Best Buy Bounces Back: Surveillance (11/13)

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Nov. 13 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Nela Richardson, David Strasser, Bob Crandall, Clarissa Batino, Stephen Bienko, Howard Lindzon, Bart Chilton, and Lanhee Chen. (Source: Bloomberg)

This is "bloomberg surveillance." and embattled white house defends the affordable care act.

Small business and battle over what obamacare will do to the bottom line.

Best buy repairs the bottom and top lines, stock soars.

We speak with a bull about what is in best buy's secret sauce.

The devastation and panic in the philippines.

A relief effort proves difficult.

Good morning, everyone.

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

Live from new york, wednesday, november 13. joining me, michael mckee and scarlet fu.

Good morning.

This is not a skyscraper.

This is the british pound.

This is what happens when unemployment falls faster than expected in england, 7.6%. the bank of england moves forward the date when they might move rates.

Mark carney testifying right now, saying they might hit that in 2015. they were predicting 2016. is the crisis over?

The crisis is not over.

There is still a lot out there, on the continent especially, concerts out banks.

Things have calmed down.

That is other big news, spain experiencing deflation.

The european harmonized measure, they are at zero inflation year over year.

By their own measure, they are down 0.1%. crisis is far from over.

In this country, not a lot of data this week.

We get mortgage applications.

Mortgage rates have gone up about 0.5 percentage points.

We have on a saturday, before the bell, macy's, are americans still spending money?

After the bell, sea world and cisco.

Todd park, the nation's chief technology office testified before the house about the fog healthcare.gov.

Equities, bonds, currencies, commodities.

Euro, 1.3415, sterling on the move.

Crude is 94, a weaker crude.

The vix showing good equity markets under 13. there is the crude differential, 93.33 on american soil.

European oil, one of 6.94 -- 106 .94. here is the news of the day, mike, jack in -- jump in.

This is governor draghi and vice chairman yellen's worst nightmare.

Not as fairly.

Currencies have to devalue internally.

This shows that they are making progress.

A lot of this is energy prices going down.

Not differ the spanish people, very painful.

It gets them to where they need to go.

They don't have the currency to play with, they cannot depreciate the spanish currency.

That is what would normally happen if you had your own currency.

Let's get the front page.

We have scoured all the front pages of the major newspapers and websites.

The american-u.s. airways $70 billion merger, cleared to fly by the doj.

They reached a settlement that resulted in relatively few concessions to allow the creation of the world's biggest airline.

What is going to happen, they will give up 104 flight slots at several airports, 52 round trips at reagan, 17 california -- la guardia.

One more step is approval from a federal judge.

They're interested in those should -- slots.

We will be speaking with bob crandall in a few minutes to get more on this big deal.

Starbucks will pay $2.8 million to settle a dispute over the back coffee business, a defeat with kraft.

It centered on an agreement starbucks entered into to do should be coffee and grocery stores.

We are so jaded by bank finds.

$2.8 million, a big deal.

Starbucks said kraft was not doing enough.

This is all of their earnings since 2012, a lot of money.

$2.8 billion.

Microsoft, changing the way a rates and pays employees as the company goes to a major restructuring and prepares for a new ceo.

They will no longer evaluate employees on a bell curve on a fixed scale.

It is called a stacked system, jack welsh made it popular ige, a certain number of people in each division had to be let go.

This could change the way that microsoft -- that is you and i compared to tom.

The news is they are going cross management platform, looking at each other's divisions to double check.

There is so much contention.

It is controversial.

Microsoft needs to hold onto talent.

Steve ballmer is leaving.

They need to make sure they have the right people.

That is the front page.

An airline merger.

Now it is official.

We need to get the official word, robert crandall, legendary at american airlines.

He has been a supporter of the show.

Good morning.

Good morning, tom.

Are my there's going to go up -- fared going to go out -- far es going to go up?

Not because of the merger, but they probably will go up because the airline industry needs to make more money.

What is happening to the profits of the airline business?

They are reinvesting those profits.

America has an enormous number of new airplanes coming over the next 10 years, most of the airlines are rerecording themselves as well.

Hopefully, the u.s. airline industry will get back into the top of the league in terms of equipment and service.

The creation of a third national champion, we have united, delta, the new american, it will be good for the economy.

This is a notoriously cyclical business.

Does this set the airline industry up to make money on a regular basis: forward that you are down to three major carriers?

Making forecasts about the future is unnerving.

I do think the industry in the years ahead will be somewhat more stable, considerably more stable than it has been in years past.

In the years since 1978 when the airlines were deregulated, the industry has lost money consistently.

Hopefully, they will make at least a little money in bad years and decent money in good years.

Amr-u.s. airways comes out ahead.

What about southwest and jetblue?

If you look at what is happening, both jetblue and southwest have spoken up for some of us slots that are going to have to be released by american and u.s. air.

I think you will see that southwest and jetblue have a very different operating model than the legacy carriers.

They will do very nicely.

Bob crandall, thank you for coming by.

Former chairman of american airlines.

So much going on, a busy morning.

In washington, deficit hearings and budget hearings tomorrow.

Vice chairman yellen will appear before the senate banking committee.

Nela richardson is with us, she studies policy of our nation's capital.

David strasser, it snowed in new york city, time for a frenzy about retail holiday shopping.

Nela , within the same old same old of washington, all these people want to do is get business done, get out of town, and get back to their districts.

What do congress people focus on?

It seems like six things.

Tiom, i wish they wanted to get business done, we would avoid a lot of problems if they were not getting business done.

They are focused on the budget committee.

These talks resume this week.

They want to make sure that we are not in the same situation we were a month ago.

The committee needs to get an agreement, whether it is a grand bargain that seems very elusive, or a small deal about how to give the government open.

Is a polarized committee or a centrist committee that will get whacked over the head down the road?

It is polarized.

The house and senate are about $80 million apart.

Democrats are starting to introduce demands and where they think the tax revenue raisers will be.

There is always the specter of obamacare in the background.

Will be the demand going forward on how to delay some parts of thsis?

The same stuff we heard.

This is a redux.

Didn't she say this?

The more things change, the more they stay the same.

David strasser, how does this play into consumer sentiment?

None of this can help.

Your say the lower end consumer still struggling.

We have a note out this morning, black friday will be fascinating.

Black thursday, thanksgiving.

Walmart really set the tone yesterday by doing a one-hour guarantee on all their doorbusters.

It is tremendous.

Most people offer limited supply products on doorbusters.

For one hour, they are guaranteeing $100 off the ipad, cheaper vizio tv's, they are going to drive the pricing and the traffic up.

Pricing is what it is all about.

Here it is even more so, is about having enough inventory so everyone will get it.

Even the headline price can be misleading.

You may have limited supplies.

Here, they are telling you if you come, you're getting at.

David strasser with us.

We will talk about the holiday season.

She shops, scarlet fu.

Johnson & johnson reaching a settlement of her hip implants.

They will pay more than $4 billion to resolve 7000 lawsuits over the recall.

The agreement is the largest settlement of u.s. legal claims for a medical device.

Cost-cutting offset a drop in shipping rates at maersk.

An 11% increase in third-quarter profits.

They cut unit expenses by 13%. the financial crisis and a booming orders left the shipping industry fighting an oversupply of containers.

Elon musk ruling out a tesla recall.

The company founder says there will not be a recall of the model s, calling three battery fires in the last 3 weeks.

He said headlines make it sound like teslas have a propensity to catch fire, nothing could be further from the truth.

Coming up, begging for help in the philippines.

Aid is not getting to the people who need it.

When will it?

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

? good morning, everyone.

"bloomberg surveillance," 10:00 a.m., rick scott on "market makers," 10:00 a.m. so much going on in washington.

That important state of florida and the governor's view.

I am scarlet fu with tom keene and michael mckee.

Returning to the philippines, the u.n. has appealed for more than $300 million to fund emergency efforts in the country following super typhoon haiyan.

They are going through a massive struggle to get aid to those suffering after the storm, which may have killed 10,000 people.

Manila bureau chief clarissa batino joins us by phone.

Tell us what you are seeing.

Hi, the issue today, aside from the death toll is that aid is not coming fast enough to survivors.

If you ask me, there are two reasons.

Many areas remain out of reach.

President aquino said 29 counts are out of reach.

Another reason is logistics, transport links are disrupted.

The government does not have the capacity to reach the for the communities that we need aid.

We see scenes of people mobbing airports, trying to get out of the city, tacloban specifically.

Is anyone going in?

The only ones going in are those bringing in aid aside from relatives of those in affected areas.

Everyone is trying to hitch a ride out.

Clarissa, will u.s. and british boats be able to get into the harbor at tacloban and provide immediate assistance?

Tom, i think they will get to the other side, which is where the gerald ford landed.

That is where the chefs are supposed to land.

Once they are there, there is a good chance they will reach more people.

We see the story unfold, eight people killed at a rice warehouse overnight.

What is the response in manila?

Is it a government or some other reaction?

I think the people are naturally blaming the government.

Peace and order and relief is not coming as fast as they promised.

The government has beefed up its police force.

In those affected areas, a lot of it, the police force were practically wiped out.

More than 900 of the police in eastern area or missing or out of range.

We have talked a lot about tacloban and the populated areas.

What about the coast and other provinces?

Are they getting reports about casualties and damage?

We are getting reports of casualties and damage in northern sebu, more than 50 be ach resorts were damaged.

A similar situation is happening at other tourism sites affected by haiyan.

Clarissa batino, reporting from manila.

The u.s. has promised what he billion in aid, -- 20 million in aid., the vatican is sending eight, china, $100,000. i have got to think that is going to go up if china wants to be taken seriously?

They argued over territory.

This is a humanitarian mission.

Coming up, a conversation with bart chilton.

Stepping down as commissioner of the cftc.

We will discuss the future of agency and regulation on "bloomberg surveillance." ? good morning, everyone.

"bloomberg surveillance," i am tom keene.

Michael mckee and scarlet fu with us.

A busy day.

A top headline, new guidelines for the use of cholesterol lowering stat medicines -- statin medicines.

Patients no longer need to lower cholesterol levels to a specific target, just take the writers of the sta -- right does of the statin.

This could double the number of americans held will to take statins.

Good for astrazeneca, bad for mark.

Rising 19%, compensation for equity related positions will see the biggest gains on wall street.

You do not want to trade bonds.

Workers in interest rates trading could see page up 19%. a francis bacon triptych the most expensive artwork ever sold in auction.

Three studies of lucian freud sold for $142.2 million at christie's to an art dealer.

The previous record was edward much's -- edvard munch's scream.

Word is that end up, over a couch?

Overlooking central park.

Is a triptych, you have got to have room.

Not a small painting.

Ok, a good auction season.

A good morning must read.

Lots of choices.

The debate over the role of higher education in the future.

Narrow and better equip your graduates with practical skills for the job world?

40 you broaden it to get a well- rounded education to encourage creative thinking?

Director of american studies at columbia university talks about the humanities crisis.

He says each side is half right.

Yeah, he is dead on.

David strasser with us of jenin on coming -- janney montgomery.

Everybody goes to narrow to quickly.

They are doing a freshman.

It is great stuff, it is critical.

It is important for the economy, we are not in an economy where you can expect to stay in the same career your whole life.

There is a lot of career switching going on.

The narrowness is distressing.

It has not worked out.

Everyone is a freelancer, you wonder what will be more valuable to prevent -- promote yourself.

I am reading a book on bach.

I am reading about the meat industry, america being a carnivore nation.

What are you reading, data?

-- adavid?

I am reading the book from the woman who wrote harry potter.

What are you reading?

My twitter feed.

There is it -- there is a real scholar.

There is nothing there about this number, 270%, how much best buy's stock is up in 2013. getting back into the strategy behind that.

All that is coming up on "bloomberg surveillance," on television, streaming on your tablet, your phone, and bloomberg.com.

? lex good morning, everyone.

" bloomberg surveillance." -- good morning, everyone.

Sterling moves off of governor mark carney's comments.

Futures unchanged.

Oil dampened over the past few days on gdp cautioned.

That was a lame data check.

Could winners and losers be better?

Assured guaranty, one of the a guest gainers yesterday, up six percent in trading.

Approving $400 million in an equity buyback.

This is a consistent team discerning season.

Dish network, up six percent.

The chairman says the takeover of t-mobile is still on the table area profits coming in better than estimated on a rebound in paid television subscribers.

Speaking of star performers, the best performing stock in the s&p 500 in 2013 -- want to take a guess?

Best buy.

The electronic retailer has a new lease on life and is gearing up for the holiday season with a particularly aggressive approach.

It will open its doors at 6:00 p .m. thanksgiving night.

The detroit lions are playing.

Stop it.

The greatest recovery i have ever seen tom is certainly in recent years.

Best buy beats -- greets the holiday season firing on all cylinders.

I have to ask you about this call.

You kept a buy rating all the way down.

Have you ever experienced something like this?

This was pretty special.

The stock, when people hate it, they hate it.

I have never seen anything like it.

When they love it, they love it.

I just thought people were misreading it.

I still think there is a lot of value.

One of the most agrees that -- egregiously mispriced stock.

At 1.i asked if i could stop coverage and buy it.

Seems like that was a much better way to report it.

Where does it go from here?

It hasn't an incredible rebound.

Doesn't all rest on the holiday sales season?

If you look at the stock thomas to one of the cheapest retailers out there.

Maybe six times even.

-- ebitda.

When i think of competitors, i think of home depot, lowe's, other bigger retailers.

Staples a little higher multiple.

There is still value here.

I was looking at the numbers.

Looks like so for doing it on this expense side.

Not on revenues.

Revenues down from a year ago.

When did that turn around?

I think you will start to see that in the third quarter.

The corridor they announce next week, you should see positive, store sales.

Arthur that they have sold off.

I think they will do 2-3%, for the third quarter.

They are up against an easier number.

Part of it is i remember last year when he wants a show room.

Some of them you do not follow, is there an news sustainability to the generation of cash by retail or is it passion to fashion?

Michael kors a cool one.

Is it season to season hit or miss or is there a new maturity?

I think it is both.

As a consumer, i think there is a certain maturity for ralph lauren.

There is a brand that can offset hits and misses.

If you look at the abercrombie and stuff -- that is a disaster -- those have been a disaster.

Was that you modeling in the show room?

I wonder what makes best buy successful and radioshack not such a successful experience.

Why would some retailers excite you?

I follow you on twitter.

Why aren't they a radioshack?

First of all, the size of the store.

Of much better mix of product.

Radioshack -- they were just disintermediation a lot easier.

They lost -- they did not change the business.

They have not had a merchant for a long time.

We will see how that works out but they have not had a merchant running the business for a really long time.

Did circuit city need to die for best buy to come back in the ashes?

Consolidation is just what is going on and retail, no doubt about it.

There was a time where people misunderstood the strength they got from the closing of circuit city.

They were coming off of what was a consolidation.

People misread that as a secular decline.

Michael mckee and i were on radio yesterday.

Or just few.

There was the snow falling down.

The holiday season was starting.

What is it going to be like?

What will this holiday season be like?

I think it will be ok.

The low and will continue to struggle and will be very competitive at the low end.

What walmart is doing on thanksgiving is tremendous.

The one-hour guarantee could be the first hit -- are they desperate or trying to take the high ground initiative of the season?

One question we were talking about is whether or not some of the inventory they have, an opportunity to get rid of that.

My sense is it is probably more planned than that.

They said they're going to get their customer back.

One thing about walmart, they are merchants first and foremost and want top lines.

They make about some margin am about half the business its consumer bolts -- consumer bolt ables.

We have to have you back through the season.

I have about 18 other questions.

Our twitter question of the day, what is your favorite shopping experience?

Going to the show room at best buy.

Tweet us b@bsurveillance.

Shopping for bowties.

My official bowtie.

Congress called another official to testify over healthcare.gov.

He will testify about the impact obamacare has on his business.

This is " bloomberg surveillance." ? good morning, everyone.

Bloomberg " surveillance." i thought it would be a quiet morning.

Forget that.

Michael mckee with top headlines.

Mark carney hinting that officials may consider raising interest rates sooner than forecast.

It was supposed to be 2016. the u.k. economy is recovering.

This follows a fall in unemployment to seven point six percent.

Here is a dog bites man story.

Congress approval rating has longed to the lowest level since 1974. just nine percent of those polled by gallup approve of the job lawmakers are doing.

Pay-tv keeps losing subscribers.

Losing 113,000 subscribers in the third quarter, up from 101,000 a year ago according to the research firm.

The firm says pay-tv lost more subscribers over the past 12 months than at any point in its history.

Greg moffatt out with that.

We will get him on here shortly.

Now it is really an ugly quarter.

So many different ways you can watch and these days.

I was talking last night on my ipad.

So cool.

I have one of those google chrome cast things.

She is back with a chart, grade and single best chart.

I want to highlight the federal reserve the lemma.

It was posted by mauldin economics.

The white wine shows household wealth increased year on year.

The blue line shows household spending year on year.

What you see is historically as household growth grows, so do spending.

Over the past two years they have traversed.

A lot of people will point to the federal reserve role.

Zero interest rate policy, quantitative easing creating a financial market bubble that is large relative to the pickup and the economy.

For me, a two-part wealth.

This has been an equity search, not the housing surge.

Only a portion of americans enjoy the stock market versus the broader housing market.

Did i do ok?

You did great.

You get the pros on your side . the stimulus did not have the effect on the economy it was intended to.

That is not did.

This is a muted instrument.

Fiscal policy was necessary to get jobs created, the housing market back on task.

This goal policy is broken.

We are left with a surge in equity markets.

Not so much in the housing or consumer spending.

The white line going up is the housing wealth.

We are supposedly feeling better.

Is this sustainable if nice chairman yellen becomes more restrictive?

The rates are so low, it would take a while.

Rates would have to go up a lot to mute any good feelings about the housing market in terms of confidence.

It is important to note that consumers do not say rates were 10%-12% 10 years ago.

Consumers and homebuyers look at what rates were last order.

-- last quarter.

No one will purchase a major investment like a house when they see the job market like it is.

Confidence is a crucial part of the housing market, and we have not gotten there yet.

We also look at what the neighbors got.

Taking a look at photographs making news.

You have to look at the philippines.

I have been looking at the images of the damages.

Soldiers stand in the air control power.

One of the hardest hit locations.

Severely damaged.

Really difficult.

Not enough people on the ground to help distribute the aid coming in.

It takes a long time for logistics to get in place.

People suffer.

A little bit different look.

The field museum of chicago doing a little bit of housekeeping yesterday.

Giving t rex sue a little dusting.

267 years old.

The best preserved dinosaur ever discovered.

In new york, here is what we were talking about, the 1969 francis bacon.

Hanging in thick christie's gallery.

The most expensive artwork ever.

On her and $2 million.

-- $142 million.

The total take for the night, a cool 691 point one dollars.

This is trickle-down?

Trickle stays at about the same level.

Transferring wealth among the wealthy.

Connived by art in my retirement plan?

Maybe if you have a self directed ira.

Bloomberg does not allow you to go to christie's and invest retirement funds.

140 million, but the headline is it went well.

Yes.

Those that are doing well are doing well.

Back to spending.

Not just the chinese keeping the art market afloat during the downturn.

We want to talk about 49. that is the maximum number of full-time employees a company can have without being acquired under the affordable -- without being required to offer insurance.

One small business owner plans to spay -- stay within the number.

But we will discuss the cost of doing that next.

? this is bloomberg "surve illance." charlie ergen leaving the door open for a takeover of t-mobile.

The dish network ceo said i inc.

T-mobile was still on the table.

Microsoft is scrapping the way it evaluating them for use.

Eliminating the long-standing practice of reading employees on ethics scale.

Microsoft hopes the new system encourages more teamwork and collaboration.

The company undergoing a restructuring getting ready for a new ceo.

Telefonica looking for partners and mexico.

They have held talks with a number of companies according to people familiar with the matter.

Any deal would part -- be part of an effort to challenge carlos slim and mexico.

Redskins beating up on obamacare officials over the implementation of the website.

The chief technology officer todd park the latest in the hot seat testifying at a congressional hearing about the troubled launch of healthcare.gov.

Major opponent of the affordable health care act.

Small business owners shuffling full-time and part-time status of employees.

A huge deal.

We are finally here moving into december.

Stephen bianco testified before congress on small business.

A former new jersey state police officer.

He has asked me to work for his college hunks moving business.

What do we wear when we moved?

We got a lot of request to come in with their shirts off.

That has nothing to do with the company obviously.

What does the affordable care act due to your business cap coax rex not just my business but a lot of small businesses that employs 42 million people.

The u.s. chamber of commerce came out with a report that 41% have already cut employees hours to reduce the number of hours worked.

Do you cut or are you going to joint venture things out to get around the law?

I will do both.

I have already begun to reduce employee hours.

That is the way you have to do it.

The mandate, the delay does nothing for us.

We have to plan ahead.

Have you figured out the cost per employee if you do not do what you are doing?

What is the number?

2500 per employee.

Hominy and employees do you have?

-- how many employees do you have?

Are they all affected by this or separate pay units?

They are under my main entity, which puts us over the limit.

What do your employees want?

Do they prefer to work our time to remain freelancers?

In my line of work, they come in wanting to work hard time.

While they get their they find this mission in life that now i want to work full-time, start enjoying more things.

I want more money and opportunities and will want to go up to full-time status, but with this affordable care act, we are going to start reducing fat.

Keeping it at 36 hours per week.

Do you offer health care?

We do.

If not for the affordable care act, would you be making these people full-time workers and paying health care?

If it were not for the affordable care act, we would make them full time 36 plus hours per week.

One of the things is changing the full-time status to 36 hours.

That not only affects the financial mom but with it and -- the financial realm but it changes the hours.

Neil a richardson -- neila richardsonw ith with us.

A lot of people in washington care about the effect of small businesses.

It seems like in your business you are able to make the trade- off between part-time and full- time workers, and many him for use coming into the game working full-time at.

Not all businesses can do that and not all would be willing to sunset growth to avoid regulation.

That becomes a major problem of even thinking about spending growth.

We are the ones that have created this nation.

We employ the most in this country.

Small business wal-mart, 2.2 billion employees.

This is completely removed for them.

Which medical plan should washington focus on, the cadillac bands for big companies or focus on small businesses?

You have to do both.

Walmart would tell you that, too.

At least that's what i think.

What would you like to see from elected officials?

I would like to see the elected officials stop being partisan.

Our constituents must look at each one of us, each one of our small businesses as if they were their own.

They have to stop looking at the next vote.

They had to come together.

They had to meet on a bipartisan double to figure out what is the best thing for our nation.

We got to grammar school and we won because we were bigger.

Then we got to high school and started winning because we have entered training.

We got to college and started winning because we have more opportunity.

Now we are in the process.

We are not succeeding as a pro athlete right now as a nation.

We are in a stall mate.

The majority of it is because we are mentally becoming weaker.

We will have you back.

College hunks with us.

David strasser with jimmy montgomery scott.

The forex report, let's look at it.

A lot moving in the markets today.

Michael mckee looking at sterling.

Stronger sterling.

Yen as well.

It is bloomberg " surveillance." ? ? a clear what running -- a clear runway to create the world's largest airline.

American and us airways.

Microsoft employees, rejoice.

No more stacked rankings.

Invest in repairs to the bottom, the stock soars, brick and mortar businesses succeeding in the age of amazon.

It is wednesday, november 13. joining me this morning, michael mckee, scarlet fu, and our guest host, howard lynn, cofounder of stocks, twits, he has a basis on stocks, twitter, we will not talk about that.

[laughter] you have been watching this chart -- this chart of sterling all morning.

The pound surging, seven and six percent, the most in four years.

The threshold for a rate increase in the bank of england, seven percent.

Saying they could reach that sooner than their forecast.

They also cut the forecast for near- term inflation, so we are seeing a major reaction in the markets in england.

Wax watching the united kingdom -- watching the markets in the united kingdom as a precursor with their challenges.

They are managing to work ahead.

Maybe it is better to be lucky than good.

The inflation rate is falling below zero, at zero by the european measure.

Mortgage applications are out just now.

Mortgage rates have gone up quietly, about half of one percent.

We have not had any good numbers recently because of a government shutdown.

We will see.

Macy's earnings coming out this morning, cisco is always a bellwether for technology.

The chief technology officer is going to investigate today before the house committee.

Very good.

Company news?

You came up of all of that.

Plenty of headlines on top, american had not -- american airlines clearing a major hurdle in their merger.

Giving up 104 flights, plus several major u.s. airports as part of the agreement.

One more step before the deal can close, approval for a federal judge.

Starbucks settling a dispute with craft, paying two point $8 billion over its bag coffee business and an agreement that called for them to distribute the coffee to grocery stores.

They wanted to end the deal, laming they were not doing enough to promote their coffee.

Microsoft is changing the way that they balance employees, eliminating the practice of writing workers on a fixed scale.

Microsoft hopes that their new system will encourage more teamwork and collaboration as they restructure the company overall.

That is today's company news.

Looking at the bond analysis before the equity analysis at the back and the front of american airlines and their story.

The analyst at give me credit was forced to accept the bid from us airways, that the lawsuit would be settled in a negotiated settlement.

That is what we have seen.

Joining us from houston.

What do we need you know that is new in this transaction?

The good news is that what is new is not news.

The deal that we saw yesterday is pretty much what everyone expected.

It is a good thing, it is less disruptive than what was anticipated by the most recent rumors.

It is good news and we are ready to move forward.

The headlines are reagan, laguardia, lax, the rest of them are beneath our selfish interests.

What should we focus on?

The body count?

Better service?

Airlines sitting in the desert in arizona?

Better service overall was the trend we have been seen for the airline.

This is an industry that remarkably after decades has finally become sustainably profitable, which has really changed over the past decade.

What we have seen is the airlines have gotten more efficient and provided better service at the same time.

The previous mergers we have been paying a lot of attention to that were approved, arguably they were more conflicted than this, those airlines were more profitable and had better ratings from customers.

You can have customer service that is satisfactory to your flying public as well.

Now you have the airlines able to merge, the question is -- how well will they?

The continental and united merger, they struggled, and wrote about how difficult it was.

What is the outlet for them getting their cultures together?

United really was a cautionary tale.

We are all in a happy moment right now of the merger getting approved, but life is short and so is our honeymoon.

The next stage is going to be execution.

I do not anticipate seeing some of the problems as they take this on, it will be a similar situation to what continental management took on.

Taking on a much bigger airline.

I would anticipate that they will see the same level of challenges as united.

It probably will not be textbook perfect as we follow delta and northwest, but i think it will be something more successful than united.

Very good.

More on that merger throughout the day.

Twitter redesigns its look, howard, a new timeline, he knows about changes in digital media and the stock founder, also an angel investor holding twitter at $.42 per share.

Kidding.

New changes, does twitter need to be like facebook?

I hope not.

I think they are being creative, taking the timeline and leading journalists and kids create their own timeline, i think they have a lot of surprises up their sleeve.

You have a very creative platform with a ton of engineers and the huge salesforce.

I think they are going to come out many different directions.

Is a twitter engineer better than of -- different from a facebook engineer?

Or are they just writing codes that are interchangeable?

I think they are mostly interchangeable.

These are big teams of engineers, who in general have a mindset about what they can and cannot do.

They need to be led.

They have their little intricacies, just like any cfo or accounting person, but they generally like to be left alone, they like to solve their own problems.

Steve jobs used to demand from the top to make things done.

I do not know if that is how it is that it twitter, things seem to move slower there.

The product has not evolved as much as one might think.

These changes, is it to boost numbers?

Or endangerment?

Engagement is not the problem.

Seen how bounce rates work off stocks, we know that they can look at twitter and go -- we understand their problem.

They are broad, they are from entertainment to politics to sports.

Stocks are just stocks.

In the first appearance, some woman or man just coming into twitter, it is overwhelming, but stocks you know what you are getting, you talk about stocks.

How do they make it appeal to that worsen the first time.

Once they get you, it is addictive.

It is, but how can they change the format or interface to make it easier to sell advertising?

Facebook got credit for redesigning their newsfeed and putting the ads in there.

People see those.

Twitter can try to own the natives.

They bought a company called mopub, we are not sure where they will do, but in my world they would come over to stock twits and say that they have the same problem as us, a stream all day with people talking, we will help to deliver the relevant ads.

And then we look around and say -- that looks like a good idea.

That could be there adsense.

We have got a lot to talk about.

Howard meeting -- managing the immediacy of twitter.

Saying that he is buying bonds, that he believes in the slower economy and he is moving for equities.

Getting short.

Rising for the right reason?

Looking for lower yields with higher bond prices, he pointed that out on a consensus call.

Absolutely.

An eight week high.

Well, whether it is buying bonds or anything else, the twitter question of the day, what is your favorite shopping move?

Is it buying bowties, like tom keene?

? . ? good morning, everyone.

"louisburg surveillance," i am tom keene.

-- bloomberg, surveillance -- bloomberg surveillance," i am tom keene.

He travels in the air, that means within his gauge of the economy, howard is looking at go go.

Is this going to work?

Can we all have toys in the air?

Here is why i buy it.

I buy it because you have to soothe the savage beast and we are savage beasts in the air if we cannot get our peanuts or our water.

We have always known that we can turn these toys on.

For the business model, they can charge of seen amounts to get you on the air, like jetblue, who stuck directv on there, but an airplane for most people is in office and a chance to catch up.

The problem i have with it is that i do not buy stocks unless they have six or seven months of public trading.

We do not have that yet with go go and the profits are not there.

Stock twits have been all over the breakout.

When we go to london there is a lot more wi-fi there than in most u.s. cities.

Does the government need to step in and give us international airline wi-fi?

Where everyone gets it?

Why's that is the risk to owning a go go.

I do not like owning unprofitable companies where the catalyst could be taken away.

Owning great growth stocks means -- can there be money?

Everyone wants to enter that into the air, but what is the wildcard?

Verizon or someone else beating them to texting in the air or something else, that seems to be the latest surge in the stock.

This matters, you and i don't , twitter does, what is the next twitter?

It has to be snap chat.

It has to be uber.

I think that uber will be the next $40 billion to $50 billion ipo.

It combines allowing me to be a rock star -- holing my phone out of my pocket and saying, you know what?

I just landed here, 700 other people are rushing to get the taxi, i go right to the front of the line.

We will have to leave it there.

Howard wants to talk about has to buy, stock of the year, their holiday retail strategy, all of that is next on "bloomberg surveillance." good morning.

? good morning, everyone, "bloomberg surveillance," mr.

Mckie is with us this morning, rj -- chief economics expert is with us.

A lot going on, something you want to pay attention to, officials may consider raising interest rates sooner than later . the uk's economy has been covering the drop in unemployment with the jobless rate falling to a four-year low.

Buy in's on the news of cholesterol-lowering medicine, patients taking the medicine now no longer need to lower cholesterol to a specific level, instead just take a specific dose.

It could double the number of americans qualifying for treatment using the drugs.

Good news for astrazeneca.

The panel says that the nonpatent drug is ineffective.

Triptych is the most expensive artwork ever sold at auction last night, 100 and 42 point million dollars, art dealers believed to be bidding for an unidentified buyer who purchased it.

Steve:? -- steve: cohen?

It would look good over your couch.

Wax president obama nominated timothy mathison to head up the cftc, remember -- president obama nominated timothy mathison to head up the cftc, remember that?

They still have two seats open, raising the question -- will they be able to regulate?

Bart chilton has been on the watch i the -- by the end of the year, following the spirit and legacy of the volker rule, we all await the chilton rule.

Mark, good morning.

Where would you like your cftc to go?

Where would you like it to be in three years or five years?

Good morning.

What i want our for consumers and markets to be protected and for the economy to be protected from something like what took place in 2008. we have made a lot of progress so far in the last three years in this big dodd frank approval.

In three years i hope we will have the cops on the beat, as we have talked about before, to look over these rules.

It is a big day with nice buying the nyse, back to businesses usual, moving around the deck chairs.

Guys like you, are you any smarter than you were in 2006, 2007? a lot smarter, because we have been beat up.

I think everybody -- you guys are a lot smarter.

We have learned a lot about dark markets, trading that has no light of day whatsoever.

That is the main thing.

When people think about this large financial reform and what happened, we brought trading that took place off the exchange into the light of day.

We added capital margin requirements to make sure that they were backed up so that you do not have a lehman brothers leveraging 30 to one and no one knows about it and they go under . we have some very basic controls in place and we have learned some lessons.

How do we go forward?

You do we have cops on the beat?

Remember, these are ultimately going to be international.

We will have to work with the european union and others around the world on global markets.

Speaking of cops on the beat, you have been to the confirmation process twice.

Any advice that you have to offer?

What kind of insider's account can you give us on the confirmation process?

One, my advice would be not to go on any tv show or talk to the media.

Maybe with the exception of bloomberg.

But any audience for any nominee, their audience is the united states senators.

Save your answers for them.

He concise, be clear.

He has gone through this in the past and has been on the hill many times.

I spoke with him yesterday and offered him the advice i could.

The main thing is going through what the senators want to go through, it is a time-consuming process.

It is one thing to go through the process where the fbi checks you out, that has already happened, but now the senate has to have a look see and i hope they move expeditiously so they begin people at the agency who can make sure we are running smoothly.

Tim matheson is a securities lawyer by training, two openings, you are leaving, there is not going to be anyone left with an agriculture background.

People with agriculture interests are upset with the white house.

You are right, mike.

When i started in 2007, i was the fourth of five people that had an agriculture background.

I think that the important thing is to remember that these are different markets than the equity markets.

These are about risk management.

Whether or not it is farmers or energy consumers, those that have a stake in the endgame, if they actually owned the stuff, they need to be able to hedge their risk, otherwise we are going down the road of merging equity futures.

Bart chilton, thank you so much, congratulations on your public service, six years is a long time.

Howard, quickly, all this regulation is completely foreign to you?

This is a major distinction of success over what you do.

Well, i think there have been some software driven entrepreneurs who have decided they would rather beg for forgiveness than ask for permission.

Not me, personally, i am not a developer, but next will be finance.

Best buy.

Next we will be speaking about obamacare and we will be seeking with a former romney policy advisor about what we can learn.

? this is "bloomberg surveillance," joined by michael mckee, tom keene.

Johnson & johnson, reaching a settlement over its six-year plan, pain to resolve more than 7000 lawsuits over the recall of recent plans according to people familiar with the matter.

It is the largest settlement in history for medical device.

Cost-cutting offsetting shipping rates at maersk, posting an 11% increase in third-quarter profits, expected to cut unit expects his -- this -- unit prices.

The shipping industry is fighting the oversupply of containers.

Elon musk is ruling out a tesla recall.

He says there will definitely not be a recall of the model asked following -- model s, saying that while headlines make it sound like they have a propensity to catch fire more than other cars, that nothing could be further from the truth.

I have seen a lot of car fires on the road over the years.

Like 5, 10, 20. i see them all over the internet.

Once someone films it, it goes viral.

Matthew klein, writing about that for us.

Let's talk about best buy.

If you look at how the stock rise has done, the greatest stock price recovery in 2013, a lot of this due to the strategy of show roaming.

They really have a new lease on life as they get -- gear up for this aggressive holiday season approach, letting consumers walk around, touch and fraud, ask a lot of questions, price matching the lowest price on the internet.

They will be doing this at an earlier time on black friday, it will be black thursday, 6 p.m. on thanksgiving night.

That is just sick.

The interesting thing is we make a big date -- begin loud of black friday, but it is not the busiest shopping day of the year.

It is usually the weekend before the christmas.

It does not predict how the season is going to go.

Digital is the enemy of best buy, i would think, howard lindzon, in the digital space, does best buy -- should they be around for five years?

They do not deserve to be around today.

This used to be an upper-middle- class place where he went to hit your electronics and you were happily ripped off because they knew that you would be back.

Now i take my children there because the bait and switch continues to be the twitters -- the twitter feed, bring in your old ipad.

Try to teach your kids a lesson to let them negotiate?

We know we will get ripped off, they send you to the customer support desk with the woman with tattoos -- not that i judge them -- you just insulted scarlet on a massive level.

Sorry.

Let me finish the story, it gets better.

30 minutes later they are telling you that they can give you $13 for your ipad.

I say to them -- does this sound like a good deal?

You have wasted our time, they bait and switch us, at least we can walk over to the apple store and see if someone will walk by and talk to us.

20 minutes later, nothing in the apple section.

My tweet is -- why is apple representing their product in this army operation?

At the apple store we traded the old ipad's and we will by our computers there.

This is a misunderstood thing.

Tremendous institutions love best buy, every november, you have got to buy best buy.

I am not saying to dump the stock year, but this is not -- you mentioned earlier in the our a lot of the stock surface is the expense cutting.

So they have increased gross margins, but revenues are not higher, they are down from one year ago.

And they are going to plummet.

I do not know if they have to move to aaa away, but it is a broken model.

This is why we love surveillance -- what are you seeing -- this is like joining a health club that says they will build another one any miles away, but you have to stay here.

Best buy is an atrociously run operation with people that do not care and whisper under your breath -- why did you not do this on craigslist?

A store within a store might be google for samsung, but apple needs to get their products out of that store.

Howard lindzon, very different opinions.

The approach now, twitter, some woman -- to calm down, take the meds, howard.

People are worked up.

Data check, we have some economic data coming out later this morning.

Futures are down by seven points, the 10 year yield around the eight week high, the euro was weaker versus the dollar.

Good morning, everyone.

"bloomberg surveillance," all of our interviews, including howard lindzon all fired up, on itunes and android as well.

Howard lindzon of stock twits is with us, talking about twitter in the digital space.

Of course we have got to talk about the affordable care act, known as obamacare.

President clinton came out to make some comments.

When he speaks, he chooses his words carefully.

He has an enormous impact in the influence.

He came out to say that president obama should live up to his promise, saying that if you like health care, you should keep it, that the president should do whatever it takes to live up to the promise, change the law, do it administratively, however you can to make sure that people can keep their health care of they like it.

The premise of the law is that people who want to keep their health care, the health care they are keeping is not as good as what they would get from obamacare, but if they wanted, president clinton says that they should be able to have it because you promised to do them, undermining obama and his efforts to fix the whole thing.

It is a bit of a snide remark there.

Ronnie chen is a bloomberg review columnist at the hoover institution public policy direction, part of the mid- romney 2012 campaign.

He knows the fight over health care policy very well, is very familiar with it.

Welcome to "bloomberg surveillance." what is the alternative that republicans are offering right now, aside from d funding?

What is the productive, constructive effort being offered here?

Good morning.

I think one of the things republicans have been focused on for the last few weeks is the notion that if people like their health plans, they should be able to keep them.

I think that bill has to do with removing some of the federal impediments to people keeping their plans.

Beyond that, it is a macrolevel view that starts with lowering costs.

What about keeping the best parts of obama care?

The parts that consumers and individuals like?

The challenge with obamacare, we are testing to say -- look, key parts of it in place, but the law is really rotten to the core, there is not much you can do to fix, amend, make it better, or change it around the edges.

The reason there is issues with the website is not because tech guys cannot figure out what to do, but because there is something wrong with the structure where of the law.

How about a plan that would have states offering health insurance exchanges for individuals and small businesses?

You do not like the coverage guarantee, the idea that people cannot keep -- cannot get insurance with pre-existing conditions?

We have to do something about pre-existing condition exclusion, no question about it.

The system before was flawed in that way and it needs to be fixed, but the answer is not coming insurers to cover everyone -- that was the paul ryan plan that i just described that egypt -- that he put out two years ago.

They had a plan that was very, very similar to obamacare and obamacare was met -- modeled on mid-romney republican plans from the -- for massachusetts.

First of all, their plan was different, it did not require coverage for everyone, it said we have to figure out ways to get people with pre-existing conditions covered.

We have talked at nausea about the fact that massachusetts and the affordable care act have significant differences.

I realize that the administration likes to wrap its arms around success the governor romney had in massachusetts, but the reality is that the laws are very different.

Massachusetts reform health care in one state and demonstrated we have to do state-by-state reform . lonnie chen is with the hoover institution.

This just goes on and on, does it not?

It will not the settled for quite some time.

Junked by december?

They have to make a decision.

They have to make it work.

The two -- the twitter question of the day is not about shopping for insurance on the exchanges, but what is your favorite as you head toward the shopping season?

? good morning, everyone.

"bloomberg surveillance," michael mckee is with us this morning, joining us in the loop this morning, -- joining us is "in the loop," anchor, scarlet fu -- betty liu.

We have the new ceo of first corporation, the company known primarily for their magazines, like "good housewives," privately owned, had you read that article russian market i love it.

Is like leonardo dicaprio.

You and i miss the important stuff.

You should have scarlet the celebrity.

I know.

You would take over the whole thing.

Once they start covering the economists.

One interesting fact about him is that nine percent of their profits come from television, their business ventures, from digital, not from print.

That is really where things are headed for them.

Betty liu, 8 a.m. this morning on hearst and the difficult magazine business.

Talking about the future of health care, let's look to the national system out of the hoover institution.

Helping mid-romney with his campaign, a bloomberg viewer who writes sprightly stories that are controversial.

Is this not just the debate about health care?

Are we not just arguing about the nationalization of the system?

Unfortunately that is where things may be headed for our friends on the left.

The notion is that obamacare is not working and let's talk about going to a single-payer system.

That is the danger here and i think people have to be aware that that is in the debate and is coming soon.

Wax republicans have spent the last two years doing everything they could to undermine obama care and it is still the law of the land.

Are they just going to accept it and make it work tom or is the battle continually going to be -- let's destroy the law?

The first step they tried to take and this would be a reasonable thing would be to say -- let's put the brakes on this, obviously it was not ready for prime time, the law itself -- the one reason they were not is because republicans refused to fund the creation of these websites.

That is not necessarily true from the perspective of the states who had the option to go into the federal exchange and it was the federal government's responsibility to make this work and they did not and you cannot blame it on republican governors and states.

Members of congress, you can blame it on, though, who put up all kinds of roadblocks for implantation.

Again, members of congress did it because they realize the law was unworkable.

Some of the shenanigans around the shutdown were unfortunate, but the basic message remains that it is a flawed law and the effort to get rid of it is one that should continue.

Apparently well.

Thank you for being with us this morning.

Coming up, we will discuss our agenda to a couple of retailers reporting, like best buy, macy's as well.

We get a sense of how the holiday shopping season is shaping up on "bloomberg surveillance." streaming on your tablet, phone, and on bloomberg.com.

This is "bloomberg surveillance." our guest host this hour, howard lindzon.

Time for some company news from the files of "bloomberg west." leaving the door open for a takeover of t-mobile, the ceo there says -- talks about why it was still on the table.

Member, he failed to purchase sprint.

They want to pay a television operator to purchase their subscription service through comcast and time warner, according to the wall street journal, letting viewers access through the cable set top boxes, giving them access to current seasons.

Looking for takeover targets and partners, they have held hostage a number of companies according to people familiar with the matter.

Any deal would be part of a larger effort to challenge the dominance in mexico.

That is the company news from the files of "bloomberg west." dow futures, -51, the story if you are really interested, it is older, their iconic structure of compensation, micro stock can pitch a late in and doing away with the dreaded stack system.

This is a huge deal.

It is the end of an era for microsoft, they will no longer be evaluating on a bell curve and a fixed scale performance ranking.

As you call it, the stacked ranking system, what it did was it fixed the workers on the team who needed to be graded poorly and only a few were awarded top rankings.

Even if you are doing well, if you are not doing as well related to your peers, you will be called an under performer.

They are restructuring right now to focus on devices and services and there will be a new ceo soon . jeff immelt has pulled away from us as well.

Richard williams is with us, senior software analyst at cross research.

He joins us now on the phone.

Is this steve ballmer from running the new ceo?

That is an interesting question.

You could ask the same question about buying the headset division at nokia.

It is possible, but i think it limits some of the flexibility of the new ceo.

Will this help microsoft retain talent or attract new talent?

I think that it attracts talent and it is a positive event, because the biggest problem with this is it tends to turn people into political subgroups, i think that is part of the reason that microsoft grew to be very s

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

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