Government Shutdown Looming: Surveillance (09/27)

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Sept. 27 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Richard Clarida, Duff McDonald, Tom McClintock, Nigel Travis and Amanda Ripley. (Source: Bloomberg)

It is a game of week and chicken as washington conference at midnight monday shutdown.

Republicans and the president are far, far apart.

Holidays loom and jcpenney, they need financing.

When in doubt, delete.

They aim for one gazillion dollars in new stock offerings.

Consultants, just how much are they worth, anyway?

We consider the firm.

Good morning, this is "bloomberg surveillance." i am tom keene.

It is friday.

Friday, september 27. joining me as always, sara eisen and scarlet fu.

What a week.

And what a weekend it is going to be.

I think congress is going to meet this weekend?

Here we are.

Could have a government shutdown.

Midnight monday night.

They're supposed to meet this weekend.

The debt ceiling debate has been moved up to october 17. first, let me get you started with a morning briefing.

Japan's inflation accelerated to the fastest rate since 2008 in the month of august.

Another positive one for the prime minister abe as he tries to lift the country out of diversionary funk.

In europe, confidence rising.

Adding to the momentum.

In the united states, this morning, i read on personal income and personal spending numbers.

University michigan and summer confidence, another confidence rating as well, for the consumers.

And washington, the senate has a procedural vote today to try to avert the government shutdown.

If they pass it, it has to go to the house.

President obama will be meeting with india's prime minister at 11:30. they're set to talk about defense cooperation, potentially a deal for u.s. companies to sell nuclear technologies.

I wonder if they will talk about the rupee?

Maybe a little bit.

They get a high mark for leach -- released stanching the pain.

We will talk about a dead data check.

One screen.

That is how quiet the markets have been.

Futures negative six and they deteriorated in the last hour.

10-year yield has gone nowhere this week.

Lower yields since the chairman's bombshell of no taper a week and some days ago.

Euro, 1.3492. the currency market, pretty much -- i will say stronger yen off the ballet.

Sarah will have some interesting comments in a bit.

Time for the front page where we scour the papers and the weather the most important stories.

Every morning on the front pages is washington.

We need an update.

Tom called it a ballet in washington.

I think of it more as an awkward primary school square dance.

There's no clear path heading into the weekend.

The senate plans to vote on a spending bill and send it back to the house that would fund the government for the first 1.5 months of the fiscal year.

We have heard from the speaker of the house john boehner who says the house is unlikely to accept the spending plan that would come out.

Go back to square one.

The house republicans are set to continue working through the weekend.

John boehner has pushed for the idea where they would combine spending cuts, and a delay in the affordable care act.

What is confusing as it seems like the republicans are very focused on the debt ceiling, where they feel that a little more leverage instead of the government shutdown.

That is the overnight news here.

Tying up a lot of things with the u.s. bar wing authority.

Everyone is watching for any sign of progress.

Second story has to do a jcpenney.

We know the company says it has told everyone a dozen the more cash and can survive, yet it is only 84 million shares to the public anyway.

It could raise as much as $1 billion in stock depending on whether there's enough demand for goldman sachs to take up the increase.

I get the highest marks to citigroup who got right through the bs from jcpenney.

This is baloney.

It is not a share offering.

It is a massive dilution.

We will take this up later in the show.

We also want to mention our third front-page story.

Jp morgan ceo jamie dimon meeting with attorney general eric holder.

Here he is getting carded entering into a federal building.

He is discussing a settlement with the government that would involve a cache find of more than $7 billion plus $4 billion in relief for struggling homeowners.

This has to deal with the years leading up to the financial crisis.

They are cracking down.

We will see when the talks result in an actual -- could we see that today?

We could.

We didn't get it yesterday.

Very good.

We are thrilled to bring you richard clarida.

And tough macdonald joins us out with the controversial book of the autumn season on consultants , "the firm." let's talk about your on a terror policy over to fiscal.

-- let's talk about your policy over the fiscal.

If they screw it up mama there are two chances to do that with the continuing resolution next week and then a couple of weeks -- you say october 17. that is the debt ceiling.

The baseline case and optimistic thinking as we will avoid a train wreck and go to the last second like the last two deals did.

But there is that left tail risk.

If we were to go over the line on the borrowing limit, that would be a disaster for the economy as well.

Why are we having this discussion of every expert tells us the vectors of our debt dilemma are improving?

How can we improve our deficit and yet have this discussion?

I think it tells you there is an agenda other than fiscal policy year between the congress and the white house.

I think this is perceived to be the bargaining leverage the republicans have is every year to have the debt ceiling and appropriations come up, and that is why there's a lot of talk about loading this as another measure into the bill.

There's talk of doomsday and catastrophic scenarios here.

Three days until the government could shut down.

A few weeks until we could default and no sign of progress.

What would it take to spook the markets?

The shutdown is different from the desolate.

-- from the debt ceiling and shutdown are different.

October 17. "the firm" and eight other books as well, and one is on jamie dimon.

Are you know him fairly well.

When your reports of them going in to negotiate with eric holder, is it with his tail between his legs and giving up more than he bargained for?

I don't see jamie dimon negotiating with the tail between his legs at all.

The guy is a pragmatic.

I think he realized he had to get a deal done.

The uncertainty of yet another investigation, another fine.

This is a pretty bold move to try to get it done and wants.

I know you're here to talk about mckinsey consulting, is 11 billion dollars enough?

Does jpmorgan see that as a one- off expense or does jamie dimon rationalize that across quarters and years?

I couldn't tell you what they think, but the whole idea of the money machine that is jpmorgan -- we all say, well, that is a huge number.

But it's not.

Not for these guys.

Jim cramer wrote a column yesterday that said this is about as cheap a deal as he could pull off if it removes uncertainty.

Almost look at it as a net present volume races as well.

How does he go as a favorite to anchor washington, obama's favor banker, to where he is on the cover every single day with a fine or penalty or some type of bad behavior?

This is the price you pay for being number one, for starters.

You're the biggest target out there.

On the other hand, his aggressive demeanor certainly endeared him to no one in d.c. over the last several years.

Duff mcdonald with us as well as richard clarida.

Lots to talk about putting his superb expertise on germany.

We are going to start with a couple of tech companies.

Intel need some help with its television projects.

Looking for a partner to provide either a base of internet subscribers or rights to movies and tv shows according to a person with knowledge of the situation.

The strategy shift is a plan launched by the end of the year could be delayed.

Oracle says the cloud will lift its margins.

The database software maker expects to boost operating margins by shifting the cloud- based services.

Oracle to better compete with workday and salesforce.com and alice forecast -- analysts forecast it will move sharply this fiscal year.

Two closing in on the deal, the japanese electronics companies had to sell its health care unit to the private equity firm for 1.5 billion dollars.

The unit provides digital medical records and makes instruments to measure blood would close.

A deal could be announced today.

That is this morning's company news.

Marks another, do we have to talk about, jcpenney.

It says it is not running out of cash, so why is it trying to raise $1 billion with a new stock offering?

That conversation is next on "bloomberg surveillance." ? good morning, "bloomberg surveillance." he single-handedly resurrected the new york public library.

Joining betty liu "in the loop" at 8:00 this morning.

It is amazing what he did.

He is also founder of the blackstone group.

He single-handedly resurrected the new york public library.

With got to talk about jcpenney.

It has been saying it doesn't need more liquidity, but it is offering 84 million shares of common stock to raise cash, all ahead of the all-important holiday season for retail.

Scarlet, yet and following this -- you have been following this.

The company said as late as august it was fine, it would be able to go through the holiday season, get through the fiscal year with enough liquidity yet here it is building a cash buffer anyway.

Analysts pointed this out early on.

They started this concern once again about jcpenney, talked about weak fundamentals, inventory rebuilding -- which is critical before the year in season -- an underperforming home department that ron johnson started but never finished.

This liquidity buffer is key to make sure there's enough confidence to get them through, and a signal to their suppliers as well.

What are the analysts saying about cash position?

They have a lot of question marks.

The company said they see sales improving to the second half of the year, but the fact they're going out and selling shares means they're also worried, nonetheless.

Citigroup has essentially over nominal gdp same-store sales gain of 7.5% is the hope, the wish, the prayer -- absolutely.

When in doubt, dilute.

They're killing her equity shares.

Don't they already have loans?

What they do.

It was arranged by goldman sachs.

They drew $850 million from the revolving credit line.

Liz done him was anticipating the company would sell debt, not necessarily raise equity.

This way they're deluding all their existing shareholders.

I totally agree.

At 12:39, i was up, a note was put out on another body leaving the management ranks.

That is the other big thing people are watching for.

All of these moves taking place behind the scenes has a lot of people wondering.

There are a lot of hedge funds invested into jcpenney.

They're more short-term and long-term.

Richard clarida now with pimco, this is creative destruction?

When you hear about a company issuing a massive amount of equity to fund christmas amateurs, that is not a good sign.

Duff mcdonald, does jcpenney need consultants?

I don't know.

This is just like kmart.

Everybody is focused -- lambert came in to kmart and everybody was up in arms about what could happen.

Same thing with jcpenney's. this has been circling the drain for years.

Can we still that phrase, circling the drain?

You must be a writer.

That could be the title of my next book.

We're going to talk about his new book called "the firm." also, alamo lally from the ceo of ford, celebrated ceo, but how long at fort?

More on that next on "bloomberg surveillance." ? this is "bloomberg surveillance." top headlines, the u.s. and iran agreeing to talks on nuclear weapons.

They will meet in geneva in the middle of october.

The agreement to discuss the issue came about after secretary of state john kerry met with his iranian counterpart yesterday, marking the highest level talks between the two countries in 30 years -- 36 years.

United nations security council agrees to resolution requiring syria to give up chemical weapons.

As a compromise between u.s. and russia, but doesn't call for any automatic analgesic if syria doesn't comply.

Inflation in japan accelerates to the fastest pace in five years.

Consumer prices excluding fresh fruit jumped last month, slightly better than economists were looking for.

Higher energy cost for the biggest factor behind the increase.

Good news on the deflationary spike.

It is a huge story.

We will talk more about that in a moment.

Mr.

abe is in new york.

City see the new york yankees?

What's i think he was a little busy yesterday.

The internet was on fire last night with talk of alan mulally moving from ford to washington state and microsoft.

He noticed tax to nothing about software, but matt miller knows about ours.

We talked to the star a bloomberg television, matthew miller.

Good morning.

Good morning.

Alan mulally out of kansas, known for his work at boeing, goes to ford.

Wouldn't it be easy to go back to washington state?

He wouldn't just be easy in terms of the move for industries, but of course, he still lives in washington state.

In seattle.

That is where his family stays, where his house is.

He would need to hire any moving vans, really.

The question is, would he want to leave ford?

He seems to continually deny the reports that pop up over and over and over.

You know about the famous alan mulally early thursday morning meeting, one ford, one mulally.

I think that is like one microsoft.

Can he just transfer his management skills to microsoft?

That is what steve ballmer things.

He is written in the past about alan mulally and said his skills as a turnaround artist, if you will, could translate into any industry.

Of course, alan mulally has advised steve ballmer only recently about how to do business at microsoft.

Both of them are pretty candid about that.

The question is, would he leave ford because he has promised to stay there as ceo until at least the end of 2014. this speculation has been swirling for a bit now, since early september.

I know you spoke with alan mulally about this in a number of times.

What has he said to you?

He just continually says that while in is flattering, he plans to continue to focus on his job and used that term laser focused, which has become a credible jargon in corporate and ceo at speak, but i think he invented the term.

It is interesting because it almost seems as though microsoft is now using the media as a recruiting tool, trying to help convince alan mulally, although, if bill gates comes over to her house, i don't think you need anyone else to help convince the guy.

Matt miller, thank you for waking up early and joining us on alan mulally.

Here is the book, "the firm." duff mcdonald on alan mulally.

This guys like the new hero on the block.

He is like the guy right now, isn't he?

I guess if you do one turnaround, you're in demand.

I think it is fascinating that everybody thinks microsoft, the solution there is a new ceo adjustment of and personality at the top when it is sort of a structural shift that has got these guys.

With all your research on mckenzie, they parachute in to microsoft, what would your consultants to besides showing up with spanking new in bas?

They would come in and spend several months finding out from your people what you're doing.

One of the first things they do is turn around and tell you what you just told them.

Would alan mulally allow that?

I don't see him as a guy that would do that.

Mckenzie -- his great strength has never been an emergency situation.

There better over extended period of time.

A lot of the management consultant into becoming ceos.

A parachute in, take a look at what is going on in the company, they go work for the company themselves and become very successful.

It is a factory for future ceos.

It is mutually backscratching relationship.

One of the things that mckenzie helped the demise is this notion of the ceo is the thinker, the strategize or.

Like alan mulally.

So when you get that ceo who is divorced from line responsibilities or operating responsibilities, gets to spend a lot of his time doing the thinking, who to see hard to help them do the thinking?

He hires mckinsey.

There is this great -- virtuous cycle -- up top there.

It is no surprise boards hire these guys to help them.

A money question to me is, is alan mulally that kind of person?

I don't perceive that, but what do i know?

Do you perceive him as a virtuous circle guy?

I do not.

He delivered some of the tough medicine ford needed, but at the same time, when you're in a situation like microsoft is in, when he really needed to say, jesus, what do we do here?

Mckenzie can be really, really soluble in helping you get that done.

Duff mcdonald with us.

Richard clarida from pimco also with us.

We will continue on his conversation about mckenzie.

Perhaps alan mulally should go to washington.

The showdown that could lead to a shutdown.

Congress has to come up with a budget deal or the government may close as early as next week.

Our twitter question of the day -- ? first, bloomberg.

This is "bloomberg surveillance"i'm sara eisen.

This could be a down week.

It is finally starting to feel like the budget is touting to make a difference.

There it is.

Some way to the market.

You last hour of futures.

The yield comes in four digits.

2.6299, that is a long way from a tape assured 2.70 that we saw.

Gainers and losers.

It has got to be mark setting.

The world of technology meets retailing.

Ebay up almost five percent in trading yesterday after saying it would buy the payments start at raintree.

$800 million in cash.

Of course this is to focus on mobile, the mobile transaction business.

The locating a nice left.

Jabil might drop like her as a customer.

The z 10, blackberries revolutionary touchscreen phone is not doing so well.

It hurts, global holdings are down 16% because you did not rent the tesla this weekend.

I wanted to rent the tesla this weekend.

The double-barreled fiscal fistfight.

U.s. government could shut down midnight monday night.

The senate foods today to cut off the debate on whether to keep the government open and then said to the house.

If that is not enough, treasury secretary says if congress doesn't pass a lot to raise the debt ceiling the u.s. will default.

We have been here before.

He's also former assistant secretary to the treasury.

Clearly, one of the nation's leading authorities on the leakage of fed to fiscal policy.

Just your general thoughts of what you need to hear this weekend and into monday.

There will -- the hustle get the senate bill and the speaker says he won't let that be passed.

So the house will pass another bill they listen back to the senate which means that we could really go up against the deadline monday night at midnight.

We could well see a brief shutdown.

That could have happened 20 times that in the 90s and 80s. based on your 10 year, our politicians in any way aware of the damage that they could do to the economy echo i don't think they have fully internalized to the damage.

I don't, because i think if they did we would have this resolved months ago.

The brinksmanship makes me nervous because there is always -- it may be an intention to get this worked out but at the last minute there is definitely room for error and as i said the key decision is in the middle of october when we are talking about the debt ceiling.

It is for real.

Is all this having an impact on investments?

I think corporate investment this cycle has been very soft.

It is not been robust third is can't help corporate investment in that low probability event that we go over that debt ceiling cliff.

It would be a huge negative for the economy.

Serious question, next week, tom, the jobs report.

I believe this is a focus of beos.

Writer think everyone on the hill was an essential -- give us a primer here on the debt ceiling.

Steve forecaddie, you know the whole out-of-state and brandeis owns it.

People flunk these courses.

What is so hard to understand about fiscal policy and a simple phrase like a debt ceiling?

The point is the government has to borrow when it runs a different -- when it runs a deficit.

That really is just because congress likes to have that leverage over a couple of years.

He can usually get something they want out of it.

You are playing very high stakes because if you go past the debt ceiling, then you run into an issue of making payments on interest, salaries, defense, social security.

It becomes obviously a very significant -- let me say, it has never happened in our 200 plus years as a country.

You and i have done panels in dubai and traveled around the world together, great.

Do other countries face this idea?

Germany, does germany have a debt ceiling debate?

I am not certain of any major country that has this peculiar feature.

If congress authorizes the spending and the taxes come in take responsibility if the numbers don't add up.

Tom graves of germany and with the great expertise in his subject, here we are, almost a week after merkel's running election victory.

To think that is a good, positive thing for europe that she remains at the helm?

Absolutely.

It was never in doubt that she would prevail, but her margin was very significant.

I believe it was the biggest margin in a german election going back 50 years.

She was this close to doing something very hard, which was not having to need a formal coalition.

You are definitive on this are we moving on to a degree of security?

Is this a new germany or is it different?

I believe that germany is so completely integrated into europe now, which is really the purpose of the euro project.

I think we moved beyond that 20 years ago.

Within this, and with germany, what do americans need to know why we can't do it germany does?

Their unemployment rate is so remarkably low.

They do things different than us.

What is a best practice from germany that we could steal?

One area where germany is a world leader is transitioning people from high school into highways jobs.

They have an apprentice of that works for a well and obviously it is easy to talk about it but they actually pull it off.

It has been studied very widely.

The other thing is germany went through it.

10 years ago of some pretty significant structural changes.

This laid the groundwork for the productivity and export them that we see.

They have a model for us in terms of exports?

Part of it is a bit unique to what it is they're good at making, which is the time machine tools.

The eu has capability -- has export capability as well.

It depends on what the global economy is.

Richard claire that with columbia university.

-- richardclarida clarida.

Teaching tapering 101. you can relive german history as it turns out, because we have a shot of the apartment that once belonged to cancel -- belong to chancellor angela merkel.

This is a place she was living in back in 1989 when the berlin wall came down.

It is now available to rent on line.

75 bucks.

It looks pretty nice, doesn't it?

Is no longer the soviet bloc apartment of before.

We need a german expert.

Take southeast air and post them on twitter.

Why not?

Coming up on the next hour of bloomberg surveillance, it's coffee day.

What goes best with coffee?

Donuts.

Bloomberg streaming on your tablet and your phone.

Bloomberg.com.

? this is "bloomberg surveillance"i'm sara eisen with scarlet fu and tom keene.

Some of the money will be used to hire police and improve the transit system.

Other funds will go to demolish buildings and redevelop neighborhoods.

To try to has closed more than 150 thousand empty abandoned billions and 120 miles of vacant land.

Seeley took over after the strike.

His 24 years as commissioner is second only to the majors.

First commissioner.

Oh, baseball history, very cool.

Speaking of baseball, let's take a look at how the battle played out.

We're talking about the postseason and the new york yankees versus the red sox.

The probabilities of making it to october through the regular season.

For the yankees, they started off being the favorite, but there is a turning point.

In late may, may 25, two thousand 13 the red sox took the leak and never looked back.

That through-line keeps going back.

For those of you michael k fans, scarlet, he had profound math last night about how injured they were this year.

This team -- i prefer the math of mariano rivera and what he accomplished during his career.

Richard clarida here.

They were just old, what they?

-year-olds, they were broken down and for the first time in 20 years they actually scored fewer runs than they allowed.

It was just a terrible year for the yanks.

The real drama is a-rod versus mlb.

That starts now.

Well it had to start now.

The red sox are told months ago they were in last place.

It was their worst year since 1965, which unfortunately i remember and they turned it all around.

Now the fun begins.

Let's take another look at what happened last night at yankee stadium when mariano rivera some of the best closer in baseball history, said goodbye to his fans and his teammates.

He played his final game at yankee stadium and of course he is all-time leader in saves.

He didn't actually get a chance to play for sale yesterday because the yankees were down four nothing versus tampa bay, but he did pitch a part of the eighth and ninth inning.

Then everyone came up and congratulated him.

Are they crying?

He is 43 years old, he is retiring after this season, but quick mention for ms.

Eisen.

I am thrilled.

What can i say?

Let's cut to the chase.

Can you get me an scarlet tickets?

The reds made the playoffs.

The wild card to get to play.

I can hardly contain myself.

I am thrilled, seriously.

Let's have a moment now for first look.

A sad when here in mumbai where firefighters have been working with rescue workers.

They're trying to search for survivors.

The collapse of a five-story residential building at daybreak this morning.

At least four are considered dead and dozens are trapped.

This is the third such collapse this year in india's financial capital, mumbai.

Is a mess.

If you look at -- president obama's going to be meeting today with the indian prime minister.

At the yuan general assembly, speech and -- speaking of diplomatic behavior.

First time we have seen this in years.

Officials described the meeting as constructive.

Clearly, a lot needs to be resolved.

A single meeting was the reason for all the traffic is weak, right?

And list the most for this one important meeting.

But it was a high level meeting.

Car lovers rejoice, this one is for you.

500 vintage chevrolets are up for auction in pierce nebraska and are practically new.

They are pink.

Most of the cars have never been titled, have less than 20 miles on them, so you can expect to see thousands of auto enthusiasts come visit this auction.

It is a town with a population of only 1700. it is going to be absolutely flooded.

Coming up, to companies in need of a turnaround, jcpenney and blackberry.

Can they handle a consultant like mckinsey?

He wrote the book on what everyone is talking about.

Jamin and your tablet at bloomberg.com ? this is "bloomberg surveillance", i'm scarlet fu joined as always by tom and sarah.

The videogame maker was being sued by former ncaa athletes over the use of their images in some of their games.

No terms were disclosed.

The company is also canceling its college football game saying the agreement doesn't resolve all the legal questions related to the issue.

Both soft bank of japan and yahoo support the corporate structure that the chinese eat commerce giant wants.

There's a debate over where alibaba will listed shares.

Leading many people to predict that alibaba is leaning towards a new york raised ipo, perhaps at the new york stock exchange.

Ebay moves to beef up paypal, the online auction site is buying raintree four a unit of paypal.

Shares rising on the news.

That is today's company news from the files of bloomberg west.

Sarah?

Cell phone, just a fad.

That was mckinsey advised to at&t back in 1980. do they deserve the hype?

And all those fees.

The story of mckinsey and its secret influence on american business.

That was a great example that we pulled from your book.

At&t getting advice from mckinsey that cell phones are just a fad.

How much bad advice does mckinsey give?

It is hard to say because most if not all of their engagements are secret and confidential.

When these guys are brought into help predict the future, i assume that their batting averages about the same as anybody's, right?

Who can predict the future.

They are as wrong as often as anybody else could be.

One of the reasons why to book is so illuminating is because mckinsey is such a treat -- is such a secret.

We do know that it has enormous influence on corporate america.

Absolutely.

For several decades now because of serious penetration of the fortune 500, not only that, but globally.

Amazingly, i found the 85% of their business is repeat, so people are bringing them back in again and again.

John barton, the leader who has been on this program many times, we consider him a distinctive friend of the program, they do great economic research.

You are criticizing a consulting business.

What is the mckinsey distinction versus the other consulting firms?

What mckinsey has managed to do, and it has started back almost 100 years ago with martin bauer, who is sort of their spiritual godfather, is that they decided to set themselves apart by dress code, by the way of thinking, but aware presentation, but a way of dealing with clients and this crazy adherence to a code of conduct, a coat of action -- even a more iconic ibm code.

It is either mckinsey or ibm who is behind it.

But they are behind it now.

They're getting the best and brightest.

That is all fine and well.

They bringing these bright shiny scrubbed 28-year-olds.

What did they know that a 50- year-old ceo 15 years experience doesn't know.

The hbs crowd?

Nothing.

They have the global network.

They have experienced consultants.

They know what they're talking about to some degree.

When you hire mckinsey, you're not just hiring the age bs f guys, those are the analysts.

They're the guys who step all night.

You are hiring a mckinsey because they are who they are right now.

They are advising everybody else, they can draw in a global team of consultants on a moments notice, you are them because you tell your board you hard mckinsey and that often- -- you say that like a mckinsey consultant.

They give you cover.

If you're the ceo you don't want to tell your employees, you know it is my decision.

Just as definitely a huge part of their business.

It is being brought into a to help cut costs -- it play a big role in tearing apart businesses and taking them down.

Tom broke up the research.

Mckinsey global institute is a premier research institution.

These guys are definitely helping divide some of the undergirding for forward thinking about the planet.

Are they aware of the criticism against them?

Would a boston drupal mckinsey or the others try to change now or is it business as usual, forget about the critics like of mcdonald?

I think mckinsey was a little concerned that there might be some bombshell in this hook, and enron that nobody knew about.

They have heard all this before.

On some level it is the same as goldman sachs or the other investment banks.

You want to criticize them for their greed or their class to make money.

It is not the first time you have heard and they do not care.

Mark zuckerberg uses mckinley in a roundabout way.

Sheryl sandberg is x mckinley -- e isx-mckinsey.

There is a question whether this new generation of companies particularly tech companies who are much flatter and not as hierarchical as historical american conglomerates, we will use mckinsey in the same way they did before.

Duff mcdonald with the firm -- with"the firm." this has been wonderful.

A strong euro is trading above one point 35. a strong sterling, strong euro on the fact that we have seen economic data in these continents kind of shift in continental europe.

There from exiting recession.

We saw that are numbers there in terms of consumer spending.

They are tapering.

And the fact that we didn't taper here that is leading to some weakness for the dollar.

Richard clair deck, always good to see you.

Coming up in the next hour, tom is starving.

Nigel travis will be here to talk coffee, donuts, international expansion and healthier food notions.

That is bloomberg television, streaming on your tablet your phone and bloomberg.com.

This is "bloomberg surveillance" ." republicans work into the weekend.

They will be far far apart from the president.

It is an iconic new england brand rate do you run on dunc kin?

American kids are dumb.

How to make the kids like the kids in helsinki?

We will look at that in this hour.

It morning this is "bloomberg surveillance" i am tom keene.

It is friday, september 27. joining me as always is sara eisen and scarlet fu.

Nigel travis, chief executive officer of apple crumb, -- make it to chocolate glaze, cancel the apple crumb.

Overnight news, a victory for prime minister shinzo abe.

Abenomics trying to lift japan out of the economic gloom.

The reason is economic recovery is gaining momentum.

Personal income and spending for americans.

5:55 a.m. university of mexico -- university of michigan.

11:30 a.m. eastern time, president obama will be meeting with the indian prime minister.

Of course they will be talking about bilateral trading ties.

There is early morning briefing at how about some company news echo we need to start with j.c. penney.

The firm is pleased with the turnaround and then makes a move to find cash.

They will sell 84 million shares that could raise up to $1 billion.

Jcpenney also forecast positive comparable sources.

The stock is down premarket.

Esther diamond goes to washington.

Jamie dimon meeting with attorney general eric holder at the department of justice yesterday.

The firm is looking to settle government investigations.

An announcement is expected any day now.

What was agreed upon or discussed was an $11 billion settlement area for billion dollars would go to -- dr.

Dre jives a deal with carlyle.

Financial terms not disclosed.

Beat said it would buy back the rest of race take us by smartphone -- by smartphone maker htc.

We need to get you one in seville headphones are used.

They come in little colors.

No one with a bowtie on a pakistan by these headphones.

All right, let's talk about what is happening in washington or what is not happening.

Three days to a government shutdown.

The senate will vote on a clean spending bill this afternoon.

Right to kick the action back to the house of representatives.

Meanwhile, no sign of progress on the debt ceiling.

Ashington correspondent peter cook spoke with a washington democrat in the senate about the democrats hartline.

Have a listen.

If we turn the cr with a simple extension of government spending or even the debt ceiling into a political bargaining chip, we are finished.

We will do this every time.

85 or six times a year.

Was i going to do to us as a nation, to our government, to our reputation or to our economy.

This is bad politics.

Peter joins us from washington.

It is interesting to hear durban's longer-term perspective . however we going to get to the weekend.

When it is all said and done they're going to send a clean spending bill back over to the house of representatives were john boehner told representatives he would not pass a clean bill.

He needs to have something to show for his efforts.

The publicans -- republicans delaying obamacare for one year or repealing a device tag within obamacare.

Dig durban said they will reject the bill.

He will get his party to vote for it and then kick it back to the senate.

Is there anything echo at rattled off about a different outfit -- a different options.

The idea of getting rid of the federal subsidy for members of congress for their healthcare, that is something the politically sensitive of course will involve members of congress.

Dick durbin said there's no way we will accept that as well.

It could set a bad precedent for the country.

It could happen to private citizens as well.

That is just the shutdown of the debt ceiling.

October 17, peter cook.

It is a crucial weekend for washington, for a beleaguered john boehner.

Tom mcclintock is john boehner's worst headache energies from the forced district he is to the right of most republicans.

Congressman, good morning.

Would you want from the speaker of the house's weekend?

I think the speaker has acquitted himself are well.

The last week the house acted to avoid a government shutdown.

We were addressing a crossing problem -- a crossingrushing problem.

People are being notified by the employer that the plan they thought they liked is being dropped.

They're seeing their hours being dropped back.

This 800 pound gorilla of the can't be ignored.

If you go back to the october 17th state, what is a notable item.

What you say we will not budge on?

This is a progress at his base in negotiation.

The senate is designed to exercise its best judgment, which presumably will do today and then there is a conference process.

The problem is come harry reid and as you just heard, dick durbin and the senate democrats are refusing to negotiate on anything.

The process can't function like that.

If you are asking what is going to happen, i don't know.

I am tonight powers of prophecy as a mere mortal, but i can tell you it is not how the system is supposed to work.

Timesman peter cook in washington.

Let me get a sense of the timing here.

If john boehner assist piece of legislation from the senate, makes any change to it, you know as i do that it takes four days for the senate to even agree on what day it is.

They would miss that deadline quite likely on monday evening.

Republicans in the house are prepared to maybe extend these negotiations on monday.

I can't speak for all republicans, i can speak for myself and that is that we do have a process.

Sometimes it is agonizingly slow . it is sometimes very frustrating but given a chance to work it can and does work.

I would certainly support anything that gives it that chance to work.

It does ignore the damage that obama is doing to the affordability and accessibility of coverage for millions of americans who were promised lower rates.

Instead they're seeing skyrocketing rates.

Who were promised that if they like the plan that you be honest.

There has been a distant theoretical discussion for folks at seven -- is very real and very personal.

Clearly, you have a point.

You have an argument to make your on obamacare.

Certainly i agree with you that the system is set up for negotiation.

We are talking about high-stakes game here.

A government shut down at a default on the full faith and credit of the u.s. government debt?

I are you negotiating on obamacare which is seemingly a separate issue.

Why are you putting that have credibility at stake?

It is for much to do with fiscal issues.

We just had a very sobering report from the head of the congressional budget office yesterday warning that this nation is still a long way from fiscal solvency and obamacare is a big part of the entitlement program -- of entitlement problem.

We have artie move to avoid a crackdown.

The senate is taking the position that they are willing to accept a shutdown of the government by not negotiating.

That again is a situation i cannot stand.

This is the heart of the matter.

Do you believe that this big of the house with me to go out and get democrat votes to push against those of you who are to his far right first of all, i don't think you can characterize us as being to the far right heard the vast majority of the american people are opposed to obamacare.

The support for obamacare which has never been high has been dropping very dramatically over the past several weeks.

I believe that we are speaking for the vast majority of americans, republican and democrat, who are watching their affordability and accessibility of health care directly threatened by this measure.

Tom, thank you so much.

Tom mcclintock from the fourth congressional district of colorado.

It is over by the nevada border.

Don't think he's a fan of obamacare.

We're going to ask nigel thomas whether he is a fan.

On bloomberg coffee -- on bloomberg television and radio.

Good morning everyone, "bloomberg surveillance"," i am tom keene.

The affordable care act, every ceo down to the smallest of business is focused right now on october 1. how big a headache, nigel, is the affordable care act for dunkin' donuts?

It has been a very difficult execution, but i think we supported our franchisees.

I believe we work with them right from the start.

We have been working with them for a year and have to half to get ready for october the first.

We try to make improvements in the affordable health care act and i think we worked very closely with the administration to get the employer mandate worst back one year.

The key thing is, as we have franchisees, we can't mandate what they do.

We try to advise them to be on top of it or it they are all ready for october the first and our franchisees are pretty calm about what is happening.

You're in massachusetts, you speak to the junior senator elizabeth warren.

What is your council this week?

Do we need a delay across all of obamacare?

Personally, i think mixing up obamacare and mixing it up with the debt ceiling in the deficit and everything is mixing apples and oranges.

I think is becoming very political.

This is a huge execution of task.

A number of companies in our industry went to meet with the administration.

We offered to help.

They have reached out to us.

We have choices to continue -- we have to let this thing continue.

They were given the choice of what to do.

Your accent is not a boston accent, i believe.

The british system i believe is misunderstood.

We have a basic healthcare system, the national health service.

You have the choice to have a private system.

It was interesting, some and send me a message today, saying it was addressing never had.

I think the system of a national system plus private on top where you can choose to spend more money for better and faster service, is a great system.

We have the best healthcare in the world in this country.

I think we need to find a way to reduce the cost, we need to make sure there is focused on reducing the cross -- reducing the costs.

I had an operation for 9000, after winter insurance it was down to 3000. that has to stop.

I had an operation as well, it cost me one dollar $.29 -- it cost me $1.29. it was a successful donut ectomy.

We took care of it.

Nigel travis with dunkin' donuts.

From new york city, this is "bloomberg surveillance"," good morning.

? i am distracted.

How do you solve the twitter question?

Scarlet, please.

I insist.

Oh, you're so generous.

It is a momentous moment.

Dunkin' donuts.

You know what we are talking about.

I am going with the apple.

Pumpkin coffee is very in.

Don't talk with your mouth full, tom.

We're going to take a break here for a moment and do some serious top news headlines on bloomberg surveillance.

Starting at top news headlines, u.s. and iran agreeing to talk on nuclear weapons.

They will meet in geneva in the middle of october.

The agreement came after secretary of state john kerry met with his counterpart yesterday.

That meeting met the highest level of talks between the two countries in 36 years.

The united nations council agreed to a resolution requiring syria to give up its chemical weapons.

The resolution is a compromise between the u.s. and russia but doesn't call for any automatic penalties if syria doesn't comply.

It also doesn't specify whether syria has complied with the directive.

Inflation in japan has accelerated to its fastest pace in years.

It is slightly higher than economists report heard the biggest factor behind the increase.

Those are your top news headlines.

How can i concentrate when you're stuffing your face with donuts?

He is almost done with it too.

He took it in less than two bytes.

The fast food industry is growing faster than ever.

Nigel travis, the ceo of dunkin' brands international.

Why is that a priority?

The number one focus is still the u.s.. we have always been seen as the regional northeast, jane.

We have gradually gone south and west.

We have a huge opportunity as we go through texas, which we are very excited about at the moment.

Out to california.

It is officially opening up in 2015. we will have a few stores before then.

We can build a 3000 store still is of the mississippi.

We made an investment earlier this year in spain.

You may say crazy time.

The spanish prime minister's calling and into the recession.

Actually, spain had -- it is not a good short-term investment, but a longer term investment yes.

Germany, which we see as a part of a european strategy, is going great guns.

We are very excited about that.

You are right, it is difficult to concentrate.

Dunkin' donuts, two bytes.

We are going back to my home country at the uk.

We were there 20 years ago, we are back.

We are very excited about europe.

Here is the secret of growth.

Everyone talks about asia.

I think latin america is going to be the boom place.

I think the pump can donut is the untold secret.

Your international strategy takes on a contrarian viewpoint.

As you referenced, most ceos to about asia.

Is that hard of your strategy?

We have been in asia for 30 years.

China, i am going on record as saying we have not gotten china right.

With baskin-robbins we are really excited about the opportunities there.

Asia is very strong first.

India, i am meeting our india franchisees -- here is the record, tom.

Is it culturally transfer?

Whether it is tim hortons in toronto or dunkin' donuts.

How do transfer the culture?

The culture transfers easily.

When i was a kid, i used to do a donut run.

When you go to latin america back on that subject, he get on a plane and you will see boxes just like this and you guys will be fighting over it, on the aircrafts in the bin above you, you see boxes and boxes of donuts, the same in southeast asia.

Donuts are global.

We all think of donuts as an american thing.

But it is not.

It might be global.

But in california where you have more difficulty expanding too, like their local donut shop or they don't want to be part of an international chain.

True, so we are in texas.

I think you distinction is our range, our speed of service is very important and the fact that going with it is our coffee plus our sandwiches.

Is interesting come in texas i had a taxi driver who had not been in dunkin' donuts for 20 years -- these are nutrition personified.

Is there such a thing as a nutritious donut?

We do have some very low calorie donuts and we have a whole menu called deedee smart trade -- regular menu called bb smart.

We have to change our further question of the day.

Forget it.

His three donuts in one segment route?

That was a matter of about four minutes.

Out enough i'm going to be able to do radio today.

I think that was absolutely disgusting.

Tom you have glaze on your mouth.

This is "bloomberg surveillance" we will be right back.

We're going to talk about education system in this country when we come back.

. this is "bloomberg surveillance." i am scarlet fu emma joined by tom and sara.

Intel wants help with a tv project.

They are looking for partner to provide a base of internet subscriber or rights to movies and tv shows.

The strategy shift means a plan launched by the end of the year could be delayed.

Oracle sang the cloud will lift its margins.

They expect to boost operating margins.

Oracle has beefed up cloud computing efforts to better compete with workday in salesforce.com.

Analyst forecast that oracle's operating margin will increase sharply this year.

Panasonic and kkr closing in on a deal.

The japanese company said to sell its health care unit for 1.5 billion dollars.

This provides digital medical records and makes instruments to measure blood glucose.

A deal could be announced as early as today.

I have some headlines.

Charles evans, president of the chicago federal reserve bank, is speaking in oslo, norway.

When a fed president speaks, investors pay attention.

He is considered more like minded with ben bernanke on the jobless side.

Explaining that we were not ready to taper.

We could do it in october, november, or january.

A quiet market.

10-year yield lower.

And then there is the evidence -- evans leg down.

He says we need to have more confidence in the gdp.

The data does not provide confidence in major purchases.

Everyone wants to know now, now that the fed held off, when?

Speaking and rhetoric.

It is worldwide.

Washington is here debating its debt, but the japanese prime minister is focused on restoring his economy with a combination of infrastructure spending, interest rates cut, devaluation of the japanese yen.

He was here in new york this week for the united nations general or sibley.

He'd spoke to charlie rose about his mission as prime minister.

The reason why was chosen as prime minister is again is that we were in prolonged inflation of 15 years and the economy was in a downturn and doldrums.

And i was chosen as a prime minister to do something about the economy.

So my mission is to revitalize the japanese economy.

He told charlie that he does not know where the name abenomic s came from.

His new thing is when men -- wom enomics.

Is seen a black limousine in new york?

Clogging up traffic.

He is on this pr blitz.

Our columnist has written about this.

He says when abe says his nation is in the midst of great elation, he needs to stop believing his own press and get out more.

Confidence in abenomics is still in overseas phenomenon, not a domestic one, he says.

I had a chance to sit down at the major corporate executive from japan, the ceo of a cosmetics company.

90% of their revenue is from japan.

They live and die by the japanese consumer market.

I asked him, is abenomics working?

Is it spurring the domestic consumer to buy more makeup?

There are a couple of economic indices, like gdp, unemployment rate, and share prices, they have improved pretty much thanks to abenomics.

However, the base salary for ordinary people has not been increased at all.

Some companies, exporting companies, they raised their bonuses temporarily, but not raise salaries yet.

It should be to raise the base salary and then people will want to spend more money.

That is so interested.

-- that is so interesting.

We have seen it in the gdp numbers and the data.

When it comes down to it, the salaries, the income levels of japanese people have not gone up.

Therefore, he has not seen a big boosting consumption.

This will be the trick.

And tangibles, like confidence, have not returned.

People will hold onto their habits of saving and not spending.

We have baskin-robbins in japan.

Over 1000 stores in japan.

The point is it is going to take time.

This is a cultural shift by the government.

They are trying to stimulate the economy.

I think it is more of a mental state right now than a physical state.

Alternately, it will break through.

It definitely needs to move away from where they were for the previous 10 years.

I want to give everyone a data check as we head into the open.

U.s. stock index futures right now showing a decline in stocks when the market opens.

A lot of concern over the budget talks as an impasse.

We have some data.

Personal income and personal spending coming out at 8:30 before the market opens.

The 10-year at two point 62%. good morning, everyone.

All of our interviews are on bloomberg radio plus and on itunes.

I am tom keene.

Nigel travis, chief executive officer of dunkin brands, is with us.

American kids score below average versus other nations.

You can take the s.a.t.'s, the average verbal score is now at a new low.

How do we make our kids in schools smarter?

Amanda ripley follow the data in finland, poland, and south korea.

She is the author of "the smartest kids in the world: how they got that way." when you move past funding and discussions of poverty, what is it that the countries you focused on -- what do they have that america is missing?

They went through a time of economic herald, so we know what that feels like.

For a variety of reasons, a ended up coming with a considered says the kids needed to do rigorous work in order to survive in the economy.

Once you have had that consensus, other things happen.

Other things fall into place.

Finland, in the late 1960's, shut down its existing teacher training colleges, which are a lot like ours.

Your book uses a lot of words like rigor, resilience, higher order learning to describe what is lacking in u.s. high schools right now.

How do we get there when my second grader's teacher uses words like fun, encouragement, and support.

You are wearing a blue ribbon today.

Everybody gets a blue ribbon, right?

Yes.

Certainly we have a problem with our anxiety about children's self-esteem.

That is not the case in many countries around the world.

That is a huge challenge.

I think we are starting to see a slight shift, but it is very countercultural.

I wanted to go to nigel travis from dunkin' donuts within english education.

When i give doors to the british kids, they are smarter than the american kids because of that rigor -- when i give tours to british kids, they're smarter than the american kids.

Do not be full by the accent.

The u.k. does not have the results of finland or area, although it has improved recently.

Certainly, the trick is to have rigor and fuse the whole system.

You want teachers or carefully selected, well-trained, and you want work that is worth doing.

We are moving in that direction here.

Very turbulent, but 45 states in the u.s. have adopted common core state standards which are more rigorous standards for what kids should know in math and reading.

Of course, it is a no-brainer.

But there is opposition from the tea party.

There's plenty of opposition.

You say that i schools in finland, korea, and the other country, what about sports?

What's i think we lost sight of the priorities.

Kids pick up on those signals.

When i spoke to exchange students about this, nine out of 10 said kids seem to care more about sports in america.

They also said that american classes were easier.

You see the interaction of those two things.

I am not saying we should do away with sports altogether, but in most countries it is separate from school.

Kids do a year abroad in college and they are never the same.

It is so much harder, and they come back totally different.

That is the concept that comes up in the u.k. in the modern world, you need to solve problems.

I am on the board of our school in massachusetts.

We had a debate the other night about creativity.

We were talking about the role of the arts in the music, dance, and art in general.

I think that is important, but that does not seem to come out of your studies.

That is important.

Finland is a great example of that.

Would you see in asia, like in korea, there is less of that.

I think it is a problem, trying to get that balance.

We have a lot more to discuss.

A man directly joining us with the latest on her book.

Are you going to send your kids away for their education?

They went to hong kong last summer.

Congress normally deserted on the weekends.

Not this one.

House republicans working on a proposal to keep the government and business after monday.

? good morning.

I am tom keene, joined by sarah and scarlet fu.

Betty liu is with us.

Did you get a memo today, did someone die?

Because i am wearing black?

I do not know.

All i can say is -- was that doughnut good?

That look too good.

Which one, there were three.

I only saw one.

We have the newsmakers on today.

Jon huntsman will be joining us, the former republican governor of utah.

We also the former amp passenger -- she's also the former ambassador to china.

Also, steve schwarzman, the blackstone cofounder, chairman, and ceo.

We did a panel yesterday at the china institute.

As a big new venture where he is putting together a stoller's program in china.

We put that together.

We will also talk about the fed and washington.

Ok, bloomberg and steve schwarzman and jon huntsman on "in the loop" with betty liu this morning.

Are we moving?

We are moving.

We have a couple banks on our radar.

Guggenheim has downgraded tank of america and goldman sachs.

Bankamerica cut to neutral from buy.

That stockade -- that stock taking a spill right now.

There has been a lot of talk about currencies and commodities being softer.

10% drop perhaps that citigroup.

Jpmorgan stumbling a little bit as well.

I am watching nike shares, on the move after nike announced results that topped analyst estimates in terms of their profit es

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

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