Fed Signals on Tapering: Surveillance (8/22)

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August 22 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Bloomberg Contributing Editor Jeffrey Hayzlett, "The Facebook Effect" author David Kirkpatrick, 85 Broads owner Sallie Krawcheck, Work Market CFO/COO Jeff Wald, Dartmouth College professor Danny Blanchflower, U.S. Education Secretary Arne Duncan and "The Town" author Mark Leibovich.

The fed is broadly comfortable but the bond is not as prices decline.

Investors consider selling their bonds.

Hewlett-packard disappoints as management considers a long and winding road.

Sunday football may never be the same area can you watch the cowboys and redskins on youtube?

Good morning, everyone.

This is " bloomberg surveillance." on this august 22. good briefing morning.

There is a lot to talk about.

Better news on chinese manufacturing overnight.

Pay pmi index shows a rebound in august from 11-month low.

Europe showed better numbers as well.

Services in europe expanded for the first time in 19 months following a trend of better economic data.

Too soon to: all-out recovery but it is good.

It is thursday that means at 8:00 in initial reads -- read son and initial jobless claims.

The fewest americans filed jobless claims last month and we will see if the trend continues.

9:00 a.m. the house price index and a few earnings to keep an eye on this morning.

We will talk about sears.

We will have numbers in a moment.

Abercrombie & fitch, and dollar tree and gap earnings.

Pandora and we will speak to the ceo of retailmenot.

I guess buying the socket wrench did not help.

Earnings came in at $1.46. that was pretty ugly in terms of earnings.

Revenue came in at a $.9 billion and that was a tad light.

The real kicker is total domestic same-store sales came in 1.5% and that was mainly due to came -- kmart which is down as well.

How did they turn this thing around?

What do they do with eddie lampert in charge?

Kmart down 2.1%. i bought a washing machine.

Let's do a data check.

Futures rebound up six, china pmi helping out and we will get the yields in a minute.

The dollar is stronger and the euro is weaker and hydro carbons are bouncing around.

Note news flow out of egypt.

-- no news flow out of egypt.

This is the yield curve and the numeral two-yield is not changed, the 10-year yield is slightly up.

The curve is wicked to steep.

You are talking about higher yields, five-year, seven-year, 30 year yield sitting at the highest level since back in 2011 on the idea that everybody is waiting on the fed's next move, a taper.

There is news out of london but is it about economics or bond losses?

They could be a little bit of both.

The idea is the economy is on more solid footing to the federal reserve can start to step out of the game.

There is also the question that once they unload, you will have lack of demand.

It is not like we did not see this coming.

That's a good point but we are seeing this market reaction.

Everybody knew it was coming.

Let's keep sarah happy so we have brent crude.

This is my board.

Copper is doing better.

The data from china helps and imports rose 15%. that was due to financing deals, not end user demands.

Finally, i had three people last night ask what i am watching.

I am watching muni bonds and watching bill gross who went to a new low in net assets, it $10.61 on the hallmark total return fund.

That is the longest data check we have ever done.

It is timely.

We will be watching for the bond redemptions.

It is time for the front page.

Now that we've gone through some of the market action, it has to do with the fed and what came out yesterday.

That's our top story, federal reserve officials reaffirmed their plan to start winding down monetary easing.

The fed minutes were released yesterday and officials were on track to start winding down the 85 billion dollar bond buying program as soon as to set -- september but they were more uncertain in june of that economic growth.

They said the label market was leaked -- week.

The markets are completely day today.

That's day to day.

One analyst that has been gloomy said it is not clear that the economy is doing better and it is not clear that it is doing well enough for the fed to start to scale back in september.

He would peg it at december.

Wells fargo is our next story, eliminating 2500 jobs in mortgage production.

Demand for refinancing has slumped and will probably drop more as interest rates rise.

Wells fargo said mortgage lending will flow for the rest of this year because of higher mortgage rates and they don't spur a lot of refinancing.

This is something they have been worrying about.

Do they have a stagecoach?

I use might wells fargo app.

We are also looking for yahoo attracting u.s. -- more visitors since google indicating a turnaround by ceo marissa mayer.

We have more than 100 96 million users -- more than 196 million users which is up.

How is that possible?

They did not count mobile usage.

A small detail.

That is the front page of a very busy post-that morning.

Jeff hayslett is with us.

David kirkpatrick is with us as well.

Marissa mayer, another victory lap?

Is this about not counting mobile?

It is not a victory lap but it is the first really nice positive news story about yahoo we have heard aside from the fact that she is there.

The vogue pictures were pretty modern.

She is in " vogue" looking glamorous.

Yahoo is good and it has made some progress.

Let's go to the fashion editor, jeffrey hayslett.

That's why the traffic is up.

They were searching for her.

What kind of marketing message does that send for a serious ceo?

I think it is ok.

Our ratings would go up if we would get time to do this as well.

-- tom to do this as well.

It is the people, the product , the traffic and that is the revenue and i think this is bs.

They did not include the mobile numbers and that is the big thing.

Most searches were done on mobile and that is the big thing.

That's like saying we are popular among blue haired ladies but they are all dieting.

-- but they're all dieting.

The web is important.

That is some place where yahoo one something.

As far as " vogue," if she feels comfortable and confident enough to do that it is probably a dozen sign about what she feels about the company.

Is yahoo cool again?

They dropped the!

Off their logo.

I think the photographs were a good distraction and i don't than they thought those things through.

There is something that happened.

Talk about web traffic and weather they will be viable in the future.

Talk about if they are going to get advertising dollars.

I religiously use yahoo weather.

I love it.

Can one single app change the future of any single company?

A great app can but i don't know if the weather app can.

I think they are working on that kind of stuff.

It is just great.

Isn't whether just whether?

I look it up like this.

You are in the next issue.

Tom is posing.

The fbi is investigating jpmorgan's energy trading unit.

The investigation is an effort to see if the bank's employees broke criminal laws.

The probe is related to charges they manipulated power markets in california and the midwest and jpmorgan reached a $400 million civil settlement last week.

Trading errors at ever bright security has cost the president of the chinese brokerages job.

The president resigned after almost $4 billion worth of buy orders that were mistakenly placed last week.

It set up the biggest chinese market swing in four years great regulators continue to investigate the issue.

The sec is examining what went wrong at goldman sachs for the regulators are looking into it malfunction that flooded the options market with orders earlier this week.

The sbc has been cracking down on other firms experiencing technical problems that this undermines investor confidence.

Very interesting.

A frightening moment in major league baseball -- this video is tough to watch.

Jason heyward of the atlanta braves was hit by a 90 mile per hour passed ball breaking his jaw in two places.

It was really ugly and he will undergo surgery today.

The mets pitcher called it everyone's worst nightmare.

Atlanta has been on a roll.

Are they liable?

Even if it is a mistake?

That ball comes in so hard.

That is the darker side of when that happens.

This is every pitch, there is that fear.

It is tough.

I'm glad you covered that.

It's not just about a rod.

Coming up, we will talk about hewlett-packard and meg whitman shaping up the hp earnings but they missed estimates.

What about their turnaround plan?

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

? good morning, everyone.

If it's thursday, it must be " bloomberg businessweek." the latest issue will be on newsstands tomorrow.

Steve case, the worst merger ever.

I was with him the day of the merger and he looked like a deer in the headlights.

Look at what he is up to now.

He is on the cover.

From his perspective, it was the best merger.

Keep that in mind.

That is a mice -- nice distinction from david kirkpatrick who did "the aol effect." hewlett-packard is announcing a management shakeup and came out with earnings.

Alix steel has been digging through the numbers.

It is out with the old tech and in with the new.

The broader issue is they missed the tablet and smartphone revolution and messed the online computing from hardware and software and the replacement of photo printing with new things like they spoke.

Where are the sales?

Revenue is down eight percent for the eighth consecutive quarter.

You've gotpc'a, printing and servers.

There is a lot of price competition and dell is cutting their price, it is a slippery slope.

In terms of profit, they did pretty well.

Profit was up 116% but that was a cost-cutting story.

That helped profits.

At some point, you have to grow.

Investors like the 82% growth for the year.

What is going to be the catalyst ? they could consider breaking up the business.

Raking up the business could be good way to go but the problem is, no area is really growing so what would be the value?

Jeffrey hayzlett has him through this before at east and kodak.

The parallels are shocking.

It really is but they have a big cash cow.

I have always called hp big ink.

They make the money and the little tiny ink cartridges.

They make billions of dollars off of those little ink cartridges.

They are behind the locked campers and they are getting the cash there.

They can do a lot of different things.

They do acquisitions.

You will see a move harder and harder into the professional services side.

They are bringing back employees back at hp.

The cmo was one of the both volatile jobs.

Less than 24 months on the job, this guy did not make it.

What does the cmo of hewlett packer have to do?

Chief marketing officer.

How do you do that?

You will have to get the strategy across the board and it does not sound like they've got that right now.

It's not just hewlett- packard, this is a problem across the old-school tech companies like dell.

How do they diversify their business when everybody is trying to do the same thing?

Someone has to have some vision.

Maple -- maybe michael dell would do this when he takes over the company.

To push back against a cmo, it even kirkpatrick is with us, is hewlett-packard about getting back to the mystery -- the mystical moment of hewlett and packard?

At would be a great marketing approach to take.

I think the cmo role is critical to a company like hp.

What you said about the yahoo weather app is interesting.

A signature roddick that is really good can turn everything around.

Hp has no one thing that we can look at and say that is cool.

The comparison to codec is not complete because they have great services revenues, a lot of software revenues which are profitable.

Their business is not the pc business.

The printer ink is not inconsiderable.

Hp is a truly diversified company.

You nailed facebook, do you buy hewlett packard?

Not really.

It will be a long road ahead.

You always put him on the spot.

I was right about facebook.

Coming up, we will talk technology with the rise of netflix and apple tv consumers have less incentive to subscribe to their cable and satellite services.

We will talk about the key reason.

Will be nfl lose fans if the games are exclusively online?

? it morning, everyone.

It has been busy in august.

I went to the " financial times," mohamed el-erian says prepare for tricky times ahead in terms of the market.

There is a long list of insurgencies that are building up.

-- uncertainties that are building up.

This wants to autumn market volatility.

A sickly, don't fall asleep this summer, there is a lot going on in the fall.

-- basically, don't fall asleep this summer.

We have not seen movement in copper but china is getting better.

There are outside moments and factors.

He also talks about washington.

You have european uncertainty, the middle east, and japan's all of that combined -- you have to stay awake.

A wall of worry.

Did you see that linked in is trying to get at university students and high school students to get them engaged in college debate and even jobs?

I would suggest that he does not have a 15 or 17-year-old.

He sends a message that if you are cool, you go on facebook and if you are nerdy you go on linkedin.

I was working when i was 14. the rules have changed.

David kirk actor is with us.

-- david kirkpatrick is with us.

There is such a myth that these systems are destroying actual human life and it is wrong.

The idea that people are on facebook and not really talking to human beings or people are going to lincoln and therefore they are focusing on getting a job and no longer care about the things teenagers care about -- that is some old dodgy person's prejudice.

It is not based on any real data or information.

Doesn't this push kids and resins who are hyper about their kids getting jobs to get into this?

At 13, i had a job.

I was working at mcdonald's, mowing lawns -- anything i possibly could.

More important, where does lincoln get revenues from?

It is about the hiring and the job search.

They are trying to get ahead of the game.

I like it.

I worked in a coffee shop, true statement.

During high school.

? this is " bloomberg surveillance." united nations want expert just access to the suburb where a chemical attack took place in syria.

It was alleged they used chemical weapons to kill 1300 people and many of them women and children.

United nations has a does not have confirmation that chemicals were used and and its inspectors and not been able to reach the site to to the fighting.

In egypt, long time ruler hosni mubarak may be released from prison as early as today.

An egyptian court ruled that he will free pending charges still being heard.

His release is projected to give more attention -- to offer more attention in the area.

In sports,ichiro suzuki slapped a single to left field for his fourth outpost -- his for thousands -- his 4000 hits.

The other 1300 came as a professional in japan.

That was great.

He made a great catch in the game where he slid across the grass.

He has a great arm.

The crowd acknowledged him and both teams congratulated him.

I don't know how old he is but he plays like it is his first day in the majors.

Why don't the red sox get players like that?

Total silence.

I was going to ask the same question.

It is august, i am fragile.

Let's do a data check to save us from sara eisen.

Futures are up 7, 10 year yield is up, the dollar is stronger and the euro is weaker and oil is nowhere.

We've got to talk about sears because earnings were just out of the top of the hour.

They posted wider than estimated losses for the second quarter but management lacking retail experience, can the company turn around?

This is a question for jeffrey hayzlett.

Eddie lampert is a hedge fund manager running sears.

What is your prognosis?

I think it is an idiotic move.

This guy has 17 different divisions in the company.

He is trying to put everything together and have these groups compete against each other and he should be making bets in smaller places in putting everything behind one or two arrows.

I think he is making big mistakes.

He has some great rants.

-- brands.

These are brands we go back with.

He is trying to sell rolexes in sears.

Give me a break.

Chanel purses.

It is a bad move.

Sears is still around and still in business.

What is he doing right?

I don't see that he is doing anything right.

One thing is he likes to read a lot of management books and put those out to his team.

Maybe we should get our books in there.

That would help.

The kenmore dishwashers are still by far the highest rated dishwashers made by anybody.

I just bought one.

However, the customer service is so hard terrific that that -- are effect come a they give us a $100 credit to apologize.

-- ourhorrific, they had to give us a $100 credit to apologize.

If you have something breakdown, they sold the service business.

They have a program called shop your way.

Those frequent shoppers spent 18% more than the other shoppers.

I was been more of my time bringing back those customers.

I look at the headlines and it looks like one big cash burn.

The cash is near a 10 year low which means they are struggling.

They are doing some things right in terms of their leasing program.

That accounts for 60% of their revenue and that is doing well.

When the management comes out with a release that says they have created seven billion dollars in liquid assets means they are struggling for cash.

Even the retailers that are well run like target are lowing -- lowering expectations.

They have one little to word headline -- no cal - no conference call.

There is an article on mr.

Lampert and the lack of transparency here is used.

They wrote about how he operates like a hedge fund with different silos.

We have been talking about retail.

Walmart is down and everyone seems to be down.

I think it is the silent tack we have seen since the beginning of the year and that is the two percent social security tax that came in.

The people going into walmart and sears, that two percent is $1000 on $50,000 in terms of revenue.

That is disposable income that they don't have anymore.

It is a tougher environment for lower to middle income.

For a sears, it has not -- it has an even further road to climb.

He is competing with ebay and amazon but he's got 2000 stores.

They haven't had a good hit product since grranimals.

They are pouring all this money into further business that is not their core business.

That dog will not hunt.

It is me going in and picking up my washer and dryer.

It is me picking up some new tools over the weekend.

That is their customer.

It is meet going in and buying the alamo guitar where the guitar case is the guitar amp.

That was $50. this must have been back and the day.

I want to see you play air guitar.

We've got a retail-themed report on the wages.

If you look at walmart and target, what is the trickle-down for wages?

Hourly wages from 2009 until now -- walmart is pretty consistent, around nine dollars per hour.

Target is at its highest level at $8.50. when you adjust for inflation, these arrows show what the salaries should be.

Target around $8.25 print wall mart should be nearing $9.50. the argument is you are not paying your workers fair wages.

Aren't they the workers who will buy your products?

Walmart says their average wages is $12 and $.70. that is less than $25,000 per year.

On the two percent payroll tax, it is less.

Imagine the stimulus -- how to target get away with paying people so much less than walmart?

I have no idea.

The chairman of the president's council of economic advisers -- he and i did a thing for the council of foreign relations in washington and the entire seminar was on this inequality.

These are themes for elites.

It is so critical that is keeping the retailers on its feet.

You get great locations.

Investors should be running the company.

We've got a guy who thinks he can run it because he has put the money in and it has not worked.

It did not work with jcpenney or here.

It is not a blue-chip stock anymore.

Sears roebuck -- searshalf-bui ck.

I wonder how costco can get away with it krawcheck . ? this is " bloomberg surveillance." the national security agency violated the constitution when it collected tens of thousands of e-mails from americans in the years 2008-2011 which was the finding of a secret national security court.

The documents were declassified yesterday and the disclosure has added two demands on lawmakers for more oversight of the nsa.

In china, the former chinese politburo member trial continues today.

He is accused of taking more than $3.5 million in bribes.

He is also charged with an abusive power charge linked to the murder of a british businessman.

His wife was convicted in the killing last year.

Manufacturing in china jumped from an 11-month low.

The reading of the index topped analyst estimates and the chinese economy is indicated as strengthening.

As the fed moved yesterday, markets moved as well.

Joining as now is david blanch power -- david blanchflower.

He is formerly with the bank of england.

You and i talked yesterday.

We see the fed minutes.

We see the bond moves.

These are brutal moves in the bond market?

They appear to be.

My rating of the minutes is perhaps people have jumped too far.

If the fed was ready to go, they would have gone at that meeting.

I remember using the term"past dependent." that is what they have been trying to say.

They will wait and see what the data looks like.

I don't think the date it will this issue by the september meeting given the way it is red.

Tapering is obviously going to come but the big question is when and what will they do and are they going to stop mbs or bonds?

I suspect it will not be resolved by the september meeting.

Let's look at the bond flows.

This is a remarkable chart.

Looking at the huge bull market in bonds with the money flowing in and finally, you turn around and it flows out for it there is the 10 year yield with a spike recently.

I think this is just germane.

We have seen an abrupt move.

Is the fed telling the markets what to do or is the market telling the fed what to do?

Asked in some sense, the market is telling the fed what to do.

They talked about unwarranted rise in yields.

In essence, this market move makes it less likely that the fed will taper because it is equivalent to some form of tightening.

The members of the committee will be aware of that.

In a way, the mistake is the market seems to think it is a done deal.

I don't think it is a done deal.

Having sat in meetings, sometimes it is not clear at the meeting where the vote will go.

I don't think it is a done deal.

If the moves in the market make it less likely that the fed is going to start tapering, more likely, they may do more qe.

You have been there before at the bank of england inside the closed door meetings.

There is lively debate, i'm sure.

How divided do you think the federal reserve is?

I don't know if they are divided but when you read the minutes, it is clear there are differing views.

The view i would take his probably that the doves will dominate and the data is not entirely clear.

They talk about the moves in the labor market being promising but do not resolve it.

They are worried about fiscal policy and on the net, the risk is to the downside.

People have differing views that they have made it clear they will watch the data.

The reason for that is to resolve the problem which is how you will get out.

Thank you so much.

It goes to the interdependency of the markets.

The fed acts and bonds tighten and everything is linked together.

You saw the instant reaction from the stock market but then it recovered after that.

I am looking at 292 10 year yield.

The highest yield since 2011. we will talk about what could be a sea change for watching television, specifically sports and specifically football.

Google may be ready for football.

They are talking rights to nfl games.

This is our twitter question -- would you watch football on youtube?

? this is " bloomberg surveillance." this is something you don't hear very often, a win for yahoo they attracted more users during july then google.

More than 160 9 million users spent time on yahoo which is up from last year.

That is 4.3 million more than google.

Microsoft it is cooperating with a bribery investigation with the feds.

It is looking into possible illegal activities and business partners in russia and pakistan.

It reportedly centers on allegations made by former microsoft representative in china.

The hewlett-packard fourth quarter rocket forecast comes up short of analyst estimates.

Meg whitman also took active protection -- rejection for 2014. for pcs and lower business spending hurt her turnaround efforts.

We will stay with the " bloomberg west" theme -- well americans switch their nfl watching to you to?

Nfl president roger goodell met with google this week.

They currently pay one $.2 billion and google could easily pay that.

The internet giant has been playing around the edges of tv without making substantial deals and that nfl deal could change the entire industry.

It is a whole new model.

With us is david kirkpatrick, head of techotomy media group and author of " the facebook effect." well i watch football on a computer?

Why not?

There is an age-old dialect between content and distribution.

Right now, i think content -- i don't believe it has ever been king -- right now, the weight of evidence as they have the dominance.

Somebody like the nfl which has incredible content, there are so many outlets trying to bid for their content and google is the richest and they will probably get some of this.

Don't you watch nhl on your computer?

A little bit but -- i go back tomax mcgee and the first super bowl but these are huge habits.

Yes, but i don't think -- people just want their content and they are used to one million screens and want it anywhere they'll get it.

Our kids don't even watch tv.

They've got their eye pads, their iphones, they're androids or whatever tablet.

Might daughter does not own a television set -- my daughter does not own a television set.

We are dealing with the wild wild west and the real winners and losers in this game is with content -- the cable companies have the biggest potential for a loss here.

People will just bypass them.

They will only be an internet provider.

It is about the money.

If you look at how much cash apple has on hand and google has on hand, why wouldn't they go straight to the leaks themselves?

-- the league's themselves?

It is about the traffic and usage and then comes the ads.

That is what will drive this thing.

Google can do it because they have a great ad sales team.

They can make lots of money.

Now i can pick up my ipad or mobile device and work outside and watch the game at the same time.

Those are the kinds of things that will happen.

Over the last few weeks, there has been a disruptive power of other media outlets.

What does this do to traditional bundling?

It is nothing good.

Traditional bundling is fundamentally irrational from the consumer's point of view.

To the degree he gets broken down, that is great for us.

Is it realistic that will happen?

Without question, we had regulation and the phone industry and like we saw in the airline industry -- this is the same kind of breakup we will see year.

It is the wild, wild west.

Anyone with money -- apple has 146 billion dollars of cash on hand and google has $56 billion of cash on hand.

Google is in a great position.

I just got their new device, $35, stick it on your computer and -- stick it on your tv and you can watch anything on your computer screen on your tv as if it was meant to be there from the beginning.

Google is building a all infrastructure to make it brain dead simple to watch whatever they have on youtube on your big-screen tv.

It looks fantastic.

$35. do you have to buy a new tv for that?

Absolutely not.

That was a smart move by google in terms of chrome cast.

They made the tvs backward compatible.

You just use an hdmi hookup.

It is so easy to use.

Someone is coming forward with newer technology.

You don't need adongle system and that will change it again.

I hate when you guys come on.

I feel like such a fossil.

You are the first person i ever saw using vine.

You love the yahoo weather app.

Our twitter question of the day -- you can tweet us about that.

Cowboys/redskins on youtube?

That means i have to watch the bengals in 2017? we are looking at a strong dollar versus the japanese yen.

When you look at yields of the highest level since 2011, it is on the tapering trade and ahead of the fed meeting on september 18. we will talk about the impact of the higher rates on bank for it our yes test in the next hour is sally krawcheck.

? . . this is "bloomberg surveillance." the fed of comfort appeared bond investors are not heard what i bear market means for wall street dirty salty -- sallie krawcheck will join us on the hour.

Cerro will be doing a 20 mile height.

The whispers will be on janet yellen and lawrence summers.

And at the dregs of august bus tour, the president wants to reduce your college tuition bill.

Good luck with that.

Good morning, everyone.

It is "bloomberg surveillance." it is thursday, august 22. joining me as always, sara eisen and alix steel in for scarlet fu.

Sallie krawczyk in with us.

Quite slumming answer with a morning briefing.

-- sallie krawcheck with us.

Let me get it started with the morning briefing.

It rebounded chinese manufacturing in the month of august from an 11 month low.

Also better numbers out of europe.

Services across the region expanded for the first time in 19 months with more evidence that europe potentially is turning a quarter here.

Here in u.s., 8:30 a.m., weekly read on initial jobless claims.

Lastly, fewest american school filing for an employment claims since back in 2007. nikon a.m. -- price index for having heard 45, the weekly bloomberg and summer -- consumer index.

The confidence index is front and center.

The u.s. consumer with a pretty downbeat forecast from walmart and target among others.

Always looking forward to watching consumer sentiment.

Sears out before the bell, disappointed in terms of their roof was old.

Abercrombie & fitch, dollar tree -- after the bell, more retail.

The gap, pandora radio, and retail me not.

It is a flash cell site sort of like groupon appeared we will have the ceo on tomorrow.

Retailmenot.

You did a great job at three clock p.m. yesterday, bond market really moving.

Five-year, seven-year, 30 year he yields all at the highest level since back in 2011, driven by the fed.

There is your morning briefing.

A crowded agenda.

Alix steel has company knows.

Abercrombie & fitch did reports down 10% in the second quarter, way below estimates.

Higher interest rates lead to layoffs over wells fargo.

Bloomberg has learned the bank is cutting 2300 jobs in its mortgage business.

The layouts, as slums do to higher mortgage rates.

Job reductions or equal to 20% of wells fargo's morning -- mortgage loan officers.

At the eye is investigating jpmorgan energy unit.

Bloomberg has learned the investigation is never to see if tanks and please broke criminal laws.

It is related to the charges that the unit manipulated our markets in california and the midwest.

Jpmorgan reached a $400 million civil settlement with regulators on the matter last week.

And a win for yahoo!, the web giant attracting more u.s. visitors then google during july.

It was the first time yahoo!

How to google since may 2011. up 21% from a year earlier, and that is according to come for.

That is today's company news.

As we gear up for the said conference, bloomberg's julianna goldman who covers the white house joins us.

Special treat, she is here in new york.

She just released a big profile at larry summers, the potential pick for the next fed chairman.

She is up there with janet yellin.

We know the president is close with him, but it will be a tricky battle to get him confirmed.

That is the question -- how big of a fight is a going to be?

Why is he so loyal?

Quite this is the guy the president wants?

I'm not saying this.

He is the guy the president would be drawn to.

There is a trust, confidence that the president has been larry.

First -- has with larry summers.

Specifically the auto bailout where summers was instrumental in devising -- advising the president.

At the time in march 2009, these were some serious to liberations, and the president's economic team on whether to bail out chrysler was really split on this.

Vice chairman yellin, what is the new new about larry summers and the white house?

The question now is the timing and when the president is going to make this decision.

He was is on martha's vineyard.

What kind of considerations should ease the two while he was there, is he still interviewing some of these candidates, that is the big question is what is it going to take for him to make this decision.

Who ate the more, the liberals -- the democrat or the republicans?

These are considerations the white house will have to figure out.

The democrats sent that letter for janet yellin last month.

I am -- janet yellen last month.

I am baffled.

Here is krugman a couple of weeks ago, secretary summers did not recognize the extent to which the political world has changed.

He has been carefully cultivating an image of a very serious person, in a world were very serious person-ness has gone from a sort of cachet to a liability.

I think that really captures the conundrum.

This discussion has turned into a political circus of sourrts that people who watch the fed say they have never seen this before.

The white house is even surprised by some of this reaction.

That is why they signal to members on the hill that they need some space here.

This is the president for the decision to make very maybe we just need a powerful woman at the top of the federal reserve.

Gender politics at play here.

Sallie krawcheck is our guest host.

Former head of wealth management at merrill lynch, a long career on wall street.

Do we need a woman to run us economy?

When in a blindingly intelligent individual in that role.

People are going to be controversial.

If you are a -- if your head was above the deck gearing the downturn, people made decisions under a lot of pressure, under a lot of intensity.

If you have been sort of in the game, if you have been playing for that period of time, it will be controversial.

Echoes on the heels of another bloomberg article that came out today talking about janet yellen not being a political insider been having a great relationship with chairman's overseas.

What is the implication there, politics versus the qualifications?

Everybody is not going to have everything.

Different candidates are going to come in with different strong qualities.

This goes for wall street as well.

I think blindingly intelligent and experienced and yes the ability to interact with people -- oh, i am not going there.

These people, and they sit in a big fancy room with big fancy people and they give a speech.

I cannot see secretary summers, chairman summers going in front of new york law the dawes -- la- de-das and wooing them.

It would be a different set.

-- fed.

Would that disqualify him?

I did not say that.

Quite they would be the most important policy measure right now.

First of all, when you have people who are close to the president what this is thank you mean?

The one thing i can promise you is the president will pick leave things as the best person for the job.

Any discussion about gender, what not -- but going back to the chrysler discussion, the team was split in march 2009. summers laid out without any equivocation why chrysler should be saved and alternately that is what convinced the president.

You talk about communication, and that is an example where he spoke, steven rattner, the head of the auto rescue -- the team said that when larry summers would be in meetings with the president it was like the old commercial when larry summers speaks, everybody listens, even the president.

What is a place where people like jason furman, new chairman of the president's council of economic advisers, do they advise the president on these matters?

The conversations are going on in the west wing.

There is a core group of economic advisers, including gene sperling, jason furman, others among many of the members of the auto bailout, the auto rescue team, who are supporting larry summers for fed.

They think he would be the best guy for the job.

Certainly gender plays a role here.

Sallie krawcheck, i know you are doing a lot of work for wall street and bringing women into the investment world.

Talk about your project.

Quite i think bringing women into senior management and financially engaging women, politically engaging women, i am a recovering research analyst.

Every bit of research that i see on diversity of management teams is positive.

It leads to higher returns on equity, lower volatility, more client focused, more long-term focus, more innovation, bringing in people with different backgrounds -- there is magic to it.

Is it a smooth curve up, or are you looking for a jump addition to a better place for women?

What i think we're looking at is investing in women and the financial and economic success of women.

It is actually a great investment.

This is not a nice to do, it is a great things happen when women are economically and politically engaged.

It takes on the volatility in the political process.

Therefore having a business that invests in that it helps in that progression is a great business opportunity.

Their welding a number of powerful women.

We did not even get to hillary clinton.

She will lobby a jackson all, but i know giuliana -- juliann a has her ion appeared coming up, 2020 is the year freelance workers will out number full- time workers coming up on "surveillance." good morning, everyone.

"surveillance." i am tom keene.

Sallie krawcheck was head of management at bank of america.

The soap opera of the ongoing regulatory wars, you have been vocal on the spirit what is your statement about what we should do about the problem child, jpmorgan?

You don't want to call him the problem child because it is such an excellent, outstanding, typically well run company like everybody on the planet.

They make mistakes in business.

But what we're seeing going on right now with day after day there is a new article in the press about investigations, it is the damnedest thing i've ever seen.

Wi-fi not allowed to give my opinion, i am in the news business.

But you have been vocal in supporting her juicy enough is enough, but the fact is the process continues.

-- supporting this.

You say enough is enough.

What you're saying is maybe a complete coincidence that it seems every time we pick up a newspaper there is a new investigation of the company.

I am reading the newspaper about the hiring individuals, chinese individuals and getting business, and sitting there and saying ok, i get it, they are hiring the person sitting on the beach, but hiring a person for their contact?

Lloyd blankfein has gotten much more visible for the public.

Doesn't jamie diamond have to get more visible with mainstream america?

-- doesn't jamie dimono have to get more visible with the public?

Wife is on oprah -- he is not on oprah every week, but he is producing good results, and good related results come for lockyer had even a press for the chain of what we saw on the six- year financial crisis?

How do you extract a penalty?

The government is looking to do it through the increased regulation.

Through dodd frank, through the increase in leverage.

This continues.

It should.

The right conversation, you and i talked about this before, the right conversation for us to be having is what is the right amount of leverage, what is the right amount of capital for these institutions because they will stumble again at some point.

Humans are not perfect.

Viewer member the discussion about dodd frank working?

. frank is not been fully implemented.

It is a extremely detailed approach when really the issue is do they have enough capital for the risk they are taking.

Sallie krawcheck with us.

This is must watch him a listen.

We will talk to ms.

Krawcheck about wall street at a time of higher interest rates.

It is "bloomberg surveillance." good morning.

This is "bloomberg surveillance." i am sara eisen here is always with tom keene.

Alix steel is in today for scarlet fu.

Our guest host is sallie krawcheck, former head of global wealth & investment management at bank of america.

I'm watching abercrombie sells because they're getting hammered in the premarket spirit down more than 18%. it was a terrible quarter.

First their warnings -- earnings him an incredibly light.

Comp sales were down 10%. you also had revenue that came in light and margins were even lower by about .4%. the third quarter with the row kicker.

The third-quarter estimates were cut more and half, more than half.

This is incredible.

The fema business is really soft, they were looking at weaker traffic, they will try to land -- the female business is really soft.

Are they trying to get rid of naked boys in the front lobby?

They did not specify that, tom.

If they cannot win fema buyers with that -- do you think that is their biggest expense?

I think so.

Their website is naked boys -- with sunscreen on their noses.

It is inventory in all seriousness.

These are the problems at some retailers like the gap have been really dealing with.

With the say in your coverage of this is not just abercrombie, this is everybody?

It is a retailer by retailer case.

Cap does not have this problem, but we have seen this with abercrombie, we also sell weaker form american evil yesterday.

There is a really company- specific story right now.

Shout out to all of her chin citigroup.

He absolutely nailed this -- oliver chen.

He absolutely nailed the story.

Tom, the freelance economy.

Freelance, i don't know what the difference is between freelance and part-time.

It is our time america.

They are paid by the hour, they take care of their own benefits graciously.

You can call it a freelance economy.

Now as a -- how does a part-time or become a full-time or or for that matter 80 freelancer?

They help companies like on the con, lockheed martin, keep track of exactly who was on the payroll.

He knows how the sausage is made between 29:30 and 30:00. what is a freelancer?

Somebody who will be paid a 1099, who does not fit the iris definition of a w-2 worker.

They do not get benefits.

If they are truly a freelancer, they are an independent business that has a number of different customer that has the website, a logo, business insurance.

They have determined this is the way they want to conduct their work.

Why are the numbers booming now because we are seeing more freelancers then i think we have ever seen.

There are two different transparencies are the ways -- two different ways.

There are 12 of always wanted to do this.

Some have always wanted to engage employees these way.

When you look at a corporation, the lodges cause they have is their labor cost.

That is a predominantly fixed costs.

If there was a way for corporations to engage more freelancers and it turned a fixed cost into a verbal cost, that is something they would love to do, and no technologies are just coming online.

Do they make more or less than full-time people?

They can make much more.

They can make $100,000 a year working at the pace they want to.

Sallie krawcheck, i would say this goes to your work with 85 broads.

We are talking about highly educated people.

What about the rest of america ? i think you have two things going on here, people want to work full-time and are being forced to work for time, but i think it is very interesting.

The trend amongst women in particular is you have 60% of full-time working women with minor children who wish they had flexibility.

And companies, by the way, will say that they have it, and then you have all of the stay-at-home moms who want to economically reengage and are not able to full-time.

See you have two things going here.

One of which can be great for the economy.

The other -- the health care reform law.

What does that do to change the workforce into more of a freelancer place?

Obamacare, all the evolving frameworks in the regulatory constructs, are going to make this more challenging.

One of the biggest impediments are customers have always had first as assistant spirit they have never had assistants to manage freelancers.

It is difficult to onboard, awkward people.

People were using spreadsheets and a series of point solutions to do this.

Our platform allows them to now do it.

Our platform is coded to the regulatory framework today.

That for merck is evolving.

That is something that a lot of companies are concerned about.

The last thing they want to be at the next microsoft that got a $1 million fine for ms.

Classifying -- $100 million fine for ms.

Classifying information.

When you look at this, affordable care act, our freelancers working 29 hours or 50 hours a week?

A lot of things that obamacare continued explanations and there will be explanations of that framework is a dip later at our concern is we think about the freelance economy, and our customers concern is this is going to be a new evolving construct in the regulatory framework?

The obamacare implementation supports freelance in two ways.

One, the part-time workers are an awful time, so the business to not to pay for the insurance, but also it helps make it easier for individuals, freelancers, to buy their own insurance and get their own interest.

It perpetuates this trend.

As if they structural shift in our economy?

There's a massive shift because people want to work this way and companies want to work this way.

The only school that has not caught up with the regulatory framework within obamacare, this notion of you have to cover if the full-time employees or full- time equivalents, are they going to redefine what a full-time equivalent is?

That will lead to a hold series of reactions.

We will get you back when we get obamacare underway.

Jeff wald, thank you.

Work smart, 1099, w-2. another big theme is the cost of college.

Coming up, we'll talk to president obama's chief education secretary arnie duncan on the president for the new plan.

This is "bloomberg surveillance." i am sara eisen here is always with tom keene, and alix steel is in for scarlet fu.

Our guest host is sallie krawcheck.

We're looking at a rally for u.s. equity futures.

Alix steel is here with some specific company news.

We want to start with sears because the company focus day -- posted a wider than forecast loss.

The estimate was for a loss of $1.07 per share.

Sales fell 6.3%. loyalty members use more promotions and discounts.

Trading errors that ever bright securities have cost the president of the chinese brokerage firm his job.

The president resigned after almost $4 billion were mistakenly placed last week.

Is that of china's biggest market swing in four years.

Regulators continue to investigate the issue.

Fcc isn't limiting -- the sec is examining what when running goldman sachs.

Sec has been cracking down on other firms experiencing technical problems as a concern that mistakes will undermine investor confidence.

That is today's company news.

What we have been thing in the markets loud and clear, rising interest rates driving down bond prices, deadly for bond investors, but not for everyone.

That this is absolutely fascinating.

Sara mentioned futures up 7, yields don't give way, they are higher rates.

They may be a godsend for the likes of merrill lynch and smith barney as they fight off, titian -- off competition.

Sallie krawcheck, you have seen all of this before.

She knows where the brokers keep their yards.

The firms are making money.

The firms are making money.

Making money again.

Are the clients making money?

We see bond prices go down.

This is really painful.

What i worry about is you talk of two individual investors, and they are not as aware as they should probably should have been at their bond funds can go down.

You hold a bond to maturity, and you get it back.

You might give up things like oh, oh, dear.

The price can go down.

Exactly.

Quite higher interest rates have got to be finding some wiggle room for these firms who have had very low yields which means very low fees.

Yes, but -- fees really have not been as big an issue for the merrill lynch and a smith barneys as able to get has been.

Each individual problem that -- product will have -- to deliver value to its client base and keep fees astray.

Merrill lynch for the return on assets, are away, revenue they make, was flat for something like 16 years.

You are known as the last honest analyst on wall street a few years ago.

You were a securities analyst at sanford bernstein.

Are you betting for the future on your merrill lynch or your smith barney, or do you have to bet on low fees?

Wife yes.

-- yes.

We get into pitch debates about advice or no advice or low fee or hyphae.

Yes is the answer because different clients are going to want different things.

For those who are client -- comfortable doing it themselves, a vanguard makes sense.

Financial advisors bring real value.

People only think about did you outperform.

How about the financial plan, keeping people from panicking in the bottom, asking them the tough questions?

Fl .a.'s deliver a lot of value.

Sallie, you were talking about how these may not be that affected by taper, but what about the man?

Demand is not there.

We are seeing wells fargo cutting jobs because refi is going down.

What does that do you go now we get into a different -- do that do?

Now we get into a different question.

If rates are going up, as the economy is stronger, credit will be better.

I never liked the words bank and bear market together.

If we are seeing a bear market in bonds, which we have not for a long time, and these guys hold a very large inventories, and they all have a lot of leverage, you just want to keep an eye on them.

It is one thing if interest rates rise selling and a -- right steadily in a sustained way, brutal as mario draghi described the action.

How are they prepared for such a move?

Read the annual report and try to figure that out.

Are these banks utilities?

These banks are highly -- continue to be levered institutions with greater risks than utilities have.

Again, we get back to the basic question him of the underlying question is do they have enough capital for the risk that they are taking.

Questions on chase.

Just that simple.

A really will be answered for some period of time.

Sallie krawcheck with us.

Eight quick data check, futures up 7, euro weaker, crude 1 04.25 in america.

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

I am sara eisen here is always with tom keene, alix steel is in for scarlet fu.

Our guest host for the hour is sallie krawcheck, the former president of global wealth & investment management division for bank of america.

We welcome all of you worldwide.

You may not know that ms.

Krawcheck to a plunge off the deep end x numbers of month ago.

85 broads street is the address of goldman sachs.

She said women of 85 rods street, let's call it 85 broads.

What is 85 broads?

85 broads is a network of professional women who come together, one for the network, networking has been cited as the number one unwritten rule for success.

They come to evan for the network and the education that we provide to them.

Do you like linkedin?

They are different because i love linkedin, by the way, you and i both -- we were writing 401(k)s. they do a fantastic job.

I would say that there are similarities.

85 broads also has off-line events, and so we are constantly delivering that education both online as well as off-line to the women who are members.

What is the state of wall street hiring for women right now?

Hiring or advancement?

Hiring has stated -- maybe it is not the man or the women come in one by one, but the hiring of women has been pretty strong.

We lose them, though, into their 30's and 40's. what is the biggest hurdle?

How much time you have?

If there were one simple answer, there were the one simple answer.

Women leave the workforce for many reason.

Some of which are driven by their companies, but a lot of which are german by the fact that we have a lot that we are doing.

We tend to lose women in their 30's and 40's, which is why they often join at 85 broads because they join in their mid 30's, the first is in third grade, the first it is an inner garden, and they can breathe again.

You and i have been through this this and various offspring.

Realities like lacrosse camp and you name it, it is there.

You and ryan with one of your devious offspring, the other day, serious responsibilities.

The reality is we want to go back to work.

Why can't america change and have a security dan at bank of america -- a securities analyst at bank of america work at home?

They can.

I was in line for kronos yesterday, which was a really interesting experience.

For three hours.

It was delicious.

A bloomberg exclusive on "surveillance." i found i could work from home.

Other jobs can be tougher.

He of one or two clients, and you are an investment anger, you find being face-to-face matters a lot, but at the research analyst -- what is a perception working from home when you are in an office?

I think the smart company's are going to change it.

I think it is changing.

I think the smart companies are going to change it because they need a quality work and they need the members of workforce.

I don't think people know this about sallie krawcheck, 85 broads, years ago, ms.

Krawcheck was definitive insecurities analysis on wall street.

Like, you waited around, and you waited for those -- it was to result in granite, and it came out, and everybody read it.

I don't think people know that about you.

It is like ancient history.

Agent is sort of a strong word, tom, -- ancient in sort of a strong word, tom.

[laughter] look, if these firms could get to what i like to call flex ability without change, and recognize that having 70% of a person fully engages better than having 100% of them partially engaged or none, it is lights out.

It is a huge deal.

I have to make money here -- is evident growth in stocks, is that a fad that is overt?

Ok, we changed topics.

I have got to make some money.

I don't think that is ever over.

I think people like to get their returns in different ways.

Some people are more capital appreciation to mother folks are dividends.

In theory, they are interchangeable, but investors have preferences.

I think investors will continue to demand for them.

I totally agree.

Investor preference right now is give me the money as you see with apple.

This is fantastic.

This is like an eight hour sallie krawcheck-athon.

Stay with us because we're going to talk about washington.

It is my summer must-read.

Everybody is talking about it.

We will get all the juicy details of washington on "bloomberg surveillance," on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.

? good morning, everyone.

"bloomberg surveillance." sara eisen, alix steel is in for scarlet fu this morning.

We go to the white house now.

Secretary of education arnold duncan -- arene duncan.

The president is out on a bus tour today on college.

My basic taskke on the news, arne duncan has decided to redo the princeton review.

Good morning.

You were at harvard, captain of the basketball team, you're going to rate the schools?

I think we're going to go out and travel the country and listen to folks.

The big thing we want to do is have a much greater transparency.

Young people and their families need to know the colleges they are looking at, do they have good graduation rate, how affordable is a, are they going to be burdened with debt at the backend?

The time of going to college is known -- has never been more important, unfortunately it has never been more expensive.

They need security to know that they will not be crushed on the back and.

Virtually everywhere i go, to the cleaners, grocery store, you'll hard-working, middle- class folks coming up and saying college does not feel like it is worth it anymore, it is for rich folks.

There is a real problem for that.

Third terry -- secretary duncan, it is great you are working on this.

Why are you bringing in the university presidents?

Why aren't you

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

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