Obama Is California Dreamin’: Surveillance (11/26)

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Surveillance." Guests: Robert Profusek, Nicholas Thompson, Mark Ellwood, Barry Ritholtz, Nathan Sheets, and Geoffrey Stewart. (Source: Bloomberg)

This is bloomberg surveillance.

A changing of the guard at walmart.

China has money to burn and wants to buy america.

Should beijing acquire u.s. companies?

President obama heads to california to speak about the u.s. economy.

Good morning, everyone.

I am tom keene, live from our world headquarters in dublin new york -- in new york.

It is time for our morning brief.

We are briefing today.

We are never struggling.

India's gdp held below 5% for the longest spell.

It is going to be a busy morning in the u.s. make sure bloomberg is on if you are cooking or you have your ipad nearby.

Building permits and housing, home prices, consumer confidence , and you factoring index -- manufacturing index.

President obama visits the dreamworks animation facility in glendale california.

I wonder what he will say.

I think he will talk about the economy and raise money.

Data check.

Equities, bonds, currencies, commodities.

10 year yield was at 2.75%. a stronger euro versus weekend.

-- weak yen.

The dollar churning.

Oil is elevated in the last 24 hours.

The dow still about 16,000. brent crude 110 -- forget about that.

111. we will talk about china in this hour.

We have scoured the webpages and front pages.

There was plenty of news to discuss.

The white house is selling the iran nuclear deal to skeptical lawmakers.

An aggressive campaign to head off new congressional sanctions against iran.

That would jeopardize the agreement.

On the cover, one of it ron's influential leaders expressed optimism for this deal.

The former president of iran called the agreement a step in breaking the ice.

Is there any support in washington?

I have yet to see anybody go, yeah, this is great.

You hear more people object to a loudly.

An update on the chrysler ipo.

It is delaying its listing until next year because of an inability to resolve a routine tax issue quickly enough.

It is the latest move in this long-standing cat and mouse game over what to do with chrysler between the majority owner of fiat.

Fiat is looking for a way to buy chrysler.

Auto workers want a higher price for the minority stake.

A lot of the motion.

What are they saying?

This is a huge deal.

The huge transaction.

They say he will get it at the end of the day, it is a matter of paying up for it.

The union is going to make sure that he does.

We have seen this all year.

The dual track ross s. -- process.

What is a dual track process?

You weren't paying attention.

It is when a company puts itself up for sale and at the same time files papers with the regulators for an ipo, threatening or giving us some leverage with the potential buyer, saying i can get more in the public market, so you better pay up.

Paying up will be a big theme for chrysler whichever way you go.

Boeing -- u.s. regulators are set to tell -- warn airlines on boeing 787 icing risk with general electric engines.

I would not want to be on that plane in the right weather conditions.

The risk is small but.

This is not inflammatory.

This is a relatively routine study.

This has been found in all engines in high altitudes near thunderstorms.

It is a matter of people being careful and aware.

Regulators are set to perhaps make a move on this.

Lots of economic data.

Mergers and acquisitions.

Nick thompson is bloomberg contributing editor and with the "new yorker" magazine as well.

What is distinctive that we need to know about iran?

The most distinctive thing to know is that we actually finally have a deal, that we have diplomacy that seems to be working because sanctions were so effective.

Strong pressure and negotiations turned out to be a good mix.

The american political system may be a good political system for making deals because we have a president who wants to negotiate and you have a congress and a history that indicates we are willing to go to war.

Let's talk about the basic idea of 2013. what happened?

Do we blame the lawyers that there were no deals?

It depends on how you look at it.

There were plenty of deals.

Not that many megadeals, but some.

You guys are busy?

Yes.

Your associates are well fed?

Sure.

The lawyers are always busy.

The bankers are the ones who want more, more, more.

I totally agree with you.

Major law firms have like eight christmas parties.

Has that changed?

It is just the way it is.

You guys have been busy, right?

Yes.

There have been big deals.

Verizon.

They have been smaller.

Beneath the front page headline size.

We will have to talk about this, particularly on china.

This is an emotional issue.

On this tuesday -- a four-day workweek.

Let's get to company news.

Your scarlet fu.

Bayer is talking a deal with norway.

The $2.4 million bid for new we can company -- a norwegian company.

Westfield is winning big in london.

They won approval to rebuild them all in south london -- a $1.5 billion project.

It will develop as many as 600 homes and offices as part of the deal.

Apple is coming up with a smart phone.

Apple did not infringe on a patent owned by an electrical engineer.

That is today's company news.

I wonder how long that will stand before someone else comes up.

They have been winning a lot of suits.

It seems like within all the patent wars and all that, apple is coming out ok.

Can you imagine how many lawyers they must have?

A whole lot of lawyers on call for apple and samsung.

There is a new word alert.

Sue-it.

What doug macmillan needs to do first.

We will discuss this coming up.

Streaming on your tablet, your phone, and bloomberg.com.

Good morning.

There was one fewer tree in central park.

We went out and chop it down.

We brought it in.

That is the courtyard at our world headquarters.

X to bloomingdale's and 59th street in beautiful new york city.

It is a beautiful tree.

"market makers" 11:00 this morning.

David kostin will be on market makers today at 11:00 a.m. -- the goldman sachs view one earnings persistency in 2013. i am with scarlet fu and cristina alesci.

In case you missed it, walmart has tapped doug macmillan to lead the retailer as ceo.

The veteran has a few challenges on his plate ahead with slowing growth to increased competition from the likes of amazon.

What have you got on the new ceo?

He becomes only the fifth ceo in walmart's history as a publicly traded company -- since 1970. walmart has always looked internally.

He is no exception.

He started off with the company when he was a teenager.

Summer intern.

He worked at sam's club.

He was the head of walmart international.

He beat out other internal candidates.

How will this affect things politically?

He had the support of the walton family which owns about 50% of wal-mart's shares.

Will simon -- bill simon --there was a concern then there is not a role for him here.

There is a concern that there will be a brain drain.

I think it has been a big deal.

The stock is up 60%. thanks to its nice dividends.

They have hit the ball out of the park even with the challenges.

It is seen as a defensive stock.

It is usually hovering around the unchanged line.

Let's bring in robert.

Leadership is about a path.

This is one of the toughest things for companies to do.

Sure.

It is very difficult.

Sometimes there is breakage.

When you set up an internal system, there are winners and losers.

Is there a best practice your ? there is no question that the best practice is to hire from within.

Even though they have to do better online?

Basically very little experience on that front.

That is an important point.

Maybe there's a good argument when you need to make a shift in direction to get someone from the outside.

The search process is to some degree superficial.

To make sure that you do not miss anything.

You do all the checking, everybody says they're great.

Are you representing microsoft?

There is the ultimate search going on.

That would be a different story with alan mulally front and center.

When you need to make a strategic move for may be taking someone with a different perspective -- i'm not sure wal- mart needs to make some move like that.

I agree.

One major question is the fact that mcmillan has a lot of international experience.

That has raised questions about whether there will be more of a focus, given the fact that they really fumbled the ball on that front.

There is a talk that he will focus more internationally.

The u.s. has done quite well under bill simon.

The biggest benefit that mcmillan brings is that he is a great communicator.

It is very important.

They have 2.2 million employees.

They do business with so many vendors and so many countries.

It is wal-mart's job to speak to the different constituents.

Let me bring in the quote from credit suisse.

They are terrific analysts on big-box retailers.

Pragmatic, realistic, we think he will continue the legacy of focus on compliance and the core values of the company.

He also suggested there might be possible divestitures from walmart as well.

More deals, more deals.

It is going to be fascinating, just fascinating to see what walmart does here.

I go back to share price.

Whatever the case with nominal gdp and domestic challenges.

He will certainly take credit for that.

Bill simon did do quite a bit.

There are a lot of question marks over whether he was pushed out.

Sure he had the shortest tenure of any ceo at walmart, but he did more than just told a ship together.

They went to the financial crisis and through the recovery.

Nick thompson.

What can leadership in corporations learn from your foreign affairs world?

What can they learn from the complexity of diplomacy?

The complexity of diplomacy is quite different from corporations because you are switching up the players every four years and you have a limited timeframe in which you have to negotiate.

You very much up to plan for worst-case scenarios.

That is one thing you can learn when you are planning an internal succession versus an external succession.

You enter a more high-risk environment bringing in someone from the outside.

Any from the outside is a massive learning curve.

Which you see in politics when people tend to make a whole lot of mistakes in the beginning.

The president came in and everybody says he has no experience and it will be very hard -- he had a very successful couple of years legislatively.

Now he is having a really rough time.

For that theory out the window.

Wal-mart.

Wal-mart.

The stock did reacted little bit.

Doug macmillan, next ceo of walmart.

Let's move on.

Coming up, forget las vegas -- atlantic city making its move by going digital.

We will talk online gambling.

? good morning.

Christina has the top headlines.

We will start in afghanistan.

The u.s. says sign off on the security agreement or risk the pullout of american troops by the end of next year.

The afghan president continues to add to his list of demands.

It calls for the u.s. to keeps some troops in afghanistan beyond 2014. internet spying by the nsa -- it may cost u.s. companies $35 billion in lost revenue over the next three years.

This is according to the research group -- anger over the spying is hurting global sales at u.s. tech companies.

Online gambling debuted across new jersey.

The garden state becomes the most populous state to wager from the comfort of their homes.

Governor chris christie will generate $180 million in tax collection this fiscal year.

How do they know who is gambling at home?

They have special software that enables them to check whether you are in new jersey's borders.

How do they know it is not a 12-year-old getting addicted to poker?

You have to scan in your credit card, your drivers license.

There are a lot of data that you have to pass on.

We will talk about this later.

Julie hyman will be reporting from atlantic city this morning.

The question is how will this impact your saturdays?

[laughter] huge impact.

How did you know i don't have a life?

It raises bigger questions beyond what are you doing saturday night.

Our twitter question of the day -- is online gambling a moral hazard?

Some people have suggested that it is.

Tweet us.

Time for the morning must- read.

Mine is on activist investors.

We have heard a lot about how they have come in, a lot of high-profile activist investors targeting companies.

Writing about how shareholder activists limit productivity, but not wages for the workers at the companies.

He is referring to workers and the number of hours per worker.

The social good of this new activism -- that is what it comes down to.

You look at the new activism.

Is bill ackman good for the market?

It depends what length of.

-- length of time you are talking about.

It has always been there.

Back in the 1980's, we called them raiders.

It was a different word.

Activism has been there.

There is a huge amount of capital today committed to it.

The funds that they manage.

This is not just about corporate raiders.

This is long-term investors that are pressing for change.

These are people who have nothing to do with the corporate raiders that are actually supporting the bill ackman's and the carl icahn's of the world.

Cut back on your research and development.

I need more cash right now is the message on wall street.

Don't invest, don't buy that little thing.

Give me money.

I critically look at the timeframe of the activists.

Who was supporting on the side themselves?

Who was supporting them?

There is plenty of support in the institutional investor community.

The corporate governance paradigm in general -- you have something to the iss.

You have these other forces.

Stick with us.

We will see where that takes us.

Coming up, companies -- chinese companies go shopping in north america.

? good morning.

I'm tom keene.

Let's do a data check on a tuesday.

Equities, bonds, currencies, commodities.

The euro is beginning to put on steam as we begin to make it -- toward 1.36 -- make a dash toward 1.36. let's take a look at some of the big gainers and losers from yesterday.

Sears trading at about a one- year high.

It says that the report about the sale of the canada unit is false.

A lot of people speculated that eddie lampert was looking to sell off that unit.

Lions gate down 10.5%. this is the producer of "hunger games: catching fire." same analysts were looking for a lot more from the movie.

I still can't get used to alcoa as a single digit stock.

It is no longer a member of the dow jones -- it has fallen off people's radar.

It is an afterthought.

My favorite topic is deals.

I want to talk about china.

When chinese meat giant signed a deal earlier to buy smithfield foods, the u.s. government cleared the takeover.

Some dealmakers are expecting to see more chinese companies take a run at other u.s. assets.

Chinese acquisitions last year exceeded those of the previous three years combined.

That is pretty stark.

China has the cash.

Should we fear china?

It is front and center.

Is there a new new as we go into 2014 with chinese acquisition of our assets?

Smithfield was important psychologically.

For little bit, everybody said maybe this is a national security issue.

But, you know, smithfield made sausage and bacon and stuff like that.

It was hard to argue as a national security item.

$2.8 billion -- that was a little bit of a breakthrough, especially in the mind of the chinese businessperson.

We can do this stock.

Is the distinction here a majority ownership or are they more shrewd to take modest minority ownership across a broad swath of companies?

They are doing a lot of that.

$12 billion of investment of china in the u.s. that is way underestimated.

It does not include investment in private equity firms, the deals that put together.

Are they visible under 5%? no.

Not if it is a passive investment.

They are invisible.

Five years ago, it was $300 million.

What is the biggest challenge to getting a deal done?

The government would rather see the investment stay in the country and not export the capital to the u.s. actually, the chinese are trying to export their capital to the u.s. law firms like mine, we rushed over to china under the assumption that capital was going to china.

I was totally wrong.

It is coming.

What have you learned in the last 24 months?

What is the message would have to americans about business practices that you see in china?

Capital is coming the other way and you have got to do your homework.

You can't just come here and say we would like to do this.

You have to do prep work.

The smithfield deal was not prewired.

You can do that.

But it was replant, pre-thought- out -- by our government relations and everything else.

And you can get it done.

If the chinese company is trying to buy a big tech company, that is a bit different.

I don't remember -- don't know if you remember the situation a few years ago.

They made airplanes for commercial application.

There were more national security concerns.

Right.

The one thing that is still difficult in china is that the u.s. is a cacophonous place.

When senator schumer says i don't like this, the chinese businessperson says, wait a minute, i didn't realize that is how it is here.

We talk.

What is different between chinese companies coming in and buying u.s. companies first is japanese companies did in the late 1980's? there is no difference from my point of view, really.

Does all of it and in tears?

There is more state money.

I don't think so.

China is stating -- sitting on a ton of treasuries.

I will go with that incentive.

I think the core issue of our viewers and listeners across america is who is investing in smithfield?

Is it a direct conduit from beijing and the federal government or is it actually a freestanding company?

Freestanding.

You buy that idea?

But let's not kid ourselves.

It is a controlled economy.

Someone has to say that is an ok thing to do.

You don't think beijing is a rubberstamping of a pork maker and a sausage maker in america?

I think they're looking at it before it is done.

State-owned companies are state owned companies.

Fascinating, fascinating.

We will have more on this.

We want to pivot to another topic.

Elon musk's company postponed the launch of a rocket last night.

The countdown was halted at less than four minutes from liftoff.

There was a problem with the liquid oxygen tank.

The lodge has been rescheduled for thursday.

This mission will carry a communications satellite into orbit.

Spacex couldn't get it done.

All of the talk about private companies being in a better position than the government.

What is your report on elon musk?

This failure to launch is indicative of his year.

He has had an extraordinary year , but every time there is an extreme of success, ever something that goes wrong.

Basically, he has had the most interesting, successful your that anybody has had.

I have been a critic at times, but the fact is this guy has jumpstarted innovation, he seems to be impervious to criticism.

He is impervious to criticism, he has time started innovation, he is still dreaming back.

What is your prescription for 2014 for elon musk?

Ideally for him, tesla will start to make more inroads.

A string of success, buying more and more cars, better, and better.

Do you think it will grow into its valuation?

Good point.

I'm not sure about that.

Let's not talk crazy here.

There was a lot of promise, a lot of dreams built into tesla.

I think we will see with elon musk -- the question is whether he will get bored by his current companies and start a fourth or a fifth.

Some interesting perspective.

I am fascinated by the year of elon musk.

He is on the covers of all these magazines.

He seems like an interesting guy.

The world's most interesting man.

[laughter] i don't know if you can use them for that.

He is a man with lots of children because he once to improve the overall intelligence of the human race, he said.

He is a quirky guy.

[laughter] this is part of his whole character.

The one he has put out in public.

It seems genuine and real.

Speaking of the new era, the nasdaq hitting 4000 yesterday.

The s&p 500 above 1800. whether you should buy into this bull market.

That is coming up.

? good morning.

Trouble in the control room.

With me today scarlet fu and cristina alesci.

Maybe i can save you, but i cannot save a lot of ceos.

They are losing their jobs.

What mark is not alone in making the change at the stop.

-- walmart is not alone in making the change at the top.

Competition and shifting consumer traits are among the reasons for the high rate of turnover at the top of u.s. companies.

The new air zone -- japanese officials will not accept false and positions on its airlines by china.

The four decade long paid landowners to reduce crops.

It will be phased out over the next five years.

Those are top headlines.

Industrial farming in japan?

Who would have thunk?

I think we should look at a single best chart.

This is a good one.

The flip between the u.s. and europe following the recovery from the great recession.

European stocks, the white line.

The yellow line, u.s. stocks.

European earnings-per-share are close to their 2008 low.

U.s. earnings-per-share are almost double their level back in 2008. the interesting thing here is that top line growth is not maturely different between the two places, it is weaker margins in europe.

And dilution among the financials.

Nick thompson with us.

This speaks so much of that euro-screlosis.

We clear markets.

It is ugly, but we do it.

They don't. do you think any -- see any hope that europe can become more supple?

There were so many cultural differences, language differences.

It makes it hard to act.

We responded very slowly, inefficiently, but we did actually respond and that is a reason why our chart heads up at the top.

It is the different kinds of responses.

They chose austerity.

We chose stimulus.

Is a huge question for next year.

Can they get it going?

What we got and photos?

-- in photos?

The philippines is beginning the difficult transition from rescue mode toward a long-term recovery.

The government will limit coastal rebuilding with the hopes of improving the country's resilience against another storm.

Is that a boat on land?

Yes.

It is crazy.

The pictures from these efforts are astonishing.

The fact that the government wants to limit the rebuilding on the coastline is actually difficult because the country is made up of more than 7000 islands.

I thought there were like 12 islands.

How many islands?

7000 islands.

22,000 miles of natural coastline.

While.

It is huge.

How do you enforce that?

And they have snakes.

I don't get that.

In china, cleanup efforts are underway after a massive oil pipeline killed 65 people.

A leaking oil pipeline caught fire friday afternoon.

The amount of oil released is unknown.

It is thought to be significant.

This is going to be months of cleanup.

This goes into the environment.

Nothing has changed, hasn't? no.

Nothing has changed.

We have not done a good job on it.

We are getting better at cleaning up after disasters, but there continue to be disasters.

What else do we have?

We have a lighter third photo.

Thanksgiving is not even over, but there are preparations for the christmas eastham -- season at the u.s. capitol.

It is the republicans doing that.

The capitol christmas tree was put up and placed by a large crane on the west lawn of the capitol.

It is 88 feet tall.

That is pretty tall.

I kind of like the idea of an 88 foot tall tree.

It is probably from a swing state.

[laughter] out of central park?

Best answer yet.

Probably out of a swing state.

[laughter] it is the holiday season.

Six shorter shopping days.

Retail will be interesting.

The white house does not exactly want to rush the calendar because do know what they have to do with coming up?

November 30. the deadline for the healthcare.gov website to be up and running.

Will it be ready?

That is coming up.

? this is "bloomberg surveillance." flicks get you company news from the files of "bloomberg west." the chip maker is seeking $500 million for the online pay-tv service.

Intel is scaling back its tv ambitions to focus on chips for mobile devices.

Qualcomm suffers a bit of a chat -- setback in china after an anti-trust investigation is launched.

Sony says growth forecasts are conservative.

It can top its operating income target.

They may also look into the cost reductions.

-- deep cost reductions.

How about those activist investors?

Seriously.

They have had a tough time.

I'm curious to get our guest host's opinion on this.

What do you think went wrong or right at sony in terms of the way jim lobe handled it -- dan loeb handled it?

There was no question he wasn't going to push around the company.

This is not some company where the boards are going to get we can need.

-- weak-kneed.

The company is doing something.

Do you think they would have dumped something if it were not for him in their agitating?

-- done something if it were not for him in there agitating?

Japan is different.

There is interlocking ownership.

It is not like year.

We will continue to monitor this one.

It will continue to play out in the next couple of months.

The president's deadline of november 30 to fix the healthcare.gov website is fast approaching.

They are stressed out over whether the website will he fully functional by then.

Can the obama administration take another hit from this beleaguered rollup?

Joining us is nick thompson.

November 30 is supposed to be the deadline.

Evelyn sibelius has managed -- kathleen sebelius has managed expectations lower.

The white house has said that the website will work for the vast majority of users.

Process is product.

This process is what people will remember.

That is true, but i do think they are making the right moves.

Even if they fix everything they have identified, there will still be lots of terrible things that happened because of the press that has come before hand.

They do have to manage expectations.

They have done a pretty good job saying that it will not work for everyone.

In the last 48 hours, they have been sounding a lot more optimistic than before.

Maybe they know something we don't know.

How does this compare with the performance of an e-commerce website that goes live?

You have monitored lots of these things.

It compares a lot worse.

They had a deadline.

The company that had as many problems like this -- they would not have as complicated a system.

They would not have built it in such a crazy complex way.

They would have stopped.

They would have better project managers reporting more to the ceo and it would have aborted.

Fabulist charts showing the state-by-state variance -- fabulous charts showing the state-by-state variance.

Who is winning the battle?

Is there one state that stands out?

Kentucky and california.

Kentucky was at the top of the fancy chart.

What are they doing there?

There is a huge divide in how the health care will work in republican states versus democrat states.

In the long run, that will be the big split.

In the beginning, it is the states that have set up the system right.

Of course the people in california are focused on the technical aspect.

In kentucky, the system is based there.

It probably had good managers.

Are they making an activist effort to get the people who don't want to do this to do it?

The healthy young kids?

Is that the distinction?

Right now it is more of a technical distinction and then it will also become a cultural distinction.

What is going to happen with this law is that once the system works, once people start doing it, you will see it early spreading in states where it takes off, because people will get the quotes.

One is that on my calendar?

March?

Next year.

2016? you brought up a great point about young people and the fact that beyond the technical issues the real problem may be the fact that young people are not going to sign up in the necessary numbers to make this thing work.

And possibly have the patience.

[laughter] we are definitely not going to have the patience.

The question is between new premiums come up possibly low use, and the fact that youths are having to pay larger and larger college bills -- how much more of a strain is this on the youth of the country?

If you consider it a strain because you have to pay monthly premiums, yet it is a strain.

A lot of young people can stay on their parents' insurance.

It will save them a lot of money.

If they don't have health insurance and they have a big problem and they see their friends get crushed -- it is not necessarily harmful for them.

This might also affect the other side of the equation.

We will see if they sign up en masse before november 30. before december 31. we will see.

Looks to a forex report.

Yen is weaker.

Euro yen, 137. this is "bloomberg surveillance." ? a changing of the guard at walmart.

An international executive needs execute.

If it looks like a bubble, it is a bubble.

We travel as well to atlantic city.

There is online gambling on marvin gardens.

Good morning everyone, this is "bloomberg surveillance." is tuesday, november 26. joining me, scarlet through and christina alessi.

Good morning.

Good morning.

It is time for the morning brief.

Overnight, india's gdp held below five were set for the longest spell since 2005. building permits and housing starts, 9:30 a.m.. 10:00 a.m., consumer confidence.

Also 10:00 a.m. manufacturing index.

A busy retail day.

Barnes & noble, tiffany, cracker barrel after the bell.

Also of note, 3:15 today, president obama visits stream works in glendale california.

I wonder what else is going to say.

Scarlet?

Tiffany results just came out.

I'm not sure the numbers are comparable because it is such a big meet.

Third quarter earnings a lot higher than anticipated.

$11 million versus 800 89 -- it is a stark comparison to what we have seen at the lower end of the retail spectrum.

Before we get into that, let's get into the company news.

Let's start with chrysler which is delaying its ipo until next year blaming a routine tax filing.

Majority owner and ceo wants to buy the rest of chrysler rather than going public.

U.s. regulators are set to order airlines to avoid flying boeing streamliner and 747 -- eight jumbo jets near thunderstorms.

This after some of the planes experienced ice buildup.

The problem is not limited to these engines and ice crystals have been found in all engines at high altitudes near those thunderstorms.

It is official, apple coming up with a smart phone.

A federal jury says that they did not infringe on a patent by a seven-year-old electrical engineer.

He claimed he came up with the idea for a handheld device that can wind a computer with a wireless phone.

That is today's company news.

First i heard of that.

I didn't realize the patent warts has gotten that far.

First to my saw cell phone was a michael douglas movie a million years ago.

A big ugly thing.

It was five times sizes had.

Speaking of the new era, walmart international head that mcmillan will replace mike duke.

How does walmart need to adopt a strategy ahead?

Here is the author of bargain fever.

Mark, you can track what walmart is going through with what tiffany just reported, these blockbuster earnings and revenue increases.

Walmart struggling and even though it managed to hold onto its core customer, is losing ground and losing fast to amazon.

I don't know why they're all these naysayers and hand ringers.

I say walmart is doing long-term what everyone else is been trying to do.

It calls it endless aisle.

You can shop online pickup in.

It realize those two channels -- it realized those two channels and that all its stores are just way where houses.

On the wake-up or they worried about moving units or price analysis?

That is a really good question.

I think what walmart is worried about is the same thing everyone is worried about which is amazon.

All it is thinking about is how we beat amazon.

This holiday season all the big ox retailers have gotten together to agree on price match.

Other more defensively minded in terms of protecting against amazon?

Look what they're doing in china.

They said in 2016 they're going to open 110 new operations in china.

That is quite aggressive.

You bring up amazon, it is not just having a network of stores around the country, it is also about managing inventory across that.

That is what amazon does so well.

It does had to get products to the people where there is demand.

Can walmart do the same thing?

I don't agree with you.

I don't think amazon does that particularly well.

Why is amazon racing to build these distribution centers around the country?

Is crossing its fingers and saying i hope the stores that have stores everywhere but don't realize we are ahead.

It is just warehouse.

Retail is changing ever so quickly, isn't it?

It has been changing for 20 years.

How do invest in it?

Very carefully.

You have to be aware of the fact that retail has been a low margin business for a long time.

Let's be blunt about amazon.

It is a fantastic company.

I by half the junk i buy from amazon, but they haven't made a dime of profit in god knows how long and still investors love them.

That is really a speculative trade.

Walmart, on the other hand, on the low-end, you look at walmart, target, dollar store, it'll run of stores in the lower end, very challenging to make money.

You have to catch them just right.

We are not a huge fan -- rex this upcoming holiday season, mark, when you look at massive discounting, people don't want to buy anything unless it is 40% off.

There's a game going on with artificial discounting.

You have to think about something like black friday.

Black friday is when the mall becomes an outlet mall.

Outlet malls or 60 to 70% -- items that are sold at outlet malls are made to be discounted.

My mother was a buyer.

This is right after the civil war.

What did you learn after the collapse?

It looked like there had been a crime.

What we learned from filene's was that they were too small to survive.

We learned that tjx has a bigger market cap and xerox.

It is huge.

Pre-k's size matters here.

Obviously you are really optimistic on walmart.

But what could they be doing better?

Answering some of its international operations.

It scaled back in india and we empathize with india because india is a really hard environment to operate in because of all the regulations about needing a local partner.

I think walmart is doing the right thing.

They're bringing in an international expert.

How do you respond to america's projection of retail to china?

That is an amazing question.

When walmart went to south korea, it went in wrongly and it created walmart south korea where you couldn't see over the different aisles.

Korean shoppers like to see over the aisles.

They like to get little samples.

You can't export wholesale, but you want to export cheap prices.

Obviously we have a new ceo.

Does this indicate any new strategy or is it just more the same?

I think it is more of the same.

But i hope so.

Berry, jump in here.

We talk about the phony sales.

What happens when you back away from it.

Look at jcpenney?

Disaster.

U.n. long at 30, right?

We don't like playing in that space.

You really have to get lucky on the low-end.

On the high-end it is different.

We look at tiffany's and neiman marcus going down the list, there is a different headspace.

Look, the maltese falcon prop sulfur $4 million at auction yesterday.

That is one market.

Walmart, tj maxx, target, that is a different market.

Where will walmart the inside of five years?

I think it will be thriving.

I hope everyone copies it.

11 optimism on walmart because everyone has taken shots at it.

Take a look at it, it is up 60% or so from the trading range bottle of a few years ago.

Euro-dollar is not that boring one dollar 35. quickly, barry, do you like the hydrocarbons?

Do you like they will?

You could look at some of the majors like exxon mobil is cheap.

Conoco has an interesting name.

Barry and i got matching ties.

There's too much excitement.

When we come back, online gambling goes live today in new jersey.

Online poker, blackjack.

We will discuss all of that.

We also wonder what are the unintended consequences.

Our twitter question of the day -- is online gambling immoral hazard?

? good morning, everyone.

I'm tom keene on "bloomberg surveillance." the big picture is you are impatient.

Consider a market dropped on of seven percent.

It is an absolute disaster.

Where did our ability go to withstand a loss?

Why we participate in the equity markets.

This is the heart of the 2003 matter.

We are addicted to not taking a loss.

That is right.

We haven't seen a pullback of 10% in over a year.

Assumption is every drop leads to handwringing and more qed.

We're down five percent!

We get a five percent pullback on average once a year.

Beginning 10% pullback every 18 or 20 months.

Every pullback far less in common to many people think.

It is just part of the natural volatility that you get with the upsides of equity.

You've written so much about sound financial planning, trying to make rational decisions given the emotion of the moment.

How much of a drawdown, a marked run in our 401(k) should we withstand before we panic?

The best route to answer that is the flipside.

How confident are you that you're going to get out before the damage is too bad and especially get back in.

I can't tell you how many people have contacted me over the years saying i listened to you in 07 and 08 and i got out of equities.

When you got bullish in 09 at that you're crazy and here it is 2010, 2011 and the market is up so much and i don't have the nerve to pull the trigger.

That is the risk with the nonprofessional.

As we have seen, lots of professionals a moment to step out there is very litt difficult reentry.

Is it the idea of cash going to shareholders, buybacks and dividends?

There is an enormous amount of factors.

Any time someone says anyone variable is running the market i look askance.

We have earnings off the lows from 140%. we have a tremendous amount of skepticism.

I have been calling this the most hated rally for four years.

A huge amount of people underinvested.

The last survey i saw, i don't remember who put it out whether it was fidelity or bank of america.

37% of portfolios are cached.

You should have three or four percent across your -- but 37%? the general leave across the top that this is a bubble?

Stay tuned.

Coming up, if you live in new jersey you can now gamble online.

We will talk the senior vice president of caesars, that is next on "bloomberg surveillance." good morning.

? quarks with us, art test host.

Our top headlines, whenever he got?

The u.s. tells mohammed karzai to sign off on the security agreement or risk a complete rollout of american troops by the end of next year.

He continues to add to his list of demands for approving a deal.

The proposed security agreement calls for the u.s. to keep some troops in afghanistan beyond 2014. switching to the internet, the and as a spying may cause $35 billion in lost revenue over the next three years.

The firm said anger over the spying is hurting global sales at u.s. tech companies.

In japan, it is ending subsidies for rice farmers in the four decade old policy that paid landowners to reduce crops.

It will be phased out over the next five years.

It is likely to spur consolidation of smaller rice patties into larger fields.

The rice is a big deal.

We did a lot on rice a couple of years ago.

It is an amazing business.

Very cultural, right?

Huge huge difference.

Imagine a country paying its farmers not to grow food.

Thank goodness we don't do that y. u.s. treasury bonds, for decades the world's risk-free investment.

Not any longer.

More so than the long-term debt of spain and italy, two countries only recently back from the brink.

Nathan sheets, global head of international economics at citigroup.

Nathan, how odd is it that u.s. paper is bouncing around more than spain and italy?

What we're seeing here is the u.s. monitoring policy nearing and in flexion point.

The fed over the next few months is likely to start tapering and that has created a bit of upward uncertainty in the tenure treasuries.

Under the hand, the ecb seems so settled into a comfortable stasis, where they're going to be stimulative for a long time and they would do further stimulus on the margin.

They won't be changing -- when you look at the u.s. policy and the idea of tapering, do you think of it as a single date for chairman yellen or chairman bernanke.

Do you see it as an devolution for two thousand 14? is very evolutionary.

The fed is going to respond to the data.

Both in thinking about when they start tapering but then once they start tapering they will be looking at the economy and looking at the performance of the treasury market and determining the pace of tapering based on what they see.

Very evolutionary.

Make another angle here that explains why voluntary -- u.s. treasuries are still primarily owned if not by the fed then by foreign governments like china and japan.

By all means.

That is a good thing and a bad thing.

When you think about domestic ownership of the italian and spanish government securities, a lot of that is in the banking sector.

I think that makes the banking sector more normal than otherwise.

Berry, fold in nathan sheets' policy into investing.

Do all have to look at what chairmanyellen is going to do?

They have told us about inflation.

Their toes about -- we remember the beginning of the year you and i had a conversation i said if he hadn't refinanced your mortgage you better start now.

? what did you learn in the bond ugliness in the summer, in august?

Vigilantes aren't dead and they're happy to front run the fed if they can.

In the second, nothing beats a latter bond portfolio.

You better not put it all in black and spin the wheel.

You have to be thinking a shorter duration but having things come out year after year as opposed to making that all in debt.

Nathan and there you both touched on this.

What is -- what does the volatility in the bond market say to the u.s. consumer?

What is the impact on the real economy?

That is a good question.

I'm not sure.

On a black friday -- i don't know if the people swarming wal- mart further $69 200 inch tv or hitting the malls really are looking at that.

I think the people that the credit rating and the income to refinance have and the people who can pay down their credit card debt have heard everybody else's in a different zone.

Where i think we have seen a most important macroeconomic effects as been on the housing market where mortgage rates have gone up significantly relative to early this year.

The housing market is not as strong as it was early this year . there is very much a wait and see in terms of the impact of mortgage rates.

What about the fact that mario draghi has gone through all of this with soothing words and not necessarily action.

Will he be able to continue doing that through words alone?

Mario draghi's verbal interventions i think have been the most effective in the history of central banking.

Truly extraordinary what he has been able to achieve.

But it is going to be hard to continue to just do it with words.

If you want to provide additional significant stimulus to the euro economy, easy going to have to do more.

I'm not sure the germans are going to let him.

Citigroup this morning on bond volatility.

Worry, angst, it is another wall of words.

Coming up on "surveillance." if you're 21 and you happen to be in new jersey, you are in luck.

Open for business in the garden state.

We will discuss is coming up on "bloomberg surveillance." also on television and radio.

? this is "bloomberg surveillance." i'm scarlet flu with tom keene and christina alessi.

The big storm is headed to the ease coast.

Rain, sleet, snow, you name it the east coast will be getting it.

The storm will be hitting an area stretching from atlanta all the way north to boston.

Hundreds of flights have already been canceled.

The storm has artie triggered winter weather advisory's from new mexico to arkansas.

The huge swath of the nation.

This is during one of the busiest travel.

Of the year.

Maybe everyone is going to be eating turkey on friday at this point very cracks you make a joke about it can imagine the philadelphia airport?

Right in the storm's path?

We are returning to jersey.

It is a third state to legalize online gambling.

Joining delaware and nevada.

This has been a contentious issue from the start heard a lot of money to be made and lost by casinos and gamblers alike.

Bloomberg's senior correspondent julie is in atlantic city.

Julie, you better get back your fast.

What is been the response from casino owner so far?

Is something they've been pushing for.

Their 10 of the 12 casinos in atlantic city that of gone into online operations.

I'm standing here in front of caesars on atlantic city boardwalk.

Of course, people can be doing this from the comfort of their own homes.

The casinos that get the licenses have to have a physical presence here in new jersey.

That was one of the things it was designed to help boost their revenue.

How does it work?

You have to sign in online, you have to get your age and identity verified and then there is geolocation software that can pinpoint where you are and figure out if you are legal to gamble.

In other words, if you sign up in new jersey and say you live across state lines, you will not be able to gamble at home.

You can gamble on your commute and work, but you can't gamble out-of-state.

There have been some little hiccups here for some of the border areas like hoboken, for example or cherry hill new jersey.

But they're working out the kinks here.

Julie, what are some of the responses from smaller online players that want to get into this?

Obviously, this benefits the physical large casino players out there.

What about the smaller guys?

All of these casinos here have actually partnered with online operations from ultimate gaming to betsy or depending on the casinos.

They are not going it alone.

They don't necessarily have the infrastructures of their partnering with other companies that have expertise in this area.

In some cases european companies , because that is legalized in areas over in europe.

And in some cases here in the u.s.. sheldon abelson, who has all kinds of biases here, is a giant of camping in casinos and all that, says this is simply a moral issue.

What checks are in place so my 12-year-old kid won't be playing blackjack when he comes over from school?

Again, the idea is that you have to log in and have your age and identity verified through the process online.

That at least is going to keep you from doing that.

Adam talked about the danger of equal like -- i'm not sure who often those curves are employed because they want people to be gambling.

Julia, look at this.

What is the mood in atlantic city?

Are they looking at this as the salvation of revenue?

It is a margin that is going to be helped.

Looking at the numbers, you have definitely seen a plunge in revenue in atlantic city.

It was a peak of $5.2 billion in 2006. it might be under $3 billion this year.

Is going to be close to $3 billion.

When you look at online gaming, it is a higher margin business.

That said, i saw one estimate that if new jersey wants to meet its tax target for online gambling, that means people gambling online in new jersey are going to have to lose $1.8 billion.

Overall they lost $3 billion.

It is not clear if it is going to have the size that is needed in order for tax revenue or for the casinos themselves.

Julia hyman, thank you so much, in atlantic city.

We will continue this discussion.

What is the downside here?

First, we have casino owners giving us ethics and morals lessons.

I find that interesting.

Second, this is a bad business.

New jersey is not ideally located for this.

You have new york state starting to legalize casino gambling in various counties.

That is going to be competition for atlantic city.

The other thing is, you have to adapt to changing times and changing technologies.

The bottom line of all of this comes back to what mark twain said, it gambling his attacks on the stupid.

Pretty much that is where we are going.

Quoting samuel clemens.

Let's give a quick data check.

Higher as we head into a lot of economic data including housing permits.

Good morning, everyone.

"bloomberg surveillance." live streaming on your ipad out of bloomberg tv plus in bloomberg radio plus and on android as well.

I am tom keene.

Christina alessi and scarlet flu.

Scarlet?

We're going to tackle a camping in new jersey.

New jersey may be hitting the jackpot today online specifically.

It is our cover story of the day.

New jersey is the third state in the union after delaware and nevada to launch online gambling.

He joins us this morning from atlantic city.

Jeffrey, i know that you guys have been running a test.

. period.

What time demand and be seen from new jersey as regards this product?

We are very excited with what we have seen so far.

Laster saithe traffic and response from the public has been great.

It has surpassed what we expected and we think today with the official start of moving out of soft launch widespread operation, we will see even more traffic and the enthusiasm will continue to grow.

To the city glitches in terms of credit card issues or the ability to verify someone's age or the ability to confirm that there actually new jersey?

I think one of the big issues we will see is trying to get cash on the various websites or the credit card issuers are a little bit cautious given the history of gaming in the u.s.. now it is a legal, regulated, secure place to play online.

You can come to caesars atlantic city behind me, deposit cash at the casino cage.

I think a lot of those concerns have been alleviated in the second go around of online gaming in the u.s.. jeff, you are a smart guy out of duke economics and stanford gsp.

We know the predictability of cash flows and the gambling business and the casino business.

Who will be your customers in online gambling?

What is the demographic you expect will use online gambling?

I think this is just a new distribution channel for casino gaming.

As we have seen in other industries, the move online has opened up products to a new demographic and a new customer set.

We'll see the exact same thing online.

Some of our traditional customers will love the -- in the meadowlands, can i bet on new york giants for all in new jersey?

If you are within the state of new jersey, within the borders, you can definitely log onto harriah's casino.com.

Do anything you want.

Do anything you want, tom.

Go to it.

We will send you to new jersey to take care of that.

Online gambling is not without its critics.

Sheldon adelson says he will launch a campaign to stop its spread.

He said this is an issue of morality.

Listen to what he told the bird television a few months ago.

It is not a money issue with me.

I think it is a train wreck.

It is really toxicity.

It is a cancer waiting to happen.

Because of the cancer but, jeffrey come as he really worried about morality or is it a reflection of concerns with the competition with brick-and- mortar casinos?

As we discussed earlier there is a lot of control input put into place.

New jersey has done a tremendous job setting up tight regulations for online gambling such as preventing people from out-of- state from gaming.

Individuals can go all of our websites, self exclude, make sure they're not allowed to play . there are a number of controls in place and we feel that as the market evolves over time, the type of regulation cc new jersey will spread elsewhere and people would use it for what it is, fun, entertaining, safe, legal activity.

Jeffrey stewart, thank you so much.

Greatly appreciated heard is with caesars in atlantic city.

That is not all today.

We will be discussing this all day on bloomberg television.

I'm sorry.

Are you kidding me?

Are you kidding me.

Former treasury executive for new jersey is explaining how to boost revenue from online gambling.

We take a look at why that is the case.

We will look at that on bloomberg surveillance agenda.

Good morning, everyone.

Bloomberg television.

Chief executive officer of the luxury institute.

It is retail week at "in the loop" with betty lou.

The excitement of luxury shopping.

This is bloomberg surveillance.

Good morning from new york city.

It is time for morning movers.

Christina.

I'm looking at oil.

With all the stock of what is going on in the middle east it is definitely going to challenge or perhaps push down oil prices given the fact that we have a deal with iran is now afghanistan.

It is looking like we have some motion there as well.

We have seen the prices come down.

That is probably because people are betting there will be more and more production and maybe saudi arabia will change the game.

There's a december opec meeting.

Helena croft at barclays was saying -- i should point out that "the new york times" had an article about the communication between saturday been the united states.

Tiffany was soaring after blockbuster earnings report.

Beating analyst estimates by a wide margin.

The numbers were -- i had to do a double take.

The consensus was for $.58. revenue, topline and also beat estimates.

Tiffany has now boosted its four-year forecast as well -- its full-year forecast as well.

It is very emblematic of what is going on when people are saying, oh, stocks are at a high and earnings are at a cyclical high.

There are two ways rices -- either stocks come down or we are earning a salary.

It doesn't take a lot of gains in earnings for the to be a reset in whether we are a little overvalued or perhaps have you done any research on definitel tiffany lately.

It doesn't matter if the low end is spending as much as he did last year or if we have growth at the higher end.

All we need to grow in terms of economic growth in consumer spending.

You have to have that middle and outspending if you c want to continue growth in the current structure.

If you look up at past circumstances in europe where there is a fat tax, they made the decision to say there will be a little less consumption and a little less volatility.

Would have any investment in your theme for investment is until years,. that is right.

You will continue to see people spending money.

Using the middle and upper side spending money.

We have been having this debate in the office.

If you look at some of the high- end auctions, the $52 million ferrari that number reported on, no not me.

If you look at some of the monets and picassos, the ultrahigh and is spending money like they have billions.

And in fact they do.

Berry riddles with us -- barry ritholz with us.

Tweet us@surveillance.

? good morning, everyone.

Jason ackerman is going to tell me -- he is with fresh direct.

I got swanson tv dinners.

You're getting a turkey, actually.

With your refined palate?

This is "bloomberg surveillance." we will be off thanksgiving except for me.

I will be working here with francie makua.

No more violins for tom keene.

At her get here.

Intel is looking to exit the pay television business.

The chipmaker is seeking $500 million for the pay-tv service that is online.

The company hosted secure sale for its unit for the end of the year.

It was to focus on chips for mobile devices.

Qualcomm is being probed in china.

No specific charge that it violated chinese law.

Sony entertainment unit is going conservative.

Sony may also look to deepen cost reductions beyond the $250 million.

We have got your many e-mails . new jersey launches online gambling today.

It is controversial to say the least.

Julie hyman is in atlantic city.

I think barry ritholz says it clear that i do.

It is not only attacks on the stupid, it also falls disproportionately on the lower economic strata which tends to gamble more.

A lot of what they are talking about in terms of safety provisions are just tissue paper.

After the show i was set up a proxy server.

You can logon and gamble new jersey from anywhere in the world.

That is nonsense.

Plus your playing poker against boston computers.

Is not like a credible poker game.

Let me play the other side, they do this in ireland, right?

They do this all over europe.

They could've set up shop with one of the casinos in atlantic city.

Yes, this is pretty common.

Different culture there.

Different types of spending.

They are much better safety net when it comes to people gambling.

What is the difference between this casino and the one you and i look

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

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