Market Reality Check: Street Smart (07/08)

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July 8 (Bloomberg) -- On today's "Street Smart," Trish Regan and Adam Johnson find your last trade of today and first trade for tomorrow. (Source: Bloomberg)

Correct time for a reality check.

Earnings -- it time for a reality check.

Earnings season focus is on the fundamentals.

Plus, we give you three ways for investors to get in on the wheeling and dealing in idaho.

An investigating flight two hundred 14, the airline industry's reaction to what went tragically wrong.

It corrects from bloomberg world headquarters in new york, this is "street smart" with trish regan and adam johnson.

The s&p 500 posting its third straight day of gains.

59 minutes to go until the closing bell and we are scouring every market.

The earnings season is kicking off right here.

I alcoa will give us a report in an hour right after the bet the the -- the bell.

Will earnings actually matter?

It wouldn't it be nice if we could talk about companies and management and ceo's you are making a difference, rather than whether it is just greece, syria, turkey, egypt -- take your pick.

It is time for the big picture.

We will show you three charts . let's start off with the dow jones industrial average.

We have had a fairly volatile session on the dow industrials.

We opened up fairly flat.

As earnings begin today after the bell, the $3 billion for egypt.

Look at the 10-year, falling two basis points after peaking above two 0.70 last week.

-- above 2.70 last week.

I missed that.

I was gone.

The yield goes up, the price comes down, and people come in and buy those bonds.

And finally, i want to assure you natural gas, because as we're all trying to stay cool, obviously air-conditioning was running all weekend.

They will continue to do the national weather forecast -- they will be continuing, because the national weather forecast calls for more heat.

Now let's get to the big three.

Julie hyman is keeping an eye on things.

One of the ways people are beating the heat is getting away.

The price line has been upgraded today to being overweight by morgan stanley.

He thinks the stock can go above $1,000 per share.

It is maintaining its dominance in -- dominating position with its european booking engine.

Also the the, dell,. michael dell got support from institutional shareholder services, about a $24.4 billion offer.

This potentially gives them the edge over carl icahn.

And those dell shares actually benefiting about 3% here.

And the nasdaq is lagging today, part of the reason its semiconductor makers.

Analysts commenting on the the intel's camelot -- cannibalization.

One of the new chips potentially cannibalizing the demand for other chips.

On to our top story, everyone.

In less than an hour, alcoa will kick off the second quarter earnings season.

You have two months of american bellwethers telling us in cold, hard numbers on whether or not the u.s. economy is growing fast enough to justify the near record stock prices we have seen.

And analysts are boosting their s&p targets while also lowering the second quarter profit growth predictions.

The catalyst could be the overwhelming number of companies that are driving down.

Seven companies have made negative pre-announcements for everyone positive pre- announcement.

If that is the case, then why boost s&p forecasts?

The upcoming earnings season could actually was a reality check we're looking for.

We are joined by paul hickey, spokes investment research, and our very own dominic chu.

I will start with you, miss martell.

Our company earnings going to be strong enough to support the market?

What i was looking at this morning for a leading indicator is the financial sector.

On a three-month time frame, the strongest sector is financials.

I think that will be a good leading indicator.

The financials of the banks are the heart of your economy.

If they're going to do well, generally, the economy is going to do well.

If the economy does well, i the markets do well.

You cannot have the markets go up and financials aggressively going down.

They are two big and -- they are too big and too important.

Would be a good earnings season?

The bar has been set pretty low.

Overall, the we have seen many more negative revisions than we have a positive.

The smaller regional banks is where you see the real strength in stock prices in the last few weeks.

. the steeper yield curve in, and no more u.s. domestics.

For you, it sounds like it is u.s.-focused companies.

One sector we like is the the consumer discretionary sector.

That is higher than any other sector.

If you look at analyst revisions, positive to negative revisions, they are about equal in companies that generate 100% of their revenues in the u.s. it is about 2 to 1, negative to positive, revisions.

We are the best game in town even though we are growing slowly as pr.

If you look at individual sectors, one thing that a lot of things -- that a lot of traders are looking at, one thing is profit growth.

It has gone up tremendously, some 60% prices for the s&p 500 have kept pace with that.

They are near record highs.

The one thing that has not kept pace is the growth in multiples.

What you are willing to pay.

Yes, how much we're willing to pay per dollar of earnings.

It has only risen about 17% during that same time people want to pay more -- what would make people want to pay more for coverage multiples.

With the fed eth and everything right now, maybe they are not ready to pay.

What gets people to pay a higher multiple?

Confidence in china and the european markets will be key for the non-domestic companies.

If you look at valuation and look at those with foreign exposure, they are the cheapest they have been in a decade.

Where you want to focus is the non-u.s. component for fund managers.

The the you -- you need china to start looking better, in europe to start looking better to bring investor confidence back to those stocks.

The s&p 100 companies, which you would get with the discretionary companies, mostly all of the sectors of the market.

I think she just set you up for your memo tomorrow morning, searching for the non-u.s. to try to find some growth.

Well, certainly.

Alcoa, the stock has not been a bellwether for the the market.

But listening to the conference call can tell you about where the demand is globally.

You need to listen to what the company is saying about global demand and not specific company issues.

Collectors mention one thing very interesting in the beginning and that there are a lot more negative pre- announcements for companies that positive.

It is called managing expectations.

You want to set the bar of about lower.

But seven-for everyone positive is around high as we have seen since the financial crisis in 2008, 2009. it is still not clear sailing for companies.

The bottom line, are we getting back to real fundamentals than?

We're so tied to what the fed is doing and looking at all of the sub language it so carefully.

I think we have now factored in tapering.

Dr.

edward is now in the markets.

-- of that dirty word is now in the markets.

And we will get a sense, get to look at the top line revenue growth.

If we have strong top line revenue growth, then we can handle a little tinkering.

Correct.

We will take a break.

We willhave some breaking news.

The obama administration has just released its version of the budget and projects that it will strength -- shrank by $2 billion over estimates.

The congressional budget office just a few weeks ago, sequestration, everyone in washington says it is bad economic policy, but these numbers to reflect the tightening felt here in washington as well as tax collection and the payment coming in from fannie and freddie mac.

It is the smallest deficit in five years.

We had that at a requisite four 0.7% of gdp.

-- 4.7% of gdp.

Even in april, the administration projector -- projected it would be around $900 billion.

This is down from that figure, to be sure.

What are they talking about in terms of economic projections going forward?

Right now, the administration is lowering its growth rate in 2013 to 2%. and it has deficit growing at 3.1% next year.

This is taking some pressure off of the congress to use something in the short term about the deficit.

But this is the early years.

Baby boomers will start to retire and didn't entitlement programs will start to kick again.

The longer-term picture is still muddy, at best.

And gridlock is prevailing in washington, as gridlock prevails and as sequestration prevails, that is why these numbers are a bit better than they were just a few months ago.

I'm curious, as you were talking to your clients about these issues, where does the budget deficit figure in?

Batted in them top 10. they do not want to buy equities because they're very conservative and concerned about the future.

This is one big positive that the market is not paid attention to.

4.7% of gdp, that is the lowest we have seen in about five years.

It is a positive, getting back to fundamentals, which is where you were going.

We need that.

I will show you how you can profit the the from this job.

Plus, heading to sun valley idaho for the annual summit.

? rising rates are barred -- bad for like you and me, but we are investors and can still make money.

Take a look at the the 10-year.

That is the move on the 10-year.

In about 6.5 weeks we have gone from 160 up to 270. that is a massive move on the 10-year yield.

It is bad for business, but good for banks, because they can loan at higher rates.

That is bad for all of us.

Banks are lending to the real- estate business.

Banks verses reit's and yellow.

As the 10-year has gone higher, the ratio of banks verseus reit's has gone higher.

We're all investors.

We do not need to be left out in the cold.

Look at all of the financials on the s&p 5 hardware analysts have raised estimates, and this is key, where the banks are still trading below value.

These are eight banks doing better year to date.

Again, the analysts are raising their estimates on all of these banks and they are trading at or below book value.

This is where people have been putting their money.

The returns year to date speak for themselves.

It kind of sounds like what maryann bartels was just saying.

She is a chief investment officer at bank of america and merrill lynch.

She says investors need to realize that tapering is not tightening and we want to welcome you back to "street smart" with mary and bartels.

It will raise the target to 2. 77 last week, how high do you think it could go?

We raised our target up to 3% and then for next year up to 4%. we are looking for rates to steadily climbs higher.

We are talking about a transforming world and it has three main components.

One of those is called the great rotation with great market shifts from bonds to stocks.

We are just now starting to see the outflow into bonds.

This is something that could happen over the course of the year.

This is not a one-time event.

Clients may witness more volatility in their portfolio due to fixed income.

The the cracks do people need to start thinking about -- the the the do people need to start in the about rotating their money then?

They might get pummeled.

That is correct.

Fixed income is an important decision within asset allocation.

But when you look for rates to rise, there are two things you start talking about.

The first is duration.

How many years out do you want to go out on fixed income?

You don't want to be far out on the curve.

Not 20 or 30 years.

We're recommending about seven years.

And then you look at the equity market.

As its long as the struggle -- the economy is strong, that rates are fine.

Because the growth is in the economy, which is the real reason and that would be a great positive.

And if we can get europe turned around and out of a recession and get more clarity on where china is, that will be another added positive.

Banks are the second-largest group in the s&p 500. the largest technology.

But the you think of that?

Technology went into a new secular bull market of last year.

We see it the technology being a major component to the equity market.

Instead of looking at the market and where equities are cyber security is one of the topics that we've mentioned.

If you can latch onto 18, now it is suddenly something we can put into plain english -- latch onto a theme, then it is suddenly something we can put into plain english.

And in the market there is concern that the market has gone too far too fast.

When you look at all the major averages, they are all broken out of the big trading range, indicating we are in a new secular bull market.

And i do not think that is what investors believe yet, the market can go up over a time frame and they are finally out of this trading range.

We still think about 2009 and look over our shoulders.

It is time to move on.

You are here with us for the whole hour.

I'm glad you're here today.

Egypt's chaos is not just in the street, but in the markets.

? this is "street smart" on bloomberg television.

We are streaming live on your tablet, your phone, and at bloomberg.com.

As you know, clashes in egypt have left the country devastated and it is in chaos.

Julie hyman is here with more on today's global outlook.

Moves in the egyptian market have been unprecedented, the volatility we have seen recently.

Well, yes, because we have seen a 14% rally.

The perception was that with morsi out, egypt would be able to look forward.

But now you're seeing violence and death in the clashes between his supporters and the military.

It is clear is not necessarily going to be this direct, peaceful democratic path.

If you do not have some kind of political stability, why would you be investing?

Why would you put money to work in egypt right now?

The the -- one trader looks at the dividends as the market was due for correction anyway.

It gives people more reason to sell.

Which by the way, cut the nation's rating to b-- and that raised concerns about the the morsi being ousted.

Now we have the credit rating adding to it.

In spite of yields rising up 7%, closer to 8% last week.

How do american investors deal with all of these headlines from greece and?

From greece the the hill?

Correct excuse me, from egypt.

-- from greece?

Excuse me, from egypt.

From a global economy affected, it is not looking to affect our market.

Earnings will be much more important to the direction of the markets rather than what is going on in egypt right now.

That makes sense.

Coming up next, the media moguls are going to sun valley.

What to expect after the break.

? some of the biggest names in media gathering in sun valley this week.

In the media world, the place where deals happen.

Comcast has acquired nbc universal while at the conference.

This year who knows?

Dealmaking could pick up best the market improves.

We want to bring in the panel for speculating.

Give us a sense of why this conference is fascinating.

An amazing gathering of big names.

They are relatively secret about what they say inside the meetings, but it is unusual to get some money big names together at the same time.

This is arguably the most important time for traditional media and technology executives to be talking.

The economies has gone better at their advertising revenue has climbed.

They have got more money for pay tv providers.

Services like netflix bring in more money.

At the same time, concerned about the services in a bigger way.

You cannot sleep these rigid much these days.

You have to think about what is around the corner.

We've been looking at the head of cbs.

Rupert murdoch.

Give us a roster.

A who's who.

Who will attend this year?

One of the fun things you hear from people that are there, they get up into the presentation and you say that is weird, i was fielding questions from warren buffett.

Bob iger of disney will be there.

Many members of the murdock plan will be there.

On the technology side, the guys from google.

The folks from twitter.

The founder of linkedin.

You know -- we know that you will be there, too, right?

What i will be doing is fighting in the bushes, which is basically what journalist to try to get comments.

Take good jason blair, talk about what these folks will do.

The we think we might hear any deal talk coming out of sun valley?

To go our sense is the topic will be consolidation of the media industry.

John malone has proposed a combination of charter and time warner cable.

The hurdle is whether they have financial capacity to do the deal, and whether it is the right stage in life cycle to lever up.

What is arguably is it is attractively are -- at track the revalued.

A high-single digit free cash flow yield.

The bottom line is the dialogue about strategic alternatives is good for time warner shareholders.

I wonder what the future of cable is as we look more and more towards the online environment where you no longer need to have a cable box in order to get content.

What is your sense of how these companies will fare in the market?

What we brought for do today is the index for media stocks.

What is interesting is they have a huge break out from the early 2000 time.

They are starting to come into the all-time highs around 2008. this is very important.

Once you start approaching all- time highs, normally what occurs is you get the backing and filling.

Maybe this conference we will cease see choppy this occur in the stock.

We will watch for the chopping us.

I guess we should also watch for more synergies.

One thing we did not talk about is what the future of television will look like.

Tim cook expected to be there.

We have talked about him sending more and more and more -- more and more deals with traditional media players.

The ceo of sony.

Traditional media sales not doing as well.

So that is the kind of deal to watch for as well.

Good luck in your travels there.

Thank you to the rest of the gang for joining us.

Over to you.

Is the duel over dell finally coming to a close?

New details in the battle that could decide the final period and economic bellwether.

Things you need to know about alcoa ahead of the earnings.

They happen right after the close.

This is "street smar." michael t." michael dell picks up a key investment today.

The shareholder advisory firm cites the 25% premium.

Bringing in cristina alesci 2 has been covering the story from the very beginning.

Perhaps as surprising development in somewhat of a blow to carl icahn.

Ticker definitely a blow to carl icahn.

This takes into account a number of decisions -- factors when they make the decision.

In this case it seems to be certainty that trump's price.

With carl icahn's bid, he has to go through a number of steps in order to execute his $14 per share buyback that compares to $13.65 that michael dell had.

The publicly-traded portion out there.

Even still, iss says shareholders would have to bow down carl icahn's proposal.

Then there would have to elect it.

Then there would have to vote for carl icahn's board of directors.

How big a deal is iss?

Four injured companies and mutual fund companies, a really big deal.

You have the sides painting such divergent pictures going forward.

Michael dell said there is real risk here.

Carl icahn saying there is potential upside and a company executive said the company is not even factoring in the acquisitions it has made over the past couple of years.

The ones that began to throw -- showed through their earnings, they could show through the potential upside.

There is a better shot of michael dell in silver lake getting the deal done.

Is that the thinking?

Absolutely.

It they did not, do they run the risk of shareholder losses?

Bove it is interesting to bring that up come up because in the document today it basically said we approve the deal, but there were still some concerns over the way the deal was handled.

Number one, it seems like southeastern was not given the chance to participate in the deal, even though they expressed interest.

They raise concerns about why blackrock was left out.

There were three private equity firms and the biggest one in the world was not invited in.

At the end of the day , they were catering to the short-term infested -- investment firm.

He has already made a statement, right?

Saying he approves of the decision.

He basically says you have to see past the short-term.

Remember, even though the company keeps putting out the negative projections, we have not revised the official operating income for the year.

They will still make $3 billion and still have $3 billion on the balance sheet.

You have to take that into account.

This is not a business like nokia that will essentially disappear tomorrow.

Word portly, those acquisitions have not been factored in yet.

But it's even more striking, the company's only adviser said michael dell can make a return of 40% on the deal.

That is huge.

Presumably everyone else.

Why would you want it?

Why would you invest in that?

To go it is disingenuous to say it is appalling nights but why would you invest in the company?

Iss saicddd we are not willing to take on the risk for another 40 cents.

That is basically it.

Thank you so much.

Cristina alesci.

Shares of alcoa have fallen more than 5% since the first quarter earnings release.

Can they make up for this time around?

Everything you need to know about the company kicking off this quarter's earnings season in less than 20 minutes from now.

We have been talking about in just a few moments alco what will kick off second quarter earnings season.

The only way to save the aluminum producer at this point may be too kill it.

Julie is here to explain.

Prices have certainly been tumbling.

It has not been good news.

It has been struggling.

If you look at the performance, a number of different measures it is at the bottom.

Low share price.

What was market cap.

Lowest annual revenue on a trailing 12-month basis.

The stock is down almost 10 percent frizzes median gain of 18% for the other dow members.

That is going into today's session.

A lot of it -- a lot of it has been because of the price of aluminum.

This is globally.

It does not just affect all, where.

50 percent of the aluminum producers are losing money as a result of what we have seen with these aluminum prices.

Aluminum prices really struggling.

This is so important obviously.

This is what it does.

The biggest business for the company if you look at the primary metals business.

$10 billion business.

The stuff it six out of aluminum is performing better.

-- it makes out of aluminum is performing better.

If you look at the primary business, it is not looking good.

The metal business, the ebitda will be down 87% this quarter year-over-year.

The other business is doing well, but if you want the aluminum production business to improve as well.

It will continue to cut production.

That is what we've seen it you are ready.

Capacity is 4 billion tons annually.

This year so far it has permanently shut down almost 150,000 in capacity.

Last year about half a million tons.

Reviewing an additional 11% for possible closure.

If alcoa would just as it, it does not do any good.

Competitors need to do the same thing, and largely they are not.

We're seeing some cut capacity, but not enough to bring the price back up here yet to go not easy to be in the metals business.

-- not easy to be in the metals business right now.

Time for charttt attack.

Talking about a black swan that could top the equity market rally.

Maryann bartels, tell us about this.

Well, i do not know if i would classify it as the black swan, but but certainly a potential risk to the rally.

We have had break as that may make investors a little nervous.

Take a very much.

Bring in the camera and show everyone that chart so we are on the same page.

You can see the high back in 2011. today we got as high as 104. when you look at the blue line, what does that tell you?

Of the high was 2011. when we go to the next chart, you will see a technical breakout that might lead to back up to 114. that might be somewhat of a worry price.

First, you would have to get above 110, the height of last year.

Near 114 there could be a concern there is a tax to the consumer and consumer spending starts flowing.

The bullish part will be uc we will not get tapering.

It is all data dependent.

We have had very strong job gains for two months in a row.

That argues for tapering.

Exactly.

We're not forecasting tapering until the end of the year.

What are economists keep stressing is tapering is not tightening.

It is still a theoretical interest rate cuts.

In theory, and these are not exact numbers, but the basis points to 25 basis points.

Still easing that is occurring but less.

There is support from the fed, but i think we have to reprice because we're seeing interest rates higher.

I think you will start hearing some people get concerned that future data may ease.

That is why we raise it as a risk factor.

Has the team put together a number where you can say if crude rises another x amount of dollars it does the following to g.d.p.? there generally is a direct link, but not recently.

Normally you have to get 3% of gdp.

It is global.

We're nowhere near that level.

Now that it has been somewhat of a technical breakout, i think it is worth watching to see how ya might go.

So what oil.

To go from price top 10 stocks need to know coming up on "street smart." how will the accident in san francisco affect the airline industry coming up.

. . all right, if you missed everything that happened turning today's session, we are going to tell you about all the stocks you need to know about.

Number 10, alcoa.

All eyes are on alcoa as the kick of earnings season moments from now -- as they kicked off earnings season moments from now.

Best buy shares are up about one percent today after suncoast raised its price on the retailer.

The firm says that best buy is is a shining itself to turn the tables on its competitors, that is amazon.

And eli lilly, up on the news that the ceo is ready to return to work after having heart trouble earlier this year.

Number seven, america mobile.

They have been -- carlos sim -- carlos slim is investing.

Sprint dropping one percent today.

Those shares are in favor of the control of the wireless operator.

Number five is priceline, one of the best performers in the snp today.

Morgan stanley is getting bullish about the online travel sites -- essence be -- s&p is getting bullish about the online travel site.

Morgan stanley called it the dominant search engine for european travelers, guys.

It may be dominant as a search engine.

It is also dominant on a pe braces.

-- basis.

It has been a top flyer for years now, right?

It has been outperforming the market.

When that happens you get the higher valuation.

Very true.

Number four, hbc -- htc.

The smartphone maker exceeded analyst estimates.

Bowling up .5% as investors wait for the investigation results into the asiana crashed by the nts day.

This is the first fatal crash by an asian airliner.

The in tsp has reiterated the slow velocity of the aircraft is being critical to what happened.

That would tend to suggest pilot error or a problem with the aircraft.

Investors perhaps reading that similarly.

Holing may be up today, but intel is not.

-- boeing may be up today, but intel is up.

It also points to a frequent theme this year -- the weakening of the market for personal computers, not rate news for intel.

Let's move on to our number one stock of the day -- dell.

The embattled computer maker 's battle gets even hotter.

Investors should expect michael dell as the safer bet even then carl i conn's proposal to keep the company.

We are coming up on the closing bell.

The s&p up nearly 90 points, nearly .6% on the doubt.

There you go on the s&p, .5% there.

The nasdaq barely up one point.

We will cover our stocks, bonds, commodities.

Our reporters are all here.

Julie is here to kick it off again.

Since may 22 -- that is when ben bernanke ignited the tapering talk.

We have recouped almost all of those losses we have seen since then.

We are getting into that second- quarter earnings season without co., and even though there is not a lot of optimism for alto itself, analysts have -- for alcoa itself, analysts have been cutting estimates on that company.

Maybe we will get back to fundamentals when it comes back to stock investments.

When it comes to the groups moving today, we have utilities performing the best of the group in today's session, up one percent.

Staples leading the pack.

There does not seem to be a clear demarcation day by day between the sensors and the cyclicals because financials and discretionary so were among the better performing stocks today.

How about commodities?

Natural gas up as much as 3.5% and it is called the weather commodity for a reason.

For instance, how hot was your july those record temps -- how hot was your july 4? those record temps will stay throughout the week.

Forecast is calling for a very hot july.

All commodities are moving higher.

Oil futures went above 100 four dollars before dropping back from the 14 month high.

This spurred by the traffic and egypt's suez canal.

Middle on the rebound, but we now that's who he and eric john colson is telling -- billionaire john colson is -- his company at a 22% decline in june.

Over to you.

Michael ponte over at barclays say that investors should see this as a buying opportunity.

The data was positive, but given the state of the economy, we may have moved too fast.

Let's look at what's he is mentioning.

We are looking at the 10 year yield.

Movement wise, we saw these moves happen today.

We are down 10 basis points.

We are down to 2.64%. government is buying debt.

Over the last two years, you can see year on year those highs for the u.s. 10 year government know.

People are saying maybe the selling was overdone.

Let's pick up some bargains while we can.

Yields down about a's -- about eight aces points.

Trish, they really will see that trend continue for a little while.

Again, that moved today, pretty sharp to the downside with the 10 year government yelled.

Julie hyman is tracking alcoa.

Julie?

We are looking at a penny the here, trish, coming up at seven cents, six cents from alcoa.

Even so, it is a decrease.

As we talked about earlier.

The problem for alcoa is that lagging aluminum price.

The profits from the stuff it engineers, the aluminum flat rolls, the parts for the automotive industry, the primary metals business where it just makes aluminum has been suffering.

The company is reaffirming its forecast that global aluminum demand will grow about seven percent this year.

As we also talked about, the problem is supply is largely outstripping that demand.

That is what we are hearing from alcoa thus far.

I will keep going to be statement and see what else we can figure out here that the company is saying about itself and the more global aluminum demand.

Trish?

Let's get two more on today's trading.

We are going to our street fighters for more on the markets roundup.

Our closer, mary ann bartels, still with us in new york.

Have we finally -- now that we have gotten into earnings season -- started to get into fundamentals?

I think so.

We were in this zone where we were waiting and going from number two number, waiting for news from the fed.

I think we have a clearer picture of what their intentions are.

Alcoa reporting earnings.

We see they beat the penny there.

Alcoa is traditionally not a good bellwether on the economy or earnings going forward.

There is not too much correlation with followthrough and other sectors.

We did see nice valuations, and i think they will continue as we get further into earnings season.

Up 90 on the dow industrial average.

It has been quite a run.

What is your take on what is going on behind the scenes?

There are a couple things.

The fed scared off the market a little bit.

Look at what the economy is doing.

Numbers of late have an pretty decent.

Alcoa always seems to do reasonably well with the earnings and expert haitians.

Watch the conference call.

They are a minor called now.

They used to be the bellwether.

Now they are not.

I am looking at -- the economic data is important, not the fed.

That is so true.

Data dependent.

We are all watching every piece of data, just like the fed, trying to game the chairman.

Jobs.

Very big deal.

We talked about this earlier.

190 5000 jobs created two months earlier.

What does this say about the state of the economy?

We see it modestly growing.

The jobs growth , the rate strategist raised the forecast on the treasury yield, three percent this year, four percent next year.

That is pretty optimistic on the economy.

Does that mean we can taper without a problem?

Really, is this all of the economy?

Technical factors?

We need to look at some of the reasons why the rates are increasing.

There are big words, trading, hedging, taking place with the treasury driving rates higher.

Do you see this as temporary?

Technical repositioning -- a lot of that is hedging, switching to emerging markets.

When you talk about that complexity trading, as bond prices fall, bondholders have to short more and that tends to compound it?

Exactly.

Your strategist at bank of america-merrill lynch, your rate strategist saying 40% of the action in bonds -- fundamentals.

40% is due to fundamentals.

Maybe 60% is more technical.

Got it.

So, if anything makes you nervous, 60% is more technical and only 40% is fundamental.

We have been talking a lot about the 10-year to date as rates have been increasing.

Do you save three percent and our future, at least by year- end?

Jim mcnally?

Three percent on the 10 -- year?

What do you think?

Yes or no?

I think it is a question of when the fed does come in and say they are going to taper.

And the pace of that.

We only have a rough idea of when this timeframe is going on.

We do not have an idea of how much they are going to taper or how fast the taper is going to ramp up.

I do think stocks can head higher with higher rate.

Remember, they are only tapering if they are saying the economy is better.

That means stock should go higher as well.

You also have the great rotation argument we've been talking about.

If people decide to bail on bonds and move into equity, that should bode well for the market?

The money has been and the safe harbor of late and it should combat can be legitimately sold.

What he said earlier about rising interest rates, that is in fact true.

If you look back, if they slow it down, the stock market does better it well.

We are nowhere near the top and i think we're getting away from the bottom.

All right.

Thank you, daniel, and jim in chicago.

And thank you to our closer, mary ann bartels.

That is your close, everyone.

We have your first trades for tomorrow.

Here is a look at what is next.

The airline industry in the aftermath of the crash.

How one accident can affect flyer confidence for years.

Plus, amerco's bartender economy.

The current cheap, temper cheap -- temporary jobs that could ruin the economy.

And coca-cola.

The billion-dollar hangovers.

That is today's weird wall street.

Stay tuned for your first trade tomorrow, all coming up when we continue.

First.

Bloomberg.

The national transit -- trip national transportation safety board says it is working to interview all for violets on that asiana plane in san francisco to find out what happened on that tragic flight 214. but, do we already know what happened?

Here is cory johnson with the story.

Asiana flight 214 began in shanghai at 3 p.m. local time.

The plane stopped in seoul to take on more passengers -- between stopped in seoul to take on more passengers.

The flight was typical of dozens of flights that go from korea to san francisco every week.

Well some carriers choose to cram the 777 with 365 seats, this light was near capacity with just 307 people.

219 passengers, 16 crew.

The sky was remarkably clear.

The san francisco tower told the pilots that the visual flight rules were in effect.

In other words, the pilots could guide themselves to the runway.

In the last moments of the approach to san francisco international, there were clues something is not quite right area data from flight aware shows the safe approach -- a steady, safe decline.

The airplane comes an much steeper and you see the pilot try to track the plane out of its dissent.

-- descent.

At seven seconds, someone says "go around." then air traffic control warning other planes to avoid the runway.

Coming into slow and too low, the tail slammed into the sea wall short of the runway, snapping off and sending the plane spiraling down the tarmac.

As the fire department raised on to be seen, they found smoldering ruins of the massive 777. line on the tarmac, passengers.

Wasn't more ran from the plane , debris strewn on the runway.

All told, 282 survivals were rushed to local hospitals.

Silicon valley-based samsung university david yu snapped this picture.

He wrote "most everyone seeds fine -- seems fine." in the midst of the smoldering wreckage eun used the incredibly ironic twitter handle@flysfo.

That brings up the key question.

Will people fly to sfo san francisco or anywhere else after this incident?

How does something like this affect ticket sales in its aftermath?

We want to bring in our panel.

We have a pilot and consultant with abc aviation and expert analyst wayne.

Gentlemen, welcome.

You know, we had a nearly perfect for talladega free decade.

-- for talladega free decade.

Do you think this will cause people to second-guess whether they get on a plane?

I really don't. and i will tell you why.

People are tuning in and they are seeing that a plane with over 300 passengers had a major incident, and yet most of the people on that flight revived.

That is a testament to how far the aviation safety record in this country has come, rather than the other way around.

While it is tragic and scary to see some of the images on television at the moment, the autumn line is this crash is one -- the bottom-line is this crash is one of very few that has occurred and with minimal for talladega's -- fatalities.

These images are all over the news.

While most is ms.

Travelers do not have a choice, there are a lot of leisure travelers out there who may be debating whether they fly or drive to florida this year.

Do you think these images have any impact on them?

Yes and no.

They have an impact, but the impact is not include canceling travel plans by air.

People sophisticated enough to find an airport and buy a ticket understand that we just went 12 years at 32 house and lights per day and this is the first time we have lost a major airframe since 2001, which was after 9/11. that's an amazing record.

That means we have basically gotten to zero.

I think people understand that.

You would have to fly -- i believe the figure was 38,000 years personally -- before you would be in an airline accident.

We all know intellectually how safe these guys are, but there are still people out there.

Do you think this has any impact on air travel?

Ironically i was in san francisco airport last week and i was admiring how efficiently the airport was operating.

That airport is very impressive.

Also you have to admire the boeing 777. only two casualties.

That is amazing when you compare it with the history.

As far as pr goes with the public, accidents do not occur that frequently.

If handled properly, it will not affect the public at all.

There were a couple dozen accidents where was not handled properly by the airline and the airline was hurt.

At after that, everyone in the plane perished.

But it was handled very well and there was no effect on their business.

John, you are the pilot among us.

Retired air force eyelet, u.s. air force pilot, also airlines captain.

Can you take us inside the cockpit and help us understand those last 15, 20 seconds on the final approach?

Not to put too fine a point on it, but that is exactly where the investigation is knowing.

We had four pilots in there, all qualified to fly the lane.

One had just transitioned and, which is really not a major issue.

The question is, how did they get the plane slow up and slow up to the point where it was literally stalling and just about to fall out of the sky?

These are questions that had to do with, was someone paying attention, but where were all the pilots?

Was someone intimate it into speaking up?

That is sometimes a problem.

We changed our culture in north america, but not everyone has followed on that.

Was there an expectation that the auto programs were going to kick in?

It was a clear day.

Instrumentation was not affect her.

Everyone should have been able to easily -- you said it was a clear day.

Instrumentation was not a factor?

They should not have been relying on instruments?

Know, we always rely on instruments.

You're not going to take a look at your ils and disregard what you can visually see.

All those things are to aid your visual capabilities.

It was a clear day.

Every pilot knows how to land an airplane or they would not be certified as a pilot.

There are are a lot of questions that go to what they were thinking, feeling, seeing, and perceiving.

Thank you for your perspective.

Ray , josh, thank you all for being here.

Coming up, we're talking about jobs and there is danger in our unemployment data.

We will tell you who was getting hurt, next.

Are you considering splurging on botox?

I'm not, but they farm a might be.

Manufacturers just made it a lot cheaper.

We have more on why allergens could the a takeover target.

This is an intriguing conversation.

Yes, it is, adam.

Botox is one of their best sellers.

It brings then $2 billion a year.

If you look at the products, it tells the entire story.

They are down four percent in the last two months.

May, that is when allergan said they were going to set a lower rate for two drugs.

It has been a huge lunch.

The worst performer in the s&p healthcare index.

The reason that anyone could be interested is what a big moneymaker botox is.

Four years from now, it could be thrilled billion dollars.

That is the forecast, growing 67% this year alone.

My favorite quote i found -- one analyst said botox is little competition because it is the scotch tape off toxins.

A brand name that has become -- trish , this is hard to watch.

Needles for me out in general.

I am not going to look at the pictures.

This is a lot of money.

Even with the plunge, still worth $25 billion.

Who will buy it?

Only a handful of layers have a kind of money.

Probably big pharma.

Lacks a smithkline , pfizer, etc.. pfizer, what have they doing lately?

Divesting assets.

Glaxo, we know so -- glaxo, we know they're already selling through china.

Merck is interested in of the maliki.

I spoke to one fund manager at pollywog, and he says he disagrees because the stock is neither inexpensive nor broken.

It still trades at an earnings multiple of 21. olivia sterns, thank you.

? welcome back to "street smart." i'm adam johnson with the bloomberg top headlines.

The dow jones industrial average, you can see up about 89 points.

It was a volatile session.

We opened down and finally traded backup.

Alcoa giving us a slightly did report.

Take a look at the s&p 500 and you will see a similar pattern.

Also up about .5%. also good news out of europe.

We cannot forget europe.

At the ee eufinance ministers met and decided to give more to grease.

The nasdaq was struggling a little bit.

Earnings are here . stay tuned for more.

You are absolutely right.

Earnings season is here, adam.

Alcoa topping estimates.

Shares are up one percent after hours.

Activist investor bill ackman has a new target.

According to investors, he is pushing square as raising money to buy the stock.

It plans to acquire more than five percent of the firm.

Grammy winner lauryn hill began serving our three-month prison sentence in connecticut.

She reported to the federal prison this afternoon.

She led guilty to failing to pay taxes for the last decade.

For more bloomberg news anytime, download our award-winning at.

And those are your headlines.

A part-time job is better than no job at all, but what if the economy is creating a few too many part-time jobs?

Part-time hires are making up an increasing share of newly created jobs.

They are low-paying, temporary, and without benefits.

Can part-time workers really sustain and grow our economy?

You're with the answer, -- you're with the answer, our guest and david.

David, let's talk about the latest numbers.

Do they suggest we are getting close to up prominent part-time workforce?

If you look at the trends, part-time employment is about twice what it was before the great recession.

The trend is troubling.

We have made improvements since the great recession started, but the problem is i really fear we are creating a society where we do not have enough good, well-paying jobs and the growth of part-time employment is part of that.

Andrew, you represent an industry that has a lot of part- time workers.

Is there a danger there are a few too many part-timers?

One of the great things about the hospitality and restaurant industry as it allows a lot of flexibility.

It works a lot of -- it works very well for a lot of people's lifestyles.

The industry does allow for a lot of upward momentum and mobility, so -- we would like to move the aunt two percent, three percent growth.

How do you do that unless you see people with salaries they can live on, benefits, etc.? i think you're exactly right.

The total problem with today's economy is the lack of demand.

That is because workers do not have the purchasing power they need and businesses cannot invest.

We will see this week growth.

Things are getting slightly better, but not at a peace we really need, and the part-time employment is a key piece of that.

And just to respond to the guest's other comment, part- time employment has doubled since the great recession, and that part-time -- [indiscernible] hold on.

For people who would prefer to be working full-time.

The flexibility is fine, for people who want that choice.

The problem is our economy is creating the kinds of jobs for people who would prefer better jobs, not just part-time, but also -- go ahead.

Flexibility is very important for many people.

Restaurants are the anchors of our neighborhoods and we have a vibrant restaurant and hospitality industry, it allows other industries such as the text hunter here in new york city -- such as the tech center here in new york city to grow.

I would not disagree with any of that.

David, i think you would agree a job is better than no job at all.

What we are getting at, can the u.s. economy really thrive if these are the only kinds of jobs we are creating?

A bit, let me ask about obamacare.

When that goes into effect, that means if you have more than 50 employees in your establishment, you are going to have to either offer health care or pay a penalty if that worker is beyond 30 hours a week.

Do you think that with obamacare we will actually see more part- timers as a result?

You know, it is possible, but i think any effect of obamacare on employment will really be at the margins.

The big picture problem with the economy as we do not have enough demand.

That is the troubling thing.

Since the great recession started, the jobs that we lost, the vast majority, work middle- class jobs.

The jobs we are replacing them with our low paying jobs.

Jobs created since the great recession, over half are low- paying.

That means lesson $14 an hour.

And you cannot but -- you cannot build an economy off of that.

David, let's not get ahead of ourselves.

It takes time to get gdp back up to 2.5%, three percent.

We are trying to get there.

It may take a few more years.

Yes, we are trying, but we are not going anywhere fast enough.

That is the real problem.

It was long-standing well before the great recession started.

Even before the great recession started, we were creating high- paying jobs.

As we have followed up the middle, we have done damage to our economy.

A lot on top, a lot on bottom?

And the restaurants industry, the great thing is you cannot ship these jobs overseas.

A lot of them are low-paying, but not very low haying.

They also afford upward mobility.

We need people to wash dishes.

We need people to be porters and restaurants.

People can go up through the ranks.

When you speak with a restaurant operator, people start off as a dishwasher or server, and now they are a manager or an owner.

I think we need to be thankful for these jobs that we have , encourage further growth in these industries, and the restaurant industry really does support the growth of other industries that are very important for the middle class.

Can i jump in?

Sure.

On that, most people think of restaurants as following other kinds of employment.

That you create jobs in any factoring or tact and restaurants emerged to serve those.

It is not that restaurants drive growth.

They feed off of it.

They are useful.

But they are not drivers of economic growth.

Unfortunately, they are one of the few places creating new jobs since the great recession and that is a troubling sign.

It means we are not producing the real leaders of economic growth.

We are stumbling along.

We need good jobs, but we need jobs, period.

Andrew's point, we will take what we can get here.

Very good to have you both.

The next wave of telecom m&a. our next guest has a roadmap to the creditors.

That is next.

? time for your next big trade, where we re--- we bring you the next old calls on wall street -- the next bold also on wall street and the people behind them.

Our next guest is kevin smith and he joins us to explain -- telecom takeouts.

You got my attention.

What is the trigger?

I think the trigger is rising interest rates, which historically has been very bad for telecom.

On top of that, you have competition coming in.

We have sprint set to close on wednesday.

Setting a precedent.

This was very disruptive in the japanese market.

We think they will spend $16 billion in cap next over the next two years to invest in spring's network.

They have fairly deep tropics, a large stake in ali baba, and we think they will be disruptive in the u.s. market.

I think that at&t and verizon have sensed that.

Arpu --arpu is average revenue per user?

Exactly.

That other growth will slow.

Verizon has had subscriber losses to t-mobile and sprint.

We expect t-mobile to have the first positive reports in two years this quarter.

Sprint will start to improve its trends in the second half.

That means less growth for at&t and verizon, and we think that that means they will look at m&a to grow the business.

What is the valuation as they go after some of these guys?

I keep -- i think the key thing is that at&t and verizon are investment grade and can still borrow and mean four percent range pretax.

It would be primarily for cash and a large amount of debt.

The two primary buyers of assets, the investment grade, the access to the capital markets, the stock prices, the valuations, they have a strong currency -- so they can get the money.

It does not matter how expensive they are?

They are concerned about potential high valuations, but some of the things they like are attractively valued.

Such as?

If you look at europe, which at&t and verizon have talked about, those stocks trade at four or five times ebitda.

There is a financial arbitrage , if you will.

I think they're looking at strategic assets in the u.s., which are to be more expensive -- let's get to some of the names.

Give the viewers a couple of examples.

What type of companies?

You look at strategic assets.

Something like spectrum some of the enabler of wireless technology, the kind of penetration we expect with rock band usage to grow from one gigabit currently -- here are the names we're talking about.

Dish, shaw communications.

We have learned that perhaps mr.

Malone is interested in time warner cable.

Why these names?

What about all these targets?

What do they offer?

I think they either offer spectrum or last mile for fiber connectivity.

I think those are two things that are important.

Spectrum is needed for mobile broadband and is needed for wireline broadband.

They build the access on last mile access, whether it is global or wireline.

You see the convergence of wireless and cable.

Vodafone is and the process of buying a german company.

It is about getting more assets and getting more eyeballs, however you need to do it.

Either get more eyeballs or more money from those eyeballs.

That is it.

Thank you for being here.

Up next, how much green for the to start?

Up next.

? andy murray delivered and now he's going to collect.

He became the first british man to win wimbledon in 77 years.

He made $12 million last year.

Now one estimate says his annual earnings may soar to $70 million this year.

Here to discuss his victory are our uk bloomberg counterparts.

This place has so much history.

You just look at it, the people who have run here -- it will not get bigger than this.

I will try and win another one if i can the rest of my career.

At it you know, i don't think even if i did it would the as special as this one.

You must be tired.

How did you celebrate?

When he won the u.s. open, you drank champagne.

Was it the same this time?

Yesterday was very busy.

We went to dinner, finished around 2:00. i'm going to go out this evening with my team and my friends and family.

Go out to dinner and celebrate tonight.

I'm sure they will try to get some alcohol down main.

-- down me.

Honestly, we believe that you will try to stay away from it.

Look him up what does happen next?

How do you deal with what is now completely different for you?

You have won the u.s. open.

Fantastic review of one wimbledon.

This is a whole different footing.

From your point of view, we spoke to a branding guy, he said this could be 75 million dollars to you.

Doesn't matter though?

-- does it matter though?

It is a tough question to answer.

When i am on the court, i was unbelievably nervous yesterday and i was unbelievably nervous at the end of the match.

The reason for that, you want to win wimbledon and you want to be part of an historical event on occasion.

That is what makes me unbelievably nervous.

But you know, we are sportsmen.

We get paid a lot of money.

Probably too much.

Definitely too much.

But we have a short career, and you try to maximize as best you can.

That was andy murray who appeared on "the pulps." i love the english understatement.

Yes, i think we will go out and celebrate a bit.

At check in with pimm fox.

We are going to talk about quantum.

Yes, quantum computing and how it could revolutionize our daily lives.

We will be speaking with the president and chief executive of a company called dewave systems the world's first and only quantum computing company.

Customers include nasa as well as google.

For more on the math, science, and physics on quantum computing, look around.

We have that coming up.

More "street smart" next.

? ok, it is time for weird wall street where the bizarre is business as usual.

You have something?

This transcends weird.

This is wacky.

Ready for this?

Uncle sam trans forms the reason farmer -- the raisin farmer.

He has to turn over some of his crop to the national raisin reserve.

Yes, he stopped complying in 2002. turn those over, marvin.

Isn't that crazy> a raisin reserve.

Weird, wacky.

I'm trying to figure out the hierarchy.

Yeah, we are bordering on completely absurd.

For now it's just wacky.

But kind of cool.

The president of coca-cola -- the company has introduced a new bottle made entirely from frozen water.

Forget glass.

It's all about ice.

It has the company name etched into the ice.

Once you have enjoyed the coke, the bottle melts away.

But you can only get it in parts of latin america right now.

And then you can eat the isa.

It might hurt your hand.

How do you hold?

Like they have a little label.

It is kind of brilliant.

It's very echo friendly.

We need the same thing for booze.

Which brings me to our next story.

160 billion dollars -- that is much hangovers cost of the u.s. economy according to to a cdc study.

Americans consume about 182 billion drinks per year and that has never happened to anyone here.

No.

no.

Certainly.

That has never happened here.

That is it for us today.

See you tomorrow.

Bye-bye.

?

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

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