No Gaza Truce in Sight (7/16)

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July 16 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Neil Dutta, David Kirkpatrick, Phil Mattingly, Dennis Yang, Brad Hintz, Tom Porcelli and Porter Bibb. (Source: Bloomberg)

Janet yellen create stock prices.

Israelis killed near the entrance to gaza.

No cease-fire insight.

A landmark partnership.

The entire tech industry will adapt.

Good morning.

This is "bloomberg surveillance.

I'm tom keene.

With me, scarlet fu and adam johnson.

Overnight, we had signs of growth around the world.

The estimate had been 7.4%. it is a good sign.

U.k. unemployment falls to the lowest level in 5.5 years.

It was sort of, do you think it was frothy?

Not frothy?

No.

what was janet yellen's, yesterday?

We are trading at about 16.8 times forward earnings.

It is in that range.

I went to the oxford english dictionary on my bloomberg terminal.

Frothy.

1533 is the first definition.

It says, frothy, their frothy waves.

It is a frothy surveillance this morning.

A frothy brees.

-- breeze.

Economic data here in the u.s.. we get producer pricing index.

Janet yellen will be watching that.

9:15 industrial production.

How much are companies operating?

The beige book at 2:00 p.m. earnings before the bell.

Blackrock in bank of america.

Scarlet, you will be breaking bank of america.

Can we have a moment of silence for scarlet fu?

She rocked it yesterday.

Jpmorgan, goldman sachs, it was awesome.

It was a pretty busy day.

I like that.

True or false, brands get two thirds of their business outside of the u.s. tubing items of note.

-- two items of note.

Janet yellen testifying before congress for the second day in a row.

15 years ago today, jfk junior's plane crashed off martha's vineyard.

That was terrible.

No other way to put it.

That is the morning brief.

Equities, bonds, currencies, commodities.

Some interest today.

We advanced.

Dow futures up 52. crude oil turns on american oil.

The vix doing better than good yesterday.

I stand corrected.

A pullback after the yellen comments.

But well above.

Gold futures under 1300. some of the risk on appeal.

I want to spend three seconds on this.

This is apple computer after the festivities late yesterday afternoon.

World is going to end.

$56. world is going to end.

Apple is dead.

Tim cook is a failure.

He is terrible.

Boom.

We are about to go through 700. they are inky.

International business machines corporation.

Yes.

That was a stroke of brilliance.

Coming together.

Here is scarlet fu.

We will start with geopolitics.

What cease-fire?

Hamas rejected the egyptian plan.

Palestinians resumed rocket launches and that resumed israel launching more air raids.

Israel suffered its first civilian death.

This morning a sort of, now what?

In all of my reading.

Will israel send ground troops into gaza?

It has not happened yet.

More than 200 palestinians have been killed.

What will be the relationship with israel?

It also begs the question given the fact that the white house mideast coordinator phil gordon was suggesting that perhaps withdrawing from the west bank would lead to stability and prime minister netanyahu said that was the last thing we're going to do.

The secular egypt.

Secular egypt was put in their place by hamas.

We will discuss this with phil mattingly, our white house correspondent, in the next hour of surveillance.

We want to get to our second front-page story.

Apple and ibm ending a rivalry that began 30 years ago that began 30 years ago.

The guys in blue.

That is the one.

Had won a lot of awards.

Got a lot of attention.

Apple and ibm are now partnering up.

Apple gets access to industries that has never focused on.

Health care, banking, enterprises.

When this ad ran, we stood still.

There was no youtube, no repeats.

You stood still when you watched it.

It was must-see tv.

Who is the director?

Ridley scott.

Who went on to director many multi-hits.

Ginny and tim cook post for a picture together because of this alliance.

We will discuss it further with david kirkpatrick.

It is a big move.

Third front page.

We stay with the tech industry.

Yahoo!

Will return at least half the cash to investors.

This matters.

What is yahoo!

If not for the 30% stake at alibaba?

I think it is something around 23%. they will keep a bigger stake in ali baba after it goes public.

We know the stock has done phenomenally well.

She was spirited about the revenue line.

This segment is not doing well.

Banner ads.

Stabilizing.

There shares are down in the free market.

Yahoo!

Reported sales that fell last quarter.

Operationally, there are still some issues.

Earnings growth that yahoo!

This year, based on consensus estimates, 3%. that is it.

That tells you what you need to know.

Those are the front-page story.

An optimistic view on the american economy.

We are thrilled to bring you on short notice.

David kirkpatrick.

Bloomberg to meaning editor on apple -- contributing editor on apple and ibm.

I want to talk about yahoo!

First.

Is it still a train wreck?

I don't think of it as a train wreck, but a company that is trying to find its way through transition that nobody has the formula for.

I have had a number of people say that marissa mayer my number doing that great of a job, but who can do a better job?

Who can say this company?

They are trying to become a media company.

They have a new deal to do live broadcasts and concerts and they are thinking of ways to amplify their media.

I think they are doing a decent job.

The problem is that the traditional banner ads in the kind of ads have been diminishing in importance.

Who is the david kirkpatrick merger that is the best outcome?

Who should buy them?

Or who should they buy?

I don't think aol.

If that is part of what you are asking.

It is -1 plus -1 equals -2. i can't think of one.

That is the headline.

That is the headline.

Especially on the heels of the apple-ibm partnership.

You wonder if there are other unlikely tech alliances that could give the struggling big old tech companies a bit of a left.

Would've alibaba bought yahoo!? their ambitions are so gigantic.

You keep hearing about it.

They are doing all kinds of stuff, distributing video, they have a cable channel.

That is like a child eating its mother.

It is kind of like that.

Alibaba has global ambitions.

At some point, maybe they would be, maybe they would want to get a hold of it in the united states.

If you look at the revenue breakdown in yahoo!, it works out to be 44% display ads, 34% search ads, and then the balance, 27% marketing and other stuff.

Is the ad display model broken?

The traditional ad display model is broken, in my opinion.

We are into a new targeted era where the people with the most data when and they display ads in all kinds of creative new ways and yahoo!

Does not have the most data.

Looking at other parts of technology was chair yellen yesterday and her federal reserve.

I don't believe alan greenspan ever did sector analysis of the s&p 500. were you surprised that an economist would weigh in on sector specific valuations?

I'm glad she is still at the fed.

If i was competing with her in institutional investors, she would be better.

Absolutely.

This is unusual.

In the minutes, they have been talking about stretch valuations for some time now.

I was not as surprised as some participants were.

For her to name industries.

The biotech industry has been on fire for quite some time now.

Is stretch valuations a new word for bubble?

Not necessarily.

It is the early stages of potential bubblelike behavior.

Boy, are we splitting hairs.

Neil dutta is with us and he will continue to split hairs with us.

Right now, she does not have a split end, company news from scarlet fu.

Thank you, tom.

Internal gm reports so -- show a cover-up.

New york times used the freedom of information act to get the documents.

Two family companies making your business bet.

The cash deal is worth $4.7 million.

Google picks up an auto expert as it tries to develop self driving cars.

Alan mulally is joining google's board.

His engineering background is credited for ford's return to profitability.

That is the company news.

David kirkpatrick is with us.

I was thunderstruck at the quality of google's board.

It is interesting.

I think alan mulally is a fantastic person to join.

Googles ambitions are spanning the economy more and more.

He has done a fantastic job afford.

-- at ford.

I think all of these companies will move in this direction.

Ford has been doing things better.

Do you think mr.

Mulally will drive a tesla nobody goes to google.

I will point out something interesting.

Ford's operating system has had a lot of difficulties.

The fact that he is now on google's board is a directional indicator of something that might not be sewed good for microsoft.

-- so good for microsoft.

Something else am i not be a good indicator for microsoft is apple and ibm.

Coming together and taking on the corporate markets.

If that is something we will talk about.

In light of that deal, who is the next big tech partnership?

This is "bloomberg surveillance." we are on bloomberg television, streaming on your tablet, your phone.

If you are there, we are there.

? one of the most interesting gentleman and finance.

-- in finance.

Wilbur ross on m&a, banking.

It :00 a.m. this morning.

"in the loop" with betty liu.

Bank of america earnings and about 45 minutes.

Another transaction.

More like a partnership.

Shares of apple and ibm are both trading higher.

The longtime rivals are joining forces.

The goal is to expand the business market for mobile devices.

We have david kirkpatrick and the founder and ceo of tech, onomy.

Bring your own device?

Employees insist they use that device for everything.

It is like the employees over the will of the cio pulled apple into the enterprise.

That is the world we are in.

Everybody has wanted to use apple in this enterprise for some time.

A lot of people.

For a five years ago, i moderated a panel and the guy was telling me he had helped a major media company give ipads to its senior leadership and it was the first time in all of his work as a cio that he had ever seen true enthusiasm among the tech clients inside the company.

When you give them an ipad, they light up.

The security is not as tight as say a blackberry or other devices.

It needs to get tighter.

China called the iphone a national security concern.

The knock against every kind of's -- kind of technology today is that security needs to get tighter.

Ibm has an extraordinary global sales force.

They have all kinds of forces they can bring to increase the apple market share.

Now they can really go in wholesale.

What is the response here of ow they can really go in wholesale.

What is the response here of the other major players?

It is google scratching their head and saying, could we link up with oracle?

I don't know.

There has to be some with a google could respond.

Ugo has major designs on the enterprise market that they have made some inroads in.

Microsoft is definitely not thrilled by this announcement.

If you look at what the ceo did putting office on the ipad, it is the same impulse.

It is giving the individual control.

Scarlet mentioned security.

There was the issue with china saying there was a real problem.

Is that real?

Is that a legit concern?

I don't work in the nsa, so i can't really tell you.

I know it is a real concern in china.

It is a perfect, strategic, competitive effort for them to make to earn american companies and advantaged chinese companies.

It is logical from a competitive point of view.

Apple products have been so popular inside china.

I was surprised they would do that because the enthusiasm for apple and china is phenomenal.

It is kind of an anti-citizen thing for the government to say that.

At my come back to its own agenda.

They are promoting their own companies.

They are getting more companies that can compete head-to-head.

Coming up, and incoming nyu stern's global business professor will join us.

To make sense of all of the bank results we have gotten so far.

Bank of america will also be reporting.

We will be all over that.

? good morning, everyone.

"bloomberg surveillance." del futures up 52 this morning.

Let's get right to a morning must listen.

Former senator am a former first lady hillary clinton was on the daily show yesterday.

Here is what she told jon stewart about whether she will run into one the 16. -- in 2016. here is the book you have written.

It is called "hard choices." a lot of hard choices.

Not for your editor.

It is an incredibly complex and well reasoned and eyewitness view to the history of those four years.

I speak for everybody when i say no one cares, they just want to know if you are running for president.

[laughter] are you?

I was going to make an announcement, but you kind of spoiled it.

How long can she play coy for?

The criticism is that she rewrote history with the book and tried to paint a more attractive picture.

With her vote for the iraq war.

The effect that the president had with hope and audacity was profound.

He outlived a vision -- outklaid a vision instead of looking back.

This was also not her first book.

She published another book.

She has several pieces of work out there.

David kirkpatrick, his acclaimed "the facebook effect." how hard is it to take a thick book and make it a reasonable read?

Not for your editor.

[laughter] basically, we know when the steve jobs book came out, we know that it was so long because they had to rush into print.

Did they chop "the facebook effect"? i wish it had been thinner than it is, but they did not chop it that much.

I had fantastic editing.

It is hard to take something long and make it short and that is where your real clarity of thinking has to arrive.

Was their clarity of thinking in the fed's statement yesterday when janet yellen testified?

She thinks that bio talk and small-cap stocks are overvalued.

That is clear.

We will discuss market reactions next.

? good morning.

"bloomberg surveillance." scarlet fu is ready for bank of america earnings.

In about 30 minutes.

Adam johnson is with us as well.

Higher is where we are today.

Janet yellen put a blanket on the market.

Janet yellen and the federal reserve will soon be behind the proverbial eightball.

If the american economy improves, that is the case of optimistic economists.

Neil dutta likes what he saw in retail sales yesterday.

He will hang on every word of chair yellen's q&a this morning.

I was thunderstruck by the variance of economic opinion on retail sales yesterday.

You took a positive spin.

Why?

The people who took a negative spin done on how to calculate gdp.

Retail sales go into gdp.

Those were stronger-than-expected.

Auto sales were stronger-than-expected.

Those also contribute.

Some of these arguments with bearish folks are getting tired and increasingly pointless.

Within that and janet yellen's focus on slack, would you suggest that she and the fed have to migrate away from the comfortable theme that resonates with some the americans?

I think that you opened by saying that the fed is getting behind the eight ball.

That is their policy.

How far behind the curve rather the going to let themselves get?

-- are they going to get themselves get?

I happen to think that janet yellen is a fairly traditional central banker, in contrast to the portrait of her in "the new yorker" recently.

The economy is improving.

Between now and the end of the year, that is a long time.

We will have a more rapid progression to the fed's subject of us than many of the markets are anticipating.

Let's take her at her word.

She said six months that a reason.

I think a second-quarter rate hike is absolutely correct.

Second quarter of 2015. i think you are seeing more folks come around to that view and i think it is only a matter of time before the markets do that as well.

Historically when the fed has started raising rates and waited too long to do so, what has been the slingshot effect?

How quickly has inflation accelerated?

Inflation never just hits the fed target and sits there.

It is usually going higher for a time.

That is probably what will happen.

Something slightly above 2% this time next year.

That is not terrible in the scheme of things.

I do think there is a bit of a symmetry in the fed's goal.

They are comfortable with inflation moderately below 2% than above it.

Otherwise, why would they be tapering?

Those who think the fed will go late in 2015, early 2016 -- that is a question they cannot answer.

Why are they even talking about rate hikes next year?

Janet yellen is trying to revamp the bed, wire -- the fed, why are they not raising their inflation targets?

I think she is a traditional banker.

They are talking about stress valuations.

Jerry allen made the comments about -- jerry ellen made comments about -- chair yellen made comments about valuations.

Valuations appear stretched.

Issuance has been brisk.

Accordingly, we are closely monitoring developments in the leveraged loan market and are working to enhance the effectiveness of our supervisory guidance.

Stretch valuations in junk bonds, in small cap social media, biotech.

What is the fed trying to signal here?

That the fed understands that investors are concerned about the markets?

That its policy has costs and benefits.

There are benefits and the macroeconomy.

There are costs with respect to financial markets.

People do take risks when volatility is low.

The fed is keeping an i on those risks.

This is all part of macro provincial regulation.

-- macro prudential radiation.

-- regulation.

This is not unlike what we saw last year with the tapered tantrum.

They willingly traded growth for financial stability last year.

She'd knowledge is that the big spike in rates slow the housing markets.

And yet it took some froth out of certain markets.

It is not entirely clear to me that she has used this as a negative thing.

Charles schumer and janet yellen going together.

What does this mean for the average guy out there in america?

It is a lot of monetary mumbo-jumbo.

Issue a liberal, a conservative, a monetarist?

What does it mean for the average person?

This debate we have seen.

The average person should know you have nothing you have to fear at the moment from the fed.

The fed is not going to dramatically adjust interest rates higher anytime soon.

I happen to think it will be a bit sooner than people expect, but they will still be pursuing a very accommodative sense of monetary policy.

They will let this run.

Saying they will maintain extreme accommodation for elong period of time does not keep rate hikes off the table.

The semantics are important to rid -- important.

A constructive view on certain stocks.

Ibm shares rising along with apple.

We will continue our discussion about how these two long-term rivals are teaming up.

Our twitter question of the day follows.

He was next after the apple-ibm partnership -- who is next after the apple ibm partnership?

? good morning, everyone.

Scarlet fu and adam johnson with me.

Let's get to our top headlines.

Russian officials investigating the subway accident that killed 22 people.

More than 130 riders were injured.

The probe is focusing on a switch that failed.

The subway is one of the world's busiest.

President obama picking up the phone and hoping to patch up relations with an ally.

He spoke with german chancellor angela merkel.

The first talks since cia station chief was kicked out of germany.

New figures show the damage being done by hackers in new york state alone last year.

There were more than 900 data breaches.

The records of more than 700 million people were exposed -- 7 million people works post.

Those are the latest top headlines.

Our morning must-read.

Governor rick perry of texas.

The president needs to direct the faa to allow drones to monitor suspected illegal activity along the border.

I'm intrigued by this.

I chose it because i had not thought of making the connection between drones.

You are the author of "the facebook effects.

What is the effective drones on the impact of our psyche?

There has been a lot of focus on drones delivering amazon packages.

I think things like monitoring the border is where you will see more economic impact for drones in the short term.

Inspecting things that cannot otherwise be accessed.

Industrial facilities, power lines.

It is getting so easy to send up drones.

It is a logical point.

What about the fear factor?

Scarlet, you are talking about a plane that had to return to the airport because a bird fluent to the engine?

What if it is a drone?

That is why the faa is concerned about a. i think it can be managed.

We have managed air control for a long time.

I do think drones will go up in the air and a lot of ways and we will figure it out.

They are too attractive of a proposition for too many applications.

They are very inexpensive for what they accomplished.

Amazon saying it is going to deliver your books.

Do remember nanotechnology?

That was the rage three years ago.

Or y2k. remember that one?

We have photos today.

Yes, we do.

I will start with one we mentioned earlier.

15 years ago today, the nation was shocked as aggrieved the loss of jfk junior.

He died when the plane crashed with his wife and her sister.

He was only 38 years old.

Flying at night.

Over a foggy martha's vineyard.

Critical reviews of this.

Here is a follow-up.

In the oval office with his dad.

What a great picture.

Iconic.

Thanks for finding that in the control room.

That is great.

Ok, number two.

Smoke from rockets fired from gaza city into israel.

The u.s. secretary of state warned of the great risk of the violence.

I wonder how many people actually know what gaza is.

I remember an article in number of years ago that i would suggest that most americans are clueless about what it is besides a rectangle on the shores of the mediterranean.

This is the cover of the new york times.

This really captures -- those iraq it's leaving.

-- rockets leaving.

Correct.

That is what we have been told by those who provided the photo.

Rockets leaving gaza headed toward israel.

There are some 1.8 million people crammed into gaza.

The death toll is about 204 from these days of fighting.

That is mostly on the gaza side of the border.

Our final photo of the day, number one.

Derek jeter.

The captain.

Running to first base after his at bat during the 85th mlb all-star game.

He had a double, a single, a run . he received a standing ovation.

Did you watch?

I tried to watch.

It just goes on and on and on.

They should cut out half of the garbage and just let these brilliant athletes just play.

Did it make soccer look fast?

The introductions.

Enough.

I turned it off.

Part of the derek jeter farewell tour.

Who else is retiring this year?

It is great.

But enough of the pageantry.

It has turned into a promotional pageantry for espn and fox.

It has.

I don't know what else to say.

Coming up, our weeklong focus on the millennial's market.

Online education is not just for academics, but also practical vocational skills for young people.

This is "bloomberg surveillance." ? this is "bloomberg surveillance." let's get you company news from the files of bloomberg west.

Yahoo!

Will use half the cash from alibaba's ipo will give back to shareholders.

It will keep a bigger stake in the e-commerce company.

The company ipo could be the biggest in ipo history.

Intel's latest results said the computers are making a result.

Blood sugar levels -- a breakthrough.

That is wearable technology.

Smart contact once is.

-- lenses.

To continue our millennial theme, you have a single best chart.

Given them millennial's are in their late teens and early 20's and through their 20's and starting their working lives, we know that this generation is success with gaining skills to find a job and increasingly they are finding it through online education.

We show how college courses taught online have moved over the last decade.

More and more students are taking or registered for online courses.

The white line tracks the growth rate in online enrollment as a percent of total enrollment.

Total enrollment in college courses is moving at a slower growth rate right now.

That is the blue line.

It is in the single digits.

It dropped off after 2009. the take away here is that online as a percent of total enrollment continues to grow.

That is something we want to stay on.

Online courses in practical life skills is on the rise.

We bring in dennis yang for more on this niche.

Tell us a little bit about this company?

How is it different from other online education platforms?

Absolutely.

Our mission is to democratize skills-based education and lifelong learning, rather than focus on k-12 or higher education.

We provide a platform where any expert can teach online within our marketplace of courses.

We focus on skills-based content like learning microsoft excel.

For $99, i can do pythons for beginners.

I have to learn pythons just to get smarter.

You are out of northwestern and stanford and you are doing what every politician talks about.

Are you a replacement for an associate skill technical degree?

It is probably more of a supplementsupplement than anything else.

The fundamental degrees we offer today, while they will not be changing fast enough, it is changing to market itself.

They provide a nice space in terms of thinking.

The actual skills, how we operate on a day-to-day basis, is changing way too fast four education to keep up.

One of the concerns in washington is that we have the people in the wrong places or the wrong skills.

Weiss and the government coming to you?

-- why isn't the government coming to you?

We have met with many ministers of education from around the world, but we have not had a lot of action inside the u.s.. is there bias against your work?

Do the academics say it is beneath them?

Traditional academic institutions have an educational mission as opposed to a job training mission and they view those very differently.

I have been living this for 50-some years.

Americans are a bunch of elitists and they don't want to do what you do.

Do you teach welding?

I don't know if there is welding.

We have over 60,000 classes.

Are millenial's more willing to make the jump and do something their parents might not have?

Millenial so definitely more interested than technology courses.

That is a clear difference.

The other thing i would notice the way that we teach.

Self-paced.

That sits well with millennial's who want to be able to control their own content and media consumption.

It is not only on demand, when they want to, where they wanted, on demand.

Wanted in bite sized chunks.

In the old days eight years ago.

[laughter] when you go to university and college, 14 week classes versus 14 minute soundbites.

You must have a lot of analytics.

What courses to millenial sue have college degrees take first as those who have a high school diploma?

That is interesting.

The better educated you are from a college or traditional measurement standpoint, the more likely you will be focused on some of the cutting-edge technologies.

Like python.

Python.

But also things, business as marketing, social media strategies.

Jump in here.

David kirkpatrick.

There are a number of silicon valley types that say forget about college.

I can sleep when they say things like this.

You are like the anti-peter teal.

The reality is that this pace of change you are talking about is so fundamental to the problem we have with american education.

This is one of the things -- one of the reasons that silicon valley does not have a confidence in the traditional education system.

It does not moving at the pace of the economy.

Students recognize they have to move more quickly with skills acquisition and broader learning.

You could move in the direction of even more conceptual things that are not just skills-based simply because the conceptual approaches are shifting.

If you graduate from college 10 years ago and you work in the marketing department, what has happened in the last 10 years?

Facebook, twitter, all of that has come out.

Doesn't millenial mechanic engineer need these courses?

My guess is they do.

Something with a sterling degree has to take python for beginners.

Speaking skills are available as well.

Should we all take python for beginners?

I'm beginning to realize that anyone who has been out of college for x amount of years on to take some sort of course.

The college degree is static in the world around us is changing.

Your company just wrapped up investment in may.

You have now raised $48 million in funding.

Why are education startups so appealing?

A lot of it has to do with when you think about how much money is spent in the education industry, literally trillions, and you look at how much investment has gone into it, there is a big gap relative to other things -- other venture businesses.

What do you say to parents when you have kids going to third-rate college educations, do you say to them, go to udamy?

I think they should look at udamy.

The only proxy for future workplace success was a degree before.

Now there are many other ways to show competency and potential for workplace success.

Dennis yang, figure so much.

Ceo of udamy.

34,900 26 students enrolled in python for beginners.

Can any of them give us a forex report?

Neil dutta, thank you so much.

David kirkpatrick, thank you so much on short notice.

How about our forex report?

A very vanilla forex.

The turn to the market has been quiet.

Yen stronger than euro over the last couple of days.

I put gold in there as well.

Under 1300. dell futures are up.

-- dow futures are up.

Bank of america will be reporting earnings any moment.

We will be right back.

? this is bloomberg surveillance.

But jenny creek -- janet creek goes before a house -- janet yellen goes before a house meeting this morning.

Bank of america reports at this moment.

Good morning, everyone.

It is wednesday, july 16. with me are adam johnson and scarlet fu.

The bank of america earthlings -- earnings roll by.

We have the headlines about litigation expense among others -- and among others, the efficiency ratio.

But what is really needed is an earnings compare.

We wait for that to come out as well.

Certainly, bank of america is up, and we've seen that recently with wells fargo, jpmorgan, and citigroup as well.

An announcement of an aig settlement as well.

There is a vegetation -- litigation expense because aig has reached a settlement.

$.41 as the earnings-per-share number, better than the consensus of $.29. it does look to be a better-than-expected result.

In terms of settlement, the litigation act is huge.

There is no headline here that i can see so far of the doj settlement.

Settlement is with aig.

And expense of $4 billion.

The settlement overall, 600 $50 million -- and expense of $4 million.

The settlement overall, $650 million.

Let me give you a minute to analyze the pages of data.

The deposit to bank of america, up five percent.

1.1 trillion dollars.

That is a $16 trillion economy.

It really underscores the size of these -- the bank earnings as well.

The usual ratios.

That is certainly key.

We saw a 4.5% increase in tangible book yesterday.

With jpmorgan, it's all a blur at this point.

Citibank was not quite as strong.

Bank of america is a key part of the story.

I'm adjusting my bowtie.

We have seen a pattern from jpmorgan on the bank of america.

Brad, you do not follow bank of america, but you do follow many others.

Today lowball the game so they could look good?

Or is this pretty much -- did they lowball the game so they could look good?

Or is this pretty much the way they should go?

It looks like a trading member has turned a little bit better at the end of the quarter.

Nonetheless, it was a bad trading quarter for everyone.

If the expectations were a little bit lower and they came in a little bit higher, that is good for a headline.

But you are uniquely qualified as the former cfo of lehman to talk about the inner offices a beginner -- of a given corporation.

Have you ever tried to gain earnings?

That is the rap against corporate officers.

Has anyone ever told a cfo to gain earnings or revenues?

I have actually been on boards -- both sides.

When i was treasurer of morgan stanley, iran investor relations.

-- i ran investor relations.

You do not want to lose credibility.

Yes, it would be really nice to be the numbers every time, but you can't move everybody down every time or you will have no -- and you're always taking a more cautious approach with your dialogue because that is what you're supposed to do.

Well, you don't want to disappoint.

There is a lot of uncertainty at the end of a quarter.

Adam, you know that the whole idea is to gain the game.

I think it is more covering your but.

There is a belief that on the cfo's's desk the earnings are clicking every day, and he just does not work like that.

The revenues come in pretty quickly.

But your expenses and putting them together are very -- i there is definitely that calls for more along the way.

Can you bring forward some of your sales?

I am with adam on this.

-- i am with brad on this one.

I don't think it is manipulated like that.

You don't think a cfo calls and says, let's try to book some sales in the next week to make our quarter a little stronger?

I will tell you as cfo of lehman, i was always worried that down in the bowels of the derivatives desk there was some controller who was keeping the numbers low when i needed the numbers high.

This is one where if you're going to go to hell, you want to go to hell for something you did rather than something someone else did.

Scarlet, wrap up inc.

Of america.

It is better than expected earnings-per-share number.

In terms of trading revenue, $2.4 billion in income currencies and commodities.

That is up five percent from last year.

A little bit different twist than the other big bank that reported a drop.

Equities are down 14% from last november.

Jpmorgan and city -- citibank had both warned of decline.

We did not get that.

We are thrilled to bring you brad hints this morning.

Right now, switching gears and go to a busy morning.

Tech giants have buried the hatchet.

Apple and ibm are making plans to work together.

Dozens of applications for the iphone and ipad.

They will reach our to corporate customers for those products.

It ends a rivalry dating back to the dawn of the computer age decades ago.

Google picks up an auto expert as it tries to develop self driving vehicles.

Alan mulally is now joining google's board.

His engineering background is credited for ford's return to profitability.

Their prototype cars have no steering wheel, no break, and no driver.

The new york times says internal g.m. reports show a cover-up.

The paper used the freedom of information act to get the documents.

G.m. is blamed for at least 13 deaths.

And the photos seen around the tech world of the two leaders, apple and ibm, last year walking arm in arm.

Not a transaction, but just an agreement between apple computer and ibm.

David is a bloomberg contributor and editor.

How does microsoft respond this morning to this business enterprise agreement?

Microsoft had some very creative ways they are trying to push windows more across the landscape of computing without being quite as narrowminded and monopolistic in their mindset as they have been for so long, which they can no longer be.

They are looking at this deal was some concern, i would assume.

The great thing about the apple-ibm deal is that it solves problems for both sides.

Ibm has in this extraordinary pull from below where employees wanted to use apple hardware.

Now they will be able to make a possible.

And make it a lot more enjoyable for people to work within enterprise applications inside big companies, companies of all sizes.

Meanwhile, apple has seen this bull coming from employees, but has not had this expertise or salesforce to tap into the opportunity.

Apple sees a big sales opportunity.

Is there and ibm brand value to their cloud versus anybody else's? that is a question no one really has asserted at the moment.

Yes, there probably is, but the brand value of clouds is a little bit fuzzy to many of us.

Amazon web services has its certain thing.

I don't think ibm has established a clearly yet.

As ago to bloomberg television, could we have the camera on brad hintz, who is dressed ibm 1960's this morning.

They would never wear a bowtie at ibm, with a echo -- would they?

No, i think the tassel loafers would do it.

And it worked when he was at ibm, some time ago.

And now that apple is in ibm's suite of brand, this is no small thing that apple has brought under its roof.

At dinner last night, d gels -- the details were a big deal.

Beats is going toward a young brand and on the opposite side, heavy enterprise and white shirt, blue suit kind of thing.

Could steve jobs have done this transaction?

I don't think you would have.

This the kind of thing that tim cook is perfect to execute for apple.

He is more open-minded and pragmatic.

It's not so sexy and something that steve jobs would have enjoyed, but it is something very good for them.

It brings us to our twitter question of the day.

Who is next after ibm and apple coming together?

Tweet as who should come together next.

And we want to thank our intriguing editor for joining us.

Coming up, janet yellen testifies for a second day in front of congress.

We look at the future of monetary policy in the u.s. we will he back.

-- be back.

? good morning, everyone.

Brad hints, writer of acclaimed black book on banking.

This fall, mr.

Hintz will truly go back to school.

When you walk in the room, everyone will be totally intimidated by you.

What is the course that is most important to a graduate student?

They come out of undergraduate and go into the graduate row graham, what is the thing they need to know to get an mba?

As you know, there is a core level of courses that you have to do.

That is the basic knowledge.

Accounting is a forum in which that you have to learn.

Finances and theory you have to learn.

In the end, the courses that probably pull it all together are either the corporate strategy courses -- you see them in many of the major business schools where you're actually playing against each other.

In the case of the course i'm teaching, it is on managing financial institutions.

The essentially, you're taking the knowledge in the first years and saying this is how it is done at the companies.

We will be teaching cases where we are talking about the strengths and the weaknesses.

Strengths and swot analysis and all of that.

Is the textbook a little bit different than in 2006 cap no question.

-- than in 2006? no question.

The relationship with the regulators is a key part of the effort on the part of the management.

How do you manage a company in a world where the constraint have all come in on you?

And how are you going to make money in a world where the world has not adjusted to the pricing?

Just out with earnings from bank of america and he waters in the door to guest lecture in your course.

What you want to hear from a guy like that?

What have we seen since the crisis?

These large organizations have set their tone.

There have been surprises on the market has forgiven for that.

We could think of the whale as an example.

A very extensive -- expensive stubbing your toe.

But nonetheless, running a large organization and keeping the organization from being at war with each other, you know, keeping your lieutenants together.

Many would say that was the tension that was there with jpmorgan.

When does all of this star?

September 17. are you nervous?

Not at all.

You are not afraid they will throw things at you?

This is the toughest audience you've ever seen.

Brad hints at nyu stern.

Coming up, why high-frequency trading matters.

? good morning, everyone.

I'm tom keene.

With me scarlet fu and adam johnson.

Our guest host this hour, brad hintz.

Right now, adam johnson has our top headlines.

President obama picking up the phone, hoping to catch up relationship -- patch up relations with an ally.

He was talking to angela merkel since the station chief was kicked out of germany last week.

The u.s. has been accused of spying.

Things have gotten tense since last year when germany first learned the u.s. was listening to merkel's cell phone.

Philippine officials are breathing a sigh of relief today.

The country still recovering from the super cyclone that killed more than 6000 people.

And the american league pennant winner will get home field advantage.

He earned it with all-stars last night win.

Derek jeter was cheered by many minneapolis fans.

He wins the corvette convertible.

A nice win.

Janet yellen, the market came up abruptly on her testimony yesterday.

Senatorial questions this morning maybe a bit more challenging.

They confront flat wages and slack in the economy.

The u.s. economist joins us from his headquarters.

Tom, you've got a lot of work on our wage dynamics.

As chair yellen goes before the house committee, how are wages doing?

It depends on what measure of wages you're looking at.

We like to look at what we call the wage high, and that is simply -- the wage hpie.

It does give you a literal sense of what people are earning in the aggregate.

And with a look at that, we see it running at around a four percent clip.

It has been pretty steady.

People love to refer the -- refer to this as stagnant, but it is stagnant at four percent.

It is not stagnant at zero.

In the pace is to grow at a two percent clip.

I've been saying that is exactly what we think will happen.

There are two groups, a gloomy and cautious group on american consumption, and then the enthusiast.

Which camp is janet yellen in?

Given all of her comments on the labor backdrop and lamenting the idea that there are a lot of people sitting on the sidelines, i think it is pretty obvious what camp she fits and post -- she fits into.

It has to do with how much slack is in the labor market right now.

We would argue there is not nearly as much slack as she would suggest and maybe it gets into a bit of philosophical conversation.

What you have to consider is there are many people sitting on the sidelines.

Excess supplies about 5 million right now.

But a fair question to ask is, will they ever come back, and at what speed will they come back echo if they -- will they come back?

If you exclude them from the equation, you would conclude there is not as much slack as you would think.

There are any number of surveys that exist out there.

Look at the ratio of job openings to hiring.

That is at a cycle low, which does not make a lot of sense -- or excuse me.

It is at a ratio right now that you would see at the end of a cycle.

Any reasonable person recognizes we are not at the end of a cycle.

I think there is a lot less slack than janet yellen would suggest right now.

But i got to ask you something that caught a lot of people by surprise stop -- i've got to ask you something i caught a lot of people by surprise.

That is, chairman yellen specifically suggesting inflation prices.

How appropriate do you think that is?

I don't think that is appropriate at all.

She was trying to pick on these very specific and micro sectors.

It doesn't make a lot of sense.

I had a conversation with a biotech analyst here at rbc.

We're talking about this a little bit.

The comment that janet yellen main -- made, she specifically picked on these new companies in the biotech space.

As michael pointed out to me, it is really difficult for people even in his space to determine the viability of these companies.

What you have to do is dig into these -- what products they are coming out with and how viable they are in a long haul.

That requires a pretty strong team of biotech analysts to understand that.

And the reality is, there is no biotech team at the fed.

Unless they have recently created one.

But another the a's is appropriate for her to make comments like that.

Whether it is appropriate or not, she trying to signal the fed is more into what is bothering investors?

I think what she is basically trying to say is, hey, look, we are aware there could be some imbalances.

Everyone knows this is an idea that was championed by former fed governor stein.

I think she is trying to say, look, we are ever on the lookout for such things.

I just think she could've chosen a better avenue for expressing that view.

Top or sally, thank you so much.

Chief economist at rbc capital markets.

Coming up, the cease-fire and between israel and, spain -- and hamas.

The quote out of the wall street journal, and the two reporters that went on charlie rose to talk about the phrase, arc of instability.

We will discuss that along with ukraine and russia.

And the backstory, eastern ukraine has deteriorated in the last 48 hours.

A certain late -- certainly has.

The president has a lot on his plate right now.

We will discuss that with phil mattingly of bloomberg news.

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

20th century fox, run by rupert murdoch, is said to have an $18 billion takeover of time warner, but that was rebuffed according to the "new york times." the newspaper is among the nations biggest media companies.

If combined, it would have a total revenue of $65 billion.

According to the times story, the talks have stalled so far, but we know that what ripper wants -- what rupert wants, rupert gets.

Boeing is reading 11 more seats into the economy cabin.

Boeing is changing it to get more people on board by shrinking the galley and bathrooms.

And one company says it is dropping the cost of the cabriolet.

Customers never really warmed up to the cost -- car, and the $17,000 price tag either.

Sixtysomething billion dollars in revenue.

Disney is 40 something billion dollars.

It is a juggernaut.

There are no anti-tracks issues.

With fog news -- foxx news?

Yes, you got foxx news and others that are jettisoned.

Just to be clear, the latest that we know, that time warner rejects this theoretical -- it has been discussed.

I think they have done a great job of discussing the story and they ought to be a lot more on it.

We should also make clear that the time warner co was asked last week about speculation on this and he was -- he said nothing about it.

The stock is up today.

Moving on, ultra high-speed trading thanks to microwaves beamed from tower to tower.

One chicago firm bought a tower.

It is now the fastest link.

You can read jesse's article about this.

How did the deal come together?

These towers are decommissioned.

They were used by the military.

The military has no use for them anymore.

The government of belgium does not have any i -- any use for them either.

Lo and behold, high-frequency traders do.

They scoured around and scouted these towers in belgium and paid 5 million euros for them.

I guess that is a bargain when you are trading stocks every day.

Can you tell me how much faster microwaves are then fiber-optic cables?

Faster than we can comprehend.

A microwave transmission from frankfurt to london, which is where the big financial systems -- centers are in europe, that is like a four milliseconds savings.

For you or me, that is irrelevant, but four milliseconds matters to firms like this.

Michael lewis wrote the boy -- the book "flash voice" and came on our show and talk about it.

Will people take a look at this and say it is somehow unfair?

When people talk about high-frequency trading, they defend it by saying they are offering liquidity, so on and so forth.

You start to question the utility of someone buying an 800 foot tower in the middle of nowhere in cap mastering europe.

It seems to have evolved to a point where you start asking yourself, does this make sense?

Is this what we want our financial services industry to be doing?

Is there any purpose to any of this?

That is not really a question for regulators.

But obviously, to the degree that firms might be trading ahead of others, etc., that is a question to her regulars -- for regulators.

How much of a move are they making into the united states?

In the u.s., you said?

I'm sorry, i missed the end of that.

Yes, in the united states, using microwave towers to get an advantage on everyone else.

Actually, much further along in the u.s., like everything seems to be in high-frequency trading in the u.s. most of the big firms are in the u.s.. it is a lagging industry in europe.

The use of microwave towers is a more recent phenomenon in europe.

Jesse westbrook, educating us on chicago tower trading buying these towers in europe.

We do have data coming out at 8:30 a.m., including wholesale inflation producer prices, also industrial production after that.

And the federal reserve releases its anecdotal look at economic conditions around the country.

Futures are higher in advance of all of those releases.

The s&p futures gaining six point.

Good morning, everyone.

We are on bloomberg television and radio, and of course our digital media out there.

I'm tom keene.

With me are scarlet fu and adam johnson.

Our guest host is brett hint -- brad hintz.

As countless people come out, warehouse are you going to go?

And janet -- and chairman yellen has made it clear she is involved.

Let's talk about these rockets fired across the border of israel.

Is there a diplomacy strategy echo phil mattingly is in new york and joined us.

How does the situation fit the narrative at this point -- how does the administration deal with the narrative at this point?

I don't think they can.

You have what is going on in israel and gaza.

You have ukraine, which tom was talking about.

You have an election starting to collapse.

You have iraq come on syria.

It is never-ending.

How they shift the narrative, i don't think they can.

What they have decided to do right now is to take it piece by piece.

I think afghanistan was a win for them.

I think they look at what they have been able to do in ukraine and try to get the eu to add sanctions.

That is a positive step forward.

There is so much going wrong internationally, i don't know how you shift the narrative.

But maybe you can answer for us whether phil gordon of the mideast -- maybe you can answer for us whether phil gordon of the mideast coordination for the white house suggesting the u.s. might ought to pull out of the mideast, and that might create stability.

Others have said that is what we should not do.

Is the u.s. on the wrong side of this one?

They are getting to the point where in past times and these types of issues have, between hummus bank -- hamas and israel, the u.s. has to pull back.

Looking for some pathway forward and looking at what engine you can yahoo!

Said yesterday -- what benjamin netanyahu said yesterday, we are not closing fire.

It is a dangerous political policy for the u.s. to tell israel to pull back.

I think that has to be the next up, but i don't see it happening anytime soon.

You have the israeli and palestinian conflict and a lot of volatility around the world in hotspots.

But we have almost no volatility in the financial markets.

A slow trading environment, which we are seeing as a result of the big banks.

Jamie dimon said that will change in the second half of this year.

When will that be a catalyst?

Certainly, with rising rates.

Perhaps in november and the taper has ended at that point.

You should have some volatility on the long end of the curve.

That causes uncertainty and portfolios to change and that leads to volume.

As we lead up, as miss yellen begins to mention rate rises -- she may not actually get rate rises.

You will see activities and futures going up.

We won't see a rush into treasuries and less into trading overall?

Geopolitical risk can certainly do that.

But forecasting geopolitical risk is not a good going to be in.

You raise a good question.

Phil mattingly, why is the white house so unable to take credit for any of the good gains he is talking about echo market moving higher -- he is talking about, markets moving higher, etc.? for the last couple of weeks the president has been leaving the white house and talking about economic issues and domestic issues and arguing that the economy is better than it was six years ago.

They just cannot seize it because there is too much working against them right now.

They cannot break through.

We appreciate your perspective.

Scarlet, let's talk about this story moving, time warner on terror.

Users of chartered time warner are up into the 70's and advances are changing higher.

Up 15.5% after the turn down of rupert murdoch's reportedly $80 billion takeover bid.

We will continue to monitor the story.

We will be right back and discuss apple and ibm in our agenda.

Who is next after the apple and ibm partnership?

Tweet us.

? good morning, everyone.

Futures advance of five, now down seven.

Part of the pump here is time warner rebuffs foxx in a very large transaction.

Scarlet fu has more from the "new york times," on the 80 billion-dollar proposed transaction.

It was made a couple of weeks ago in early june, according to the "new york times." they discussed it and thought it was better to stay independent.

Rupert murdoch has a history of pursuing companies and going after them until he gets his way.

And it is up 16% as ago from the 70's up to about $82 per share.

What i thought was fascinating in that was the immediate assumption that the jettisoned cnn -- that they jettisoned cnn, owned by time warner and this is one of the sideshows of that huge combination.

There have already been so many huge, nations in the media sector.

If you think about dish and at&t as a proposed one, and time warner and comcast.

Brad, walk us through these transaction fees structure for wall street.

Is this a gravy train the?

It is not only a gravy train, but also a catalyst.

If you are a ceo not involved in a company like this, you are worried that nobody will take you to the dance.

If you think eminem and a deal, for a deal the size, -- an m&a deal, for a deal aside, if there is any financing to my get a piece of that.

But there is any hedging related to that financing, i get a piece of that.

There is a mold -- multiplicative effect going on.

You can say that if you teach it.

Mocha -- multiplicative.

Certainly, this is huge.

This is really big for murdoch to have done this.

He wants to sort of cap off his long-held career with a mega-acquisition like this.

Larry acker knows the characters very well and he will be sounding off on this yield, a multiplicative deal.

And also joining us as well.

You will have a thing or two to say about the mandate -- m&a. member -- or member time warner and aol?

What happened with that.

In any case, thank you, betty liu.

To let you know what is coming up, yum!

Brands, i -- and las vegas sands, and ebay.

There you go.

We will do much more here on this transaction.

Yesterday, we had tobacco.

To make it clear, this is a rebuff.

Well, there is a dance.

You say no and then go back and talk about it.

Multiplicative, rebuff, dance . this is getting interesting.

Coming back, we will speak with porter of the project partners on this story.

? good morning, everyone.

A lot of breaking news this morning.

Whitney, scarlet fu and adam johnson.

Brad hintz with us from sanford bernstein.

And of course, the news coming out on time warner and now we have a number on the share price.

Foxx is said to be willing to pay $85 per share for time warner as it tries to produce -- pursue this acquisition.

Time warner rebuffed rupert murdoch offered to take over the company for $80 billion total.

20% three foxx is said to be willing to pay $85 -- 21st century fox's said to be will and $85 per share for time warner.

Just dollar below the potential $85 bid right now.

You can see it is up at times and then here we go with the bloomberg headline of $85 per share.

Up some 18% on the offer.

Brad hintz with us from sanford bernstein m&a. did it feed on itself and we continue as we move from tobacco into media?

You have hit on what is happening, which is the seo is becoming confident, looking for growth in a world that is not growing rapidly.

When zero is your financing price, any -- almost anything looks creative.

Let's get the media perspective away from the true financial expertise.

Our next guest has a distinguished career in media and entertainment, beginning with a small startup in rolling stone.

Porter, wonderful to speak to you.

What are the best practices that foxx can bring to time warner?

Global is the real issue, and you have to look at time warner as being almost a shadow of what it was 10 years ago.

It is really now hbo that is the driver.

I think that is the holy grail that rupert ha

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

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