is potentially a big problem for china. -- fed tapering, d tapering tapering, suddenly the capital inflow looks like capital outflow story. this is a bit concerning. do you respond to the idea that china is exporting deflation? putting downward pressure across the board and the government is ok with that. it continues to happen. >> christian, thank you for joining us. , of eurasiary group, you have been with us the whole hour. >> -14, yen is the story, we can't get to 100 yet, but stronger yen over the last couple of days. there is that handle on the eurodollar. anything short of 135 is big news here. the historic off election, finally takes a pause on a stronger rupee. >> coming up in the next hour, alan that there will be our guest host. ♪ astrazeneca, near collapse, shares sinking. regretting their past misconduct. the niceties of u.s. china mutual trust collapsed overcharges of intrigue. china calls the charges groundless. good morning, everyone. this is "bloomberg surveillance." joining me, scarlet fu and adam johnson. our guest host this hour, on the american economy, ellen zentner of morgan stanley. our morning brief, adam, you have that for us. >> overnight, here in the u.s. there is no economic news to speak out. there are a couple of earnings before the bell. dick's sporting goods and t.j. maxx there after the bell, with salesforce on the schedule today. we should point out that tom wheeler testified this morning at the house energy and commerce subcommittee on fcc oversight. microsoft is also expected to unveil a surface pro or service many at an event here in new york. the one i am focused on, nfl owners and whether to hold the super bowl in new orleans. >> roman numeral's? x yes. excuse me. >> what is that? >> lli? >> i did not do well in the roman numeral's. >> lii. imagine doing multiplication in roman. >> do you have an app for roman numerals on your phone? >> i have an app for not -- for roman numerals on my phone. this is profound. i will put it out in a moment, chart of roman numerals. i am kidding. >> i can't wait. >> 40 characters will get you to 18. [laughter] broken the last hour, the european union accusing jpmorgan of rigging interbank lending rates. also accused of trying to .anipulate rates six others agreed to pay fines last december. part and morgan were not of the group. j.crew opened its first stores in asia this week, the company is now looking to expand into europe. mickey dressler tells us that he will vote -- he will go to paris in a few weeks to scout locations. j.crew gets him a solid sales from the u.s.. the london stock exchange is in talks to purchase the company index.the stock russell has two units, the index business and an investment business with $260 billion in assets. >> ok, not as crazy as yesterday? >> yesterday was a frenzy. >> that is because of what happened last night. the first global bank in a decade to admit to a crime in the u.s. courtroom. credit suisse, pleading guilty to helping americans evade taxes. they will pay $6.2 million in penalties. a former federal prosecutor who joins us from washington, jacob, you say that criminal charges may result in collateral consequences? in terms of other banks, perhaps? tothe real question is going be -- how does this settlement with credit suisse matchup with what we are expecting to see? is this going to be a template? is this going to have an effect on hedge funds and other institutions who are doing business with credit suisse? one of the real challenges in the prosecution of a financial are the collateral consequences. in other words, is the institution going to stay in business? the big distinction here is we are talking about a non-us-based institution regulated by the states. we have heard a lot about the talk behind the scenes with federal regulators and others to make sure that there are not -- that there is no domino effect here, that they are able to -- that they are allowed to continue in business. we even heard that u.s. regulators reached out and said that it is still ok to do business. i think we are going down a dangerous road here with these prosecutions. because alternately all the corporation can do is write a check and pay a fine, undertaking corrective measures. while this might be a feel-good disposition, at the end of the day i think we are going down a dangerous road. >> and they did write a big check. jacob, what about the effect on individuals? on those who evaded taxes, are they likely to be charged and come under scrutiny as well? >> they are already understood me. the question there is -- credit suisse was very careful in formulating their settlement with the government. they agreed that they would not turn over the identity of those who were innovating u.s. taxes. the other part of the settlement that was interesting -- there was an agreement to terminate the employment of those who were involved in enabling this conspiracy to occur. there is no way the swiss government is going to extradite those individuals, but we know are the u.s. taxpayers under investigation. we have overseen prosecutions. many have missed their opportunity to come in. others are looking to come in under various guidelines and programs offered by the u.s. government. but i do think that this process, these cases, it will go on for a long time. >> jacob, quickly, what is the significance of the word criminal with these charges? >> it is very significant in the aboutthat you are talking a major financial institution that has pled guilty to a felony. going back to the original question about -- are we going to see other institutions? distinction is that when you have a u.s. financial institution, which i do not believe we will see -- u.s. financial institutions charged criminally because there are severe collateral consequences to that occurring, we have seen what those are in the past with companies like drexel and arthur anderson. it really does highlight the interplay between the various agencies. ultimately, as long as credit atsse is as effectively doing business with senior management being allowed to stay in place -- which does not typically happen in the settlements -- that is the message to the shareholders, that the company will be able to continue doing its business. that its business direction is as directed. >> jacob, thank you so much. >> as we continue this story on financials, ellen zentner joins us from morgan stanley. of course, she cannot comment on the banking industry, she will leave that to mr. gorman, but it is critical to have a sound financial system. that was at the heart of ben bernanke's research years ago. absolutely. a sound financial system is critical to the proper functioning of the economy. that is why financial stability remains a big issue today and something that is hotly debated. >> read the emotion yesterday ben bernanke traveling to texas to give a speech. we have to figure out how he will speak as compared to alan greenspan, who was very visible early on. how would you suggest ben bernanke should speak so that he does not step on the yellen fed? >> with greenspan very early after he stepped down he was still careful about what he said about the fed over time and he came or free with his speech overtime. this time we have seen remarks that were maybe because he was in texas and shooting from the cuff, but remarks about -- we a four percent nominal federal funds rate in my lifetime, those kinds of statements. honestly? that comment should not surprise anyone, but it is surprising coming from ben bernanke. my question would be -- how long do you plan on living? post financial crisis in today's , i don't think we will get back to a four percent nominal federal funds rate for a very long time. >> i want to address this and make sure that we get it within the hour, i have never seen such a fog beyond june 30. do you have a crystal ball that we can borrow? are you as unclear as i am? that youany clarity see out there? >> the clarity that we get when forecasting are what the leading indicators look like. things that tell us how the economy will be in six months, eight months. of course, you cannot include weather disruptions. as well as political concerns. right now the fundamental factors and drivers of the economy appeared to have always been in place throughout the time that the weather was masking the robustness of the economy. comingeather effects are off. we expected a big rebound. like themy uncoiling spring. >> economy or red sox? >> yankees fan. you are welcome, scarlet. we are tracking four percent growth in quarter two. so what? what will the economy look like beyond that? that is the big focus. that is why what you are getting at is the clear picture of what that will look at -- look like. we can hang our hat on the fundamental drivers before the itther screwed up gdp and remained in place. our outlook has not changed much . >> much wasp, -- much what -- must watch, must listen, housing dater -- housing data later in the week. the euro, struggling to go weaker? >> coming up, ryan sat down with the russian prime minister for exclusive interview. highlights from that conversation, coming up. ♪ everyone.rning, "bloomberg surveillance." our guest host, ellen zentner, holds court at morgan stanley with vincent reinhart away from monetary and fiscal policy, away from janet yellen after lunch. a simple fact -- money is dirt cheap. we saw the m&a frenzy yesterday. that a betteris sign for an american economy? is transactional stuff we are to?ng, is this going >> if anyone is looking for signs of a healthy market, my concern would be -- is m&a activity this year where companies are putting their money instead of cap ask, is it taking over for the buyback and dividend increases as the next place that companies put their money? i don't think that that is the case, i think this is a sign of a cyclical pickup and m&a activity. >> do you see signs of investment as a precursor to creating jobs? >> we do. quarter one, we already talked about the weather on this show, that damaged equipment spending. you will see a bounce back. beyond that i look at ceo confidence, raised higher, that tends to lead business investment. i look at the age of factories and equipment and what needs to be replaced as a share of gdp being substantial. of course, these companies have the operating cash to do that, they are holding much of it overseas, they are not stop from issuing long-term debt cheaper. >> is small business job creation overrated? on the other side of that, does big business not get enough credit for being a job creator? veryall business is still important. i don't want to get a phone call from bill dunkelberg after i smallthe show saying that business is not important. it is essential to a full and robust labor market. you need job creation from small businesses and the big guys coming together. what we have had, though, is the big guys leading the recovery in the labor market small business lagging this time around. >> defined slack as janet yellen defines finds it. >> strictly from the labor market. we don't have the popper -- proper wage growth. we still have longer-term unemployed in greater numbers than she would like to see. she is definitely concentrating on it from the labor market standpoint, looking at wage growth to tell her how much slack there is. us forn zentner is with the entire hour from morgan stanley. microsoft is holding an event today in new york. the chief investment officer is expected to go small, making a splash with new products. cory johnson will join us, we will look at maybe the new new microsoft. from new york city this morning, this is "bloomberg surveillance." morning. ♪ >> good morning, everyone. our twitter question of the day on china, what is the white house and game? a surveillance correction -- earlier we were using roman numeral's. adam johnson messed up, i messed up, scarlet messed up, super bowl is not lli, it is li. 51. not 52. i am the only dork in the world with a roman numeral app on my iphone. it is a great and beautiful thing. good morning, everyone. i am tom keene. with me, scarlet fu and adam johnson. ellen zentner is here with us because she did memorize or roman numeral's. adam johnson right now is iii. >> number one, president obama will drop by a meeting with business leaders today, some of the companies making an appearance -- ford, zürich, north america, they will all be discussing the importance of investing and creating well-paying jobs here in america. hyland, the army has opposed -- impose martial law, bringing down an elected leader. ahead of the thailand army says the military wants to restore order and have asked the politicals to stop the protests. russia, troops on the border with ukraine are preparing to move back to their home bases. a sign perhaps of vladimir putin may want to eased tensions with the west. the u.s. and nato however said they have seen no signs of withdrawal as yet. they just sat down with the prime minister of russia, and ryan joins us now. eager to hear about this one. what did they tell you? >> this is the first interview the prime minister has given since the u.s. slapped sanctions on his country. the big headline was he said that his standoff with the west could lead to another cold war. >> two-putted singly, broad sanctions are always a sign of tense relations. we do not support sanctions. you may have noticed that we have not commented on them a great deal. unpleasantries, but it is bad for our relationship with europe and the united states. the sanctionst, are a sharp right for european and american businesses. the only ones who want sanctions are politicians who use them to demonstrate their power. for example, our american colleagues need to show congress that america does not see russian, that if anything happens, they can hurt us area that the u.s. resident can make tough decisions or he is doing everything the senate accuses him of not doing. the situation is somehow different for europe. >> speaking of president obama, because you are the author, the architect with president obama of the reset in relations, are you disappointed i how president obama has handled this crisis? >> yes, i believe that president obama could be more tactful when discussing these issues. some decisions taken by the u.s. administration are disappointing. we have done a lot for u.s. russian relations. i believe that doing so was right. the agreements reached were useful. i am very sorry that everything that has been achieved is now being eliminated. basically, we are slowly but surely approaching a second cold war that nobody needs. why am i saying this? a competent politician knows how to make careful, subtle, wise and intelligent decisions, which i believe president obama succeeded at for a while, but this just proves that the united states is one of the parties to suffer from there it ministration. that has the things clearly gotten under the prime minister's skin is the introduction of individual sanctions in some cases against russian politicians. he said that even during the darkest hours of the cuban missile crisis neither the united states or soviet union ever sanctioned one another's officials. he said that that is just a dead-end. >> to most of us it is prudent -- putin. explain where dmitry medvedev fits into the russian leadership . i have no clue. >> he is competent. he is the number two. affectively he is good for what brought -- for broadcasting what president putin is thinking. they are aligned in their thinking, or at least for the prime minister speaks he is almost always aligned with president putin's thinking. president putin meanwhile is in china today. the russians themselves are doing their own pivot to the chinese as they get alienated by the west. >> is that a sort of de-escalation in its own right? force away from military and turning economics on its head by going to china? is that what is happening here? >> i think it is the russians thinking about how they can diversify one of their most important assets, natural gas. in western europe they are always talking about how they want to diversify away from russian gas.h -- china is a huge market, china needs clean gas, russians have lots of it. they have been trying to get his deal through with the chinese for 15 years. it may happen today. it was supposed to happen a few hours ago, but it has not yet. they will not give a high price if they don't have to. >> terrific coverage of your interview last week, and now with dmitry medvedev, ryan chilcote in moscow. i think this coverage is just great. we don't hear lengthy bits. we get useless soundbites. >> to actually be able to sit down with the leaders of russia at this moment? >> with so much at stake, no less. cisco financials showed signs of but major earnings, challenges remain. this is "bloomberg surveillance. a -- surveillance." ♪ >> good morning, everyone. a gorgeous view of note -- of new york city. no one out there owns microsoft surface. we will talk to cory johnson about that in a bit. have never it, i seen one. that is wrong. i saw one once, a girl in a hotel in miami. good morning, everyone. it is less frenzied than yesterday. >> a little bit. the surface is getting smaller. >> the surface many? >> microsoft is holding an event today in new york. we will get to that in a minute. company news first, looks like pfizer has come to the end of the road when it comes to astrazeneca. takeover laws prevent the sweetening of the offer. according to people from -- according to people familiar with the matter they are expected to announce not to make a formal bid. visa and mastercard are deciding whether or not to put an end to their operations in russia. the law was passed in response to u.s. sanctions on russia. they say they are talking to russian lawmakers. bill gross and his flagship fund trailed most of his peers, who -- must say it will be brokered by high-yield tobacco and that -- tobacco debt. those are your company news headlines. as we mentioned, the surface is getting smaller. microsoft is holding an event today and are expected to announce a mini tablet. cory johnson joins us with more on what to expect. has the surface made any kinds of impact? >> ritually none, but microsoft keeps coming up this. computing hasat moved to mobile tablets and they have something they will keep pushing and iterating until they >> you knowy want. what surprises a? the new ceo came out of the cloud. why with the first products on his watch had -- be something that he had nothing to do with? >> looking at tablets and the cloud is important, it is the different way that people are computing now in the workplace. when the information is on a tablet or a phone, your laptop, your desktop, it moves all around the places you compute. >> is there any indication that someone is adding aside an ipad, particularly a new ipad, in acquiring these things? >> what we know from customer surveys is that people stay with the ipad when they have it. when they go away from it they are more likely to go back. the customer retention on ios products is higher. >> then get them vetted every single day. >> even people that leave the ios to go to a samsung phone said that they are more likely to leave that. >> because i have a roman numeral app on my iphone. i don't have that on my other phone. , the wholentner point of the microsoft product is the enterprising customer. does morgan stanley use the microsoft tablet? do you use tablets at all? >> generally tablets are not issued to employees. i purchased my first i something this year. i never thought that i could use a tablet as a workhorse when i traveled. i have been proven wrong. i got an ipad air and attach the keypad do it and have been able to do for work on airplanes. it fits much more nicely. >> do you model with xl? the big moment for microsoft for me was the release of office on ios. it showed me that they recognized -- >> this is critical, they priced it wrong. i want to do xl on my ipad? it was priced insane. >> we will see what they do with that. >> it was a sticking point for me. i just assumed it was not an option and i would never be able to use and i product. once there was a solution and workaround to that, with i products, i went for it. the reviews of it were just overwhelming in terms of researching which one i wanted to buy. that was a deciding factor for me. you talk about microsoft not having quite the loyalty that apple does. i mean, they are sort of the toyota of the car world, apple of the high-tech world, because hangs itsta always hat on extreme customer loyalty. i guess it is the same. >> is this a real product coming out of microsoft? it >> they're going to be going after this for years. >> what time is the unveiling? >> 11:00. >> i don't buy it, cory. >> well, microsoft has to sell it. that is their job. as tom scratches his head, the future's art little changes right now. no economic data on the calendars this morning. tom? >> good morning, everyone. bloomberg surveillance on bloomberg television, all that digital product out there -- bloomberg radio from yesterday, my interview with mike mckee on the injured -- indian elections. mr. modine giving an emotional speech to parliament moments ago. fu and adam johnson are with me. scarlet, you talk to us about technology? >> cisco gave investors something to cheer about. but the business slump in traditional hardware could make it hard for investors to be optimistic. now is frank cal baroni. cory johnson is here with us as well. has been in a constant state of reinvention over the past couple of years. a lot of headlines about exiting businesses and cutting jobs. are you done with divestments and cost cuts? yearsr the last couple of we have had a lot of transformation in the company for the better. when you think about the overall environment, there is a lot of change going on in the technology industry. working through the changes, making sure we are making the right investments for the future is critical. we did make some trade-offs, but more importantly we wanted to make sure that we invested in areas that were good growth opportunities in the future. areas like security, data center , services that would help to expand our portfolio offerings to customers in the future. >> it is interesting to me, the way that you guys manage acquisitions. cisco is an acquisition machine. there have been so many acquisitions for so many years -- i wonder, you don't see the kinds of hiccups that you typically see throughout silicon valley. came to the company what was the biggest difference that you saw? from that had 169 standpoint. it is a large number. when i joined cisco about 10 pleasedo -- i was very to be there over 10 years, but i was very impressed with the amount of effort that they put into acquisitions. from the standpoint of making this up front, going to the process of evaluating and integrating with a long-term benefit, we do a lot of benchmarking with other companies on this topic and it is good to get the feedback from others as far as what they see in us and sharing with them what has worked well. nothing is perfect. we have our share of successes and our share of challenges as well. overall we have had much more success, which has helped us currently, as well as provided us with the ability in the future to make those organic decisions. >> you have seen ibm go through real change, from hardware to software, only 20% at cisco, when will we see those numbers rise? >> when you talk about 20% of the business you have seen growth rates in the 10% range for a number of years, although this year we are at three percent and it has to do with transitions going out of business. we expect to heavily make in the services space over the last year with continued investments as a vehicle to really build solutions for customers in the short-term and long-term. especially when you get into the overall cloud and providing different types of inclusion for customers. >> what about the long-term strategy of share count? with these acquisitions you are issuing options to employees and the decline in the share count has not been as dramatic as it might have been had you not been issued to many shares at the same time. >> all of our acquisitions have been from cash lately. but stock options to employees over a number of years, in the more recent years we have moved and yes we have had some solutions from that perspective and that is all the more reason why we have been asked to do a significant amount of buyback. this year alone. >> but they want to share count to come down. >> from the standpoint of buying back shares this year. but also from the standpoint of going down to stock options and improving how you distribute the amount of shares across the population. we need that, compensation standpoint, but we also have to make sure that we balance that. frank, cory, think you will for joining us. our twitter question of the day, what is the white house endgame for charging chinese officials on cyber spying? tweet us. ♪ >> good morning, everyone. futures go green fractionally. it has been read all morning. top headlines this morning, here is adam johnson. >> the cia will a longer use vaccination programs as a cover for spying, the obama administration has been sent to a number of schools of public health. they set up a phony one in pakistan when they were searching for osama bin laden, you may recall. a portion of american homeowners still underwater. .ccording to zillow.com thing about this, when 1/5 of the homes in this country are still underwater amah that is still better than where it was. but it is still how far we have to go with housing. moving on to the nhl playoffs? the rangers? >> no. >> two games to one lead in the eastern conference final. the winner of the series will be going to the stanley cup finals against either chicago or los angeles. >> very cool. the new york rangers, martin st. louis scoring last night and a power play. >> a five-game winning streak. keep it going, boys. let's bring in betty liu. >> you have been talking hockey this whole show. >> what is going on on "in the loop? " unfortunately no hockey, or i would bring you on. interviewing cfos on how their jobs change over the years, but we will also talk to her about how recently we have seen a lot of cease we changes where cfos have risen into the positions of ceos. why is that happening? are there skills that cfos have that they are well-suited or battle -- or better suited for? cisco. at >> very well, you know this, this is your space. the other thing that is not your space, pop, legalizing marijuana. >> well, we don't know if that is his space. >> that is me. >> new york state is going to vote on whether to legalize marijuana, to be the 23rd state so far to do this. box, he isck of med going to be joining us to talk about this growth. >> sounds very interesting. >> from c suite to pop. it just goes hand-in-hand. at 8n the loop" starts a.m.. what do you have? >> staples earlier this morning, down 11% in the premarket, trailing analyst estimates in the second quarter forecast, missing the consensus here. in fact the company says that they cannot estimate restructuring costs in 2015. >> is train wreck the right word here? like it is all disrupted by amazon. >> i want to start buying, cotto softener. everything else? >> avocados have doubled in a year. >> too expensive. much more coming up on "surveillance." ready toputin, is he close on a russian gas deal with china? we will discuss it next on "bloomberg surveillance." ♪ everyone.rning, "bloomberg surveillance." she does it all. for starter house is four point $2 billion. i can't afford one. barbara corcoran, of the going to anup, important housing deal by the end of the week. >> this is "bloomberg surveillance." our guest host for the hour, ellen zentner. let's get you some company news from the files of "bloomberg west." the camera that bikers to skydivers use for action videos, they have now filed for an ipo. doubling in the last year, they plan to position themselves as india company. twitter is holding talks right now to a higher or partner with several music related startups according to people with knowledge of the matter. one of the companies that they may buy is a sound cloud. ask apple and samsung who is to blame for blocking progress? each company says it is the other guy. in a court in california they have each said that there a point -- their opponent was making the settlement were difficult. they were in a three year long battle over the smart phone >> very good. the fondest hope of janet yellen jobsat the way to create is to reduce slack and for corporations to finally invest. witness one frank calderon at cisco, he has been there for 10 years through share price mediocrity. cisco doing better, he knows the pulse of our future in america. ellen zentner of morgan stanley says maybe. what is your confidence that a guy like calderon will spend money? >> we are seeing positive signs that is strengthening. i would call it a small uptick in aggregate growth. there is a lot of need for companies to invest after years of not doing it. companies need to see stronger theegate demand. it is typical relationship in the business cycle. high tech is an area where we have seen plenty of cap x. about the other questions about cisco? no comeback recently, popping nicely, back up to the mid 20's range. out the other day for ibm, that was a lead brick for the investor community. what do we question about the future of the stuff you make? >> i agree that the overall economy in the u.s. has been on a slow recovery. >> absolutely. >> and i think that businesses are being a bit cautious, but we need that stimulus. we want to make sure we are investing in the opportunities for growth, but we are also .ooking for tax reform from the perspective of allowing global companies to operate in an environment where they generate much more investment and build jobs. >> do you believe in the cloud? >> i do. if you think about where the customers have been in technology over the last two years, they are asking for more and more information from the cloud. >> i tell you, i admire john this, this idea of making this technological shift, you have to reinvent every three years? >> that is the whole point about change in innovation and technology. >> you talk about change briefly with taxes, would you as the cfo of cisco ring money back into this country if there were not double taxation right now? cisco,uld say not only but many companies are looking for more of a territorial system that allows for global companies to have a competitive system allowing for the flexibility of moving cash around without getting burdened by high tax rates. the answer would be yes. he have the flexibility and we would be able to do much more free investment from a global standpoint. >> was there not a tax holiday a few years back? it did not really sustain itself. >> we have done holidays on repatriation in the past. whenroblem there is legislation is not made permanent. companies know that that is not a permanent change. that is what we need, that is what has been moving at a glacial pace. we need companies to bring cash back to the u.s. and put it to work here. it is not completely stopping companies, they can issue cheap, long-term debt here as opposed to the cash from overseas, but not many companies are doing that. or as many as we would like. it would pack a bigger punch if we could bring the cash back from overseas and not have it be such a taxing nightmare. a of the r&b tax rate is great example. companies have to make long-term investments and they cannot deal with these tax systems. >> the fact is, you have hit the ball out of the park with technological progress and cisco adapting to that over a three-year or four-year. . you be in 2016? where do you envision the company being? >> the key thing we are focusing on is continuing to be innovative. talk to me about the cloud. we are investing in the cloud. even our customers are asking for much more flexibility in how they leverage, right? just a few weeks ago we announced an investment in what we call the inner cloud. the standpoint of the economics of the nation, isn't everyone on the same page? isn't everyone innovating in the cloud? >> clearly, yes. the point here is getting one step ahead. we have other customers on a global standpoint who are able to connect with global enterprise commercial public-sector accounts. getting that information from them as far as what they are asking for, delivering that ahead of others will allow us to be successful. >> are you invested in the cloud? >> do i uplink? quickly, an important question, president obama meeting with business leaders to figure out job growth. >> what about tax reform? >> we talked about what was done in the past. if you think about long-term tax reform in the united states, that is one of the top issues that the country and the business need to address. >> is this a glorified photo op? >> from a tax return standpoint? important that government and business leaders continue to have the right dialogue about where the issues are today and how we improve them on the behalf of business and the united states. politicstersection of and corporations plays into our agenda perfectly. our agenda, mine, of course, is what happens to credit suisse after they plead guilty to the criminal charges and paid $2.6 billion in penalties. what about this guy? zürich to the culture of , this will be a struggle for mr. dugan. magazine article in "bloomberg view." it speaks to the skepticism that people have over this complex rights deal. even for mario draghi, this is a big deal. putin, russia, china, potentially putting together some sort of $400 billion deal for the chinese with natural gas. looking at the gas problems in the observer, some of them got to cheap. they need to. interesting, right? the problem with europe? we can find other markets for our gas now that the chinese are open to a good price. >> speaking of china, what is the white house and the game for charging chinese officials with hacking over cyber spying? some of the answers are to freeze assets and impede their abilities to travel to places with expansionism. >> they have got every trick there to keep it under 140 characters. >> that is a jampacked answer. we cannot beat them in the long run. >> that is the bottom line and a great tweet. thank you. >> third answer -- please, please stop spying on us. pretty please. we do wonder, especially with the wall street journal reporting that this case against china is a prelude to other countries. >> i go to an expert like adam siegel saying that yesterday was a day to remember. thank you. , chambers and calderon on the future of technology. >> on the internet of things. to discussings there. "surveillance" on radio continues on radio. "in the loop" with betty liu is up next. have a great day, everyone. ♪ good morning. tuesday, may 20 and we are live from bloomberg's world headquarters. you are "in the loop," i am betty liu. new york could become the 21st state to legalize marijuana for medical use as the state senate votes today. talking to the ceo of medbox, a vending machine that dispenses medical and recreational marijuana. what does he have to say? a look at see sweet shakeups. cfo astably, target's bloomberg hosts a conference. the importance of being number two at a company. a look at oure's top headlines. credit suisse ceo brady dougan says he has not considered resigning. speculation about his future even before credit suisse pled guilty to charges it helped americans evade taxes. a warning from dmitry medvedev, he told ryan chilcote the u.s. and eu are risking a return to the cold war. he d