Finding the Next M&A Deals: Surveillance (7/23)

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July 23 (Bloomberg) -- On today's "Bloomberg Surveillance," Tom Keene, Sara Eisen and Scarlet Fu bring insight on the state of the market getting you ready for the day ahead.

This is "bloomberg surveillance." @ yahoo!, an activist investor doubles as money and runs.

What is his reason for exiting?

Tech and media lead a quiet m&a world with a leader in acquisitions, we look for the seeds of 2013 deals.

A baby is born in london.

The queen has issued another heir to the throne.

We will get a name for you later today, perhaps.

Good morning, everyone, this is "bloomberg surveillance." it is tuesday, july 23. with me, as always, princess sarah eisen, and princess scarlet fu on royal baby watch that we are now on name watch.

We don't have a name yet but we will start with economic data today.

9:00 a.m., the house price index which is one way to look at home prices particularly in focus after the surprisingly disappointing previously owned homes sales report.

This is not a small deal.

10:00 a.m., the richmond fed index.

It will be earnings to watch today.

Before the bell, radioshack.

Wendy's and the global shipping juggernaut ups but after the bell, we will get at&t. apple is also out after the bell and panera test been growing fast thanks to the rise in casual food.

Is a jumble?

Technology is not so great.

That with netflix.

Let's get to a data check.

Futures are again, and i am stunned by the s&p 5 a good number, 1694. we begin to approach 1700. the yield is backed up.

Currencies are $1.31. finally, hydrocarbons $106. it is a royal baby data checks.

Sterling.

There is this.

The commonwealth, 100 -- $1.58.70. i feel like i am at trafalgar square.

There is where the queen was when she learned that the king died in i believe it was 1951. sterling-kenan dolrar we have never done that.

Ok, nerds.

We have scoured the papers for the story making the front pages.

What a weird conference call for it netflix.

It was a little out of the ordinary.

Let's go over the numbers for the latest earnings report showed that subscriber growth missed analysts' estimates.

The video service reported 630,000 new u.s. streaming customers in the quarter which is 100,000 shy of what analysts were looking for.

If you look at the overall profit and sales numbers, very impressive.

Revenue jumped 20%. the big picture is that the stock is a bad performer in the s&p 500 and a lot of the good news is priced in.

Investor expectations have become lofty.

The sub growth number disappointed.

That conference call is what everyone is focused on.

It was very strange.

They had live streaming of it moderated meeting between an analyst at a reporter.

I got more response to our different audiences worldwide.

Thank you for all the different e-mails.

The response was he did and the majority disagree.

Robert profusek is with us.

This is a huge deal to see a limitation on a conference call.

Have you ever seen anything like this?

There is some limitations but they are not obvious.

The management can control who ask questions based on the technology.

It's not all that atypical.

The response i got yesterday was a visceral from the street.

It did not look as nice as their other calls.

On the cover of "the wall street journal," sac capital is firing back against the sec.

They rebutted the civil enforcement action by the sec.

This comes down to the idea that the defense is pleading bad management and incompetents that that is not illegal.

They are blaming him for ignoring the red flags within the firm.

This is the defense.

It sounds a little strange to say that i ignore e-mails.

One more front-page story -- this is something we heard about yesterday and have been talking about yahoo!

And marissa meyer turnaround.

A big name is exiting yahoo!, dan loeb is selling his stake and leading the board along with his allies.

-- leaving the board along with his allies.

There is a top leader executive -- micky rosen is now leaving.

She is receiving a severance package.

This is marissa meyer putting his stamp on the company.

Are they just ending?

They emphasize online video and that's an area that was overseen by mickie rosen so this is marissa meyer taking over and putting things under her wing.

Susan crawford is with us.

Also with us is robert profusek.

I found it fascinating that we have an activist shareholder that jumps in and jumps out.

This is an interesting story on many levels.

As anybody -- has anybody had a better first year as a ceo and marissa meyer?

I don't think so.

Do you attribute it to her or ali baba?

Many people are talking about some of the parts rather than cash flow.

One of the things about tech and business is you have to have some mojo.

People are talking about yahoo!

Like crazy.

You also have to have revenues.

Fort yahoo!, that means advertising revenues and that has not been shown.

Not so far but they need some breathing time to get that turnaround.

The other thing that is interesting is activism is a huge issue.

Especially in technology.

It did not used to happen but think about emc and bluecoat where it was companies struggling to sell it to private equity.

There is the idea that people are not getting the returns and now they are agitating for what every -- returns.

The agitation is mostly selling and this was not about selling the company.

Will come back on yobbo susan crawford is with us and it shows the turmoil out there whether it is netflix.

There is a big churn technology.

What do you see right now?

We see $57 billion in mergers in the communications over the years and a lot of consolidation.

Is that a search for profit?

Absolutely, round the world and netflix faces a number of headwinds.

It has a concentrated programming industry in league with very concentrated cable industry.

It is dependent on how those guys treat it.

It has been predicting that it will get a lot of subscribers, maybe 50 million in america but it is not so clear that the cable distributors will let that happen.

We will come back on this.

Let's get to company news.

Michael dell is making a last-ditch effort to win votes.

He has been meeting with big shareholders to win support for his buyout bid.

His board has been pitching small investors to convince them to back the $24 billion offer.

The stockholder vote is set to take place tomorrow.

The investigation into southwest flight 345 has begun.

Faa officials are looking for answers as to why the nose of the plan collapsed as of land at la guardia airport.

They reported eight injuries among the 100th of the people on board.

Swatch is gaining market share among swiss watchmakers.

They forecast a strong and to the year.

-- a forecast a strong and to the year.

A baby is born, a prince is born -- 8 pounds, 6 ounces?

It is a big baby.

Let's take you to london where anna edwards is there to tell us more.

Are we going to see the duke and duchess of cambridge today?

That's the big question.

It's a matter of how long we are kept waiting.

The world is waiting.

This story has captivated the world.

Princess diana and prince charles left the hospital the day after prince william was born.

There is some precedent and maybe they will try to recreate that feeling on the steps of the same hospital.

I have been digging into the names and i have a few odds for you.

Tom is not on the list.

Have you had more thoughts on a name?

We are talking about the traditional names, george, andrew.

, philip.

Do you think so?

There is a little bit of history there.

Prince william's full name is william arthur philip louis so, there is precedent.

I was trying to work out where louis came from.

That is way too french.

It is one of the fathers middleman's. george's at the top.

James comes in second and alexander, louis and henry are in their.

What else has the reaction been like there?

It is early days.

It happened before 9:00. somebody from a retail research institute earlier said they did a focus group and how the british people would react to the birth of the baby.

Most people were saying that they don't care but they said maybe they would jump on the bandwagon.

That's the way things -- things happened about the jubilee and the olympics.

What has fleet street and with this?

I've got a copy of "the sun." this is a well read newspaper.

In in the uk.

It has a picture of the easel on the cover.

The newspaper is not normally called "the son." thank you.

Coming up, tech and media have been leading mergers and acquisitions.

We will talk about where we will see m&a next on "if bloomberg surveillance,"on bloomberg television and streaming on your phone, your tablet, and bloomberg.com.

? coming up on bloomberg television, margaret kelly, chief executive officer of remax.

What kind of housing is out there and how is it changing?

It is good to get the anecdotal on how things are.

Dan loeb says goodbye to yahoo!. he successfully ousted former ceo scott thompson and at -- and ushered in marissa meyer and sold 40 million shares.

Can we read anything into the fact that he is selling?

The stock fell yesterday in response, investors believe dan loeb does not see much upside in the auto -- in yahoo!. it suggests that maybe the stock has reached its top.

He is the catalyst for much of the change in yahoo!

Over the past year.

They are trying to play down any reason for selling.

She came out with a statement in which she was -- she praised him.

She said he saw the vision for yahoo!

Stock has responded.

Most of that big rises because of the increased value of the yahoo!

Stake in ali baba.

It is interesting the dynamics between dan loeb and marissa meyer.

He was a big part of getting her in the door.

Absolutely, the stock market values the tech company at a higher p/e than a media company.

If he had hold onto ross levenson, maybe the stock would not have gotten the validation it did.

Is this a maturation of technology?

Is this an industry that is gone from a bunch of guys out of stanford that is -- that has finally grown up and becoming like the rest of america?

Yes, in a couple of ways.

Activism has shifted focus to technology.

Five years ago, activism was in bricks and mortar and smokestacks.

There has been a lot of activism in this space.

One thing i think that is fascinating about the yahoo!

Story is the activist -- it was not with vitriol and dumping on the company and the board is terrible.

Contrast that with the dell board.

It was about making changes and trying to get to long-term value.

You might say that some of the activists are going up the food chain incivility.

But are they also saying that they will not play by silicon valley roles?

Put this together with netflix and a unique conference call.

They want to play by their own rules.

Microsoft wants to play by its on rulebook with nascent activism.

Is there a silicon valley rulebook separate from the other rule books?

Yes, there has been an insular approach.

They are saying leave us alone.

It was manifest in some technical things.

Limiting shareholder rights and that's tough in terms of classes of stock -- i think tech in general -- is a big deal.

The underlying message is that yahoo!

Will make more money from the media side rather than rathertech side.

They are articulating a corporate strategy.

To me, it is a big shift in 2013 how the street and investors are telling attack what to do.

Absolutely.

We will talk more about m&a coming up.

In the next hour, our guest host is julian robertson, a hedge fund legends.

Our twitter question of the day -- what is your question for julian robertson.

He has been very active, donating to republicans.

? this is "bloomberg surveillance." it is time for the morning must read.

Dr.

doom, nouriel roubini was riding on the waxing and waning of the emerging markets and the recent slump we have seen.

That era of cheap or no interest rates that led to a wall of liquidity.

He says it is coming to an end.

Going into august, the debate of a hard landing in china and how much that is a big deal.

It has its expanded beyond china into the emerging markets.

The currencies are reaching multi-year lows.

They are looking for a brief 3% china.

I am going to the u.k. for my morning must read -- andrew roberts is an expert.

If you think it does not have political ramifications, think again because the cameron government was helped by the olympics.

The prince william burke helped margaret thatcher and the soccer cup victory benefited harold wilson.

It is a feel-good moment for britain but as more serious implications, helping politics and the government and the image of the united kingdom and helping preserve the monarchy.

I have to raise, and watch " the king's speech" again.

The excitement of it -- it is a new era to the throne.

You see great, great, great, great-grandson of queen victoria.

We are also waiting for the name.

Will we see that today?

I don't know.

There is the easel.

That is buckingham palace and people are lined up in front of the easel with the guards.

Apparently, we found out williams name in a week.

Robert patrusek is what does as well as susan crawford.

You have been outside buckingham palace.

It is wonderful.

People lined up to what people change places.

Is the royal easel?

There is a crowd in front of it.

It is a jubilant scene and people deeply believe in all of this.

They want to be trusted and understood so it is a wonderful moment.

Each country is different.

What is the baby going to be?

I don't know.

Coming up, we're going back to the dell dropped.

There is a big vote coming up tomorrow.

? this is "bloomberg surveillance." we need a data check.

The vix is at 1229. futures are just continuing.

It is more than a grind but every day trying to figure out how to go higher.

1692 on the s&p futures.

Nymex crude was $108 and pulls back to $106 this morning.

Some motorists to keep in mind -- hasbrio was a big advance for yesterday.

That was because of the royal baby.

It is a game show made by hasbro is doing well.

We want to mention yawp of dan loeb is exiting a big portion of his stake and him leaving the board and people see that as a sign the stock has topped out at mcdonald's fell as well.

The company said economic weakness would hurt results for the rest of your.

We will see apple this afternoon?

Yes.

We are also watching dell shares because the clock is ticking for michael dell and silver lake.

Shareholders are scheduled to vote tomorrow to take the computer giant private.

The deal fails, michael dell faces a fallout of valuation but also a silver light demand for the breakup fee.

I wonder what will happen to the stock?

Where is this transaction?

No one knows credit has been a soap opera since january?

Let's bring in michael profusak.

Susan crawford is will it -- with us as well.

I have never seen the duration of this.

What does that signal to you?

First of all, if this were a third party that made this offer to the board and they approved it, no conversation about an abyss.

It is about the fact that it is a related party.

If somebody else had come in and they would have said fine pocket the premium and go on their merry way.

It is the drama and sweat -- suspicion involved.

Last week was interesting.

My perspective is that maybe shareholders said let's postpone and see if they will bump a bit.

It is not happening.

They are sticking to their guns.

We have this side show about the showfee and everything but i would still be surprised at the end of the day of people said i am leaving that money on the table and take my chances.

What goes on and the rooms?

There is a huge mystery as to what actually happens in rooms were smart attorneys like you are advising people.

Is there a lot of yelling and screaming?

Do people order a pizza?

There is peace and sometimes there's others about what goes on as a heckuva lot of analysis.

If you listen to carl icahn, he would say the board is just mailing it in.

That does not happen at all.

Maybe 30 years ago but the world is different.

It is analytical.

It is a very unemotional.

It is an analysis of what your options are.

The dell board could have said no.

In today's corporate governance environment, michael dell cannot pull the strings of these guys for it is not the way it works.

We are almost 24 hours until but vote.

What is the pitch michael dell and silver lake are making to these shareholders?

They've got two main arguments.

He can argue whenever he wants.

A certain amount of money.

It's possible that he will make a lot of money but risk-reward.

Make a decision about whether you go that way or not.

I think this was part of the idea.

Let's see if they've got more sauce in there.

Are you better off with certain money or not?

I think that is what the assessment is that you were legendary with dealing with quality companies and quality cash flows and relatively predictable ravenous.

That does not describe del.

This is a company that is a train wreck of a business plan.

That must dramatically change the calculation.

Yes, there are a lot of going private deals, not just mergers where the business is at an inflection point.

Dell has done a lot of investment.

Of that be enough to offset what is going on in the pc market?

That is not clear.

Michael dell is saying i will take that risk.

Susan crawford is with us as well with focus on the number of players.

The pc business is a triopoly and duopoly.

Are there too many players there?

Is this what the merger is about?

It is hard to situate yourself at this point.

People try to find ways to control this.

There is a huge growth in china from novo.

That trend will continue.

Everything is pushing into mass- produced, enormous numbers of terminals.

It is not clear dealing with the cloud that you even need pc's at this.

. does tell me to be taken private to execute a turnaround?

You are a money manager at a pension fund.

You cannot really invest for two years out in equity great you got to think about what is the next two quarters will the next two quarters be great for dell?

I don't think so.

Are there lessons to be learned four m&a down the roads?

I think there is a lesson here.

It is maybe the process has dragged out too long.

It is a complicated deal and the sec does not cooperate in private deals.

They turn over every rock.

Maybe it has been a story that is too long.

Who is representing shareholders here?

When you set up a special committee, they have separate advisers in my experience without exception is that they do not feel they are being bullied into coming to a conclusion.

They will do what they feel is the right thing.

This is not the 1970's and more.

These boards of directors are serious places.

It has been fabulous.

Thank you for being with us.

The heat wave has broken.

It is 85 degrees.

It is gorgeous.

Coming up, $1.2 billion is what at&t just played for leaf wireless to acquire more spectrum.

We will look at some of the challenges presented to the consumer on "bloomberg surveillance." ? this is "bloomberg surveillance." china has sent thousands of police and soldiers and government workers to search for survivors of the earthquake.

But china's official news agency said the earthquake measured 6.6 and so far, more than 1000 people have reported -- have been reported injured and more than 100,000 homes collapsed.

In the u.s., first-time home buyers are being left behind in the housing recovery.

They accounted for 30% of ponselle's in the past year which is down from 50% in 2009. we may have seen only the tip of the iceberg in baseball's latest drug investigation for the former national league mvp ryan braun miss the final 65 gains of the season.

He was suspended without pay for unspecified drug violations.

He and other players have been linked to a clinic accused of distributing performance enhancing drugs.

That is just the latest in this developing story.

He is giving up $3.4 million of his $8.5 million annual salary.

The big question -- when will your favorite player get pinched?

A-rod - there is in "the new york post." is this today?

We really don't / no.

They did not want to get ahead of the all-star gain.

Game.

It is more than a few.

If you get one guy on the milwaukee brewers, you have to go after the other guys.

It was a contest between the royal baby and a-rod for the cover.

And the royal baby 1. the single best charters with us today.

It is a single best map.

There is the u.s. and income mobility based on research conducted by several universities.

The charge -- the map was put together by david lionheart of "the new york times." location matters.

Let's look at the areas where you can climb the income ladder.

The great plains, the dakotas where you see the blue.

The left and right coast do pretty well as well.

Salt lake city is a notable mentioned.

On the flip side, the south east is the lowest in that particular region.

As for the reasons why, the researchers found that the size of the middle class of tax income mobility and there is more in metropolitan areas.

The inequality issues will not go away and the president is traveling today to talk about this.

Robert profusek is with us as well as the susan crawford.

The legal business has been challenged but there is this issue of any quality and that is front and center.

It is a problem that will not go away.

You can argue it has improved in some areas.

But when you look at that map, it was frakking.

Susan crawford, you have been looking at the access to the internet.

And a great nation wants to have a giant middle-class so you can sell consumer products to them.

It drives new jobs but part of the input has got to be equality of access to communications.

We need to create a level playing field.

We talk about the royal baby but you and i have talked about this.

You go to london, wifi everywhere.

It is not a debate.

How can we be so fractious in the next stage?

Why is our internet strategy -- this is where government policy comes into play.

We deregulated the sector and have let people get divided.

We have a huge divide internally and the united states and people who cannot get online or afford it.

As a nation, we are falling far behind particularly asia where you can get 500 megabits connection in hong kong for $25 per month.

If we cannot imagines that in the united states.

This in a quality extends if you do not have digital access.

It is a good thing we have labor migration and can move freely around the united states.

We can all move to kansas city.

Coming up, we will talk about the race for spectrum with at&t taking the lead.

We will explain what that does to the playing field as the government gets set to auction off even more of that coveted spectrum.

? this is "bloomberg surveillance." from the files of bloomberg west, we start with apple.

It is testing a larger screens for its smart phones and tablets.

Apple has asked for a new tablets screen that measures slightly less than 13 inches.

The current ipad has a 9.7 inch screen.

The report after the close today.

Texas instruments says third quarter sales and profits made top estimates.

The forecast comes as the man from automotive and industrial markets helped offset the slump in pc's. they say earnings could be as high as 57 cents per share.

51 cents is the average estimate.

Aereo will announce start dates for 12 markets.

The goal is to reach 1/4 of the american population and the next five to seven years.

They have been fighting the service in court.

Not dissuaded by the threats to expand -- speaking of signals, at&t earnings are out after the bill tonight.

You have been looking at at&t and the-for spectrum.

They are trying to get spectrum because we are data hogs.

Are not seeing the double digit growth rates anymore.

Consumers are balking at the higher price to data bands.

Where do you go for growth?

New merge.

We've got a chart that highlight the race for spectrum.

Before the acquisition of leaf, at&t and verizon were neck and neck.

After the purchase, at&t is firmly in believe.

Sprint and keep mobile are less relevant.

Of that is a great start.

We have the ideal gas to discuss this, susan crawford, the good to expert on global communications.

She is the author of "captive audience." the race for spectrum is certainly heating up.

What worries you the most?

You can think of it as another input.

It can form a barrier to entry.

To my ball -- tomb -- t mobile has a bit of eggduopoly.

-- t mobile has a bid of eight duopoly.

At&t has pumped the eye of the mobile.

Does not need the spectrum.

It has plenty but the mobile would have been able to use the spectrum immediately.

It matches up with its own business.

These companies have only got more powerful consolidating even more.

Now we've got four dominant players.

We pretty much had that before the merger is.

Companies are not doing tremendously well.

Leaf was pretty weak which is why it is a good acquisition.

Is this the only way for companies to jump ahead of at&t or verizon?

The mobile has to build four times as many towers as at&t and verizon to provide the same coverage because it has higher frequency spectrum.

To me is a duopoly with two other people forced to work with the government.

The government says four is really important.

The chart we just saw this as it is really 12. i am a loyal sprint subscriber and they are doing their best.

Sprint is gaining strength.

You have a strength in sprint and ft mobile with its own voice-back after the at&t merger fell apart.

Things are looking more competitive in wireless for america.

What is the update on the fcc government spectrum?

They are under great pressure.

They hear from the carriers that they should not put limits on spectrum.

At&t and verizon want to use it to block out other players.

The foreclosure value of the spectrum to keep other people at bay is higher than the market value.

They have no real need for more spectrum.

It is the idea of keeping other players out.

What is the rate for spectrum going to look like in two years?

They are putting the traffic on to wi-fi which is basically sharing a wire.

That's where consumers are going for a flight data and video transmission.

Mobile becomes less important when you have more and more fiber throughout america.

We are all using wi-fi.

It is not clear where growth for mobile will come from.

The idea of wi-fi building out -- going back to the government deciding that they want competition -- does the public what competition?

Absolutely, i'm not sure the public is aware of how important regulation is.

A cab driver recently asked me whether verizon and at&t were two separate companies.

Their plans feel exactly the same.

Robert profusek is with us.

At&t pays a 5% dividend.

That sounds like a utility to me.

In some respects, they are a utility.

The duopoly ended up, there would be regulation.

That is consistent with the overall thrust of things today.

I would not count a sprint out.

Softbank did not put that money into this for no reason.

They expect to something to happen.

T mobile did that pcs deal and they are planning to be a player.

One thing about telekom is that at&t and verizon have roles.

Go back 20 years, where were they in wireless?

They have done a good job.

2012, at&t paid back more money to its shareholders that invested in this network.

Both of these guys are harvesting.

You have to come back.

I learned a lot there.

You can see her op-ed today.

Here is a first look in terms of our photos.

It is the first instagram photos out of north korea ever.

It comes from a photographer of videos posted of daily life in north korea.

This one shows a restaurant worker.

And a tv behind their is broadcasting military videos.

This looks like china 30 years ago.

It does.

It is amazing how close north korea is 3 i find it difficult to believe that this represents an enclosed a reality.

Else do we have?

We've also got a forex report at the end of the hour.

And level of sterling for the royal baby?

We will look at dollar-yen.

The yen goes back to its weakening always, thank you prime minister abe.

But two that i'm watching must carefully is dollar-mexican peso, the peso is the best performing currency this year.

Less a second-best is china, the yuan.

Finally, there is a bed of a bedyuan.

That is on the weaker china growth story.

As long as china continues to liberalize its economy and interest rates, it has been managing stronger.

Have come a long way.

Coming up next hour of "bloomberg surveillance, "julian robertson will be joining us for the entire hour.

Tweet us your question for him.

? . the word is out that hedge funds underperformed.

Not the smart ones.

We speak to tigers of the industry, one of the same tiger cubs is with us for the entire hour.

The president, going on campaign on the road, it is the economy, stupid.

President obama goes west.

London, a new baby.

Brazil, and a new pope.

Good morning, everyone.

This is "bloomberg surveillance ." during the as always, sara eisen and scarlet fu.

Our guest host this entire hour from tiger management, founder julian robertson with us through the morning.

Good morning.

A new pope, a new baby, and julian robertson.

Baby naming, maybe?

May be.

The housing index is one way to look at prices in the u.s. after surprisingly disappointing previously owned home sales.

A couple of days in a row.

May be losing some steam, 10:00 a.m., worth watching, the richmond fed index, it is earnings mode, we are knee deep in earnings season, radioshack, everyone watching this one, the company hanging by a thread, wendy's, and ups.

We see all these trends out, it is just a turn away from the good bank turns.

Technology to watch after the bell, at&t will be reporting apple after the close, plus pay their bread.

Before we get to that, i want to make a quick mention of radioshack reporting a net loss of a 53 cents.

In the news of late because they hired a bank to revision the financing and everyone is wondering when it will get itself together and how it will do so.

For 30 years it has been an open question.

What a disaster it has been from day one.

Netflix, shares sliding more than 5% in the pre-market with 36,000 new streaming customers in the last quarter, about 100,000 shy of estimates.

Profits increased fivefold from one year ago, the company also said that costs for content may increase in coming years.

Big names are leaving yahoo, dan loeb selling $1.4 billion of his stake, losing top media executives at the rose and, she will receive a severance package for termination about cause according to regulatory filings.

A last-ditch effort to win votes, the founder of dell has been meeting with shareholders to try to win support for his buyout bid.

He has been pitching small investors to buy his and silver lake's the offer.

Set to take place tomorrow after being postponed last week.

A nice advancement in what has been a four year bull market.

This entire hour with us from tiger management, julian robertson, of course on top of the hedge fund world for years.

I loved "more money than god," sebastian mallaby's wonderful book.

Nina is with us from the rittan fund as well.

I have to rip up the script and ask the question i would ask myself, do you open all the e- mails that come in?

Do you read every one of them?

No, sir.

There we go.

I know that you do not want to talk directly about steve: and all of that, but there is a new ballet about how we make investment decisions, how information flows to hedge funds and whether it is special information or not.

Going forward, will hedge funds be forever changed by what we witnessed?

I do not think so, tom.

I think that hedge funds are generally extremely careful, they adhere to the straight line of the rules and i do not expect that to happen.

To have a big effect.

You are actively managing money now, do you change or practices almost out of fear, in terms of best practices of a hedge fund?

Do you need to change how you do business and securities research?

We do not need to, we have always wanted to make sure that we are not walking the line but are as far from the line as possible.

One of the biggest tools for us is integrity and honesty in the business.

That has not changed and will not change.

When you see the netflix announcement of a different kind of conference call, i am fascinated by the information transfer going forward with new social media.

Are you on twitter, julian?

No, sir.

If you look at it, it is a lot different.

Information transfer is dramatically different, is it not?

No question about that.

It has been changing.

That is the gradual metamorphosis that continues.

I want to ask you your thoughts about what is going on at yahoo with them loeb exiting.

I know that you are focused on cheap opportunities, is his leaving the board a change driven opportunity for an investor in yahoo?

Let's not for us.

We look at corporate change and we look for specific thing, ceo chain is, bank mergers, and spinoff.

When marissa meyer came on board, that would have been a situation for us to look at.

Yahoo is one of those companies that is so actively followed with so much investor focus, we figured it would not have a differentiated viewpoint.

Differentiated is the heart of what hedge funds do.

Are there more opportunities coming up this year?

Or is above a quiet?

For us, absolutely.

We focus on change.

The opportunities that for us has grown substantially.

Where do you see the most?

M&a volume is beginning to pick up with mergers starting to grow and a lot of spinoffs from the statistics i have heard in terms of statistics last year and this year combined.

That is interesting.

I see this idea hedge funds in a malaise does not capture correctly the hedge fund business.

It seems there are almost two groups of hedge funds.

Do you see it as a group of excellent performers here and there, top performers, with everyone else?

Or do you bundle everyone together in that space?

I do not think that you can bundle everyone together, but one of the things that has affected hedge fund performance over the last, well, really since it started getting big in the 1980's is the increasing size of hedge funds.

It was so much easier to compact -- compete with individual investors with mutual funds that is with other hedge funds.

With mutual funds that is with other hedge funds.

I think that be success of hedge funds in general has probably hurt the performance of individual hedge funds as the competition gets tougher.

We have so much to talk about in this hour with julien.

First to the news overnight, president obama seems to be considering sara bloomer asking for the post of treasury secretary.

Hans nichols is always breaking news when it comes to presidential appointments.

What did you learn about president obama's announcement?

Sarah bloom raskin would really be the default choice.

They tried to get someone with real wall street experience , and she worked at promontory for four years, but she is not of wall street.

On the fed, where she is now, she has said some comments about big banks that will be perceived as downright hostile.

No.

1 in the treasury, jack lew, no.

2, sarah bloom raskin, neither of whom come from wall street and are both more on the regulatory side.

The plan to bring someone from the street down to washington, totally done.

Thank you for the back story on that.

We will watch the story to see if it develops.

What stands out to me is that if she goes to treasury from the fed, that mean that is another presidential appointment from the reserve, president obama is really going to shape what the next fed looks like.

Totally agree, but it feels a bit like second administration, second term appointments.

We are not in the back end of the term yet.

But it is a sign that the economy is stabilizing that these changes can even take place.

Until this point no one would even consider making a move.

We have a lot to talk about here with julian robertson, the founder of tiger.

We will talk about the hedge fund business and how it has changed.

We will also speak to how they got 29% return year-to-date.

Of course we are also willing to keep you appraised of the markets in the big movers.

Do not forget to tweet us questions for julian robertson.

This is "bloomberg surveillance." ? ? good morning, everyone.

"bloomberg surveillance ," we need to out do the royal baby in london.

Now the hedge fund baby.

We welcome your fifth grandchild?

My fifth grandchild yesterday.

Out doing the queen.

That is right.

Actually beating the doctor who delivered the baby by about two hours, because two hours after the baby arrived, the doctor went into labor and that her child.

Like a very good, you cannot top that.

Let's talk about your chair will support -- charitable support.

You actively supported mitt romney, but there is also education and you focused on newark, new jersey.

Why have you focused on supporting education in new work?

What i think the new work needs help and i think that cory booker has been a great job of developing the help.

He was helped tremendously by mark zuckerberg with the $100 million grant.

We are very concerned about the transition of teachers.

And the way that the system is set up now, it is a last in, first out basis.

The last teacher fired -- the last teacher hired is the first month fired.

We worked out a deal with the unions and the unions came in and worked with us on.

What happened was that we actually bought out the bad teachers and kept the good teachers.

In other words, bought them out, paid their contracts off.

What would you like to accomplish to help disadvantaged children get smarter?

What is the number one thing you want to do for those kids?

I think that the best thing that we can do is get good teachers in their.

Places like teach for america are places where grade teachers come from.

Under the old system, they were just being let go as the first ones to be let go.

I look at this, this support is something that will no doubt continue.

Thank you so much, julian robertson, his support of newark, new jersey, talking about mark zuckerberg and his contribution as well.

The pope is in brazil, 39% is the percentage of catholics in the world from latin america.

? ? coming up later, a conversation with the president and ceo of tv ameren trade.

How to get mom and pop back to trading stocks, they're big retail broker.

This is "bloomberg surveillance ," as always with tom keene and scarlet fu.

Julian robertson is with us of tiger management.

Imposing a no-fly zone over syria would cost the united states $1 billion per month.

The estimate for their top officer.

A no-fly zone would put u.s. aircraft at risk of being shot down.

Making a prediction to the chairman of the armed services committee.

Economic growth will not be tolerated below 11%. enough to achieve their goal of having a moderately prosperous go, and the slow economic recovery in the u.s. as parents pay less of their parents college costs.

Parents to bring in -- parents chipping in them one-third, the drop-off has students relying more on loans to pay for college.

Those are your top news headlines.

I am almost out from under it.

I could not do it again.

I guess there is a bit more tuition management?

It is not going up like it used to.

Still.

Going up much faster than they fails we see out there.

The famous myth versus reality, perception is high , reality differs.

The new performance has been a big story.

Julia roberts love this, funding over 40 hedge funds, ceding them.

Managing tiger rat, seeking opportunity and management change in destruction, the average fund struggled through historic volatility.

How do you do it?

A lot of gloom and doom.

We have a very disciplined target that we do over and over again.

We focus on three things.

Find a great ceo, spend a lot of time understanding him, focusing on finding a good business , all of it is focused around change.

It is a targeted process.

If they are listed securities, wire then not being found by other people?

Change creates confusion.

Both inside and outside an organization.

Confusion creates dislocation of value.

I will give you an example.

We owned a company called walter asset management.

It had a legacy mortgage beat.

We purchased a mortgage business that had a better business with better margins.

Stocks went from 25 to 15 because they had to delete the vibrant company, but earnings power doubled.

We purchased at 15, all the way to 19, it went into the 30's. this is a lovely example of creative finance when it is away from the headlines that we do every day.

You are trying to find managers who can do something that everyone else does not do.

What is the key attributes that you find in these so-called tiger cubs?

That is secret to us.

It is just you and me sitting here.

Ok.

one of the aspects of her that got us very interested, this was almost as important as her degree from wharton -- she was on the indian national tennis group and was, you know, a davis cup caliber, that type of thing.

Better than you or me.

She is a vicious competitor.

She is a winner.

I have found that people that compete well in one thing compete well in other things.

Within the malaise of the hedge fund business, how do you deal with that decision?

How do you deal with a failure?

A distressed company that does not work out?

It is quite simply that.

We are constantly confronting our pieces, making sure why we on stock continues to be the reason.

If there is a mistake and we know we have made, we will absolutely exit.

I am curious as to your take on the industry's overall underperformance.

Do we just need more tennis players?

It is perfectly explained above.

Hedge funds do better than the markets in bad markets because they are hedge funds.

The ideal for hedge funds is a vigorous, active market that does not move a whole lot.

There they can make it in both of the long and short basis.

In a persistently long market it is harder.

In 2007, hedge funds, i know that howard just blew it out, it was unbelievable.

Then in 2008, you know, we lost much of it.

We will come back to talk about this.

More on the give-and-take of hedge funds.

We will also talk about one of his other passion, politics, as president obama goes across the nation to give a major economic address.

? ? this is "bloomberg surveillance." here as always with tom keene and scarlet fu.

We need a data check.

Equities, bonds, currencies, commodities, not that bad.

Higher in the s&p futures, the eurodollar, 1.3 1.83, with texas center media back to 10 5.95. another big story that we are falling after francis arrives in brazil, his first major overseas visit as pope.

Quite a big celebration down there.

Absolutely.

1 million people are expected to make the trip to rio de janeiro.

Latin america and brazil, specifically crucial to the future of the catholic church.

Michael mckee is here to break down the critical nature of this trip.

Brazil is next door to his home country.

This guy is extraordinarily popular right now.

92% approval rating in italy.

The trick is to translate that into people liking the church as well as the pope.

This is his first stop on the international stage.

It is next door to his home country and he will bring a message of social justice to a country that is in the middle of a social upheaval.

Is latin america still the growth market for the catholic church?

A key question here.

1994, 75% of brazilians identified as catholic, only 67% do now, a problem for the church, latin america and africa were seen as the growth areas for the church, one of the reasons that he was selected.

There is a financial problem that goes along with church attendance.

You can see how over the last few years it has really drop off.

If he can cover more people, that is good for the church, but also good for the church boss coffers.

How has he done in the months after the hoopla of his being selected?

The early scorecard?

Pretty good.

On the sexual scandals for the church, mixed.

But he is moving quickly on a financial thing.

He has appointed three commissions so far.

He just appointed a group that will meet when he gets back on how to inform the vatican's accounting.

They are calling it the group of eight, not the one that sara knows, who are going to advise him on how to streamline the church's bureaucracy.

And he has another panel that is looking at the vatican bank and how to reform that.

Did he carry his own bag?

We heard that he did.

When i was in italy speaking to people, they are so excited about the new pope.

The fact that he is not living in the traditional headquarters.

He is trying to create a church for the poor, to reach out to the disaffected.

He wants to create a culture of the church of the poor, but he does not want a port church, which is why it is so important that he succeeds in brazil.

Does all of this release sell?

So far it looks like it may, the question is, will it be lasting?

And can he make those financial reforms stick?

Then he has to move on to the sexual scandals, which is where americans have been really disaffected and they give more money than anyone else.

Julian, how do you stay humble?

You are so successful, stockbroker coming out of the carolinas, you really did better than good, did you carry your own bag in new zealand?

Love carrying the bag.

Interestingly, the pope, did you all notice him in the little car that he was in?

It literally look like the throngs might pick up the car.

He gave up the bulletproof glass.

He used the borrowed fiat convertible last weekend to ride around in.

There are concerns.

Obviously, brazil was not a stable country right now.

There are concerns that he could be at risk, not using the pope mobile.

Very good, michael mckee with us on pope watching this morning.

Let's get to company news and scarlet fu.

The investigation into southwest flight 345 has begun.

Officials are looking for answers as to why the nose gear collapsed as it landed at laguardia.

They have reported eight injuries of the people on board the flight.

Travelers profits soared as price increases boosted margins with operating profits and analysts looking for $1.59, raising prices on coverage as a way to achieve returns on equity.

Volkswagen, getting the green light to produce an suv.

The new model goes on sale in 2015, it will be the world's highest priced suv.

Good morning, everyone.

"bloomberg surveillance," all of our interviews are on bloomberg tv plus on the ipad and radio plus on itunes.

In tom keene, always on the watch with sara eisen and scarlet fu.

Bj i am, tom keene, always on the watch with sara eisen and scarlet fu.

The address tomorrow kicking off a campaign style tour of the midwest from the president, at a looming deadlines on the federal budget and the debt ceiling.

Vincent reinhart is at morgan stanley's chief u.s. economist and former economist of the federal reserve and of course we have julia roberts here from tiger.

President obama talked a lot about the middle class.

Where is the middle class in this economic recovery?

Upper has done better than lower.

We are stretching.

Income inequality is increasing.

Real wages, except that the very highest incomes, are stagnant to going down.

Do we have to brace ourselves for more budget showdown?

The good news is about the border.

They need a budget to operate for fiscal year 2014, they have got to get a budget deal before the debt ceiling.

If they do that one hard thing, it makes sense.

In the last few days, there were a few homes yesterday, of what is the morgan stanley confidence that we are actually improving economic growth out of what we saw in the first half?

Is the president in the midwest confident of a 2% economy?

It never struck me as confident, tom.

The answer is a mixture, for sure, but the composition makes us a little bit more encouraged that we can endure durability in the second half.

Really tracking that 1% growth in the first half of 2013, with strong capital spending despite mixed numbers on housing.

We are at the peak, just getting past the peak of the fiscal drag.

Let's get a research note from vincent reinhart here.

A substantial pull back in credit suggesting a shark backup in rates after the fed signaled a sooner than expected start to qe leading to near-term caution.

Julia roberts is with us to speak on the economy.

Do you sense a cautious america right now?

I do not think anyone is terribly confident about the economy going one way or the other right now.

And we are following some moves by the federal reserve and others that really are quite different from anything we have experienced before.

That gives everybody a little.

It is the original text book, is it not?

There were a couple of the papers from ben bernanke, we emphasized the risks.

It is recently uncharted water for the bank.

Do you worry about a world without qe?

When the federal reserve stepped out?

I am looking forward to a world without.

That is going to be a long time from now.

Remember, the federal reserve officials think that it is the stock on their balance sheet.

Ben bernanke told us that they would never sell assets.

Is this investing through the punch bowl?

What worries me is the quantitative easing and what will stop the quantitative easing is when the bond yields start bursting forward.

Then they start going up.

What about the political leadership in washington right now?

Are we getting that?

You know my personal view on that.

I know you have donated a lot to republicans.

Well, i, i, i was looking for management in there.

Someone who knew something about running companies.

We will be back to talk more about the future of the republican party with julian robertson.

Boeing and its long-term forecast, even with recent mishaps, next.

? ? the race heats up with a technology entrepreneur who will be joining betty liu this morning on "in the loop." he is a new york city mayor oriel candidate.

Here as always with tom keene and scarlet fu, we are just getting going on the politics.

The politics with julian robertson with us from tiger management.

Julien, you were an active supporter of the manager, mitt romney.

He did not do better than good.

Your prescription for the republican party?

Who can you get behind after that debacle?

We need someone who will appeal to women and they do not really have to do a whole lot except not tell women exactly how to run their lives and not place restrictions on women and tell them how they must operate their bodies.

Can that kind of candidate be found by a republican party that has to go to a primary process?

A very good point.

Somehow the party has to get to that point where they can find that kind of thing.

Before they are going to get a window.

With your support of mitt romney, did the real governor romney run?

Or did he adapt to his republican realities?

He was adapting to his republican realities.

Do you see the kind of leader you would want in the white house in someone else?

I hope to find someone.

But you do not have anyone in mind?

Know.

Actually, i have a democrat in mind, but he is an environmentalist and the democrats think he is to while the.

To visit?

That would ruin him in the primaries.

Looking at the politics, do you filter through 2014? is this already a lame duck presidency?

Or could we see active policy?

Depends on the midterm elections.

After 10 years in the congress the idea is basically everyone is eyes on the prize in terms of the midterm elections.

It is not in the incentive of the white house to do anything any time soon.

In advising morgan stanley, what is his perspective on the immigration bill going through?

Obviously i cannot speak for herald, but the main point is that first there is so much a low hanging fruit in terms of the economy.

In terms of the margins where they are not contributing fully, not giving keeper of a lot of opportunities, that is the kind of problem.

At the high end to the fact that we educate to such a high degree back home.

We will continue this discussion.

How forward is fabulous?

-- harold ford is fabulous.

We are going to talk about blowing ahead of earnings.

-- boeing ahead of earnings.

? ? good morning, everyone "bloomberg surveillancebloomberg -- good morning, everyone.

"bloomberg surveillance." tomorrow, sir martin sorrell on the spirit of america and what it means for american consumers.

Really looking forward to that tomorrow.

This is "bloomberg surveillance ," i am tom keene joined by sara eisen and scarlet fu.

Let's get to company news right now.

We start with the battle for seats between verizon and comcast, boosting the speed of their internet service faster than comcast, but half of that of google.

Targeting small businesses with the service.

Third quarter sales profits beat top analysts' estimates as demand for automotive and industrial markets comes off personal computers.

The company said earnings could be as high as 50 cents per share.

Finally, 12 new markets over the next several weeks, the company's president says the goal is to reach one quarter of the u.s. population.

Sending broadcast signals of mine to subscribers, broadcast networks have been fighting the service in court.

That is today's news from the files of "to bloomberg west." boeing, earnings are out tomorrow amid a flurry of negative headlines.

Scarlet fu, you have been looking at how it impacts business.

The latest example was last night?

The latest negative headline is an accident that involves a 777 at laguardia.

Coming two weeks after heathrow, and those faulty batteries.

Stocks, doing better, up 40% this year.

Investors will be watching for numbers on the 737 hoping that they compensate for the dream liners.

Let's talk to someone who follows the company and the industry.

Bloomberg industries provides global research data across 100 industries for financial professionals.

George, you have seen a negative headlines, boeing is on the covers of all the newspapers, is it impacting the orders, sales, and earnings of the company?

It appears not.

We should say that last night at a guardia?

This is a 14 year old airplane that lost here on landing.

This is critical, i think, for everyone.

Why are we flying 14 year old airlines.

-- airplanes.

We can fly them for up to 30 years, we think.

We think?

We do not typically get there in the u.s.. those landing gear is get changed at regular intervals.

It will be interesting to see what ultimately happens here.

This landing gear being maintained by southwest.

It might not be boeing possy fault, per say, but did not -- does not help the perception out there that any kind of airplane problem you see involves building -- boeing.

The 787 does have its challenges.

They are refurbishing it now to introduce it in 2017. this is the moneymaker at boeing commercial aerospace.

This airplane coming for 2017 will be very crucial.

I want to mention a number in context.

$4.80 trillion, this is their long-term commercial jet sale for the next 20 years.

Orders are going strong.

We just came out of the paris air show.

Orders were far better than the year before.

No one seems to be ready to give up.

When you look at bowling, -- bowling -- boeing, is it a contract to contract defense?

Or is it consistent revenue?

It is, right?

Which is it when i buy the stock -- it is 50/50, right?

Which is that when i buy the stock?

It is priced as a commercial aerospace company right now.

Defense companies are not in multiples.

Remember, there is a lot of aviation projects.

They have a pretty good stream of their own.

Julian robertson, legendary hedge fund manager here, anything interest you in aviation or airlines?

Certainly the numbers that you are passing around with interest anybody.

They sound awfully good to me.

You continue to be constructive on google.

You were constructive on apple, you are not constructive on apple.

What is the distinction there?

I read the book on steve jobs.

I developed a tremendous amount of respect and admiration for his intellect.

I came to the conclusion that he really was a maverick person and really could not establish a great, long term entity.

He was just a very mercurial guy.

I do not believe he could have done that.

I think that the google people have a better way of getting things done.

It is the leadership that you like?

The leadership, apple, steve jobs is not the kind of guy who would have developed.

You were iconic in equity investment.

How do we get americans reengaged with the stock price?

I do not think it is necessary for americans to get reengaged w

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

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