Barclays to Raise $9B: Surveillance (7/30)

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July 30 (Bloomberg) -- On today's "Bloomberg Surveillance," Tom Keene, Sara Eisen and Scarlet Fu bring insight on the state of the market getting you ready for the day ahead.

This is bloomberg "surveillance." a $20 billion hole means barclays will dilute the value of the share.

A historic cash call.

For many americans, the united states is still in recession.

The economist who called it that way for years joins us to defend and keep his recession call.

Forget about amazon crime.

The president picks up his book order at the warehouse in person, but is amazon creating linkedin quality jobs?

Good morning, everyone.

This is bloomberg "surveillance." i am tom keene.

Live from bloomberg croquette quarters in new york.

It is tuesday, july 30. joining me is sara eisen and garlic to.

-- scarlet fu.

The president and tennessee talking about jobs.

First, we kick off with a morning briefing.

The japanese yen weakening for the first time in four days versus the dollar after japan's industrial production slid by the most in two years.

Also overnight, sprint released earnings.

Owned by a japanese company, posted a wider than expected loss.

Pfizer releasing earnings, beating estimates, as the company prepares to split into three units.

Here in the united states, s&p kae schiller home price index.

Closely-watched index across 20 major cities.

10:00 a consumer confidence index read.

Before the bell, earnings to watch.

Goodyear tire, jet blew, aetna, and coach.

A data check very quickly.

We have news come including julianna goldman publishing on the president's visit to chattanooga.

10-year yield flat.

Euro-dollar weaker over the past 24 hours.

Nymex now at one of 3.91. on we go.

I struggled with the second screen this morning.

A little pre-economic data banks.

Gold down $7. sterling for the royal baby, $1.53. on the data check come you get through it.

We wait for the economic data, starting with kaye scholer.

We will hear from the federal reserve tomorrow.

The big one is the jobs report on friday.

On this tuesday morning, we have scoured the paper's first stories making the front page.

Dominated by banks around the world today.

Absolutely.

We have the latest on insufficient capital levels.

Selling shares to existing shareholders to raise 8.9 billion u.s. dollars.

This comes after barclays repeatedly said they did not need to raise equity.

Now it is doing so.

They go out to existing shareholders and say we will give you more shares.

The hair cut is 40%. i was flabbergasted by that.

Would you like to buy a share, 60 cents on the dollar?

Take out the c.e.o. called it a bold but valid call.

He has to sell it some way.

The bottom line is it did give in.

Another bank making the front page is jpmorgan.

A settlement with u.s. energy regulators could be announced as soon as today.

Accused of manipulating energy markets for nine months in california and the midwest.

According to regulators, a jpmorgan unit deemed the market.

Remember, on friday j.p. morgan said it was considering a sale or spinoff of the fiscal commodities business.

The adjustment from regulation.

It is all tied to the common theme.

Our third front page story, if you have time warner cable, a time warner cable in cbs still negotiating.

They kept talking past and expanded the of -- extended deadline.

There was a brief blackout before cbs requested the signal be restored.

Time warner requesting 600% increase in free transmission fees.

The first time cbs has gone down to the wire like this and has threatened to be black.

It could still happen this week.

It could still happen because they are still talking, but cbs let it go black and requested it come back again.

Briefly, ever so briefly in a couple of key markets.

New york, l.a., dallas.

It seems like old technology.

Time warner cable has just been telling people to go alternative.

That is what is different this time around.

Not to mention these networks are building this into the business model.

Did ross with us.

Executive editor at -- dan roth with us from linkedin.

One of our most popular and victorious guess.

I want to talk recession and a bit.

We will come back to that here in a bit.

The president travels to chattanooga.

One of the hallmarks there.

-- one of the hallmarks there is a good job economy.

The job market is not doing well, all headlines aside.

I think the core thing here and something that concerns us quite a bit, the types of jobs that make money.

If you happen to be between the ages of 45-54, since the jobs recovery began 3.5 years ago, you have seen job losses, not gains.

Job losses for 45-54 year old approaching a million jobs lost.

That span happens to be where you make the most money, and where you spend the most money.

I think that is at the core of why when you say jobs are great, it does not feel that way.

It is part of why the president is going to chattanooga.

We're just learning from the julianna goldman that he will propose new economic ideas and proposals to pass but gridlock government.

That includes restructuring of business taxes, as long as initial revenue generated goes towards job creation.

Certainly changing the conversation.

Did you see which pose are available.

What is your read?

You still have the same problem of are you creating good jobs?

You can create jobs, but are they the ones that will be part of the next economy?

When you look at what amazon is doing, they say he will create a 7000 new jobs.

You can argue all you want, but having a job has to be better than not having a job.

The ceo of gallup wrote a piece saying unemployment is more like 17 percent, not 7.6%. you have to get these people working.

They have to be in jobs to make sure skills did not atrophy.

I think it is really important.

Politicians are comfortable with a linkedin world.

A huge part of america is less educated for technology and professional skills.

These amazon jobs are the jobs they will get.

Do you mean you have to be connected to someone digitally in order to find a job?

I did not think that is necessarily true.

You have to be in the market, meeting people.

You cannot have giant gaps on your rest of it.

-- on you ur resume.

Want to mention what the president is proposing.

Previously he looked reforming the corporate tax code and individual tax code as a package deal.

Now specifically targeting manufacturing and other industries.

Will it bring the gazillion dollars back from abroad like what apple computer and others have?

A busy number of hours.

We will talk about the vector of economic growth.

He feels it is decidedly still tepid.

Sprint loses more money as well as customers in the second quarter.

Lost $1.6 billion.

53 cents per share.

A smaller deficit of 31 cents was forecast.

Much of the loss tied to sprint shutting down the nextel network.

They lost more than 1 million subscribers in the quarter.

The last quarter before the buyout of the company.

Dan loeb offering of blistering review.

He said they suffer from lack of accountability and poor financial controls.

He points to the recent slump.

He made the comments in a letter in which he called for sunday to spin off the film and music business.

Lower oil prices and higher tax rates hitting the peace bottom line.

-- pb's bottom line.

-- bp's online.

That is today's company news.

Up, we will look at another company.

Revenue at the luxury bag maker, coach, up 7%. there is new competition just as the retail space starts to get exciting, the acquisition of sak's. ? coming up on bloomberg television, mark hurd, co- president of oracle.

He will be on at 4:00 eastern time this afternoon.

Always interesting.

This is bloomberg "surveillance." you could call it a mixed bag for coach.

The retailer delivering steady revenue with a strategy that mixes and matches products and prices.

We have been digging through the numbers.

Looking forward to the 7:00 report.

An area of increasing competition for coach.

Absolutely.

It did so well for so long.

It expanded across other product lines.

$100 for a coach but not typical.

Decode not typical.

Usually around $200 per bag.

A lot of competition.

They have expanded aggressively into the category of affordable can buy space.

It has been legendary for profitability.

Take a 74% growth margin last quarter.

The reason i bring in deckers, coaches kind become a lifestyle brand.

Trying to expand more into footwear.

Also mens' wear as well.

Do they sell bothas?

Not yet.

The good they are not a lifestyle.

They will eventually move there.

The analysts' are sounding down right cautious when it comes to the most recent quarter.

I am hearing things about same- store sales declining.

They expanded very aggressively in china.

China is the only one with an economic slowdown.

19% drop in the end will also hurt sales.

What does the dress for success theme addt linkedin?

I think most people say -- it depends on what kind of a job you have, the industry.

When i go to silicon valley there are people with t-shirts.

You come back to new york and that would apply in certain places.

If you look at what coach is doing in competitors are doing, you can see someone like a burberry focusing on millennial, it is a way to reach people.

Are you just saying that because the burberry ceo is a brand new influence?

To go never have a bag of fancier than the person interviewing you's bag/ ? that could be.

What about the stock price?

I beleive chanel is higher.

In terms of stock price, it has done so well but lately it has stumbled a bit.

Definitely trailed like michael course.

-- micael kors.

-- michael kors.

Madison avenue is not the country.

Not the world.

A little bit of a bubble.

As is the luxury items.

If you are doing well financially generally, then in the recent economy you have been doing very well, because you have seen real-estate prices recover sharply in the stock market recover sharply.

To switch gears here, if you are around wall street, probably close to the helicopters that are spewing out cash, and that is a pretty good thing, but most people are not near wall street.

Most people are near a main street.

That is why there is this disconnect of what the president is doing.

The conservatives said there is too much regulation and taxing.

Liberals say let's do more are keynesian spending and other things.

I think everyone is missing what is going on, which is that growth is not there.

Growth has been down shipping since before the great recession.

We will talk about this and a bit.

I want to pin you down right now on the job of economy.

Are we going to sustain this, or do you see the non-foreign payrolls -- first off, all you have now are preliminary numbers.

All of that gets refined massively.

Secondarily, you cannot get away from the fact that 35-54 has lost almost 1 million jobs since the jobs recovery began.

That is where you make your money.

Did i get away from $1,000 coach back nicely?

Very interesting.

Are they having salons?

Increased spending.

It will affect the profit margins.

I thought we knew -- since we need to the road trip to should -- to coach.

Former commerce secretary saying investors are staying away from major u.s. cities.

Our next post in host on bloomberg "surveillance." ? this is bloomberg "surveillance." i'm sraara eisen.

China has pump money into the financial system for the first time in nearly six months.

Pumping money into the market in order to stop cash rates from rising too high.

The percentage of americans owning homes, that is where it was almost two decades ago.

After hitting a record rate, it has fallen to 64%. the figures will be released later on today by the census bureau.

If you are wondering what luxury car thieves go after the most?

The answer is mercedes.

The most targeted luxury vehicle from 2009-2012. more cars were stolen during that time than any other luxury model according to the national insurance crime bureau.

Those a year top news headlines.

A busy tuesday.

A lot of discussion over china's economy.

A bloomberg you pessimist's saysview writer says it will be the world's tallest building.

He writes that skyscrapers are akin to giant punctuation marks made of steel, glass, and concrete, screaming "check us out." bubble.

An example of what you are dealing with and china.

You see it in the debate over the hard landing subject.

It will does not go away.

I thought that was interesting.

Not a consensus of a hard landing.

China will maintain target growth.

Huge concerns out there, especially for the financial system.

My morning must read is unusual.

The new york times endorsing it janet yellen to become the next federal reserve chairman.

An interesting choice because this is not a public election, just a point -- a choice made by president obama.

The reason it is so critical is because she is not part of what they called a fraternity.

She is reminiscent of other accomplished women for whom mr.

Summers has tangled in the past.

They described the group are robert rubin, timothy geithner and larry summers that have been top advisers to president obama and have helped to shape economic policy in the clinton years and obama years.

Do they make the case for why she should be fed president as to why larry summers should not be?

Take a that was part of the argument as well.

-- that was part of the argument as well.

You do a lot of economic forecasting.

The fed is the elephant in the room.

Of course.

They would like you to believe everything is ok and things are irrevocably under control, except that action suggest otherwise.

This is why there is so much attention on what is next.

I did not know.

For all the things that recommend mrs.

Yellen, you might think of someone like ferguson or somebody who has all of those benefits for example.

Icing the criticisms will not go away that the editorial is bringing up.

You mentioned roger ferguson.

Coming up, our guest will defend his call.

Why he thinks the u.s. is in recession.

? this is bloomberg "surveillance." we need a data check.

It looks like things are calmer today.

Pre economic data.

Kaye scholer out today.

A huge amount of data.

Futures flat.

Hydrocarbons go nowhere.

Big gainers to keep an eye on.

Cs industries.

They should boost the dividend according to dan loeb.

Also, interpublic, talking about the big merger and acquisitions field.

Of more than 4.5%. the ceo says there is no need for major record and acquisition.

A lot of people expect a smaller advertising agencies will pick up clients.

Getting the irs tax base.

The broader theme from the market, members of the fed meet to discuss the economy.

A gdp report tomorrow show's tepid economic growth.

The u.s. is adding jobs with 185,000 predicted in july and friday's jobs report.

The unemployment rate set to take down to 7.5%. does that sound like a recession?

With the economic cycle research in this to -- institute.

I would argue his actions are completely consistent.

I have never heard the fare -- fed chairman calller recession.

They have always said there is not one.

When there is in fact one going on.

I just have to take the lead for a second.

We do not have g.d.p. -- i will deal with g.d.p. for a second.

He would not four years of zero rate if his policy and quantitative easing if everything was ok.

I just want to say that.

When you say the fed does not agree with you, i would take exception to that.

Every time they say that, people freak out, which may mean something or maybe it does not.

To your g.d.p. point, let's go to the data.

Time will tell is that call is correct.

There is a reason why the national bureau of economic research which defines when a recession begins and ends take spare time in trying to figure this out.

-- take their time and try to figure this out.

Tomorrow you will get the revision to the history.

When you do that and when you see that, i want you to understand g.d.p., following recessions, gets revised.

Much more than you think.

You need to hear this number.

To-4 percentage point revision, almost always downward following the last few recessions.

You are sitting here applauding about a 1% growth.

Did you hear what i said?

A distinction between 1% growth and tepid growth recession and outright economic contraction?

You are agreeing with me the vector is right.

You get a preliminary number, 1% for the past three quarters.

Now what i just said the downward revisions are on the order of 2-4 percentage points per quarter.

In the first six months to good about 10% of the revision.

Subsequent revisions that come.

I want to jump in on jobs.

You can look back and forth whether this is a lot, but the economy is creating jobs.

150,000 plus the unemployment rate is moving down.

How can you say that is a recession?

We have had positive jobs growth for seven or eight months.

A severe global recession.

Now come to your point, there are also revisions to the jobs data.

Jeffrey more knows the information used to define a recession, output, employment, income and sales.

Those get revised massively.

If you look back, the jobs data on average are revised down 140,000 per month.

You are sitting here reporting we're hoping for 150-180. i am suggesting that is well within the range of provisions you need to go negative.

On top of that come anyone not making money has lost out.

The methodology is based on cycle research, not extrapolating forward the forecast.

With that, michael mckee with the president.

Chief economic correspondent suggest a huge body of america agrees with you.

I think main street agrees with us.

The fed, having had to go to zero interest-rate policy to stimulate the economy, which has not come i would argue, worked, has had to go to the wealth effect to try to stimulate the economy.

To go are you suggesting traditional forecasting blends everyone together to a 1-2% gdp where your methodology says the rich and halves are doing really well but everyone else is in recession?

G.d.p. blends everyone together.

Incumbents everyone together.

I think of that data, after revision, will show the recession.

Look at the stock market.

I agree it is maybe not the best indicator for the economy, but you cannot say the rally is all predicated on federal reserve stimulus.

Something has to be going on with corporate earnings.

Is this a recession stock market at record highs?

To go when you go to zero great interest, you are forcing people into riskier assets.

The hope is this is a new policy mechanism that will stimulate the economy.

When you have home prices going to new highs, stock prices going to new highs in sales, consumptions, what we buy a coach and other places, it is not being tepid.

Multi-year lows.

If housing is the linchpin for the optimism, we see case schiller today.

Can you reaffirm a housing recovery that will pull away from the recession call?

The recovery last spring in home prices is in place.

However, the pace of increase icing will decelerate.

You will not have the level falling, but the aggregate pace of growth will decelerate.

However, please recall in 2001 we had a recession.

I do not think anyone debate that.

Home prices rose through the recession.

It is more complicated.

We will continue the discussion.

The mail we get is almost as much as the cincinnati reds.

Michael mckee nailed this.

There is a confidence factor at work.

This is an inconvenient thing i am saying, that there is no growth and going the other way.

If you are the fed and only game in town and trying to will affect, you have to say it is working and say now i can tapir.

If you are a politician, you can take you could use my policy.

Growth has been declining since the last recession and not only happening here.

Coming up, looking for a job?

Maybe you should try working at amazon.

Getting ready to add thousands of jobs.

The president will be there today to visit during the announcement.

Put a question of the day, is amazon good for the economy?

A good question.

Andtweet tweet us.

This is bloomberg "surveillance." ? this is bloomberg "surveillance." i'm sara eisen with tom keene and scarlett fu.

Rising u.s. shale gas production is a threat to saudi arabia and opec.

In the letter, the prince also said there is a clear and increasing decline in demand for opec oil.

Fast-food workers are striking more than half a dozen cities, calling for higher pay.

Workers walking off the job in new york yesterday and demonstrations are planned throughout the united states for the rest of the week.

The average salary is $9.20 they receive now.

Jet man is set to make his u.s. debut.

The swiss venture will fly high later today at the wisconsin air show.

It will propel him to speeds of up to 180 miles per hour.

Can go as high as 12,000 feet.

Those are your top headlines.

That man -- jet man coming to wisconsin.

Are you kidding me?

You have to be kidding me.

Time for single best part.

Save me.

Are you kidding me?

Let's send you up there.

My single best part looked at the affordability of u.s. homes.

It shows the monthly payment on the median existing single- family home.

It took a big tumble during and after the financial crisis.

It comes along the bottom the past couple of years.

Since the end of last year, monthly mortgage payments have increased.

Just under $1,100, up from $800 last year.

What caused this bike?

Rising home prices and rising mortgage rates.

30-year fixed rate.

Housing affordability.

What do you see ast linkedin.

20% year over year growth in terms of people flipping homes.

30 percent are from investors, not just individuals buying their first homes.

The question is, does the money you get from investors coming in, does that put money back into consumers' pockets and they spend on other things?

Does this bring something back to the economy?

The talk about all-pass cash transaction said.

S. i get responses that there is a lot of people struggling, what ever the education and background.

Two ways to look at it.

You have people who are commonly saying i do not see it where i sit.

I do not see it in utah.

Not feeling the effects.

Other people say i need to reinvent myself and find a new job, i will be the entrepreneur.

All of this aspirational talk of saying the tools are there to be able to invent yourself into a new position.

Did you get rid of my hate mail?

-- can you get rid of my hate mail?

I think is all about transparency.

Shows you are doing the right thing.

A first look at the photographs making news today.

We will start in south africa with an unlikely photograph.

Charlise theron meeting with the southeastern -- charlize theron meeting with the south african president to discuss the hiv/aids.

I mentioned the u.s. restaurant employees are protesting.

Government employees staged a protest demanding contractual jobs.

They met -- were met with a water cannon shooting purple water.

Isn't that odd?

May be said they see it coming?

I have never seen that.

Now to south korea.

A performance of the sports stadium.

It featured 100,000 participants to create " centralized socialist realist spectacular." -- synchronized socialist realist spectacular.

That is every day.

Pretty much every morning that is how we start the day.

Emily chang in the northwest corner.

That is live.

Could be 50 years ago.

Ok.

very cool.

There is your first look, some of the photographs making headlines.

Coming up, amazon keeps on growing, this time adding thousands of workers in the warehouse.

President obama puts them in the spotlight today.

We will take a closer look at what the jobs really are.

The quality of them here on bloomberg "surveillance." ? this is bloomberg "surveillance." i'm scarlet fu.

In today's company news, an executive exodus applet zynga.

Three top executives have left.

This follows the department manager at c.e.o. earlier this month.

Softbank earnings getting a boost from the iphone.

They added more than 800,000 subscribers in the quarter.

The company used promotions to attract new customers.

Topping earnings forecast, the french network equipment maker posting 32 million in operating profit helped by cost-cutting last quarter.

Part of an effort to attract partners for technology contracts.

That is today's company news.

Take a while the president tries to boost the economy, amazon certainly doing its part.

Hiring.

Adding over 5000 full-time jobs.

No coincidence the president will speak from one this afternoon in chattanooga, tennessee.

Michael mckee is there as well.

He joins us by phone.

What types of jobs are these really in terms of conditions and pay, and the ones the president should be proud of?

That is the irony of the location they chose today, because amazon is neither a manufacturing company or a company that pays a whole lot.

Something of a metaphor for the change in the economy.

Maybe not one that obama wants to highlight.

They do make a lot of things.

There is a big volkswagen plant next door, but this is really a service economy now.

Manufacturing does 9% of total employment.

Amazon hired over 2500 people but couple years they have been around.

Starting salaries only $11.40, below the median wage.

Are those benefited jobs?

Barely get by jobs?

Or do they get benefits?

They do get benefits.

The benefits are reasonably good.

That is something amazon can be proud of.

They just cannot pay a lot.

The volkswagen plant has 5000 workers and start at $12 per hour.

We have become a cost-conscious society and that is having an effect, making it harder for the president to get proposals across.

I wonder if it speaks to something broader about technology.

Is it a mess that technology jobs are high-skilled and high- paying?

-- is it a myth that technology jobs are high-skilled and high- pan?

When technology is put into widespread use, it tends to push down wages and salaries.

There is a double edge to this.

It helps corporations come shareholders, but does not necessarily help the people.

There is an irony.

Tag of it -- tided a gut is the most wired city in the nation.

-- chattanooga is the most wired city in the nation.

You can get 1 gigabyte in your home.

There have been leveraging of that and make this a tech center quickly.

This is one of the criticisms of amazon here is they distribute a lot of stuff made overseas.

Manufacturing advocates say you should do more to promote u.s. goods but that is that really their job.

Take a joining us from chattanooga, tennessee where the president will be announcing amazon is hiring 5000 workers.

Dan roth with us, editor in chief at linkedin.

Are there jobs out there at linkedin?

You see companies looking for people with a lot of skills or few skills.

You want people who are college educated and increasingly do not care if they went to college but as long as they have the skills necessary to do what you want them to do.

Looking at the job is as high school diploma or equivalent.

Better to have them at a company like amazon or go to a college, accumulate the date -- the debt and hope to get a job managing these people?

The key is working.

You want to make sure you have some income coming in.

Make sure you have the ability to stay wired.

That you have the kind of systems to be able to invest your own time and learning how to code, what the future is.

We are at a point now where you talk about the rich getting richer and the poor getting poorer and the economy splitting, but there is a democratization that comes with technology where you can start picking up skills without having to go to college.

I think that is really important.

We might just be in the middle waiting for that to reach everyone.

These skills are critical because the amount of competition coming down the pike as the result of no growth is gargantuan.

When you step back from the recession call, all the policy recommendations and that stuff, it is happening inside the context of the fact that the current gdp data, the u.s. growth over the past five years is weaker than japan during the lost decade.

We all know how that was.

That is the reality of what we live in today, and i do not think people are dealing with this at all and will not change any time soon.

To go to think you so much.

-- thank you so much.

We will put a chart of that up at businesscycle.com.

We are seeing the japanese yen falling for the first time in a few days after weaker industrial production numbers out of japan.

The moves are subdued at this hour.

The australian dollar dropping to a two-week low.

The central bank saying there were signs of previous interest- rate cut that is starting to work.

This weighs on the currency.

Also, watch the china ankle.

Also coming up, our guest host, the former secretary of commerce.

Carlos gutierrez.

? . . this is "bloomberg surveillance." republicans wake up.

100 top donors tell gop leaders to get immigration reform done.

Former cabinet member and catalog magnetic carlos gutierrez is leading the effort.

-- kellogg magnate carlos gutierrez is leading the effort.

Lightning strikes twice.

A rinse and repeat empire, and then a top tequila.

The sun rises for john paul did jory.

This is "bloomberg surveillance ." i'm tom keene live from our world headquarters in new york.

Joining me is sara eisen and scarlet fu and our guest host for this entire hour, carlos gutierrez, the former commerce secretary in the bush administration, and a member of the battle creek michigan alumni.

A former ceo and chairman of kellogg.

Which serial did you eat?

I think it is viagra.

Seriously, i always like frosted flakes.

Very good.

Less sugar than an apple.

From frosted flakes and viagra to the morning briefing.

Japanese yen weakening for the first time in four days versus the dollar.

This after a big date out of the japanese industrial production, sliding by the most in two years.

, sprint released its earnings.

It is owned by softbank.

It reported a wider than predicted loss.

Pfizer also came out with earnings and beat estimates predict the company preparing to split into three units.

We will talk about the path forward later in the hour.

In terms of economic data in the u.s., s&p case schiller home price index.

We will look at housing prices across 20 major cities.

10:00, a read on consumer confidence.

Earnings to keep an eye out for.

Corning, goodyear tire & rubber, merck, jetblue, aetna.

After the bell, aic interactive.

9:00 begins the economic wall of data.

The federal reserve kicks off a two-day meeting.

This is not a news conference kind of fed meeting.

Everybody is expecting more action in september.

Friday, the biggie, the job support.

Isn is in there.

-- ism is in there.

We will be right here to discuss it all.

That is your morning briefing.

Scarlet has more company news.

Coaches earnings pre-adjusted earnings per share of 89 cents, matching the consensus.

Sales later than anticipated for coach or the fiscal fourth quarter.

Some banks in company news, our place is giving into regulators.

The bank is selling shares to existing stockholders to raise eight point $9 billion.

This'll address concerns over insufficient capital levels.

It comes after barclays has repeatedly said it did not read -- did not need to raise cash.

Another bank on the front pages, jpmorgan, a settlement with u.s. energy regulators could be announced as early as today.

They are accused of minute leading energy markets in nine months in california and the midwest.

Regulators say a unit game market, -- game the market, leading to rates above market prices.

Dan loeb offers a blistering review of sony's movie studio.

The hedge fund manager says the studio suffers from a lack of accountability as well as poor financial control.

He points to recent flops "after earth" and "white house down." he called for sony to spin off its film and music business.

Good morning.

We urge you to take action to fix our broken immigration system.

Our guest host is former secretary of commerce, carlos gutierrez, a native of cuba, and his resurrection of kellogg.

Good morning.

It's a pleasure.

You wrote this letter with a lot of support.

Julian roberts, and you speak of a broken system.

Why is the immigration system broken?

Our legal system does not work, which is one big reason why we have a lot of illegal immigration.

It is part of the system that few people talk about.

We talk about border security, what to do with the undocumented, but unless we fix the legal system, we are always going to have a dysfunctional system.

I'm concerned the senate bill is too low.

I want to point out this letter you are reading, it was published overnight by you.

You had a lot of cosigners.

It is a way of telling republican members of the house, there are a lot of very important republicans who want immigration reform.

This is critical.

You are speaking to whom, not john boehner?

Everyone in the house.

This is the house's turn.

After the house, they've got to go to conference with the senate eventually we are speaking to the whole -- both houses, the president, but primarily members of our own party, people who we believe should understand that this is an economic imperative.

This is not a political issue.

Sara has a great quote.

This is the letter from 100 donors, business tycoons, mr.

Evans, another former commerce secretary, standing in the way of reform ensures that we perpetuate a broken system that stifles our economy, and the risk of perception that republicans would rather see nothing.

That is the debate out there.

You were not a stranger to the politics at play.

Yes, the republicans would love to court the latino and immigration vote, but the truth is a lot of them come from districts that are mostly white.

They do not have to answer to those constituencies.

That is true.

What we should realize is this is good for the country, the economy, it is a necessity for the economy.

Anecdotally, i talked to a restaurant owner the other day.

He owned two restaurants.

He said, if i owned that had more workers, i would own it.

I would employ more citizens.

You talk to people in network culture, if i had -- in agriculture, if i had more workers, i would export more.

How do you respond to conservatives?

Either democrats, or typically republicans, who say, mr.

Gutierrez, your heritage is fine, you're exceptional success is fine, but this is a different america now than when you were snuck over the border of mexico as a cuban immigrant?

They say it is all fine and well, but it is not 1950. i snuck in on a canoe.

Nothing has changed over the last 240 years.

This is still the u.s. the conditions are the same now.

The immigrants are what at the energy and vitality and the competition to our economy.

It has always been that way.

Why are we so afraid of them?

I think the word afraid is a very good point.

There is a little bit of xenophobia.

We do not know these people, who are they?

We should not be afraid.

We have been assimilating immigrants since we became a nation.

We know how to do this.

If we get this right, what an advantage we will have versus the rest of the world!

Should the president be speaking to this line, what you are saying?

Why is he at an amazon warehouse touting jobs in the middle class and talking about budget fights and looming compromises of republicans?

Immigration is probably his only big economic idea.

The rest was another stimulus.

It is one-dimensional.

Yes, everyone should be understanding that this is economic.

Without this, we cannot grow.

What does john boehner need to do?

Would you suggest he needs to bring in house democrats and perhaps sacrifice his speakership?

What would you advise the speaker right now as he tries to get you started?

I think he has managed it extremely well.

He understands members have their challenges.

He is looking for a majority of republicans.

That continues to be his focus.

The month of august is very key because they go back home and go to town halls and they hear from the extreme hard-liners, the anti-immigration.

The anti-carlos gutierrez.

I would say people who think this is a political issue, while it is an economic issue could -- issue.

We have some breaking m&a news.

Community health is buying health management for $4.9 billion, if you include that.

That balloons to seven point $6 billion.

Community health has grown a bit through a lot of mergers and acquisitions over the last decade.

There has been a lot of consolidation in the industry.

If you break it down into the per-share price, $13.78. the target of this deal, health management shares are lower in premarket trading at $14.45, compared to yesterday's close of $14 90 two cents.

Usually an acquisition target gets a boost following a deal like that.

You mentioned this is a trend we are seeing.

A lot of responses.

Due to the president's health care law and mr.

Secretary, to you, you see immigration as an economic stimulus package.

Is obamacare hurting our economy?

I think eventually it will be an obstacle to the economy.

For me, the nightmare scenario looking ahead 5-10 years beyond the fact that this is almost impossible to implement is that we end up with lower quality hospitals, fewer drug innovations, and fewer medical device innovations.

That is not good for the country.

That for me is like down the road what obamacare can look like.

Are rich hour with carlos gutierrez.

We will continue this discussion later on immigration.

We got to talk about our place.

$20 billion in a whole.

A dilution of shareholder value.

We spoke to the ceo.

We will bring you those comments here on "bloomberg surveillance" on bloomberg television and radio, streaming on the bloomberg tv plus app and at bloomberg.com.

? good morning.

I am tom keene, with sara eisen and scarlet fu.

It is 122 miles down i-94 from battle creek to detroit.

It is a galaxy far away in terms of jobs and investment.

Our guest host is carlos gutierrez, is widely credited with selling -- saving kellogg.

It is saving detroit, this matters now.

You have been here before.

Urban landscapes, we've got to fix them.

What is the gutierrez to do list for detroit and mitch ash and michigan?

I think governor schneider has done a very good job -- snyder has done a very good job and looking at this as a business problem, how do we turn this around?

Population is down 25%. pension funding is around 70%. you've got people leaving the state, the city.

You have a situation where you haven't funded your pensions.

He continued to grow.

It came to a point where it imploded.

There are other cities that way.

His is a time when everybody is talking about urbanization as a big global trend.

The problem is, as is like having a 100-year-old company versus a 10-year-old company.

How do you jumpstart the cities?

Some say private universities and the education platform.

Would you like to see michigan state and the university of michigan step up and provide an educational foundation for detroit like you had in pittsburgh?

That is part of the solution.

We need to grow the population.

It is the same thing on a national level.

If our workforce is not growing -- how do you do that?

I would say, let's look at immigration.

What's look at detroit is a test case.

Let's look at the skills that we need to grow, to attract investment.

Let's use immigration and also migration from within the country, but it has to be about growing the population base.

If we leave it alone, it is just going to contract, and it is going to become a town.

I think it was former mayor giuliani of new york city, do you need a police presence that increases itself, safety for the repopulation?

You need everything.

Government reform, you need services.

Right now, 40% of all whites go out at night.

It is a real crisis.

Can washington play a part?

I think washington can play a part in supporting the governor.

The governor may need all those things, plus an immigration test case, and immigration plan that brings in, whether it is phd's, farm workers, construction workers.

A detroit tigers world series would help all.

Carlos gutierrez on detroit.

We will be back.

This is "bloomberg surveillance ." good morning.

? this is "bloomberg surveillance." i am sara eisen joined as always by tom keene and scarlet fu.

We just got word of a deal with -- deal.

What is interesting is the target of the acquisition is following.

Health management is being acquired by community health.

The reason the stock is down by now 5.5% is because health management says it received more subpoenas from the government on a certain er operation.

Apparently and recently received subpoenas, it now has additional subpoenas.

That is taking a hit on the stock.

Just to reiterate that m&a deal we are talking about, immunity health is buying health management for almost $5 billion.

4.9 billion if you exclude that.

It has recovered off the bottom.

It is a dog.

It is not like p ublicis and omnicon.

There is consolidation taking place across the industry right now.

This was the news overnight.

I was floored by this barclays deal.

Our clays has finally capitulated to united kingdom regulators.

The bank will make that will make a cash call on shareholders to 9 billion u.s. dollars.

-- the bank will make a cash: shareholders to $9 billion.

When we see this deal, what stood out to me was the 40% haircut to bribe shareholders to put up more money.

What did you see?

[laughter] since the 1980s, deep discounts have been a popular way of getting deals done because if the shareholder takes up the shares, it is about a 40% discount -- than actually they should not worry what the stock price is.

It is a way of making sure underwriting fees are massively limited.

Do not think of it as a displaced number.

I give it much more as a mechanism to keep your underwriting fees down.

If you're shareholders -- you're shareholders subscribed to it, they will be no worse off.

How much credibility does the ceo have?

In february, anthony jenkins presented a plan where he would cut costs, close businesses.

He said he was comfortable with how regulators viewed capital plans.

This looks like an about-face.

It is a valid point.

He was questioned about this on the call.

It's all about the leverage ratio that the new uk regulator is putting in place.

Just like you are in the united states under a much tougher regime, so the uk is suffering -- suffering from a tougher regime.

When he stood up and spoke in february, they thought they had about 40 billion pounds worth of court tier one capital.

Unfortunately, when they looked at the final papers, when they put it into law in brussels, they lost 2.5 billion.

Then the regulators knocked another 4 billion off, which we cannot see, because this is then taken another haircut on the book.

There is a lot of jargon and a lot of different organizations.

When you cut to the chase, christopher, is it tougher over there than here, or vice versa?

Who has the tougher regime, jamie dimon or the leadership of barclays or lloyds?

I would say that jamie has a tougher call to make with the 5% or the 6% he has to keep.

It is not quite the same.

What we have to bear in mind is deutsche bank reported this morning.

I spoke about deleveraging again.

Barclays and deutsche bank have enormous investment banking and -- operations in the u.s. they will be under new laws.

The foreign banking organization rules pretty they will get caught between two rocks.

Tougher european and tougher u.s. rules.

Have a listen to this sound.

Anthony jenkins, the ceo of barclays, just poke to art -- just go to bloomberg television.

Us and to what he said about the decision.

-- listen to what he said about this.

What we have done is bold action to meet the leverage ratio.

I think these commitments will did -- will decisively addressed that in place barclays very well for the future.

Christopher wheeler, you hear the ceo talking about bold and decisive action.

The leverage issue to me is the crux here.

Who is leading the way, christopher wheeler?

Visit the swiss banks or the american banks -- is it this was banks or the american banks to a more conservative banking system?

This was rarely have been pushing the hardest.

You're not forget, their bank assets are 500% of gdp.

In the united states, it is 100%. you are in much better shape.

You have some very large banks, that is the difference rid of that is what fed is worried about.

The swiss and the u.s. are pushing hard.

People are now looking to europe and saying, under the rules you are adopting, you are a little less stringent.

We do not have a level playing field.

That is the truth.

Is there anybody else we should be watching for who will need to raise capital?

We would've said deutsche bank, but they came to the market back in may and raise money.

-- raised money.

Looking elsewhere, no, because the banks we are talking about are the biggest universal thanks, retail and investment banks in europe.

They have the biggest issue with leverage.

Christopher wheeler, thank you so much.

We've got is our guest host the former commerce secretary carlos gutierrez on this idea of regulation and banks needing to adjust to a new world of higher capital ratios.

I think this is a major issue down the road where you have increased capital, a higher risk weighted average.

You're not going to be able to lend to small and medium-sized businesses.

How is that going to help the economy?

I realize how that is going to hurt the banks or punish the banks, and what is the goal of this regulation?

It is going to be tight for both the banks and people who need the cash in the capital.

Small and medium-sized businesses.

Something to talk about.

We will talk about immigration again.

This idea of regulation.

We will also have to talk about the budget battles that are looming, he deadlines coming up.

A big decision for you.

We will speak to the ceo who found a new way forward after the.com boom -- dot com boom busted his business.

That is coming up on "bloomberg surveillance" on bloomberg television and radio, streaming on the bloomberg tv plus app and at bloomberg.com.

? "bloomberg surveillance." i am sara eisen here with tom keene and scarlet fu.

Pfizer is it -- is the world's largest drugmaker.

It's popular cholesterol treatment, lipitor, the company announced it will split up its three major businesses and shuffle management.

If you read between the lines, the company may be gearing up for a bigger break up.

From the big pharmaceuticals days ago, here we go to something new.

Marsha gordon is with clear bridge investments.

He has seen the collapse of pfizer.

He joins us this morning.

How big a screwup is this?

They all wanted to get big, big.

Pfizer, big.

Merck, big.

I do not think things went wrong.

What we are seeing is the other side of their success.

When you have these large pharmaceutical franchises, the patents go off.

Then you have a big fall down.

I think this is the backside of success.

I think what we are seeing is the pharmaceutical industry, number one, learning to deal much better with these large patent lists, as well as a turn in r&d productivity.

R&d productivity, does that mean they cannot find new drugs?

If you look over the past 10- 15 years, r&d productivity has been a straight line down.

Spending more dollars.

We are beginning to see an inflection point upward in r&d productivity.

We have had a tremendous increase in investment and our understanding of genetics, immunology, oncology.

We will start to see the fruits of that.

I think the pharma sector is poised for a number of good years in terms of innovation and bringing really important new drugs to market.

If pfizer does all of this and break itself up, which part of the business do you want to be in?

Which is the growth.

When news corp.

Split up, there was a this tension.

They are setting up a growth versus value situation as well.

You see them put their oncology and the vaccine business into one business unit.

You see the core franchise of primary care medications in another.

I think that is going to be growth.

Is the moonshot we have seen in all of these, is this off of the affordable care act and clarity?

All the healthcare stocks go up -- has that been the easy money made, and is it now a slog forward?

I think some of the easy money has been made in pharmaceuticals.

J&j is an example.

Even at j&j, you see a turnaround in their drug business.

You see that across the industry where we are getting past the patents.

We are getting two new drugs being the fuel for growth at these companies.

You look at that, and that is a sustainable trend across the industry.

We want to bring in former secretary of commerce carlos gutierrez.

It would seem like in consumer businesses, it is difficult to straddle a private label, generic strategy, and a branded strategy -- employees get confused.

The supply chain is so and are twined -- intertwined.

Is this the writing on the wall that eventually it is going to have to take place that they do split the businesses?

Inside of the company, who will want to work on the value side?

Everybody will be on the innovation side.

Are they headed down the path?

This is clearly the prelude to something, and that is one potential path, to break that up.

There is a challenge in both managing the innovation business and a business that is then going to try to compete with that with generics.

I think that is a challenge.

But i do think it is also a challenge to break up the company and to separate all the manufacturing and commercial infrastructure.

Marshall, you mentioned the patents.

What does pfizer -- what does pfizer have in the pipeline?

They have launched two drugs at the end of last year, one, the first oral drug for rheumatoid arthritis, as well as another drug to replace the blood thinner warfarin.

I think those are two drugs that have significant potential.

They also showed data last year in december on a breast-cancer drug that had some of the most stunning survival data and survival increases that i have seen in a long time in oncology.

Marshall, thank you so much.

Marshall gordon is with clear bridge.

Let's get to company news.

A weak second quarter for sprint.

The wireless carrier lost $1.6 billion.

Analysts were anticipating a deficit of $.36. it shut down its nextel network.

Subscribers fell by more than one million in the quarter.

It was the last order before softbank $21 billion buyout.

Lower oil prices and higher tax rates hitting bp's bottom line.

The oil companies are earning sly to two $.7 billion last quarter, well short -- slide to 2.4 but -- $2.7 billion last quarter.

Mcdonald's is among the fast food chains targeted by striking workers.

Employees at mcdonald's and other restaurants are striking in more than half a dozen cities over the next few days as they call for higher pay.

Good morning.

It is "bloomberg surveillance" on bloomberg television and radio, streaming on the bloomberg tv plus app and at bloomberg.com.

All of our interviews are on the ipad.

Bloomberg radio plus out on itunes and android.

Sara eisen, scarlet fu, holding the fort down today our guest host on immigration is our luis gutierrez.

The former secretary of commerce for president bush.

It is time for big decisions.

We give you an inside look at the critical choices in the c suite that shape american businesses.

We are looking at 8x8, the once chipmaker suffering heavy losses and the dot com bust.

It regained profitability and added new jobs.

Brian martin has been with 8x8 since the 2000. he joins us on bloomberg -- on "bloomberg surveillance." let's get straight to your big decision.

A semiconductor company to a business communication company.

How did you identify that you needed to change course?

It was a much easier decision then you made it sound, because all of our customers went away starting in the fall 2000. lucent was one of our largest customers at the time.

We were selling to all the communications technology providers.

When your customers go away, and you are burning so much a month, and you only have one million or two left on the balance sheet, desperate times call for desperate measures.

We watched as a service provider.

; doctors to business communications -- semi conductors to business communications.

What enabled you to make that change?

It was the technology could even though we are a service provider, we still build our services on the company's own technology.

Having developed a decade's worth of communications technology, starting a videoconferencing, moving over to voice ip, it was an easier move than you might think.

I thought it was bring your own bottle.

That is not what this is about, is it?

This is about voice communications.

Byob.

Bring your own device.

What is that?

It refers to being able to digest your communications, your inbound calls, your voicemails, your faxes, your recordings on any device that you choose.

Instead of being tied to the black phone that is on your desk , you can use the smart phone in your pocket, you can use any sort of mobile device.

Is it up and running in july of 2013? this really works pretty for many years now, we have more than 33,000 customers who use us as their only business phone system today.

But it is beyond phones.

It is all about multimedia, choosing what is called unified communications to unify all these media types onto any device.

Your customers are pretty diverse great everybody from subway, the sandwich shop emma to dish network.

-- shop , to dish network read i would think it is a competitive space.

It is still dominated by -- at&t, verizon, and quest, providing long-distance to more more than 90% of the business market.

You were almost a penny stock, and then you came up here.

You have gone essentially one sent to nine cents predicted you run a company differently as a one dollar a share company then an eight or nine dollar a share company?

-- van and eight or nine dollar a share company -- than an eight or nine dollar a share company?

Somehow we stated that we stayed listed on the nasdaq could never went to the pink sheets -- we stayed listed on the nasdaq the whole time.

It is a tough thing to say to investors.

We are building for the future.

Would you be open to an acquisition?

To someone acquiring 8x8? somebody acquiring 8x8. no, it is all relative.

At $38 a share, which is where we peaked in 1999, there is valuation there, but we now have a multiple.

The company has been profitable for three years.

We are growing 22%. the company is well-positioned for the future.

Thank you so much.

8x8. very cool.

30,000 customers, nearly 100 million in revenue.

That would be a big decision.

The bottle you brought on?

Did you bring tequila?

Ok.

one tequila, to go -- to kabila.

Petrone out boasts 12 different brands.

Coming up, we will speak to the company's founder.

He is also the father of a very famous haircare brand.

Tom will get haircare device and a bottle of tequila.

That is coming up on "bloomberg surveillance" on bloomberg television and radio, streaming on the bloomberg tv plus app and at bloomberg.com.

Coming up later on bloomberg television, eric newman, the executive vice president of restaurant chain bojangles, he will join "in the loop." hopefully he will bring chicken and biscuits.

A fast-growing chicken fast food chain.

I have never eaten at bojangles great i bet you he has the affordable care act on his mind.

Also some protests, demonstrations by restaurant workers about food chains over higher pay.

The president, michael mckee, the president wants to restructure business taxes.

The initiatives are designed to help manufacturing.

They are also designed to bring $2 trillion act from abroad.

You know that from apple computer, but many others.

Hans nichols is in washington with more.

It is about that $2 trillion number.

Can they finally get it done and bring all the money back from abroad?

$2 trillion is one place that the white house is looking for new revenues for a jobs program.

What you do is you take that $2 trillion back, you tax it at some amount, and you take the revenue from that and you designate it for new child -- for new jobs programs.

He looks like tax repatriation.

It is not entirely clear how this differs from some of obama's earlier proposals.

What is is that the white house and president obama are decoupling individual tax reform from corporate tax reform.

That is the big headline.

They accept that individual tax reform, grand bargain, it is pretty much dead.

If you want any movement for jobs, you do it on the corporate side, and they haven't worked out the details with a price tag.

Let's bring in carlos gutierrez with business experience, but also a former secretary of commerce.

This has to be a constructive mood, but it is in a polarized washington.

Can anything get done?

They are trying to raise revenues, which is the last thing i think that the government needs.

In the president's speech, one thing that was cleared is th

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

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