This is "bloomberg surveillance." facebook crushes skeptics.
More than a year after a miss priced initial public offering, mark zuckerberg ossie big bet on mobile decidedly pays off.
Visa and mastercard, they are doing better than good.
They are not the too big to fail banks.
After big bertha, phil mickelson uses them, the ceo, tailor- made.
This is "bloomberg surveillance, " live from world headquarters in new york.
Joining me as always -- they don't play golf -- share eisen -- sara eisen and garlic -- dominic chu, scarlet fu.
What a lucky name to have.
How about facebook earnings?
Let me kick it off with morning briefing, including the uk economic growth.
A strong number.
Recovery gaining momentum.
All main industries in the british economy expanded for the first time in three years.
That was a positive.
In the united states, 8:30 a.m., that means initial jobless claims are coming out and also durable goods orders and then at 9:45 a.m., the bloomberg consumer comfort index and then the kansas city regional index.
It is still earnings mode.
Amazon this afternoon.
Before the bell, though, dow chemical, general motors.
We will talk about the refreshed product lineup for gm, the most in history.
After the bell -- starbucks, amazon, and dekkers.
I knows garlic covered this -- i know scarlet covered this on facebook.
A game changer.
Stunned even the most optimistic people.
Now you are seeing the upgrades coming out this morning.
A year from now and two years from now we will talk about last evening.
You can see on bloomberg hd, earning still coming up.
We look at equities, bonds, currencies, commodities.
Dow futures, -90. higher yield.
2.59%. 2.61 when i walked in this morning.
Euro-dollar, 1.32. hydrocarbons are off the mark in the last 24 hours.
Vix, 13 point 18, still a low number.
The two year yield has moved from .29 to .34, something the pros are watching.
Apple, -- use which of the dollar again for apple?
I think today facebook is more important than sara's currency market.
Here is the char -- the difference in yield between the 10 year and the two-year.
The last couple of days, this is the speed ms.
Of the yield curve.
It screams better u.s. economy.
We saw it in yesterdays new-home sales number.
That was enough to make yields go higher.
That seems to be the trend.
Along with rising stocks, at least here in the united states.
Now it is time for the front page.
We scoured all the papers and the web before the top stories.
On the front page -- mark zuckerberg and facebook.
All about facebook.
14 months after the ipo debacle, facebook appears to be on the mend.
Increased demand for mobile advertising.
The number we want to pay attention to is 41%. mobile business made up 41% of advertising revenue and mark zuckerberg said on the conference call mobile is on track to surpass desktop at spending as well.
Tom, you have been talking about not seeing anybody on facebook.
The numbers on active users disproves it.
Shares, surging right now.
Everyone is still on facebook.
There were some negatives in the report.
We will talk to jeff about it in a bit.
But i am sorry, it blew away the most optimistic people like ryan wheezer at pivotal.
And they capitulate this morning.
Another story we are watching , our virtual from page, how big investment banks such as goldman sachs and deutsche bank winning the reputational and financial consequences of working with sac advisers, steven cohen's hedge fund firm.
Trading, lending, brokerage services.
It all comes as federal prosecutors get ready to charge sac as early as today.
To me it is a little bit of a jargon alert.
A prime broker is a brokerage or firm that helps a hedge fund or investment house affect all of their transactions.
It could be anything -- a banker -- banker, day-to-day butler for the hedge fund.
For those two major banks to walk away, that would be a huge blow.
We will wait to see how it shakes out.
Credit squeeze posting a 33% jump in second-quarter profit weird earnings at the investment bank more than double.
Our own europe editor manus cranny is in zurich any just spoke to credit suisse's ceo.
Looks like cost cuts are no longer the driver of their story anymore.
Those cost cuts came through very much in the first quarter.
Of the 33%. investment bank profitability, almost double.
Was it hard to be the second quarter of 2012? not much.
It joins jpmorgan, lloyd blankfein and the boys on the street where investment banking has delivered a good return.
To put it in context, even though we had significant volatility in the second quarter, resulting good.
Some of the volatility did carry over into july.
We have seen signs of stability.
We will see how it obviously plays out.
The pipelines are pretty strong.
There is actually a fair amount of business to be done if the markets are there to do with.
Certainly can't ignore the volatility.
He is also fairly bullish on the wealth management business of credit suisse as well.
If you look at the wealth management business, you've got money coming in.
The conversation we had was that the clients decided to take a little more risk.
But of course, volatility is something that might cause them to step act.
Just the tone of the conversation.
Let me give you this.
Capital, a demonstration, inventory.
-- out to migration.
What happens if you are left with a lot of inventory?
They are inventory light.
Thank you so much.
Manus cranny joining us from zurich.
Future down slightly in zurich.
In zurich, gorgeous weather, and when i am there, it is 12 below zero.
I feel so bad for you when you are there.
It is actually cool for one to new york.
Manu s, how is the food during the heatwave in zurich?
Let let me rephrase -- how was the beer?
The beer is moist, cold -- 32 degrees.
You come from london, 34 degrees.
I him in my shorts.
Tv at its best.
Manus showing leg.
We will have to go to our surveillance meteorologist to get the conversion on that.
Thank you so much.
Manus cranny reporting importantly from zurich.
Our guest host, a principal at douglas c lane and associates, and we also have longer contributor and former east men -- eastman kodak.
How is the wall of worry?
It is amazing people are still scared for the equity markets.
They are scared of the bond markets.
They are scared we are missing now will we have had the last 18 months.
Every earnings release -- a book, qualcomm -- so many bears saying we cannot believe this, it will be the last quarter.
Go to your facebook example, it has good lateral.
The advertising now 41%. look at google.
Lateral, i feel like i him on espn.
Jeff, where does the culture come from?
It has coming from washington for a long, long time.
Starting to see positive results from facebook, it is time to get back to the business.
It has been there for a while and facebook and some of the big operations are giving air cover for a lot of little businesses.
If you don't care about facebook, i am sorry, what we heard last night was really important.
Let's get to company news.
Again and worldwide spending on debit and credit cards boosting visa's earnings,@eight cents better than analyst estimates.
The ceo says the company is being helped by consumers pushing away from cash transactions.
A weaker yen meant strong sales for nissan in the u.s. seeing u.s. sales surged 25% in may.
It came after nissan cut prices on seven models.
A strong u.s. showing helping the company post spurs quarter profit that topped analyst estimates.
Net income rose 13% for the period.
Go daddy may go public.
The website registration company could sell shares as early as next year.
Sales are surging as small cut -- smoke companies turn to them for web hosting and online services like book keeping.
It could be worth as much as $6 billion in an ipo.
That is this morning's company news.
Coming up, much more on facebook.
Summer surprise earnings take off, including mobile.
More on how the company is making it work.
Also the twitter question.
What is the future of facebook?
We want to hear from you.
Good morning, everyone.
After the earnings, daniel amann from general motors, chief financial officer, will be on "in the loop" with betty liu.
She is back from her sojourn at mcdonald's. she brought me the number 2 value meal.
The number 2 value meal, i asked for it.
This is "bloomberg surveillance ." with tom keene and scarlet fu.
On the top of the agenda, facebook shares are flying this morning in the premarket the social networks sales eating estimates, especially on mobile.
It is successfully luring more advertisers to mobile and more tablet services.
What stands out to me is facebook went public, virtually no ad revenue from mobile.
Now it is 41% of the advertising business and mark zuckerberg said it may overtook -- overtake the other advertising.
The stock had still been a train wreck if you bought in early on but it is starting to make its way back.
That's a listen to what mark zuckerberg told investors on the call yesterday.
We aren't just building a strong monetization engine for the company but creating tools to enable new growth, jobs, and businesses to support a larger economic shift based on knowledge and information.
I am proud of the work we are doing to help developers create apps, local businesses find customers, and great brands to tell their stories.
Local business advertising is something analysts highlight as well.
They have not necessarily expected that.
Richard greenfield, he has been a noted short.
Here is the comment as he capitulates late last night and into the early morning.
Richard greenfield, really well regarded.
You know him from the netflix conference call of a few days ago.
And this is the graceful way you get out of a wrong call.
Upgrading to neutral from a sell.
Analysts looking ahead are not looking so much at advertising mobile revenue but new at products coming out.
This quarter was impressive because it was not done with the benefit of the new ad product.
David kirkpatrick going after me yesterday -- i was cautious.
Jeff hayzlett, bloomberg contributor.
What was reaffirmed for you yesterday by mr.
Trading in birkenstocks for wingtips.
Finally seeing the company grow up.
Mobile has been there a long time.
The mobile usage am a we have been talking about the of mobile.
The biggest thing they did was allow me to be able to start to buy the ads on mobile.
I buy ads every day.
I spend $50 a day as a small business.
I used to buy millions when i was at kodak and now i buy them every single day and i can do it on my mobile phone.
Do they work?
Trading for likes.
I do not like that portion of it and i don't like the fact that someone at facebook has to approve that ad or post.
I still don't like that and i think the big advertisers don't. we just show the video -- rosetta stone, which i am a big supporter of.
I still can't speak french.
But the quality names out there, will they be there in 24 months?
About 20% of the total revenue are coming from the big companies.
Most of the other ads are the $50 or a hundred dollar buyer who are promoting the local taken shop or dry cleaners.
Really some of them are not the best ads in the world.
The overarching fear that facebook is losing its cool or at least people are not hanging out as much.
That was addressed in the earnings.
The number of daily active users increased 27% from last year.
Jump in there.
That was the big issue going into earnings, that people were concerned the more advertising that was coming on, you will lose your loser pays, and that did not happen.
They still have to be careful because if you clutter up with too much advertising you can lose users.
Is facebook a blue-chip stock?
I do not think yet.
The big advertisers are still looking at it.
But definitely one of the in mobile you need to own.
Just a sign how much facebook has come back, general motors back as a customer.
I think you have to look at the overall effect.
They are like a giant sequoia tree.
They really trade this canopy for this ecosystem that operates around them.
It is not just them but all the other ancillary businesses kicking off because of facebook.
This is really what they do.
It helps them pump more and the economy and the business in general.
Yesterday afternoon was a sea change.
The issues they are focused on like home and grass search and whether they are gaining traction.
Almost image compared to the brute force of numbers.
Remember who is using this.
Singing -- sitting at home, local people.
I encourage everyone to buy an ad in manhattan you do that -- you understand the business model.
We urge everyone to tweet us about facebook.
Our twitter question of the day.
Coming up in the next hour, the next step for detroit and for other cities in financial trouble.
We will talk about the danger of the default with muni expert herself meredith whitney.
This is "bloomberg surveillance." i'm sara eisen, here as always with tom keene and scarlet fu.
A train derailment in spain has killed at least 77 people.
It crashed as it approached a station.
Officials say at least 140 others have been treated at area hospitals.
In china, former high-ranking communist party politician has been charged with corruption, abuse of power and it affecting bribes.
It comes as new leadership tries to close its most serious insulin decades.
Remember, bo's wife was convicted last year of killing a businessman.
In the hamptons, 600 75 homes were purchased in the second quarter, up a whopping 25% from a year earlier.
The most since 2006 when housing body -- values were climbing toward their peak.
$520,000. the consumer comfort index later this morning.
Just getting better.
At least in some parts of the country and income levels.
Let's get the morning must- read.
Here is scarlet fu with a little international relations.
The new prince -- george alexander louis.
Third in line to be the king of england.
He is the source of real pot -- a source of real power.
According to a harvard university professor who is an authority on international relations.
He writes in an information age where power is not only a function of whose army wins -- you have a combination of hard power and soft power.
For democracy, human rights, soft power may be more effective.
Royal baby marketing executive.
In the local economy, because of the baby, 440 million dollar injection.
A plea for the prince and princess, have more babies.
It will help the economy.
How would you advise such an institution?
It is not going to a board room.
They have done a really good job.
When you think about what it was like 10 or 12 years ago with the monarchy, i think they were ready to start to throw them out.
I am not going to make any correlations, but we did get the uk gdp figure today.
All industries in britain -- have more babies.
Let's tell michelle obama -- get the president together.
Speeding off in the new black range rover.
I think it makes people focus on the non-negatives.
People are more positive.
They feel good.
Back on this.
George alexander louis windsor.
And we will talk aboutvisa and americans'love of plastic.
? this is "bloomberg surveillance." i'm sara eisen, as always, with tom keene and scarlet fu.
Looks like u.s. equity futures are under pressure.
Up to, down to, forget about that.
-11 on the s&p futures.
Dow futures, -87. hydrocarbons, 107.108 , down to 104.61. gold down eight dollars.
What a retreat.
No shortage of movers during earnings season.
Earnings are fun.
We have a tech heavy edition of losers and gators.
Electronic arts right around a five-year high.
Sure, it earnings beat estimates, but really we are talking about a loss because the loss is smaller than anticipated.
You wonder what is going to happen to a company like electronic arts after the next sony playstation or xbox comes out.
Just my take on it.
Apple shares also gaining more than five percent, certainly riding high off of the fiscal third quarter earnings on profit and sales.
Another company to watch is visa.
Rockets are up -- profits are up.
Improving consumer confidence, improved spending, and improved that car uses.
-- credit card usage.
Also startups and small businesses.
It is what you got.
If you don't have loans, you have your visa card.
Visa shares have surged, all this without the distraction of being a bank.
The forefront of the cashless society.
Sarat sethi is a shareholder.
On them negative side, -- on the negative side, regulatory overhang.
But the model of a visa and mastercard is a toll.
It collects a toll every time you make a charge.
And there is no credit risk.
The risk goes to the bank underwriting the credit card.
One of my small local restaurants stopped taking american express.
That has been ongoing because amex has a higher charge and visa and mastercard also have a debit card as well.
I hear guys like you enthused about visa, including meredith whitney, what about amex?
Amex is more of a credit risk and more of a real charge card as opposed to a credit pulling guard.
It is important for visa to have a good relationship, and mastercard and amex, with retailers.
So much comes from the merchants charging the fee.
There are negotiations continually, but they can't live without each other because most merchants need the ability to charge and if you don't have that -- people are moving away from cash, not just in the u.s. but globally.
It is more efficient to use her credit card and now to use your phone.
By the way, visa and mastercard -- they have, the one thing they have is the security system is behind all of the credit cards.
You can't really displace them as easy as people think.
Will what about -- what about discover?
They came out with earnings that beat analyst estimates.
They don't seem like a big player and can really catch up.
The analogy is like intel and amd.
They cannot really get them out of business.
Discover is fine but the big behemoths aren't visa and mastercard.
Ecosystem, once you have them as a merchant, you got to have them.
I love the phrase ecosystem.
I have no idea what it is.
What i know is it is a piece of plastic with a name on it.
Jeffrey hayzle tt -- to me, the ultimate brand, a piece of plastic.
What is the worst practice you do not do -- is you try to build a view -- as you try to build a visa or mastercard?
It is about a promise delivered.
Inside those businesses, every day they are delivering and delivering.
It works flawlessly.
They have to do it to do business.
With the ceo, saying we have to spend 842,000 on the golf tournament?
Probably more than that.
Usually a couple of million.
Visa is starting to make moves.
They are introducing a black card, try to compete a little bit more with american express.
The difference with american express, it is used by corporations and businesses for their entire purchasing systems.
Visa does not do that.
It has always been a focus more on the individual, and in this case, small businesses.
Also emerging markets.
What i find interesting about the strategy, they are targeting places like myanmar where people do not have access to banking.
They want to move away from the cache system right to the credit system in a lot of the emerging markets.
Why are they spending all the money?
If you build a brand, people start using the brand.
Some of the commercials for visa and amex are some of the more memorable.
How many of you actually pay cash?
We don't do it.
That is the way it is.
I go weeks without having a dollar or two, seriously.
Serat, the stock price of the 300-some percent.
How do you in this market acquire today after the move we had?
You look at days.
If we are down today, you get the pullbacks and pauses -- the more volatile stocks get hurt because somebody is saying growth will slow down and stocks like visa and mastercard get hurt more.
They seem to just have a higher beta than the rest of the market because the growth rates -- trading at a much higher premium than the growth rates.
You have to nibble and maybe take a little bit of the price.
Sarat sethi is with us.
Terrific earnings season.
There have been some losers.
But still, facebook, i am still speechless about.
Here is another mover outside of earnings in the market.
Caroline kennedy being appointed ambassador to japan.
Japan says it welcomes president obama's new appointment.
She is the daughter of the late president, jfk, and was the cochairman of president obama's campaign in 2012. she has been a very -- important political ally.
About 18 five percent of his ambassador appointees have been political rather than career diplomat.
What i find interesting is she is the first female ambassador to japan in a corporate culture and power culture dominated by men.
My question is, what took so long?
She change the campaign of the president.
I believe it was january of 2008, the uproar when she came out and aggressively got behind him.
The clinton campaign -- now, he is returning the favor.
The heritage of this come of this ambassadorship, one of the plum stories out there.
Caroline kennedy to japan.
Also an exciting time for japan with abenomics and a tense time between urbana china.
Coming up, another fun company, callaway golf, trying to get back on the green.
Coming up, how the ceo chip brewer lands to get out of the rough.
This is "bloomberg surveillance" on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.
? this is "bloomberg surveillance." i'm sara eisen, as always with us tom keene and scarlet fu.
Top headlines -- china is to boost its economy.
The premier saying the country will speed railway construction as a way to support economic growth.
China also approved tax breaks for small companies and moved to cut fees on exporters.
The uk's economic recovery gains traction.
Gdp increasing 0.6% in the second quarter as all main industries showed expansion.
That was the broadest growth in the uk to three years.
Gdp rising 1.4% year-over-year.
On the bright side for spain even, unemployment falling for the first time in two years.
The unemployment rate dropped to 26.3% in the second quarter.
Obviously still elevated, but it is down from 27.2% in the first quarter.
Even with a drop, unemployment in spain three times higher than before the economic slump began in 2008. those are your top news headlines.
If you put some of the data from europe together -- spain, yesterday with german manufacturing, maybe things are turning around.
At is where you see the euro at one point 32, a real game changer against the consensus.
-- the euro at 1.32. my single best chart shows the u.s. is an outlier when it comes to spending on healthcare but not any good way.
The yellow line is the u.s.. percent of gdp.
Currently at 18%. it was at seven percent in the 1970s. the medical blue line is the rest of rest of the world.
We did not bottle -- bothered labeling the countries.
On average, they spent about nine percent of their economy.
The reason why, pricing power comes up again and again.
Two of the most profitable industries in the u.s. -- pharma and medical devices, they have margins of almost 20%. health insurers, by contrast, have margins of about two percent.
A lot of people say it is a big deal for residents of other countries because our high spending makes medical innovation more profitable and they reap the benefits.
To me it is almost incentive ash sarat sethi -- chris verrone this firms that talked about a new -- what happens when johnson & johnson and other health-care stocks go straight up?
Somebody tells me i am being taken by the affordable care act.
Johnson & johnson -- i do not know, full disclosure -- out of me -- making money out of me?
I think what they discounted is as more people are going to be able to get medicines, the market is going to grow even bigger.
Even if you had margin pressure -- and this is happening -- happening and other industries.
More and more people are going to be taking more drugs.
What is the cost?
The cost is pretty minimal because they already funded all of this.
The monies will have more and more money to make.
We like merck still.
We like sanofi.
And we like lumina -- a lot of the companies making diagnostics.
What about the other side, the health insurers?
They are front and center.
That is where people will put pressure on.
Even if it is two percent margin, it is still two percent margin.
If your premiums are going up the -- double-digit, something's got to get.
How do you brand this?
You are a brand guide.
You walk into a hospital or clinic -- this is not callaway golf, is it?
Very tough to brand something like this.
It is a very local decision when you think about doctors and nurses, healthcare, and the way people make decisions.
A lot of it is really local and you will not be able to brand it as you would traditionally look at a bigger company.
You are from a medical family, and all i hear is that this will cost more.
At the end of the day, all i hear is this is going to cost everybody more money.
There is nobody who is going to tell you it is not true.
It is going to cost more money.
That is what is reflected in the stocks.
That is why the companies will make more money in the future and the stats reflect that.
And, by the way, when they come out with a new drugs and people wanted, it will fall to the bottom line.
The "surveillance" lesson, $2000 deductible health care policy by j&j. let's have a first look, some of the photos making news.
We have a global edition.
Not the royal baby but a brand- new airbus a 380. it is being rolled out by british airlines.
Being told -- towed by rugby players.
North korean soldiers passing through grapes grown -- gravestones at a korean war cemetery in pyongyang.
Let's go to spain now.
This is terrible.
We have a shot here of the train that derailed, killing at least 77 people there were 238 passengers total.
All of the eight train carriages went off the rail.
It happened on the northwest city.
Every time i see that now, i worry about texting.
I was a washington accident four or five years ago where an engineer with texting.
What we know is it had taken a curve is very fast, where the speed limit was only 50 miles an hour.
There have been a lot of accidents recently.
A lot of accidents.
All right, coming up there is a lot to talk about.
Remember, you can watch "bloomberg surveillance" on your iphone, your tablet, and bloomberg.com.
In the next hour, meredith whitney over the fallout from detroit.
? this is "bloomberg surveillance." i'm scarlet fu, as always to invite tom and sara.
From the files of bloomberg west -- facebook shares soared after the earnings report.
The vet on mobile showing size of paying off.
Shares of ads on wireless devices now to surpass desktop computers.
Half it was $.19 a share, in nickel better than estimates.
Google challenges apple with a tv device.
The new gadget allows users to send you to been that foot -- netflix videos to phones, tablets, and television.
It will sell for $35. it plugs into a tv's hdmi input and allows customers to watch videos without a remote control.
Surging smartphone sales help and qualcomm quarterly sales may be higher than wall street is predicting.
Revenue could be as much as 6.6 billion dollars.
Analysts were forecasting 6.3 billion.
Increasing demand for cell phones and emerging-market.
That is the company news from the files of "bloomberg west." we will talk about callaway golf now.
Out of the rat?
The california company has been making a comeback after losing 70% market share back in 2007. not so secret weapon?
Ceo chip brewer.
Callaway also reporting after the bell today.
How is the company looking after the turnaround?
The entire industry really fell it off the cliff during the recession and callaway was slow to recover.
It is not really participate in the comeback.
Part of it was because it is not really, with anything innovative.
It certainly came out with a big worth of back in the early 1990s with the stainless steel composition and also the big head.
But after that, it had a lot of iterations of the driver and it really did not come up with anything new, did not follow-up with anything.
A lot of people scratching their heads.
We have the ultimate grandmaster follower, jeffrey hayzlett.
You have to love a ceo named chip in charge of a golf company.
He is going to the green.
He has been a great job.
Heaping rmb and getting back to the core.
I think that is an important thing.
He made a decision not to wait around to launch at the big pga merchandising show in january, but do the releases when the products come out.
He really smart move.
He also shed off some of the other companies part of the operations.
In month after he got in, so the company for 20 -- big sporting goods.
Sporting-goods, but yet he that the intellectual property and one of the manufacturing plants.
He is focusing on a branded house and not a house of brands.
It helps to have phil mickelson who just won the british open using his gloves.
It comes to innovation, because this is a competitive sector.
Absolutely, and tailor-made took market share from callaway.
A lot of people looking to chip brewer to turn things around, not just improve on the obvious things like revamping the marketing and ad campaign and continuing with the cost cuts.
That will be a big area of focus.
I think the two things that are facing golf manufacturing -- manufacturers are, round players down and -- people are not replacing.
Not even callaway, but you spend a few hundred bucks, you are not going to upgrade.
Let's look at the chart of callaway, which i don't get.
Obviously a name brand phil mickelson and dominic chu use the mac daddy wage.
Should this be a publicly traded company?
I don't think so.
To me, it is textbook private company.
This is steady growth, high margin business.
If you are in the public markets, you are trying to get gross out there.
Really not a growth business.
High margin big back -- high margin with black chip brewer has had success before.
A smaller company -- i think the real billion-dollar mark and anything below -- stealing shares from each other, i do not think the whole market will grow as -- where is the public service to take the stalled private?
Essentially, if you do not have enough debt, you put that on it.
There are probably private equity guys who have a better golf game than you.
If i played golf, i would be his handicap.
We need to get carl icahn off of dell and on the callaway golf.
Maybe there are opportunities because the company like to talk about growth outside of the u.s., particularly asia.
Especially since asia has been a real area of growth for the gulf industry.
A lot of question marks in emerging markets, is this a concern?
It could be.
This is a game of leisure, people spend money they ordinarily would not have.
To thomas point, is this really publicly traded after you play these for sales cycles or investment?
And the question for chip brewer, how much do you have to go away from your core product and innovate to turn something like this around?
He actually stop the hemorrhaging going on.
He made some really drastic cuts to some of the people.
It was very tough.
He said it was very tough.
And he is holding the line.
I think it is starting to turn around.
Can i ask a dumb question, sarat?
Are all golf balls the same?
At the end of the day, very similar.
With your eyes close and hitting one, could you tell the difference?
It is the field.
The top balls are similar.
At the end of the day, unless you are a professional golfer, most of these golf balls, it really does not matter.
Pure marketing to tell you you should pay five dollars on the titleist versus a dollar.
M a right now every manufacturer of every golf is saying, are you crazy?
-- right now, every manufacturer of every golf ball is saying, are you crazy?
My golfing is from caddy shack.
The currencies on the move, the biggest one is the british pound against the dollar.
It is under some pressure.
What stood out to me is that uk gdp number which came in better than predicted.
Also dollar yen slipping below the 100 level.
You see it with the future than the united states.
You wonder what the catalyst will be.
Ktiit from socgen.
They have to commit to abenomics.
Sarat sethi, where we'll be in a year?
They will be higher.
Probably pause, reset a little bit.
Next year, three to five years, we are pretty positive on growth.
You look at any company that the top line revenue -- facebook, qualcomm, visa -- they will all be we would buy the market.
Thank you so much.
Our bloomberg contributor.
Coming up on the next hour, ralph schloss fine --schloss stein joins us as guest post.
? this is "bloomberg surveillance." facebook's bet on mobile pays off on this is ginormous earnings surprise.
General motors retools to take on ford.
The legendary rivalry is back.
This race will be decided by design, not horsepower.
We will hear from a man who literally a reshaped cadillac.
And meredith whitney says there are many more detroits coming the wake of the historic bankruptcy.
Should you worry about a contagious crisis?
Good morning, everybody, this is "bloomberg surveillance,"in new york, it is thursday, july 25 with sarah eisen and scarlet fu.
Our guest house this hour is ralph schlosstein, the president and chief executive officer and adviser to dell and is with the banking boutique evercore partners.
He is on the front line of m&a activity.
In the u.k., economic growth accelerated.
The recovery gained momentum, maybe the royal baby, but all elements of the royalty -- british economy showed improvement.
At 8:30 a.m., we get report on the initial jobless claims and durable goods order and at 9:45, the bloomberg consumer confidence index.
Which of those is important?
I like the consumer comfort.
Durable-goods is important.
We will see how companies and manufacturers and the big investors are spending on their capital goods.
Before the bell, some earnings to watch -- dow chemical, starbucks, amazon, and deckers, that company that makes the no longer cool shoes.
I don't see you out front of that issue basnight you cannot wear boots in the summer.
That's a morning briefing.
We need to start with facebook.
Shares are soaring in the pre- market with double digit percentages after the second quarter earnings report.
Mark zuckerberg's bet on mobile is showing signs of improvement.
Revenue rose 53%. profit was 19 cents per share.
Fallout from the investigation into sac continues . goldman sachs and deutsche bank are two of the firm's suffering the consequences of the hedge fund company.
Federal prosecutors could level criminal charges against sac as early as today on the charges would be the result of a long- running investigation into insider trading.
Credit suisse is getting a big boost from investment banking.
Earnings at the investment- banking unit more than doubled last quarter which pushed overall earnings higher than forecast.
It is not just cost cutting any more.
You can see the unwinding of the banks.
Ubs and credit suisse in europe and others over each year brings up the idea of who will win at banking and the next 10 years.
Ralph schlosstein is with evercore partners.
They go back to 1966. as i said earlier, a boutique.
He does not like when i says that.
There is this image of a boutique, you guys hit the ball out of the park with earnings announcement yesterday was.
This a thank-you to michael dell?
No, it was a minuscule effect on the quarter.
We did it with a very -- clients and boards of directors, ceo's are embracing our independent model with a very senior bankers, getting the business and doing business.
You guys have adults and they say we are not going to credit suisse are another major firm.
We will go to a focused approach.
They like the focused approach to the senior level in tension and completely free of any potential or actual conflicts.
We have no balance sheet.
That is winning.
So you don't put up money for a transaction.
That's right, we are winning the hearts and minds of the executives and boards of directors.
Our model works.
Meredith whitney will join us later in the hour it will take replicate or attempts to replicate with you and roger altman have done?
It is hard for them to replicate that completely.
Their business is a different business.
They have a very large amount of capital.
They have to deploy that capital profitably.
Biggest problem they all have is return on equity.
Our ideas and our relationships are core.
There is no pressure in our business model to try and make money off these clients in any way other than giving them the best long-term advice.
Your intellectual capital walks out the door every night.
Are you winning because of the constraints the major firms have?
Not really, those have a modest effect on encouraging people to join us.
What is really winning is that the bankers who want to provide strong strategic advice want to be in a place where that is the central business of the company.
Even the firm that has the highest percentage of their banking earnings from advisory has less than 5% of its banking earnings from advisers.
The overall climate for m&a activity has been somewhat ho- hum despite the fact that you are getting a lot of deals.
What is your outlook?
We do a lot of things really well at evercore but one of them is forecast the future that we don't do well.
The environment has been very steady for the last seven quarters, trailing 12 months, announced m&a has been between 2.2-$2.50 trillion.
For the last 14 quarters, it has between 2.0-2.6 per the environment is basically flat.
In that environment, we grow our advisory revenues last year by 25% and this year, year to date, almost 30%. if we are winning on market share but we will have much more in the hour.
One of the top stories is caroline kennedy is tapped to be nominated ambassador to japan.
She was a major campaign contributor.
Is it more about rewarding supporters or having your friends represent you abroad?
Let's go to lisa lehrer from washington.
Give us the back story?
It is not surprising that the president picked caroline kennedy.
With caroline kennedy, is -- it is less about the money and more about the mistake.
She is the only surviving child of john f. kennedy and she was a really early and torture of president obama in 2008 which gave him a big boost.
She has loyalty among democratic voters.
This nomination was a long time coming.
What we found in an analysis this week is that overall, 26 ambassadors current and incoming gave $30 million in campaign contributions.
That is about half a million dollars per investor on average.
Most likely, the number is much higher than that because of the way the sec collects the data.
I will agree with that but it goes back to john jay in 7097. -- in 1797. she is an iconic figure from that moment in 1963, breaking the bottle of champagne on the aircraft carrier, as a child, she goes on to a distinguished career as an attorney.
What took so long?
To use our within democratic politics?
That is surely the icon of a generation.
This is something that presidents have been doing for decades.
This is 1/3 political appointees and 2/3 state department increases.
If you remember, there was a lot about changing washington and reducing the influence of money and politics we are not seeing that in this area.
Caroline kennedy certainly has a celebrity power and there are many people who think that is a good thing.
She is the first woman ambassador to japan but she does not speak japanese.
She transcends celebrity.
She is iconic.
She is truly american royalty.
? ralph schlosstein this comes at a critical time for the u.s. relationship with japan, the third biggest economy of the world and there is tension with china and abe-nomics going on.
How important is this relationship?
It is incredibly important.
We are seeing real momentum in the japanese economy for the first time -- in years -- but in this case, decades.
Caroline is a great selection, consistent with the tradition of ambassadors.
Let me finish -- tom -- we have traditionally cents, always picked iconic figures mike mansfield, mondale, she is consistent with that, but we will have more with ralph schlosstein on "bloomberg surveillance." ? good morning, everyone.
John boehner is front and center on the immigration debate.
Republicans and democrats are deeply divided.
Ralph schlosstein is our guest host.
He is a democrat and served in the carter administration.
Immigration matters to all of us, particularly to mr.
The suspect we are light years from the spirit of ellis island.
What happened here?
Why can't we get together?
Hopefully we can because this is not only a very important economic/justice issue -- we will not support 11 million people, but much more importantly, it is a critical economic issue.
The thing that separates america and has over the last century is our unique demographics and immigration has contributed to growth.
If you look at the developed world, europe, japan, the united states -- we all have roughly the same birth rates which are not enough to keep the population steady much less growing.
We have been fueled, our growth has been fueled by immigration.
I look at the republican jeff flake of arizona trying to find a middle ground with democrats.
Why can't there be more republicans that come over to a middle ground?
We have a challenging situation in the house where the leadership, which is understandable in some respects, has basically said that in order to pass a bill, not only does it have to get a majority of the members of the house but it also has to get a majority of the republican members of the house.
If you got most of the democrats and half of the republicans, that is a standard that is almost 3/4 of the house which is a high standard.
Would you suggest that speaker john boehner will sacrifice his job to get this bill through?
First of all, memories are short in washington.
I am not sure it will cost him his job to do that.
This is a critically important issue but it is also important because it is the issue that washington can demonstrate that the republicans and democrats can work together to finish something.
There was a pol yesl today.
President obama's approval rating was down a little bit to 45%. congress was at 12%. that is worse than wall street.
It is even worse than journalists.
[laughter] ralph schlosstein -- coming up, general motors and the new refreshed gm.
This is "bloomberg surveillance." ? this is "bloomberg surveillance." our guest house is ralph schlosstein, the president and ceo of evercore partners.
A train derailment in spain has killed at least 77 people.
The train crashed as it was approaching a station near the northwest city of santiago.
At least 140 other passengers have been treated at area hospitals.
In china, the former high- ranking communist party leader has been charged with corruption, abuse of power, and accepting bribes.
The indictment comes as the new china leadership tried to close its most serious political scandal in decades.
His wife was convicted last year.
Received a suspended death sentence.
Home sales in bantams hit a 75- year high -- in the hamptons, hit a 75-year high.
It is the most since 2006. the average price is $920,000. people that are chinese experts say this is not just another trial.
There is a lot going on here.
Remember how famous bo xin li was.
They are looking to make an example out of him and the new leadership was to set a new tone of being less extravagant.
This is a big deal.
Gm is reporting earnings today, making the biggest product push ever with 18 new or refreshed vehicles for 2014 with americans buying cars and pickup trucks.
At the fastest rate since 2007, can they close the gap on ford?
I am excited for the refreshed impala.
Head is like a brand-new.
Part of the refresh between ford and gm, ford is almost 3% more profitable than gm.
The general motors solution is new products.
A conservative consumer wants a conservative pickup truck that is part of the us.
Corvettes, trucks -- after 32 years of molding clay, john medugian is legendary head general motors and credited with single-handedly resort -- reverse -- resurrecting the cadillac line.
It's a thrill to speak to you.
Thank you very much for that great introduction when you look at this 2 day, our guys like you still working with clay?
Clay is still used by computers are part of the tool kit to the designer's use.
It is a combination of using clay and computers.
Did ford motor's win and the last three years because of better design?
I think they are on a roll.
Ford design is really doing a great job.
They've got some refresh products that look great on the street.
I am excited about the upcoming mustang.
We are talking about the new product line for general motors, 18 new cars and some are refreshed and others are brand new.
What does that say about how much risk taking gm is doing?
With the implala, have a huge hit.
I would like to see them take more risk than some of their cars like the trucks.
But i think their car lineup is looking great.
I think the addition of being in china is going to help a lot.
Talk about the influence of companies like apple and target where design has been part of their brent and the effect on the auto industry's. design has become such a strong element and a strong differentiator.
Apple has set the tone along with target.
Design has become so important to the car business.
It is the last frontier for the last differentiator between all the different companies.
Design has to become part of the strategy for the company to succeed.
In general motors case, they have got a strong position globally with their design organization to really push designed as part of global gm design.
Did you ever get in a fist fight with bob lutz?
The aztec became the coolest car in hollywood.
Does someone listen to a guy like you?
It goes both ways.
We try to do as much as we can but in the end, senior management always make that final decision.
In the design of these new cars, who does gm have to target?
What is the demographic and the geography?
Because general motors is such a large multinational global corporation, they should appeal to every customer on the planet interested in buying a vehicle.
You have first-time car buyers as well as retirees and everything in between.
Does designed matter in a car-sharing economy when people are renting cars by the hour instead of buying?
Schering will become much more prominent i believe in the future.
-- ca =-sharing become more important and that company.
People want to be seen as something that looks good and design has become so important and so ubiquitous that good design is really going to make a successful product.
We hope you can join us more often.
Truly legendary and it works with clay.
What do they do when they make a mistake?
How do they do that?
It is not just about the exteriors, it is also the interior.
By way, later on bloomberg television, there is a conversation with the ceo of general motors after earnings and will be joining betty liu at 8:00 a.m. ? coming up later, the president of netaporter discuss the industry trends.
This is a luxury retail company online.
Do you know the company?
They have all the great brands.
Do they sell bowties?
It is mainly for women but we will check.
The markets are on the mode.
-11 earlier and now - 8. yields are a bit higher but i am on a higher yield watch3 + . there is a lot of bread on the data screen today.
Futures are under pressure.
One company we will be watching as amazon reporting.
Ebay is going up against the mother of e-commerce, amazon.
Ebay now - amazon and google are making big strides into this same day local delivery service.
You buy something on line and get it delivered to you the same day often within an hour.
This is a logistics business.
You have to have a good supply chain and ebay is new to this.
They need to diversify its revenue stream.
I remember hearing about this last fall.
They were testing it in different cities?
They are doing it in new york and the bay area and they are expanding to chicago and dallas.
There is a staggered delivery location and they are being cautious.
They are also expending it to reach the office worker segment.
It was only available as a mobile app but now it will be available to desktops.
They want these products available while they're at work.
It is like a personal delivery service.
Does it work?
It works for now and it seems to be a good service.
Ebay wants to be the goat to place for all these different retailers.
Different retailers will probably not satisfy same-day delivery so it wants to be the place.
No one talks about ebay anymore.
Maybe they want to change that with local delivery.
It is great for products that are discontinued and you need to find them somewhere.
Ebay did not divulged any sales for the streets of the top selling item is the ipod mini.
Where is the m&a opportunity here?
It sounds like there will only be two or three players left.
And some of these industries that are scale industries come up frequently get consolidation without m&a, just taking a share.
There are plenty of industries where that is not the case.
We expect to continue to have at least a modest size growth.
Does evercore have a large west coast operation?
What do you do in silicon valley?
We are growing that as we speak.
We recently -- as was announced publicly -- a fellow named scott cameron from bank of america/merrill lynch iran their soccer practice and will open an office in silicon valley and we -- who ran their software practice and will open an office in silicon valley.
Just got numbers out3m, second quarter earnings per share, $1.71 and the consensus was for $1.70. general motors beat as well.
Let's start with a weaker yen -- less start with general motors.
General motors adjusted earnings per share, 84 cents on the consensus was 77 cents.
This is a head of a wave of new models.
Currency pricing pressures narrowed the international operating profit.
A weaker yen in japan helped nissan sales in the u.s. it sought u.s. sales surged 25% -- it saw 25% u.s. sales surge.
Net income rose 13%. meantime, ing u.s. ended its sponsorship of the new york city marathon after this year.
It will focus on supporting financial literacy and will end running sponsorships and other races in connecticut and miami.
They have posted these races since 2003. a gain in worldwide spending on credit cards, boosting the profits of the separate income declined to 16%. visa ceo says they are being helped by customers' switching away from cash.
Good morning, everyone, "bloomberg surveillance,"on bloomberg sell -- on bloomberg television and streaming on your phone, your tablet, and bloomberg.com.
Our mobile application has amazing creature.
They get a lot of people.
My morning must read has to do with the carnage of detroit.
There is the op-ed that made a big splash a few days ago.
Meredith whitney is known for her analysis of the american banking system and famous for her call on the weakness of the municipalities and the massive push back by the municipal-bond industry.
It did not happen in 2011 and she has forcefully argued for a more long-term view.
She is the author of "fate of the states" and joins us now.
Good to see you.
Your op-ed was the harshest language i have heard you say against the muni bond industry recalled those people bond peddlers.
What did you mean?
They sell bonds.
That is straight forward.
They say detroit is a unique and -- occurs.
What are the other five towns in michigan that could be like detroit?
They are under emergency management.
They are public and they are in fragile positions.
Or across the rest of the country, you know stockton and other california towns are reeling from a lack of funds to pay for basic services.
You have so much support coming in by email against the industry.
The people who support your time line, what is your time line for municipal challenges?
Is it 2013 or is it five or 10 years?
To be clear, never had a time line.
I said people would start to worry about it at the end of the fiscal calendar year four states.
That was in june, 2011. that is when people started to worry because the government had given stimulus and it ran out and that's when but robert metz of the road in terms of states having to fend for themselves -- that's when the rubber met the road.
It left these governments to fend for themselves without basic services.
Who do they side with?
Do they side with the bondholders or the pensioners or at the residence?
What is stunning about the detroit case is for the first time on a large-scale level, the officials are siding with the residents saying we cannot take any more cuts to the system or more cuts to the police department or fire department.
This has been the central core of my argument.
It comes down to an issue of willing mess, not ability.
You sought similar things happen in the past.
Politicians are starting to vote with their people.
You say in your op-ed that investors in municipal bonds may pay the price.
Is there a sweeping misconception about municipal- bond stacks i'm sure you could rewind to the last three years and have the bond paddlers say this will never happen and it cannot happen and it won't happen and then you might remember that people said the same thing with the housing industry.
You have to distinguish between the aaa rating and others.
Of course you do, but what is triple a really worth at this point?
Mexican debt downgraded a week before its bank crediit went bankrupt.
-- michigan got downgraded a week before it went bankrupt the rating agencies cannot keep up fast enough.
Let's come back with meredith whitney.
We will talk about expense reductions at those banks.
Big banks are accused of driving up the cost of everything from aluminum cans to gasoline and why our nation's biggest banks are big merchants of metals and energy.
? today, "in the loop,"daniel ammann from general motors under 18 new designs and how they will catch up with ford motors.
Meredith whitney is here as well as ralph schlosstein, why do you know this?
I have a very stylish wife and a 28-year-old doctor who may be slightly more stylish.
It is on the cost of cutting edge fashion brands, ne =-a- porter.
Meredith whitney is talking about the fate of our cities.
You say many more will follow.
Are you looking at many more outside of michigan?
Absolutely, i never mentioned the detroit i don't think it is constructed.
There is no surprise that emergency managers have been assigned to this in michigan.
The fact is, the financial situation of so many municipalities are on their knees.
The heart of this is what happens with the pensions.
This is the no.
1 guy in "the washington journal," david steele, the chapter 9 bankruptcy academic.
Everybody should read this and he agrees with you, meredith whitney.
It is so sad because many people get angry with pensioners for getting these big payouts but they are expecting what they were promised.
Politicians of yore over- promised with no accountability because they knew they would not be in office when the payments were due.
It is unrealistic for so many pensioners to expect 100 cents on the dollar when there is not enough money clearly in the system to support that.
The i-shares municipal bond etf has gone up.
Would you argue there is a declining price.
From the civil bonds?
I think detroit is a game changes.
It sets a clear -- anybody who was told there is nothing to worry about by their bond advisers should pull up the detroit story.
Ralph schlosstein, i am eager to get your opinion.
You are following the u.s. economy.
We have a big restructuring business, as well.
Mara debt has hit the nail on the head.
-- meredith whitney has hit the nail on the head.
Municipalities have constitutional requirements that their current budget de- balances.
That has caused a pilot on of long-term liabi