Facebook Buys WhatsApp: Surveillance (2/20)

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Feb. 20 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: David Kirkpatrick, James Albertine, Richard Falkenrath, Jed Kleckner, Bill George, Alex Kliment, Candace Corlett, Greg Rohan, Vladimir Tenev and Baiju Bhatt. (Source: Bloomberg)

This is "bloomberg surveillance." fighting a rep to getting kiev's independence square.

In a pending civil war in ukraine.

-- an impending civil war in ukraine.

And facebook excel for big money whatsapp.

And trading stocks commission free.

Good morning, everyone.

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

It is thursday come up every 20th will stop i am tom keene.

Adam johnson and alix steel as well as scarlet fu survived a helicopter dropped in eight feet of powder two days ago.

Time for a morning brief.

It is an extraordinarily busy day.

China manufacturing fell to the lowest level in seven months.

China's central bank also draining cash from the financial system for the second time this week because the rate the bank charged one each other for overnight loans sent to the lowest level in 10 months.

Finally, japan's trade deficit record to -- widened to a record january.

It weighs on prime minister shinzo abe's recovery.

8:30 a.m., the all-important must pay attention cti.

We are paying attention to the inflation rate.

945 a.m., bloomberg consumer comfort.

10:00 a.m., mortgage doing what she's was that we have earnings before the bell.

Walmart and tom's favorite shoes -- crocs.

After the bell, nordstrom, hewlett-packard, and groupon.


rogers moment.

It matches your iphone cover.

They do.

I have got my girl iphone cover here.

It goes with my pink crocs.

Let's do a pink data check.

We're looking at equities, bonds, currencies, commodities.

Futures negative two, yield comeback.

There is a relaxation of from the tragedy we see in kiev, we go from $2.68 back to $2.72. nymex crude still elevated above $103. more in "surveillance" today.

The ruble, two measurements -- dollar ruble and the ruble basket, which is a mix of euro and dollars.

That is with the pros look out.

$41 70 four cents.

And there is nymex crude front and center with the ukrainian oil hub in the pipeline.

Here's a charget on inflation.

Article for a core ablation number.

That recent disinflation -- critical for a core deflation number.

No big deal, but if we see a take down there, that becomes far more important for chairman yellen and others as well.

It took hours.

We scour the front pages of the papers and the web this morning.

A lot of stories.

Pre-k's tom, really only two stories everyone is talking about this morning and you know what they are because you are talking about them.

Pilots in the ukraine overnight, and facebook's -- violence in the ukraine overnight in facebook's purchase of whatsapp.

Starting with ukraine, 11 dead overnight in kiev.

This is the last six hours.


25 official yesterday.

These are the official numbers.

So god only knows at this point some of the other numbers.

You are looking at a live shot right now of independence square in central kiev.

There does not appear to be any violence at the moment.

The president has effectively declared martial law in the ukraine.

Meanwhile, the western side of the region has effectively declared itself independent.

President obama spoke in mexico yesterday.

Here is what he had to say.

Along with our european partners, we will continue to engage all sides and we continue to stress to president yanukovych and the ukrainian government that they have the primary response ability to prevent the kind of terrible violence we have seen, to withdrawal riot police to work with the opposition, to restore human dignity.

Everyone is worried and focused on putin's reaction.

Remember, this is a crossroads of oil.

We talk a lot about this, the idea of sanctions and we see the president began to nudge toward that.

That is front and center of the euro.

Here are the bloomberg headlines.

The review crane -- the ukraine ministry shows you the cacophony there.

35 dead since the classes resumed.

The death toll today converted seven.

You gave us a bigger number -- 12. i do want to point out the ukraine ministry as saying 20 police were wounded by sniper fire in kiev as well.

A live report is coming out.

Difficult to say what the definitive numbers are.

And the official ministry did say that a number of people had gone into various defense department, stop aids, taken out guns and weapons, tens of thousands -- stock ckades, taken out guns and weapons, tens of thousands of rounds.

The other big story we are talking about is purchase -- facebook acquiring whatsapp which what appears to be a large number -- $90 billion.

$12 billion in facebook stock, billion dollars cash, $3 billion restricted.

They are effectively at facebook paying $42 per person which compares to the $5 for instagram and that is only half the valuation of twitter.

All the analysis, now we have gone on to a new analysis, which is more of a balance sheet affected we will talk about that through "surveillance" today.

Did you know about whatsapp?

I did not.

I did not.

Nope -- never used it.

I do not think there was a core audience.

Remember, the big incentive is not to just compete against google, which was rumored to be linked to by whatsapp, but also teens and trying to recapture that as well.

Let me point to the number here, the trade of the century, tom, sequoia capital took a 15% stake in whatsapp that cost $8 million a couple years ago.

They got $3.5 billion.

That is like you and your super bowl betting.

At is your front page, these two big deals, situations rather.

We need to talk to somebody smart on whatsapp.

David kirkpatrick is a bloomberg conserving editor, author of the wonderful "facebook affect," and i thought really on a twitter feed, you got a lot of play last night.

With your perspective here.

What is the key distinction of this transaction for our mr.


Pre-k's i have it here on my iphone.

I'm surprised you do not have it because that is when people start using this, when they are outside the u.s. for americans.

What was the question again?

I know you're tired.

What is the distinction for mr.

Zuckerberg on this?

What is the why?

The most interesting thing i have not heard talk about yet is the sheer aggressiveness that he continues to show.

As a leader, as a determined leader to keep the service in front at all costs with a long- term vision that he is known for, that i have always talked about, i think this shows that he is willing to pay whatever it takes to keep on the cutting edge of what is going to be important down the road, and i think actually despite the shocking price that everyone reacted to when they first heard it, it actually begins to make more and more sense when you think about it.

$11 billion in cash, no long- term debt, has full positive, $2 billion a year, $3 billion a year, cash flow positive.

This is the critical thing, folks.

I went to a net analysis, and my question to you, david -- people are looking to the future discounting the value.

Ego to the future, seven years arbitrarily, and you pull but that value, facebook and the others are not playing with the matthew and i are used to.

They're not discounting at 3% or even 7%, a lofty number, they have got a much higher number which makes this transaction makes sense.

At negative the nature -- i think it is the nature of the internet.

If you get the right service, the amount of money you can make it spectacular over the long term.

And it is not necessarily important even to look at how much whatsapp will make -- it is a channel that can lead and feed to a lot of other facebook services where they may have a far better margin.

It is also just a way of keeping in front of the switches -- all the people of the planet.

I want to say this is the group of users that zuckerberg wants -- everybody.

He wants to own everybody.

Instagram, all right -- i don't know phone is the right word, by the way.

He is presenting his turf and for filling his vision, which is to be a platform for vacations and sharing for everyone -- for communications and sharing for everyone who lives.

He has a defensive element because let's face it, google wanted this, yahoo!

Was trying to talk to them, too.

The thing about zuckerberg, he started hanging out with the two years ago, took them to dinner, "the times" said how many times they went walking above the hill in silicon valley.

I have it on my phone.

Did i think it would sell for $90 billion?

-- $19 billion?

David, didn't simply make a new rulebook of getting a bunch of -- didn't simply make a new rulebook of getting out of front of each other, apple and samsung and others?

I think there has been a new game plan for a while.

Yvon microsoft paid $4 billion plus for skype, people were like oh, that is a lot of money.

I do not think it needs to be a new game theory.

People have already recognized the scale of opportunity on the internet is almost unlimited if you can have the right services and go to a massive scale, especially at a global business.

By the way, i want to throw in another idea.

Wechat, another service very similar to whatsapp, coming out of china, shenzhen-based.

That service has roughly this amount of global users even though most of them are in china, 40 $50 million plus.

We will go back to david kirkpatrick.

We will go beneath the headlines of whatsapp and facebook and give you a little more on "bloomberg surveillance." and are toward her question of the day, actually.

What's your take on facebook buying whatsapp?

Tweet us @bsurveillance.

I also have some company news that i want to update everybody on.

Brian moynihan if they pay kite -- gets a pay hike.

$12.5 million of that were stocks.

The remaining 1.5 million dollars was in salary.

Morning and not receive a cash bonus.

-- moynihan did not receive a cash bonus.

Nelson tells is pushing for a break in pepsico.

He said 837-page letter -- a 37- page letter.

Nbc universal ceo declares the sochi game and "tremendous success." in bc is averaging -- nbc is averaging 23 million viewers.

The primetime audience is doubled what nbc had before the sochi games.

Viewership is really bad.

No one is watching it.

I would watch if i did not do it about a 6:00 p.m. i am watching tesla.

In 20 earnings we saw last night with plans to raise the model s 56% this year.

Can tesla become a large global player?

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

Good morning, everyone.

Coming up on bloomberg television, stephen joyce, the chief executive officer of choice hotels international in the night :00 a.m. hour, "in the loop" with betty liu, with stephen joyce.

This is "bloomberg surveillance." i'm tom keene.

With me adam johnson and alix steel.

It is on an automobile.

35,000 is the number you need to know.

That is how many model s cars tesla plans to sell this year.

Stock is trading 150 times earnings full support 11 times.

James albertine covers tesla.

He joins us on the phone from washington, d.c. this morning.

Good morning, james.

What does tesla have to deliver to be worth its valuation?

Good morning, to what for having me.

I think the shift has really moved to the week of great excitations for tesla and that is really what is heading into the $200 territory.

It started this week with the ipo, take out by a tech company, now i think the focus is shifting to this idea of a giga factory.

I believe management will have a call next week to get into more details, but it is essentially bring either battery production in-house.

That is not as much about the car, it is warm up the ancillary opportunity to get into the energy storage market, where i think investors may be focused again at these elevated valuations.

James, i read your report that came out just yesterday before the earnings.

The title was -- "value exceeds fundamental reasoning -- we question take out." why did you phrase it that way?

I think as a car company, it is significantly overvalued.

It was a beat really driven by lower than expected r&d costs, which i think is dangerous at this stage in development for a company like tesla.

To get to 35,000 units, which is 1000 a week versus the gate hundred.

We really do not know much about the adoption or uptick level at the $50,000 price point, with a thick is the biggest looming risk.

To get to that point, there are significant investment, infrastructure, retail, and now giga factory related next two- year to three year period, which poses risks that we do not think are being appropriately valued.

One of the short-term risks could be the model x and when that is going to start reduction.

Elon musk spoke with homework's -- with bloomberg's betty liu.

Quite steep artist -- the hardest part with the x is obtaining great looking great functionality.

It is easy to give up on one of those, and it is dam hard to make an suv that is beautiful and incredibly functional at the same time.

Bright, so when you're taking a look at that, what kind of negative is that in the short term.

I think, just to be clear, i think elon is a visionary and it is a luxury price point based on a tremendous job.

I think the x extent that full sub again, at $211 or so for share -- i think the x extent that.

Again, at the $211 or so for sure, it extends.

For have a market cap of $60 billion was about the guys seen six teslas on the road that has a market cap of 24 billion.

Why is this thing overpriced, and as a greater order the go flat for years like say ebay used to do?

Again, i think we are sort of bridging that gap between my expertise is value waiting a our company and others who look at it more for pure technology perspectives.

So there are some out there that view it as the next sort of amazon or the next big tech stop.

Bringing it back to reality for the moment, that is anticipating a much bigger shift in their core business.

Remember, they sell cars.

They do not sell into the energy storage market yet.

There is this great sort of fuel of high expectations that have not really been checks to an extent by rubrics around cost of returns.

James albertine, thank you so much, with stifel nicolaus.

David kirkpatrick with us, our bloomberg intervening editor.

People want to sell this of a tech company.

Tesla -- a tech company?

Well, elon musk is a technologist.

I would say yes.

I think it is a lot of different things, and that is the nature of modern companies.

I think every company is looking to become a tech company.

Tesla is a great example of a company that is an old industry but truly is a tech company.

But i would say what he was talking and i quote just now about beauty, you know, when you pick about the rumors that apple might try to buy it or something, apple needs a new steve jobs.

They have johnny isakson all, but what like are you saying -- but what are you saying apple should buy tesla?

They're trying to buy the key thing, which is using globally, then apple may be willing to pay $20 billion, $30 billion for a guy who can help them do what they want to do, which is make the most beautiful, functional tech products.

I think you're crazy.

All right, david.

Is david kirkpatrick crazy your twitter question of the day.

On the show tomorrow, on the cover of the new "bloomberg businessweek," and in-depth look at the transportation company uber.

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

Good morning, everyone.

Stitches -- futures -2. i am tom keene.

With me adam johnson and alix steel.

Adam has our top headlines.

Every go with a truth in kiev, tumbling and clashes.

35 people have been killed in the violence as protesters drove right police from independence square.

Tv images showed activists leading captured uniformed policeman away from the square and demonstrators regained control of the area.

That is a scary concept.

Shifting to china, a gauge of manufacturing their fault to a seven-month low.

February ratings were adjusting manager index look from january's level.

For customers were calling for it to be unchanged most of economists say the recent trade figure shows manufacturing dropped off at the country celebrated the lunar new year, the year of the horse and china.

In sports, syracuse perfect season comes to an end against boston college.

Stuns the orangemen, 62-59 in overtime.

This was in syracuse, which rubs assault anyone.

The team suffered its first loss after 25 straight wins.

Wichita state now the only unbeaten team in -- biscuits will never forget that.

Let's go to our morning must- read.

Mike line of "bloomberg view ," -- matt klein of "bloomberg view" has to say a specter is haunting the u.s. the flow of information seems to be getting choked by a lack of high-speed data connectivity.

That will not change unless new investment becomes more profitable or the government intervenes.

David kirkpatrick, also of "bloomberg view," the eight most dangerous words in the english language, i am from the government and i'm here to help.

I do not think that is crazy.

I think the u.s. is falling behind in a times -- in terms of broadband delivery among developed countries.

I think that number was like 19 in terms of broadband speeds, average citizens can access.

It is the lifeblood of the modern economy, broadband.

If you do not have it, you are in trouble.

David, you are sticking with us.

Coming up in the next hour, bill george of harvard will be talking about facebook.

Good morning, everyone.

"bloomberg surveillance." i am tom keene.

A lot going on.

Inflated -- inflation data at 8:30 this morning.

Futures -2, dow futures-team.

Let's look at the data stream quickly.

It is an improved data stream.

Unrest in the ukraine has some effect.

The yield comes back $2.68 to $2.72. nymex crude still elevated, pipeline still key to russia, ukraine, and to europe as well.

Kiev burns.

Of course renewed burning this morning.

Ukraine leaders began a nationwide antiterrorism operation.

Europe and washington stand aside, washington consensus is a consensus of ineffective words and platitude, simply can't say since -- simply can sanctions work and can the american and administration have the will to affect immediate sanctions?

Richard falk and roth is with us.

A former white house security advisor, bloomberg contributing editor.

-- richard falk anden rath is with us.

They're going to little effect other than to reinforce the symbolic protest of the west -- because russia can come running.

Simply supply the press of gas.

What is it will we can do?

Europe job, brussels has a statement, i do not get any sense of a two dude list for the west.

It is not at all clear what they can do other than take a position and maintain it to the best of their ability.

This is a crisis that is going to be settled by ukrainians and maybe russians but nobody else.

The role of the outside world and this crisis is really rather modest.

This is in an area where we are regarded to intervene militarily.

That is absolutely clear.

Enormously west have have already been established.

There are no effective effectiveness of state.

From the bloomberg terminal, ucd concerning the -- ucd continuing stream, you have got the key of meir talking about -- the kiev mayor trying to get to some sense of reality.

Let's share with the president had to say.

Our approach ofas the u.s. is not to see this as some cold war chessboard in which we are in competition with russia.

Our goal is to make sure the people of ukraine are able to make decisions for themselves about their future, that the people of syria are able to make decisions without having bombs going off and killing women and children -- richard, i understand the concept -- we want to help them make decisions for themselves, but how do we actually do that?

They need to get some sort of reconciliation going so they can have an election, possibly at our agreement and a shift in government.

Yanukovych has said he is not going anywhere.

As long as that is the case and he is willing to use force, there will be lunch at and there's nothing the west can really do.

One of the things that has happened is the protest has changed.

When it started in november, it was about the traditional east- west divide people protesting his decision not to continue to move for the european union.

Now it is a much broader protest against corruption, dictatorship, poor economic performance, and general hostility toward the regime.

Ian bremmer was with us yesterday from "time" magazine, and he went right to your point, which is that dialogue has changed.

His key points are the russians and the russians centric ukrainians in eastern or north and ukraine.

What do you suggest they will do?

The current regime is ready to fight to hold onto power and not let things go.

That is an age-old division, and what is interesting though is there are some sites of report that the popularity among those sectors in the east, traditional base, are flipping as well, objections -- meanwhile in the rest, the region called lviv want to separate.

How concerned should europe be about that.

They should because it would be war.

It would look like yugoslavia again.

Already six debt over the last couple of days is nothing when it comes to blows along ethnic lines when it did 20 years ago in another part of europe.

We have been talking about whether hundreds could do.

I want to bring in my morning must-read from the "wall street journal," he talks about there are no two putins.

Can we buy pulling out of sochi or by boycotting the sochi ceremony on their sunday ensure that the winter limits will not go down as the games that were the defeat of europe?

It is not going to happen.

Even if they did pull out of the olympic silver that come it would be symbolic of course, but this -- putin has had a hand in this and putin is not a democrat.

It is a more complicated situation than just vladimir putin suppressing -- this is critical.

We are honored to have with us dr.

Falkenrath and david kirkpatrick, the "facebook effect," gone is your world of social media immediacy to kiev is remarkable.

What can the u.s. do to help them decide for themselves?

We have already done an enormous amount by providing facebook and twitter and other tools that have emerged from our economy that are major factors in what has allowed the citizens of the ukraine and syria -- all these countries -- not always with the greatest long-term consequences -- richard, does vladimir putin care about twitter?

Care about twitter?

Social media accelerates certain dynamics in these countries, but the countries have followed apart and go to war before facebook and twitter can around.

But the acceleration of the contribution our economy has given.

When will we see civil war?

Hopefully we don't. there is a small urchin of the right now in the central square and it is in the hands of the ukrainians.

It is not up to us, it is not up to anyone on the outside to decide this.

That is how these things often go.

Your ability to influence from the outside is extremely limited.

The backdrop here is a totally failed economic experiment.

We forget that we move from putin and we move from russell's -- why is this economy -- we move from brussels.

Why has this economy failed so much?

Pipelines carry natural gas that is brought to the cert -- the surface in russia that goes through the ukraine and heads to europe.

You can see the flow.

There is the map.

Not only that, the ukraine have a lot of natural gas.

A just don't have the resources and the lack of corruption to develop it.

Adam, that looks like your grand tour when you got out of college.

Of the grantor i would like to have taken, but given what is happening now, i am certainly glad i'm not doing it.

Richard, this whole thing began because president yanukovych signed a trade deal with russia rather than with europe.

The people said no, we want to bond with europe.

How to sell possibly get results over the next two months?

It will not be resolved with yanukovych and the european union.

The new ukrainian government could resume dialogue with the european union and see if they can get this deal back, but there has to be a governmental change by then.

It started as a protest to that decision by yanukovych, which was coerced by russia, that is clear.

This important point out of this conversation -- it is much bigger than that.

This is no longer the flow of oil.

And particularly the culturally oriented -- those who are culturally oriented toward the west, that is how it was in november.

Now it is much broader.

It is a very diverse set of protesters, and i think the classes that we have seen were likely precipitated by an element along -- among the protesters.

Not all of them, but a few of them said we need to take the fight to the police, we need to do it now while the world is watching.

This is how we will get them on our side.

They likely initiated this and then the police forces retaliated with a brutality.

Richard falkenrath, thank you so much.

Somehow i think we will see you tomorrow or the next day.

I suspect we will be.

The russian ruble is taking a hit.

Some of the lowest prices we've seen for the russian ruble.

Yes, there's a lot to talk about.

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

Tom, alix, and i will be right back.

Good morning, everyone.

"bloomberg surveillance." i am tom keene.

Adam johnson and alix it with us.

A $19 billion twitter question.

What's your take on facebook buying whatsapp?

A lot of back-and-forth last night on the zeitgeist.

That is our question, @bsurveillance.

What is the new new here for you, david kirkpatrick?

It is truly an international transaction, isn't it?

International is the way to look at the growth of the internet at the moment and that is where zebra -- and where zuckerberg is taking his company more and more.

He is talking about internet.

Oregon, his effort to extend internet access to all the people in the world who do not even have smartphones yet.

-- he is talking about internet.org.

That is a wave is trying to extend what he is doing to the people in the developing countries.

That is where whatsapp has gone.

Have the push the whole innovation a paper to the back of the bus?

No, not at all.

It is still excitement, juston the one hand is innovating with services that may be more for the developed economies with paper, which is a very cool app that i've been using, and it is good, and they are also biting thing that they have not had a chance to buy things.

There really -- they are willing to buy, acquire, copy, they are willing to do anything to stay on top of communications globally.

David kirkpatrick with us on facebook and whatsapp.

Let's go to single best chart which has a russian tilt.

It certainly does.

I want to show viewers would've happened to the ruble, the russian ruble as well as the russian market.

There is the ruble.

Remember, the ruble is quoted as the number of rubles per dollar, so if that goes higher, the dollar is going a lot more -- you are getting a lot more rubles for your dollar.

That is why it is moving up.

He ruble is falling.

Meanwhile, look at the russian stock index, the yellow line.

That has tanked over the last several years.

In other words, it has hadit all the markets.

Up with is on the internet from the terminal on the russian ruble.

She has returned, i had it all mitre while she was gone worried about her -- i had an all nighter worried about her while she was gone.

This had a bottle of lock in it, wasn't i was very good.

Olivia sterns joins us right now back from sochi.

This is the most comfortable thing i've ever worn to work.

How did you think i could afford it?

The russian ruble drop.

This is the official russian outfit.

By the way, i'd really like these by the way.

Let me set the stage for you.

You can see russia from the air.

We all talk about how sochi is subtropical.

There you see it.

This is from my plane.

Yes, it is right there on the black sea, b can see the snow.

The difference between the old park and you can see it is about an hour.

Is a fancy?

Is it, like, resorty?

The: the part itself is -- the olympic park itself is finished.

What else?

I have a picture of us going to hockey.

Nothing better than going to a russian hockey game supporting russia.

You are so far from the ice rink there.

Very nice.

We had some corporate friends hooked us up and that was a great way to see it.

There is nothing more exciting to do.

You were there for the american-russian shootout.

Every time the russians scored a slap shot, fireworks went off for some he went for the russians during the russian- u.s. hockey game?

He had to.

It was so contagious.

There is nothing more contagious than being an american and being proud.

[laughter] there you go.

My top photo of the day coming up, i believe it is -- there you go.

Palm trees in sochi.

Are you kidding me?

Can i quickly show you the back of the outfit?


Russian all a big team.

It is official.

This is what all the adorable little figure skaters wear.

Did you watch curling?

Is it fun in person -- did you see cap curling?

Nobody knows how curling works, but if you watch it, it is shockingly accurate and on.

On the whole, i think the press got it wrong.

I had so much fun.

And i got gloves.

Very cool.

Welcome back.

Thank you.

Thank you for the vodka.

We can have that at lunch, right?

Right after the show.

Oh, smirnov -- imagine that.

150,000 -- this is the number of people on the waiting list for robinhood.

Get in line if you want an account.

Zero commission stock brokerage app called robinhood.

We will be with eco-binders -- with the cofounders coming up and this is "bloomberg surveillance," on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.

Good morning, everyone.

"bloomberg surveillance." we are from new york city.

Spring is in the air at least for 24 hours.

Maybe 48 hours.

For all you worldwide, a challenging winter on the eastern seaboard of the u.s. we get a little bit of excitement here with a sprain.

A beautiful -- with spring.

A beautiful day.

Good morning, everyone.

Alix steel has our company news this morning.

From the files of i am sara eisen, here as always with tom keene and scarlet fu.

--from the files of "bloomberg west," hp is negotiating be settle shareholder negotiation stemming from an $8 billion write-down on the autonomy deal according to people familiar with the matter.

The lawsuit is alleging hp ignored warnings of accounting regularities at autonomy.

And fox with a legal battle against aereo.

Aereo's case against the supreme court is pending.

An htc is ready to join the smart watch battle.

The taiwanese company plans to demonstrate a wearable device next week according to person with knowledge of the matter.

Prototype will be shown to wireless carriers.

No timetable on when it will be introduced to the public.

That is today's company news from the files of "bloomberg west." all right, time for our new economies segment where we are talking zero commissions for life.

Yes, that is the promise from a new stock trading platform graded by stanford grads called robinhood.

Founders vladimir kenneth and baiju bhatt.

This is a slim margin business.

Our you going to make this work, vlad?

It is great to be here, first of all.

One of the things that we are able to do because of the high level of automation that engineers are building into the platform is run very, very lean, so we have the ability -- you are running so lean you're not charging commission.

I mean, that is lean.

The algorithms are going to -- the interesting thing is that it does not cost much money to process a trade.

A purely electronic transaction.

So the majority of what those commissions are going for through the online brokerages are toward brick-and-mortar stores, large advertising budgets, people answering phones -- but baiju, you guys still have to pay for the lights.

You have got to put food in your mouth.

Explain how making money off margin loans is going to work.

You can think of it as a premium model, right, so there are a lot of traders out there that like to trade on margin.

When you percent of the assets -- 20% of the assets.

We get the ability to short sell or take their holding the buy more with them and weeks in the capital to do so.

I have got enough gray hair were i've seen this 25 times.

What is the differential with you guys?

You are smart, smart map guide, physic majors, you code an eight lane with us.

So what?

You are up against e trade, scottrade, and the rest of them.

That is a great question.

It is really important to point out that this idea brokerages operating with effectively zero transaction costs is not a new thing.

If you look at the electronic trading world where hyper trading happens, that has been the norm for a long time.

And so you are bringing high trading efficiencies to the regular person?


I would think young people would be really interested in your product because they do not have a fee but they do not have a lot of money to trade.

Are they really want to be trading on margins?

That if the thing.

We are excited about sort of a lot of our users are growing up and becoming customers of ours for a very long period of time, so if they are not necessarily using margin or other premium features we have on day one, we are ok with that because these people will stay around.

David kirkpatrick with us.

How much have you raised to finance this?

Somebody is paying something.

Weisel global ventures, right?

-- google ventures, right?

We raised some money in the round.

Will there be a cross-selling opportunity down the road beyond what you're talking about?

Will this lead to other businesses?

Is this a loss leader kind of thing?

Zero commission trading as our first big thing, but i think we have a lot of things other than a zero commission that will differentiate us down the line.

Can you actually name those 4s, vlad?

-- for us, vlad?

To tom's point, we want to know what differentiates you.

Margin balances, what else?

Robinhood is a mobile-first product, so it is really designed to deal and work great on a mobile device, and that is where we see sort of a big need in the market.

What has been the response from major wall street to this.

The idea -- i have got an iphone and i am bringing high frequency trading efficiencies to a commission-free aspect.

Had anybody from wall street out 1-800-robinhood and said hi, guys, are you having strawberries and chocolate?

What is your response to this?

It has been interesting.

I think a lot of people are somewhat epochal about it, some people as they have learned more about the business realize that it is not that unusual for transactions to not cost anything.

A kind of realize that if you build a system where there is not significant overhead per account, like there is not a human involved, like it, moving papers around back and forth, that it actually works pretty well.

So remain dollars from index ventures.

How long do you think until they recoup their cash?

We are looking to raise another round of funding this year, so we will see.

I think all of our investors are excited about this for -- we are ready -- you are a member of finr a. does that mean the people who are on the waitlist will be able to trade anytime soon?

Updates on that coming fairly soon.

Come on.

Help me out here.

We are well aware of the demanded we are working as hard as we can to get the product to those people as quickly as possible.

All right.

A good problem to have, by the way.

Vlad tenev and baiju bhatt of i am sara eisen, here as always with tom keene and scarlet fu.

-- of robinhood.

I will give you up to speed with what facebook is doing.

Forex report, russian angle to it.

Today, we have seen in the ukraine this morning, bill george will join us in the next hour.

There is the ruble basket, $41.74. stay tuned.

More on "bloomberg surveillance ." this is "bloomberg surveillance." the fighting in kiev's independence square, europe considers and impending civil war and ukraine.

When in doubt, by a major competitor.

Facebook takes out whatsapp foray a gajillion dollars, the drought in california reaches epic performance.

This is "bloomberg surveillance," live from new york.

I am tom keene.

Joining me, adam johnson and alix steel.

Our guest hosts, ceo of delivery.com.

Warning brave.

-- morning brief.

Chinese manufacturing get a fell to the lowest level in several months, the central bank drained cash from the financial markets.

Over in japan, the trade deficit widened to a record in january, surging import costs weigh on shinzo abe's recovery.

Here in the u.s., inflation data, cpi rate and initial jobless claims.

9:45, consumer comfort.

10:00 a.m., fell if you fed -- philadelphia fed and mortgage delinquencies.

Walmart earnings coming out momentarily.

As well as crocs.

A very busy day.

Adam has company news.

Brian moynihan is getting a pay hike at bank of america, boosting his compensation by 17% to $14 million a year, 12.5 million dollars of that was stock grants, the $1.5 million was cash, moynihan did not receive a cash bonus.

Stock has doubled over the past several years.

Activists investor nelson tells -- nelson peltz pushing for a breakup of pepsico, saying he will take the case to investors.

The ceo said keeping the beverage and snack units together was in the best interests of shareholders.

Fox wins a legal battle against aereo, a judge granted a request to block the service.

The supreme court agreed to hear the case last month.

Breaking news on walmart, julie hyman is at our breaking news desk.

Remember walmart came out several weeks ago and said its earnings for the fourth quarter would be at or below the low end of its forecast, it looks like the numbers are coming in at the low end, $1.60, analysts had lowered their forecast to $1.59, slightly beating on that basis.

The companies sales coming out, $128.8 billion, that is a little below estimates here.

Probably most importantly, the company is coming out with a forecast for the first quarter for earnings that are below estimates.

A couple different things going on.

Walmart's u.s. business has been struggling.

In particular, it talked about the cuts to the u.s. taking a toll on customers and therefore on its sales as well.

In addition, walmart has been trying to keep competitive on price.

Amidst competition from its rivals, including the dollar stores.

That seems to be taking a toll on margins as well.

Thank you so much.

This is really bad stuff.

Wal-mart preannounced numbers a couple weeks ago, effectively they barely made those reduced numbers.

Guiding down, as julie pointed out, the guidance for next quarter is $1.10, one dollar presents, the estimate is one dollar per three cents -- $1.23. walmart is almost losing its own game.

Everyday low price is there again, if they cannot match that because amazon is putting pressure, that is why you are getting sales up 1.4%, how do you fix that?

It is fascinating on a nominal gdp basis that they are doing sub 2% sales and their free cash flow is down substantially.

Same with coca-cola and pepsi, this is really something worth watching.

That are walmart.

Let's get back to our top story -- facebook buying whatsapp, most interesting without making a slight to the ukraine.

I want to go to bill george, harvard business school, talking about management and making a bold move.

I have not seen such a bold move, david kirkpatrick talked earlier about the game theory, this is mark zuckerberg not become overcome by events but really seizing the moment.

This is an established -- this is an astounding price.

Mark has shown his willingness to put a lot of money on the table to go after mobile.

He realizes that he was missing it, he is making a strong comeback.

I would never underestimate him and sheryl sandberg, they have a real sense of the market and where it is going.

$19 billion is a lot of money.

I am honored to ask you this with your experience in the real world.

The idea of buying an entity so the other guy does not get it -- how important was it for mr.

Zuckerberg to buy this so the team at google did not get it?

They are head to head with google, i think there is a certain defensive move here.

Whether you can justify that kind of price, it is pretty dangerous.

I think he has shown his ability to incorporate these things.

The thing that struck me, they are going to have complete autonomy, i don't know what that means.

The only way to justify this is to pick up those 450 million users and try to get them on facebook.

Bill george, let me bring in david kirkpatrick.

One of the things you have done, you are a big believer in business ethics and thinking big picture about the value of business in the world.

Look at zuckerberg's approach to providing a service to the whole planet, that is the way he justifies such a bold move.

Whatsapp is so prevalent in developing countries.

Does that make sense to you from a business strategy and ethics perspective c? it makes sense he is going to have the platform everyone wants to go to, he will enhance it.

The other thing, there has been a lot of talk about, going back to microsoft should desegregate the consumer and business market.

I don't think you should do that, we are all consumers and all in business.

I think the two are blending.

Everyone wants to go mobile, i don't think you can sit safely and say i have my desktop here when everyone is using ipass.

You have to have a platform everyone wants to use.

When you take a look at all the sexy mobile apps, they go out of fashion as quickly as they come in, what is the risk for facebook if whatsapp cannot make it?

They have spent a lot of money.

A huge valuation on it.

Are we seeing a tech bubble like we saw back in 2000? amazon, in those days, was buying eyeballs, that is what zuckerberg is doing.

Amazon went through a dip, its stock lost 90% of value.

Bezos had it right, zuckerberg is taking the same kind of bet.

You wrote the book "true north," what is mark zuckerberg's true north?

He is driven to be that guy with a breakthrough platform, using tech to make a difference in the life of everyone.

I think if google -- they have about the same goals.

I want to get you on the record, one last question.

Does the silicon valley troops -- do they play by a different financial book?

Are they using a discount rate or a net present value mathematics different from everyone else?

Yes, they are using a let's control the whole market.

You were talking about walmart, you see bezos' strategies playing out.

You are looking at a long-term view very much here for zuckerberg to control and when the mobile market.

Hey, do not underestimate the sky -- this guy.

Bill george with harvard business school.

David kirkpatrick, author of "the facebook effect." and ceo and founder of delivery.com, you are eating walmart's lunch.

Do you see walmart as your number one competitor?

Who is your number one competitor?

Amazon and walmart are companies we would like to emulate in terms of size, walmart is doing almost 500 billion dollars in revenue.

In terms of how we are different, we work with local merchants.

Instead of a remote warehouse, we are putting this businesses' products online.

We have 10,000 merchants locally to order from the same day.

That is taking something comparable to amazon's platform to the restaurant business.

David kirkpatrick, thank you so much.

We were talking about facebook, i were twitter question of the day.

What is your take on face but buying whatsapp?

Treat us @bsurveillance.

Wal-mart earnings beating estimates, what is really happening?

We are going to be talking about it, we will be right back.

? good morning, "bloomberg surveillance." news in the ukraine, violence overnight.

No one is watching more so than vladimir putin in russia.

The economy is the size of iowa.

That is one of the great challenges here, a larger economy than you can imagine.

Critical to putin's efforts.

Alexander climate is with eurasia group, working with ian bremmer.

I saw ian's thing in "time." if vladimir putin was to read eurasia group, what will they focus on?

The first interest in ukraine is geopolitical, there is a rationale for russia -- a nation bloc.

Russia has always viewed ukraine as part of its sphere of influence.

Even culturally.

There is a domestic political rationale.

For putin, one of the main motifs of his presidency, since the orange revolution, ukraine has been preventing popular uprisings.

This would question his clout in his own house.

Within this, northeastern ukraine, away from kiev, more towards russia.

Are the supporters of the present president of ukraine, if they waver, the government in kiev is in trouble.

Do you buy that?

Certainly something to watch, eastern ukraine has been turned towards russia.

Another fault line is the relationship between ukraine's oligarchs and the president, they are one of the main support bastions for the president, if they defect, the game is up.

Meanwhile, the western side, lviv, has already defected.

How viable is separating this country?

It is almost impossible to conceive, there is a heightened risk in civil conflict situations with parts of western ukraine effectively rejecting the federal government.

What action would you like to see from secretary kerry or the president?

There's not much the u.s. can really do, the u.s. does not have the amount of money to bail out a ukrainian government.

They do not want to put troops on the ground, for all the high-minded rhetoric we are seeing from the u.s. and europe, there is very little they can do.

Thank you so much, alex with eurasia group.

Cannot say enough about ian bremmer's peace and "time." check out our in-depth look at uber, you can really get into it and learn about the company.

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

? good morning, "bloomberg surveillance," i am tom keene.

Scarlet fu is off this week.

Our guest host is jed kleckner, ceo of delivery.com.

Adam has top headlines.

Starting here, the u.s. orders airlines to be on the lookout for shoe bombs, homeland security warned airlines about threats that shoe bombs might be used to attack jets.

Be aware, allow more time if you are traveling.

In egypt, putting journalists from al jazeera on trial for terror related charges, accused of damaging egypt's image.

The journalists were accused of backing the muslim brotherhood, the party that supported mohamed morsi.

Egypt's new government has branded the brotherhood a terrorist group.

In sports, syracuse's perfect season comes to on end.

Abolish -- boston college stunt the orangemen.

A last-minute attempt missed, the team suffered its first loss after three games.

Wichita is the only unbeaten team in division i basketball.

Features, negative 4, dow futures, -29. hours away from an important cpi number.

-.4%, fourth quarter u.s. comps for walmart.

Walmart guiding down for the quarter.

A rough report.

Brittle report, the problem is that walmart has lost its franchise, it no longer owns the discount mass market it helped create.

Lowest prices every day -- amazon, cleaning their closet.

Dollar general has their own way to compete, price point.

Joining us to help us figure out what is happening, candace, president of strategic retail.

She advises companies.

What does walmart need to do to compete with amazon?

Computing with amazon is tough.

They need to think about what shoppers go to a website for, it is all about convenience.

It is about how do i get what i want very quickly in one click.

Right now, all retailers, not just walmart, their websites are more cumbersome than amazon.

What about integration with brick-and-mortar?

The toys r us ceo said that, why is walmart now more effective at doing that?

It is cumbersome, and it organize their business with two separate divisions.

There is the online division and the bricks and mortar division.

Those have to talk to each other more.

It is a whole new game for them, a new way of doing business.

Amazon started right out-of-the-box to be online, walmart has to learn.

The ceo of delivery.com, jed kleckner, what are you able to do?

You can sell me anything online, what do you do differently than walmart?

I would like to turn this on its head and ask why walmart is not turning stores into local distribution centers?

It is one thing amazon does not have, a physical footprint near cities.

Amazon has hundreds of the settlement centers.

That is what walmart should be concerned about, if amazon is in a position with fulfillment centers as it is, it is going to get into the business that walmart is and.

1/3 of americans visit a walmart every week.

Why doesn't walmart turn its business into -- you can help us understand this, is walmart already starting to do that using the stores as warehouses?

They are, you can pickup your order at many stores.

The preoccupation is that walmart's core business is still brick-and-mortar, that is what they think about it in their heart every single day.

That is what their business is about.

I suggest a lot of people watching bloomberg do not go into walmart, is the walmart now, brick-and-mortar, ios 7, is it the same aisle as it was 10 years ago?

Walmart has done a good job of shaking up the store layout, bringing shoppers in and winding them through the store, they have done a lot to make stores more attractive.

Most of the shoppers are folks who still go to bricks and mortar stores.


They are not on twitter or doing amazon?

Credit suisse sews the most logical way to jumpstart growth for walmart might be to-one dollar -- might be to buy family dollar.

I think walmart has lost its everyday low price position.

I don't know that buying family dollar is the solution.

They tend to go with organic growth in the u.s. versus acquisitions internationally.

Is it time to make the switch?

They need to look at selling people different things, instead of just the stuff in the store, they already have banking services, where else can they go to sell more things to people.

Delivery.com focuses on the millennial generation, mid 20's to early 40's. does walmart have an identity crisis relative to amazon?


How do they fix that?

They have to do better, i am not sure they can compete with amazon.

That might be hearsay.

We like heresay.

I am not sure they will compete well, they have a huge one nil base -- a huge mobile base.

They have to figure out how to sell more things.

Thank you for joining us.

Coming up, the california drought is bad.

Taking you there after the break.

? good morning, "bloomberg surveillance." i am tom keene.

A beautiful meaning -- a beautiful morning in new york, it has been a long winter, a rochester winter.

Spring today.

It has been a fairbanks winter.

An alaskan winter.

Jed kleckner, ceo of delivery.com, giving us smart perspective on the walmart as they came in with a nominal gdp, family dollar constrained earnings report.

Walmart lowered guidance, barely made that.

Company news.

Activist investor nelson peltz pushing for a breakup of pepsico, sending a letter saying he will take his case to investors.

Pepsico's ceo said keeping the snack and average units together was in the best interest of shareholders.

Brian monahan gets a raise, bank of america boosting his compensation by 17% to $14 million, 12 point $5 million of that was in stock grants, $1.5 million was in salary.

Moynihan did not receive a cash bonus.

Harvard university receives the largest gift in history, kenneth griffin is donating $150 million, this will fund scholarships for 200 undergraduates and provide funds for another 600. griffin is the founder of citadel advisors and graduated from harvard in 1989, that is the company news.

Good news.

How do you get to the federal reserve bank of dallas to comic books?

From the time of "gone with the wind." 1939, he was saving a submarine in distress.

Action comics printed the first comic book of superman, that is priced at a cool $120,000, greg, president of heritage auctions joins us.

My mother threw out my comic book collection.

Most mothers did throw them away, which is why so many of them are so rare.

Cars are on a rebound, our comic books the vector up?

Nostalgia is on a rebound, the bring back of the muscle cars, tv shows from the 1960's, baby boomers, at their peak earning years, they have the kids out of college and are looking back to things that interested them when they were younger.

They are pushing prices on the very best items.

I love what you brought today, here are some comic books that are important.

"superman," all the major movie characters.

I these museum quality?

Is this something the smithsonian will bid on.

I think the smithsonian would love for a fever to bid on it and done it.

-- and donate it.

How much are we talking about?

Just to get some price perspective.

The original comic art you are seeing is from 1939 from biederman.

-- from "spiderman." that will sell for $200,000. that is $600,000? i take these and pay off my mortgage.

At least half $1 million plus the art.

Is there an increase from a few years ago?

Especially at the top end, people have been putting pressure on the market for the best items, the things that do not come along very often.

The very best items, the prices have gone straight up.

What defines quality in a comic book?

Comic books are rated from zero to 10, there is a grading company, you cannot actually open them and turned the pages, they are encased in plastic holders that are hermetically sealed.

How can you?

He sold babe ruth to the new york yankees.

A 1918 red sox-chicago cubs world series.

What is this worth?

Thousands of dollars.

Tom is running off with that.

It will look great above the meantle.

Jed kleckner?

Who is buying this?

What is the market size?

Heritage auction sells about $1 billion a year worth of collectibles like coins, comics, sports and everything else.

This auction is going on today and tomorrow in new york city, it is not too late.

The comic book sale is today.

People can also been online from anywhere in the world on ha.com.

You can get your bid in.

You are killing me.

Your credit is good.

Thank you so much.

A quick data check, let's find out where futures are trading, down slightly, not a whole lot.

Good morning, "bloomberg surveillance." on bloomberg television, radio worldwide.

A busy day, looking at the ukraine and the facebook transaction as well.

Much more of that through the day on bloomberg television and bloomberg radio.

2013 marked the driest year in california's history.

Agriculture is taking a hit.

Erik schatzker joins us from california.

Good morning.

Good morning.

The statistic -- it is hard to believe that statistics understate what is going on in california, they are calling this the biggest route in more than a century -- the biggest drought in more than a century, everything is unbelievably dry, no matter where you go in the state.

I was in the sierra through the central valley, the farms, out to the coastal vineyards like this one, we are not too far from the pacific coast.

All those people and industries in california are feeling the drought now.

Most americans will not feel the impact until the summer months, for example.

This is why we came to california, the industries are feeling it now.

I spoke to everybody from joe, a farmer who president obama came to see last week to talk about decisions and i will have to make about what crops to plant or not to plant.

He plans melons and tomatoes, asparagus, almond trees.

He is facing a loss of almond trees if he does not get enough water, he is deciding whether to put melons and the ground.

Almost impossible for farmers.

It is a catastrophe in the making.

The economic impact will be measured in the billions of dollars.

Are you noticing new technology farmers maybe gravitating towards?

It has been a three-year drought . the farmers say they have been dealing with drought like conditions for 20 years, they have things like irrigation tape, a much more efficient means of irrigation.

People like joe, the guy who president obama came to see, they say they have been able to increase yields by 25% to 30% with the same amount of water relative to what they were able to do 20 years ago.

The fact of the matter, it does not matter how much technology you have if you have no water.

These people are totally at the mercy of mother nature on the one hand and water authorities on the other, between the state and the fed deciding how much water follows in northern california.

Finds its way into the central valley, that is artificial, that is why california is a miracle of human engineering, none of that was here in the 1920's, it was brought down throughout aqueducts.

If the feds and the state

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


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