This is "bloomberg surveillance." the adult one of apple announces a historic announce of shares to shareholders.
Facebook is not google.
Facebook wins with mobile.
And wall street, well they bought american housing.
The housing recovery levels out.
Good morning, everyone.
It is "bloomberg surveillance." we are live from our world headquarters in new york.
It is thursday, april 20 fourth.
I am tom keene.
Joining me scarlet fu and adam johnson, who bought apple shares at $1.06 20 years ago.
He has our morning review.
Mom bought you apple shares?
Don't own them anymore.
What a day.
In the years of my career come i've never seen this.
You, tom keene, maybe the best comment i have heard about apple.
What is in call -- context for us again.
$66 billion in 19 months, they delivered a ford motor company back to shareholders.
They took the entire market cap before the year -- returned the cash.
Let's get to a morning break.
Overnight, german business confidence unexpectedly rose in april signaling optimism.
Spanish growth, imagine that.
Spain and growth in the same sentence.
Accelerating in the first quarter.
The prime minister called the ecb to report a recovery.
Back in the u.s., 8:30, we will get durable goods orders and initial jobless claims.
9:45 we get the bloomberg consumer comfort index.
11:00, kansas city fed manufacturing index.
A lot of data and a lot of earnings today.
A total of 86 companies report today.
Eli lilly, gm, caterpillar before the bell.
After the bell, amazon, microsoft.
This is the single business day.
64 companies in the s&p itself.
About 13% of the index.
Let me do a data check right now.
Equities, bonds, currencies, commodities.
I have got a great mac chart.
Futures up 7, much of that due to the apple enthusiasm.
Nymex crude goes nowhere, 101.70. euro-dollar$1.3824. the yen strengthens.
I will not say the president has much to do with that.
That is pre-split divided by seven.
That is yesterday's quote.
We will open up about that.
Here we are to be quiet.
This is the move index.
Things to jeff rosenberg of blackrock for wisdom on this.
This is the volatility of the yield curve of bonds from two years out to 30 years.
Here is the quiet of last decade, and we're right back down there to the decade and a good feeling of where we were in 2006, 2007. a quiet, complacent market whether equities or bonds.
What an historic day yesterday afternoon.
Here is our front page this morning with scarlet fu.
Nothing quite about apple's results yesterday.
Apple rewarding its shareholders , boosting share buyback by $30 billion, raising given by 8% and splitting its stock 7 from 1. where is the stock right now?
It is up 7%, but it is down 26% from a tie in 2012, so it has been a slow slog, and a lot of investors may have bowed out of it and look for growth.
We will talk through this about all of "bloomberg surveillance," the blue-chip, this has been be fema for many guests on the -- been a theme for many guests on the show.
You do that by actions, not words.
Tim cook proved that apple can still grow, so it is maturing but still growing.
Operationally it looked ok, too.
That is something that is very encouraging.
Our second front-page story is a story that is a first on bloomberg.
General electric on the burden of making its biggest acquisition ever.
We are talking about $13 billion.
According to people familiar with the situation, ge is and talks to buy alstom.
A company that builds trans am power plants.
It would give ge control of high speed train technology.
We talk a lot about the recovery in europe being a couple of years behind the recovery here, maybe here is a similar error low, warren buffett making a bet on the u.s. several years ago, now he is making a bet on europe.
A french company with several thousand employees in the u.s. and he got it at a pretty good price because the market has been dropping in the last couple of years.
Better front-page story, later on today, the fda will announce proposed regulations on e-cigarettes, so be careful -- why don't we show the video of me smoking these cigarettes?
Did you get a headache?
It is different from a cigarette.
It is right back here by my bald spot.
That is where the matrix plugs then, right?
The bloomberg chip is back here, i do not need a security that some of the microchip is right here.
I had mine the plastic surgeried up.
The fda is looking into this $3 billion industry that is basically operating under no rules, so some of the proposed regulations that people are thinking would come into effect would be banning of e-cigarette sales to people under the age of 18. in our meeting this morning, did someone say it were on an airplane as somebody lit one up?
Yes, because there are no rules against using e-cigarettes or vaping.
I can go on and on about what was so real and what was so phony.
I walked into a party that was sponsored, a media event, that was sponsored by one of the vaping cigarettes, so there were 15 people gaping.
It's not like be.o. it was the nastiest smell.
There is no smoke -- yeah, it is vapor.
Anyway, those proposed regulations are coming out later today.
A very good.
Call it the apple effect.
How will silicon valley adapt the culture of california?
Facebook has shown the door to a cfo, apple generated $30 million in cash, and they have 90 days, facebook generated one billion dollars.
David kirkpatrick is author of the "facebook effect." you own apple shares at $.75. you know, journalists, we try to be stupid about investing by policy.
What did tim cook teach your silicon valley yesterday?
Be blue-chip asization -- the company has become the bedrock of global technology quality, so i think if the quality is established so deeply in the product, in effect they are doing the same thing to her company.
When you get to that scale, you just cannot skyrocket up and growth anymore.
When i look to your book, you have heard me rave about mr.
Kirkpatrick's book "facebook effect," there is an effort to get a zuckerberg ecosystem.
Apple has that ecosystem in spades.
Is that the message that amazon, facebook, and microsoft need to find their own ecosystem?
Next week, facebook has this f8 event.
It is their fourth or fifth event primarily for developers, and they will put a renewed focus on their ecosystem and their platform, which is a really big deal for facebook.
Facebook does have a huge ecosystem, by the way.
Each time you go to website and we register with facebook, which we all do everyday, that is using their platform.
Are you going to speak to mr.
I hope to.
I have not got an an appointment.
That would be great.
Facebook, if you are watching this morning, we would like to see mr.
Or patrick speak to mr.
Zuckerberg -- and then come on "surveillance" and tell all of us.
Of course i will.
Rackspace because $1.28facebook has 1.8 billion monthly users.
There are a lot of large numbers here.
Even as it leaves mobile concerns behind in the dust, it cannot keep growing its user base at this rate.
At this rate, maybe not, but in fact they have some other tools at their disposal.
For example, instagram, which they announced yesterday now has 200 million active users.
It is something often said.
Facebook is losing a little bit of it cachet among american teenagers, but in fact they're going to instagram it'snstead, which also owns.
Is it feasible that instagram can take over other facebook assets?
It is possible.
Maybe in the united states that is a possibility.
It is not something they are terribly worried about because they are hedged.
Instagram is taking over for twitter in many respects.
I have 21117 followers on twitter.
I take pictures of bowties.
It is amazing.
Of the jury is still out.
Facebook clearly prove they can go to mobile.
Now it is 59%, 60% of users are going on mobile.
But when will facebook prove it can actually monetize all of those mobile users?
Well, you look at these statistics of mobile advertising, they are skyrocketing there.
I think they are steadily proving they have because capability of doing a possibly of anybody.
One of the phrases that sheryl sandberg use on the earnings call yesterday was the first targeted marketing platform in the world at scale.
That is truly possible for them because this is something people continually underappreciated about facebook.
The knowledge they have about their users is unparalleled.
No other company in history that is shown ads to people has ever known as much about the people they show ads to.
That is huge.
David kirkpatrick with us.
I am instagramming right now.
Courtney, i am sorry, i'm not listening to you in the enteral room.
Company news -- we will start with ibm.
We will add technology to his health unit.
This is as the pentagon prepares to open bidding for $11 billion health records contract.
Watson is best known for beating humans on the game show "jeopardy." ibm has just hired a top person for its health team.
The telecom company trolled by billionaire carlos slim wants to buy the rest of an audrey and firm.
America mobile may pay as much as $2 billion to buy a minority investors.
He has been trying to expand beyond latin america.
And a judge for heineken reporting a 37% drop in last quarter.
Sales were down less than three bring percent come up markets including russia and poland are proving challenging.
Heineken also reporting currency losses.
When was the last of you had a heineken?
Actually i have a sixpack in my fridge.
2:00 a.m.? i've been having trouble sleeping, and since the alarm goes off at 3:30, i needed to knock myself out.
The twitter question of the day -- we are all talking about apple, what a big deal, splitting the stock, 7 for 1. as tim cook finally proven himself as apple's ceo?
Sweet us @bsurveillance.
We will be right back.
Good morning, everyone.
"bloomberg surveillance." coming up on bloomberg television, this is fascinating, howard marks of oak tree capital on the -- oaktree capital on the word of the market, look for that at 10:00 this morning on "market makers." this is "bloomberg surveillance." with me scarlet fu and adam johnson.
History made yesterday, scarlet, on apple.
Absolutely, tim cook finally leaving carl icahn.
He had been pushing for return of cash, and that is what tim cook delivered.
Increased by back by $30 billion to $90 billion.
This is a capital returen program to return $130 billion.
There is what, one susie $5 billion on the bookes -- there is white, $165 billion on the books right now?
Quick something like that.
Paul kedrosky with a financial apple is pushing every button and turning every dial they have.
This is the kind of stuff you do when you do not have any new products to talk about.
Right now that is where apple is out.
It is not have a new product to talk about, so it is buying time by giving investors what they want.
What is interesting is by doing all of this at once, the buyback, the stock split, the dividend increase, it is loading a quarter completely and for a tech company, that is a pretty strong statement according to could dos could draw paul kedrosky.
David kirkpatrick, i see the buzz.
So many expectations have been inserted into apple that if you are slightly disappointed, you blame him for everything.
My feeling is it is an extraordinary company.
It is not really their fault that investors have been so confused about them for so long.
I don't have any doubt they will continue to impress on product because they are the world's leading technology products company bar none.
So it is not really worry me.
And i think they are really doing surprisingly well.
People want to dock them down so bad.
Of the "new york times" lead is apple is starting to slow a little.
I will read it to you.
Can i read this?
On my iphone.
I have it on my iphone.
Ok -- remarkable growth script is starting to -- are you kidding me?
Brian chin wrote that.
Brian, i love you, but i just don't get it.
Carl icahn has been pushing tim cook to do something.
"i agree completely with apple's increased by back and extremely pleased with results.
Believe we will also be happy when we see new products." that is carl tweeting last night.
And brian blair has said this is a stock that has been largely ignored by institutional investors by the last couple of months.
So what these moves are are essentially moves to shift that sentiment as they head into the second half product launches.
You and i were in the car on the way to a charity event going back and forth on this.
I said, david, which is not said here, which mr.
Cook brought up, is little sidecar things like 66% of revenue is international.
When you do a pro forma on india or china, that is a remarkable -- india iphone sales up 55%. a lot of people have asked the -- one of the going to go after low-price product markets.
Which facebook is focusing entirely on.
They may not need to.
It was some point certainly have that option, and that is a gigantic growth opportunity.
And here is another point about all that money being earned abroad, that is not paying u.s. taxes.
That lowers the tax rate.
They know they will make it up in volume some point.
You live on airplanes.
Describe for me who in china buys apple products.
I do not think it is 300 people in beijing.
No, almost everybody seems to -- i checked into a hotel, this is a hotel registration, and she somehow saw that i worked -- i forget what i was doing at the time, but it was not that long ago, and the first thing she asked me is -- what is going to be in the new iphone?
That is not at all uncommon.
People in china are as obsessed with iphone products as we are.
None of this is in the zeitgeist, scarlet.
In terms of cumulative sales come over half a billion iphones sold by apple overall.
What i found interested in the corner was -- what i find interesting in the quarter was this has tim cook fingerprint all over it.
Ernie nine point eight percent, above 39%, for the first time since september 2012. one of the things about carl icahn tweeting "i wonder what will happen with the new products" is he has probably heard more about what the new products are then anybody, so that may mean something.
Let the knowledge and the fact there was a black mark -- ipad sales way below.
I think quick on the conference call when into that and into the "wall street journal" as well.
Michael holland gave a great recitative of apple at $430 a share.
All right, we will be keeping an i on apple shares throughout the morning.
Meantime, be sure to check out the newest edition of "bloomberg businessweek." it is the success issue.
It hits newsstands and your tablets where you can read on the go.
This is "bloomberg surveillance." on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.
Good morning, everyone.
"bloomberg surveillance." i am tom keene.
Scarlet fu and adam johnson with me this morning.
Let's get to top headlines.
President obama says the u.s. is prepared to impose more sanctions on russia.
He is in japan to talk to prime an assertion so operate.
He says if russia does not follow through with an agreement over the ukraine, then u.s. and its allies will follow through with more sanctions.
And south korea meanwhile, investigators are trying to figure out that transits were shipping more cargo than it should have.
Shipping cargo may have been what caused the ferry to sink.
The fda already regulates tobacco and now plans to extend its reach to e-cigarettes.
The new rules include a ban on sales to anyone under 18 him a plus a cigarette makers would have to provide an ingredient list.
The roles would also cover cigars and tobacco for pipes and hookahs.
Those are your top headlines.
This is an interesting must read.
Adam johnson has been noise on a quiet street.
Around the corner from where our very own pimm fox lives, we are talking about demolishing the museum for folk art.
"architecture is not static, least of all urban architecture, which jostles daily with its environment and the multifarious human to work and play in that apartment.
One story from the living city, a building loses its lifeblood." they are talking about taking down this 82-foot-high iconic fac½ade and move it to queens.
Because there is room for it at ps1. he says it is taxidermy, not preservation.
But the metropolitan museum on 5th avenue here has the united states or whatever there.
In the american wing.
In the "surveillance" wing, there is a temple of "surveillance." [laughter] david kirkpatrick, you started off as a graphic person before you became an author -- my wife is a painter, a painter.
Are we confusing with taxidermy?
I do not think it is a black and white question, but the row question is whether the museum of modern art need to create such an empire that and knocks down a museum that is beautiful right next to it, so it can be yet more gigantic.
What i think is weird as you have the hearst building where they took this old shell and build a giant tower over a, which is an interesting tower, but -- put me in the backdrop, the backdrop to mr.
Kirkpatrick, that is under threat, too, with all those skyscrapers.
That is what it comes down to.
We will be back with more on "surveillance," including how amazon prime members to get hbo shows.
Good morning, everyone.
"bloomberg surveillance." no one in our view of new york city this morning will buy the new products for apple.
There are no new products being announced.
There may be, and maybe somebody in the view will possibly by a new apple product was a big or to stay.
Good morning, everyone.
"bloomberg surveillance." i am tom keene.
A busy morning with a terrific set of guests.
Scarlet fu, let me do the data check first.
Futures are up, they improve.
Not much as mr.
Putin speaking now on ukraine.
And in the president is in japan as well.
Is putin a gainer or a loser today?
In the last couple of weeks a has been a loser in the u.s.' eyes.
It is the busiest day of burning seasons today.
We have a lot of earning to catch up on from yesterday.
I wanted to highlight at&t mainly because customers opted to pay full price for smartphones.
They are no longer necessarily buying the von come in that is hurting profits.
If i have to buy the iphone 6 , i will have to -- you do not have to.
But people are increasingly do that because they do not want to be tied to those higher bills.
T-mobile certainly making its impact felt.
He also thought netbooks on the gainers and losers list.
The reason we bring that up is because -- you also saw netflix on the gainers and losers list.
He really bring it up is because amazon prime will allow people to stream hbo shows online for no extra cost.
It is a multi-year exclusive licensing deal.
We do not know how much it is worth, but the aim is to steal subscribers away from netflix.
Joining us now is blumberg industries professor of north america research, paul sweeney.
What it hbo decide to strike this deal given that there have been so many calls for hbo to loosen its grip on it contracts?
That is right, and i think it feels throwing the towel like another -- like a lot of other cable companies.
Listen, we know a lot of our viewers are actually consuming the content online, so online videos become a tremendous surge of growth for consumers.
I think hbo kind of said we have to be where our customers are going, particularly our younger demos.
"game of thrones" was the most illegally streamed program in the last few years.
It is not included in this licensing deal.
Is this deal an acknowledgment that the subscription only business model is outdated?
I don't think so.
I think subscription only is a great model for them.
It is externally profitable force hbo, showtime, and the others.
They are saying the cinema we want to preserve our existing business, but we have to make sure we are participating in a new technology, the new distribution platforms.
Is this effectively hbo saying that while it is good at content it is not good at distribution and it needs a partner?
I think it probably says our existing distribute model works just fine but that may not be the most optimal distribution model five years, 10 years from now simply because we know that the viewing, people are consuming more video online.
David kirkpatrick with us as well.
I wanted to ask you, paul, do you think netbooks and amazon had a bidding war over this content?
How much do think hbo got for it?
It has been reported that it has not been a bidding war, that hbo went right to amazon prime.
I think that is because there is bad blood between affluence and hbo.
That is not mandated not get paid a hell of a lot closer i am sure.
The deal could have cost amazon about $200 million plus.
That is just one number out there.
But you say bad blood, to me this is so emotional.
Explain the theory of your world as we respond to these distribution transactions.
Arguably the folks that are really in the driver seat that are really going to benefit from this explosion of online video and other distribution systems is hollywood, the content creators, so they're sitting back saying where can i get paid for my content?
We know they are streaming more windows, it is not just broadcast television, it is not just premium cable like hbo, it is not like online videos.
But hbo has been a role in eal innovator.
Hbo go into sleep possible.
-- hbogo is hugely popular.
They are only allowing three-year-old programs to go to amazon.
Amazon is the video is still pretty new.
It launched in 2011. apple, for instance, has been struggling to get content.
Why does that use its $150 billion in cash to get content?
For apple, it is a hobby to them.
Apple tv has been nothing to them.
Everybody in the entertainment ecosystem is way for apple to make the play and get into the business in a big way.
What would it be, come on, paul?
It is not a piece of hardware, it is not the apple tv box.
There are plenty of boxes out there.
Everybody is into that business.
The question is -- when does apple want to get into the content business?
If they want to do that and a bit way, that suggests mna.
They need to make a big acquisition.
What you are seeing is the holy grail, i think if i am hearing you correctly, a tv that does it all.
Are you having to switch to hdmi1, hdmi2, apple tv, just push a button and i get whatever i want.
When does that happen and who figures it out?
That is starting to happen now.
We're starting to see a lot of apps coming into the tv universe because like you say people do not want to play with the various different boxes.
So s smart tv's come into the marketplace and become more proficient, you will see it being driven by cap.
-- by apps.
Is your world bangingeionng driven by cheap money?
We have not talked about jenny allen.
As they stood up and go we have got to ask now before those crumpton washington screw it up?
What has been one of the main drivers of the performance in media stocks and it has been the best run i've seen in 25 years covering this sector is that media companies are returning him to tremendous amount of cash to shareholders looked up they are buying back stock, paying dividends, and part of that is because the business models are so strong and the other part is he has cash is so cheap these days that it is better to return to shareholders than to make vague acquisitions.
And it pushes up their share.
Aereo, we talk about this as though it is changing the world of tv.
What is your take on the aereo debate?
I think it is a 50/50 coin flip will stop i think the broadcasters will prevail.
I think the supreme court is going to look at it in a very narrow way and say this is something like copyright infringement.
It may be where they are going.
I think so.
Any concerns about cloud computing and what does it mean -- cloud computing at such a big part of the technology story long-term.
If you go that route, then it becomes a little more -- because we are doing a round robin here, give us an update on fox.
How is the land of murdoch doing?
He split his news corporation company into his entertainment -- it works out?
It worked out.
We know the fox story, the entertainment story will be great.
He has great entertainment networks, great at that, well the road challenging part of his conglomerate if you will is his new newspaper business, new news corporation.
The newspaper business remains very top.
Advertising is still in a decline.
The question is -- can the newspaper companies transition to the digital world and get paid online?
And that is where his heart is, the newspaper business.
All sweeney, thank you so much, for bloomberg industries.
Coming up, oil industry blooming.
We have got a lot of oil.
We will to how much.
This is "bloomberg surveillance." on bloomberg television, streaming on your tablet, your smartphone, and bloomberg.com.
? and don't forget apple tv.
Oh, yes, apple tv.
Good morning, everyone.
We welcome you to our conversation here on "bloomberg surveillance." we need you on our conversation on our twitter question of the day on apple.
Has tim cook finally proven himself as apple's ceo?
That was out there yesterday in the zeitgeist.
I thought the coverage was just fabulous yesterday on facebook and apple will stop sarah frier, good morning in our san francisco newsroom.
This is "bloomberg surveillance." i am tom keene.
With me scarlet fu and adam johnson.
The robot submarine has neared the end of the search for the missing malaysian airliner.
Authorities say the bluefin 21 subtest completed more than 90% of its search area and obviously no success.
Meanwhile, debris that washed ashore turn out to be a falsely.
In ukraine, police have cleared pro russian demonstrators they have occupied fort almost two weeks.
Five people were heard.
The building occupations are part of the russia plan to destabilize the country.
And a baseball, new york yankees pitcher michael pineda was ejected, accused of having something on his neck, and presumably he was using this to get grip on the ball.
That is illegal.
You are grabbing your neck, tom.
Your hand is stuck?
It is stuck on the bowtie?
That is where you hide your pinessar.
Of the boston red sox would never do that, scarlet fu, that is just appalling.
Hitters are allowed to use it, but pitchers tours are not because it can allow them to have a better grip, but in colder weather, and it is they need something to hold onto that ball in little tighter.
Here is something that the u.s. has not seen since the great depression.
Today's single best chart tracks crude oil.
Inventories rose 3.5 million barrels in the last week to just shy of 400 million barrels, the highest since 1931 according to the energy information administration.
The game changer here is the shale boom has boosted production to be most in a quarter-century.
We have got a lot of oil.
This is a controversy, isn't it?
By the way, you cannot export oil.
You can export natural gas, but you cannot -- and this goes way back to world war ii effectively where it was considered a national asset.
David kirkpatrick, you focus on the tech industry.
Your author of "facebook effect ," what do you think about this rise in oil -- how does this affect your world?
There is an increasing and very clear connection between energy prices and the tech industry because they do are basically the country's largest consumer of power.
This is one reason why they are locating near hydroelectric plants and why facebook's latest one is in northern sweden so they did not have to cool it is much.
These things use gigantic -- i heard a couple of years ago google was the single biggest electricity consumer in the state of georgia because they have a data center there.
These data centers are gigantic.
Energy prices have been helped by the shale boom, no question.
Are we going to relax into british thermal units right now?
Joule was a heat power.
What is a joule?
I don't know.
I was taking a road trip in ice hockey.
I missed it.
If you boil one liter of water, it is the amount of energy required to -- i don't know, something like that.
We will talk more about energy and oil in the next hour.
I'm for the u.s. to scrap its ban on exports.
We will speak with an oil industry insider in the next hour of "surveillance." looking forward to that.
One buffere -- warren buffett hosted a lunch to benefit, am i saying it right, i have got pine tar on my brain.
Anyway, you attended this lunch, jeff, that warren buffett hosted, and i want to just play something that we were able to get a hold up from that lunch in the get your take on it.
Tech stocks, very few i would want to buy at the price, but they're not like the ones that existed 15 years ago or whenever it was.
We are not seeing total craziness or anything, in short, but we are certainly seeing some companies go public at very high valuations and some private transactions at some pretty fancy prices.
What is your take?
You are an investor, you were at the lunch, not in the bubble?
I am a real estate guy, so there is a lot of discussion about a lot of different industries with mr.
Buffett, and of course we all have a lot to learn from him, and a lot of the topics were about philosophies of different industries and things of that nature.
I think technology is such that it is changing so fast, there is so much room to run, and different companies had different evaluations.
Buffett show up and have a glass of water and sit there, or does he chowed down and really dive into the conversation?
Oh, he was diving in.
It was truly amazing.
You look at him at 83 years old and he is not as much energy and enthusiasm as anybody.
What did he say about the times we live in versus the last time we went in this?
Well, there was a question that was asked about -- are we out of the recession?
Have we cleared that path?
I think the general comment is we are not clearly out of it, but we are much better than we were, and on much stronger ground.
I think overall there is a tremendous enthusiasm and confidence in the united states economy.
Jeff pintar, one of eight attendees.
A dare i ask what it cost you?
No, it was not me.
I was a lucky hanger on.
A friend of mine was the winning bidder and he invited me to join.
It is nice to have good friends like that.
This is a benefit for the glide foundation.
Here is a number for you -- $20 billion.
That is how much private equity firms, hedge funds have spent to buy 200,000 single-family homes.
Will this investment to bolster the broader market?
That it is coming up on "surveillance." good morning, everyone.
"bloomberg surveillance." it is new york city on a beautiful april day.
May back ends.
I would say the weekend beckons when i look at that photo.
That is not a photo, that is live video.
If the chrysler video wrapper on the corner of the citigroup building, and of course the empire state building as we look down time.
This is "bloomberg surveillance." i am scarlet fu here with tom keene and adam johnson.
Let's give you company news from the files of "the bloomberg west." qualcomm hitting a speed bump.
Forecast a profit and revenue fell short of estimates, taking longer than excited for china to rollout a new mobile network.
That is coming in.
Amazon striking a blow at netflix.
The company has reached a deal with hbo to stream some of that network's older shows like the "wire" and "the sopranos." and investors don't care much for at&t's next smartphone deal.
Shares of at&t fell off for bing percent yesterday.
More customers opted to pay more price for a smartphone in exchange for lower bills.
That is today's company news.
Let's turn to something like your housing bill.
Old news, big money came in at the housing bottom.
They bought up everything in sight.
Execution is in order and phoenix, atlanta, not even chicago.
Institutional money has provided a foundation to the nation 's housing.
Jeff pintar is the ceo of pintar housing.
Starts with a lean kitchen and a wall mode lawn.
You guys go in a buy lousy property and the guys like you manage it.
What is the backstory our audience needs to know?
Is still an incredible value investment opportunity.
The market fell so fast.
There are still a lot of runway when you were able to pick up investments that are -- the current market value is below the replacement cost.
So you are biting at $.60 on the dollar?
That is about right.
What is my coupon if i am in one of your deals?
Am i making 8% net clean every year?
That is exactly the number.
That beats ample buyback.
Not bad, but how long the way to get back to par, 10 years, 20 years?
Everybody's crystal ball is a little bit different.
If you look at a reversion to the mean with current home values right around 65% of replacement cost as evidenced by the lack of new home construction starts, as the market continues to revert back to its supply and demand conundrum, comes into equilibrium, the home values will continue to depreciate about 5%, 10% in most major markets.
Are godlike you in fancy suits and ties -- have you distorted the whole market so that our viewers are paying more for housing or for their rents?
There is no question that all the institutional capital that is coming to the market in the last two years has graded a more competitive landscape for the mom-and-pop homeowner.
The other side of that is the average renovation costs that institutions ourselves and our clients have been putting into these homes, about $35,000 per home -- that is like a pantry off your kitchen.
$40,000 -- that was with the oak cabinet with the white paint?
Something like that.
The thing is, you know, you put that $35,000, $40,000 into it, and then you have to maintain it.
How do you know when people who are just renting are coming in, that they will actually take care of it?
This is the biggest challenge within this industry of owning homes as scale from a management standpoint is the ability on the operation -- and the importance of picking the right tenant with the right credit underwriting, treat them right, having the right culture when they come into your home, let them have that feeling like this is their house, give them the same pride of ownership as if they were owning it because they do live there.
What we're finding out is on average the typical renter will stay in that home for 2.5 years to three years.
So if you are able to deliver a product that is good condition that does not have a bunch of deferred maintenance because you just improve it by $35,000, $40,000, it allows them to have the pride of ownership and they will take care of that house and stay in a neighborhood and be part of the fabric of the community.
Jeff, we tech people tend to worry about jobs and incomes as automation surges across the economy.
We just heard this week that the american middle class is no longer the world's richest.
Does it worry you that possibly people aren't going to even have the money to buy these houses to get the values back to the mean as you were describing before?
Is there a possibility of that?
I do not know if we will see that type of appreciation.
The government and interest rates play a huge effect on the cost of capital and what people can afford.
Right now we are in historically low interest rates, the borrowing cost for the end user, the homeowner still makes the homes extremely affordable.
Right now, most market -- the cost between owning a home on a monthly payment versus a rents on a monthly payments, it is right around equal, and so we have got this credit dislocation that exists where many people may not have the credit to get the approval for that loan today, but as credit restores and improves, and if the cost of capital remains cheap -- jeff, thank you, jeff pintar on housing, thank you for coming in.
Boy, two big company announcements yesterday.
David kirkpatrick with us as well.
This was the president in tokyo on an asian trip not visiting china.
Abenomics, challenging, the headline is on ukraine.
35.689 on ruble as well.
All right, coming up in the next hour of "surveillance," robert nardelli will be the guest host.
We are looking at any indication how much gm's recalls will her results.
This is "bloomberg surveillance." apple announces a return of cash to shareholders.
Facebook wins with mobile.
And we are up to our eyeballs in oil.
Why is a gallon of gas $2.99? good morning everyone.
We're live from new york.
It is thursday, april 24. our guest host is robert nardelli, the former ceo of chrysler and home depot.
Let's get right to the reef -- brief.
German business confidence rose, signaling optimism in the region.
Even in spain, there is accelerating.
They called on the ecb to support every.
We have a lot of data.
9:45, consumer comfort.
Then fed manufacturing activity.
Their are more earnings than i can tell you about.
You name it, they're coming out.
To follow on that, 64 companies are reporting for the s&p 500. that is the biggest for the earnings season.
That is a lot.
We're going to star with facebook.
Shares are up four percent in premarket trading.
First quarter revenue soared past expectations.
They used to struggle with mobile advertising.
Mobile accounted for 59% of revenue.
The telecom company -- america mobile made buyout investors in telecom.
And heineken is reporting a 37% drop.
Sales are down less than 20%. they blame divestments and currency markets in poland and russia.
That is company news.
Stay with us to the morning on this record day of earnings.
Last evening, corporate history was made.
Apple computer return cash to shareholders.
In the past 19 months, they have returned a ford motor company to shareholders.
Gene munster has been a steadfast bull.
He is with paper jeffrey and joins us now.
I want to get what we have that is unspoken -- 63% international sales.
Is tim cook's upside his international expansion?
Investors did not feel the products were priced right.
Ultimately, the iphone numbers were driven by international markets.
They got their solid base in the u.s. they grew at $200 billion revenue -- unit growth outside of the u.s. when you do a net present value, does it make you raise your price chart?
We are keeping a conservative is the simple answer.
The big mystery piece here is the majority -- of their cash is outside of the u.s. when you do a net present value, you have to bring that cash back to the u.s. there are huge penalties.
I want to ask about gross margin.
39.3%. approaching 40% for the first time since september 2012. how does apple keep that number heading back towards 40%? one of the benefits is they are 6-9 months after the last product release.
That is part of the reason.
One of the particularly impressive stats is they were able to deliver that upside to the margin, despite the esp's falling.
I think the simple answer is that they are getting better economyies to scale.
That is a testimony to their manufacturing.
There's is one negative item here that i need to mention.
Ipads or 17% of revenue.
They missed estimates by 17%. how concerned are you?
It is a concern.
When you look at the context, it was clearly a net positive.
There is something else -- what ultimately has happened is they quickly saturated the high-end market because of the success with the iphone.
They are shifting the need to grow in emerging markets.
You are the pro.
I follow the feed carefully.
Did tim cook leave the legacy of steve jobs behind yesterday afternoon?
I don't think so.
That will depend on what happens by the end of this year.
He has shown that he is able to grow in emerging markets.
The real legacy, to separate himself from steve jobs, it has to be about new products.
Let's post the twitter question of the day.
Has tim cook proved himself as the apple ceo?
We want to thank gene munster for joining us.
Good to get his perspective on the other work that we will do.
Breaking news -- you can see this on bloomberg hd tv.
We will have much more.
Biomed is a private company -- $13 million.
This goes to the fervor we are seeing.
This was part of that deal.
The animal health unit -- you take this back to goldman sachs, there is a real fervor here.
The number one biotech related investor -- commented two weeks ago, biotech got too cheap.
It was trading at the same level as pharma.
A busy morning.
Our guest this morning as the former ceo of chrysler and home depot.
I want to get your take.
Overall, what to make of this?
Is this a sign of a healthy market?
We are seeing a tremendous amount of activity.
People are looking for opportunities to jump in.
Companies where they see topline growth.
We just heard about apple.
He did a good job of growing his core.
The question now is, what happens in the back half of the year?
To me, yesterday was a history of it.
Many others wanted a day.
At the end of the day, this is about finance.
For any company, returning cash to shareholders.
I think the thing that was intriguing to me is that they're going to go out and leverage, as opposed to repatriate.
Use cash, issued debt.
The important thing here is, as china begins to grow, we have to address that as a country.
The administration has to face any issue of how do we encourage repatriation for redistribution?
There are many other companies we never talk about.
There is a plethora of companies that have cash.
A couple trillion dollars when you roll it all up.
How do we address that?
You famously lifted margins at home depot from 30% to 34%. how hard is it to do that?
It depends on the starting point.
If you have not had the intensity and focus on cost of goods sold, manufacturing efficiency, then you get a good lift early on.
That is what we get at home depot.
The interesting thing with apple is this dichotomy of dividend increase, buying shares back, and doing a 7-1 split.
I think we will see a short-term satisfaction by the investors.
The thing i faced was the longer-term.
Why are you spending more on reinvestment?
Why aren't you growing globality as opposed to giving us cash?
There is a push poll in the short term activists and the long-term people who want to continue growth.
A lot of people say this will embolden the investors to push for more capital return.
Is that a new hostile takeover?
Recent surveys were performed by ernst & young -- one of the biggest issues is activists.
How do you engage them as opposed to having an adversarial relationship?
As surveillance exclusive -- the printer is fixed.
The show will go on.
Bob nardelli is with us for the hour.
He is the ceo of chrysler and home depot.
More on activists investing.
? good morning everyone.
Our guest host is robert nardelli.
He has experienced leader transition at fortune 500 corporations.
It is a delicate practice involving grace, dignity, and incsneense.
They are considering the post just in the old years -- jeff immelt years.
How do you get a guy out the door with an ego that is star mess -- dartmouth-size?
D? he stepped into one of the most prestigious positions in the world.
He has done a marvelous job of navigating it.
The question is whether he feels it is time to move on, whether the board would support that are not remains to be seen.
How much is german by the people below competing for that position?
Queen elizabeth is 88. prince charles is just waiting.
What do you do at the corporate level?
Having gone through that a few times -- it is like people magazine.
It was jeff and jim and myself.
We were hoping to get the nod.
The timeline for that was relatively close.
You hang in there and spent 30 years training.
You want to see the race through.
If you have young, high potentials and there is another eight years or so -- marcon in their, -- mark hung in there.
Allen has done a phenomenal job thatat ford.
Is this one guy on the board who drives the conversation?
Or is it a board decision?
It depends on the board.
We talked about succession planning in the ceo office.
You need to have that same level of succession planning.
We have a bubble going through the boards right now.
Over one third of them are 68 years of age and older.
. you need to plan for that with the same thoughtfulness, skill base, matrix analysis.
If you have a strongly director or director in charge, they will lead the effort.
Bob nardelli on leadership -- we have much more on techo nology, economics, and finance.
? good morning.
I am tom keene.
Our guest host is robert nardelli.
To get you started, adam johnson has the top of fines.
President obama says the u.s. is prepared to impose sanctions on russia.
He said that if russia does not follow through on an agreement over ukraine, the u.s. and its allies will follow through with more sanctions.
In south korea, investigators are trying to figure out if that sunken ferry was carrying more cargo than it should have.
Most of those who died were high school students.
The fda already regulates tobacco.
They plan to extend to e-cigarettes.
They will propose new bans to anyone under 18. and makers have to include ingredient lists.
The rules will also cover cigars.
I tried these things.
Nicotine delivery is more precise, narrow, and stronger.
I do not want my kids taking that drug.
If it was a pill, you would never do that.
The tv ads would not be banned.
They could still advertise.
The best advertisement is all the celebrities.
Leonardo dicaprio does consta ntly.
One of the things you mentioned about the sanctions in russia -- from a geopolitical position, we talked about energy independence.
I wonder why we are not using andit as a tool to calm the rest of europe.
We could say we are going to export natural gas and energy.
I think this is critical.
Ge buys a company in france.
Should they be precluded because it is a russian directed business?
We bought this company.
We did the gas type line that went through -- pipeline that went throguh.
Does this change the dialogue at ge?
I would say no.
Either you have teeth or you do not.
Unless you put teeth into it and say we will use the energy independence now -- why aren't we doing that?
What you're talking about is activists governments.
I want to talk about investors.
Bill ackman, carl icahn -- they are trying to create value for shareholders.
You had two-faced activist -- to face activist investors.
What are the best and worst practices?
There are good and bad.
Some of the activists that come in are interested in increasing shareholder value.
They are not cut and run or looking for a way to boost the stock.
Those are sometimes not productive relationships.
I think the number one discussion in the boardroom is activism.
How do they handle it?
I think the best way is to be open, not defensive.
You want to have good discussions and understand their motives.
Are there things that you have gone to sleep on that they are surfacing?
We talked about margin enhancement and cash flow.
Those are healthy discussions.
If you have an adversarial relationship, that is a problem.
Bill ackman spoke with us yesterday.
Let me play a clip from that interview.
We don't want to partner with everyone.
We want to partner with the best management teams in the industry.
This is not about making a pop on a stock.
This is about establishing a large position in the company.
That is an attractive proposition for shareholders.
I think that is a good model.
If that is correct, it is probably ok.
We look at jcpenney and the flipside is an example.
They did not do as well as they could have.
What is more effective?
Applying pressure in the background or being publicly pushy like bill ackman?
I think, again, there are pros and cons.
There are some hedge funds that want to stay in the background and work with the ceo to improve performance.
Some have a hidden agenda.
What did you prefer?
I would rather have them work with me then to go out and start touting things that are not being done.
I liked the tweet yesterday.
It was very gracious how he approached apple.
Is the calculus forever changed?
Are we so focused on cash that the future ceos and boards will put cash first?
It is an interesting period.
The ceos have dug deep and whether the downturns.
-- weat hered the downturns.
They have stored up this stockpile of cash.
Some of them to this is a great opportunity to go in and release that cash.
That gives a short term satisfaction.
We could talk about this for three hours.
Can we do six hours today?
Let's do it.
Coming up, eli lilly is raising his sales forecast.
This is "bloomberg surveillance." you are watching bloomberg tv.
We are streaming live on your phone, tablet, and bloomberg.com.
? good morning.
It is a beautiful day outside in new york city.
Two months from now, we will not have any data.
This is "bloomberg surveillance." let's get you some company news headlines.
We start with frorbes.
Germany has dropped out of bidding for the magazine.
So have companies in china and singapore.
They may be asking for $400 million.
A federal appeals court says that the maker of campbell's can be sued by the european union.
They say that reynolds american have a scheme where they laundered money through cigarette sales.
And time warner cable reported first-quarter earnings that beat estimates.
It was their lowest quarterly losses in five years.
They agreed to be bought by comcast for $5 million earlier this year.
That deal has not closed futures up six.
Jeff immelt has said that ge is an industrial company.
Nothing makes that as clear as a report from the europeans yesterday saying that there interested in acquiring a company in france.
Matthew campbell, good morning to you.
This is an interesting activist transaction.
General electric with -- a french company.
How badly does alstom want to go after -- want to be acquired?
There is a pronunciation guide on the website.
Well, that is a very good question.
What does jeffrey in notes and -- jeff immelt and ge want?
Shares have gone down quite a bit, which makes it a bit of a bargain.
Jeff immelt has said that their future is the past.
As in manufacturing, capital goods, real engineering.
There are few better ways to do this then acquiring alstom.
They are an iconic company.
Limited to the question that everyone will ask.
Will the french government intrude on this transaction?
Generally, you would be safe and betting yes.
Ge is a special case.
They have cultivated a good relationship over a long period of time.
They have more employees in france than alstom.
The woman who runs ge france is very impressive and super respected in the french establishment.
I recall famously when mario, a former prime minister of italy, who was the head of anti -competition, shut down honeywell.
Do we have any indication that there may be something to slow this transaction?
The antitrust issues are relatively minor.
These two companies do not have an enormous overlap in their principal businesses.
Alstom is strong in turbines for hydroelectric dams, and also on the transport side.
Ge does locomotives, alstom does trains and sgignals.
The direct overlaps are relati vely minor.
You broke this news yesterday.
What was the response of ge?
Two they need to speed up the associations?
Ge has not tipped their hand yet.
Alstom put out a slightly odd statement, saying they are not aware of a potential tender offer for the company.
If you parse very closely, that was not a denial of anything.
What our sources have told us if this is a deal that could be announced as soon as next week.
In paris and new york, some bankers and lawyers are hard at work now.
Thank you so much.
We will continue this discussion.
Fascinating to see ge with more employees than alstom in france.
You learn something new everyday.
Medical is big.
We bought the gas turbine p ortion of alstom, that gave us globalr reach.
And this deal has not been announced yet.
We're looking for this over the next week.
We also have earnings coming out -- futures are being driven by these results.
We're on bloomberg television, radio -- look for our digital products on bloomberg.com.
And on tv plus.
I am tom keene.
We are honored to bring you robert nardelli on this day of significant corporate earnings.
There is another one.
Caterpillar and gm just announced.
First quarter adjusted earnings beat estimates.
Caterpillar also boosted its forecast as well.
Great indication of the global economy, especially in the emerging markets.
Topping the consensus -- i am not sure this is comparable.
The big story is the charges of recalls.
I look at caterpillar # numbers.
Is this about an american manufacturing renaissance?
It is a great story.
I will be down in peoria and a couple of weeks and they will share some of their secrets on how they do this.
We talked about the transportation business.
Caterpillar bought the gm locomotives.
There is a pretty tough competitor in that business.
Gm to caterpillerar--to another company now.
Eli lilly just raised its estimates.
Their ceo joins us now from their headquarters in indianapolis to discuss earnings and strategy.
You raised your sales forecast.
The earnings-per-share outlook was reaffirmed.
Is this a cost-cutting environment?
Really, 2014 represents a pivot point.
You saw this reflected in the first quarter results.
The impact of losses that we have been preparing for for some time was offset by strong growth outside of the u.s. what you saw also was a series of positive bets that solidifies our confidence.
It was highlighted by our first approval from the pipeline for advanced gastric cancer.
We had some positive readouts on the pipeline, capped off by the announcement of the acquisition of a health business.
Pharma is in dealmaking mode.
Why is this an opportune time?
I think balance sheet they're very strongly states.
-- balanc sheets are very stron g these days.
For us, animal health is an area that we feel good about.
You also see activity with some of the early acquisitions in areas of neuroscience.
You are a double e. here's a first and second derivative here.
Will there be an acceleration of dealmaking in pharmaceuticals because of the health care boom and affordable care act?
Well, i think it is hard to predict exactly how all of the firms will play.
We never left the business development arena.
We look for opportunities to complement the business.
This is the htl that we have done over a series of four or fimve years.
We continue to be active.
Given that we have a strong balance sheet, we will continue to play.
Lilly has always taken an independent path.
Will you keep that or are you an acquisition candidate?
We believe that large-scale acquisitions do not make sense for lilly.
We're looking for the types of deals you have seen historically from us.
We are centered around an innovation, resource-based strategy.
This has led to the recent launch in approvals and the hype line -- pipeline.
Thank you for your time.
That brings us to the twitter question of the day.
Has tim cook proven himself as apple ceo?
? good morning.
This will continue through the morning.
Betty liu is with us and she is here now.
You guys are in the thick of earning season.
I am talking about chick movies.
Why are chick flicks at the top of the empire state building?
"an affair to remember", "sleepless in seattle," we're going to take you on a tour that you cannot buy tickets for.
This is underneath what is being made over and why.
They are seeing a lot of competition from other big properties.
Hudson yards, and the tech hub in chelsea -- i talk with the new jersey person.
Manhattan is still foreign.
Tony malkin took the empire state building public last year.
He will join us for an inside the empire state building.
She will be starring in her own romantic comedy.
You did not mention "king kong." of course.
[laughter] ra, thank you so much.
What about general motors?
They are moving higher, up by 2%. that is a modest move.
They beat consensus by a large margin.
The analyst consensus was $0.04. i wonder if there is a one-time item we are not accounted for.
Revenue is missing the mark.
The ceo of gm's division says that results in europe are better than expected.
China is also another issue.