Diplomats Meet Over Ukraine: Surveillance (04/17)

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April 17 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Barbara Marcin, Kurt Schacht, Paul Krugman, Paul Miller, Richard Haass, Bill Cohan, Hugh Johnston, and Gerard Cassidy. (Source: Bloomberg)

This is "bloomberg surveillance." "thank god ukraine discusses decentralization." russia militants are killed and ukraine.

Diplomats will meet in geneva.

Janet, no slack in the american economy.

Paul krugman notes a need for immediate stimulus.

Forget drones any tools who wear cool glasses.

Google misses on mobile.

Good morning, everyone.

This is "bloomberg surveillance." we're live from our world headquarters.

I am tom.

Joining me adam johnson.

Olivia sterns event for scarlet fu this morning.

Very important, incredibly busy day.

Let's get right to the brave.

The brief is brief because overnight we learn that japan's consumer confidence joined to these -- drops to the lowest level.

That is your only economic number overnight, but that is is -- we have plenty in america.

9:45, homework consumer comfort index, 10:00 the philadelphia fed business outlook.

All that is coming up today.

And we have a ton of earnings, morgan stanley, goldman sachs, pepsico, and the ge.

Let's do a data check.

We look at stocks, bonds, currencies, a lot of these.

Futures -5, 10-year yield, 2.63, euro does nothing, $1.3860. nymex, nothing, down to $103.92. there is the data check.

Let's go right to front page.

It is an incredibly busy morning.

We can go five hours for you this morning.

Here is olivia sterns.

First base torry, talks and at solving the crisis in ukraine getting underway in geneva.

Diplomats will all be there.

The state department saying that geneva will test whether or not russia is serious about a diplomatic solution.

Ukraine meanwhile, we just learned they killed three pro-russian militants after an attack on the military base in eastern part of the country.

President obama says russia's government is supporting militia in ukraine.

Nato says 40,000 troops are on the border.

The u.s. and eu want troops withdrawn.

They threaten to increase sanctions if troops are not leave.

Putin's latest comments says he hopes he does not have to does eploy troops.

I have never ever seen this is the twitter vigilantes out, we have reporters reporting from eastern ukraine trying to figure out "der spiegel" from the propaganda from eastern, pro-russian, and the propaganda from russia, the cacophony out on twitter of news and non-news is just remarkable.

And about what is happening.

There is evidence that russian citizens, whether they are part of the military or just plain citizens, moving into the ukraine -- which putin denied.

Which you tonight, yet ukrainian authorities are saying some of these people bullies have taken into custody have cell phones where we can determine that the carrier is russian based, so they are saying these guys are from russia, they are not ukrainian.

You have 40,000 troops on the border, putin is worried about a civil war, obviously it looks like he will do something.

Richard haas from the council on foreign relations will join us.

What is going on in geneva, quickly?

That they will be meeting, eu and russian foreign ministers post of most people think that it's unlikely if these talks fail, then we will be talking about ratcheting up the sanctions.

That is of it will be talking to richard haas about, the head of the cfr.

One of the headlines i jumped out to me as you point out, tom, putin saying several minutes ago u.s. and russia should work together on missile threats.

So amid the cacophony over ukraine, you have got these little all live branch is being handed.

And it looks like a lot of cold war muscle flexing.

Our second from page story -- chinese microblogging service weibo raises $286 million in a u.s. ipo.

That is what is interesting if they decided to go public in u.s. it is still soggy.

It begins trading today on the nasdaq.

Weibo is owned by aliibaba.

Seven other chinese companies have filed for ipo.

There are 129 million users that are active worldwide and it has posted losses for the past three years.

You and i have seen this before was up when they say the window open for ipo, they mean that, it is like a window and they close that quickly.

Look at what happened with mollison company, the new investment bank where the ipo priced at the lower end.

But on its debut a did trade higher.

Because they price at the lower end of the range.

That is the game.

New york stepping up its probe of high-frequency trading, attorney general eric schneiderman subpoenaing six firms, chopper trading, jump trading, and capital research.

Schneiderman wants to know about these dark pools also with their trading strategies.

The fbi also investigate high-frequency trading.

They want to know whether trading firms act on non-trading information.

Michael lewis put the spotlight andwith that book.

Here is tiered pricing illegal?

And as that creating an on level playing field?

The one at of sodomy -- and by the way, tom, is the the one that jumps out at me, and by the way the way, tom, he will not go in order to pay for that order flow.

It is an interesting debate.

We are thrilled to bring this story out of uva and harvard, barbara marston, portfolio manager for go belly, she is with gabelli funds, which barely describes her dividend growth expertise, no doubt she has an opinion on high-frequency trading as well.

Do you and mario sit around over coffee with all of those evil people that do high-frequency trading?

Everyday.

[laughter] no.

There is certainly a role for a number of these changes -- they benefit you and your shareholders.

Sometimes.

How do high-frequency traders and what happens their benefit you as a long-term moneys manager?

I do not know that high-frequency traders do, but exchanges do.

You want to have as broad a market as possible and open pricing and as liquid a market as possible, so there is a role for a number of these.

In other words, you want to see 9, 11, 12, 13, whatever it is exchanges operating separately?

I think there is a role for it.

He would not rather see all of those exchanges come together in one single place where in.

All the best bits are arguing over one another?

Perhaps that is the way to go.

Barbara, let's talk about dividend growth.

What you do has been revoked for four -- the vogue for four or five years.

Do you think the dividend growth will continue forever?

We are looking for total return, so i think that leads us to companies that are good cash generators and can grow cash and earnings over time, and usually a company that can do that pays a good dividend and can grow the dividend over time, but our focus is on a total return.

Total return after a four-year bear market, how are you positioning for this year?

Is it a different year forward for the gabelli?

Know, grow cash and earnings over time and willing to return cash to shareholders, frequently in the form of a dividend, but sometimes in the form of buybacks.

At the focus on growing dividends makes you focus on company's i can grow their cash and earnings over time.

What is a best practice with corporations when you're on a conference call, and earnings reports are coming out of the banks, what is the best practice he want to see from executives right now?

We want to see companies that are paying attention to shareholder value, so companies that -- we're looking at companies that can maximize, that involves selling off non-core assets or returning cash to shareholders.

We are looking at companies that are managing for shareholder value.

Very good.

Barbara marcin with us for the hour.

We were going four or five hours of "surveillance" this morning.

Richard haas joining us later and of course we have bankers goldman sachs and morgan stanley out.

Here's our twitter question of the day, michael lewis, good morning if you're watching -- is heightened with the trading a crime -- is high-frequency trading a crime?

I will be reading this, i will be reading stiglitz joseph stiglitz on high-frequency trading.

At general motors may have found a way to save billions of dollars in damages over that ignition switch.

The bankruptcy judge could say he was not liable before the company reorganized in 2009. gm has asked that ignition switch lawsuits be put on hold until the judge rules.

The marissa mayer staking more steps to revamp yahoo!

The company is bringing david philo back, charles schwab and former walmart ceo is coming back.

Meyer took a 32% pay cut.

Meanwhile, disney is offering to raise starting pay by 25% for its workers at florida's theme park.

It would raise the minimum wage to $10 an hour.

U.n. officials say they are -- union official said are pleased with the deal.

If your job is to dress up like mickey mouse or snow white, you are a cash member.

I did videos of the float going by in anaheim.

They wave like you.

When you see me in the food court.

Snow white was aggressive.

Have you noticed the queen, though?

The queen is so gentle.

It is what they do.

What it costs to go to disney world, you have to mortgage a third tiled to get in.

It is magical what they do.

That is why they call it the magic kingdom, tom.

Google does not have the magic.

The stock is down again because of the earnings miss that happened yesterday after the close.

Very ugly.

We will be talking about the thing and now what does google try to do?

This is "bloomberg surveillance." on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.

We will be right back.

Good morning, everyone.

Coming up on bloomberg television, it is the special tesla edition of "in the loop" with betty liu.

Look for that 8:00 a.m. eastern time.

Isn't that curious that you cannot have dealerships in new jersey, right?

I'm sorry, they cannot sell directly.

You can only have dealerships.

It is like uber not in brussels.

But uproar continues.

Olivia come on the train wreck known as google, what a surprise last night.

They missed on the top line, they missed on the bottom line, expenses were up 23%, no return on cash.

One of the big takeaways here is that the move to mobile is costing them.

It is having a big impact on their ability to price.

The cost per clicked down 9%. volume rose $.26. that income came in as $5.04 versus $4.97 a year earlier.

They're also spending more money.

They just lashed out a couple of billion dollars to buy next.

So they are being so inquisitive or whether or not they are actually doing some profitability.

Let's bring back and barbara.

Barbara, you are a long-time shareholder of google.

Would you buy google now at the share?

Absolutely.

The growth is still very strong.

The company is doing a good job with moving to mobile, but of course the cost per clicked is going up, so the martins have gone down as they are participating in a move.

The company has been making some acquisitions to position itself for growth going forward.

It has a very strong investment in youtube.

There are a number of growth avenues for the company going forward, and i think it is very inexpensive, 20 times earnings with these growth drivers going forward.

Are you not concerned they're not making more money mobile advertising, because the cost per clique on mobile seems to be much lower than it is on tableau on pc's, and that is where the growth is?

I think it is important that they are participating in that market and yes, some of the growth will come at a less profitable rate than some of the growth in the past, but again, the company is well-positioned going forward in a number of areas.

You are more qualified than anyone to talk about corporate stewardship of cash.

Google gets to play by a different playbook.

They do not have a dividend.

They do not have to take their huge cash and deploy some of it at the margin back to people directly like you.

Do you want to see more cash come back to gabelli funds?

Yes, yes we do.

At the moment i think we are all giving google a pass on -- why are we giving google a pass?

At the moment we are giving a lot of technology companies a pass.

Apple -- we inspect apple to actually make some sort of announcement at the upcoming earnings announcement that they will do something with the cash and return, make some sort of concerted program to return cash to shareholders.

Again with google, everyone gave google a pass on the dividend, special share dividend, which is really a matter of -- let me be direct -- is mario gabelli the new carl icahn?

We do appreciate carl icahn when he enters a company frequently get something done that is better for shareholders.

Yes, he does.

He is very effective at that.

What do you think is the best use of cash?

Up the dividend, invest in r&d, made acquisitions?

A could be a combination.

Certainly for a couple like -- a company like apple.

We appreciate the share buyback.

Evidence puts cash back into your hands and it is the best way to return the cash to the owner, the shareholder.

We really like a dividend to be returned.

On the other hand, you also want companies to grow and acquisitions are frequently a good part of that.

Is google a search monopoly?

When you look at the generation of cash in the presumption, even on an off quarter, olivia, up goes everything, even with mobile.

Are they a monopoly?

I would certainly say if you look in terms of share, yes, you might almost call them i monopoly.

They are the strongest player in that area without a lot of serious competition.

It is fascinating to talk to somebody about these stocks that owns a stock in both.

Barbara, thank you, this is great.

Speaking of acquisitions, they spent billions of dollars on next.

I could be a core business.

How much time do you given to spend on the mozart like the s -- moonshots like the s product, the anti-agent.

It is all a bunch of rich guys.

They're capturing more and more of the dollar going online, and google is capturing that, as we said, going into mobile and doing a good job there.

At the moment i say you are feeding growth in the future.

If things were to slow down, then the focus becomes how are you spending your money and what are you going to get growth from it, but they have so many interesting things going on inside the company.

They sure do.

As we have been discussing, guys, a lot happening in ukraine and russia overnight, president clinton speaking -- president clinton speaking taking questions.

We will bring in the one person who is better than anybody else we know to help us sort this out.

Ps ambassador richard ross, president of the council on foreign relations.

He will be joining us in the next hour.

We will be right back.

It is a four-day workweek , folks.

I learned that yesterday.

That is how lame a life i have.

Olivia sterns is here, adam johnson has our top headlines.

Let me just clarify it is not lame, you are just in the zone.

You are always in the zune.

I wear global glasses all we can -- i wear google glasses all weekend.

I will let you keep that.

More violence in ukraine.

An attack on a military base kills three pro-russian militants.

Secretary of state john kerry will be in geneva when ukrainian and russian officials said down to discuss the crisis.

We will certainly keep you apprised of any headlines coming out of that.

And for private equity mobile, mark laceratsry, new owner of the milwaukee bucks.

$550 million.

And an incredible story we just want to share with you.

Almost 300 people still missing from the sinking of that south korean ferry.

Many passengers were high school students heading to a resort island.

The ship sailed into rocks in the middle of heavy fog.

He'll so many people missing.

We wish them well.

Those are your top headlines.

Really incredibl difficult story.

Students texting their parents -- in case i don't see you again.

Incredibly difficult.

The search continues.

This is live from korea.

We welcome all of you watching from asia this morning.

Yesterday was a special day for janet yellen and the economic club of new york and an extended conversation with paul krugman, the laureate from princeton university.

Here is paul krugman on this like any american economy.

People are unemployed long enough, they may never get into the workforce, if you think there is a lot of slack or there might be a lot of slack in the u.s. economy, then that should be a tremendous preoccupation.

We have got to get rid of that.

We have got to get this economy back to something like full employment.

It becomes the most urgent priority we have right now.

Paul krugman of princeton, the university of new york here in a half hour.

Barbara marcin with us of gabelli funds.

There is krugman looking for stimulus.

What will this economy do?

Do you see slack forward or can the american economy improve?

I think it really remains to be seen.

Without we had a lot of momentum closing of the end of the year.

In the fourth quarter -- in the first quarter, whether has attempted to mask it.

We will see that any earnings report.

You had the first quarter where i think gdp is excited about 1.6%. second quarter we are expecting a rebound, 3.6%. the first six months it is hard to tell and we need some momentum in the second half.

And we have ge in five minutes.

Ge earnings in five minutes.

We need 3.5% gdp.

Is that what we need to jumpstart the nation?

We do.

We have had five years of slow recovery where we cannot get past 2.5%, but we do not see it yet.

Quite fascinating conversation.

We will hear more from mr.

Paul krugman, noble laureate, we will talk about how we deal with the long-term unemployment.

A good thursday morning.

I saw a map of the world last night with cold directly centered over the empire state building.

Shockingly cold yesterday.

It is a gorgeous morning in a cold april air.

We say good morning to all of you will worldwide watching "bloomberg surveillance," antiwhite for your many messages out on twitter and to us here at our world headquarters.

I am tom keene.

With me adam johnson and olivia sterns will sub scarlet fu is off.

She has that two weeks.

It takes a lot of of time -- she is doing a grand tour.

Let me do a grand tour of a data check.

Futures -5, euro elevated $1.38 59. russian ruble changes, nymex crude back above $104.15. here is olivia sterns with our gainers and our loser.

Let's start with yahoo!

Shares up 6.5%, biggest gain since july.

It is alibaba.

Yesterday they pose a 66% sales surge, last quarter of 2013 joy and exhilaration of growth ahead of a potential u.s. ipo.

The results helped shares of yahoo!, which owns about 24% of the chinese e-commerce company.

They also reported its first sales growth in more than a year.

The question we keep asking is -- how much is the bet on yahoo!

Really a bet on alibaba?

Also yesterday, moelis and co.

Going up after raising less than landed in its first ipo as an investment bank.

Adam, let's get right to general electric.

General electric out with earnings, they beat the estimate by a penny.

Read three cents is the number.

I should point out the revenues are a little light.

The stock is up because of one number, tom, and this is a big deal -- organic revenues up 8%. that is way above the estimate of anywhere from flat to up 5%. that is a big deal.

8 present is the first real recovery organic revenue growth.

We are thrilled to have barbara marcin with us from gabelli and company.

As a huge deal to get industrial ge back on track.

That is a big revenue beat and it will be interesting to see where it came from.

What fascinates me about this company, tom, 24% of revenues are energy related.

26% are capital.

That is half the company.

Energy and capital.

They are on track for their retail finance ipo again and very quickly, that organic revenue growth is the internal number of the organic industrial growth at ge which really speaks to the optimistic deutsche bank estimate on where the american economy is going.

Paul krugman does not agree.

Janet yellen giving her first speech to wall street's, a key moment in her speech on slack was the idea -- can we delineate between short and the long-term unemployed?

I spoke with all krugman about the new "new." the nation has millions of long-term unemployed.

The basic problem with the u.s. economy is there are not enough jobs, and then given that, employee or skid to be picky.

Who do i want to offer a job?

Preferably somebody who already has one or who lost a job recently.

So the long-term unemployed get ruled out.

There has been nothing like this since the 1930's. this is a completely new thing for almost everybody.

People who remember this in america were children when i last saw it.

The long-term unemployed really don't have a voice in washington?

A there are many things i am a grave out, but that is certainly one of them.

We can try to do things to make them more employable, but mostly what we need is more job so that employers have an incentive to go out of look for qualified people ignorant they are not people who already have jobs.

What level do you see the proper amount of growth that we need to begin to really solve labor challenges?

Well, i am of the belief that we have slack in the economy.

I think we still have 5% or 6% of slack in the economy and we should be taking that up fast.

We should be growing.

When you are that deep in the hole, you should be growing several points above the long run growth rate.

So we should be having 4%, 5% growth at this point, so when we look and say great, we're doing 2.5%, that is just showing how far we have become accustomed, how far we have become used to this economic condition.

What a great conversation with paul krugman, the university of new york in honor of him, i tell you, we talked about princeton economics where you studied a couple of years.

Krugman out with a new textbook and he made it clear he has got to rewrite the textbooks -- so much has changed.

So much has changed.

I want to point out that maybe we get some indication this morning from ge that that could change in the form of operating margins, up 50 basis points.

One of my other princeton professors, alan blinder, talked about the wage price spiral.

Once he started a company is able to raise prices, maybe that is when you get more people.

Barbara marcin with gabelli funds with us.

He talks as an economist about policy and dolls.

You guys are in the real world.

Are you ahead of paul krugman?

If the following a better american economy?

We don't see that yet.

We were still hoping to get a run rates better than 2.5%, and i know you were saying this is the theme of janet yellen's yesterday, too.

What we will be interesting is the earnings outlook that comes, the outlook along with the ge call.

We are always interesting to hear that.

Bge conference call.

Yes, they take a look at what the growth looks like and give affirmation about what they see.

That will be one.

I was thinking about how the watch will reflect.

Yellen has said there is considerable slack, but then you said operating margins.

What does operating margins due for slack?

Nothing.

It is the same old story of growing the bottom line -- think about operating margin as an indication of whether a company is able to raise prices.

One operating margins, and barbara, wei yan here, as operative margins go up, that suggests there is pricing power, and if there is pricing power, that means there is a need for expansion.

That is one way of getting margins but the way the companies have gotten margins is by cutting expenses.

We have not seen pricing power.

But maybe we will see that on a conference call.

I want to go back, olivia, to your work in london and europe and i thought that janet yellen had a great respect for the united kingdom economy.

You wonder if we can get the surprise this year in the u.s. what you witnessed last year in london.

That would be incredible.

And to what extent the u.k. went to the opposite direction of europe, embracing austerity, that is what the finance minister was embracing.

It would be great to see that.

They are seeing inflation pickup , which we have yet to see, 1.5%, that is the latest this week.

I thought the yellen speech yesterday was incredibly boring and also incredibly -- another thing -- it was really subtle.

She gave a speech, folks, and a brooklyn accent.

She said numerical criteria, and i thought she said new miracle.

I tell you what my take away was, sitting in front of the camera listening to it, she said it is quite plausible that by the end of 2016 am i know that is two years away, we get to 5.2% or 5.5% unemployment and inflation is up to 2%, all of which is good, but -- paul krugman told you he would rather see 3% inflation.

Absolutely.

There are some distinctions between krugman and yellen.

One of the most intensive notes that i saw on the dais was stanley fischer.

Potentially the new vice chair.

He was really listening to what his chair with 88. fascinating.

He was the governor of the bank of israel, comes back to the u.s., and he may not be the vice chair of the fed.

How about guacamole?

Coming up, holy guacamole.

The drought in california has cut into supply of all the we will discuss this, "bloomberg surveillance," on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.

How does olivia sterns do that?

She is the queen.

It is our twitter question of the day.

Get out your pen, pencil, we already appreciate the response @bsurveillance.

Is high-frequency trading a crime?

We are there with six subpoenas.

It is the new "new." is high-frequency trading a crime?

Our twitter question of the day.

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

We welcome all of you worldwide on this thursday morning.

Welcome to bloomberg television and bloomberg radio.

Adam, get us started with top headlines.

That unmanned submarine searching for the missing malaysia jet has gone for its third dive.

Its first two trips were cut short by technical issues.

The search is now in its 41st today, that makes it the longest ever search for a missing passenger jet.

Incredible story.

Meanwhile in new jersey, governor chris christie wants to eliminate the staple the real estate transfer tax.

That tax is charged whenever a property owner sells a house.

Or a home in new jersey with a median rise of her hundred thousand dollars, ending this would save about $7,000, lowering taxes -- will save about $1700. lowering taxes, that is right coming elections in november.

Playoff underway last night.

Dale white scored overtime to give the canadiens a five-four victory.

Massive shout outs on the media wars to nbc who bet on this a number of years ago.

They will go here now for eight weeks.

For those of you worldwide, there is a frenzy to this, totally different than the regular season.

I do not think there is an equivalent in sports.

It is awesome.

It is a different game.

The raiders play the flyers, regional attention -- the rangers lady flyers, regional attention was of i'm going for anaheim ducks.

My team this year.

The docs are out where they grow avocados.

It is time for ussingle best chart.

I've never done that, though fro m hotkey to avocado.

Today is the price of avocados to mexico where they grow, and where they are shipped through texas.

Demand for avocado has grown in mexico and has soren last year.

The main ingredient in guacamole more than doubled in price through september.

This year, the trend is continuing.

Prices are already up 40% in 2014. there is always a huge spike every year around the super bowl.

That is when you really have got to -- that is when the avocado blood needs to happen.

But this is bad news for companies like to bully who will be reporting earnings at 8:00 a.m. this morning.

As we do here at "bloomberg surveillance," we go to our guest host to find out how they approach guacamole.

Yarbrough marcin -- barbara marcin of gabelli funds, how do you take your guacamole?

I generally like it in a wrap.

Onions or no onions?

No onions.

I hate onions!

Why?

I don't know.

How do you make your guacamole?

Take the guac, slice it up, put it in the ball, you add a sweet onions, salon tro, habanero peppers, and a little bit of lemon and salt.

That is it.

Why do i know we will be topped by olivia sterns?

One of the reasons i am happy to be back in the u.s. is the walkable he in london is horrible.

-- the guacamole taste is horrible.

Ye you can make guac for the duchess and his worship as well.

Adam johnson, you have our top photo?

6.033 times 10 -- avocados to physics, two photos, courtney is begging that we do photos.

Our number three photo of the day, russian navy soldier setting on the deck of their ship making its way to the they of the crimean city.

Incredible what is happening.

Number two photo, you may recognize actors carey mulligan and helena bonham carter, but the star is england's parliament in a 2015 movie "suffragette." the first time the u.k. parliament has ever been shot andina a hollywood film.

And the number one photo, tom, the john drumroll -- in all seriousness, this really is something else, rescue teams searching for the missing passengers at the sight of the sunken ferry off the coast of a south korean island.

It was carrying students and teachers, it is shocking to think about this.

Six reported dead and 290 people missing.

I can't fathom what must be like to be a parent onshore wondering how your child is doing on that ship, is he or she alive.

And us all those girls working on this through their evening in korea, we will have much more on bloomberg television and bloomberg radio.

Turning back to finance, we have goldman sachs on later.

Very quickly, morgan stanley is out with earnings.

It is a very nice beat for fortress corpsman, $.68 versus $.60. i cannot begin to convey the back conversations on the success, james gorman has had with morgan stanley and turning around, which is a very troubled ship.

Those charts look very different.

Barbara marcin with us of gabelli funds.

The real positive surprise as we look at jpmorgan, bank of america, i have never seen such a difference among be banks as we see this quarter.

Quite yet, we have really seen and he -- yes, we have really seen in the last couple of years.

As he were talking about, morgan stanley made a deliberate turn into wealth management couple of years ago and that is really paying off for morgan stanley.

This is a new area with their share buyback announced by james gorman.

We look at all the banks, again go goldman sachs coming out, stay with "bloomberg surveillance" for that.

Right now, futures -4, stay with us worldwide.

It is "bloomberg surveillance." good morning, everyone.

"bloomberg surveillance." futures -3. i'm tom keene, with you, adam johnson and olivia sterns.

Incredibly busy morning.

Ge, morgan stanley moments ago.

Morgan stanley just out.

Each and every bank has told a different story.

To think about banking and trading in the first 90 days of 2014. paul miller is with sbr capital markets, seven years on from the beginning of our financial crisis, the too big to fail banks are trying to figure out their collective futures, one of the key questions, all, good morning to you.

The road to speak with you as we await goldman sachs.

-- paul, good morning to you.

Thrilled to speak with you as we await goldman sachs.

I think the whole banking system has too many people but i think he will continue to seek layoffs, and with the bigger banks, all the mortgage operations given the fact that the spring buying season never occurred, that is one of the big areas i think you will see a lot of layoffs is in the mortgage banking area, but yes, i think the layouts did not measure with the call structures.

There is an argument in national hockey over who is coach of the year.

I would suggest ceo of the year in your world, maybe james gorman.

What has james gorman done differently at morgan stanley that the other bankers have not done?

All these banks are very different.

I think everyone wants to slap them into one situation, but these guys have done a great job with the wealth management, they have done a great job on the fixed-income side, but i think -- they have moved through the crisis better than other institutions, but they are a little bit smaller then these other guys.

When you look at jamie dimon, jpmorgan, these guys are much bigger and much harder to move the ship around.

So i think that morgan stanley is a little smaller and i give them an advantage in the situation.

Paul, if these are the guys doing it right, who is doing it wrong?

You are rated by bloomberg as the number one analyst of getting be sure side of banking right.

Who is doing it wrong right now?

When you look at these, i think they are all doing a pretty good job.

I think once that are just too big are the ones that are struggling.

They come america -- they have that mess with country wide, but they are starting to clean up.

With citi, i think they are just too big.

As they get smaller, they will operate much better.

I like to compare you with the noble laureate paul krugman.

He says there is a concentration in banking.

I think you just said that.

Are the banks too big?

And is there too much concentration of deposits and businesses?

I definitely think they are too big.

We have always said even since the crisis, we woke up and we had four to six giant institutions, and that is too concentrated.

I think you are starting to see -- it is happening slower than i thought, but i think you will continue to see things get smaller.

Barbara marcin with us with gabelli funds as well.

It was easy in 2009. yes, it was, and it was expensive, but i was wondering maybe what paul thinks about -- how should they be valued going forward?

It is not enough business.

Let me translate that.

Barbara marcin would like some free advice from fbr capital markets this morning?

Which metrics are you looking at right now to value these banks?

When you look at his oracle valuation, when you look at the areroe's, it is hard to make money, yield curves every flat.

When you look at something like bank of america, they have a hard time, the roe's are below 10%, so why should they be trading above book at any point?

So the valuation side, you have to be careful.

This is not back in 2005 when they were growing at 10% and they had 25% roe's. a lot of these institutions are not hitting their 10% threshold, so a lot of them will be trading right around book him a maybe 10 times earnings if you are lucky.

If you look at other institutions like wells fargo, they are having roe's in the double digits, and they're getting valuations that are much more historical comparable, 12, 15 times earnings.

Adam, it is amazing to me how this conversation is so different from 24 months ago.

So different.

Very quickly, at one point we see a citi or bank of america both trading at a discount start to move up to more of a 1.4, 1.6 even where we see wells fargo?

When you start to see their earning roe's in the mid teens.

When you start to get a 15% roe, that is when they start trading 1.5 times book.

Otherwise, they will hover around book or discount the book.

Like paul miller, thank you so much was a busy day for morgan stanley and goldman sachs.

Barbara, thank you so much.

With the gabelli fund.

How about a forex report?

A lot going on, headlines coming out of ukraine, yen a bit stronger, euro above $1.38, and the ruble near 36. coming up in the next hour of "bloomberg surveillance," richard haas, resident of the council on foreign relations, joins us as a guest host.

This is "bloomberg surveillance." a quote from moscow, think the ukraine mentions the centralization.

Vladimir putin to the ukraine -- diplomats will meet in geneva.

Janet yellen on the american economy.

No need for immediate stimulus from paul krugman.

And in the next hour, goldman sachs reports.

A busy morning here on bloomberg "surveillance," live from our headquarters in new york.

Joining me is adam johnson and olivia sterns.

Our guest host for the hour, richard haass.

And richard cohen joins us.

Much to talk on his wall street as well.

Here is adam johnson.

Overnight, japan's consumer confidence dropped to the lowest level since 2007. futures are down but not just because of that and beat and -- and also, economic data in the u.s., we have initial jobless claims.

The bloomberg comfort index and at 10:00, the philadelphia fed business outlook.

A lot happening today, before the bell, texaco -- we have already gone the numbers from morgan stanley and ge, better than expected.

What do you have for us?

General motors may have found a way to save the audience of dollars over the ignition switched effect.

A judge could find that they are not responsible for the defective ignition switch.

I asked that this be put on hold until the judge rules.

And more steps to revamp yahoo!. david philo is back, as well as charles schwab and formers walmarts ceo -- will be joining, that would give yahoo!

Eight order members.

Myers took a 32% pay cut last year, and the stock doubled under her watch.

She will make a $32 million.

And disney is raising pay at the theme park by 25%. this would happen over two years and would raise the minimum wage to $10 per hour.

Officials say that they are pleased with this offer from disney.

That is the latest company news.

Thank you so much.

Diplomats will meet in geneva, switzerland.

Ryan is there with more on the ukraine.

Let's start with united states.

Secretary kerry, what does he hope to accomplish this weekend in geneva?

You know, what the u.s. would like to see is for russia to sort of pulled back of pull back the 40,000 troops that they have east of the border, and also, to say to russia, stop funding and coordinating these so-called activists in the east of the country that are creating all of this unrest.

I think that those are the main objectives for the united states.

Although i am not really sure that those objectives will be met.

Is this just a ballet, or is there any true negotiation going on, any real diplomacy going on between russia and the west?

It feels an awfully lot like a ballet, and a short one at that.

If you consider that they just started these talks, the first talks with the russian and ukrainian foreign minister's are actually sitting down.

-- ministers are actually sitting down.

Rush and the ukraine, it is significant they are sitting down.

They just met couple of hours ago and only are supposed to be for a couple more hours.

If you really want a conversation it would take hours upon hours to get to a solution, if not days.

It does not look like this would be a quick ballet.

Thank you, ryan chilcote from geneva.

We have ambassador richard haass, author of "foreign policy begins at home.

" william cohen joins us, and his acclaimed new book, "the price of silence," on duke university and the uproar over their lacrosse team.

Ambassador haass, thank you very much.

I am sure you have a busy day, thank you for joining us this morning.

Vladimir putin, what is the symbolism of this moment in russia, his speaking amicably, it seems.

We don't do that, do we?

He is approaching the ukraine through the lens of how it plays at home.

This has boosted his ratings so far.

But at some point it will stop working well at home and that means economic sanctions get more serious and start kicking in.

There are signs of weakening on the u.s. economy, -- on the russian economy, the stock market is going down and this will start to accelerate if we have new sanctions.

The house on foreign relations has been way out front with linking economic and capital flows to the policy of the moment.

How tightly linked are these?

They say that they have lost 70 billion and vladimir putin, thank for this and thank god for that.

How linked are these moments?

They are very connected and -- the scale of the action is too modest to shape his consequences but we will know something, we begin with that story on diplomacy.

If putin wants to show real interest in diplomacy rather than a delight, that will probably the first indicator that the sanctions have been incurred.

We are trying to put pressure on food and with sanctions -- putin with sanctions.

What motions in russia would be a check or balance for putin?

It is basically putin and a gang that run things and some individuals get sanctioned, particularly heads of oil companies, that would have an impact.

And the court of popular opinion, we should be much more public and what we are doing with the price he is costing the russian people and his personal wealth.

We want to make him and his policies more of a story, he will not continue to ride this nationalist wave forever.

And there is a possible strategic response that we have had here, eric gagne's about launching financial war against russia.

What do we do to put pressure on russia?

We get target financial institutions like we did against iran.

In the long run, it is weaning europe off of energy dependence in russia.

Commenting on this at a question for the ambassador, you're a student of this and you studied it on wall street, but you really studied this, didn't you?

I studied human behavior and one person i don't understand is putin.

Unless he is on a campaign of continuing to offend these pieces of territory he is interested in, and the opposition, are you comfortable with his response so far?

It seems to be measured and he has not made a big deal about the cost to the russian people, or made a big deal out of putin's wealth, are you satisfied with the president's response so far?

I would ratchet up -- ratchet up the response to what have seen and take another step, not the most important thing -- the most important thing for secretary john kerry to do would talk to the europeans and come up with a common approach to hurt russia.

Should they use john mccain?

He was out this last weekend, really striving -- does richard haass support the rhetoric of john mccain?

You don't want the ukraine to go to war with russia, they depend on different levels and we do not want to introduce nato to the equation, but we do need to strengthen internal capabilities for the ukraine so they can deal with the locals who the russians are propping up.

I want to get your morning must read from the "wall street journal." 25 years after the fall of the berlin wall, -- the post-cold war west stands on led by the american president.

" is that too harsh?

That is harsh because the united states is working to gather this response.

Let's keep it straight, russia is not a great power and they don't have these kinds of capabilities.

This is a local challenge and we should meet this in a very focused way, with sanctions and strengthening the ukraine and building up nato a little bit and getting going on the energy front.

Russia is a one-dimensional economy.

Let's go after that dimension.

Is it the clinical appetite of europe to enforce those sanctions, or companies based in germany or italy -- the answer is, not yet.

France and italy, because of exports and britain because of the wood -- their financial institutions.

You think we should start exporting oil?

And we should expedite natural gas.

That would be important for the market.

As we go into the weekend, is richard haass willing to say that the ukraine is in a civil war and was this bull run that we saw last night?

The question is where the russians decide to go, will they continue to press this or go back?

Looking at the ukraine as stable, kiev and the west, but the eastern ukraine is in play.

I cannot say -- your essay a few weeks ago on hydrocarbons, and what we need to do i thought was just brilliant.

What do we need to see from obama this weekend?

I would call for tougher sanctions against vladimir putin, and his inner circle and in particular something on american energy policy.

This is a major opportunity to adjust our policy, that we have moved from energy scarcity.

Richard haass and william: as well, aipac our.

Pepsico just beat earnings estimates.

We will go to the cfo when we get back on "surveillance." ? good morning, everyone.

"bloomberg surveillance." this matters to my guest, richard haass.

It should be on your radar, india will elect a new government.

The most original democracy of the 21st-century.

Let me get your opinion.

India has 22 official languages.

I am stunned about how i don't cover india.

Why does western media and the business media ignore them?

This is on the other side of the world, and for many americans it is uncomfortably foreign.

It has not been an international actor in many ways, it is only $2 trillion and trading in investor relationships so we don't. the debt coverage the way that we should.

This is a hodgepodge, this is a cacophony.

What does this mean for the election?

We will know the results in about a month.

By may 16 or so.

The real question is what kind of -- what is the leading party, the opposition party has led before.

What kind of coalition will they have, will they dominate in getting some at the federal level or is this so broad they will be stymied?

Is the family still involved in most of the political mythology of the nation?

Yes, but for the time being this is fast waning.

They will lose this election badly, and this is a real repudiation of the congress party, the gandhi family party.

Old people and middle-age people want change.

They are tired of the corruption and the inefficiency.

The gandhis have held on for too long.

Is a socialism involved particularly in the south of india?

There are smaller parties and cast elements -- caste elements.

It is more consultative than that and that is one reason it is so hard to rule.

Robert rogers from the school of chicago says that the india system -- they should have janet yellen help them financially.

What is the scorecard?

Indian growth has come from double figures to below five percent.

Indian growth has to go up eight or nine or 10% again.

You have such a large denominator, 1.3 billion people.

When it starts to grow, that means infrastructure and getting the government to dramatically roll back and clean up corruption.

I have to get smarter on india, and you can do that again.

I cannot say enough about what richard haass and his team have done at the council on foreign relations.

Go there to get smarter on india.

We will get smarter on washington with our chief correspondent, peter cook, getting ready for a long weekend and the sunday talk shows.

Stay with us.

This is "bloomberg surveillance" on bloomberg television and bloomberg radio.

? good morning, everyone.

On "bloomberg surveillance," our twitter question today, already a huge response on wall street.

Is high-frequency trading a crime?

We have subpoenas -- and that is our question today @b surveillance.

This is "bloomberg surveillance." adam johnson is here with the headlines this morning.

We start with south korea were 300 people are still missing after the sinking of a ferry.

Many of those on board were high school students.

There is speculation it crashed into rocks in heavy fog.

An unmanned summary looking for the missing malaysia and jet has gone on its third drive -- there died.

The search is now in its 41st day, making it the longest for a missing passenger jet in modern aviation history.

And for private equity markets, the buck stops here.

The new owner of the milwaukee bucks with a 40% investment -- who bought the team for $550 million from the former senator, herbert kohl.

Those are the top headlines.

Pepco announced the results and betty liu joins us with the company's cfo.

Ahead of earnings, earnings were $.73 per share and organic revenue was up and volume in the u.s. so far is declining, this has been a consistent story, not just for pepsico but coca-cola.

Hugh johnston, the ceo of pepsico, joins me.

Read to see you again.

Great to be here.

You have some pretty strong sales growth going, not just here in north america for snacks, but for beverages and snacks overseas.

How much pricing power is this giving you?

Actually, the pricing power is quite good right now.

If you go back to the investments we made a couple of years ago, those things are both strengthening the brand, and also we have products, that the consumers work for.

What you saw is five percent growth in revenue, three percent revenue growth in beverages.

And frankly, consumers are moving more and more to the $20 billion brands around the world.

So the company is performing very well right now, and individually the pieces are good and collectively the portfolios are working very effectively together.

And your margins expanded by at least -- at least 40% in some areas.

Where are you able to raise prices the most.

We have the ability to do this pretty well around the globe, when you look at the development it's in the u.s., or if you look at russia or india or brazil, because our brands are strong and our innovation is so good, it really does give us considerable pricing power, and to do that in a way when consumers are willing to pay extra for a product because frankly the products are just that good.

The reality is that in doing that, we are also not losing market share and often we are gaining market share, with three percent global revenue growth, we didn't outgrow our primary competitor and we do feel good about the performance of these pieces.

In latin america, disappointing results from mexico.

Revenue declining below single digits because of the obesity tax that mexico put in play.

Is there any chance of a reversal or will we be stuck with that, that performance?

I spent the mexico performance will continue to get better.

The overall lack of american performance was quite good and mexico had its share of challenges because the mexican consumer faced a lot of taxes, not just on food and beverage products but elsewhere, as consumers reoriented their household budgets.

They will not figure out there disposable income and the results are exactly what we expected.

We do expect that as things move forward and consumers get their budgets straightened out, we will go back to growth in mexico.

There is little doubt in my mind about that.

Is it right that in the u.s., where we see soft drink volume decline quarter after quarter, you say, yes, you see diet pepsi declining, but some of that market share is going back to regular pepsi?

We do see the regular performance across soft drinks, particularly in flavors like mountain dew, performing more strongly.

There is a trend there, and in addition, you see consumers going to products like gatorade, lipton tea and tropicana.

The good news for us as we have the best noncarbonated portfolio in all of north america, and as the consumers shift from diet drinks without carbs, frankly this affects us.

With the noncarbon be higher as a volume than two percent?

No, i think that right now you have the category that will grow probably in the zero percent-one percent over longer periods of time, and therefore they will show outperforming versus the overall category.

That is reflective of that migration, from carbs to non -carbs.

Hugh, greg to speak with you.

Hugh jo-- great to speak with you.

Hugh johnston.

What about this and coke, which was four percent lower.

You have a great our coming up.

And tesla, you will talk about this?

We will talk about how tesla interrupts the dealership model.

Converting from actual stores selling cars to actual showrooms, and the battle that elon musk has raged -- waged against dealerships.

These are being banned in new jersey.

We have lots of guests for you, including the ceo from autonation who says that one day, he may want to sell teslas.

We look forward to it.

Olivia?

All groopman on the income gap and inequality.

-- paul krugman on the income gap in inequality.

This is "bloomberg surveillance" streaming online and on your tablet.

? good morning, everyone.

"bloomberg surveillance," i am tom keene.

We will commute, worldwide.

Let's get the company is, here is olivia sterns.

The largest liquor maker has seen a hangover from asia.

It fell one percent in the quarter, the biggest problem is in china -- what i have crackdown on giving tucker to government officials.

Shares of ibm are down, first quarter sales missing estimates.

Ibm is trying to shift their business from hardware into cloud computer and data analysis.

And time to play "name that tu ne" with apple.

They are planning to add a discovery feature in the update of its software that will allow users to defy a song in iphone or ipad.

This is like shazam but you can sing songs into it and if you are in key -- ? let it go ? does that work?

That is some the council on foreign relations, the world don't bother me anyway.

Let's give peace a chance.

A diplomatic solution onto a more serious subject, that is today's talk in geneva but as u.s. and russia and european foreign ministers meet today there is little hope of diffusing the escalating crisis in the ukraine and doubt about the european appetite for tougher -- for tougher sanctions.

Peter cook joins us from washington.

Will we see tougher sanctions this weekend?

I think the feeling we get from bc is that more is on the way, particularly as geneva plays out the same way everyone expects, with no clear breakthrough in the crisis in the ukraine and the message we have gotten from the white house and the state department, and the treasury department is that things are tied up right now, to once again go after cronies and those close to vladimir putin, people who are part of the industry there, and the idea of sex oral sanctions, on higher industries in russia, those are still being held out there, as a final stick, if you will.

Those are out there as well and the white house believes they would have an impact on the russian economy, whether or not they would have an impact on vladimir putin, that is another matter.

Is there concern that the sanctions would have an impact on the european economy?

There are more concerns in europe, that there are more prizes in store for them, as they go along with the sanctions.

There was a meeting in the european union, that the sanctions were listed and countries were allowed to look at these lists of possible options on the table and what the likely impact would be on russia and what the likely reprisals would be, and there are -- there is the idea that a bigger stick needs to be held out there, and individual countries are reticent about this because it may hurt them more than other countries in the european union.

Not every country should do this the same way, and not every country has the same relationship.

Some say that the promise he starts at home.

Your book last year, really emphasize get your house in order before you project internationally, here we are.

Is the house in better order now, what we can do better against the ukraine?

The short answer is, no.

The fundamentals are still on in terms of the economy.

And u.s. growth rates are relatively somewhat better than europe, japan or whatever.

But with sanctions, what is so interesting is that this is pretty much a catch-22. to her russia they have to be somewhat integrated.

We can hurt russia but there will be some blowback and the pain on them is much better than the pain on us.

Would you do something this weekend?

And what would you do?

Right now, you only sanction the 17th largest bank in russia, why not number 10 or number five or name a few more individuals?

Why not put together a list of the offenders?

We could say, this is what is going to happen if you don't change.

Does this exist?

This does not exist.

Is there a tipping point where the old army around putin decides that they are -- it is good to reduce support?

-- the oligarchy around putin decides they are going to reduce support?

They could say at home -- you are reducing that.

He has the strength in his hand at home and does not want to go the way of yanokovukovych.

If he discovers this, you will find a new reasonableness from putin.

His approval ratings have never been higher but if he loses the control of the oligarchy, we have to wait and see.

We go to adam johnson -- we go to the 7:30 moment, s&p futures are down but only small, they have come off of the low and the 10 year is hanging steady.

The euro, hanging steady at 1.385. oil is still up at 103.60. good morning, everyone.

"bloomberg surveillance" on bloomberg television, and all of our product out on bloomberg digital, look for us on bloomberg.com and bloomberg tv plus and bloomberg radio plus on itunes.

I am tom keene and with me, olivia sterns and adam johnson.

With us is the -- is ambassador richard haass from the council on foreign relations and william:. paul krugman spoke at an event last night and he said when it comes to the growing gap in inequality, he is hopeful.

The idea that guys like krugman want to push the government to redistribute the benefits that they do not have and the other side is, the republican spirit and the spirit of america that we can lift up with our brothers and bring the bottom up with us.

Which can it be?

There is some of both but there is zero evidence that the kind of extreme inequality that we have is good for economic growth.

There is a lot of evidence it

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

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