Barnes & Noble On The Brink: Surveillance (07/09)

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July 09 (Bloomberg) -- On today's "Bloomberg Surveillance," Tom Keene, Sara Eisen and Scarlet Fu bring insight on the state of the market getting you ready for the day ahead. (Source: Bloomberg)

You can't beat amazon, the nook fails and the c.e.o. is out at barns and nobals.

30,000 jobs are in jeopardy.

Going back to the future in search of emerging market car sales.

Would you drive a dodson again?

How about a 240 z? i'd go for that.

And new technologies and materials save lives, while executives consider legal options to help the korean airliner survive lawsuits.

Good morning everyone, this is bloomberg sauer villyens, i'm tom king live from world headquarters.

Our guest, steven king, no not the mystery novelist.

Also a member of the shadow council on economic.

Good morning.

Good morning.

Good to see you, tom.

We also have the director at the national security council.

A lot to talk about.

U.s., china certainly in focus today and this week's diplomatic conversations talk about.

And of course the latest on the plane crash.

Before we depth to all that, let's depth you caught up on the morning briefing.

Dating out of china, showing inflation stayed relatively low in june.

Also european finance ministers are meeting for a second day after agreeing to release three billion euros of aid for greece and the international monetary fund updates its world economic outlook this morning.

That's coming up.

In terms of u.s. economic data on the dockett, we get the small business optimism and then after the market's open, the job openings, the jolts, comes out.

And on the company news front, it was a surprise appointment.

Yeah, absolutely.

Data check.

We look at equities, bonds, currencies, commodities.

What a shock, we're up again.

Can we go down like one day in july?

Up seven right now in s&p futures, down 10-year-old, euro dollar, 128.70. but we get down to 102.96. the vix is what i'm really following, still under 15, i think that's a big deal.

Maybe we can migrate back to 13 or 12. the steepest of the yield curve is a big picture for all of the u.s. banks as we enter earnings season, 229 basis points with gold.

Today we happen to go up, 12.48. copper was steven king's focus on china.

Copper flat on its back as it has been for a year.

A lot of questions about china now.

Let's get to our guest host.

You're not the novelist who writes about mystery and horror, but i like how wall street deemed your new book pretty scary stuff.

Yes, that's right.

What's your message?

From the book, we've run out of the kind of growth we used to have through the 50's and the end of the 20th century.

We made promises to ourselves which have seen much faster growth rates.

I think if your bank had the little train that goes by in hong kong and your foundation of the hong kong and shanghai bank, if china's 7% g.d.p. and it used to be 9%, that's a 22% markdown.

Is that math too simple?

Absolutely right.

China has slowed down quite considerably.

But it is much bigger than it used to be.

Still a big absolute number because of course it's bigger than the case.

We have a lot to talk to you, particularly stephen, with the meetings going on in washington.

We need to meet to greet on the front page today, scarlet gets us started.

Some company news.

The c.e.o. of barnes and noble re-signing on monday.

He was the man brought in to build the nook.

He was the c.e.o. for the last three years.

Now we know of course that the chairman of barnes and noble is trying to review the company's business plan.

He wants to take the retail side private.

Either way, the business overall is suffering.

There's a plunging sale and this is they lose share to the likes of amazon.

We've heard they've been changing up their merchandising mix a little bit.

As you know right by our world headquarters you walk by an abandoned borders which i think have been abandoned for two years.

Securities puts a value of two times on this dinosaur.

When do they get put out of their misery?

They're the only player left, the big box book seller left and they're losing market share not just to amazon, but costco and wal-marts of the world.

There's the retail book shops and the nooks.

That was actually a bright spot a while ago.

They were doing well.

Everybody's getting out of it.

Is there any other tablet that's successful besides the kindle?

Well, there's amazon kindle and the apple ipad.

And those are dominating.

That's part of the problem.

That leads us to our twitter question of the day, what exactly should barns and noble do?

Tweet us, we want to hear.

Good question.

Certainly hands full trying to figure that one out.

The other front page story, the fall out continues for asiana's airlines, south korea's biggest airline.

Already people are looking at what the damage could be done.

Asiana could deploy a tactic under international law that would bar passengers from suing.

This is a victim friendly sort of issue, and just trying to figure out, litigators are trying to figure out the damage to this airline.

Meanwhile i've been checking out the stock, today it rebounded a bit after a sharp slide yesterday, down 6%. the c.e.o. continues to be open and continues to come out and be communicating, they've already apologized of course.

And they're investigating the pilots, the c.e.o. did come out and defend the pilots that work for the airlines.

The only thing you can do at this point.

Stephen king, he lives on air planes, flies across the pacific 42 times a year.

Let me cut to the chase.

Would you fly on asiana airlines?

A lot less easy than what the case was a few days back.

The reality is that i don't think passengers think too much about the dangers of air crashes.

I mean, the reality is we have to fly around the world constantly all the time.

It may have an impact on the margin but i think most of the time we're constantly sort of having to be in the air whether we like it or not.

Flying is very safe as we were showing everyone yesterday.

Big crashes every once in a while to remind everyone how dangerous it could be potentially, but overall the rate of accident is low.

Do i understand the koreans and the united states will inter view the pilots together or is it separately?

Anybody know the answer to that?

In fact they waited to bring the south korea investigators over to do it to together.

Interesting, interesting.

Well, the story unfolds and we move from the drama and the tragedy of the crash to ok, what are we going to do about it?

Because it's still pretty horrific.

Corey johnson, if you see it, his package yesterday on the crash.

While we continue to wait for more details out of that, let's talk about something everyone in the market has been fixated with.

That's earnings.

After yesterday, ticking off the earning season with a one penny beat in profit.

Overall earnings to increase only 1.8% in the second quarter.

That is down dramatically from the earlier.

I didn't know, that interesting.

That's all the blended stocks together.

That's right.

Earning season begins at a crucial time for the stock market too because the indexes have been on this powerful recovery and we're still within striking distance of those record highs.

The ideas of earnings coming back, got to go to the top line, stephen king with us, they come out with a relook at global g.d.p. revenues are tied to g.d.p. is it a -- they're not going very quickly globally.

Obviously the u.s. has recovered a little bit.

If you look at the countries in the emerging world like china, brazil, they're all slowing down.

The reality, the last few years, the reason why earnings have done well is profit share.

It's hard to keep it rising year by year unless they pick up strongly, difficult to see how earnings could be as impressive as they have been over the past few years.

What would you think to see from the i.m.f. today?

I think it's difficult to say at this stage.

But the main biggest story is the fact that the emerging world is slowing down.

So what was a big kicker is beginning to go into reverse.

We've got earnings, sara, friday we've got the banks.

Jpmorgan and wells fargo.

Let's get to some company news.

Shell picking out its c.e.o. and it is a surprise, the oil company naming -- he was not considered to be a candidate for the top job.

He will take over on january 1, next year.

The battle for hulu heating up.

The online video service received two proposals by a deadline for bids last week.

Directv is offering to buy hulu while time warner cable is bidding for a stake in company.

No financial terms for either company was available.

And tesla motors onto the nasdaq a 100. that's right, the electric car maker will replace oracle before the start of trading next monday.

Shares of tesla have more than tripled this year as they turned a profit for the first time.

That is today's company news.

Coming up, tom, remember the b 210? yes.

You do?

Yes.

We haven't seen it in a while.

The 240 z -- the coolest car, what the rich kids have.

I didn't have.

Nissan has not made this car in a long time, pulling the plug on the brand way back in 1981. now the c.e.o. is bringing it back at a special price.

We'll talk about the strategy.

On bloomberg surveillance, streaming on your tablet, your phone and on bloomberg.com.

Good morning everyone, this will be most interesting, former general of the united states army stanley mccrystal in the loop with betty liu this morning.

This is bloomberg surveillance, i'm tom keen, as always joined by sara icen and scarlet fu.

Cars!

Nissan has a new strategy, heading back to the future you might say, not reinventing, it is delivering the datsun.

How many years has it been since we've seen a datsun on the road?

Try the early 80's. nissan killed off the brand back then and is now reviving it to get into the emerging markets, notably india, indonesia, russia and south africa.

For india in particular, nissan has a 1.3% market share after three years, wants to get to 10% by 201. it's doing that through cheaper cars like the datsun.

A hatch back with five doors, and priced at around $6,000. some of them are even lower.

And there's a lot of competition for this space because india is filled with compacts and mini cars, toyota, ford, volkswagon, not to mention other european car makers.

So what's the difference with a datsun at $6,000? wants to make it cheap.

It's easier to revive a brand than to build something new.

So it doesn't have to invest that much money into it.

Can use an older vehicle platform for the datsun.

I know that datsun back in the 30's -- after the war, because the name nissan didn't work after world war ii.

They had to come up with another name to rebuild the brand and boy did they hit a load stone with the 240 z. this also may have to do with carlos because he's had a stint with electric cars.

He put a lot of money, five ball dollars, kind of missed targets, been kind of ho hum.

Nissan depends more on the chinese markets than its rivals toyota and honda.

We know what's been brands.

You can say nissan has done pretty well with u.s. sales.

Stephen king with us today, and it really speaks to this animal spirit of overcapacity.

Segments of the economy where there's too much stuff, like too many cheap cars?

Interesting about the story with datsun in the emerging world, you see them buying cars for the first time.

Really important change, and actually creates new growth opportunities around the world.

The kind of typical car you find in the west is something which is crammed full of lots and lots of fairly expensive safety features.

And fairly big because the reality is the typical western consumer is fairly big.

Are you looking at me?

No, not at all.

Looking at myself in the mirror.

The point is, the emerging world, the average consumer is a lot smaller, lot lighter and can make much smaller cars.

Nissan is not the only one doing it.

They're building these low cost vehicles.

Who are some of the biggest competition.

Absolutely.

You're names companies like ford, hyundai of korea, not just a rival, but g.m., and the thing is they're all targeting these first time buyers.

And want to make sheer first new car purchase.

Well stephen, i wonder how much brand recognition is important in this strategy to tap into the emerging market consumer.

It's interesting that there's a tiny little car where the exeels are about as thick as you get on the shopping trolllies, didn't have quite the right image.

The image is still very important for cars.

Even if you have a consumer buying a car for the first time, still something that will be important, the brand makes the person feel about buying that particular car.

Not so daft to come up with, a datsun strategy.

And it is a name that people recognize.

Stephen king joining us in new york this morning.

One thing that stood up after the san francisco crash, high tech materials, making aircraft chris boshes a lot more surviveable today.

Legal strategies helping victims survive lawsuits.

We'll take you inside the new science and strategy coming up on bloomberg surveillance.

In top headlines this morning, egypt's interim leader sets a time table for new elections but the country's main group has rejected it.

The call for elections came just hours after more than 50 people were killed in clashes between the military and supporters of former president mouhammad morsi.

European government agreeing to release money to the country to prevent another debt crisis showdown.

Greece will receive the aid as long as it delivers on economic reforms and of course on the spending cuts.

And pollution is cutting five years off the life expectancy in northern china.

No joke.

The toxics air has led to stroke, cancer.

The pollution tied to china's policy of providing free coal in the heat for region.

Hard to believe five years.

Yeah, it gets worse.

Hard for a lot of companies who track in china because they don't want to necessarily move there.

Singapore has its own issues.

Morning must read.

Very interesting today.

My morning must read slams all the rich high school and college students who are volunteering this summer.

Andy kessler, he's a former hedge fund manager calls them generation guilty because they have everything and are compeled to serve or give out of guilt.

He writes -- in other words, go and get a paying job.

He says money that funds all the volunteering and charitable giving comes from someone making productive money, working productively, creating wealth and giving away usually by way of tax reduction.

You're betting off looking for a job.

That brings to question what kind of jobs -- you got to go out and get a job which is my basic take is challenging this summer as well.

Challenging as well is chicago.

This is a difficult story, scarlet and i visited two weeks ago.

We had a fabulous time in the chicago.

This is not funny, -- richard falcon is with us he's been fighting for the police forces.

This is stunning is what we've seen in chicago.

Horrible weekend.

But this has been a problem in chicago for very long time.

Their murder rate is between three and four per times what it is here in new york city.

And there's one big difference between our police forces and it has to do with a tactic called stop and frisk.

Something which is done in new york city, it's controversial, but it has clearly driven down the rate of gun violence.

In chicago, there is no stop and frisk.

So, the officers are not allowed to approach someone who fits a suspicious cross pattern and inspect them.

Are these gangs?

No they ruven a gangs, but not just gangs.

Not just gangs.

Most violence, gun violence occurs between people who know one another.

The gang related violence is easy to identify because they self declare as gang members.

But i don't think it's predominantly.

We had the newtown massacre and i saw the kids at one of the new york baseball games, 20 some people killed there, it was horrific.

We have 11 over this long weekend, roughly?

Fatally killed.

We only need three weekends to have a newtown in chicago.

That's right.

Newtown is happening every month or less.

They're losing about a person a day, roughly in chicago.

The current mayor and his police commissioner, former nypd have driven the homicide rate down from about 500 a year to 400 a year.

But still way too high.

What's your prescription?

What would rudy giuliani?

It would stop, frisk in the community where the gun violence occurs.

And coming up, we're going to look at how technology saved lives in the plane crash in san francisco.

? tom, i think we neet a data check, building on those gains.

They do, the exact way to put it, when you see the 14.78 closing on equities bonds, currencies, commodities, we continue to advance up six, 10-year yield a long way from that 240, 2.66, nicely under, 1.263. crude 103.03. they are elevated . let's take a look at commodity stocks which are big gainers yesterday.

Energy, energy, climbing more than 4%, a unit of the company plans to raise up to $411 million in an i.p.o. and price line, tom and sara, riding a nine-day winning streak.

Morgan stanley sees it gaining global market share as the economy improves and more bookings move online.

They see the stock heading to $1,000 and higher.

Intel was a big loser off by 3.6%. couple of bearish analyst notes.

Citigroups citing the poor p.c. environment and others talking about reductions over at intel.

Well, no matter how you look at this week, no question, technology has made plane crashes more surviveable over the years.

The airlines are very serious about safety from the cockpit to the seat cushions.

Planes are much safer and really even half a deck aid ago.

They really are, george ferguson with us today on the airport watch for bloomberg industry, they provide global research for bloomberg industries.

George, i had a layover one in san francisco and there's a quiet al cove where they have a museum of the seats going back to the 1920's, which are hilarious.

They're like wicker, completely fragile, totally opposite.

Totally unrecognizable.

But to me the message here with this tragedy is these planes are different than they were five, or even 10 years ago.

They definitely are.

The funny thing is a lot of flame retardent products making, but those seats are getting smaller and smaller too as you notice as the witted of those seats they keep crunching them down so they can make even more money, so the great thing is they're making it more safe, and of course trying to prove the economics of the air lean.

The cockpit, i think it's four pilots interviewed today by the koreans, by the americans.

If you were in that room, what would you ask them about the technology in the cockpit?

We're wondering that maybe there's too much technology in the cockpit.

Maybe too much of a reliance on technology.

When we look at the asiana crash, what we see is the failure of the glide scope, and the pilot should have been doing a visual glide approach.

And it seems like somebody who wasn't picking up the cues as they were on the wrong glide slope, and potentially going to and ultimately did hit the ground before the runway.

We see parallels to the air france 447 flight where -- out of brazil.

Yes, the brazil to paris flight, where we lost a tube in the flight, where it gives you ram air pressure.

The airplane's computer doesn't know how fast the airplane is moving through the air, and so the pilots were counter reacting the air, and the airplane was in a stall, they should have pushed the nose over and gained speed to pull that out of that problem.

And the pilots couldn't see what was going on.

In response to the crash is it then to load up the cockpit with more bells and whistles?

I don't think so, i think that's the wrong answer.

What i think we need to do is get the basic airmanship skills in the crew so they know how to fly air planes well and they don't get stuck looking at computers all the time and not focusing on how the airplane is beheying.

I want to share with you a first hand account of what they're talking about.

Had a chance yesterday afternoon to talk to ben levy who was on the flight, he joined us from san francisco.

Here's what he told me about some of the trauma on board flight 214. have a listen.

Of course, yes, a lot of people injured.

Standing next to a person next to me who had a pretty big cut next to his face and breathing pretty heavily.

Lot of people with nose bleeds.

I didn't see any open fracture per say, but broken legs, broken ribs and head trauma was the majority of the injuries you'll see, or even neck, spine injuries.

But as far as seeing people hurt, saw a lot of people hurt, but somehow pretty much everybody in the back of the plane was able to get out fairly quickly.

He had taken it a number of times, and george what stands out to me is the upshot here is he said so many people were able to get out, they were able to escape.

He even said he would fly it again and yes, tom, send his children on the flight again because he realizes that airline travel is much safer.

Yeah, i think it was very impressive it stayed mostly intact.

Probably hit the runway at 100 miles, stayed intact and preserved a lot of lives.

There's a new rule where they have to evacuate in 90 seconds, and this was put to the test.

Yes, yes, tell us about this.

They put it to the test, not in this hark as an environment, but they need to be able to -- they get a special challenge, up to 800 some people in that airplane.

This one only had 300, but yeah people are very motivated.

That's also a testament to crew training.

Captain sully, the pilot of the u.s. airways flight that he landed safely, he talked about cockpit technology.

Visual flight rules means you have good enough visibility and cloud height, that you can fly the airplane without reference to instruments to the runway.

Of course, especially as a pilot who might not have had as much particular experience in this particular type of airplane having an electronic glide scope would have been an additional aid.

So we don't know how important it is but that's just one more bit of information that we know that they didn't have available to them.

George, there's some chatter that asian pilots are more reluctant to hand fly air planes than american pilots.

Is that a fair assessment?

Honestly i can't say that.

What i can tell you is when we look at the industry, we see europe and the u.s. having very strong aviation cultures, back from world war ii.

Put a lot of men in air lanes.

Took them out of fighter jets, bombers, put them in civilian air fleet.

Got a lot of the seat of their pants flying skills.

Our pilots come up through general aviation, which is quite robust.

They don't have those big general aviation -- i'm going to cut right to the chase.

Would you have one of your kids fly on an international airplane?

You want them to fly with somebody, male or female, who's landed on an aircraft carer don't you?

I think so.

Do you want to jump in, richard is with us.

My basic take is ntsb is like the agency everybody else in government ought to behave like.

They do a good job, as does the f.a.a. air travel has gotten much safer over the last 20 years.

But the safety factor can never be reduced to zero.

This reminds me of a great 1980 book called "normal accidents" it is impossible with a technically complex system to drive the air rate to zero.

The thing i would worry about is general aviation.

Over 90% of the fatalities that occur from air travel in the united states come from private planes flown by amateurs.

The ones flown by professionals are by far the safest and then commercial aviation the safest of the subset.

Is there a single group or single crash or single fire that changed safety in this country for airlines and the way we fly?

There was this period from 1994 to 1997 when we had one crash every three months.

And people said enough.

I mean, that was when the f.a.a. really began cracking down.

On a series of different things.

A systems approach, not a single, no single feature you can point to.

I don't mean to cut you off, please continue.

Single feature that makes the whole system safer but they've done it in cooperation with.

Have to get you back, george ferguson with bloomberg industries.

Coming up, edward snowden complicates the top level u.s./china meeting beginning this week.

We'll tell you how.

? good morning everyone.

Carol masser inviting in a mrg ratea inside our wonderful series on how these businesses run.

I walked by one this weekend, it was jammed.

That's tonight.

This is really, really interesting.

What a success story.

I love them.

It is huge.

In new york city, just below central park south, it is jammed 24 hours a day.

Yeah, they're all over the country.

Carol masser tonight.

Have you ever had one?

Why are you looking at me like that, of course i had.

I had three burrito, yes.

I've got some top headlines for you this morning, starting with president obama who is considering speeding up the time table for with drawing troops in afghanistan.

This according to media reports.

The president is also weighing an option that would leave no american troops in the country after next year.

Inflation in china remains subdued last month.

The consumer price index rising 2.7% from a year earlier, that was slightly higher than what was forecast.

Overall china recorded its first half inflation since the financial crisis back in 2009. and after three years of decline, u.s. apartment vacancies were unchanged in the second quarter.

Vacancy rates held steady as a wave of newly built units reached the market.

This according to real estate research firms, and those are your top headlines, another sign that things are better in the housing market.

Stephen king with us of hsbc, their chief global economist.

In england, the economists love this to death.

"when the money runs out." my chart is on the slowing manufacturing taking place in china.

From gary shillings late e monthly note.

What we have here is u.s. manufacturing, the yellow line making a strong v-shaped recovery after the crisis.

Chinese manufacturing is the white line, it's kind of incomplete there.

It stumbled even more though falling at an increasing speed, below 50, the level that is china is rapidly losing because of rising wages and the tipping point is coming up, 2015, that's when the u.s. becomes more competitive because the sayings game by outsourcing to china is only in the single digits.

Is it really happening, a labor average trauge?

If you look at the capita income, about $7,000 per year in china, about $40,000 per year in the u.s. labor costs are really quite high but how to get workers in the western inland provinces into the kind of international market.

But doesn't that increase the cost of transport and moving it out?

You can try to invest in ininfrastructure to link the western parts to the eastern parts, a bit like the way the u.s. went east to west during the 19th century, the same kind of story.

It is costly but there are adjustments relatively slow.

On that basis you end up with a period of relatively weak chinese growth.

In the transition period.

Absolutely, yes.

What do we most get wrong in our analysis of china?

What drives you nuts in london and in new york about how we look at china?

I think part of the problem is that the data is not necessarily 100% reliable, it's quite murky to analyze what's going on in china.

We look at china too much from a sickly cal point of view.

We've never seen anything like this over the past few hundred of years.

Every 10 years, achieving what the u.s. took 50 years to achieve is a phenomenal story.

How fast, or slow, is china really growing right now?

I think about 7, 7.5%, which is very impressive by other countries standards but can it keep it stable?

The promise to all the rural poor people that they will indeed escape from poverty in the years ahead.

All right, stephen king, also richard falconwrath with us.

And coming up, we'll talk about barnes and noble facing an uncertain future.

All sorts of questions about whether they should break up after the c.e.o. quits.

This is big news.

Also our twitter question of the day, what should barnes and noble do?

Tweet us, have you got a turnaround plan?

Should it break up or spin off some of its units or get a new c.e.o.? ? good tuesday morning.

Let's get you covered on today's company news, it looks like a legal set back, the firm's effort to have the justice department's $5 billion lawsuit thrown out was tentatively rejected.

A federal judge said he will issue a final ruling early next week.

The u.s. is suing s&p for freud related to ratings on mortgage securities tied to the financial crisis.

The c.e.o. of barnes & noble is out.

He resigned after three years in the top spot.

Barnes and noble is considering splitting the book store business from video divisional media.

And ford f 250 pickup truck has become the most stolen vehicle.

It bumped the escalade from the top spot for the first time since 2003. this is according to the insurance institute for highway safety.

They have beefed up security to deter thieves.

Sara, i know you've got some headlines.

According to person familiar, new york stock exchange will take over administering the scandal plagued london bank, the global bench mark rate, this according to a person familiar set to be announced by the u.k. treasury today.

So perhaps givening off that responsibility.

This is a huge deal.

This goes from the british bankers association, they've been doing this for years.

I think of the movie "mary poppins." there's a scene where the british bankers and dick van dyke in the tuxes, and the perception has been that stephen king gets dressed up and then we figure out the base rate that everything's based on.

Of course it has nothing to do with that stereotype does it?

Nothing at all.

Obviously the issue is that this is the rate at which banks blend to each other, the scandal will last a few years.

A growing lack of trust.

Is this a defeat for mansion and house and the british?

A defeat for the city?

British are quite used to defeats from time to time, afart from wimbledon.

Oh, very good.

He was from scotland right?

It still counts, tom.

It absolutely counts.

But britain's been very, very welcome to the idea of international influence on all sorts of things.

Flying in young carney from canada.

Exactly.

So it's ok if it's handled by the new york stock exchange?

I don't know the story in detail, but to say if you've got a good regulator coming in to run it, then that's absolutely fine.

An important rate.

Really, really important rate.

And that announcement to be coming out later on today.

Yes, earlier having andy murray taking a beverage with prime minister cameron.

10 downing street.

Yes, he's on all the covers of the newspapers, he's a hero.

We're going to turn to china now because kicking off the latest installment of the strategic dialogue with their counterparts.

It's often a snooze fest but this year it takes place against the back drop of spy versus spy.

Edward snowden has revealed a massive u.s. intelligence operation.

The u.s. has been calling out chinese cyberespionage for months.

Richard, are we hypocrites?

Can the united states still go after china for sibe espionage?

Yes, and yes.

Of course we do it and we try to get people to stop it.

A little bit of progress was made when the two presidents met last april and they decided finally to actually start talking about cybersecurity, until then they had not done so at all.

And for the private sectors, this really matters.

The two governments are not going to stop spying on one another.

It may be possible to reach some basic rules of the road about the extent to which they permit their surrogates to spy on private global companies.

I'm glad you mentioned the private sector and companies because we should draw a distinction between spying between selectal property, theft from u.s. companies and what the n.s.a. is doing, and certainly government officials should be able to do that.

No question, when the official spying, that's going to continue and they're not going to talk about that, except to score some rhetorical points.

As i said, it has gotten a little bit out of control with syndicates out of china spying on global companies, including, especially the financial industry here in new york.

And to the point where the obama administration raising this to the high level.

And the chinese ok, at least talk about it.

I can guarantee you these are not be particularly frank, candid talks.

They're very stilted and carefully scripted.

I'll say.

Well edward snowden certainly factors in one way or another.

While he remains hunkered down in the moscow airport, the guardian newspaper released a new excerpt with its interview.

The n.s.a. doesn't limit itself to foreign intelligence.

It collects all information.

There are literally no ingress or egress points anywhere in the united states where communication can enter or exit without being monitored, collected and analyzed.

Edward snowden speaking to the guardian, he's not going away.

Can i ask a dumb question?

Why are we wasting time on this guy?

When does something happen?

When can this story go away?

Yeah, it's sticking around.

The next big move will be if he manages to get out of the airport in russia to some other place.

The two other places -- well, putin can use his american express card and get him a one way ticket.

He may do that.

We may also find a way to divert that flight while it's overflying friendly air space and arrest him there.

So that's the next move.

We're not going to give up trying to get our hands on him, the u.s. government.

He's got to get out of there at some point.

Another dumb question, how do you defer a flight?

What do you do?

Well, you have to go to the national government that controls the air space and that air space has to instruct the plane to land.

And under the international rules of aviation they have to do it, otherwise a violation.

So, you've got to figure out the flight plan, figure out whose air space it's going through and ask them to do it.

They just did it with the president of bolivia.

They don't send jets up to fly next to it and all that?

We could, the united states could.

Next time i guy away you're going to divert my plane.

But no question this complicates an already complicated relationship between the united states and china.

Not to mention the fact that hong kong let them leave.

But boy are the chinese glad he's out of there and not their problem anymore.

Very difficult for the united states now to look across the table and be tough on cybersecurity when all this stuff is out for everyone to read right now.

Richard, thank you so much.

Fantastic.

And stephen king, thank you again, his book is "when the money runs out." a little scary, like a horror book, like the other stephen king.

Yes, rave reviews.

Coming up, barnings & noble is in need of a new nook as the e reeders fails and c.e.o. quits.

It is our twitter question of the day, what should barnes & noble do?

Tweet us.

We are going to discuss with someone who has covered a lot of corporate issues, and corporate challenges in the past.

What should barnes & noble do coming up.

? . ? you cannot beat amazon.

The sales, the ceo is out at barnes and the nobles.

30,000 jobs in jeopardy.

Suddenly?

Retail real-estate catches the bid.

You can make money on the big boxes and the small ones, too.

Where should you put the next j. crew store?

The beaches, the mansions, the parties that sarah and scarlett go to, the double rating from moody's. you should take advantage of bonds.

Muni is having a golden summer in the hamptons.

Good morning, everyone.

This is "bloomberg surveillance ." it is tuesday, july 9. and joining me all it -- as always, back from the hamptons, sara eisen and scarlet fu.

Our guest host this hour, richard cleared up -- richard clary the -- clarida.

We will have to go out to the east hampton's. investigate -- we will have to go out to the east hampton's to investigate that bond sale.

I think you are right.

[laughter] producer prices at the wholesale level for business are falling in china.

European finance ministers agreed to release 3 billion euros of extra help for greece.

We ourselves -- we are also paying attention to the imf fund.

Global nuance is a big deal.

We are the only people in the world that actually look at this.

That would be true.

Also, economic data, keep an eye out at 7:30 a.m., the small business report from the national federation of independent business, and at 10:00 a.m. we get a job openings, a closely watched indicator of the labor market.

More than that friday report in italy.

This is the report of the job leavers moving and confidence coming back.

I was talking to central bankers about the strength of their economy.

They appointed van van burden, but scarlet fu has more company headlines.

Shell is taking its next ceo.

It is a surprise.

Beurden was the head of the refining unit, but he will take over on january 1 of next year.

The battle for hulu heats up.

Online video service received two proposals for bid last week.

Directv is offering to purchase hulu, of time warner cable also is looking to put a stake in the company.

The ceo of barnes and noble is out, resigning after three years in the top spot, which could accelerate a breakup of the country -- company.

That is today's company news.

Sarah?

Barnes and noble is a big story.

The question here is the nook.

, which everyone thought would be the savior of this company, and initially did well, could not compete with barnes -- with other e-readers.

Have you ever seen anyone on the street with one?

I have.

I knew you were going to ask that.

Shockingly.

Ok, the idea is this.

The nook went down in flames.

Was evident to me from day one that the chief executive officer was gone, gone, gone.

The former cmo of eastman kodak.

One day the game in film ran out.

He has seen this before.

Jeff, good morning.

I am more worried right now about my ford f 150. here in south dakota, we might go get it.

The 250 being the most successful car in america this morning.

Jeff, what do you do with a company that is done?

How do you put these companies out of their misery?

We are seeing a real theme going on here.

The boys are back.

All of these former ceos and founders coming back to run these companies.

I think that this is a move with the guy did not resign, he was asked to leave, it is clear to me that is what is going on behind the scenes.

They are putting in their players, the various pieces, as they announced back in february, taking the retail stores -- that is all he wants, not the electronic business.

I think that they will form a partnership with microsoft.

Is that going to happen?

Let me get to that headline right now.

They have already invested.

I think the deal was already there to get them into the book business.

That is what they're trying to do.

This was part of a longer-term play that has been going on in the boardroom.

This has been a long-term soap opera.

We are thrilled to have daniel her wits with us now.

A member of the board of rock- and-roll hall of fame.

One of the other cool things that you do, this has always been about real estate.

What would you do?

How would you advise them at barnes and noble this morning?

We always like to think that real-estate is the most important part of it, but it is not, it is about merchandising.

When you do not sell anything that people want to buy, that is a problem you have is a merchant.

You can change all the bits and pieces, move personnel, maker stores bigger and smaller, all of those things, but it is what you put in the store that is important.

How do you merchandised a bookstore, and electronic media store, a coffee shop, whenever they're going to do.

Jeff, answer the question, then, if you would, given the question in technology -- change in technology?

Put the leather chairs back, put the service back, make it more of a browsing experience.

They took all of that out and tried to make it about the electronics.

They need to get back to that customer where they had that incident activity in the retail experience.

If they can do that, i think that people will go back.

Books are still selling.

There are products that people want.

There might be electronic, but we know that they still sell.

That was a shameless plug.

Your pickup truck got stolen.

You got me up early in the morning.

[laughter] what you are advising is not to go after technology, but to go after the old school book business, do not go after amazon and apple?

Think about it, the last time a harry potter book came out, where were the lines?

Outside these stores.

People still want that experience.

Let's give them the right kind of experience and welcome back.

Let's go to the economics class room.

Richard clarida with us this morning.

The bottom line is that this is a creative destruction?

No one knows where the retail book business is going to go, but it will look different than it does today.

Your guests are right, what is the value proposition?

Where can we deliver value and make profits?

It will not look the way it did 10 years ago.

We do this better than a lot of societies.

And we allow it to happen.

The key thing is that we get out of the way and that is the key for the economy.

Jeff, go out and make sure that your car is still there.

Have to get going.

Take care.

[laughter] m&a in the grocery business, kroger is buying harris teeter, the high-end grocery market, assuming their debt, adding to their earnings in the first year.

This is a bit of a surprise given that we were just told the cerberus was considering making a bid for harris teeter.

Kroger has won out, in cash, harris teeter shareholders, a premium to the close in january, when harris teeter said they were looking for alternatives.

Gross restores our real estate, are they not?

Indeed.

Do you own any gross restore land?

We do.

We have grocers as tenants in a number of centers.

How is that different from the j. crew or a bad calabash, and beyond?

Obviously they have that daily traffic.

It does not necessarily need to be a traditional grocers.

It could be wholefoods, sprouts.

Are you going to go artisan all on a tuesday?

A little bit.

They do.

They bring daily traffic your shopping center.

Even the wal-mart supercenters, targets, etc.. what a story on the recovery of a real-estate investment trust.

The market continues to move higher.

Thank you, chairman bernanke.

Even hydrocarbons over the last few days have put out a bid.

West texas, 102. the stock market continues to grind higher.

A lot of company news out there.

That kroger acquisition just announced, the barnes and noble ceo quitting, this is our question for the day -- what should barnes and noble the next?

Any ideas?

The former executive at kodak says to focus on the books.

What do you think?

? ? this is "bloomberg surveillance," said in tom keene, joined by our guest host of this hour, richard clarida . one of the hallmarks of our central bank has been increased transparency invisible guidance.

The professors from columbia, now at pimco.

He would suggest that things are changing across the pond.

The punch bowl, expanding its bid?

Coming here, he knows the changes at the bank of england.

This is a subtle but important.

Press conference, press release, are we going to see that?

We are going to see it and importantly when the rest of us were focused on fireworks, we have big news coming out of the bank of england, both of them deploying put the first time since forward guidance, talking about the guidance of future passed a policy, specifically saying -- we do not do former guidance, so in the case of mario draghi they said that rates were on hold for an extended period.

The they had not ruled out going into-deposit rates.

-- negative deposits rates.

Should the viewers believe their crystal balls?

I think the answer is yes.

The rates are on hold for an extended period.

They may not go into the negative, but the fact that they are discussing the vitamins in the bank communications being supported is important.

Bank of canada, very successful there.

Looks like he is bringing over that approach.

Let's bring it back to the new york very -- to the u.s. very quickly here.

The next step?

Not going to jackson hole, the next step is probably after the september fed meeting, a press conference where the fed will have to announce that they're doing tapering or explain why not.

Obviously, tapering is on the table.

We almost got through the show taper free.

[laughter] back to you, sarah.

We are done tapering.

It is a big theme in the markets.

Coming up, big box retailers are a big business.

Who is behind the boxes themselves?

Retail real estate, from wal- mart to marshalls, more inside the deals with the danaher wets.

Coming up, "bloomberg surveillance," streaming on your phone and bloomberg.com.

? ? this is "bloomberg surveillance." our guest host for the hour, richard clarida.

Top headlines this morning, leaders setting a timetable for new elections, but the countries that made it -- main islamist group has rejected it.

50 people were killed in clashes between the military and supporters of the former president, mohammed morsi.

Libor gets a new home.

Euro next will take over that benchmark.

It will officially be announced later today.

Pollution, cutting five years of the life expectancy in china.

Stroke, heart disease, cancer, increasing.

Tied to the chinese policy for coal in that region.

Five years?

A huge deal.

Richard clarida is with us from pimco.

They have a big hong kong operation.

People want to move to singapore?

We have an operation there as well.

I certainly noticed it in beijing.

Absolutely.

You cannot walk around the streets without wiping your eyes in blowing your nose.

And it looks orange.

It is the only place in the world where you get out of a taxi and there is this sort of orange haze over everything.

Retail space, the vr is making major profits on retail properties.

Bringing big box stores to your neighborhood.

We have the ceo, daniel hurwitz, here to talk about it.

What type of deal activity are you seeing right now when it comes to big box retailers?

It is excellent, as good as it has been in my 30 years in the business.

Successful retailers grabbing market share, at the same time it is existing stock portfolios, able to drive trends.

Retailers are being much more creative.

Why is nothing new being built?

There are many reasons for it.

We go through a 100 year flood every 10 years.

There are better places to put your capital on the acquisition side.

My experience is that rates are all different and the major message is, as he talked about barriers to entry, what are the barriers to entry when there is a bed, bath, and beyond on every corner?

Getting the right to build in the united states with governmental approval for state, local, and federal is so difficult.

You have worked with colgate and the rock-and-roll hall of fame out of cleveland.

Various institutions out of ohio.

Your company had a near-death experience in 2009. just below $2 per share.

What did you do to turn this around?

We had to be honest with ourselves.

We had to be realistic about what we own, why we owned it, and what we needed to get rid of.

We had to improve our bench, hire better people that understood creatively have to manage the markets and bring the company back to where it is today.

What are you seeing in terms of retailers and how they are using their space in response to the growing competition from online business?

Online is an interesting topic.

Most of our retailers, particularly the ones that we do retail with, they do look at online as an opportunity.

We would be reluctant to do business with someone who did not have an online strategy.

It is not really a threat as much as it is a distribution opportunity.

You develop a cash flow with a monthly feel coming in to the income statement.

How do you distribute that?

How are you going to do dividend growth going forward?

It is an issue.

Everyone has a different strategy based on their investment opportunities.

But after you figure out what you are required to distribute, you do have some flexibility.

You look at it based on where you put the capital to grow the business.

You look at where the capital is best served.

In your industry they have delivered 18% per year, you cannot make money in stocks.

Are you kidding me?

What do you learn from big guys like simon property group?

They are obviously the bellwether in our sector.

Consistency of strategy is the thing they have taught us most.

While we are operators of real- estate assets, we are not necessarily financial engineers.

They have always had a strategy that they have articulated to the market and executed.

This kind of gets into your world, richard.

The federal reserve has been talking about scaling back stimulus.

Stocks that act like bonds.

They have been popular in selling off pretty hard.

D.c. this as a head wind?

A temporary one.

I think that when stocks are volatile it is interesting but the truth is the operating metrics are not volatile.

When there is no good reason for volatility other than headlines or financial engineering, things of that nature, i am confident in the business.

Overall, your business is very code-related to the economy, a window into the consumer.

How much they're walking through the doors of stores.

Exactly.

Jobs and wages are the things that are the most important.

You are a member of the border director of the rock-and- roll hall of fame?

Yes.

Can you give us stones tickets?

We can.

Yes.

[laughter] all right, coming up.

July may mean its summer fun for many, but four states it means a new fiscal year and, guess what, they're doing a lot better.

The state of the state's coming up.

? ? a bloomberg television special, "inside chipotle," airing tonight.

Carol massar goes inside the mexican grill, speaking to executives.

This has certainly been one of those cult favorite spots.

We will go inside the company.

As year -- here as always with tom keene and scarlet fu.

We need a free data check.

Not much economic data in the first days of the week, but as you mentioned earlier, up, and we go.

The euro, the foreign exchange has been quiet for the last couple of days.

Hydrocarbons, 103. that is west texas intermediate . elevated oil prices, the back story to the early part.

I would say go with a rising stock prices as well.

We all know that the train route connecting washington, new york, boston, hauling movers and shakers, everyone along the atlantic seaboard.

We are looking at another very business friendly corridor?

Absolutely.

On the other side of the country the crash of 214 introduced many of us to the china of the san francisco quarter.

Hauling patent lawyers from asia to silicon valley.

This is actually their third busiest international route.

We mention of lawyers because we have apple and samsung suing each other every day over patent infringements and the companies are very codependent on each other as well, even as they compete.

This is the business class.

The other thing going through korea is that it is a cheap place to fly out of.

Of course, we are all aware of it right now.

Ben levy was a survivor of the crash and spoke to us yesterday afternoon.

We talked about why it soeoul has become such a destination.

For the last two and a half months i have been flying into korea.

There have been a lot of early moments in this technology with systems at $1 trillion with tax rates.

I can see them opening up to the rest of the world on the outside and inside markets.

That was baen levy on that flight.

What i thought was interesting was he said they are just starting to open up to that at -- entrepreneurialism activity.

There is a lot of action going on.

A lot of new business.

The man connecting samsung to silicon valley, he was also a passenger on that flight, he survived and we did about it.

It also comes, interestingly, as we hear about them tracing their roots in silicon valley.

There will be breaking ground on a new u.s. headquarters this week.

Richard, when i think of korea, i think of our great american success over there.

Is it safe to say that it is the last american economy in asia?

It certainly produces a lot of world-class products that they export to the u.s.. 20 or 30 years ago all the brands that were very markey brands had very humble beginnings.

It is obviously a wealthy country, hard-working, educated, a real powerhouse in automobiles, consumer electronics and other goods, so absolutely.

Are they coupled with us or are we decouple?

I think we are all toppled, but in the next three to five years i see more trade in asia.

Obviously, china is important, but asia as a broader region, i think, has a lot of fundamental dynamic positives going for it.

Certainly it is two major technology hubs, very much on all of our radar is this week.

In the meantime, more company news?

That is right.

The deal in the supermarket business that just broke at the top of the hour.

Kroger purchasing harris teeter , paying a premium to the close in january on the high end supermarket chain, giving kroger more than 200 stores in the southeast and mid-atlantic region, adding to their earnings in the first year.

A legal setback for standard and poor's, their effort to have the justice department's lawsuit thrown out was rejected.

A judge said that he would issue a final ruling next week.

The u.s. is suing s&p for fraud related to its securities in the financial crisis.

Texas motors is replacing oracle before the start of trading next monday.

Good morning, everyone.

"bloomberg surveillance," always here with sara eisen and scarlet fu.

Our guest host is richard clarida.

July 4 marks u.s. independence and the start of the 2014 fiscal year for the states.

And while there has been major muni market volatility, it turns out that nine states are actually reporting budget surpluses.

Absolutely.

Time to take advantage of tax- free bonds, something we have focused on here.

Yields are up as prices decline, but there is insatiable demand for the tax beleaguered.

On black rock, looking at each and every bond.

We will get to that in a bit.

Richard clair that is with us as well this morning.

Good morning from princeton.

Nice to be here.

Is it the time of my life to buy bonds?

We have seen this drop off.

It july load the boat this july on muni bonds?

I would say load the boat.

We would -- we have created some value and markets do get very emotional.

Right now it is higher rates, ever since the testimony back in may, that is the way the markets want to go.

How strong do you believe the economy is and what is fair value?

Typically, markets overshoot, so it is probably wise not to overload.

We tried to buy shorter duration, shorter maturity.

Bill gross, richard, legendary for the four or five-year area.

But we purchase muni four or five years out.

Is that a big mistake right now?

I would say it is.

They are known to be the most bang for your buck.

It is known as a longer duration fixed-income asset, but what you have to think about is the emotional direction of the markets raising hire protecting against that volatility and insulating the downside protection.

Short intermediate, if he really want to stretch a bit, but that is as far as i would go right now.

Why are nine states having budget surpluses?

All we hear about is demand new for the states, how did they get this together?

We have been talking to wind blew since the financial crisis, but it has been a slow grind to repair the balance sheet on the revenue side.

They have reported 12 consecutive quarters of better revenue growth reflecting a stronger economy.

They have also been somewhat constrained on the spending side.

Several years ago california was reporting a huge deficit with a surplus.

Clearly a turnaround, 45 states that met or exceeded their revenue forecast.

Richard, this goes again to that doom and gloom from a few years ago.

Even state and locals getting a bit into it.

Would you presume that in the next 18 months we would see state and local governments a field?

That is actually a positive for the labor market, because a lot of the jobs were state and local governments laying off and now they are not laying off.

Some are higher.

Most states have to balance their budget.

And they run the deficit they have to put policies in place.

There is an east hampton piece of paper out there, how does a judge enormous place like back -- blackrock participate when they see this paper?

I think you have to pick your spots.

Your point about local government?

These hamptons are certainly local.

Think about what the housing market means to local government.

It is credit research, value in the m

This text has been automatically generated. It may not be 100% accurate.

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