After the Crash: Market Makers (07/08)

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July 8 (Bloomberg) -- On today's "Market Makers," Erik Schatzker and Stephanie Ruhle use analysis, insights and A-list guests to help set up your daily market trades.(Source: Bloomberg)

Merrill lynch could we want to check in with her and see if she is just as bullish.

She says everyone is expecting a selloff.

She says to stop expecting a selloff, the economy is doing better than you think.

Adam johnson, thank you for joining us.

He has been up early, through the whole stretch -- as have you.

We've got you covered on bloomberg television.

"market makers" starts right now.

What happens when it's pilot ever?

Sizing up the impact on boeing and asiana after the crash in san francisco.

Michael dell gets a surprise endorsement, but will it be enough to get shareholders to back his buyout?

Written 's -- britain's $74 million man, and a big payoff after ending the uk's long drought at wimbledon.

? good morning, everybody.

Welcome to "market makers." i am erik schatzker.

I'm sara eisen.

Welcome back from italy.

Thanks.

In for stephanie ruhle did i had it chance to look at famous italian companies.

I was lucky enough to go to a very exclusive economic conference -- this is an annual event for you.

Last year i was talking about the european debt crisis.

This year all the economists and central bankers were talking about the u.s. and the surprise recovery.

I will have comments, including former fed chairman paul volcker, later in the show.

But first, a market makers newsfeed.

Standard & poor's is getting its day in court.

S&p 's lawyers say that reasonable investors would not have relied on what it called puffery about credit ratings.

S&p has cut softbank's credit rating to junk.

The japanese firm that just one a bidding war for sprint nextel is cut from triple b to double be plus, the highest noninvestment grade.

And from bloomberg.com , hedge fund billionaire steven: not off the hook just yet.

Federal prosecutors may miss the deadline for charging him in the biggest insider trading case in history.

Still, according to a person familiar with the probe, cohen will remain under investigation and could face conspiracy charges.

This morning a big piece of good news for michael dell there it -- big piece of good news for michael dell.

The investor has decided to endorse the buyout of his namesake computer company.

It is good news for the man whose face you just saw, carl icahn.

He is urging other investors to reject the offer.

Will a green light from iss be enough to push them over the hump?

We will ask brian marshall, analyst at isi group, for his opinion.

Meanwhile, our top story the day, the flight recorders from the crashed asiana thing in san francisco show that the pilots tried to abort the landing before impact.

What we actually know about what happened?

Cory johnson takes us inside.

Asiana flight 214 began in shanghai about 3:00 p.m. local time, contingent of 60 chinese students and 10 teachers among those boarding on their way to san francisco for a summer camp.

The plane stopped in seoul to take on more passengers, and it's 504 began a 10 hour, 20 minute flight to san francisco international airport.

It was typical of the dozens of nonstops from seoul to san francisco that fly every week.

The boeing 777 was one of the newer planes in the asiana fleet, one of the 12 777s purchased in 2006. while some thousands -- some carries chose to cram it with as many as 365 seats, this asiana flight was near capacity with just 307 people, 291 passengers and 16 crew.

As the plane approached san francisco, the sky was remarkably clear, six to seven- not wind.

The pilot told -- pilot said that visual flight rules were in effect.

Pilots could guide themselves to the runway without the assistance of instant traffic control.

In the last moments of the approach to san francisco international, there were clues that something wasn't quite right way to look at this flight path from the previous asiana flight 214. data shows the safer approach -- a study, straight decline culminating in a safe landing well under the runway.

Now look at the actual flight path for the saturday asiana flight 214. you can see that the pilot is trying to jack the plane out of its dissent.

But -- listen to this audio recording of asiana 214's communication with the tower.

77 over and back, someone says ke$ha seven seconds over and back, some of those go around.

A loud banging stash seven seconds before impact, some of -- seven seconds before impact someone says to go around.

A loud banging sound.

The tail slammed into the sea wall short of the runway, sending the plane spiraling down the tarmac.

The fatalities -- 2 16-year- old chinese girl is.

As the fire department based on the scene, he found smoldering ruins of the 777, lying on the tarmac dozens of passengers who jumped before bags deploy.

Dozens more ran from the burning plain, debris and luggage strewn on the runway.

Survivors were lush -- rushed to local hospitals, a number in critical condition.

A samsung executive race off the plane and snapped this picture, which spread rapidfire on twitter.

"i just crash landed at sfo.

Tail ripped off.

Most everyone seems fine.

I'm ok.

Surreal." in the midst of smoldering wreckage, eun used the correct if horribly ironic twitter handle, @flysfo.

Cory johnson is live at san francisco international airport.

Interesting, this morning 's any reaction from boeing and asiana.

What have we heard from those two?

The companies are saying they don't know what happened and they want the ntsb to continue with their investigation.

They say they don't know if any mechanical problems.

A lot of fingers being pointed in the direction of the pilots without any specific accusations.

But that entire sequence of events -- i found the audio recording this weekend and some of the flight data as well that help us make a animation.

This is another animation as well.

It really shows the dramatic difference kind of dissent that took place from this in terms of the steep pitch i which it came down and the slow pace as well.

Very different from the same asiana flight that came before.

What more can you tell us about asiana and the reaction from this flight?

It is a popular rap, from korea to silicon valley to san francisco and a big one for the tech community as well.

And it has been a flight an airline that has had very few safety issues in its short existence.

I think only two crashes of a note in his existence.

But indeed, this flight between korea and san francisco is an important one for the technology business community, because so much business is done.

Korea is the most connected country in the world.

I think the broadband internet penetration is something like 110%, which is just a multiple connections in most homes -- which is to say multiple connections in most homes, many ohms, and loss of commerce and evolution of commerce.

The most connected businesses in the world are there, a model of businesses all over the world, it couldn't silicon valley, going to taking lessons of what the may hold.

That route is a well-traveled one for business travel is here in san francisco.

Cory johnson, " number quest" editor at large.

You will continue to bring coverage and news throughout the day, and the national transportation safety board is conference happening at 2:30 eastern time, 11:30 pacific time.

For more on the crash, we take you to boston.

This ap -- this aviation expert was an engineer with boeing for a decade.

It does appear increasingly to all of us, including you, i'm certain, that this was a case of pilot error.

From what you have seen, is there any way to fault either boeing or asiana?

At this point it is entirely too early, because the ntsb is in the telemetry part of the investigation, although their briefing yesterday did discuss some of the information from the voice recorder and flight data recorder.

That is the beginning of their analysis.

And there is substantial data from boeing and the airline that has to be reviewed.

Is the airplane's performance following the crash itself, the tail slamming into the sea wall, consistent with what you would expect to see a crash like this?

You are an engineering expert.

Is this the kind of thing that boeing is model -- do airlines try in any way possible to prepare for contingency like this?

Airlines and manufacturers and regulators repair for all sorts of contingencies.

But one thing that really can't be per pair for is once an aircraft has substantial damage event like that, where you have a major portion of the airplane ripped off, it is unclear what the dynamics will be.

Some of you may have seen the video shot by a witness across the waterfront that show the airplane almost doing a complete 360, and the back of it looking up significantly from the ground before it slammed down.

That is not something that one can anticipate.

The performance after-the-fact by the flight the flight crew and cabinet crew was outstanding.

They got everyone out and they were able to deal with severe damage to the aircraft and the fire.

Specifically this model, 777, we know it is a critical one for boeing.

You worked with this company.

Talk about the safety record, which as far as i can tell has been really strong for the 777. it has been.

I was in the city engineering department and one of our project was development of the 777. i am familiar with the changes that were put into that aircraft to make it more able to withstand crashes and to avoid problems in the beginning.

But again, the kinds of things that were done years ago would feed into what is happening now in that the kind of information presented to the pilots, the kind of systems that were put into the aircraft come would have prevented this sort of accident from happening.

In fact, in the over 18 years of service, this is the first time there has been an accident that involved a passenger fatality, which is a record -- there's really really no parallel for a major aircraft program having that many millions of flyers and that many years of operation before having a fatal event.

Is the damage that you have seen consistent with what you might expect under the circumstances?

You know, clearly, i don't know what to expect him but it seems perhaps a little unusual that a plane with a burnt at the top would've sustained as much fire damage as it did.

It is unclear what the dynamics of the fire were after the airplane came to rest, because there was a time, a few minutes, which gave the crew, the cabin crew and the flight crew, enough time to evacuate aircraft.

It is unclear where the fire started or when the fire started.

But when it does progress into the cabin like that, until they can put the fire retardant there, you will see what you saw yesterday, an uncontrolled fire that consumes large parts of the cabin before you can really get anything on it.

What is the appropriate length of time for a pilot to be trained?

This 43 hours enough?

From what i understand from the stamens of the li, 43 hours appears to be the number of hours this pilot had in this aircraft type.

However, before any pilot in a modern airliner steps into the cockpit, they very likely had hundreds of hours and ground training and simulator training.

Today's simulators are so-elegy that you can literally have a pilot have experience only -- are so high fidelity that you can literally have a pilot experience only in a similar and the first time they fly airplane is in an operational flight.

I would not put the stock in the number of hours this pilot had in an aircraft.

Keep in mind, this was a veteran pilot who has been with the airline since i believe 1996 and who had years of experience buying other aircraft models for asiana.

This is by no means a rookie or inexperienced pilot.

Thanks for joining us on "market makers." as sara mentioned, the national transportation safety board will the briefing today.

We will bring that to you of course.

When we come back, fear of flying or not, what the numbers tell us about airline crashes and passenger safety.

And michael dell gets an important ally in his fight to take his company private.

That is next on "market makers ," blumer television, streaming on your phone, tablet, and this is "market makers." michael dell tip that a key endorsement.

Iss says investors should accept his to $24 billion buyout bid for the pc maker.

The firm cites a 25% premium intel's -- in dell's offer.

Cristina alesci has been covering this for five months now?

Incredible.

This is somewhat of a surprise, positive for michael dell.

We were expecting iss to come out against michael dell and silverlake.

This is a huge feather in michael dell's cap.

The bottom line is let's forget about the 25% premium.

Iss basically caved to message that michael dell was putting out there, which is that if you don't -- you are going to see the stock fall.

That would take time for carl icahn to lament his deal.

Shareholders would have to vote on michael dell's deal and then elect carl icahn's board, who would implement his plan to buy out 1.1 billion shares for $14 a share, technically higher than the bid for michael dell, but essentially iss says there's too much execution risk with the carl icahn plan.

This has to be a blow for carl icahn.

Does he respond?

It sets them back in terms of his shareholder vote.

Going into this deal, expecting that it would be a tight race -- in fact the numbers were actually in carl icahn's favor because -- so obviously, iss is recommending for deal with michael dell bodes well for michael dell's chances at this point.

But keep in mind, carl icahn was trying to urge shareholders to focus on the short term.

He was trying to tell them focus on the longer-term, because if you actually look at what the company has been out there saying, it they say that it is falling, pc sales are horrible, but they never revised earnings projections to reflect this horrible negative outlook.

Carl icahn's point is that look, even if it is going to be back, in the long term you will make a lot of money on turnaround efforts, and the shareholders should be allowed to participate in that.

We will see how influential iss really is with the shareholder vote.

Iss is influential in any vote.

In this one, there was particular attention given to it even the opposing views on the comedy's future.

That vote is july 18. cristina alesci, our deals reporter, on the latest feather in michael dell's cap, erik schatzker, and endorsement from iss.

If you are a jealous shareholder, what do you do, take your cues from iss or put your faith in carl icahn?

The senior managing doctor at isi group rates the shares neutral.

What would you do?

I think you have to go with iss.

It shows that they did their homework.

This is the most challenge company in our coverage universe.

You have to take the 1365 and run for the hills.

It did not feel that way two months ago.

There was a lot going on in the past six months.

We have a rating on the stock.

If you look act six months ago, our earnings estimate was about $1.50. today it is about a dollar.

Things have been following pretty quickly there from a fundamental standpoint.

This makes the job of the special committee of a lot easier, doesn't it?

There was a widespread a petition that iss would not endorse this offer.

There was a few out there that iss would go with the highest bid out there, carl icahn's $14 billion bid.

The first move was to take control of the board, obviously.

They will probably fire michael dell.

It starts off in a very difficult position.

I think 1365 are present a much better outcome for the shoulders longer-term.

That is pure speculation because all icon is not told anybody what he is going to do if, in in fact, he were to win this.

That is correct.

We think it will unfold that way.

What about cristina alesci 's point that carl icahn has been telling investors to focus on the longer-term, not learning forecast and the woes in the pc business?

That is something that shareholders need to consider.

Sure, but at the end of the day there has to be tremendous change with del.

Up to 50% of the revenues are pc-based.

Two thirds of the revenues are shipped with hard drive and district attached to it.

This is going to take years to unfold.

We don't think that is inside the investment horizon of many in terms of public equity investors.

Let's say the shareholders line up behind carl icahn.

This bid gets voted down, i can't -- carl icahn somehow gets control of the board and does what he think he is going to do.

It happens then?

-- what happens then?

Who runs the company?

It would be good to have an experienced tech industry veteran.

At the end of the day, it will limit the company's financial elect ability to go out and make deals.

The only way you succeed in technologies to innovate.

He all a candidate is to research in of -- the only way to innovate is to reduce -- is through research and develop.

If it appears to be going the other way against michael dell, any chance he could last- minute come in and about the offer?

I don't think so.

$13.65 as the final offer for silverlake.

With the dell shares trading at about $13.33, the discount to the offer price, is that appropriate?

Should it more fully evaluate close to $13.65? a three percent spread is pretty attractive.

I would take that spread an annualized it and you'll have a good return.

Yes indeed, with only a couple weeks to go.

Brian marshall, senior managing director at the isi group, talking about michael dell and carl icahn.

It is not over yet.

Coming up , airline crashes are dominating the news headlines for a few days, but is the real story airline safety?

We will show you some surprising numbers.

When we come back, a new bonanza on madison avenue.

By callista may decide to lift the the ban on hedge fund advertising.

Live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle.

This week the sec is expected to lift an 80-year-old ban on advertising by hedge funds and private equity firms.

The fcc chairman mary jo white is in favor of dropping the ban, and you know the industry has been pushing for it.

But could such ads open the door to more fraud?

Our guest spent more 20 years with the sec's enforcement division.

Good morning to you.

Nice to see you again.

I watch television and all the advice he do likes paris for or viagra -- are we going to be bombarded with for private equity firms and hedge funds if the ban is lifted as expected?

That will be interesting to see if we are.

I don't think this is for everyone.

There are going to be a lot of concerns that go along with this.

While this rule will change the registration requirements, the firms will -- funds will potentially implicate the anti- fraud position if they are not there for the way they advertise.

Just like you see with pharmaceutical ads, you will probably see a lot of fine print -- "past performance is not indicative of future performance, if you have a history of heart disease or high blood pressure, this may not be the right investment for you." the small investor might not understand that.

Do you think regulators have gone for have to attract investors who don't understand the risks of going into -- protect investors who don't understand the risks of going into private equity?

I think there is been last- minute wrangling to get editions proposed on this rule double be voted on for wednesday.

Those are meant to satisfy the investor advocacy lobby.

They are -- there are essentially two of those.

One is the sec is going to ask for a more robust exemption form that funds will have to file.

Those will have to say who was behind the investment, with the use of proceeds is going to be, risk factors and other things that speak to investor protection.

The other thing they are going to ask for is a rule that prohibits felons and other former securities laws miscreants from being associated with these types of fund offerings.

Tom, of which uses such a fine print?

Do you expect the kind investors being targeted by these these firms, hedge fund managers and private equity managers, are going to read the fine print and understand, more importantly, what it means?

They will be required before they actually sell the securities to any individuals -- they are going to be required to have to verify and take reasonable steps to verify that the individuals they sell to our sophisticated investors.

For an individual, that means household income of more than $300,000, wealth in excess of $1 million, excluding personal revenue.

In other cases, they could be financial professionals.

But in order to make that sale at the last minute, the fund needs to be absolutely sure that the person meets those requirements.

Regardless of the fine print, at the very last step in the process him of the fund -- or the sales representative is going to have to make certain that these people are suitable.

At the end of the day, in your opinion, is this a good idea?

We have seen the growth of the alternative investment business without the help of advertising to institutional investors and high net worth individuals have poured money into hedge funds and private equity firms, and in many cases those investments have underperformed what one might consider to be traditional investments.

A.b. they come with lower risk, maybe they don't. but you have to wonder -- i wonder whether or not this is just a play for more assets so that these firms, which charge management fees, we should remind everybody, can just get more the way of profits without necessarily delivering anything in the way of investments.

I think you are right and i think the proof will be in the pudding.

What will be interesting to see is if individuals who have very safe mutual fund investments and up -- end up with these advertisements calling investment financials and saying, hey, i want to get the better returns i saw advertised last time i was driving on i-95. can you put me into one of these investments?

It will be interesting to see over time if the assets assets move from mutual funds into hedge funds.

What types of hedge funds and private equity firms do you expect to take it vantage of this and use it?

Could it be the underperforming ones that are trying to get clients and the big reputable hedge funds don't need to advertise?

It will be whatever hedge fund and incur the risks associated with potentially advocating the anti-fraud positions.

Funds need to be careful.

A more sophisticated the fund, the more aware they will be that they can't, number one, make material misrepresentations and number two, amid the things that investors find enforcement that find important in making investment decisions.

It will be available to all of them.

We will find out as early as tomorrow, possibly wednesday.

Former sec enforcement official, now hundred buckley sandler, with us from washington.

Heading for a meltdown -- we will talk to the author of "the upcoming collapse of china." "market makers" on bloomberg television, streaming on your phone, tablet, and of course on bloomberg.com.

? this is "market makers." i am sara eisen.

Leaders from the u.s. and and china will be meeting in washington.

A chinese delegation meeting with secretary of state john kerry and treasury secretary jack lew to talk economics and foreign policy.

Gordon chang says nothing will come out of this meeting.

He is the author of "the coming collapse of china" and blogs about china for forbes and you have been predicting this meltdown for a long time.

What is the white house strategy when it comes to negotiating with china?

We have no strategy and we have no policy.

What we have been doing for the last three years is reacting to china.

I think this is probably true in almost every other capital in the world, especially when you look at asia.

When you -- what we are trying to do is come to terms with this new chinese belligerence, which actually is quite serious.

We don't have a policy.

We call it it it, we call it rebalancing, but what we're trying to do is come come to accommodation with worrying trends.

Would you like to see something more aggressive out of the administration?

I don't think there's much we can do at this point.

Alternatives?

Well, there are alternatives, but what we are trying to do is react, that is all you can do when you have china going off the rails, not only china where the economy is really in trouble, but a political system where it remains in disarray after last year's transition.

What is the united states reacting to?

Does this government, jack lew everybody else at the treasury department of the white house, understand what is happening in china?

I think we probably see china as the dominant power in the 21st-century.

All the all the narrative you hear on the street, which is absolutely wrong because i believe that within six months, maybe a year, we are going to see a real failure in the chinese economy that will have so many geopolitical consequences not only for china positive response of for us.

Defined failure.

Basically you will have a lehman crash, probably bigger in china than it is in our country.

Right now in china the debt is 2.10% of gdp.

Our debt is about 105% of gdp.

In china you have an economy that is not going at the 7.7% that they claim, but it is probably growing two or three, but once you start striking out economically useless production, you are basically at zero.

You are painting a gloomy picture of china right now, yet we continue to see american corporations jumping in.

Yum!

Brands, kfc opening all over china, trying to cap into the chinese consumer.

Is that going to be the market of opportunity for american corporations?

Not over the long run.

The market of opportunity inside united states is probably going to be india, which is great demographics, is going to overtake china as the world's most populous nation within maybe seven or eight years.

China has about pete on everything.

Yes there will be some opportunities at the lower end of the consumer market, but for a lot of companies like caterpillar and heavy machinery, all that is pretty much over.

Wouldn't you call this a given in the sense that china trends port -- transferred from an export-led to a demand-driven economy that the rate would slow?

They are trying to make it slow.

Of course it is.

They are trying to export their way out of problems when no one is really buying in great quantities.

It is a big problem because of all the debt they have been accumulating.

They have no choice, but they need to make substantial and structural reforms to have a consumer economy.

They can't do it.

In the long run, yes, but in the short run, debt crisis in china is not the same thing as a debt crisis in portugal or ireland or even italy.

It would be worse.

But subject to market forces the way that sovereign borrowers like those are -- that is one of the reasons why japan hasn't blown up, because it is able to sell most of the debt domestically.

China would've had this debt crisis long, long, long ago if it had a more open economy.

But what they have been doing is trying to make all sorts of internal arrangements to go as they've got a semi-comman of the economy and they can -- and this is the type of thing that they have done for decades, now it is catching up to them and you don't have the ability to make those adjustments anymore.

That is why they are in such trouble.

Gordon, you have been making these productions for a long time.

What is going to be the turning point or the point that brings all of these problems to light?

Probably it was last month, where we saw those spikes in interbank rates.

We saw the waves of banks defaulting.

We saw, for instance, the pboc, the central bank, putting money on an emergency basis into china's largest bank.

That is the loss of confidence and eventually it will create problems.

The fuse is lit and they do not have solutions.

They are going to watch this thing until it falls apart.

Two percent growth, is that what really is happening?

Something along those lines, nobody reallyknows.

It is not running at more than three or four.

It certainly is a provocative viewpoint on china.

Thanks for sharing it with us, as always.

The author of the -- the author of "the coming collapse of china," gordon chang.

When we come back, the name is synonymous with aluminum.

Almost said aluminium.

Is that the canadian saying?

What some people say that i'll: might be killing off part of its aluminum business.

Later today alcoa kicks off earnings season.

It has been the worst performing stock on the dow this year.

It is doing something about it, taking steps to improve the bottom line by cutting production.

With us for days -- for today's "futures in focus" is julie hyman.

It sounds counterintuitive, cutting production which in theory would lead to lower sales to get more profit.

It is kind of like in the airline business, when you cut capacity you want to increase your profits.

You cut production, you take supply out of the system and thereby increase the prices come even though alcoa obviously is just one producer.

The supply problem is a big problem right now.

Deutsche bank estimates that 50% of the producers are losing money as a result of a huge supply glut when it comes to aluminum.

What is been happening is overproduction by the aluminum industry.

Tons of aluminum are sitting unused.

That means aluminum prices sink and the producers lose money.

The only solution, indeed, might be to come back.

The hope is that if they come back -- cutback they have less product to sell but that the prices will be higher, at which they are selling.

Economics 101, in other words.

Supply and demand.

Let's get into the detail on the steps that alcoa has taken and what they ultimately hope will happen to prices.

They have taken some steps to cut smelting capacity, or armored viewing additional capacity.

They have about 4 million tons of annual production capacity.

If you break it down, the company has permanently shuttered more than 150,000 tons of permanent capacity in smelters in italy and quebec, and globally, elsewhere, it is showed about 530,000 tons temporarily as well as permanently, and extra both, and is removing -- reviewing an additional 11%. an analyst at davenport who covers the company says that alcoa is doing more than most and maybe anyone else, and they have to drive a wooden stake in the heart of their business -- in other words, kill their business in order to save it.

You get at a good point, and it is a problem if you are commodities producer.

Other people making the same thing.

If alcoa cuts but other countries don't, i wonder if other countries are doing the same thing.

They are not.

That is a big issue.

Locally we have seen some reduction cuts.

-- globally we have seen some production cuts.

According to morgan stanley, guess what, there is going to be one big reason country that is going to present a problem.

The new plan set by china is set to dwarf the 1.3 million in cuts, adding an additional 5.4 million tons of capacity.

If the supply glut continues, it will be a self reinforcing cycle.

Will alcoa have to cut more production to make up for what competitors are not doing?

The companies making more profit on its engineer products, the seven makes from aluminum.

The aluminum production itself is still the biggest check of its business.

Julie hyman with today's "futures in focus." former federal reserve chairman paul volcker is talking regulation.

Why the volcker rule and others are not going as planned.

He is not happy about it.

I will bring you the comments next.

As the investigations continue in our coverage of the asiana crash in san francisco, we should stress that fatal accidents are extremely rare.

Scarlet fu will show us how safe are flying has been in this morning's "off the charts." this is from matthew yglesias' blog at slate.

He shows that fatalities from planes are extremely rare.

You are more likely to die driving a car or riding in a taxi than being in a plane.

90% of aviation fatalities were in the general aviation sector here that means that private pilots were set ash flying single-engine aircraft.

The vast majority of the aircraft accidents between 2000 two 2010 were results of pilot error rather than mechanical problems with the aircraft.

And the lower fatality rates show it is much more survivable.

The technology has made a huge difference.

Flame retardant part -- prevents fire from spreading.

You have enhanced crew training -- crashes themselves have become more infrequent.

Usually with smaller airlines than the bigger jumbo jets.

Speaking of flying, sara, you had no fear of flying this weekend on your trip to italy, when you are hanging out with the once and future central bankers.

Including paul volcker, the former federal reserve chairman.

They talked about the world's problems and what is frustrating them the most and i asked paul volcker what has him or it, and he says it is the lack of regulation, including the volcker rule being implemented in the united states.

Here is what he attributes.

Too many agencies, all of which have a particular point of view and a tendency to get to the lowest common denominator.

There are sometimes more detail than is necessary.

That is the tendency of bureaucratic organizations.

It is unfair to the market not to know what the rules are.

It is not efficient, not effective.

I actually thought these were pretty strong words from chairman volcker on the bureaucratic organizations.

So many migratory agencies involved in the rulemaking processes.

-- so many regulatory agencies involved in the rulemaking processes.

This is all creating market uncertainty, the fact that there is no clarification on these rules.

Interesting that the man who inspired the volcker rule is talking about things that are unfair to investors and the markets.

I want to hear about the former governor of the central bank of israel, on his way back to that job.

The current chairman of j.p. morgan chase international, and in a few months he will be taking over the bank of israel.

He talked about the federal reserve and when the paper might -- the fed might taper it's qe.

When the circumstances allow, they will start tapering it down.

In a way, the good job reports give a good opportunity to activate the plan.

I want to emphasize that nobody talks about a plan of removing the punch bowl away, a plan of contracting quantitative easing to a contractionary level.

One talks about the very gentle turning of the dial.

We will have much more when "market makers" returns.

. . after the crash.

How would ag and an accident in sentences go affect air travel?

Steve ballmer made changes management team and his strategy.

Mega millions for and the mermaid.

Companies are set to throw the money at the first english wimbledon winner in 80 years.

I'm sara eisen.

Wrapping up a four-year long effort to merge fiat with chrysler.

Fiat has exercised its option to take control of chrysler.

They would try to reach a deal with the autoworkers union.

More fallout from the collapse of that garment factory in bangladesh.

70 retailers and brands have agreed to inspect all the factories they use.

Wal-mart and target not among them.

They are in a separate plan being developed the been the world's ". blackstone has set up a finance unit to offer loans starting at $10 million.

They're reaching out to landlords who specialize in single-family homes.

We will be talking about detroit's victory.

They are on a hot streak.

Americans are now rushing to showrooms, but what about europe?

Things have not been this bad for about 20 years, and they are likely to get worse.

We are digging into that problem.

Another story i am looking into, one of the world's richest people has a new investment, shazaam.

I will tell you why carlos slim is buying into this.

Boeing, a turbulent year.

They have been beset with battery delays on the dreamliner, and that's the tragedy in san francisco.

Joining me now is adam johnson.

How is bill and responding to this problem?

As you would expect.

They are all over this.

They put out a press release yesterday.

Let me share the details with you.

First and foremost, boeing expressing its condolences to those affected by the crash.

They sent a technical team yesterday, which is now on site, providing assistance under the ntsb.

I spoke with jim mcnerney under during the launch of the dreamliner.

I wanted to get his sense of what it was like when they were trying to figure out the problem with the 787. here is what he told me about six weeks ago.

We are galvanized, because we are on this mission to produce the best and most important aerospace technology.

We have to colleges, people do not sleep.

People do not sleep.

With the 787, they had several hundred people trying to figure out what the problem was.

However, the problem and it of being simple.

They just had to insulate the boxes.

They are lending hundreds of hands to figure out what happened.

And talk but how critical this product is to the brand.

It is the second most ordered product for boeing.

864 hrsorders.

This thing is crucial.

It has been it in service for about 11 years, only one other incident.

Expected to be extremely safe.

Comments now about why the airplane was going so slowly, which tends to suggest this was not a boeing issue.

Again, the ntsb will be ruling on that.

And i assume they will have to work with regulators throughout.

I have been in touch with the company as of a couple hours ago.

Ntsb is handling all of those inquiries.

They are working closely with each other to make sure nothing went wrong mechanically.

Thank you.

Adam johnson has been following the reaction to the latest san francisco crashed.

You can watch the ntsb press conference on the sand francisco crashed at 2:30 eastern -- excuse me -- yes, 11:30 pacific time.

A trained disaster that killed five people this weekend in a quebec resort time has intensified the debate over shipping crude oil.

With me now is the director of research at clear view energy partners.

She covers the energy market and environmental policy.

This is an issue that you understand very well.

We will show people a visual representation of this.

The volume of crude oil being shipped by rail has exploded because there is no more capacity on the nation's pipelines.

How much of a risk at this introduced to the nation's energy infrastructure, and the possibility that we could see more accidents like we saw this weekend?

We first need to figure out what happened and what caused the accident.

It is difficult to say because we had this terribly tragic event, that suddenly we should not be shipping oil on rail at all.

Certainly, you have a need for both sources of transportation.

The first thing we have to do is figure out what happened in canada, and then move on from there.

Isn't it virtually a fact that the more oil you ship by rail, the greater the chance for accidents like this?

If we are shipping more, there is more of a risk.

I guess how much more is the question.

You could say, if we did not drive cars, we would not have car accidents.

Certainly, this does increase the potential for accidents.

However, an accident of this size and scale is extremely unusual.

Certainly, the possibility we could see a logical increase in smaller releases, but this is also an industry that prides itself in continually improving their safety standards.

In american association of oil pipelines have demonstrated they have improved their safety record.

The challenge here is, we are focused more on the safety of these pipelines, but we are dealing with a variety of problematic chemicals and fuels which are shipped across the nation, by rail and pipeline.

One thing that we have talked a lot about is the keystone exxon pipeline and the accrual that it still needs before it goes ahead.

Of those supporting the pipeline say that it is a safer delivery system.

They have committed to 50 safety enhancements above current law and order to facilitate this project.

Certainly, advocates will point to that as a reason why using new and improved and better pipelines is the way to go to enhance our energy infrastructure.

But is that the way to go?

Is the increase in the rail shipments reflect a lack of investment in pipelines?

It seems to be the only way to get most of the oil in north dakota out.

If you are implying there is a lack of investment, i think what we see is the industry moving forward as fast as they can.

Rail has proven to be extremely competitive.

You could argue that a pipeline is slightly cheaper, but you have significant optionality with railcars.

It is a shorter commitment, you can switch their destination, and there is a lot of opportunity there.

They have moved aggressively to pursue this market.

This is something we are seeing that is drawing both investments on rail and pipelines.

Thank you for that.

Much more to come out of this.

Another developing story we are following, nsa leaker of adverts snowden has a deadline to deal with.

Will he except -- accept the venezuela's offer of asylum?

Hans nichols, could venezuela be his best bet right now?

Yes, but there is a difference between having offered asylum and having trouble documentation.

Any of those three countries would give him travel documents.

However, cuban president roh castro said that he was supportive of venezuela and bolivia but he did not mention whether a plane carrying snowden could land in cuba to refuel.

When you look at a distance it has to travel from moscow to caracas, it is a long distance.

Mike rogers talked about this over the weekend.

Using trade relations with bolivia and venezuela to be used as a pressure point.

The president was in africa last week downplayed how important this is, that they will not scramble any jets, but their actions betray a bit of their true intentions here.

We do not know for certain, but any time you ground a president's plame in a foreign country to look for a potential american citizen, seems to me, to be pretty high on the administration's prairie list.

What are we expecting to hear today about government efficiency?

You look at what they tried to do every year this time of year.

They tried to talk about summer jobs.

He will announce a new program to make things more efficient.

This is their chance to change the conversation into jobs and economy at the beginning of the summer.

Thank you, hans nichols.

A reminder, president obama will be delivering remarks at 11:50 a.m. that is, assuming the president speaks on time.

Forget about life in the fast lane.

In europe, the auto industry has shifted into reverse we will talk about what that means for the auto making business.

And steve ballmer is about to shake up the management at microsoft.

You can also watch us streaming on your tablet, phone, and on bloomberg.com.

It is not outside in new york city but a beautiful and clear shot of midtown manhattan.

We will leave new york to talk about technology.

Changes are expected in microsoft.

Reports are that steve ballmer will make changes after don mattrick went to zynga.

With me now is a former equity analyst.

What message does steve ballmer need to communicate with his strategy?

The main one is that the company will follow through on this message that he put out last year that the company would increasingly focus on devices and services.

That was a lovely thing to say but was not reflected in the way the company was organized.

Like most people, i see this as an attempt to line the company with what they are doing, devices on one side and services on the other.

Right now, internally, it resembles something more like " game of thrones" where there are all these turf wars.

Where does this leave microsoft windows?

The idea would be that windows finally gets consolidated under one leader.

Hard to say right now where it would end up, but the idea would be to take the mobile operating system and a desktop system and related services and all have been inside one group.

The trouble is, one of the thing that has gone them in trouble in the windows 8 release is an attempt to shoehorn in a lot of the mobile parts to the desktop.

People reacted against that.

People say that they do not want to use the desk top like a touch screen phone.

It is not obvious yet but the benefits are to consumers.

Can steve ballmer do for microsoft as others did for ibm?

No, and if he could have, he would have a long time ago.

The problem is, you have a guy who is wrapped up in the dna of the company.

It is clear where the company needs to go, services, but that is not in ballmer's dna and history.

What they need to do is largely abandon most of that heritage and move on to services, much like ibm.

My expectation is that this will be his last hurrah.

Where does all this leave xbox and gaming console?

This was complicated by the departure of mattrick to zynga.

One of the reason that he exceeded allegedly was because he did not like the structure, potentially wanted to be ceo under ballmer.

Now this will be part of the hardware division.

In the interim, it is being run by ballmer, and that is not the best place for it.

I have heard from a number of people that there are a lot of talented people in microsoft under ballmer.

They can do clever things.

Is that true?

If so, why do we not see more fruits of their labors?

There are some fantastically talented people.

The fundamental problems are two fold.

One is the structure, these turf wars over power.

Second, a truly bloated middle management structure.

People who were elevated to positions of incompetency within the organization.

The best way to unleash that innovative force would be to have fairly radical restructuring, layoffs of middle management, and allow these people to go out and create these start-ups within microsoft and be more innovative.

Without that, they are trapped under this bloated layer of middle management.

Stay tuned for any changes they may make.

Thank you.

When we come back, a reminder -- and i'm serious about that -- of how seriously people take soccer it in the country that will hope the next world cup.

President obama speaking later this power on what is being called his vision for smarter government in the second term.

The richest man in america has taken a stake in a british app company.

Carlos slim has invested $40 million in shazam, and the audio identification app.

He is in good company.

Other backers include kleiner perkins.

We are going to look at a different kind of story but also from latin america.

This one is from northeastern brazil.

Violence at a soccer match left two dead.

A preferred and player argued over a call, so when the pair -- player refused to leave the field, the resf fatally stabbed the player.

Fans stoned referee to death and stamped his body.

Soccer has been plagued by hooliganism four years, but decapitation takes it to a new and hideous level.

This is "market makers." i'm sara eisen.

It is hard to believe, alcoa was once the largest aluminum smelter, but now they're ranked third behind a russian and chinese firms.

Coming to is here to talk about what alcoa is doing to stem its slide.

They are reporting in earnings today.

Certainly a long list of problems for alcoa.

Alcoa has the lowest market cap and the lowest sales on a trailing 12-month basis of any stock in the dow industrial average.

Down almost 10% vs.

A median gain of 8%. the big problem is that the aluminum industry is overproducing.

Massive tons go over used, and this causes prices to sink, to the point where producers are losing money, and the only solution might be to cut back on when they make.

Even with these headwinds, we could see a bullish sign in the options market ahead of their earnings.

The two most actively traded options are $8 bullish call options expired in july.

Employed alone, these contracts would bet on a 2% gain in shares.

In july weekly contract that expires this friday has seen 4200 contracts changed hands, mostly at the asking price, suggesting new bullish positions.

But you might be thinking, what are traders bullish now?

One theory is that it is oversold and investors are under estimating it earnings.

Earnings have been trimmed across the board, and that could lead to a surprise.

Twice as many bullish options for alcoa today as bearish ones.

A little near-term boost in a long slide.

Thank you.

He will be back with another options report in the next hour.

Joblessness and recession are taking a predictable poll on the european auto industry.

Sales fell to a 20-year low, and now europe's third largest car maker expects things to get worse.

I think 2014-2015 will be, at best, stable.

More realistically, we could see another decrease, maybe not as deep as the one we have seen for the last years, but i'm not optimistic about the situation in europe because i do not see what will be the trigger to start the growth, particularly for the auto industry.

Is a dire outlook which has implications for ford and gm, not just european countries.

With us to talk about it is the senior analyst at edmonds .com.

Everyone wants to call a bottom in europe.

Is it too early?

It may be.

We are certainly seeing conflicting reports come.

The mere fact that there are two different points of view make me think that nobody really knows more the bottom is.

If that is the case, gm has said on a number of occasions in the past few months, it wants to break even in europe by the middle of the decade.

If you cannot call the bottom, how could gm get there?

Is a good question.

Let us remember, they have been calling this a number of times, for breakeven, and it has not happened.

And they say mid decade.

That is not really clear on exactly what that date will be.

With an uncertain outlook for demand, some of these automakers have had to rethink their european operations.

Where are the opportunities right now, in china, with the emerging consumer, or in the united states?

China has been a bumpy ride as well.

Long-term everybody agrees that it is the place to be.

It is interesting, we have europe and the u.s., the u.s. on the upswing, the victory doing very well here.

Last month we flirted with a 16 million number, and we have not seen that since 2007. we do not see that letting up.

There is a lot of pent-up demand.

Performance like this certainly covers up a lot of problems.

Our general motors and ford, with the legacy operations in europe, doing enough with the things they can control, versus what they cannot control, like the economy and consumer demand?

There is also the capacity issue to deal with.

In the u.s., we dealt with it, it was painful, but it is over with.

That has not been taken out of the system in europe.

There is a reluctance to do so.

No country wants to lose a car plant.

There are plans to do that, but it is taking a lot longer to get those plans into place.

Are you talking about a restructuring of the industry, like what we saw during the crisis in detroit?

Absolutely.

There has been too much inventory in europe.

Everyone has been calling for it.

It has just not happened.

It is harder to do than in the united states.

In absolutely.

That excerpt we had, carlos ghosn looking for a trigger in the auto industry.

What could be, elimination of overcapacity, or do you have to wait until the european economy turns around before there is any meaningful improvement in the automaker's? it has to be both.

The capacity situation has to be addressed.

The economy is what moves it along.

We saw this in the u.s.. took care of the capacity issue, and then got the economy rolling.

And it has not been released from here in the u.s., but we have improved had, employment, lower interest rates.

We had a lot of pent-up demand that help to spur the markets.

There are a lot of economic factors that have to help on the upswing while you are dealing with restructuring, or shortly thereafter.

The europeans wish they had a situation as good as we have here in the u.s. thank you.

Sometimes when you look past the had lines you can find a surprise.

That is what we found when we look past the friday jobs report.

? 195,000? jobs created in the nine states in june.

A closer look at the number may signal troubling signs according to an analyst of bloomberg government.

Tell us company to headlines, what has a concern with these jobs numbers?

The big jobs number is like red bull to markets and politicians.

It energizes, but you do not need to look past the service to see that this is a lack luster jobs report.

The key trend to follow is the strength of part-time jobs at the expense of full-time jobs.

Since an january, the economy has steadily increased the amount of part-time jobs that it has been adding.

There was a tipping point in june where we added 360 part- time jobs and lost 240,000 full- time jobs.

That difference is troubling when you look at the economy as a whole.

Aren't there some positive signs?

We look at the household survey which provides us with the under employment figures.

There we see the number and the people in the labour force increasing, albeit at a slow pace.

Longer-term unemployed, 15 weeks or longer, way down, 4%, relative to 4.6% a year ago.

You will also see the underemployment rate, the broad measure, increased in june.

That measures people who would like to work full time but cannot find a full-time job.

They can only work part time.

What i fear is that what we're seeing in the jobs market is people thinking it is a great market, let me get back in, and all they are finding is part- time employment.

What is driving the rush of part-time employment, is a confidence signal, potentially the new health care lobbying adopted, what is the reason?

In washington, they will point to the health care any time it is involving a jobs report.

Companies are reducing costs, which means reducing hours.

Also, the industry is gaining strength are typically low wage jobs.

60% of the jobs created in june were from low-wage industries like retail, leisure and hospitality.

Unfortunately, that is where the jobs are.

We still have not gone the full mechanism of benefits to be produced in great number every month.

Does this speak to a policy failure, does it say, perhaps looking at these numbers, job creation should give you some pause?

What is the ultimate message that these numbers sent to you?

It is not just about quantity, it is about quality.

We have to look under the surface and see what kinds of jobs are being created.

Consumer spending and retail is 70% of the economy.

When consumers feel insecure, they will not by those big- ticket items.

We have to look at the quality of jobs created as much as the quantity every month.

We also have to look at wages.

We saw a big jump in average hourly wages.

Is that a sign that perhaps things are looking up and we could get out of this funk of part-time workers?

That is good news.

That was the rainbow in the rain clouds that i saw.

As we move into the second half of the year, we have to determine which trends are sustaining, which ones are fluctuating.

This part-time worker trend, you will see, will remain with us through the fall.

Good to see you.

Thank you for the analysis.

When we come back, britain has not seen a day like this in 77 years.

Now the man responsible will cash in.

? this weekend on the grass courts at wimbledon, and leamer delivered, and now he will collect.

He became the first british man to win the wimbledon in 77 years.

Now the frenzy of british companies hoping to sign him for endorsement deals.

One firm says his annual earnings may soar to $70 million after his victory.

He talked to bloomberg about what it may mean for his career.

Winning wimbledon is the pinnacle of our sport.

This place has so much history, you just look at the names of the people that have one here.

It will not get bigger than this.

-- won here.

I will try to win another one in my career.

I do not think, even if it did, it would be better than this one.

You must be pretty tired today.

How did to celebrate?

When you won the u.s. open, you had champagne on the airplane, wash your face with shaving cream.

Was it the same this time?

It was very busy.

We had the press afterwards, and then went to the champion's dinner, which finished around 2:00. i am going to go out this evening with my team and friends and family, go out for dinner and celebrate.

I am sure they will try to get some alcohol down me, but i tried to stay away from that.

We believe that you will try to stay away from it.

That sounds like a lot of fun.

Regarding what happens next, how do you do with what is a completely different ball park?

You won the u.s. open -- fantastic -- but now you have won wimbledon.

From your career's point of view, we spoke to a branding guy that said this could be worth about $70 million.

Does the money really matter?

I mean -- is a tough question to answer.

When i'm on the court, -- i was unbelievably nervous yesterday, and the end of the match.

The reason f

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

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