Beleaguered White House: Surveillance (10/30)

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Oct. 31 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: David Blanchflower , Julianna Goldman, Eugene Munster, Rohan Marley, Brent Toevs, Abby Joseph Cohen, Kerry Trainor, Bernard Marcus, and Martin Neil Baily. (Source: Bloomberg)

The fed acts.

The obama administration are beleaguered.

Politics is never having to say you are sorry.

Coffee.

Try to catch fire.

Good morning, this is "bloomberg surveillance." i am tom keene.

It is thursday, october 31. i believe that is halloween.

Joining me is the scary sara eisen even more scary scarlet fu.

You came in on a midnight flight?

Practically midnight for our early wake-up hours.

I got to speak with a number of ceos across industry about their frustration with what is going on in washington.

Back from ohio.

It was good.

How about a morning brief to get you caught up.

Think of it to be in sticking with its campaign of record monetary easing.

Also in corporate news, sony surprisingly cut its annual profit forecast, plunging box office receipts for sony and still demand for electronics continues to be the story.

In the u.s., data out today, 8:30, thursday initial jobless claims.

In the weekly bloomberg consumer comfort read.

There is a slew of earnings before the bell, cigna, time warner cable, discover, hanukkah phillips, mastercard -- conoco phillips, mastercard, aig.

Breaking news out of europe.

The unemployment rate in europe, all of europe, continues to rise.

12%, now 12.2%. the backdrop, which we will talk to david blanchflower about, is deflation.

There's just no inflation out there.

We will address this in this hour and what it means.

Interesting to look at the corporate earnings in this country and the commentary and numbers out of europe, for instance, general motors yesterday, perhaps signs europe is turning the corner.

We will see.

It will not be any sort of booming recovery.

Let's get to the data check.

We will go real quick -- let's go on to theftse.

-- to the ftse.

A little bit light.

We can't afford harrods.

A data check dedicated to danny blanchflower.

Time for the front page are the most important stories.

We have to go back to the federal reserve.

It held steady on its bond buying program.

This was expected.

Policymakers came out of the meeting with no clear signal.

We don't know if they will start pulling back on seamless and in december or first quarter of next.

They also stuck to their assessment of the slow-growing economy.

If anything at all, it would seem said officials were not as dovish as some may have anticipated.

We saw stocks with a rare retreat from record highs.

Things to all of ge capital and the ohio state university for the great hospitality.

Here is what he said, "uncertainty is the new certainty." but can the fed fireback?

It is just a question of what happens next.

Our next front-page story has to do with facebook.

Mobile fueling the jump in profit.

Great numbers.

And comments in the conference call put a damper on the optimism.

Facebook putting the brakes on the number of ads in your newsfeed.

And younger teens, the company said it during the conference call, they're not using the site as much as they used to.

We will get more details on this.

This has to be troubling for facebook.

Younger teens, that is supposed to be the poor audience.

Do you know any younger teens, tom?

No.

president obama defended health in boston yesterday, about he would not let republicans try to turn healthcare.gov failures into ammunition in order to repeal the affordable care act.

Kathleen sebelius apologized during the hearing.

It was dual messages from the white house.

It seems to show the white house insiders are acutely aware of the opportunity this is giving the gop.

Bazaar.

But this is worth mentioning, a poll shows the president's approval rating has hit new lows.

Our approval rating for david blanchflower is off the chart.

His plane took off from dementia last night, turned around and went back and he still rushed took off from new hampshire last night, turned around and went back, and he still made it here.

He advises federal reserve governors, dartmouth economics professor and bloomberg contributor.

Joining us as well, julianna goldman.

There's something about boston.

What was the president doing in boston trying to over show or show up the boston red sox?

You've got to be kidding me.

This is the obama world series.

Why did he go there?

Who advised him?

The reason they went there was to try and strike -- you're talking about this jewel tone.

Wanted to say, halo, look, health care worked for -- hey, look, health care worked for matt romney.

It might be rocky, but ultimately this will be successful like what we saw in massachusetts.

Will that resonate?

With who?

The american public?

The republicans?

I saw another poll yesterday which indicated americans are willing to give the website sometime, but they don't have a whole lot of time and that is why the administration said they set the november 30 deadline.

They are in triage mode.

The message from the president down to the staff is, let's make sure we fix the problem now, says plane later, figure out what happened after the fact.

When you go to 1600 pennsylvania avenue, how behind them are other democrats?

Right now you're not hearing democrats criticize the white house on this.

More when the other democrats look back and say, how did we get here?

Was this a management flaw?

Was this problems of the west wing that brought this?

What they say is it is a management issue going forward.

What will be tested now is the reaction and response.

I wonder about the party because they're going into another round of high-stakes negotiations here with the budget, with another government shutdown, with another debt ceiling not to mention every thing else on the table like immigration and the tax code.

Does this week and the democrats hand?

I think it is just a matter of bandwidth and the kind of income the white house can?, that democrats, republicans -- she is so washington.

If we all -- if we said bandwidth, it would be punchy.

I understood the reference.

But the white house has missed steps on health care is providing an opening for others to come in.

John mccain tech news opportunity, looking at a weakened white house, to talk about how he might come in and disrupt the confirmation of janet yellen as fed chair unless the white house does more on libya, benghazi.

That is right.

I think republicans can smell weakness and they will try to jump in.

Look -- will he gain traction?

I don't think you can separate john mccain from lindsey graham.

In some ways he does need to show that independent streak that he would step up.

These are threats.

They are not saying they would oppose her nomination, just looking with what they have always latched onto benghazi.

David blanchflower is with us.

Danny, look at janet yellen and the fed and many some -- and they need some governors.

How important is it to be properly staffed and quickly staffed?

Very appropriate to be properly staffed.

I think the big deal here is, how important it is to sort out the janet yellen confirmation.

We are in a word of forward guidance.

If you end up delaying the apartment of a new chair, that would be very bad for the world.

So i think this transfer needs to be seamless.

She was supposed to be the safe bet, not the controversial pick likes larry summers was.

One question i have, if you get to january 30 first, if janet yellen this still isn't confirmed as vice chair, wouldn't she be the chair so take some of that pressure perhaps off of members?

Presumably, there's no reason why ben bernanke would temporarily -- he is still a governor.

He is a term through 2020. and official told me last month that he would be leaving on the 31st.

I understand that, but he hasn't announced it.

What do we do if we don't have a fed chairman?

As vice-chairman, wouldn't you become the chair?

I assume so but -- all i know for certain is ben bernanke didn't get any sleep last night as a diehard red sox fan.

Lots to talk about in this hour.

Abby joseph cohen joins us as 7:00. let's get to company news.

Cigna just reported earnings, big beat over the consensus.

Third-quarter sales increased 10%. more fallout from the foreign- exchange trading investigation.

Citigroup and j.p. morgan for their top london traders on leave.

The moves come after regulators began investigating their use of an instant messaging group.

Regulators are looking into whether participants of the group tried to manipulate rates.

Shell mrs.

Profit forecast.

-- shell mrs.

-- misses profit forecast.

Shell was it by a 2% drop in oil and gas production tie to theft and sabotage at its operations in nigeria.

Sony unexpectedly lowers its full-year profit forecast.

The electronics company taking it from slowing demand for its tvs and visual cameras -- digital cameras.

Walks off his sales for its movies down over last year's levels.

Second straight for your profit after cutting 16,000 jobs and also unloading assets.

That is today's company news.

The top story of the morning, of course, the st.

Louis cardinals failed to recuperate.

The boston red sox from worst to first, beating the cardinals 6-1 last night at fenway park, winning the world series.

Congratulations.

It was their third championship in as many years.

And the m.v.p. -- last year was their worst year since 1965. what is so cool about this, none of us have ever seen them do this at home.

Ever.

First time in 95 years?

I'm old enough to be in the camp were unit it red sox would never win.

There in the premiership now.

Good.

Let me do my morning must read on economics, finance, and business.

? i can't begin to know ? ? spring became a summer ? ?woa woa woa, sweet caroline ? ? good morning.

Michael leavitt this morning "in the loop." no doubt on the affordable care act.

"bloomberg surveillance." we have to talk about facebook third-quarter results in late yesterday resulted in some volatile trading.

First it was a blowout number and then some comments.

First the blowout numbers, higher-than-expected revenue and profit, mobile as percentage of total revenue up 49% versus let's say 41% in the second quarter, better than anticipated.

But the worrisome comments about how news the promotions will not rise significantly going forward.

And younger teens apparently not using facebook as much as they used to.

The engagement level dropping off.

The facebook challenge for investors and analysts were, how to monetize it and make money on mobile, on advertising?

It was never a question about the user experience.

That was something that mark zuckerberg had nailed down.

Acyclic, making more money through ads, boosting your user base without annoying all of these millions of people who are on facebook with marketing pitches.

They're just confronting who wants ads in their news feeds.

No one likes it, but if it is done seamlessly -- but if people are not engaging as much.

Facebook's growth in north america slowing.

It is a saturated market.

Most of the revenue growth comes from north america.

Their user base is growing more quickly in other parts of the world, but that part of stopping monetized as well.

Gene munster, good morning.

Will this affect the twitter ipo?

I'm sorry, they're directly linked, aren't they?

They are in it will have an impact.

This is something twitter investors will start to extrapolate for year and half down the road.

The good news for twitter is facebook stock is in a much different place today than it was nine months ago.

Likes when you look at the newsfeed question, is a legitimate?

Will we use ads in our newsfeed?

We will.

It is a question.

I think what is really going on here is facebook's cfo is probably using this as some sort of tool to keep expectations in check all stop -- in check.

If you look at ad growth, it came from ad pricing.

That was up 42% in the september quarter.

The number of ads was up 16%. it clearly had an impact on the stock, but i think you're probably making a little bit bigger deal out of it.

Gene munster, you write there's a theme of under monetization at facebook.

Now that facebook plans to sell ads instagram, will that make up for it?

It probably will.

At the end of the day, they grew 60% total revenue.

Expected 32% next year.

They're testing the video product.

As an investor, you look back and say, it is concerning about the engagement member with teens and i'm concerned about the ad low number, but expectations for growth, there are some wild card second play in with instagram and video.

Such as what?

The two biggest wildcards are , they're probably 300 million instagram users and video has higher -- they make more for the video ads.

Gene munster from piper jaffray, thank you so much, linking to twitter.

Did sara eisen get enough sleep last night?

That's not it.

Which has a brighter future, facebook or twitter?

That is our twitter question of the day.

Everybody is glued to the reports of gene munster when it comes to his call on apple.

How does he do it?

We followed him and his methods.

How he digs of those timbers on what to expect from apple and we will show you that coming up here on "bloomberg surveillance." ? good morning, "bloomberg surveillance." we are all together to listen to sara eisen's morning must read.

It is a good one.

The curse of the second term of the presidency.

If you look at some presidents of the past, it doesn't look so bad for president obama.

Here is the quote i pulled -- so maybe it is not all that bad for the president with his health care problems.

Front and center, julianna goldman at the white house.

To you feel it?

Most people said they felt that with reagan, with bush senior.

Are they tired?

You do get the sense where we had the irs, the nsa scandal snowballing, that there is this cascade of bad news that they haven't been able to really contain or control, and they look reactive instead of proactive with all of this.

Is it they're tired from the day today crushing grind or is it they bring many people, which are sort of the second-tier people?

I think there really isn't the new blood that second terms need, which is one of the things people were saying before the president's second term is that he needed to bring in new people because this white house does tend to be a little too insular.

You haven't seen that yet.

Yesterday i spent some time with chief executives from industries like steel.

Fred smith from fedex.

The signal from washington right now is that they are actually hurting business, and that president and congress is not listening in the business leaders come on capitol hill for the photo ops.

What is that relationship right now?

We know the president has extended a hand of this community.

I think the relationship is probably better that it was a year ago between the white house and the business community.

You get the sense they realize it is a paralysis and dysfunction in washington that is gripping both sides, but they would like to see more leadership from this president.

My morning must read, comparing how people's expectations were too high coming in.

It is not the technological problems, but fundamental problems.

It is a management problem.

Julianna goldman, danny blanchflower with us.

He said in a bit of a pickle.

How long can it afford to taper?

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

We need a data check.

A little light -- off the lightness of the fed meeting yesterday.

Crude goes nowhere.

We are knee-deep in earnings season.

Dreamworks is up more than 17%. the box office success of "turbo" and "the croods." linkedin gave a sales forecast that came in a little bit lighter.

Interesting, given facebook.

This is a big deal.

What facebook said yesterday.

We will talk about this.

Younger teens not engaging.

The fed is also a top story.

Investors are assessed with what the fed will do next.

Will that make a move to taper or scale back?

The clues are hard to figure out.

Will the unprecedented stimulus end up hurting the economy in the long run?

Are there negative side effects that we need to talk about?

It is an original said policy.

-- fed policy.

Where and when will return to economic growth in a normal fed?

Wages is your effort in your classic book "the wage curve." wages are going nowhere.

Down we go.

Negative wage growth.

We are back to about flat right now.

When the wages go up?

What makes them go up?

Two things.

The big things is that when the labor market is so tight -- we are a zillion miles from that.

We have people outside the labor market.

They are pushing down on wages.

Firms' ability to pay is limited.

I think people should be watching wages really closely.

They are not going anywhere.

Is janet yellen watching them?

Absolutely.

Look at unemployment, but worry about other things.

The fed should be looking at the wage rate.

They are going no place.

So maybe that justifies the record amount of stimulus that we are saying.

But you have to look at the negative side effects.

The unintended consequences.

The risk of bubbles.

Inequality, rising income gaps.

There are so many different things that people are looking at.

You can only do what you can do.

The question is what is the alternative?

You are in a situation at the fed where the fiscal policy is lowering gdp by a lot.

You can't cut interest rates any further.

So you need to do quantitative easing.

The choices you have are limited by the congress.

The question is what are the alternatives that you can do?

Few to none.

This is why sara eisen and i and scarlet fu don't have real jobs.

That is david blanchflower.

This is the theme in your london and your europe.

Deflation.

Do american viewers need to worry about deflation in the united states?

When you look at the press release yesterday, they have been talking about the fear that inflation is below the target.

If you look at the projections from september, the fed sees no inflation anywhere.

It does not get to the target of 2%. the point of qe -- or the idea of it was to push up asset prices.

That's what we were telling you inequities.

What is so scary about it?

The big concern is that why would you ever take out a loan -- you take out a loan -- and now you have to start paying it back with money that is work less than what was.

If you look at germany, deflation was the nightmare.

Not inflation.

For all of you worldwide, we yammer on everyday about central banks and this that and the other thing.

Julianna goldman is with us from the white house.

The politics of it all.

She's at the white house.

She's at the white-hot office, right -- white house office right?

David, seriously, this is deadly serious stuff.

What does this debate mean for our viewers?

We are not quite to real deflation worries yet.

We are migrating there.

We are absolutely moving there.

The fed has a target of 2% inflation.

Yesterday we had numbers out that set 1.2%. the worry is that the fed is not doing enough stimulus because inflation is too low.

We are in a position where inflation is too low.

We can get it up enough because there is too much money being pulled out of the american economy, not being pushed in.

The fiscal policy is lowering gdp by around 1.5% to 2% per year.

It looks like the next move should be to do more stimulus, not less.

He were crazy.

No.

with data watches, if consumer confidence collapses -- julianna goldman, where is the president?

You need congress.

The president -- we talk about senators standing up to block the fed nominee, this is a polarized, gridlocked congress.

You are not going to get the stimulus.

To your two worlds, this idea of a president who has to deal with a plutocracy from qe.

David blanchflower's quantitative easing has been a win for the haves.

That is not the president's constituency.

We can get into the fact that he is the president of the united states of america right now and a booming economy is good for everyone.

He talks about the middle class more than anything.

And this has had an impact on inequality.

This is made the rich richer.

The alternatives were all worse.

It is about all the upside risks, sara says.

But what are all the alternatives?

We will worry about it down the road.

Not yet.

Normal ain't now.

You are the watcher of all washington -- are they going to change the redskins' name?

Some of us are people who -- i don't necessarily think that the name should be repeated or that it should be even out there.

The president gave his two cents on what he thinks on the name.

That is something for dan snyder to figure out.

Now that we have covered the serious issues in washington -- julianna goldman with us.

David blanchflower, qe forever, with us.

Coming up, we will talk to the ceo of vmimeo.

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

The european central bank is making its liquidity swap agreements with other central banks permanent.

The measures were put in bank during the financial crisis to give banks access to global currency.

The arrangements are a prudent liquidity backstop.

President's obama's -- president obama's approval ratings hit a new love.

-- low.

This is according to a new poll from "the wall street journal" and nbc news.

The boston red sox win their third world series title in the last nine years.

Bases-loaded double from shane victorino broke open a game.

The red sox wrapped up the title at home for the first time in 95 years.

It is the eighth world series championship for the franchise.

Those are your top headlines.

Third and how many years?

You are crying.

Big victory lap for boston.

The city recovering.

The linkage to the marathon -- it was certainly motivating -- i talked to a legendary sports broadcaster in boston and he was adamant that it was not about the marathon.

He said this team had a magic before the bombing.

They did so badly last year.

It is all about managers.

It is.

What the hell do you know about baseball?

I think sara and i know just about as much as each other.

Jeff immelt is a big cincinnati reds fan.

Cracks what do you know -- what do you know about cricket?

Cracks nothing -- nothing.

I do know a lot about apple.

I finally got my 5s. we spoke to gene munster about it.

My job is a sell side research analyst.

My job is to figure out if the iphone will be a hit and what the impact will be on the stock.

90% of people who love iphones say they will buy another iphone.

We are heading over to the apple store.

Can i ask you a few questions about the phones you are buying today?

It is kind of like an opening weekend of a movie, where we are trying to get an idea of what the opening weekend sales will be like.

You really never see this from other product launches.

Sometimes when so-and-so's no and the clients to do the serve way -- and refuses to do the survey, sometimes it is best to leave the group and talk to someone else.

The doors open and 15 minutes.

-- the doors open in 15 minutes.

This is much bigger than what we expected at the store.

We need to gather some other places too.

Now that we got our line, we start to work on our actual research back at the office.

What we have at the flagship store -- the gentleman said that he was in line for a couple of hours which is a couple -- a sign that this plan is refilling itself which is a good sign about overall demand.

That gentleman was very helpful.

He is a security guy.

An apple employee told him that he will probably be cut by about 3:00 today.

That is a sign that they will sell out by 3:00 today.

It has been consistent since the iphone came out.

As long as apple keeps creating products that people want to have, this enthusiasm is going to continue.

Overall, the way i think about launch dates is that they are a lot of fun.

It is the energy that is out there.

It is a chance to cover and talk to as many people that we can talk to.

Even though it is tiring, it is a worthy effort.

If you thought sell side analysts do spreadsheets, there's a whole new image.

This video -- and the other one from yesterday, single to best videos i have seen from bloomberg.

That is what sell side really does.

Everybody thinks these people are planted in front of spreadsheets.

That was absolutely mint about the real world.

You can catch it on bloomberg.com/video.

Coming up, bob marley's legacy lives on.

Marley coffee is going up again starbucks.

This is "bloomberg surveillance." i am scarlet fu joined by tom keene and scarlet -- sara eisen.

We have some company news for you.

Panasonic doubling its profit forecast.

Earnings for the full year will reach $1 billion.

The profit picture comes as panasonic shifts away from consumer electronics.

They are now supplying electric car batteries to tesla.

This deal may bring in $7 billion in sales over four years.

Softbank tops analyst estimates.

Net profits rose.

Part of the increase due to the iphones.

Apple plans a big boot to capital spending.

The company will increase spending to $11 billion for this fiscal year.

Within $500 million will be spent on apple's retail operations.

The plant to open 30 new stores and remodel 20 others.

That is today's company news.

But another -- another company on the move is starbucks.

America and asia led the way, about four times what you're up posted -- europe posted.

Disappointed investors drove the stock up.

What has starbucks buzzing is not just the beans.

For dollar cups of coffee.

One company doing just the opposite is marley coffee.

The organic, free trade brand is looking to expand across the country.

Joining us now is rohan marley.

One of bob marley's seven sons.

11 children total.

I got into the coffee business by chance.

I visited a farm as a child.

The farm had coffee on the land.

I asked the community what they are for, they said growing coffee.

You are the corporate person in this business.

What is the value proposition going up against starbucks and that the doughnuts?

Starbucks love the way for us.

We don't even see them as competition.

The singleserve category is doubling every year.

As an organic and sustainable company, that is not a niche market anymore.

We are bringing that to homes across america.

Rohan, what have you learned from starbucks that you don't want to do?

Not so much about what i don't want to do.

I learned that the core values of starbucks and principles.

More of like something to bring back -- socialization into the coffee world.

The book and sit and talk to each other and speak to each other.

Starbucks has become so humongous that people tend to forget where they came from, the roots of starbucks.

We want to get back to the roots.

This is great.

I spoke to the ceo of under armour yesterday.

You have to deal with this gentleman's legacy and his father's legacy.

You make once grew up and it is done.

You have to live with that everyday.

How do you build the brand of marley?

Certainly, it is an iconic brand.

It inspires passion.

It in spires transformation.

That is what we want to do to coffee drinkers around the world.

We have to stay true to our values.

We have to make sure the products fit into those core values.

We have to make products that excite people when they drink our coffee.

We have to be unique.

The consumers are speaking.

We are growing at a fast rate.

Why is that, when you going to the hotels and to these coffee makers and you put the coffee in, it takes at -- tastes absolutely terrible?

That is a great question.

Let me get this one.

. i'll tell you why.

The respect for the been in the coffee and the process, people don't respect that core value anymore.

Coffee is like one.

It should not be drunk, it should be tasted.

The true connoisseur will never be drinking it in the lobby.

He wants to know where his coffee is grown.

It should be held at a higher value.

People should not drink garbage coffee.

I wandered the one for free in the hotel, but i will go downstairs.

There's this whole trend of crafter n.l.. craft beer, craft cocktails.

Craft coffee?

Are consumers paying a premium?

Yes.

They are.

They will go down and pay therefore -- four dollars for a cup of coffee.

Do you want to excite your customer?

That is what we are about.

Do you want to co-brand with someone like ms.

Presse oh that gives you an -- nespresso?

We want to be the nespresso.

We are going to expand on the platforms.

We are going to double our platforms.

Forget about the single shot.

Become come, you need to bring three gallons of black coffee.

I want to congratulate shane victorino for the excellent job he did last night.

You can do that.

We will be back.

This is "bloomberg surveillance." the fed, the affordable care act -- the obama administration addresses its.

Of -- healthcare.gov crisis.

Politics is never having to say you're sorry.

Vimeo is high-quality video.

Can it pull ahead in a youtube-y world?

I am tom keene.

We are a little punchy this october 31. mohamed el-erian is very smart.

Vimeo is a video website.

Healthcare.gov is a health care.

Two places you should visit.

The bank of japan keeping its policy on hold.

No change there.

Unexpectedly, we did get a word from sony, cutting its annual profit for -- forecast.

Plunging box office receipts, falling demand for some of its electronics.

Will .2% unemployment rate across europe, a new high -- 12.2% unemployment rate across europe, a new high.

A slew of earnings before the bell.

Time warner cable, discover, estee lauder, exxon mobil -- it spans all industries.

Aig will be the big one to watch.

Scarlet fu has company news.

Facebook says it will limit advertisements on its news feed.

The social networking site is trying to strike a balance by making sure members are not annoyed by marketing pitches.

Facebook says that younger teens are not using its website as much as in the past.

They made the disclosures after posting the third-quarter earnings report.

More follow-up from the foreign exchange investigation.

Jpmorgan and citi have put traders on leave.

Regulators are looking into whether participants try to harness up a four x rates -- manipulate forex rates.

Shelton missed its profit forecast.

It is below the $5.3 billion that was predicted.

That is the company news.

The white house is taking it from all sides this week.

We have julianna goldman in new york.

The cover of "the wall street journal." it is not just the technical glitches anymore.

He really is facing a hard time because of this.

What has been the white house response and message?

They are in triage mode right now.

They need to cauterize the wound.

The need to get the website up and running.

I need to fix everything now.

Then, do a forensic review of what went wrong and try to streamline the management.

Yes, we know we have to get this right, the legacy is writing on it.

That they have been through enough of these crises before to know that the shiny object of the moment and that in six weeks we will be moving onto another matter.

How do you respond to the idea that when ever is a crisis, the president throws and other cabinet secretary under the bus?

Who has he thrown under the bus -- who has he thrown under the bus?

Sebelius.

So far he is standing by her.

They have been trying very hard not to do that here it they have been trying to temper praise for the product, versus the website.

The president promised that they wouldn't lose health insurance plans.

It adds fuel to the fire.

It adds fuel to the fire of the bungled rollout.

Who was in -- who is driving this bus forward in terms of getting the economic bus back on track?

Economics of the health care and the overall administration.

The gatekeeper of the white house is the chief of staff, denis mcdonough.

All roads lead to him right now.

You have the economic team, jean sterling.

He will be taking over as the national economic counselor at the end of the year.

X -- julianna goldman the lives it.

Now we have the senior investment strategist at goldman sachs.

Her many critics are aware that she has been a persistent -- the dow is up 19%. we will get to that in a bit.

How distracted are you by the follies of julianna goldman's washington?

Washington has had an and or ms.

Impact.

The concern is that if the washington follies continue, it can have an impact on the global economy.

The united states is by far the world's largest.

We are the engine of global growth.

The rest of the world is looking a little peaked right now.

Questions about europe.

China may be coming back.

The united states has always been the key jive or.

If we are not doing well and our confidence is off, that is not good news.

How do you link -- how do you link julianna goldman's world with the measured and cautious idea to the being up 19% this year?

How do you dovetail all this?

It is totally consistent.

My view is that economic growth is below potential.

We could be doing much better, if not for a whole host of factors.

It is not just the government.

It is not just the constraining fiscal effect in terms of policy.

There are other things going on as well.

The market can do so well because the market started the year inexpensive.

The ratios were too low.

The value approaches that we prefer, dividend discount model's, suggested that the model was selling -- market was selling below value.

We are approaching value based upon 2013 earnings.

If one looks out into 2014, the portfolio strategy group believes that we have more to go.

Obviously, there has been a significant percentage change.

We think that the rate of growth in the equity market will slow somewhat.

We still think the market is underpriced on a 12-18 months scale.

Earnings is the single most of norton factor, not the fed -- important factor, not the fed?

Right now.

Investors are focused on the top line right now.

That is entirely appropriate.

Revenue growth seems to still be a big struggle here.

Companies have a lot of cash.

Investors are little less willing to reward companies that put that money to work, than companies who use the money for buybacks and dividends.

We are about see that change.

Over the last year or two, investors have focused in on dividend yield.

And not just high yield spurs, but the companies who were likely to use their cash.

That is not would good company should be doing on a long-term basis they should invest in the future to research and development and capital expenditures.

Over the last quarter, we have seen investors focusing on that use of cash.

Martin bailey will join us as well.

When you look at a classic article in "the wall street journal" decades ago, why aren't we talking about the equity markets?

Nobody is talking about your world.

Why is that?

The rich people are.

Nobody is talking about the equity markets, why?

People have been so accustomed to talking about fixed income markets.

We have gone to declining interest rates, declining inflation, bonds, and yields, and investments were the place to be.

This is particularly over the last five to six years that we have forgotten that the economy does better and equity investments are the place to be.

Part of the fed strategy is to help boost the stock market.

Make people the richer and more confident.

She gets record hate mail here at "bloomberg surveillance." i am man enough to take on the hate mail for the moment.

Julianna goldman, thank you so much.

Good to be here.

A challenging time.

What are the white house and britney spears have in common?

Good morning, everyone.

I am tom keene.

She is senior investment strategist at goldman sachs.

Cash and the use of cash by corporations.

Sacrificing the future of their research and development and their capital expenditures.

They are doing it to placate carl icahn, you, and me as well.

Wonderful to have you here.

Cash, it's the new drug, isn't it?

And they want it now.

If you prefer -- compare the current numbers to 15 years ago, corporations are using more of their cash for things like dividends than they used to.

That has to come from someplace.

It is coming from the long-term investment in the company, for one.

I was talking to the ceo of ge.

He is committed to continuing to build ge research and development.

Are you saying that?

Research and development at the corporate level has held and fairly strongly.

We are not seeing research and development at the governmental level.

What we know over decades, if not centuries, is that the u.s. government has typically stepped in to find -- with capital when there are big projects to be done.

This messman's -- investments in scientific research typically gets funded at that level.

We have really seen that come down.

As a percentage of our gdp, we are nowhere near where we used to be.

And all this debate -- in all this debate, is it just about nominal gdp?

We need more growth and that will sustain earnings?

It is much deeper than that.

It is about our long-term competitiveness and our ability to provide good jobs for people so the middle income wages and incomes -- do you prevent -- predict more income and jobs in 2013? that is our expectation and hope.

Basic research -- that is where we are lacking.

Abby joseph cohen, going as the russian star of the washington capitals for halloween.

I can see her going door-to-door with number 8. i am going as, ok, as kelly ripa.

I'm sorry.

It was a quick idea.

Kelly ripa, halloween.

Coming up, the skies interesting.

You want to know about the affordable care act, he is in the trenches.

He will be on market makers at 11:00 a.m. much more on the future of your health care.

Look for that at 11:00 a.m. this morning.

Are you going to be there?

I think stephanie and erik are back together.

Our guest host for the hours abby joseph cohen, it senior investment strategist at goldman sachs.

The jobless rate is unchanged at 12.2% in europe.

In spain, unemployment held at 26.6% in september.

Germany's jobless rate fell to 5.2%. europe's central bank will keep cash lines permanent.

The arrangement with the fed and other big central banks are a proven liquidity backstop.

The boston red sox win their third world series title in the last nine years.

Bases-loaded double from shane victorino broke open a scoreless game and sent boston to a 6-1 win over the st.

Louis cardinals.

The red sox wrapped up the title for the first time at home in 96 years.

Those are your top news headlines.

I had such a scarred childhood.

The first year they won i did not believe it.

It is just like, they didn't go to the moon.

I genuinely didn't believe it.

You've had a last good couple of years.

I'm now admitting that we won.

I didn't realize how rare it was.

Now i'm worried about spring training.

I'm worried about next april.

Just enjoy it.

I had a ticket to game six last night.

I'm in columbus, ohio.

We are going to talk about video right now.

It is hot.

The market is taking off.

Youtube gets over one billion unique visitors every month.

Vimeo is aiming to take some of those viewers.

They know attract a 100 million unique visitors one month.

Like so many media outlets, it faces a dilemma.

With increased advertising, could it scare viewers and investors away?

The ceo of vimeo --kerry trainor he is a former guitarist . he joins us right now.

What a great idea to have an internet executive nvidia out that actually did music videos.

How original.

I don't know that that's really what got me the job, but it was certainly a fun time to play here in new york.

With your distinction?

Vimeo has always been focused on providing a high-quality experience for viewers and creators.

That remains true today.

The high-quality video sharing platform for creators and their audiences.

When you look at your monthly visitors, and 2008, 4 million users.

2012, that exploded to 72 million.

Currently, more than 100 million monthly visitors.

A lot of people say vimeo is to youtube as linkedin is to facebook.

That is a decent analogy.

We are in the middle of another record month.

This month as well we will do over 110 million unique.

One of the reasons we are growing is similar to your analogy to linkedin.

It provides something different than youtube.

Youtube defines the category of video sharing.

We are now emerging as a different type of experience.

Linkedin's membership is also cap compared to facebook.

I see your point on linkedin.

I don't think ultimately we are cap in the same way.

Linkedin is absolutely a professional network.

Where facebook is a general social my work.

We are certainly used more frequently by professionals, be they filmmakers or ad industry professionals.

We are also used by consumers.

We are also used by small businesses.

There is no explicit cap.

I am just thinking of netflix.

How do you get better content?

Is there any reason what you can't get original shows on vi meo?

No, there isn't. we are inherently a two-way system.

Creators can upload content.

Viewers are consuming that content.

Technically, there is nothing preventing us from delivering a much more robust viewer experience.

We are starting to turn our attention on the audience side, on the viewing side as opposed to just serving them with tools.

Abby joseph cohen with goldman sachs worries about bigger companies.

Here is the cutting-edge of entrepreneurship.

How does this multiply into the rest of america?

It is a wonderful question for every other country as well.

One of the important things is that there are good, interesting technologies, fabulous ideas, but then also good management.

One of the things we have seen time after time over the last many decades is that flameout.

When someone has a great idea, but they don't have the capital or the management skills to really bring it up to scale or two incorporated with other technology.

What is the number one most watched video?

It varies from day-to-day and week to week.

To give a sense of the number of categories.

What you see on vimeo do well -- i heard the phrase cap video thrown around.

Typically cap videos are not those that break out on our website.

We see things like time lapse videos or other creative approaches to video.

Action sports.

Thank you so much.

Mrs.

"bloomberg surveillance." -- this is a "bloomberg surveillance." third-quarter profits at france's biggest bank oh rose.

The net income rose to .4% -- 2.4%. shell missed profit forecasts.

That marks a 32% drop from one year ago.

It is below the $5.3 billion that analysts predicted.

Finally, sony unexpectedly lowers its full-year profit forecast.

The electronics company taking a shot from lowering demand for electronics and box office sales for movies down.

Sony has been forecasting -- they cut jobs and sold assets.

Round up the usual suspects.

Sony has been saying this for 20 years.

Sony has had a lot of problems.

Call us up.

Dan loeb, call us up.

Single best chart.

It is a halloween special.

It is from the national retail federation's top costume survey.

We will take a look at the six biggest costumes.

Back to basics.

Number six is vampires.

Number five, zombie.

Number four is generic superhero.

Number three, sara, princess.

Who is that princess?

Kind of like the icy -- ugly stepsister.

Actually, mardi gras last year.

Tom, are you wearing my hair?

Lets the the which.

The number one biggest cost him -- costume is the witcvhh.

Including tom keene tonight when he goes trick-or-treating on the upper east side.

Americans are expected to spend $2.6 billion on halloween costumes.

It's a big deal.

I remember when it wasn't a big deal.

I bring the beer companies.

-- blame the beer companies.

It is the beginning of the holiday season.

Halloween is the fund spending.

It is the confectionery sales that are fabulous, of course.

It is the run-up to the very important holiday season.

We will more in november.

Mixed signals, can just consumer confidence numbers were pummeled.

Is lloyd blankfein going as ben bernanke?

Maybe paul giamatti is.

Are you going to go trick-or- treating?

You are.

You're not sending your kids as janet yellen?

No.

i would imagine a lot of ted cruz costumes.

You could be a zombie.

Or ted cruz.

I think that looks like you, tom.

Can we pull that up again?

Tom is a zombie.

This is tom before the makeup.

Halloween, there it is.

It does speak to the consumer.

You are calling the consumer within your optimist him for 2014. is the american consumer there?

And some in instances -- in some instances.

For middle income families, incomes have not risen on an inflation-adjusted basis.

There are concerns.

The consumer balance sheet is largely repaired.

When we take a look at debt payments, relative to purge them all income, they are down at a record low level.

How long is a bull market supposed to be?

I hate to say that is an irrelevant question.

People ask it and i think it is the wrong question.

I think what really matters is how long will the economy continued to grow and what are the valuations of the equity market?

If the economy is going to go for a long.

Of time from here -- period of time and we have a supportive fed even the fiscal policy is in the wrong direction -- we might be setting up for our first back-to-back losses to the s&p 500 in three weeks.

Good morning, everyone.

All of our interviews, including sara's interview, you can see them on bloomberg tv plus.

I am tom keene, back from columbus, i'll.

Sara eisen back from washington dc.

Scarlet fu is back.

Abby joseph cohen when is the advisor to major league baseball.

[laughter] she is an investment strategist at goldman sachs.

We have to talk about politics.

The government shutdown certainly divided the republican party.

Some business leaders now saying that they would more actively support pro-business candidates.

With this change the flow of money?

On the phone right now is bernie marcus, the founder of home depot.

You give your money to the republican party.

Which republican party are you planning to support?

I think that the job creators network -- we don't represent either party.

We are concerned about the small businessman.

We are concerned about how he will fare in this economy.

Right now he is not faring well under the democratic regime.

We see total dysfunction in washington.

Between the republicans and the democrats.

We speak to small business people.

I have done this now -- i am not a small businessman anymore, but i used to be many many years ago and i have not forgotten what it is like to work 15 hours a day, seven days a week.

What kind of problems and obstacles we had.

Frankly, today it is worse than i have ever seen in my entire life.

Which political parties fighting for your small business?

I think that you find that the republican party is out there doing a hell of a lot more.

If you look at what happened with obamacare, the effect of on small businesses is almost catastrophic.

Let me give you an example.

I spoke to one yesterday.

A restaurant that has 500 people working for it.

Dumb and what you are going to be doing, i said.

I'm going to be on radio and on television over the next few weeks.

He said, you cannot use my name.

I said, i promise you i will not use my name.

If they find out what i'm doing, they will come after me.

Tommy what you are doing.

He said -- tell me what you are doing.

My full-time workers, i will pay the penalty.

These 500 people who have insurance today, who are going to get thrown out on the street tomorrow and will end up with obamacare -- which is medicare -- and if you know what medicare is really like, it is pretty bad for the average person.

That is a view that has been consistently voiced by part of america.

You grew up in newark, new jersey.

How does the republican party move from being the elite party back to the business view and to the finance field of the middle class?

Can the republicans do that or will they be the party of the elite?

Listen, you want to keep talking about the elite.

My god, a guy who has 500 people working for him, he is not an elitist.

He is a businessman trying to make a living.

The people who work for him are middle-class america.

How do you define elitist against non-elitist?

Let's talk about the american people.

Let's talk about jobs.

Think about 500 people, the majority of which will go on part-time.

What a crippling effect that will have on people?

Who gives a damn whether you are elitist or not?

Who is going to protect these people?

You are a billionaire philanthropist.

Is there anyone you will be willing to put your money on a 2016? right now we don't have the leadership in the republican party.

We certainly don't have it in the democratic party.

I just hope that sometime between now and 2016, somebody hauls out.

We have seen that the democrats -- you want to talk about elitists, this is more of an elitist group than i have ever seen in my life.

Not transparent.

Passing bills -- we have to leave it there.

We're up against a break.

Think of for joining us.

The founder of the depot.

Coming up, today at 9:00 a.m., the former health and human services secretary, michael leavitt.

Interesting guy.

This is "bloomberg surveillance." some premarket action.

We need to start with facebook.

It has been back and forth since yesterday.

It is currently up by almost three percent -- 3%. it gave up all of its gains after the cfo made some can't meant -- comments on the conference call.

Younger teens are not using facebook is much as they used to.

Investors have gone back to pushing the stock a bit higher.

I need to be delicate here.

Abby joseph cohen is with goldman sachs.

You can talk about twitter, i understand that -- can't talk about twitter, i understand that.

Did we learn a lot from facebook , where we are going to have a more conservative capital raising efforts by other companies?

I think we learned a lot from the early 2000's, when companies came to the market to send -- too sonnon.

There is a big change in the ipo's that are taking place now.

The problem with facebook is that it came to market too late.

It held off for far too long.

She can't discuss it.

Have you ever worn a hoodie?

My company was not -- really?

We are digging a six-foot grave fear.

-- here.

Expedia came out with results.

Its bookings increased 50%. the number of nights customers book at a hotel has increased 20%. i've never book a hotel room online.

How do you book your hotel room stomp?

-- tom?

I just, people.

[laughter] i have never done it.

Most people do it.

Actually i never take a vacation.

Perhaps it is because of the overall economy.

Abby joseph cohen, that is certainly a positive signal.

We're certainly seeing an increase in spending on services in the last year or so.

People look at travel as an important discretionary item.

Something that allows them to visit friends and families.

Also an increase in travel, much of it is business related to him and a lot of business users are now booking cheaply.

That is the secret.

I don't have any friends.

And that is why i've never book a hotel room online.

You are digging yourself even further.

We are going to throw up the tom keene zombie chart again.

Good morning, everyone.

Tomorrow, the president of blackrock joins us to talk about the economy and jobs.

We will also talk about asset management and flows of funds in this most tumultuous time.

What's -- our guest host is abby joseph cohen, senior investment strategist at goldman sachs.

Panasonic doubling its profit forecast.

It -- earnings for the full year will hit $1 billion.

They shift away from consumer electronics.

One example, they provide electric car batteries for tesla.

As could bring in $7 billion in sales over 4 years.

Softbank getting a boost from the iphone.

They posted second-quarter profits the top and -- estimates.

Part of the rise is due to the iphone.

Apple lands a big boot -- boost to capital spending.

They will increase expenditures by 57% to $11 billion.

More than $500 million will be spent in apple's retail operations, specifically to open 30 new stores and free model 20 others.

No question it has been a rough few months in u.s. politics.

Remember that 16-day government set down -- shut down?

Today, president obama will be working on attracting foreign investment to the united states.

The question is how to our domestic politics impact our dealings with friends and foes, how does it impact their credibility, how do we attract money?

Martin bailey, chairman on the council of economic advisers for president clinton, now senior fellow at the brookings institution.

He joins us from washington.

And abby joseph cohen continues with us as well.

The us is a critical issue here.

Dr.

bailey, when you look at our international relationship, how should we best proceed coming out of this financial crisis?

It has been a rocky.

-- period.

We are not putting our best face forward.

Most people perceive the united states economy as having some substantial strength.

The growth rate here seems to us to be a little slow, but is a good bit faster than in europe and japan.

We are having more growth.

People are still looking to the united states as the engine of the global economy.

We have the availability of natural gas.

Energy price him at least gas price, are lower here than overseas.

Electricity prices and so on.

And the regulatory environment -- there are still some environment -- advantages here.

We should try to streamline regulation.

We see that with the headline.

12.2% european unemployment rate.

Real risk of deflation and part of europe.

-- in part of europe.

We also look at in europe that they are not as far along in the u.s. with regard to regulatory questions.

Germany, france -- 425 times higher than in the u.s. -- 4 to 5 times higher than the u.s.. what do you think the prospects for growth are in europe?

It is obviously a mixed story.

Italy, spain, portugal, greece -- it is still kind of a basket case.

It is hard to see how they will get out of the situation they are in and restore growth.

Northern europe is much better.

The u.k. is doing much better.

Germany has continued to do well.

The nordics are recovering.

It is a two speed economy.

Heart of it are doing reasonably well.

Fairly well.

Not fast growth rates.

But maybe 1% to 2% growth.

How they're going to deal with a two speed economy and still preserve the euro, that is still a tough question.

When you look at the perception of the united states from around the world, would you hear is that the united states is still where the action is.

It is still the bright spot.

Because there are not a lot of other alternatives.

Whether the treasury market or investing in america's business.

We are the cleanest dirty shirt is the attitude.

That is not something to be proud of.

How do you change that perception?

That is a good analogy.

I have also heard the analogy of the best horse in the glue factory.

I think we are a bit better than that.

We have a lot of innovation taking place.

I think that is strong in silicon valley and other parts of the country.

The innovation machine in the united states is still going well.

As i already mentioned, the energy.

I think you can change that perception if you make the united states a friendlier place to do business.

Part of it is on taxes.

Overall, i think we will need more tax revenue to get to balanced budgets eventually.

In terms of corporate taxes, we need to rationalize and perhaps lower our rates of corporate taxation make the united states more attractive.

That is a critical question.

It is a frustration for republicans and democrats.

When do we fix our corporate tax laws so apple does not have the gdp of france abroad?

Corporate taxes in the united states -- we have the highest statutory tax rates.

You are right, many companies that are built in the united states have billions of dollars overseas.

The two parties agree that this is a problem that needs to be fixed.

The question for martin is, when we look at what can be done in the short run, the u.s. economy is below its potential gdp growth rate here at what can be done from a fiscal policy standpoint to get us moving more quickly in the short to intermediate term?

I wish we weren't in such a contractionary fiscal stage.

The budget imbalance is a serious problem and needs to be dealt with.

At the moment, government spending is declining and a lot of people support that.

I don't think it is helping us grow.

A proper kind of infrastructure program would be helpful to us that keeps the budget under control, but at the same time speaks to some of the needs.

The other thing is making sure we take advantage of the natural gas and the oil so that that is available.

On the tax side, corporate taxes.

Those would be the three big things that i would point out.

The final one is trying to improve education and skills but that is much more of a long-term issue.

Martin bailey in washington.

Thank you so much for joining us.

It is ti

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

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