Hamas Battles Back in Gaza (7/21)

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July 21 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Gideon Rose, John Melloy, Dan Sheyner, Steve Miller and Aaron David Miller. (Source: Bloomberg)

It is a disaster like no other.

247 bodies await transfer among mutual distrust.

This as vladimir putin accuses the west of "mercenary political goals." in gaza, hamas battles back in a sunday of fighting.

Monday brings secretary of state kerry to cairo.

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

I'm tom keene.

Joining me, scarlet fu and adam johnson.

In addition to the obvious crises in gaza and ukraine, there are a few things we need to talk about.

Starting in london -- prices and property fell for a second month in july.

The increase of new homes softening the market for sellers.

It is like what we are seeing in new york.

The money flow seems to be looking for assets in difficult times.

Economics out of the u.s. -- 8:30, the chicago fed.

As far as earnings, before the bell, halliburton and six flags.

After the bell, chipotle, texas instruments.

We have a busier economic week then we saw last week.

We look at stocks, bonds, currencies, commodities, futures at -2. the quiet on the screen, waiting for news flow.

Nymex is 103.14. 12.06 for the boe.

The yield curve is flatter.

.2% spread.

The 10-year to the two-year is below 200. you can see the point to federal over.

Recession, recession -- nowhere near recession, but nevertheless a rollover to a flatter yield curve.

We have looked at the front pages.

They are tragic front pages this morning.

First, the latest on malaysian air flight 17. the bodies of 251 people, 66 parts of bodies have been recovered and brought to refrigerated train wagons in eastern ukraine where they are essentially being held hostage.

The rebels are preventing the department of the train.

And the dutch are finally being on the scene, but i will be honest, i don't know what that means.

It is heartbreaking.

Ukraine's prime minister says international experts have arrived and need to get to the crash site.

Secretary of state john kerry expressed his concern over the sanctity of the crash site, keeping it secure and available to experts.

We have reports of drunken separatists piling the remains of people into trucks in an unceremonious faction, -- in an unceremonious fashion, removing them from the location.

They have removed, we understand, some airplane parts.

It is critical -- this is a critical moment for russia to step up publicly.

Meanwhile, europe is threatening new sanctions against moscow following charges that the russians supplied rockets and is now hiding evidence.

As i listen to the craziness of the headlines in the images, think of the u.s. be more involved -- the ntsb coming in with inspectors, cordoning off -- none of that is happening over there.

I would say the 40 to 50 headlines -- germany's foreign ministry says russia faces last opportunity.

I am not quite sure what that means.

Maybe it is new sanctions to cap chip with the united states, maybe more, but there is a certain intensity for what we observe -- is certain intensity to what we observe with this train or a . sunday was the deadliest day in gaza so far.

The president of the u.s., barack obama, in a call with benjamin netanyahu, raised serious concerns about growing civilian and military casualties.

I look at this effort, and it is a larger number of israeli deaths since the last time we went through this.

I saw one quote that they believe they have gotten most of the tunnels now, but you really wonder what next.

And u.s. secretary of state john kerry is expected to arrive in egypt.

He might look to broker a 2012 egypt's truce that would affect the restrictions on the movement of people.

All of them failed.

There is some fundamental issue that i don't want to pretend to try to comprehend.

It is more complicated than any of us can address.

But this is tragic.

Those are front-page stories, but we are not done with them.

We want to get into them more deeply.

247 bodies from mh 17 brought in the summer heat of eastern ukraine.

There is impatient and outrage.

President clinton pushes back -- president putin pushes back with distrust.

Ryan from "the russian observer" joins us.

What would you expect from russia and vladimir putin this monday?

You have to watch very carefully what he says over the next 24 hours.

He made a statement yesterday where he said the separatists should absolutely cooperate with international investigators and ensure their security, and that going forward, diplomatic means should be used exclusively, that there should be no more fighting.

Those are the kinds of things that western leaders want to hear.

There was also that comment from the german foreign ministry, where it was president clinton pot -- that it was president putin's last opportunity.

Watch him try to avert those sanctions.

We talked about this image before that mr.

Hooton -- that mr.

Putin works in a vacuum.

Does he have a council giving him advice?

Yes, he does.

The question is, who is in the council?

Increasingly over the last three or four years we have seen people from a security services background.

The idea of russia taking responsibility, owning up to some kind of responsibility, is probably not something they are willing to entertain.

But he also might be hearing other voices, and believe me, they will be russian officials who will be very concerned about the prospect of russia becoming a pariah state.

I know you spoke with the ukrainian prime minister over the weekend.

Listen to what he had to say this morning about the recovery effort.

These bloody guerrillas do not tell the train to leave the area.

We expect the train will leave the area as soon as possible.

Give us some context.

What did you learn from him over the weekend?

290 people killed, so far 272 bodies recovered.

This is bristly stuff.

-- this is grisly stuff.

231 of the bodies have been loaded onto rail cars, and they are pretty much stuck at the station at the crash site.

The idea is that they are to be taken to a ukrainian site that is under control of the government, unlike the crash site, which is under the control of the separatists.

The plan is now to send the bodies to the netherlands.

Remember, the majority of the people were dutch, so they could be identified outside the country.

Ryan chilcote, thank you.

Our editor of foreign affairs, also the council on foreign relations.

We also have john malloy.

I want to start with gideon.

There are ways to dissect what is going on in ukraine.

The first one sees this as a turning point for moscow and how this could really change vladimir putin's position.

Do you agree with that?

I actually don't. the question about this being a tragedy with any comparable precedent, unfortunately the sad truth is that nobody cares about the civilians except their loved ones.

The only way this would become a major turning point is that the europeans fundamentally had their spines stiffened by it and took the measures about sanctions that they have been yet unwilling to take.

I have to take issue with that.

Nobody cares about the civilians except the families of those civilians?

What i mean by that, is that nobody in a position of power in the conflict cares enough to change their behavior.

The russians don't care, the ukrainians don't care.

Ukrainian government cares, but not enough to change policy.

There are only outsiders so far that are set to stop this, and that is the europeans.

But they cannot do that much.

The 18th paragraph of every article says it is cold in winter.

How linked is this present debate and the outrage to the reality that the europeans have a heating bill comes due in november and december.

I would take the german argument that this is the last time the russians have to step up, otherwise things will change.

Because of the hydrocarbons?

Absolutely.

Foreign policy now is driven by almost entirely economic concerns.

Fabulous work on your's work to fund -- on europe's work to fund hydrocarbons.

It is a long-term problem of dependence on russian gas.

The europeans have taken away a lot of their energy sources, and in the long run they are going to be dependent on moscow and not willing to cut off their trade ties.

What is gideon rose's to do list for secretary kerry in cairo?

Again, the parties involved do not really care about the civilians.

If anything, hamas welcomes this because it puts pressure on israel.

The outsiders are all basically wringing their hands.

Both of these cases, ukraine but particularly in gaza, no one has a plan to tie some military force to political outcome.

So you see endless conflict, endless truces, and renewed conflict.

Is everybody just acting day to day and indeed our to our -- and indeed hour to hour?

This is the same stuff that has been going on for a long time.

Israel and palestine, that has been going on for decades.

No one has a long-term problem so you have the israelis beating up the palestinians until they become quiet and forget about the issue until the palestinians put them back on the agenda are in the israelis beats them up again, same thing happens.

Who is set to lose more?

Unfortunately, everybody has something to lose.

Also, john malloy on the markets.

I think we need our twitter question of the day.

What role should the u.s. play in the mh 17 recovery and investigation?

There are two big stories -- one in gaza and the other in ukraine.

There is a "should" and then what role could it play?

We will be right back after break.

? coming up on "bloomberg surveillance," -- on bloomberg television, mark farber will be on "in the loop with betty liu." this is "bloomberg surveillance ." i'm tom keene.

With me, scarlet fu and adam johnson.

Risk assets are reacting specifically to the situation in gaza and ukraine.

The dollar, the 10-year note, and the vix are higher.

Gold and oil are not.

Our guest host is john malloy.

What is the distinction between the groups that are reacting and -- gold has lost its safe haven properties.

Only about 46% of users on stock twist are bullish.

It had the initial pop and in the immediate fade.

What people are going into, and this is why gold is rolling over, is the dollar.

A lot of people went into the dock etf and we saw that search.

Really the play out of this is that the retail trader playing is dollar, vix, staying away from gold.

The other movies oil.

Uso, oil back up -- oil has been down.

Well, over time.

It is pressing against resistance it has had all year.

I realize long-term for stocks, stocktwits world is about three hours.

For long-term investors, making up the rest of us mere mortals, should we adjust our portfolios based on this?

No.

stick with an outlook that for the rest of the year you are going to have to trade stocks.

It is going to be a trading market.

The stocktwits gang has two trading opportunities from last week, first with janet yellen saying social media stocks and bonds are overvalued.

If you bought after that, you won.

Unfortunately, if you bought on friday, you won after that.

There are two great opportunities.

For the long-term users you stick with the trend of the dollar being the place to go.

The dollar is probably the best lace.

You stick with the spy, which will turn for the rest of the year.

So you start your day at 10:00 a.m. and you are still bullish.

Did you see how i got that in their?

.co yes.

From "the wall street journal," "the disconnect between frontpage news and wall street may not be that irrational.

Investors comforted in recent years by the warm blanket of central-bank accommodations are conditions to buy the dip." what is impressive, even with janet yellen saying those words, we are going to end in october, the market still remains stable and we came back.

If the market was able to take that, i think this is a market ready to stand on its own, especially with corporate earnings.

You will see some good earnings this week, some good earnings with apple, facebook.

People are starting to think that the market will stay on its own.

And the employment picture will not get any better.

They are sticking with the u.s. as the best game in town.

They are sticking with it, but respondents in a poll said 67% of volatility measured by the vix will be higher in six months time.

Isn't that better for stocktwits readers?

Yes.

That is another group that is gaining popularity on the site.

People are still sticking with facebook and apple and some of the financials.

People are buying into goldman sachs, morgan stanley, mainly those two, charlie's to commodities trading as well.

The stocktwits trader is still staying active.

John melloy, one of our guests this morning.

Also gideon rose.

Steve miller of aig will be joining us as guest host.

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

Good morning, everyone.

"bloomberg surveillance." tom keene with scarlet fu and adam johnson.

Think of how rare it would be for president obama to write an op-ed on the front page of "the new york times." at is effectively what the u.k. prime minister did.

David cameron wrote on the front page of "the sunday times" yesterday, comparing the malaysian shootdown to lockerbie.

He said "we should not need reminding of the consequences of letting the doctrine of might is right or they'll.

We should not need to be reminded of the lessons of european history." 10 u.k. citizens were on board mh 17. that is what he is responding to.

Why is vladimir putin so curiously in the background?

Hard power, soft power.

Which works here, if any?

Hard power is often good in the short-term, but it has to be married to a serious strategy to achieve a lasting lyrical goal.

That is where soft power comes in.

The israelis, and frankly, putin , have a hard power, but they cannot harness it to reach -- they cannot harness it to achieve some sort of goal.

Gideon rose, your foreign affairs magazine puts together a theme in the concept.

For this month, what would be on the cover?

Right now i think you would have to have gaza or ukraine.

But the fact is, those are not the kind of things you put in if you have a six month or a year long issue, because those are both tragic but not fundamentally significant, unless the crash leads to sanctions with regard to russia.

They are tragedies but they are not tied to the main sources of global commerce, which investors follow, or even global politics.

At the end of the day, it is a tragedy, no question about it.

That brings us to our twitter question of the day -- what role should the u.s. play in the investigation and recovery?

? good morning, everyone.

"bloomberg surveillance." i'm tom keene.

With me, scarlet fu and adam johnson.

Let me do a data check.

Negative two, negative three.

The yen was stronger early this morning with the euro, fractionally stronger.

Hydrocarbons are elevated given the headlines in eastern ukraine and the headline flow in israel-gaza.

There are further headlines, from kuala lumpur, malaysia.

Obviously, mh 17, and what we saw months ago with the previous malaysia airlines -- it has been a difficult time for the malaysian government and people.

Attention is on ukraine and on israel and gaza.

Why should we pay attention to malaysia?

What is the item of note this monday morning in malaysia, haslinda amin?

298 passengers perished, including more than 40 malaysians.

So malaysia has to be considered -- malaysia has been trying to get access to the crash site, but so far there has been no safe corridor established for investigators.

Within your reporting and your team out of singapore and co-op of them poor, it may be premature, but can malaysia airlines survive these two horrific tragedies?

It is going to be tough.

This could be the last straw.

That is what some analysts are saying anyway.

This is a carrier shuttle with financial woes -- this is a carrier shuttled with financial rose.

It can ill afford two back-to-back aviation incidents.

Are we going to see malaysian investigators on the scene at some point in the next 72 hours?

You know what, there is a delegation of 130 including forensic experts, recovery personnel, medical experts, that have been trying to get exit -- that have been trying to get access.

But there is no indication they are getting that access.

The prime minister will be speaking to representatives from the dutch side.

So far there is no indication they will have access.

Also putin has promised but has yet to deliver.

Thank you, haslinda.

Coherent possibly -- coherent policy -- this morning's focus on the human tragic continuity -- the human tragic comedy played out in eastern ukraine.

Gideon rose is editor of "foreign affairs" magazine.

I think there is a general outrage.

It was captured nicely in "the washington post" this morning.

Here is the morning must-read that i have.

It is an agenda that all to bring the u.s. and europe together.

Will it bring america's -- americans together?

The horror that has been described as a wake-up call -- it is not clear if our petty political system will pick up the phone." we have to fix our foreign policy at home.

How would we do that?

What we really need to do is take care of our own garden, get the fiscal house and energy policy in order to get some kind of national consensus so that every little per term and does not become a football -- so that every little per turbines -- so that every little perturbance doesn't become a football.

There is volatility out there but not in fact threatening u.s. core interests.

I wish what the obama administration could do better would be to indicate why withdrawing from some of our extensive commitments over the last decade is not necessarily mean threatening the core at home.

There is an argument that the white house is being too passive and timid, not taking enough initiative and being almost european in its response.

They certainly look like they are doing that.

The question as to whether anybody wants them to do more or if there is a hell of a lot more that they could do remains unclear.

We can go back to ir 101. the secretary carry travel -- the secretary kerry -- does he travel like a different secretary of state?

People think of it as pushing the rock up the hill.

He is never going to get to the top, so why bother?

The real answer is, you do it so the ball does not roll to the bottom of the hill.

It is when the u.s. pulls back, doesn't get involved, doesn't mediate, things go to hell in a handbasket.

Is there a vacuum right now?

Is a part of a vacuum, but we have been involved in the middle east for a year.

The locals do not want to make the compromises yes -- the locals do not want to make the compromises necessary.

These guys do not make the geopolitical compromise.

How does israel respond to the death count in israel gaza this morning.

There is a tragedy because israel is taking highly legitimate measures to protect them selves and strike at people who are shooting rockets at them, and they are very successful.

But what that does is highlight the asymmetry in the conflict, and the problem is that this is a dysfunctional relationship with these israelis -- which the israelis cannot get rid of.

They have to make the palestinians accept a settlement, and you cannot just do that with sticks.

You have to have carrots as well.

Is like a bad marriage.

The israelis want the palestinians out of their lives, but they cannot do that unless the palestinians are willing.

They keep knocking at the door and saying pay attention to us.

Lets see we see more sanctions and -- let's say we see more sanctions and capital by the russians.

How do you link, with all your work over the years, how do you link a dampen gdp into your stock world?

It comes back to strengthening the dollar and the u.s. very specifically on the micro level, 10 years ago you did not have the etf.

But if you look at the russian etf rsx, this time around it has been selling off and users continue to be bearish.

One writer made clear that ibm does better when things are lousy.

And all of a sudden you say there is a big company that is growing.

You wonder how the american stock market does.

Very much so.

Eugene, you wrote the -- gideon, you wrote the book "how wars an end." how does this look?

Unless one side can push one into the sea or the other side can push one into the river -- that is not going to happen.

All outside observers should know that this ends with something like the clinton plan.

This is like a bankruptcy situation where everybody knows they are going to get a few cents on the dollar, but they are each committed to a maximum position and they are willing to gay gauge -- they are willing to engage in a lot of conflict.

Gideon rose, thank you so much, our guest host for the hour, gideon providing perspective on ukraine and the middle east and israel and the palestinians.

Coming up, our last installment on the serious on millennial's. it turns out these guys all want to be in charge.

We will explain the link to private equity next.

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

"bloomberg surveillance." we welcome all of you.

Headlines -- netanyahu talking about the effort to blow up the tunnels, "exceeding expectations." we are looking at ukraine as well.

This is "bloomberg surveillance ." he also says the gaza campaign will expand to long-term quiet.

That is when the kids go to college.

I don't mean to make a joke.

What is long-term quiet in gaza?

The israelis have a long-term outlook like investors.

It means no immediate violence against the palestinians for a while.

But they have no long-term vision because real long-term vision would be creating a settlement that they would accept.

They just basically say let's beat them down and hope that they stay quiet for another few years until we have to beat them down again.

It is whack a mole in the middle east.

G-v roseann john melloy with us.

We have photos for this monday -- gideon rose and john melloy with us this morning.

Some other news -- number three photo, rory mcilroy won over the weekend, the british open.

Dealing with all these headlines, this was a welcome one.

How did tiger woods do, by the way?

Anyone keep track?

Well into the third round, then i lost track.

So rory mcilroy did better than good.

Especially as we talk about gaza, hamas, etc.

Number two photo -- the artwork "my bed" by tracey emin, was sold for $4 million.

Four $.3 million.

It was part of a christie's auction.

It created a modest upward.

I don't know how you reinstall the piece.

You don't make your bed when you get up in the morning.

Our number one photo after the giant duck floating around the hong kong harbor, now we are getting a 72-foot-high golden fabric frog.

This is in beijing over the weekend.

It will last until august.

Is this the year of the horse?

Yes.

Why are we showing a frog?

We had this in hong kong recently as well.

Blow up things in harbors?

Yes.

Is their symbolism to the frog in chinese culture?

Not that i know, but everything is kind of linked.

Everyone is yelling at me, "money." yeah, it is interesting.

That looks like my dorm room bed, that head -- that bed.

Imagine you afford a place in the hamptons, "well, i sold this bed." it is a weird world.

We talk about what is happening in ukraine and gaza in syria, afghanistan, iraq, and then a nun made bed sells for form -- and then the unmade bed sells for $4 million.

One millenial has turned giving advice to young bankers into a business opportunity.

This is "bloomberg surveillance ." ? this is "bloomberg surveillance." scarlet fu here with tom keene and adam johnson.

Let's get you company news headlines from "bloomberg west." verizon sees its users' need for speed.

It is upping its connection to shorten the amount of time for connection and receiving videos online.

Phone booth may not go the way of the buggy after all.

It is said they can be brought into the 21st century.

It would provide free wi-fi at more than 7000 sites.

Cisco, samsung, and ibm might join google.

And the device that got us moving may come back.

The walkman cassette player -- remember that?

Sony is bringing it back for premium buyers.

It can store ultrahigh quality music files, and it sells for -- get this -- $700. why would you need that when you have your phone?

Because it is retro cool.

But hipsters do not carry purses or backpacks.

It does not get into their skinny jeans.

Maybe it is like the gordon gekko clunker phone.

I am not a millenial, so i cannot comment.

Let's get to a single best chart that has to do with millenials.

We are wrapping up our single best chart series on the millennial market with one last installment.

What we are taking a look at is, who wants to be the boss?

Who wants to run the show?

Valerio's lead the way.

65% of them want to be the -- melanie owes lead the way -- millenials lead the way.

Only 26% of baby boomers have similar aspirations.

Interesting because the least likely to want to be the big boss are white women.

Only 26%, apparently.

What i really wonder is if the data just points to this generation saying because he came of age during the worst financial crisis in however many decades, just saying it is not working.

The status quo does not work, so i as a millenial -- i am not, but millennial's are saying -- i can fix it.

I want to do better.

And afford your own apartment and -- mixing music.

There is a sequence of events that needs to happen before they get there.

But if you're looking for the next top manager, he comes down to a war on talent.

Wall street, competing for top candidates they can brew -- that they can groom.

If what adam was saying is true, the idea that the millennials are disillusioned by wall street because of the financial crisis or recession, why doesn't that include pe?

Why wouldn't they be turned off by pe as they are with investment banks?

To be fair, some people got disillusioned with pe after the bubble burst, but it is still an attractive industry.

Millenials are the kind of people that want to be in a position of ownership and running a show, whereas the difference between consulting or investment banking or other service industries like going into law, you're not giving advice.

You actually get to be an owner and you get to run the show, so you get to have a vision for what you want the company to be and realize it rather than standing on the sidelines.

So is pe a pathway to being your own boss or starting your own company?

It definitely could be if you would get to be up -- if you get to be in a position where you run your own fund.

Even if you don't get to be a big way, you have a lot of incident that you have a lot of influence.

I started my career in 1988, i go to merrill lynch, right?

And you stay there a long time.

But that is no longer the way it works, right?

Dodd frank is squeezing the investment banks.

The opportunity is now the small private places.

I had never been an investment banker and it is hard for me to comment.

I have heard the same thing that you have, that it is not quite the gold rush it used to be.

The challenge i have with this analysis is that it is a razor-thin part of millennials.

Whether in the hedge fund community or private equity, these are millennials of prodigious resume and abilities.

That makes a very small part of the public.

Most of them are just lucky to have something coming in.

That is certainly true.

This does tend to be the top of the pile and represents a small number of people.

The industry as a whole is only in the tens of thousands of people, which is a small number.

It happens to be one of those injuries -- one of those industries that people aspire to.

For every person in it, there are 10 who are dreaming of being in it one day.

But pe finance in general are still attracting top-quality talent in terms of millennials.

Talk about the pay in private equity versus that of investment banks.

A bil the world's greatest authority on this, even though i have seen the numbers -- but the leaders are not scrutinizing their pay the way they are at the big investment banks.

The pay at the investment banks is very good, and that at private equity is very very good.

Some people like myself would say it is of certainly good.

But it is not growing like it used to because fees are coming down, and it is not the gold rush of the 1980's or the 1990's. they can go into the gold rush of international relations.

You said on park avenue and 67th, this is a rarefied group, isn't it?

It is not one out of 10 or one out of a hundred, it is one out of 1000. -- do you see a shift here?

Absolutely.

I think each generation is less willing to take things on faith and accept the word of the previous one.

They want to be the boss themselves.

My 10-year-old daughter would agree with that.

For those who want to be their own bosses, for private equity in the meantime, what is the most important advice to give people entering private equity?

The most important thing is to do well in your job.

It is a very demanding job that takes a lot of dedication.

But if you stick to it and learn what it has to teach you, you learn investment businesses and more and more you are learning how to run businesses.

That gives you more and more to be an entrepreneur or a high-level executive.

Thank you so much.

He has written a guide for explaining private equity.

John melloy, and gideon rose, thank you so much for your perspective.

Let's do a quick forex report.

I am watching the yen more than anything.

Scarlet?

Coming up in the next hour of "bloomberg surveillance," steve miller, join chairman of aig, will join us as guest host.

A disaster like no other.

251 bodies remaawait transfer.

In gaza, hamas battles back in a horrific day of fighting.

Good morning, this is "bloomberg surveillance." we are live from new york.

It is monday.

July 21. i am tom keene.

Our guest host, steve miller, chairman of aig.

Right now, let's get to or monday brief.

Very few pieces of economic data.

London, asking prices for property fell for a second month.

That softened the market slightly.

A different story in new york.

It skyhigh.

It is an interesting dynamic to see warehousing goes in the next 90 days.

In the united states, we have some earnings coming out before the bell.

Halliburton and six flags.

After the bell, chipotle.

It found -- it sounds like a monday in july.

There is word this morning about rupert murdoch boosting his business with aol time warner.

He is thinking about selling assets.

He could raise more than $30 million.

A major drugmaker faces losing a top backer.

Almost all allergen shares have been sold.

They are fighting a takeover bid by value pharmaceuticals.

Two fast food chains are suspending orders from any supplier.

The company may have sold expired chicken and beef.

Yum brands at mcdonald's are cutting off supplies.

Mario gabelli looking at the hundred dollar price -- hundred billion dollar price.

Time warner is trading at a premium.

That is something gabelli looks for.

There is other major news.

The west waits on vladimir putin.

251 bodies rot in the summer heat of eastern ukraine.

There is impatience and outrage.

President clinton pushes back -- president putin pushes back with this trust.

Ryan, over the weekend, i saw real shock that vladimir putin, calling him a thug.

Do you sense a growing nature on the part of the russian leadership towards kgb tendencies?

That is a good question.

It has been pretty clear for the four months that this conflict has been going on that the russians intended to act in ukraine covertly.

This is not a standard war where they are operating overtly.

They did not declare war.

I do not know if it is the tactics that russia is using in ukraine are anymore kgb-like than they have used elsewhere.

It is just that it is happening in a different country.

Now, we have this plane being brought down.

It has brought it to light.

Listen to what was said about the recovery of mh17. they do not allow the train to leave the area.

We expect the train will leave the area as soon as possible.

Give us some context.

What was your take away from your conversation with him?

Ukrainians want the bodies to be recovered.

They want the site to be investigated.

I got the sense they want to take the opportunity, in a way, and the support they're getting from other countries, to take the initiative against the separatist.

That is what we are seeing today with ukrainians launching attacks across the country, protect pure lawyerly -- particularly in donetsk.

Thank you so much.

Terrific perspective this morning on what we have experienced from eastern ukraine.

We're looking at the people of eastern ukraine and their reaction.

The comment i got this weekend from so many people is why can't ukraine just attack the rebels in eastern ukraine?

Why can't they affect that?

The priority is a crash site.

They're going to disrupt things further.

In terms of how the rebels have dug into cities like donetsk, they are nervous about going into these larger urban areas and damaging the infrastructure, hurting civilians.

That will be one of the main problems they have.

We have seen a long in the region.

How organized are the rebels?

Even israelis say hamas has been ferocious infighting.

Our the rebels organized enough to be ferocious in the attack?

I am not sure they have the controlled discipline of a group like hamas.

They have not been there for so long.

They are not fighting in a unified way.

Is there any one person who can unite the rebels?

It is difficult to say from over here.

There has been a lack of leadership over the last few months.

There are different men in charge of different towns.

There is not one unifying figure who can speak on behalf of the entire movement.

That is one struggle they face.

We want to turn our attention to what is happening in the middle east.

Israel is widening its offensive in gaza.

We go to elliott gotkine.

The operation to destroy tunnels exceeded expectations and the campaign will expand until the goal is met of long-term quiet.

What does that mean?

In means no rockets being fired into israel and no fears that one day, when you least expect it, a militant from, as will pop up -- from hamas will pop up.

I found an israeli soldier and found himself popping up in the dining whole.

They have discovered some 45 entrances to about 14 tunnels underneath the gaza strip.

Some of them are hundred feet beneath the ground.

That is the principal objective of this offensive right now.

President obama expressing grave concern about the number of civilian deaths in gaza.

What is the feeling amongst israelis that the u.s. might not be as supportive?

It is worth taking comment in context.

He said that he supports israel's right to defend itself.

Do not think the israelis see the u.s. as any less strong in their support for israel.

Many israelis expressed concerns about civilian casualties.

About 500 palestinians have been killed and 20 israelis as well.

How much on the same page are netanyahu and john kerry?

I guess we will find out.

John kerry says he is coming to cairo and then jerusalem and he is there to support the egyptian sponsored cease-fire.

If kerry sponsors that, this is a cease-fire that israel accepted and hamas and other groups rejected.

Hamas is on a different pace.

Israelis are thinking this is a return to the deaths what happened after 2012. look at how many tunnels they have managed to build.

They have been able to restock their rockets and make more sophisticated ones.

It is an open question as to how many israelis will be happy.

Thank you for bringing us up to speed.

Steve miller with us from aig.

The key question for me is can sanctions affect russian business?

Can sanctions work?

They are difficult and easy to work around in some ways.

It is more of a political statement than a business statement.

We will come back on this.

There is so much to talk about.

We want to bring in our twitter question of the day -- what role should the united states play in the recovery investigation of mh17? ? good morning, everyone.

In this matters to our guest host.

Steve miller of aig.

He has dropped wrenches on his foot at ford.

Like pharmaceuticals, it is much about not paying taxes to washington.

This is a story percolating beneath the international stories of ukraine and israel and gaza.

Is it failure going abroad?

It is the tax situation to being like a fire in the theater.

A lot of people are starting to leave.

Politicians want to lock the doors.

The real answer would be -- put out the fire.

Make the u.s. tax system competitive on a global scale.

This is trw, a name we know, with a german name we do not know.

They are going to merge so trw pays less tax to washington?

Which that would be it effectively.

This creates the world's largest auto parts maker.

A $40 billion enterprise.

The z in the name comes from the zeppelin.

In any event, this company will be larger than the previous leader's bosh and denszo.

The automakers want to buy from stable companies.

Underneath it all is a u.s. company will be leaving the u.s. tax role.

Let's carry this over with the cross industry expertise.

We see mr.

Merck -- we see mr.

Murdoch wanting to buy time warner.

Does that fine revenue growth at the top of the industry statement?

Now that things have stabilized after the crash of five years, people are starting to look at equity plays of consolidating within industries.

Auto parts is one.

Media is another.

Sheer size get to synergy, market and pricing power, thank you mickey ward code: separate companies would be.

-- and would it make you more powerful then a separate companies would be.

We will get an update on aig from steve miller.

It looking through this crisis and much more.

? it is "bloomberg surveillance." with me, scarlet fu and adam johnson.

Steve miller, chairman of aig.

Away from ukraine and israel, adam has our top headlines.

Some people in washington state are looking to the sky for help.

Wildfires have torched 150 buildings and scorched nearly 400 square miles.

One man died of a heart attack while trying to save his home.

We wish them all well.

Rockford files to "the notebook." fans remember james garner.

His acting career spanned half a century.

He died of natural causes at the age of 86. golf fans think they have a new tiger.

Rory mcelroy who won the british open.

He is the third youngest player to win three majors behind jack nicholas and tiger woods.

He won over $170,000 because he bet on his son to win the tournament 10 years ago.

10 years ago.

That is -- very cool.

Back to the serious stories.

Diplomacy is all we have left after the horror of mh17 after the repeated battles of israel and hamas.

David cameron on the cover of "the times of london." john kerry travels to cairo.

Peter cook sorts this out.

What is the mission of secretary kerry as he travels to speak with the government of egypt?

To get a cease-fire in the middle east.

It is not clear he is going to end up with that risk that -- that result.

Again, it is a challenge for secretary kerry.

He has the un's secretary-general in the middle east pushing for the same thing.

Yesterday, we got the readout from the president of the prime minister.

Serious concerns about the civilian and military casualties.

The u.s. would like to see a cease-fire.

It is not clear if they are prepared to line up behind a cease-fire.

Is egypt speaking more closely with israel or with, us?

We are not clear at this point as to what the role of general is.

In terms of players who can intermediate between the sides, there are not a lot of options right now.

He seems to have the ability to play some role here to bring the other sides, to get the fighting to be reduced.

What happens with the conflict in syria and iraq?

The president is juggling a number of balls in the air right now.

There are implications by what happens in the middle east for syria and vice versa.

Even though the president might not be talking about it in every statement, these are all issues that matter right now.

They could blow up on this president.

So many things to talk about.

Give us an update away from the newspapers, away from the reports.

The quality of the focus of the white house on eastern ukraine and donetsk.

They are doing voting a lot of time and attention to this at all levels of the administration.

Whether it is the state department or department of defense, the intelligence community trying to provide as much evidence as possible as to what took place, who was responsible, who pulled the trigger.

You have the effort at the treasury department to ratchet up u.s. sanctions and probably europeans to move forward with tougher sanctions.

That is what the u.s. would like to see.

It would like to see vladimir putin back down.

We got video statement that seems clear that he has been on the defensive.

He is pushed into the corner and being made an international pariah.

The question is how does he respond at this point.

Peter cook joining us with the washington perspective.

You have been covering the crisis in ukraine, talking to your contacts on the ground.

Are you hearing anything from them calling for more of a u.s. presence?

One that dutch resident who was interviewed was angry and pointed out that if there were 200 american bodies lying on the ground, the u.s. would be far more of balls -- far more involved.

The u.s. has tried to send a couple of experts in from the fbi.

They are stuck in kiev.

Very few officials making it to eastern ukraine.

What if it had been a plane to bangkok that had gone down?

Is there a distinction in the airline that went down?

I don't think they would distinguish between a dutch aircraft, malaysian aircraft, or a german aircraft.

You have been on the ground.

What are you looking at over the next couple of days, given the geography?

It is going to be about getting these bodies somewhere safe.

The officials in charge do not want to do the investigation on site, especially with the bodies.

They want to get them back to the families as soon as possible.

What do these terminal is need for -- mean for the insurance market?

We will have more after the break.

? this is "bloomberg surveillance." i am scarlet fu with tom keene and adam johnson.

Credit suisse is facing its worst quarter in six years.

They are expected to post a loss of almost $800 million tomorrow.

Credit suisse was fined more than $2.5 billion in may.

Another ignition problem for general motors.

They are telling dealers to stop selling some cadillacs.

They do not have a fix.

It affects 2014 ctx sedans.

Starting today, your cup of starbucks coffee will cost more.

The chain is raising prices because coffee bean supplies are tight.

Increases five cents to $.20 a cup.

That means one of the drinks my kids get is up to 12 bucks.

In all seriousness, the calorie count and some of those drinks is 300 or 400 or 500. it is like an ice cream sundae in drink form.

Do you know how many calories and get?

125. ceo's have to deal with crises every day, this includes cancer.

Our guest host is steve miller.

It is very complex, a ceo with cancer.

There are so much you have to deal with.

How did the board deal with it at aig?

The way every board has to deal with it.

You have to have a plan for what you will do if things do not turn out well with the cancer.

Chase has said they have a near-term, medium-term, long-term succession plan.

If something goes awry, they will know what to do.

You have a big conflict between your need to disclose something that is very interesting and important to investors, and that competes with the individual's desire for privacy and terms of a medical issue within the family.

Those two things, but in our american system, disclosure trumps everything.

If it is important, you need to get it out in a way the investor can understand.

What did you learn from the way apple's board handled steve jobs' illness?

Get out as much as you can about the facts of the situation and all of that.

If you do not, you will make it into a long-running story of people speculating and guessing what is behind and what hasn't been said.

In jamie diamon -- in jamie diamonmon's case -- jamie diamond is both.

Does that create conflict?

The board has to know what they're going to have to do.

Who will be in the chair tomorrow morning at the ceo gets hit by a bus this afternoon.

Bob benmosche is worse covered -- is recovered and doing well.

He is doing well.

He still has cancer.

It is treatable, not curable.

That is the difference from the jamie dimon situation.

Bob was diagnosed with cancer -- with cancer in 2010. i don't mean to -- can any officer actually run an operation from a hospital bed or from their home, receiving radiation or chemotherapy?

Ceos take a week or two vacation here and there.

Tom hasn't taken a vacation since 1990-what?

Unless the operation hits a crisis during a time when a person is hospitalized -- for the most part, you can do it.

We have telephones and blackberries.3 thank you for speaking so openly about it.

Jamie dimon that -- has made it clear this is something he can be.

Let's get your data check.

Not a lot on the calendar.

The chicago fed national index -- it is the lesser.

Brent crude is in under a four dollar spread.

Futures are down almost four points ahead of that activity.

The 10 year yield is unchanged.

Euro-dollar, a little change.

Good morning.

Breaking news.

Ukraine and the european response.

Prime minister cameron just moments ago, talking about the trains and a strong cooperation of eu members.

There is a battle in eastern ukraine.

There are battles going on in the luhansk region.

These are towns with heavy fighting going on.

How distant are they from the crash site?

They are in the region of donetsk.

There are a lot of towns along the province.

They are changing hands regularly.

You will have these separatists saying we control the town one day in a week later, they are moved out and into another town.

This is part of the skirmish between them.

Described the battle.

It is not brigades.

Is it an infantry of ukraine army forces moving against a band of rebels?

We have not seen a lot of urban fighting.

It has been skirmishing outside the major towns, in the fields and small villages.

There is a lot of shelling of towns by artillery outside of them.

That is one of the major challenges to civilians living there.

There are a lot of coal mines in the region.

The pipelines we talk about, are they in the middle of this region or might they be safe?

The one major pipeline that travels from the russian border is slightly further northeast of donetsk.

That travels right across the country down to slovakia and the hunt gary and border.

-- the hungarian border.

That is the flashpoint, the concern for europe.

I would tank so.

There have been some attacks and incidents on pipelines, but that would be a concern.

Where will the train travel to?

Does it just go west?

Ukraine has a fantastic train system.

Because of the concerns of air traffic, there is a main line goes back to kiev.

They want to get it away from this to continue the investigation.

When we talk about -- how does an insurance company begin to start assessing damage if there is constant fighting and skirmishes?

We have people in the ukraine who are part of our company, keeping track of this, day by day.

We try to keep up with it.

We also want to make sure that we satisfy claims as quickly as possible so they can get on with their business or lives.

We do not have to do it instantly.

We do take the time to make sure we get it right.

I have to ask you about peter hancock.

Negotiating with banks, to settle, this seems odd, given multibillion-dollar settlement so we see with other banks.

Describe the process.

What is unique about the way aig is approaching morgan stanley and others?

We were damaged in the crisis of 2008 i having accepted a lot of securities from these banks that has proved to be defective and misrepresented.

We had filed suits that a mailman -- that amounted to more than $10 million.

We ended up with 2 billion.

The last big one was settling with bank of america.

We wanted to find something we could live with and the put behind us.

We will have to revisit this.

This is important.

We will answer our twitter question.

Please tweet -- what role should the u.s. play in mh17's recovery and investigation.

Tweet us.

? good morning, everyone.

Alix steel is in for betty liu today.

Linking the finance and investment world to the international relations we have seen over the last number of days.

That is at 8:00 a.m. this morning.

I am tom keene.

With me, scarlet fu and adam johnson.

It will be interesting to see what he has to say to ms.

Steele about the markets.

The rare gift of adam johnson of tom keene imitation is frightening.

We want to bring in steve miller.

Let's talk about what aig has been doing.

More than $2 billion in settlements aig has recouped over soured mortgage funds.

Are you done with lawsuits and this effectively closes the chapter on what has been a contentious period in history.

This is the largest.

We are just about complete.

Bank of america settlement was a very large case.

We had filed a came for $10 billion.

We ultimately concluded it was a fair way to finish it on both sides.

650 million.

Are you going to capture another billion dollars?

Let's talk about the auto parts business.

They do not talk about -- like that.

What is important to steve miller and peter hancock?

We have global supervision from the federal reserve because of our designation as being systemically important financial institution.

That means the government and the economy have a vested interest in making sure that we do not have a collapse, like happened in 2008. the means we have to have stress tests -- we are not fighting it -- we have a second pair of eyes helping us as a board to make sure that we are safe and sound.

Also, if the fed says it is ok for us to do a share repurchase or a dividend payment, our customers will know they must be ok.

We can trust aig if the fed thinks they are ok.

He welcomes them.

A second set of eyeballs.

We have earnings today.

Yes.

Out after the bell, chipotle, netflix, and texas instruments.

Are you watching netflix?

I just finished "orange is the new black"." tomorrow, apple, mcdonald's, and microsoft.

We are in the thick of earnings.

Coming up, we are going to geopolitics.

? tomorrow on "bloomberg surveillance.

," jeffrey rosenberg will join us.

He is at blackrock.

We will talk about markets buffeted and less buffeted by international events.

This is on tv and radio.

And whether russia will pullout of u.s. treasuries or stop buying as many.

This is "bloomberg surveillance." i am scarlet fu with adam johnson and tom keene.

Our guest host, steve miller.

He has graced us with his presence.

Let's get you some company news.

It is in the files of "bloomberg west." verizon sees users need for speed.

They are boosting upload power on most fires connections.

That will shorten the amount of time needed to send the files online.

Phone booths may not go the way of the buggy after all.

Google and other tech firms say they can bring them into the 21st century.

It would provide free wi-fi.

Cisco, samsung, and ibm may join in the bidding.

The device that got music moving is making a comeback.

The walkman -- sony is bringing it back for premium buyers.

It can store ultra high quality music files.

That is this morning's company news.

Israel and gaza -- sunday, bloody sunday.

Israel surprised by the organization and ferocity of hamas.

Aaron miller has advised democrat and republican secretary of state -- he has served six of them.

We are thrilled to have him with us.

John kerry goes to cairo, what is the distinction between how he travels this morning versus secretary kissinger or secretary baker of another time?

Great secretaries of state are designed -- defined by negotiating skills, how much support they get from presidents and the lay of the land.

It is showing up at the right time.

The key to carry's effort is whether or not they have the kind of urgency required to ds ugly.

That is an open question.

What will you look for in the reports to find that urgency?

What should we watch in a couple days -- in the coming days?

You will see the israelis operate against the tunnels, which i think there are tactical objective right now -- hamas continuing to respond with rocket fire.

The israelis will try to avoid the kind of engagement you saw saturday and sunday in densely populated areas.

They are surprised by the resistance of some of the hamas fighters.

The question is whether the military clock on the ground is in sequence with the diplomatic and political one.

You do not have the right mediator, you do not have the deal.

I am not persuaded either side wants to step back.

More of the same.

Is a different this time in that president obama has signaled he is especially worried about the civilian casualties?

I have written talking points for secretaries of state and expressing concern, it is genuine concern, but the reality is the president has expressed -- i think in the main -- extraordinary support for the israelis.

It has given them a wide latitude to defend themselves and to deal with hamas' high trajectory.

What will it take from hamas to get a deal?

That is what kerry will focus on.

Once that is clear, they can go to work on the israelis.

Your book will be out this fall.

What is different now than two years ago or 20 years ago?

20 years ago, i voted for r's and d's. the last effective foreign policy we had in this country was george h.w. bush and jim baker.

They understood the relationship between means and ends.

They did not overreach and did not go beyond their capacity to achieve their goals.

Finally, they were operating in a different world, where american power could be applied and successful.

You have a cruel and unforgiving world, an enormous number of unmoving parts.

A limited capacity on the part of the united states to do everything.

We have to be disciplined when we project our military and political power abroad and be clear about our goals.

With all of your history and expertise on this, can you analyze what israel is doing wrong in this conflict and what is hamas' biggest mistake?

You have this ongoing -- this is a horrific tragedy.

A sequel to two previous movies.

1300 palestinians were killed in that conflict area and -- in that conflict.

The second time was in 2012. it was done by air.

It went on for a week.

There is no solution to the israel-hamas problem.

If you talk about the other palestinians, arguably, maybe you could make a deal.

Hamas feeds off -- its ideology is geared towards resistance and confrontation.

Israelis do not want it destroyed, they simply want it managed.

At best, you will come out of this with an outcome.

Last point -- whoever wins the military conflict, let's not forget the reality that in an asymmetrical war, what determines success is the image of success.

Who is winning the political game?

Who is winning the moral and humanitarian one?

The israelis will come out as losers in that regard.

Least a with us.

Willem marx with us.

Explain the relationship that prime minister cameron and the united kingdom has to the united states as an ally as we look at israel and gaza.

It is a complex relationship.

It is.

The european union differs in matters of policy when it comes to israel, compared to the united states.

I think they will try to follow the united states lead on this.

Tony blair is going to give a speech today and try to be involved in the process.

He is speaking about british politics.

Are tony blair and david cameron on the same page?

I do not know.

I think blair is meant to be far more involved in this than he needs to be at the moment.

Giving all of the moving parts, it sounds like step one is to try to get hamas to nail down what it wants and then the u.s. presents that to israel and goes to work.

What do you think they really want?

They are going to want to explain what they have achieved over the course of the last 10 days.

You have 500 palestinians dead, thousands wounded.

Probably hundreds of millions of dollars in destroyed infrastructure.

They have to do something on the economic side.

Here's what they want -- number one, salaries paid for 43,000 hamas employers who run gaza.

The cutter rees, 20 million bucks.

Maybe they can do that.

The crossing between hamas and egypt -- that is a question for egypt.

They probably want the release of the guys that were picked up in their sweep of the west bank.

They will argue that they have defied the mightiest military in the middle east, inflected -- inflicted israeli casualties and remained there inventory of high trajectory weapons.

I suspect -- we are going to have to go.

Thank you s

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

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