Don't fight the fed.
We are watching washington with warren buffett.
And the emmy goes to netflix.
How the online streaming giant is winning big by betting on original content.
Plus, working out on wall street.
The transpiration from nightclubbing fast cat.
From bloomberg world headquarters in new york, this is "in the loop with betty liu." it is thursday, july 18, and you are "in the loop turcotte i am trish regan, infra betty liu.
A lot of top stories.
Megan hughes is watching fed chairman ben bernanke as day two of his testimony gets underway.
His time in front of the senate banking committee.
"market makers" anchor erik schatzker on the state of financials ahead of his exclusive interview with dan gorman.
Cristina alesci is in texas where the battle to take dell private is being waged.
Dell is not the only company in focus today.
Dominic chu has the rundown of what we can expect from google and microsoft.
Meanwhile, in washington, ben bernanke is heading back to capitol hill.
Yesterday he told a house committee the fed's bond buying program is not on a preset course and will be determined by the economic outlook.
Megan hughes joins us with more.
Good morning and welcome to day two.
This is the second day of ben bernanke's two-day monetary policy report testimony that kicks off at 10:30 this morning before the senate banking committee.
Yesterday the bid had a line -- the big headline out he said the old -- he said the door was still open, and it all depends on the data, not a set timeline.
We are going to respond to the data.
If the data is stronger than we expect, we will move more quickly.
At the same time maintaining accommodation through rate policy.
If the data did not meet the kind of expectations we have about where the economy is going, then we would delay that process or even potentially increase purchases for a time.
Of course this comes on the heels of him saying last month that the fed may start to trend bond purchases later this year, end the program around 2014. that is if the economy meet its forecast for growth.
2.3% to 2.6% for 2013 along with decreases in unemployment.
If the economy slows significantly, he says the fed could increase stimulus.
He emphasized the risks to the economy for federal budget cuts, renewed threats of inflation, and slowing growth overseas, just to name a few.
One other thing to look out for is his term ends in january, so this could be the last report that those senators hear from him, so you can expect some of them will weigh in on his tenure as well.
With that in mind, are we going to see fireworks and criticism at all?
If yesterday is an indication, yes, a lot of tough questions to defend the fed's easy money policies and exit strategy.
We heard them arguing yesterday that the policies have bolster the economy.
He also fielded a lot of questions about the economic impact of obamacare, immigration, what to do with fannie mae and freddie mac.
He dodged most of those that he'd said another fight over the debt ceiling would be disruptive to the economy.
We will continue checking with you throughout the day.
This testimony this week is built on the conditional, heavy on the word "if." michael mckee has more on what it means for you.
If it goes one way we will do this, if it goes another way, we will do this.
He have a forecast, and if that comes true, we can dial back on bond purchases.
Let's look at the forecast.
The basic message, continuing gains in labor markets.
Unemployment has come down 6/10 of a percent over the last year, but only .2 since you e3 began, has not moved at all since february.
We are creating a lot of jobs now, more than 200,000 are month since the start of the year.
But other measures of the labor market, we are not seeing a big rise in hours worked, suggesting no big pickup and demand -- no big pickup in demand will drive hiring.
A lot will depend on how they define progress.
Of course, jim bullock this week telling us he is not convinced quite yet on what they are going to do.
Part two of the fed forecast -- moderate growth at picks up in the next several quarters.
On that, we have a long way to go.
Qe3 may have boost stock and bond prices.
But gdp is lower than before it began.
The economy will have grown from 2.3% to 2.6% since the end of last year.
So far we have only wrote .7% this year.
Their final forecast, inflation too low below their target.
Gasoline prices are going up.
I cannot believe i just said that.
That will inch up inflation a little bit.
The question is for how long and how much it trickles down to stop bernanke has now set up the criteria for dialing back on bond buying, but by their criteria they are 0-3. that is a big stretch for wall street right now.
Michael mckee, thank you so much.
We will keep the fed in focus today.
Stay with numbered for complete coverage of the chairman's -- stay with bloomberg for complete coverage of the chairman's testimony.
In earnings news, we had morgan stanley routing of financial reports -- rounding out financial reports.
Erik schatzker,? a pretty consistent story with every financial service beating estimates.
Morgan stanley no exception.
Morgan stanley makes its money in three principal ways.
Investment banking, trading, and wealth management.
Two businesses in particular stood out in the second quarter -- equities and brokerage.
Let's break it down by starting with the brokerage business.
Morgan stanley completed its buyout of the joint venturer with citigroup in the third quarter and posted its best profit margin in years, 18.5%. this is the proof in the pudding for james gorman's strategy to shift organ stanley away from being an institutional business to being a largely retail business with the big institutional component.
There is only one big caveat, and that is that merrill lynch, its chief competitor in the brokerage business, continues to do much better, as you can see here.
Era lynch is pretty much the same as this brokerage -- merrill lynch is pretty much the same.
I said there was another business that did particularly well in the second quarter, and that is the equities business.
Morgan stanley has come out from under goldman sachs' shadow.
Morgan fell behind goldman in the financial crisis, but as you can see, equity trading, they are neck in neck -- neck and neck.
You can see the yellow line coming up from where it had been, trailing goldman sachs to now be very competitive.
There is a huge -- there is a huge caveat here, fixed income.
The questions have been raised about the viability of morgan stanley posses income franchise, now much smaller than goldman sachs.
The franchise is not lowering the gap, and that has to be concerned for some investors.
The bottom line, how is the stock doing?
This morning it is doing great, up almost five percent and getting close to trading at its one-time rate.
Get let's -- let's get a preview.
What do you plan to talk to him about?
I will ask him about two things i just brought up -- one, the fixed income franchise.
Can morgan stanley be profitable in that if it is so much smaller than goldman sachs, j.p. morgan, bank of america, citigroup?
Secondly, the brokerage business seems to be validating his strategy, but what else does he need to do to get those numbers up to where merrill lynch is?
Finally, returning capital is what every wall street shareholder wants -- more buyback, or dividends.
Erik schatzker, we look forward to that interview.
Moving and shaking at this hour, disney ceo bob eiger is living it up on disney's dime, coming to an end.
The world's largest entertainment company is slashing executive -- some -- one thing that has not changed, they will still get into the theme park for free.
In technology, it is decision day for dell.
Shareholders are scheduled to vote on the pc maker's $24 million buyout bid.
The vote could still be postponed to give dell more to lobby support for the deal.
Our deals reporter, cristina alesci come in is at the shareholders meeting outside of austin in round rock, texas.
Are they going to go through with this and vote on the dell bid or not?
It is coming down to the wire.
The meeting will get underway in less than an hour, so they don't have much time to make a call here.
Obviously the numbers are working against michael dell.
We have heard some very big shareholders voice opposition to the deal on the table, at that meeting will take place right behind me.
At this point, the special committee could postpone the meeting.
Obviously they have the leverage here if the vote is going against michael.
And what does the postponement due?
It gives shareholders more time to potentially consider a pump, maybe putting more pressure on michael dale -- michael dell and silverlake.
But in reality, michael dell and silverlake can say this is our best final offer, and that will signal to shareholders they're are not leaving any additional money on the table.
That may force them to change their vote from no to yes and the part from carl icahn's camp, which is a risk for him.
Cristina , which way ultimately -- if they were to hold this vote right now -- michael dell cannot -- where does it leave the majority?
That is exactly right.
Michael dell has 16% he cannot vote.
That obviously sets his side back quite a bit, and you have carl icahn, who has a .8%. he will vote his shares, obviously in opposition.
Show -- so will other shareholders them as you mentioned.
Carl icahn wants a vote to happen today, because if it does not, gives shareholders a chance to change their mind if there is a sweetened offer or an announcement that it is the best and final offer from michael dell and silverlake.
And you know because you have spoken to carl icahn, he he does not know it that this is the right deal for shareholders.
He is asking for them to focus on the long-term, not the short term.
The real risk, they will see the stock continue to drop, and that is where the leverage lies.
The question is, if that in fact happens, they voted down or for the appraisal rights, something that is more in his favor , transpires, theoretically the stock could go down.
We wonder if someone could run into by it up because the board will have to do something, right?
Maybe then they take one of carl's options.
I don't know if they could just let the stock go.
Something would have to be done, and it might be that recap.
The board is in a tough position.
They are facing a potential failed vote.
That is basically a vote of no confidence in them, and their decision to put this $ 1365 on the table.
Roy con has to get his board elected, and the question there is will michael dell support that because then you will go will be able to exercise his share.
If there will be buying on the market, it could be michael dell that also buys.
We could see this very interesting dynamic here, another battle between michael dell and carl icahn.
He could wind up losing his company, because carl icahn has said to me that michael dell absolutely positively would be out.
He is looking at four other candidates for potential ceo.
tina alessi, thank you.
We'll ash cristina alesci, thank you.
Dom chu is here with a round up of all the big tech earnings out after yesterday's slows.
A couple of these companies are watching what the rest of the industry may look like, so let's look at big blue, ibm.
A narrow miss on sales, but what about the stock moving up in the early going?
Earnings-per-share could come in at least $16.90, up from the prior view of $16.70. they have been looking to increase process -- increase growth by looking at faster processing.
They're cutting costs, buying back their own shares.
That helps to counter a sliding revenues, and of course we talk about those revenues.
Other places are sliding as well.
Checkout business software giant s.a.t. they recorded their first drop in three years.
They reported their first drop in three years.
Sales indicating a future business.
They sell -- they fell three percent.
Intel makes chip.
They go into a lot of devices, and their sales slide continues as well, do they not?
Yes, they do.
Revenues for the biggest chipmaker were $12.8 billion.
They also forecast fourth- quarter sales that fell shy of estimates.
Consumers are buying fewer pc's, more smart phones and tablets computers, and that is why it is important here.
They foreshadow something to the overall industry.
Speaking of foreshadowing, what does this say about google and microsoft?
Traders are pricing in less stock moves in terms of volatility than in quarters past.
We will have it all on "street smart" later on today.
Our focus on google continues.
Up next, the wild card when you are about the future of television.
How seriously we should be taking google tv.
And what is it about the tesla electric car?
One of the big three is worried right now.
And excess is the name of the game in the upcoming wall street movie.
Stay "in the loop e i will see you back here in two.
Move over, netflix.
A new streaming tv service could be coming to town.
Google is in talks with -- to create a tv service that would let users stream live channels and on-demand shows from their tv's. i want to bring in the senior associates from a venture capital firm that invests in disrupted -- in disrupted media firms.
Good to have you here this morning.
Cameron, what can google do in this space?
Honestly, they can do whatever they want, but they will have the same challenges other folks have, that it is hard to give -- to get all the content.
The other issue is you are probably never going to be able to get all of the live sports, which is one of the reasons why people have hung onto their subtractions to cable.
You also have another one out there, apple tv.
Everyone has been waiting for that to go mainstream.
Why is it taking so long?
There are a lot of entanglements.
If you get nbc content, nbc obviously has a relationship with comcast.
Getting warner bros.
Content, there is still the affiliation with time warner cable.
You may not be able to get content from somebody because of other agreements.
And their -- and then there are companies that will take it over anyway.
What is the future with something like aria?
Obviously there is some litigation going on right now with that business.
They feel like they are in the right.
The company that we have is taking different approach approach, allowing subscribers to buy a package from, in their case, dish network.
And then everyone gets paid down the line.
On aero eo, you can get network tv program effectively for free.
Someone from cbs told me it is effectively like stealing content.
That said, network tv was always free the of those rabbit ears for many years.
So we are in a changing environment.
People want to be paid for content.
Do you think google has a shot at this?
They have a shot at it.
They will go out and try to strike these deals.
One of the big things they will struggle with, they probably cannot get everything.
There are probably one or two providers they need to work with them.
And live sports is a major hangup.
Nfl being the biggest between television audience and contracts, but baseball and basketball and hockey as well.
There are contracts in place with contractors that are -- with vendors that are difficult to displace.
We will be right back with more.
? you are watching "in the loop " live on bloomberg tv, streaming on your phone and on bloomberg.com.
I am trish in for betty liu.
U.s. equity futures are little changed stop they, too, are waiting for ben bernanke's testimony.
Sales miss -- sales may miss analyst estimates.
Morgan stanley rallying in the premarket after posting earnings that the estimates.
Erik schatzker has an exclusive with james gorman coming up.
Back again in 30 minutes.
Here is a look at our bloomberg top headlines.
Today is nelson mandela's 95th birthday.
To honor him, thousands of south africans are performing charity work, students, and united nations named it national nelson mandela day.
Apple and samsung prove formidable opponents.
Sales fell in the second quarter, prompting a loss of $7.5 billion.
Lack rock -- black rock, rising stock prices boosted fees.
A 20% increase in the s&p's index of asset managers.
A mixed message on monetary policy is raising volatility in the currency markets, and that is having a big impact on corporate earnings.
We want to bring in dominic chu with more on this story.
Let's talk about the dollar index first because this measures the dollar versus these other major currencies throughout the world.
You can see from the chart it is an up-and-down, roller coaster ride for these particular currencies against the dollar and the dollar against those currencies.
What does this mean for companies that have to hedge out their exposure?
All of that cost is rising, and some of these companies, some big-name notable ones, are saying this could be a headwind going forward.
Look at some of the big names.
Coca cola said the second quarter net income was hurt by three percent.
jude medical and medical device maker, also lowers the forecast for sales and profits after readjusting some of the assumptions it has for huge are forward exchange rate moves.
And companies like ebay and ibm, they are taking down the expectations and citing currency headwind in the future as well.
We talk about the dollar, the dollar index with the fed.
It has a real tangible impact on what companies have to do, and how much it costs them to hedge that exposure to all the wild swings.
You see more companies site currency swings as a headwind for earnings?
That is an interesting point.
Fire apps advises companies on their exposure.
They surveyed 800 clients and this is the interesting part.
27% said these currency swings were going to have some kind of an impact on their revenues going forward.
Just two years ago, it was five percent, so five times the number of companies now to get those currency swings -- think that those currency swings will affect sales.
They are having an effect on corporate profits and sales, and more companies are paying attention to those currency swings.
We are waiting on the numbers that are about to cross on jobless claims.
Estimates were somewhere around 340 5000. we will see whether or not that comes through.
Bush claims for thursday -- jobless claims for thursday, numbers should be crossing just about now.
They fell 24,000 last week to 334,000. again, jobless claims in the latest week, falling to 334,000. they had estimated to be higher at 300 45,000, so a little bit of good news there.
-- higher at 345,000, so a little bit of good news there.
Dow futures a touch higher, not moving so much on this number.
These are coming in pretty much as anticipated.
334,000 is the number.
But bring in mike mckee for more.
We always look at these numbers as sort of a casino.
What are the best after a number breaks?
I would not sit down at the jobless claims table because this is the month where auto companies additionally shut down to retool their plants.
Some are, some are not.
Some are keeping the assembly lines going.
It is for a volatile period, and the labor department says as much in their report.
We saw a big rise last week, a drop this week in seasonal adjustment.
If you want to take that away from this report, you can.
Companies not getting rid of anybody, even though gdp looks to be fairly slow, which you cannot put a lot of stock in what we are seeing in jobless claims numbers.
This is the survey week, the week they take the payroll survey for the month of july.
Maybe this decline will translate through.
The two are not closely correlated, but at least they are going in the right direction.
We will keep the focus on the federal reserve.
Say with bloomberg -- stay with bloomberg for complete coverage.
We will take you to ben bernanke's testimony live at 10:00 a.m. eastern.
And this morning, $7,092 is the big number.
That is how much you would have to write a check to pay off your share of america's debt just to china and japan.
Those two countries hold $2.2 trillion in debt.
One in every three dollars in u.s. debt is owed to other countries.
Of course, the biggest creditor is the government itself -- the fed, social security, medicare, and other federal programs hold 41% of debt.
Coming up, or nagy, the budget, and the administration.
We will make sense of it with a top republican on the house armed services committee.
Tonight, nelson mandela.
We will mark his 95th birthday by talking with congresswoman maxine waters.
That is happening tonight on bloomberg at 7:10 eastern time.
In washington, all eyes are on the fed as chairman ben bernanke take stage four day two -- for day two of testimony.
Maybe taking the foot of the stimulus pedal off, at least make it a little lighter.
One man who pays attention to what he has to say is republican congressman scott.
He -- the defense budget is still unresolved.
He joins us now.
Good to have you here, congressman.
Thank you for having me on.
You heard ben bernanke's testimony yesterday.
Do you feel like the fed is committed enough?
I think his caution about the economy is warranted.
It is fragile.
That said, the fed cannot continue to increase the money supply.
It has to taper down.
We have to let the rates start to rise through a normal level.
It is really an artificial suppression of rates we are seeing here, and that poses a risk just as much as unemployment or a sluggish economy.
Let's talk about those risks.
We have seen this movie before in a pretty bad way.
When you think about the lower interest rate environment we were in leading up to the crisis in 2008. are you worried that this low interest rate environment, all of the bond buying by the fed is creating an asset bubble somewhere in the economy?
I have lived through this.
I am an automobile dealer by profession, and i experienced that terrific time of the fall of 2008, the second quarter of 2009, which was extremely challenging for all businesses.
The key is to gradually go in the right direction, but underlying all of this, i think the key is the actual agreement on a federal budget.
I said for so long that the democrats have not met us in the senate with what we have done in the house, but now we have a case where they passed a budget, we passed a budget, and we are not going to conference.
One of ben bernanke's point is he is doing all he can, but it takes monetary and fiscal stimulus to get an economy back on track.
We are in full agreement on that.
When we come to the august recess, and there is a vote of adjournment, i am voting no.
I encourage all my colleagues to vote no.
We have passed just three of our appropriations bills.
Eric 12 in total.
-- there are 12 in total.
I just do not see a path right now of us passing all 12 in time to meet our obligations for the september 30 budget close.
It sounds like you are not that optimistic.
If we don't meet that deadline, what does it mean?
It means more uncertainty.
This is what businesses and families -- they are over it, really.
We ought to be in session six days a week going from 8:00 a.m. to 7:00 p.m., six days a week, the same thing we do in private enterprise if things are going sideways on us.
At is where we are as a country.
-- that is where we are as a country.
Both parties in my view are equally responsible for the gridlock we have here.
You don't see it getting any better right now?
It felt at least the last several months that it is a little bit better, that we saw a little bit more bipartisanship.
It sounds to me like you are saying it is breaking down again.
Look, i and inherently optimistic, and today on the capitol steps, there will be about 70 of us, a group called no labels, equally divided among democrats and republicans.
Members of the senate and house will be there.
We are not all moderates.
In fact, i am a fiscal conservative, and i have sinned dear friends on the more liberal side.
But we are starting out with this idea -- and i have some dear friends on the more liberal side.
This is a good first step.
I passed energy legislation about a month ago, and there were 14 democrats who voted for it, and virtually all of them were part of no labels and i have gotten to know them through that organization.
Back to mr.
You are critical of all the bond buying, of the low interest rates.
What would you recommend?
There is a certain separation of church and state here, but what should he be doing differently right now, tom rathman?
-- right now, congressman?
The fed cannot continue to suppress rates to literally zero.
Over time it has got to come up a bit to reflect a more normal environment.
Do you think that would help the economy?
Some folks would say maybe the threat of higher interest rates in the future would inspire people to go out and borrow.
I know it may seem counterintuitive, but we are in a false state of security with interest rates.
This is not a normal environment, and the only way this is happening is an increase in the money supply generally.
This, too, threatens our country.
And i would say this is a gradual glide slope up over time . really we need to deal with the fiscal reality both in washington and across america.
We can survive a normal interest rate environment, that is actually better for savers.
Some of our seniors would earn a little bit, and i am not talking about a sharp increase in the short run, but over time the chairman needs to make it clear that we have to get back to more normalcy.
In other words, if we are not able to come to some agreement on the budget, the markets theoretically might force us to have higher interest rates anyway, and that is the last thing you want, to be forced into that kind of situation.
We are better than this as the american people.
Men and women have sacrificed for this country at a great and high expense.
I think about the next generation that is coming, and frankly i look about -- i look around at what is happening in washington, and it compels me to say what needs to be said and to do what needs to be done.
We need to pass all 12 appropriations bills in time to go to conference with the senate.
I urge leadership to my colleagues, that we need to go to conference will stop sure, the distance between the two budget is great, $91 billion.
But that is not a reason to disengage and not talk with one another.
Keep trying, congressman.
Good to have you on the show.
We are going to keep focus on policy here today.
Stay with bloomberg tv as our chief washington correspondent, peter cook, goes one-on-one with treasury secretary jack lew.
That is at 4:00 p.m. eastern time today on bloomberg tv.
Coming up, let the lobbying begin.
The nominations for the emmy awards are coming up right now.
How much of an impact will netflix original series have this year?
Speaking of netflix, explain a key role in dreamworks the budget film.
That is next for you on "in the loop." ? the 65th emmy award nations -- emmy award nominations were just announce.
Scarlet fu, who have we got?
We know the lead actor nominees and lead actress nominees.
They did not announce the programs for comedy and drama.
Kevin spacey, the star of "house of cards," was nominated for best actor.
Not a big surprise there.
Actually, it was a surprise because this is a big vote of conference -- of confidence for netflix.
The two big names that came out.
A big deal for netflix.
There has been so much excitement over that show, for kevin spacey's role in it.
They have been lobbying really hard for these nominations, apparently sending out signs and putting signs in private yards and giving out starbucks gift cards.
In order to try to.
Through the nomination.
They got it.
Any other highlights?
In terms of comedy series, we know the best actor right now, the best actor nomination, jason bateman of "arrested development here: that is another -- of "arrested development." so netflix is doing good so far.
The of other hbo stars in the lead actress category, too.
Cable networks are shut out of the emmy's not so long ago, and they have really changed the landscape of television.
Dreamworks animation "turbo" it's -- hits it today.
For dreamworks, it is a chance to start a new franchise with the future on netflix.
Jon erlichman went to dreamworks.
My name it -- my name is turbo.
"turbo" tells the tale of a snail who dreams really big.
I was watching a snail on a dusty barrage fantasizing about wanting to compete in the indy 500. david soren, dreams, too.
It started 10 years ago with dreamworks competition.
His story was a hit, but it was not until 2.5 years ago he got to make his movie.
So far this summer's hottest animated films have been aced on moving characters.
"monsters university," and " despicable me 2." they sent me to indianapolis and had me ride with mario andretti around the track.
That experience to feel what that is like this are really gave me a sense where we wanted to bring the film center dramatically.
-- to bring the film cinematically.
Dreams were dashed dreamworks is producing all sorts of programming from netflix, heart of a plan to boost production revenue to $200 million by 2015. netflix has become such a popular way to watch television.
For now, dreamworks hopes kids will spend time at the theater watching "turbo." a snail cannot race in a competition meant for cars.
Aren't you just a little ray of sunshine.
Coming up, the focus on the emmy nominations, out just minutes ago, continues as we look at -- why house of cards is one-of-a-kind.
And for wall street anchors, -- for wall street bankers, going out for business in a way that involves less cholesterol.
It is time for "this versus that," where we look at one story with two different sides.
Today, the face of wall street.
This is a steakhouse, the traditional symbol of greed and wall street fat cats, where big money lives it up while doing no favors for their health.
This is all thanks for the salesman and dealmakers that pick up the tab for after-work drinks and expensive dinners.
That right here is a high-end place . it is where the trim traders are hanging out these days because the same dealmakers are suggesting a different type of entertainment.
So instead of dinner and drinks, they are now hitting up 5:00 a.m. workouts.
Which tactic is more successful?
One former saleswoman says clients view the typical steak dinner as a three-hour ordeal.
Bloomberg tv is "on the market" for you.
Fewer americans filed for unemployment, and as a result we are seeing futures a touch higher.
Some to watch this morning, dell, up two percent ahead of the highly anticipated vote.
And morgan stanley is up five percent in premarket.
We are "on the markets" again in 30 minutes.
Coming up in the next hour, why two of the scariest words in detroit these days might be elon musk.
30 minutes to the opening bell, this is "in the loop with betty liu." the countdown begins.
Said chairman ben bernanke is back on capitol hill today, testifying in front of the senate banking committee.
It all starts one hour from now and we will have it for you.
Shareholders are scheduled to vote on the dell $24 million -- $24 billion buyout bid.
Will michael dell and silverlake have more time?
We go to dominic chu kicking it off for us.
Let's look at what is happening with ebay shares because they are taking a hit in the premarket, after the company meet earnings estimates and also sales estimates as forecast falls shy of weakness on europe and asia.
A big win for ben bernanke yesterday.
He managed to get through his testimony with bond yields falling, basically taking out the entire rise after the june 19 fair meeting -- fed meeting.
Can he keep it up today?
Will there be any landmines he steps on to push rates up again?
People continue to watch earnings.
In addition to ebay, intel with its sales forecast, falling short of analyst estimates.
Intel is still dependent on personal computers as opposed to mobile devices.
Ben bernanke's performance yesterday was easy to grade with stock yields rising and bonds picking up.
How we can actually measure it.
It seems like he kind of wants to have his cake and eat it, too.
They be the margaret -- maybe the market interprets things differently every time -- every time he speaks.
He has finally gotten the markets sort of on his course, and we saw that reflected on the two-year note yield.
The know the 10 year yield are going to write yield curves to the state and, and even talking about it will push that up.
It is the two year yield that they directly control.
It has been anchored, and after the june 19 press conference started to rise, started pushing forward the date they might start raising interest rates.
He doesn't want that.
He managed to push that back down, and take june 19 out of that yesterday.
He wants to continue that today.
Not have anybody asking questions that he would accidentally give the markets the wrong impression.
A lot of investors still seem to be hanging their hat on september as a time when on purchasing will be scaled back.
They will not do that unless the economic data is supporting it.
He was asked to a certain extent yesterday but did not go into detail, how much they think bubbles are developing in the economy.
If they are really worried about that, september is realistic.
But if they are basting -- if they are basing on on -- they are falling short in every category.
Since amber is not a slamdunk at all.
Or 90 suggested by the end of the year when he first brought the whole thing up, so -- bernanke suggested that by the end of the year when he first brought the whole thing up.
The interesting thing today is if someone asks him what he will be doing nastier because his term is up.
Go back to princeton?
He will go back to princeton if he is not at the fed.
Stay with bloomberg for complete coverage of the chairman's second day on capitol hill.
We will take you to his testimony live at 10:00 a.m. eastern.
All right, moving and shaking at this hour.
Elon musk's tesla electric car company has gm so concerned, they are creating a special team to study it.
Tesla could be a big disruptor in the auto industry.
Gm has assembled in- house experts to see how elon musk's company can threaten business.
In the old days he says gm's attitude would have been don't worry about it.
In technology, it is decision day for dell.
Shareholders scheduled to vote on the pc maker's $24 billion buyout bid.
The vote could still be postponed to give dell and partner silver lake time to bid.
Cristina alesci is in round rock, texas.
Will the vote happened today?
Well, we are just minutes away from the answer, and lots of shareholders have turned out today.
There are about 100 people in the room, and they are being given a choice between watching the stocks fall in the short term or potentially riding at higher in the long term.
We spoke to one shareholder, a small one, but important because he reflects the sentiment that is out there right now.
Here is what he had to say about michael dell.
Everybody is disappointed with michael dell that i have talked to.
So you have to listen to that and that sounds a lot like what carl icahn is saying, that michael dell has not done right by shareholders.
And they should vote this deal down.
Of course, we may not have -- they may not have the opportunity to officially do that today because the meeting may be adjourned, meaning the vote will take place later in the day, maybe a week, maybe 10 days from now.
Shareholders may get the opportunity to perhaps vote on a sweetened offer from michael dell of silver lake.
At no that the deal is the best and final offer.
You know that shareholders are out there waiting to see what happens next.
Michael dell and silver lake have come out repeatedly and said this is as good as it gets, indicating they have no intention of sweetening that deal.
But do you think as we get down to the 11th hour there is the chance at we do see a bump, and if we get a bump, that pleases carl icahn and southeastern and the rest of them, then this in fact happens with silver lake and dell?
Here is the distinction.
We definitely heard reports that this is the best and final from michael dell and silverlake, but they did not communicate that officially to the special committee tom a which is critical in calling that bluff, if you will.
In terms of potentially seeing a sweetened offer from them, whether or not that could bring carl icahn around.
There remains to be seen because as you know, he seems pretty serious.
He told you and other people before -- and i hear people close to him saying he will not go away for a next or $.40 or $.50. that could bring in some shareholders changing their minds and voting yes.
So there are divergent types of shareholders there will stop it is not a clear-cut answer.
He wanted to go at $14 per share, another $1.65, and he wants those warrants at $20 for the opportunity to capture more upside down the road.
An interesting day on and you are right in the thick of it.
Thank you, cristina alesci.
Chipotle is serving up earnings after the closing bell today, shares up 25% since 2013 -- since the beginning of 2013. what does that casual chain need to keep momentum going with shareholders?
We are going to talk about it.
Right now, in fact, we are going to talk about it right now with julie hyman.
What do you say?
Investors are looking for rebound in sales growth, are they not?
We have seen slowing sales growth from the company.
Chipotle has been a big momentum play.
He came out of nowhere and it has grown rapidly quarter after quarter with rapid same-store sales growth.
But that has changed in the past year or so.
We have seen a slowing of that growth.
In the fourth quarter it was only one percent.
What is chipotle trying to do to bring that momentum back up to comparable sales growth?
It is offering new menu items, new tofu items, all of california now.
Analysts say that has been successful, adding another ingredient in its readers.
It now has margaritas in some places, offering more premium alcohol.
It is not clear if it raised menu prices significantly during the quarter.
I was looking at a note from lazard that says the analysts expect same-store sales growth of 5.6%, which would be probably a couple percentage points above the consensus.
Ed is the number people will be keying in on.
Let's talk about the investors that would public the bet against it.
What is that doing?
David einhorn said he is selling the shares short.
He said the canteen a bell menu would -- the cantina bell menu would provide a boost.
If you look at shares, they rebounded pretty nicely.
Last year they did fall, but this year they are up on a five percent despite the slowdown in same-store sales growth, so it looks like investors are focusing forward and looking at the sales growth coming back, and they are not buying into the short case.
Tonight, carol massar will take us behind the counter of chipotle and tell us how the company broke all the fast food rules, turning a small eatery into nearly a $12 billion mega chain, happening tonight and -- tonight at 9:00 eastern.
And netflix comes out swinging with the emmy nominations.
Why the big networks should be paying attention to this.
Plus, we told you how gm is worried about electric cars.
Could be wb next?
We will tell you about luxury carmakers and what they are thinking about new electrifying ventures.
Stay "in the loop." ? you are watching "in the loop ," live on bloomberg television, streaming on your tablet and bloomberg.com.
Intel shares are down premarket after the world's largest chipmaker reported a fourth straight quarter of lower pc sales.
Intel kicks off two weeks of earnings reports from tech companies, iker soft and google all reporting after today's close.
I want to bring in -- microsoft and google all reporting after today's close.
Scott, i would say we did not necessarily get a good feeling given what we saw out of intel yesterday with lower revenues.
What does it mean for the rest of the companies reporting?
The way we think about it, we have a buy recommendation on intel.
Frankly, the street's forecast was largely lower than where intel was guiding.
We have a new seat -- they have a new ceo and we feel they brought expectations down.
We feel the back half of the year would be aided by a be improvement in the pc area and new products, so we continue to like the stock here.
But what does it tell you about tech in general, intel making the profits for what goes inside the computer?
We know pc sales are going slower.
What does it tell you of the overall health of tech?
Three years ago before the ipad came out, maybe you might think that is an indication of wrought weakness across technology's sector, but to be frank, intel largely still is a proxy on the pc business, which is not indicated to get much better any time soon in terms of seeing declines.
Those declines might -- areas other than pc's to a large extent seem to be doing well.
We look at sandisk, they did very well, driven by mobile and solid-state drives.
So there is a lot of different aspects to technologies.
Pc is probably one of the weaker ones.
Let me just ask you, back to intel for a moment, can they begin to do enough on the mobile front so that they start to capture some of that part of the business?
We feel they are investing accordingly when it comes to mobile space, but it is very competitive, without question.
Right now we think intel with its new management is largely focused on controlling essentially costs, really what they are responsible for on their side, and hopefully the demand picture will improve, especially with some of the new offerings they have planned.
So overall in tech right now, the pc businesses for obvious reasons, and intel struggling because it is so much a part of an industry.
What excites you right now?
There are a lot of good things going on in tech.
I just referenced mobile, for example, it seems like a lot of the oem companies have been having difficulties.
But a lot of the suppliers have been doing well.
So we look at a company like sandisk, which had some tremendous results yesterday, and our analyst actually increased forecast as well as maintain a buy recommendation.
In addition, overall one thing that needs to be kept in mind is the fact that even though pc's are not perceived as good, there are a number of different ways to play that.
We like intel right here largely because it has performed in line with the market.
We see new managers making changes that will probably help performance.
Scott kessler, head of technology at s&p capital.
Thank you so much.
We are getting closer and closer.
Back with more after this.
We have some breaking news for you on dell.
The dell meeting has just been rescheduled for july 24. cristina alesci is on the ground there in round rock , texas.
A lot of people have been speculating this might happen because michael dell and silver lake did not seem to have enough votes to get the deal done.
Might they be working on a sweetened offer?
They very well could be, but the independent director, he announced this vote would be changed, and there was a loud blue -- a loud boo from the audience.
Michael dell and silver lake go back to the drawing table and get a better offer on the table.
It was quite amazing to see.
Some people think this is essentially gaming the system.
In other words, if the vote is not going your way, you just cancel it or move it, and that is essentially what carl icahn is saying, too.
This delay does work against carl icahn.
This is not what he wanted because he does not want a sweetened offer.
He doesn't want them to and an associate.
He wants to take over the company himself, and we will have to see how this plays out.
Unfortunately, no definitive answers today for shareholders.
Back with more on this story and the opening bell, right after this.
? welcome back, everyone.
You are "in the loop." bloomberg tv is on the market.
Julie hyman joins us with the latest on futures in the last moments before we get to the opening bell.
Futures indicating a higher open for the second straight day.
This would be the 10th day in 11 that we see a rally for the s&p 500 if we close that way.
People will be paying attention once again to ben bernanke and his testimony.
However, futures got an early boost by the better than estimated initial jobless claims.
Let's count down to the open with the top 10. these are the only trade you need to know about today.
Economics editor michael mckee will join us as well.
We are watching netflix this morning, the online video service's with nine emmy nominations.
The first time an internet streaming service will be in the running for tv's top honors.
Number nine, merck, the healthcare company, concerned increase over competition with johnson and johnson.
Lowering their price target from $52 to $51. number eight is microsoft, investors zeroing in on whether the software company will roll out office 3.65 this year.
The company raising full revenue forecast as a curb spending, sandisk,. number six, ibm.
Shares in premarket reflecting strategic successes at big lou, beating the -- at big blue.
Ibm with cost cuts and share buybacks against broader market slowdowns in i.t. spending.
Number five is verizon, attracting more long-term subscribers.
90 -- 941,000, to be exact.
Second quarter netting comes to $31 billion.
Number four, morgan stanley.
There is value going on with the stock, at least premarket.
An increase in its earnings that handily beat analyst estimates.
You do not want to miss our exclusive interview with morgan stanley ceo james gorman, sitting down with erik schatzker.
Number three is ebay, investors lowering their bids for shares of the online marketplace premarket.
Estimates struggling to maintain growth in europe and asia.
That is where the ceo has been focusing his efforts.
Number two is intel.
Having a rough morning after company earnings in third quarter forecast fell short of estimates.
The semiconductor maker is struggling.
People are either matching or slightly bidding on earnings and missing on revenue.
Let's get to another biggie.
It is our number one stock that you need to be watching today, and it is dell, trading a little bit higher now premarket.
We just got word that it has adjourned its shareholder meeting this morning until july 24. don't forget they were supposed to be voting on the dell deal.
Michael dell and silverlake trying to take the company five it.
$13.65 a share.
It looks like they may not have had enough votes.
They are waiting until july 24 to make the final decision.
Coming up here on the open.
You are looking at the picture of the new york stock exchange, how's it is news on the economic front out earlier today.
Jobless claims coming in slightly better than expected.
Lots to talk about today.
Joining us from chicago at the cme, michael goethe.
-- michael gerka.
A little positive economic news and let's not forget the second day of semiannual testimony from ben bernanke, happening on capitol hill.
What are you watching carefully for?
You know what, we have built ourselves into this situation, where it effectively ever since the word "tapering" has been introduced in the market.
Qed does not want to be let go.
Definitely reflected the way we would have expected in the 10 year yield with a massive pullback of at least 20 basis points.
That being said, you are seeing increased volatility in the currency markets because of that.
Central banks around the world start to go either dovish or hawkish as we straddle the line, and i think the volatility has been very healthy for the market.
Normally in times of low volume.
It seems as though the market wants to hear what ever it wants to hear at any given moment out of ben bernanke because he sort of effectively has been saying the same thing.
What do you think could tip the scales?
What kind of words could find traders today?
I think the clear pessimistic view is the jobs outlook.
If there is any kind of inherent belief down the road that we will start seeing some type of dismissal of a robust return to employment, which has not been the case or any indication thereof -- so again, the status quo would mean along that testimony, the receivership of this good news would be of course the stock market because of the -- because of what is involved there.
At the same time, bonds and interest rates are important right now because there is this inherent belief that the market is starting to believe recovery is in place and the u.s. is being the leader, and that references the needs of the dollar.
So any references by the fed chairman is going to shake the bag up.
Thanks so much.
Good to see you, michael gurka.
And we have jim tierney, who manages $2 billion.
His call -- have faith in the american consumer, especially at the higher end of retail.
It helps that the fed is being very friendly to stocks these days.
Jim, welcome back to "in the loop." america -- a good place to be as an investor?
Absolutely great place to be.
If you look back to 2007, and sumer network was $65 trillion.
In the subsequent -- consumer network was $65 trillion.
In the subsequent two years it fell, now it is back to $75 trillion.
They are going to become more comfortable with spending, and that will be the driver of our economy.
So people have a little bit more money in their pockets.
Their balance sheets have been improved, and their optimism is getting stronger.
Without a doubt.
All of those are going to drive consumer spending.
Mike, -- mike, what is the volatility mean today?
The fed will be on the hot seat today, as ben bernanke discusses moving rates up and down.
It has been a little bit healthy for the markets, but is it healthy for you?
How do you discount your stock picks going forward if you don't know where the fed is going with its rates?
You know where the fed is ultimately going with interest rates, and that is higher.
But you have to look at the absolute levels, not the relative move will stop as a -- at the 2.5% 10 year treasury, even three percent, that does not dampen activities so much that it will throw the activities off.
What are you putting in your models?
A three percent model, so another 50 basis points.
Julie, we did not talk about this, but one of your picks happens to be charles schwab, reporting earnings.
Charles schwab saw a year- over-year decline in earnings of about seven percent, came in a penny light of analyst estimates.
The stock dropped more than 40% when earnings came out.
The company said it saw muted trading volumes across brokerages, particularly when you look at the fixed income side.
With that kind of run and those kind of earnings, the question is, why it would now be time to -- jim tierney is in the hot seat, so how would you answer that?
A couple things.
One, we have been a long-term holder but it is still attractive.
There was a big gain a year ago, a $70 million gain.
If you x that out, they still had growth.
Everybody was talking about the penny ms., but that was due to higher expenses.
The leverage into 2014 to 20 is absolutely huge and schwab.
What do you expect to hear from ben bernanke today?
More of the same.
He has to continue the wealth effect and make sure the markets and housing are strong.
He will not knock that off course.
Thank you very much.
Coming up, more on the breaking news out of dell, the shareholders meeting being posed owned until july 24. wrist in a less she is in texas for us right now.
And the netflix house of cards may change the way the entire industry does business.
We want to get straight back to the breaking news we had on dell, dell announcing it is rescheduling its meeting back to july 24. cristina alesci is on the ground with more at round rock texas -- at round rock, texas, and a lot of people thought this might happen.
That's right, this was an expected outcome, but that did not stop shareholders from giving a large boo to the independent director when he said the company needs more time to solicit more proxies will stop people came here, at least the ones in the room, to have their voices heard and to vote down the deal.
What is truly amazing is that the people inside are willing to see the stock dropped rather than give michael dell the company, rather than sell it to him.
They will not settle for another $.40 or $.50. they think michael dell has done a fairly terrible job when it comes to running the company, and they will hold out for a much bigger price.
Of course, we have to see how the institutional shareholders, the one with the maximum amount of votes, if anything happens between that -- between now and the 24th to change their mind.
That could mean a bump in the price or a final statement from michael dell and silver lake.
It is a fascinating story, and we will continue covering it.
We will have a thing on it at the top.
Network executives have to be pleased with nine nominations including best drama.
These nominations -- do they matter, given all the disruption that netflix has?
It matters a lot because it shows their strategy is paying off, whether it is luring movie stars to tv, or releasing all the episodes at the same time.
Kevin spacey, who has just now made it for big -- for best lead actor, put it best that he said that it is a real opportunity for the film and tv industry to learn the lesson the music industry did not learn." any other indication broadcasters will look to this kind of format?
You wonder if the cable channels and networks will be tempted.
What if amc were to offer the entire season of "mad men" in advance for 30 bucks on itunes, and then air the series on a weekly basis?
We know that there are a number of content providers and the list has multiplied.
Amazon is producing mainly comedies.
Verizon and red box are teaming up to do the same.
People are even saying usa and tnt may break up their format and no longer order syndicated repeats and order new programming.
Scarlet, thank you for your perspective.
We have a lot going on today, talking about dell, netflix, and the fed.
Here to put it in perspective -- and i have to say, i am thinking like this is an alternative universe -- because adam and i are usually on "the close," and here we are on "the open." it is good to be with you on the shows.
I have those code numbers for you.
Microsoft and google both reporting after the bell.
Microsoft earnings expected to be up 12%, google only seven percent.
Everything that google is doing, only seven percent growth were stodgy old microsoft -- is that a reflection of an economy that is still struggling?
I am telling you what it really is, costs per click.
It has been getting cheaper, so the margins being affected are coming in.
We talked about microsoft and google, and we get a lot on earnings after the bell.
But dell as well, a big story for us.
Are you surprised?
We have been talking about them quite a bit.
When trow with their former stakes said we are not voting for this deal, suddenly you realized that these guys are realizing if they play along with this whole process, they be they can get a higher price, and i think ultimately that is the goal here.
Given that they have postponed it, dell thinks we cannot get this done, they be we can afford to pay a little bit more.
That will put pressure on michael dell.
How much more can you afford to pay?
Let's see the higher bid.
Or they can just do the recap itself.
Bernanke another big focus.
Day two on capitol hill.
In front of the senate banking committee.
Yesterday he said if the data improves, we will reduce our rate of purchases." it is subtle.
It is about the truth, right?
It is greenspan all over again, so take with it what you want.
We will see how the market interprets what he has to say today.
We also have jack lew coming up.
There is so much to talk with jack lew about, tax reform to his insertion -- his assertion that you have to get dodd frank in place.
And in september he is on his way to europe later tomorrow.
I will see you at 3:00. back with more "in the loop" after this.
It is time for global outlook.
Another automaker moving down electric avenue.
I want to bring in cart expert max gerardo, managing director for rm auctions.
He joins me from london.
Everybody is trying to get on this bandwagon.
Gm launching a study to look at the tesla vehicle, now bmw trying to get into the act.
It is considered to be the car of the future, so that is what all the prime manufacturers will be leaning towards, the ecology and less pollution.
That is what they will try to give us.
What do you think bmw's version will look like?
They have a lot of firepower, it is a big company with a lot of money behind it, so they will develop a car that is probably better than all the rest.
They have tesla a