Transcripts For BLOOMBERG Bloomberg Surveillance 20140825

Sector pmi before that. The dallas fed is going to look at manufacturing. The london markets are closed today. It is a bank holiday. We dont know when that is going to happen in london, but they happen from time to time. We will get the new home sales at 10 00. I thought this was in august yarder. Forget about it. Futures are up five. The 10 year yield is up 2. 3. The euro dollar has plunged. There is no other way to put it. That is a while number four mario draghi. There is a nice spread between the crude. Were on to the next screen. Were looking at the equity nirvana. This is a low number. The dow is over 17,000. The german 10 year, that is not a misprint,. 93. That is stunning given where we were last week. Lets go to the monitor to show what is keeping Esther Draghi up at night. This is the german twoyear. This is all you need to know amid a new low in the italian 10 year. The ramifications are back on the United States. Belowa jump condition zero. By any definition, this is germany flat on its back. I feel it we just keep saying the same thing. I keep expecting for this to stop. I expect being able to say those words. We have the same thing happening again. We have the french government. We look at the newspapers this morning. This is scarlet fu. The lastust happened two hours. Theres a shakeup in france there in the president has asked the government Prime Minister government. W the Education Minister and the economy minister called on them tax cuts for households. I think you are better at this than any of us. Explain if this was forced on him. You how hard shows this is to do in your. Oreo druggie says real money from government into the economy. An interviewe is where the finance minister says things that arent completely in accordance with the Prime Minister in france. Monday, we are forming a new government. This is hard to do. It is easy to use say in say in jackson hole. It is hard to do. We have a new government tomorrow . I dont know if it will happen that quickly. He has to form a new cabinet. The backdrop to all this is that frances economy is stagnating. For thes been no growth last two months. I am thinking about the little mermaid. Howrance cant figure out feels about deficits. They also have real structural problems that they need to fix. Mario draghi addressed both of those. This is been going on for five years. Spending more money is what they need to figure out how to do. Islamic state militants solidify their hold on syria. Now the Northeastern Province has become the first province fully outside of assads control. I am going of syria, to call it northcentral. I thought it was farther out toward turkey. It is not. It is closer to damascus. Theyre trying to hold onto gains in northern iraq. Second they captured the biggest city in june. The u. S. Has been bombing net position the last couple of weeks. As this was happening, and al gave back a journalist. That was a surprise. We will continue to follow this one as well. Our third frontpage story is a company news. Consideringis moving to a lower tax country. This surprised me. Canada, of all places. They are in talks to buy something in canada. They would move its headquarters to canada. The top Corporate Tax rate is lower print. Great hockey player for the maple leafs. He set up this huge iconic franchise for coffee and donuts. Could there be a more Canadian Firm to have done this with . We used to eat breakfast there. Hockey players use to want to go to the event states for low taxes. 2012, canada reduced their Corporate Tax rate. I was stunned. Canada. Canada . You want to play for the Ottawa Senators instead of the new york rangers. Do we know that this is an inversion move . It is being reported as that. We will check in later with erik atzker who will compare it Dunkin Donuts. Futures are up six. James glassman is our guest host. Martin lindstrom is with us. It is back to school. We will look at some of the ,yths of bricks and mortar biology and truth and lies about why we buy. The economists worldwide i what janet yellen had to say . We had the worst recession in memory. Later, people are saying we are close to the feds mandates. This usually takes seven years. Can she work in a vacuum. I refuse to believe we can work in a vacuum away from these abrupt moves in europe. That is what we have been dealing with all years all year. I think this is a reminder that we are very connected. Europe is a big partner of ours in this process. The irony is they are struggling because of the crisis. Why is the euro staying where it is . That would bring a lot of relief for the europeans if it would lower. Week euro need to be for jim glassman to benefit . If i were evening the world out, i would have the euro at parity. Something like the japanese did. John norman is the master of the universe. Noted. We want to bring in martin lindstrom. We are talking about burger king early on to make a tax inversion deal. They are suffering a little bit. Demographically, millenials dont like to eat there is much. Absolutely. Mcdonald back in the day introduced salads. They had never been associated with being healthy. This is an amazing chain in canada. Canadians love it. They are looking at acquiring that company. That will go in their portfolio. Research on this. There is a mushroom cheeseburger. There is an a1 they can cheeseburger. There are chicken fries. Nothing has changed at burger king. They have made a couple of allowances. They have more financial engineering. Is theperception consumer walks into mcdonalds and they want to have a hamburger. Theyre not buying the salad. This is the same case with burger king. That sounds like jackson hole. A baconking at cheeseburger. Scarlet will bring you company news. Pay 8 billion for intermune. They are developing a treatment for a rare lung disease. This was the driver behind the acquisition. Malaysia air is considering job cuts in review of the aircraft orders. The ceo may be replaced. The carrier may lead need to lay off 1 5 of its workers. They suffered to disasters this year. Fewer new partners at Goldman Sachs this fall. The bank will probably name no more than 70. There are slower income trades. That is company news this morning. Angela merkel is committing acts of diplomacy. She is changing germanys role in the world and being more aggressive. We will talk to you about that after the break. Surveillanceberg on bluebird television. Good morning. Futures are up on this monday morning. London is closed. A bond markets are on the move. As a perfect time to speak with the deputy chief Investment Officer at pimco. Watch for that this afternoon on street smart. Good morning everyone. This is liberty surveillance or coi am tom keene. Scarlet, you look to germany. The chancellor is managing down expectations before a meeting with russian and ukrainian leaders tomorrow. She made comments in a Television Interview after returning from kiev this weekend. Hans nichols joins us from berlin. Are we to conclude that her meetings with key of for not productive . From her perspective, she pledged new money and the need for us to have united nato and a potential round of sanctions. This is classic. We can say a lot of things about her, she knows her way around the summit. All she is doing is managing expectations. She is tempering them downward. They will have a facetoface meeting. They been trading accusations ukraine. Ading the am interested about interview that she did over the weekend. There is a quote that i pulled out of that. We cant just stand to one side, they been doing that for 50 years. It seemed significant. It seemed like an aggressive change as germany sees its role in the world. Think that was in context of arming the kurds. Theres been a shift in public opinion. They need to start arming the kurds and stop isis. Try to walk aays fine line when she talks to Vladimir Putin and maintain a relationship with them. Europeano drag her allies along on sanctions. She is been strong on sanctions. It will hurt hurt economy the way most. France . Is going on in would you please explain the collapse and ruination . This is simple. I will do an analogy. Imagine if jack wu were running around saying that obama was harming the economy. Obama would find out a way to dismiss him. That is essentially what happened. Over the weekend, the economy minister gave some strong comments saying that what the president was doing was rating. He economy erie they are forming a new government. It is a way to get rid of the economy minister. He played a big spoiler role in the General Electric purchase. Him isquestion about good cop bad cop. Did they get a better deal from ge when they bought the Energy Assets . They got a good deal. They got job guarantees for 2000 people. They got a good deal from ge. Counterbid. Sed this they extracted concessions from ge. Ge got a lot of good out of this. Irony is that was exactly what mario draghi said europe should be doing. Is that how difficult it is to do that . As long as merkel sticks with of structural rules, you are in a bind. I will give you another analogy. In 2010, obama is calling for more stimulus. Republicans are say no more spending. And everybody else in europe including mario draghi says you need to stimulate aggregate the manned. You need to get german consumers to spend more. Maybe she had a change of heart because the gdp figure was so bad last week. Maybe she had a change of heart. Were seeing that play out of the markets. Hans nichols, thank you so much. We want to give you a heads up. From nyu will be joining us as the guest host. He was attending the jackson hole symposium over the weekend. He will give us his take next hour on oberg surveillance. We are streaming on your tablet on smartphone. Good morning, everyone. Our trivia question for monday. What is an appropriate president ial vacation . We will discuss this. He is back at work today. I think he worked his whole vacation from what i could tell. None of us are on vacation. Ism johnson said enough, he going to be president ial and take a vacation. We start with the hamas leader killed by an israeli missile. He handled their finances. There will be more attacks if an and warned gaza residents to stay way. Libya loses control of the airport. The facility was virtually destroyed in the fighting. Earthquake could cost insurers at least 1 billion. Rattled winequake country. This is the largest bay area quake since 1989. The as in that stadium where , 25 had the earthquake years ago. That was candlestick. I think six people were critically hurt. It seems like everybody i know is from northern california. Said that my family would force me to move home. That is still pretty severe. California shrugs it off. My reading is it was more than just wine bottles. There is some serious damage up there. Were a lot of people writing after jackson hole. Rendon greely found religion. Transcripts ofng the popes press conferences. He says interesting things. Are you a bigger nerd than i am . You win. He was asked about u. S. Intervention in iraq. You must stop the unjust aggressor. I say stop by some means. It is an approval of the idea of force. It doesnt mean he is giving a blanket condoning of force. Sometimes youhat must stop an evil aggressor. You studied at northwestern. By any definition, these tensions dampen the economy. They make people cautious. Where these stresses are popping up, this is part of the world reduces 2 of the worlds gdp. There is a recovery going on in asia. The economic benefits are hard to ignore. This morning with ukraine and russia, that has an impulse in europe. A third ofroduces the worlds gdp. They are a big deal. They are struggling more from the existential crisis. Made those comments and people thought the whole thing was going to blow up. Moment. A very scary that is reverberating through the region. He said there needs to be stimulus. Is that even possible . Probably not. We have the same challenge here. We rely on the central bank to do most of the action. It is probably not possible because of the politics. Is 2. 8 standard deviations week. That is a big deal. We are going to discuss jackson hole. The discussion about the labor market continues coming up. Good morning, everyone. This is bloomberg surveillance. Brendan greeley and scarlet fu are with me. Markets are on the move. I did not expect this this morning. Futures are up seven. The euro dollar, we just got a 130. This is a significantly weaker euro. Germany is disappointing. Yields are lower, lower, lower in europe this morning. This comes off jackson hole. The theme is the american job market. It is improving. Some 200,000 jobs are being created. Why are so miserable in our labor economy . Why are those worries front and center. Wage growth is nonexistent. For too many, there are simply no jobs. This is a good labor market but the trends are improving and going in the right direction. The measures we look to to figure out how much unemployment air is are missing. There is a lot of parttime work. There are people who want fulltime jobs but cant get them. A lot of people dropped out of the market. When you look around, there is a lot more unemployment then you pick up. I want to show you this. Get in here and look at this nastiness of jackson hole. Look at this map. Are you kidding me . She reads this stuff . You read this stuff. Basically, this is a lot of map that says that wages are sticky. It is hard to get people to take a cuts in the recession. People accept pay cuts. Anothera newspaper and speech to say the thing we have known for 70 years. A new way tolways say the same old thing. They are struggling with wages. They are not going anywhere. In, we are the paper talking about wage rigidities. Are we going to see rage wage reflate deflation wage deflation . Is close toge inflation. Some people are seeing a real cuts. If you dont have a job this is the heart of the matter. Whatsnt the issue under conditions wages will increase . The laborthink when markets gets stronger and unemployment goes down, there will be more pressure on wages and people will get normal wages. We havent gotten there yet. The unemployed rate is down to about 6 . Is notalize the rate telling the entire story. There is a lot of hidden unemployment. We mentioned that. Is it possible to look at Janet Yellens time at the fed and say one thing she has really accomplished is she is like a renaissance painter of unemployment. Everything was flat and we just had this single measure. Detail ofe this rich what unemployment is and what causes it and what is driving it. At least she is change the conversation and how we think about it. The fed is focused on these issues. They look at unemployment and know something is wrong. Wages are not going up. She is giving voice to this debate. I think this is important. I want to pin you down. Have you adapted . Within 2015 . Sted we hold the same view. We think this is all a theoretical debate. Nobody knows yet. This is all about will we see signs that this hidden slack starts to come back in. That is a new one. Martin lindstrom is the uyology. B aboute seen a shift paying for experiences rather than buying stuff. Stable jobt a very market. As it improves and wage increases, will people revert back to buying stuff . Is this a fundamental shift we will not return back . Consumers have changed a lot erie it to things i am seeing is consumers are running on two tracks. One track is they want to have things they can buy cheap. The other thing is they want to buy experiences now. That is interesting. We have not seen the shift before. People will go online to buy cheap stuff and then go to Retail Stores to buy the experience. This is going to cause problems for the amazons of the world. This is a critical condition. We so broke as a nation that all that matters is price and there might be retail dynamics but there is not a lot down below . It is an issue. The ceos are so afraid of being different. They are like cattle going down the same path. They are all competing on price. Lets sell and experience. As soon as we have an experience, sales are going up. What is an experience . Onnaked young boys outside fifth avenue. Are you talking about Abercrombie Fitch . That is what they are doing. You can smell things and taste things rather than things wrapped in plastic. We are human beings. Look . That the almost. What you wrote. What you wrote really resonated with me. This is exactly how we run our household. Everything is automated. Paper towels, automatically. This comes from amazon. We dont leave the house to get stuff unless there is a reason we are going to enjoy it. We did a study in north carolina. Housewives are sick and tired of doing shopping. We infused gaming into the equation. Why dont we do a Stock Exchange in the stock market. When it you go when the prices go up and down. Bergdorf . Do that for light on the first floor. Is this demand the pricing for milk . Why not . Why shouldnt the prices go up and down . He wants to move her eyes milk section. We are also going to bring up how the fed talks about slack in the labor market. The are starting to see opposite. Our single best chart is coming up next on surveillance. We welcome all of you to new york city. Scarlet fu has our top headlines this monday morning. A feud over how to fix the French Economy except the coalition. The socialist governments resignation was offered. The jobless rate is above 10 . But of Ebola Outbreak in africa, congo is repaving reporting 13 deaths. That his bad days. That was sir Richard Attenborough as the mad dreamer who created jurassic park. He had a distinguished stage and screen career. He won an oscar for directing the movie don the. The thing that is wonderful s, Steve Mcqueen press. The there is a scene with Richard Attenborough and he and his people are gunned down. That single scene change this. Theven before that, he was first detective. He was in the longest running play in the west end. Prime minister cameron mentioned that in his tweet. He changed cowboys thought about life in one scene in the greatest tape. Is going to get a lot of applause at the oscar ceremony. Lets get to the single best chart. The fed is looking for wage inflation. We heard that all week long. There is funny of that in San Francisco. You are doing better if you work in the tech sector. The yellow line shows the average annual wage of san franciscan hightech workers. 156,000, up 19 . The blue line shows the average wage for Traditional Office workers. 132,000. That is the premium. This is government job data that was crunched my a commercial real estate firm. This is not silicon valley. This is not the suburbs. The agreementpite to keep wages down. This is the cartel. Despiteincrease even that work they did. They were trying not to poach each others workers. Is the heart of the matter for this president or the next president or the one after that. We have two economies. We have code writers and then we have everybody else. Code writers are creating services and products that are displacing routine work. That is the challenger people with midlevel skills. Is the Unemployment Rate really 6 . I think its more like nine. When you add these people that are hidden, the tech sector is not the problem. The news story this year is california was lagging in the national economy. Now they are starting to run ahead of it. Part of that is because of all of the activity. Boston is seeing the same thing. Part of it is what they wear. Hoodie . Ean a we are doing men who do not know they have become a meme. J. Crew stills a gingham shirt. These are our photos today. So many men have bought this and so may men wearing it in so many different ways that it now has an instagram profile. That j. Crew gingham shirt. Were looking at this at the beach. Then see myself buying shirt. You go to the store with your wife and she says you need more color. A shirt that has blue and white at the same time. Withis is all to do uniformity. We love our uniforms. We feel safe. His is the best evidence we had the levis 501 samuel days. We have a gingham at the office. We have street income. There are so may different ways you can wear the shirt. I feel their pain. I will tell you a fun story. This is basically a study showing that what you wear, you become that thing. When you wear a shirt like this, you feel more safe. It is not just something that we say. This is a safe shirt. I think this is the most daring safe shirt you can wear as a dude. Here is the instagram site. Scarlet, help me. It is easy to maintain. Low maintenance. What i find amazing is the second picture that you showed us. Throughre 20 40yearold guys wearing it. Please dont make me be more daring than that. [laughter] sureank you for making that we now understand that this is about insecurity. I am going to take that one home with me. Coming up, those were our top photos. About amazon arn branding strategy. He will continue with where the impulsive purchases are. Are they in stores or are they online . We will discuss next on bloomberg surveillance. I am scarlet fu. Its get you some company news from the files of bloomberg west. A scare in the air. The flight from dallas to san diego was diver did to phoenix because of a threat of arterial on board. The diversion came after the Playstation Network was knocked offline. Amazon is preparing an advertising program. The retailer is developing its own software for placing ads online. It hopes to use what it knows about shoppers to challenge oodles arco place dominance. Self driving car is having a bumpy road. New california rules will require divers to take immediate control of the vehicle if needed. The google car does not have a steering wheel. That is todays company is. Had reins it rains that would be daring. As it is an amazon world in which we make one click purchases online. According to our guest host, brickandmortar stores do hold some advantage. He is the author of the book about why we buy. The advantage that brickandmortar stores hold . Bricks and mortar have tried to committee on price and volume over the last 15 years. Forget about it. What they can compete on is the senses. It is an experience. It is storytelling and people want that. A rat, we petting will die in a couple of weeks. We want to touch because it makes us feel alive. That is what retailers have to do. Does that mean they should not expect people to buy anything on the first trip . If you want to familiarize yourself with the product. You walk around and get the ambience. What we can see from our studies is retailers can still tell amazing stories. You can engage with the community. I think macys and Herald Square is what you are talking about. Is that transportable to other cities across the country . We can put it in a bottle. It is about malls regaining their power. Own potsw creating our and cans. Your crafting things in malls. You cant reputation replicated online, you have a reason to go into a mall. Malls have got to get out of the price rectus. Can you explain the appeal of the Farmers Market . They are up 17 this year. Is an inefficient way to buy something. It is so inefficient it is not even funny. There is a trend in france where thatare selling bananas are not perfect. It is booming because people feel that is authentic. As an economist, do you look at retail as one whole or is it two or three parts . There are many parts to it. On the Consumer Sector that you are looking at, some people are more focused and some are in a rush and dont have time. Stick with dollar tree, are they doing an event at all or treat . Thatdont know if that is kind of urges. If i go into a retail store i i likely to buy 42 more than planned to. Online, it is around 9 . What about aspirational purchasing . That is everything. Influenced by that when we buy our gingham shirts. We all want to follow other people. We are fundamentally afraid of falling out of line. I do my purchases like that at home depot. They not doing anything extraordinary. Everything is automated that i like to go to home depot and we all have fun there. Andwealth of tools possibilities that you have make it more aspirational than practical. This is a toy store for adults. We need that. We are all a child inside. Believes he islt only 17 inside. Do economists believe that . In his world and believe the 20 roles believe that i am 20 which is why i do so much damage to myself on the tennis court. I am looking at you tom. [laughter] thank you so much. Jim glassman, thank you so much. It is jobs day. With this report. I thought it would be boring. The yen was at 104 earlier. Look it euro. That is a wow number four mario draghi. 130, that changes the landscape. Japanese yen and the korean currency, look up security. They are much scare stronger over the last few weeks. Nyu will bery from our guest host print we will discuss jackson hole. He attended it. We will be back very. This is bloomberg surveillance. Yields and germany plunge as as janetmany plunge yellen and mario draghi confront inflation. Jackson hole is no walk in the park. Mba industrytry created a bubble. The toronto maple leafs. Good morning, everyone. This is bloomberg surveillance. We are live from new york city this monday. Join me, scarlet fu, Brendan Greeley is with uys. Peter henry is our guest host will join us in a moment and will join us in a moment. Over the weekend, mario draghi said the euro area may need more stimulus. German Business Confidence declined for a fourth month. London is closed for a bank holiday this monday. It may just be because london is off for the day that there was less trading and things get exaggerated a bit. [laughter] we have some Economic Data in the u. S. Today. We get a look at the chicago Feds National activity index. Services, we will take it. We will get new home sales. s 10 30, the dallas fed manufacturing. Now, lets get to company news. We start with an m a deal. The swiss drug maker pay 8 billion for a company developing a treatment for a rare lung disease. Meantime, fewer new partners the Goldman Sachs this fall. They will name no more than 70. There is an industrywide revenue slump because of lower fixed income trading. Burger king is the latest company to consider moving to lower its taxes. It is thinking about acquiring a coffee and doughnut chain and move north to do a texan version move. Move. Inversion breakfast. Also does holee meeting said jackson addressed the American Labor economy. The backstory was not jobs, it was deflation. If frightening lack of price increase. Central bankers are scared. Peter joins us this morning. What was the backstory a jackson hole . The key thing about Janet Yellens speech. It reminded me about the speech that Malcom Gladwell gave. That is the first shameless plug there. Malcolm gladwell. Im just amazed that the gladwell comparison. Puzzles and mysteries. Yellen said that what is going on in the u. S. Market is a mystery. We dont know how much slack is left in the economy. Wages have been rising at about 2 per year. Real wages are basically steady. We dont know whether wages have a lot of room to rise or whether they are going to remain flat. Suggest after the mario draghi speech on the followup saturday and sunday that all of the ecotalk is being overwhelmed by markets and by europe right now. A well, central bankers have key mandate, to focus on price stability and full employment. They have a job to make sure they focus on the longterm instability. The speeches may not have been great theater. What is not great theater is often best for the economy. I went back of her Janet Yellens speech and there were five mentions of the dual mandate. We know the fed has a fed dual mandate. Is she reminding everybody that she is still focused on unemployment . Absolutely. It is not so simple to fullstand the economy and employment. We dont know. It is a mystery right now. Said one piece of information is not going to solve the mystery. I will go with the idea that we need more. I would just suggest obe. That we are becoming overcome by events. None of this matters if we have negative twoyear yields. The german twoyear yield, it is like this down. Are they talking about this on the sideline . Mario draghis speech was much more interesting in a way. Thank you. I agree. He said forcefully that we need more reform in europe. Monetary policy alone is not going to fix the problems in europe and we know that is the case. If you look at the overall Market Reaction to the speeches, what the markets are saying is that things are actually weaker in the longterm than expected. He said that europe needs reform in two ways. One is structural reform. France and italy need to change the way they approach employment. Thatso said explicitly countries in europe need to spend more money. That felt new and like a germanic departure for the ecb. Matic departure for the ecb. It was a soft punch at the austerity of the past. He said it does not make sense to continue to have easy Monetary Policy if businesses are not going to invest. They are not going to invest unless we address the business side. Making it easier for small and Mediumsized Enterprises to take it vantage of looser Monetary Policy. Advantage of looser Monetary Policy. The euro as a scapegoat for the blunders of politicians. We talk about this uneven pace of growth. Do you get the sense from being in jackson hole that these are crosscurrents that may play a role in how the fed makes its next move . I think the fed will be playing paying close attention to the u. S. Labor market. The key issues have been working at cross purposes for the past few years. You have easing Monetary Policy and tight fiscal policy and the lack of structural reform. In the United States, we have gotten back on track. For a number of years, we had easing and sequestration. We had things working at cross or business. Cross purposes. There is no one thing to tell us which way things will go. I want to rip up the script. This goes to our news of this morning a burger king. Of burger king. There are no burger kings with insight of new York University. What do mba students eat at nyu . Food trucks. What is the trend in food trucks . Waffles, korean ribs. Abouthink this says a lot what burger king is doing. The elite are walking away. You mentioned the wall street journal this morning. Maybe it is not fixable. Burger king and mcdonalds are trying to pull on the same food lever as they always have been. The food trucks are a different thing. A great example of innovation. It is innovation, but do you think the Restaurant Business to nyu students sit in the food truck line . If you come down sometime, you will see everything from waffles. Is this surveillance breakfast innovation . Any Stern Business School students go on to open food trucks and do well . We have had food trucks. We have had at least one student in the last year. Twitter gets a lot of flack for not providing anything valuable to the economy, but it it isk but i think important to note that twitter allowed food trucks to be possible. Exactly. The role of innovation in the u. S. Economy in driving u. S. Workers. From newhenry with us York University stern school of business. We want to mention our twitter question of the day. What is an appropriate president ial vacation . Good morning, everyone. Bloomberg surveillance. The euro on the move. A much weaker euro. That is a wow statistic. Good morning, everyone. It is bloomberg surveillance. Brendan greeley and scarlet fu. We want to focus on ali baba. As it focuses on the final stages of its u. S. Ipo, we do our Due Diligence on one of the key figures behind one of the biggest u. S. Initial Public Offerings ever. He is not jack mas number two man when presented to investors. He is the one in charge of negotiating the acquisitions that the company has undergone. He set up there particularly unique legal structure which. Revents chinese who has created all of the legal and financial structures that investors want to learn more about during the roadshow. Im curious about the structure. How much control does the Chinese Government have over ali . Aba it is safe to say that the Chinese Government could shut it down . The u. S. Government did a the chineseled that government could shut it down if they wanted to. Alibaba is only tying certain assets to the vie structure. It is safe to make a guess that the Chinese Government is consciously choosing not to shut it down. Exactly. There is a lot that rides on this ipo. At the same time, the hong kong Stock Exchange declined to and u. S. Markets are rushing toward it with open arms. Exactly. That was mostly due to the partnership structure, the group of 27 individuals that has an ability to nominate a majority of the board. The Hong Kong Exchange sees that as multiple pockets of shares. Like not a dual structure we see with companies in the u. S. , but it was enough for the Hong Kong Exchange that they know that group of individuals has more power than the rest of shareholders. Thank you so much. She will be on the watch for the alibaba ipo. Coming up, tom keene fell hard for soccer during the world cup. Going tove affair continue into the fall . This is bloomberg surveillance. Good morning, everyone. Bloomberg surveillance. Im tom keene. Scarlet fu and Brendan Greeley in for adam johnson. Peter has just wandered back from jackson hole. Lets wander through some top headlines. Frances economy. The socialist government resigned. Islamic state militants in syria say they control a key military airbase. That means Government Forces have lost their last stronghold in the northeast. A Human Rights Group confirms the victory. The california quake yesterday could cost insurers 1 billion. It rocked the heart of the northern one country. The largest bay area earthquake since 1989. Those are the top headlines. Serious earthquake. The angels and as played last night. Insurers are not worried about the size of the quake, but the size of the insured value. That is a dense pocket of insured value. Sobering. Everyone is back to work in california. President obama is also back to work. He is returning from a twoweek vacation in Marthas Vineyard that drew serious eyer from both sides of the political ire from both sides of the political aisle. How will the president be remembered . Peter has worked closely with the president. You are on the 2008 transition team. How do you think obama will be remembered . Which is note key gotten a lot of recognition is pulling the u. S. Economy back from the brink. ,t is hard for people to say thank you, things could have been a lot worse. You rather be living in the United States or western europe . United states economy is growing and 2 per year. We are creating jobs. We are debating whether the fed should raise Interest Rates because there is not enough slack in the economy. Europe is in a different situation. It is hard for him to take a victory lap with so many people feeling as if the economy has not gotten better and wages not increasing. If we are talking about legacy, were talking about longterm. In the short run, there are still a lot of things. I agree. The fiscal deficit is so improved. On a relative basis, we have done so much better than a lot of people with comparisons to. Why is he struggling . Communication is a very difficult thing. It is difficult to get people to appreciate. We are Getting Better in relative terms. We are not doing very well in absolute terms. Is his white house to insular . It is always a challenge to communicate. You have somebody problems coming at you. I think president s are often best evaluated in the long run. Sothe short term, there are many issues coming out. It is hard to separate the news from the noise. The real contribution is going to be pulling the economy back from the brink and i think the future is going to show the janet yellen was an excellent share. I get worried when i hear president s talking about history will prove. That means it is not working in the present. I was wondering if i could get you to react to a quote from over the weekend. Cornell west and he is channeling the liberal id on this one. Bothted as if he was progressive and concerned about the issues of serious and justice and equality and it turned out he is just another rall liberal neolibe centrist with a smile. A veryessor west is bright man, but i would characterize things differently. Did you see how delicately he did that . No was his answer. [laughter] i have no idea what he said. He did say cornel west was bright. The United States is facing rising into many quality. That is the major issue that came out of jackson hole. One of the things that we need is a more targeted policy. How do we create more high skilled workers . That is the key to generating prosperity going forward. You can have a debate about redistribution. Seriousan have a conversation about upgrading the u. S. Workforce. With your wonderful success i economics and experience, think of the New York Times makingbout a migration the nation more democrat party. , do the redsident states become more purple . I think a part of what is happening is you see this migration and a sort of natural turning of the country that is correlated with that. I think the key issue for the Democratic Party is going to be, what is going to be their legacy on issues of inequality . Are they going to take a populist approach or are they going to push an agenda to recognize that the enormous wage if we see in the country, youre a high school graduate, you make roughly what a 60 of what a College Graduate makes. We have had a significant widening. With the answer being education. He is at nyu stern. We will discuss the value of an mba. Lots of question marks. We want to bring in our twitter question of the day. What is an appropriate president ial vacation . We guess tweet us. This is bloomberg surveillance. Im scarlet fu with tom keene and Brendan Greeley. Adam johnson is off for the week. Just last month, america was watching soccer. Records were broken. Will the appetite last . Will they tune in in the fall . We have one successful European Team that is putting that they will. Munich is like the new york yankees. Everyone hates them. That is exactly how it works. They always win. The timing of the world cup victory could not have been better. They have a plan in place to build the brand in america. Sure, germany won the world cup. With six players who all play for munich. The National Team is munich plus. Do you see an Immediate Impact in the people who won the world cup . Absolutely. Here in the u. S. . Yes. The club was already ready to do something. They opened the Business Office in new york this summer. It wants american fans and it wants american revenue. We have 60 Million People interested in soccer and 50 Million People interested in munich. That is a huge target. Id take somebody who is interested and turn him into a fan . We have launched a u. S. Website. We definitely want to get in touch with the fans. It ranks third in revenue and behind real madrid barcelona. Its three sponsors on a quarter of the franchise. The u. S. Push is in part the sponsor idea. Their team has a lot of exposure. They are going to come back to america more and more often. It is a really smart thing for us to be along for the ride for. Americans do not have to start watching the league for this to work. Munich is already a part of the champions league. They have to get to the ones who already love soccer. 1 of the total market. We are not looking for mass influence. We are looking for targeted, smart influence. We are looking for where it is popular. Seattle, portland. These are audi counts. They are chasing success. They said attendance records on a summer tour. The bavarians think there is a more target for more teams. The market is so big. Everybody could help the sport growing. Iswhat i took out of that that the demand is already there. We are not waiting for soccer to take off in america. Audi said that we think soccer towns are audi counts. Income and demographics and it already works. They dont have to wait for tom keene. My basic take is that americans will not watch minor league sports. They wont watch minor league soccer. These guys are not minor league. They were one of the best in the world. With nbc sports, with the Wonderful Premier League package, they just have to show us the best players. I saw this team play the other munich team 20 or 30 years ago. Thehe end of the game, match, sorry, everyone goes out and applauds the audience for coming to see them. I thought it was so great. Yeah, we do that on surveillance. [laughter] inyou never see that happen north america. The players cant wait to get off the field. The premier league is a great example of this already working. Did the world cup have a bounce . Did it have a genuine bounce . No, i dont think we are looking at that. I think we are missing the success that is already in the u. S. Of the premier league. It took off like a jet again in the fall. Ok. It already started. You can watch it this weekend. It is on all of nbcs properties. Problem. N lies the lets get your data check as we get ready for monday trading. We have data on the horizon. Sales, dallas fed manufacturing. Futures are up. This is bloomberg surveillance. Bloomberg television, Bloomberg Radio, streaming on your tablet, smartphone, bloomberg. Com. Im scarlet fu with tom keene and Brendan Greeley. Adam johnson is off this week. Our guest Justice Peter henry, the dean of the stern school of business at nyu. We have a senior hamas leader killed when an israeli missile hit his car. Benjamin netanyahu says there will be more attacks and warns gaza residents to stay away from hamas. A new Ebola Outbreak in africa. Congo officials report 13 deaths. The virus has killed more than 1300 people. Something that was real. That was sir richard admiral ttenborough. An oscar for directing gandhi. Those of the top headlines. This matters now to our guest host peter henry. He is the dean of the stern school of business at nyu. Is telling ernest mba candidates that they must deal with the ramifications of the federal reserve. The imf is reducing emerging market outlooks. It is a challenging economic environment. The key thing to remember is that emerging markets account for roughly half of global gdp and almost two thirds of global growth. What happens in emerging markets matters to what happens in the u. S. You look at brazil gdp. 4 or 5 . They are nowhere near that. Are they on the run . Are they on their own. . The primary focus of the u. S. Fed is going to be on the u. S. Labor market. Emerging markets there is one key thing there is a period of relative calm and in this period of time, we need to see countries do more of what mexico keyoing, pushing forward on Economic Reforms that will allow them to continue to grow. It is walking monday wonky monday right now. Which of the emergingmarket countries will when . Win . The smaller and entrepreneurial ones or the big four . It is not a matter of size, but which ones are most committed to policies. Mexico is coming out of the gate and showing themselves to be very serious. They have pushed through reforms in the past couple of years. When you are a small country, you are going to be largely exposed to factors you dont control, whether it is turmoil in the middle east or the ukraine. All you can control is whether you are putting in place a value. Place value. Taughtis globalization in 2014 . The key thing we have started to understand is that in the 1980s or early 1990s, there of mexico orfear emerging markets, generally. That is not the real way emerging markets reflect the u. S. Economy. The Unemployment Rate is about what it was 20 years ago. The key issue is the effect of the Global Supply chain. If you are a graduate of an mba program or an undergraduate open to you are employers around the world. Hat has pushed up the wages i think that was waged there he for mbas. s. Wage theory for mba thank you so much. As we get ready for the monday of trading, lets take a look at our data check. We have futures higher before new home sales coming out at 10 00 a. M. Dallas fed manufacturing coming out to 10 30. Coming up, is an mba degree worth the cost . We will discuss with peter henry. This is bloomberg surveillance. On television and radio. Good morning, everyone. Bloomberg surveillance. Coming up on bloomberg television, the chief executive officer and chairman in new york and they have a new superstar. Association. S the new tennis star is ok and it ada miss can eugenie bouchard. One of americas oldest burger chains is going north may be jumping ship for canada and its lower Corporate Tax rates. They are in talks to buy tim horton. We have to discuss oh canada. Tim horton was iconic. He played for the rangers and his number is retired. I remember seeing him playing. Remember seeing him play. You have that one on me. He cofounded a doughnut chain in 1964 that is now a canadian institution. To put this into perspective, what it would mean for canadians for burger king to buy tim hortons, there is one tim hortons for every 9721 canadians. Is one mcdonalds for every 22,000 americans. 15 of canadians 15 and over go to tim hortons at least once everyday. What is the difference between a cup of coffee at tim hortons and Dunkin Donuts . Canadian,opinion of a the tim hortons cup of coffee tastes better and so do the doughnuts for that matter. Last i went to the Dunkin Donuts, everything tasted like cake. Canadians are very snobby about their doughnuts. But this is all about taxes at the end of the day. The bunnies want you to believe there is a strategic rationale for the deal, but tim hortons has struggled in america. Hasican operating income accounted for less than 5 of the total operating income. They have a few in the middle east. They have 850 locations in america. 3500 in canada. This is the remarkable thing. Can help them expand and become more profitable in america, but they envision adding 4100 more locations in canada. Can you believe that . No i cant. Northwestern ontario. Will they go to tim hortons of burger king buys them . That is a good question. Will they screw up a good thing . It is an outrage. Erik schatzker is on the tim hortons beat for us. We will be right back with more on bloomberg surveillance. Good morning, everyone. Bloomberg surveillance. Bnp paribas on fixed income tomorrow. Berger. S negative yields in germany and the financial repression. It is perfect timing. This is bloomberg surveillance. Keenearlet fu with tom and Brendan Greeley. Adam johnson is off this week. Our guest host is peter henry from the nyu business school. A scare in the air for the president of the entertainment unit of sony. This flight was diverted to phoenix because of the threat of explosive material on board. Knocked the Playstation Network offline. Uber hits the road in israel. Regulations will not be the biggest challenge. Is a ubiquitous taxi hailing app in israel. That will be the biggest challenge. Googles card does not have a steering wheel. They say they will change the design. I was just thinking, what if is like groupon . It is an idea that is infinitely replicable. I do use it. It occurred to me the groupon was this amazing overvalued company because they had this amazing idea, but anybody else can replicate it overnight game changer. Four cabs rides and seven ubers over the weekend. What reid doing . What were you doing . American universities are mbas. Ring 70 more peter henry must stay out front. The dean at nyu stern. He must you with students and faculty demanding rigor. What is new this season as you try to get tougher and smarter in the land of the mba . Problemsolving. You cannot be somebody who has talented one particular area. You need to know cross disciplines. Is problemsolving an extension of management and leadership or is it figuring out theory and statistics . I think you need both. We were talking about the difference between puzzles and mysteries. We are moving into a world in which students will be confronted with mysteries. Mysteries mean you need to be able to take a wide range of information and figure out how to add value. That is where leadership comes in. Full disclosure, nyu stern was my first sponsor of bloomberg on the economy an eon ago. What is a distinction between a topflight mba program and the alsorans . Faculty and students. You have to have the best faculty and the best students. If students are not part of the conversation about where the world is going, they are not going to be able to deliver value. Let me give you an example. What is it about emerging markets that is going to drive growth . Urbanization is the story. Paul romer did pretty well on the west coast. That is what it is about. Take a look at the west coast. There was an article about students at dartmouth who were heading up to San Francisco to get to know people as they started their mbas. Offeroes an mba have to that economy which already seems to have what it needs . Good question. What we have to get our students to understand is that traditional tools like finance and new areas like urbanization and thinking about the big trends that are driving the world, that is where you can make value. Areas and doing the equivalent for the world of infrastructure to bring a food truck into lower manhattan. I want to hear from you on the divide between soft fields and hard fields. Tom talks about rigor. If it is rigor that people want, wouldnt the cfa be a better bet . It is a better return. Think about puzzles and mysteries. If you get a specialized degree, you can apply the tool in one area. If you understand data science and you are also a leader and you see a range of problems that need solutions, then you are in actually be an organization to lead change. Dean after dean after dean, the biggest headache for students after five years, the get their mba, their first job, and then what do you say to somebody who has been out 5, 6, 7 years and are miserable because the payoff was not there . Reevaluate whether you are actually working at something that is your passion. The data show that students who graduate with an mba from a socalled top program, the returns are very good. An mbal compensation for at this point is 168,000. You are talking about life satisfaction. You are going to make money if you do what you are passionate about and you are also going to create the most value for yourself and your business. What are students demanding more of . What does this years class one more of that they did not want five years ago . We are seeing a much bigger interest in relationship. That is a healthy sign. Where are students going to start businesses . Analyticsis on data has given students new ways to maneuver windows into areas where they can actually create value. To your point, in order to do that, you need to have the analytics. And the chops. Peter henry, thank you so much. Dean of the Nyu Stern School of business. Stay with us as we get to our agenda. My agenda is what is happening on the markets. This is a monday morning surprise. Pay attention to this on Bloomberg Radio and television through the morning. Negative yield strive lower in germany. There is the german 10 year. These are little incremental moves. They are huge deals to the economy. Tom, you have to head to the radio studio. Brendan, what are you watching . , a13 cases of ebola reported brandnew strain, in the democratic republic of congo. Very worrying. As a problemt it of public health, there is a country that is a country where they have little or no infrastructure for public health. Hat is troubling that is the nicest way to put it. Im going to switch gears and go to something lighter. The emmys are on my agenda. Seth meyers is hosting at 8 00 p. M. In lastf cards won years emmys. Netflix is back with house of cards and orange is the new black. This is the golden age of television, after all. Lets get to our twitter question of the day. What is an appropriate president ial vacation . President obama is back from Marthas Vineyard. Kitchenaying in a soup feeding the homeless and needy. [laughter] two weeks of that . Im tired of writing this story every four years. We have to again visit the question of whether the president of the United States deserves a vacation. We all make clear it was a working vacation. Are there president ial vacations . Windsurfing was not seen as president ial. President s are never really on vacation. President obama made that clear. He came back to washington a couple of times. John kerry may should not have gone windsurfing. Is it not president ial . You are not running for president. Lets get to the other answers. , the future vision of america. That is one way of looking at it. How about this . The shortest number of vacation days, jimmy carter. Peter henry, thank you so much. Thank you. Youre welcome. Peter is the dean of the Nyu Stern School of business. In the loop is up next. Have a great rest of your morning. Good monday morning. We are alive. You are in the loop. I am matt miller in for betty liu. Reverting is becoming the latest Company Looking to shift its headquarters overseas for a lower tax deal. The u. S. Open kicks off today. U. S. Fansers can rally around . The ceo of Womens Tennis Association is joining me straight ahead. Do not miss that. Here is a look at our top headlines this morning. A job maker is doing its biggest deal in five years. It is paying more than 8 billion for a treatment for a lung disease that is waiting approval. And, cleaning up after the strongest earthquake in 25 years. It damaged buildings. Of people were injured, thousands of bottles of wine were broken. Insurers aill cost