? inside mcdonald's, the fast- food giant reports earnings.
What do the golden arches tell us about the global economy?
Sec showdown, ted kaufman is in the loop as washington makes a plate to take down hedge fund billionaire steve cohen.
Is regulation heating up?
The world waits for the word of delivery and we look at the business behind celebrating and raising the royal air.
From bloomberg world headquarters in new york, this is "in the loop." good morning, is monday, july 22. you are "in the loop," and i am betty liu.
Breaking news on mcdonald's, not a great quarter.
The stock is down 2% right now, a mess on the earnings in u.s. sales.
We will have that covered for you in just a moment.
Julie hyman is digging through those latest mcdonald's numbers and she will talk about the major issues going on, particularly in the u.s., for the fast-food giant.
Julianna goldman, watching president obama today, set to make a speech this week, framing the changes in his economic policy for the rest of the term.
Dominic chu has a rundown on the greatest hits this morning and a potential warning for netflix investors , who have seen more than a doubling of the stock price in the last year.
Let's start with julie hyman on mcdonald's. a miss for earnings?
And for sales as well.
Earnings per share coming in $1.38, $1.40 with the average estimate.
A slight mess there, 7.0 9 billion, that was the estimate, but with mcdonald's you have to focus on same-store sales at restaurants that have been open for at least 12 months, giving you a comparable picture, not the growth fueled by new stores.
Particularly in the u.s. the company came in disappointing.
Comfortable with a gain of 1%, in line with estimates, but in the u.s. the sales were only up by 1.5% -- only up by 1%, of 1.5% had been the estimate.
They are pushing the value menu, dollar menu, refreshen their product line in the u.s., but it looks like that strategy is not entirely successful when it comes to boosting those numbers here in the u.s.. still going through the numbers, but those of the headline numbers that you will want to know about with shares trading lower.
We know that they get a lot of their revenue, most of their revenue, really, from overseas, europe, and asia.
They just announced that they are moving into vietnam, a market that they have not been in.
In europe they said what?
That sales were going to be flat in july?
Yes, flat in july is their estimates.
In the asia-pacific, mideast, africa region, the region that lumps together, down 3/10 of 1%. as a growth company, like so many, it is coming from a developing market as opposed to what you see here in the u.s. or europe.
If you look at the overall breakdown of revenue, as you say most of it comes from outside the united states.
The biggest chunk comes from europe, but the fastest-growing part of their business is indeed that's asia-pacific, mideast, and africa.
All right, julie hyman, thank you.
Our senior market correspondent on mcdonald's. there are a lot of questions about mcdonald's out there right now.
What do you think about the company?
Send me a tweet, let me know.
What would you ask me mcdonald's ceo?
I might pose the question to the man himself when we go inside mcdonald's on wednesday.
We will go through every aspect of the business.
That is all day this wednesday, only on bloomberg television.
In washington, summer is not over yet, but the white house is getting ready for a budget battle.
President obama delivering the first of a series of speeches on the economy wednesday in illinois.
Julianna goldman joins us now.
What can we expect to hear?
What details from the president on his economic policy?
Looked, what the white house is trying to do here is refocus the attention of the country back to the economy, but this speech is going to be more thematic than substantive.
The president's going to be talking about middle class fairness.
You will likely hear the line of the american economy works best when it works from the middle out, not the top down, but do not expect a lot of detailed policy on wednesday, but it will kick off a series of speeches on the domestic agenda, which is when you could see some new proposals.
Some of them rehashed, some that require congress, and some that require the private sector for help.
Tell us about the college not college he is speaking at.
A college that is near and dear to the president's heart, where he gave his first economic speech as center in 2005. over the last five years for most of his big economic speeches he has always talked about his knox college speech, one of his favorites according to an adviser a spokesman.
He is always telling his speech writers to go back and look at this one for big economic speeches.
There is a lot going on in washington.
The immigration debate, edward snowden, are any of his comments on wednesday when to cut through the noise?
That is the hope.
We have seen them try to give it back to the economy before, but the white house is clearly frustrated that other stories, especially edward snowden, have taken away from the broader economic message.
Van piper sent that message to supporters last night where he talked about what he called phony scandals.
Yes, it is a slow summer months, the white house is looking at another potential fight to raise the debt ceiling, it may be another time to look as sequestration cuts.
They are trying to lay the groundwork and get people talking about something other than what they colophony scandals.
Thank you, julianna.
One city that could use an economic bush, detroit.
The positive spin is that bankruptcy is bottoming out, that it is a chance for a fresh start for the city, michael mckee says that the real deal is that that is wishful thinking?
It may be a year, five years before it is all sorted out, but the one question that no one is asking -- what is left of detroit once the process is over?
Detroit is a huge city.
You could fit 7 sysco, boston, and manhattan inside the borders of the city with room left over.
Once home to 2 million people, but now there are only about 700,000. meaning it is a very empty city.
Dark blue, 60% empty.
Another 66,000 empty lots.
You have heard that statistic that 40% of the street lights do not work, but what about 60% of their ambulances'? they have the highest violent crime rate in the country.
Those are problems that bankruptcy cannot fix.
What they have is a legacy of bad management with computer systems that do not work and are so far out of date that they cannot even be used and they do not have enough money coming in to pay to fix any of that.
60% of people in on him -- in detroit are unemployed.
The property in the city with income taxes as high as they can go by law, get collections are collapsing.
Once you get past bankruptcy there still is not much left to build on.
The city cannot afford to provide services to that area.
Residents have rejected the idea of shrinking the city.
So far no one has come up with a good idea for making detroit viable.
There are a few, but they are pretty much the standard ideas.
They passed a law giving tax breaks to movie companies, but not a lot of them have come.
Quackenbush has done a lot for downtown, but that is not the rest -- that is not enough for the rest of the city.
They have so far created about 4000 jobs, no where near which indeed.
All right, mike, thank you on that.
Let's switch over back to talking a little technology.
Dominic chu is here with a roundup from our bloomberg west radar.
Netflix -- netflix made political history -- made history when "house of cards" became the first internet only program to be nominated for an -- for an emmy.
Investors will be listening and watching closely to that earnings call to see if their push into original content is drawing more subscribers.
As for the stock, it is the single best performing stock in the s&p for 2013, traded up 383 times for earnings.
Traded -- trailing only alcoa.
Get ready for some volatility for these stocks.
They are already pricing in a 14% move up or down in line with past earnings.
From netflix to apple, there developer site will be available for engineers and programmers after the company took it down on the 18th because it was a target of a hacker is looking to use and steal personal information.
This is used for engineering information, software documentation, all the things that help to create apps.
The latest in the battle over dell, as if there was not enough drama between them and the activist investor, carl icahn, it looks like silver lake might be getting into its own disagreement having to do with a potential breakup fee if the deal does not get done.
This is according to people familiar with the matter, silver lake considers itself entitled to a breakup fee if carl icahn wins the battle.
They believe that silver lake should only be entitled to reimbursement of expenses.
Dell will hold its annual vote on the 24th.
It was postponed last week.
Which was a surprise.
Thank you, dominic chu.
Moving and shaking this morning, you have got to talk about this, the british royal family is about to get bigger.
Kate middleton has been admitted to a hospital in london in the early stages of labor, planning to have a natural birth, this is the child's first couple and it will be third in line for the british crown.
Reporters and photographers have been camped outside of st.
Mary's hospital for the past seven days in what has been called the great cape wait.
While we wait for the news from st.
Mary's hospital, we look at the economy that this royal baby has created.
Who is going to cash in?
And back to better homes and gardens, they did not get the memo, apparently, as the company is launching a new magazine as others are shutting down their magazines.
The ceo will explain in just a moment.
What will the take for these new banking laws?
Ted kaufman, stay "in the loop." ? ? do not mess inside mcdonald's this wednesday only on bloomberg television.
I am going to be in chicago with ceo, getting an exclusive look at the company's business.
Also, we are going to have a bit of fun, i attended hamburger university in mcdonald's where they train their restaurant managers around the world.
Yes, i got to flips and burgers, make some fries, i know exactly the science behind the food.
Ok, but first we have you covered on everything mcdonald's. the stock is lower right now, down almost 2.5%. they reported earnings on missing estimates, not looking great on the sales front either.
Julie hyman has been digging to those numbers.
Peter has more on what is said about the health of the restaurant industry.
Julie, let's start of view.
Com sales in the u.s., that stands out here.
That is where the disappointment comes from, one of the main reasons the shares are trading lower, u.s. sales are up only 1% where analysts were looking for a gain of 1.5% in the outlook for july was not sunny either, the company said they thought those sales would be globally relatively flat.
I should mention in june that same-store sales are comparable to 9/10 of 1% with 1.4% being the estimate there.
Most of the disappointment coming in the u.s., where sales were down 2/10 of 1%. now, all of this still represents a rebound, because in the first quarter sales fell by 1% globally.
Things are improving, just not as much as analysts estimated.
Net income rose by 4% with earnings per share coming in $1.38, up 2 cents shy of the average analyst estimate.
Why is this happening?
Looking to the statement, the ceo of the company talked about the informal economic uncertainty that is pressuring consumer spending, where they have really been took -- pushing their value menu, but it looks like that strategy has not been entirely successful.
It does not look that way at all.
S stay with me, i want to bring in peter, a senior restaurant analyst.
Look, peter, if mcdonald's is a function of the macro economy, what can they really do to these numbers?
I do not know that there is much they can do.
Right now they operate all day, 24 hours, drive-through, beverages.
There is no low hanging fruit for them.
It is a function of the economy improving.
We have seen job growth that has not necessarily translated into same-store job growth.
As julie was pointing out, the dollar menu has been eating into their profit margins.
But the dollar menu is still trending between 12% in 15 percent and other sales.
It has not changed much, despite the fact that it has been promoted so aggressively.
Hopefully the fact that commodities are coming down will give them more promotions over the next six months to 12 months.
You talk about the law of large numbers, not as much in effect for mcdonald's overseas.
Reflected especially in june, where by in the mideast and africa, outpacing the u.s. in what analysts had been estimating.
How much does that make up for the lagging elsewhere?
It will be tough to offset.
If europe improves , perhaps, but other areas cannot offset it.
We had a new story about the mcwrap.
How important is it really for the company?
Her it is innovation that is important, bringing these items to the menu.
This is a really good product for them.
You need more motivation to drive same-store sales higher.
Friday this was something that the press always covered, but not always analysts.
The obesity situation how they have been attacked for their promotion of junk food.
There was the mcbudget and that controversy last week.
How much do you factor that in as you look at the future of the company?
The differences in what people say that they want and what they purchase is very different.
Calorie counts will go on the menu across all restaurant once obama care is in effect.
Restaurants with calorie counts have not seen any impact in terms of people trending down to lower calorie item is.
I think that what people say and what they purchased are different things.
Thank you, peter.
And of course, julie hyman.
Something you have not seen, alex rodriguez playing in a yankees game, but another setback?
Putting an end to risky business, will they be able to lobby their way out?
We are going to speak to the former senator.
? ? you are watching "in the loop," on bloomberg television.
It is 26 minutes after the hour, meaning that bloomberg television is after the market.
Equity futures with dow futures down, slightly, the s&p 500 little changed.
Copper, seeing its biggest rally in two months, 70% of companies in the s&p that have reported have beat estimates from analysts.
Mcdonald's continues this trend with missing estimates on the markets again in 30 minutes.
A look at bloomberg top headlines, posting second quarter results on the street, suggesting exploration is alive and well while demand for drilling services with high and low prices at $70 million.
Much hinges on the netflix quarterly earnings after the close today, while most investors remained smitten, others are concerned that extensive regional programming costs will play havoc with the balance sheet.
They may have to increase their monthly subscription fees.
Ubs, wall street rivals in the second quarter, an end to the division with a $7.6 billion amount of new money, tied to the end of the u.s. federal housing finance and history -- and industry.
The latest in a string of banks.
Washington, the sec sending a strong message that there is a new sheriff in town.
Alleging that the hedge fund manager behind sec failed to supervise two labour portfolio managers at the firm and ignored red flags.
With more on this i am joined by senator ted kaufman, who struggled mightily for more regulation in washington.
First, walk us through what happened here with steve cohen.
Peter cook has more on the new tone coming from the sec.
Let's start with you.
This has been an ongoing case against steve callahan, the sec stopped short of charging him with insider-trading.
What is going on here?
That is the key point.
Among the most successful hedge fund managers in history will fight a lesser battle with the government.
They said to fall -- file and administrative action, accusing him of failing to supervise his employees properly.
That kaelin was a bad boss when it came to operating the company.
They're looking to ban him for life using this non-court action.
They claimed that he should have known that his employees, michael steinberg, matthew cohen, were using material information to avoid losses of millions of dollars.
The sec will have a lesser burden of proof with this kind of action rather than charging that an outright crime.
A spokesperson says that the sec policy action is without merit and that he acted appropriately at all time.
Then he will fight these charges vigorously.
Remember, his empire is big.
60% of that is either his own money or employee money.
Still a big charge against steve callahan.
He has had a laser on him for several years on this.
I want to bring you in on this.
This is all part of chairman white delivering on her promise to step up enforcement.
Absolutely, it is something we have been expecting for some time.
After taking on terrorists and mobsters, she promised a bold and on the lending enforcement operation.
Last week certainly demonstrated that.
She took on not one but two separate hedge fund managers, charging steve: with failing to supervise those, separately rejecting that $18,000,000.70 deal -- $80 million settlement deal with phil falcone, sending a message -- a clue million dollars settlement deal with phil falcone, sending a message that wall street should take notice.
She is very smart, she is very tough, she makes hard calls.
Based on what they filed, this case looks like it is the proper course for them to take these are the big first enforcement actions at the john white sec following years of criticism they have less enforcement and are less likely to take cases to trial, more likely to settle cases.
One high-profile example from 2011, and $85 million settlement from citigroup was initially rejected by a federal judge in part.
In june they pledged to change that policy and take that tougher approach to the risk as they appeared tougher on the part of mary jo white meaning that more cases that go to trial they could lose, which is the risk.
Thank you, peter cook.
I want to bring in a very special guest to talk about this.
Ted kaufman struggled mightily during his time in the senate but failed to pass bank regulations to prevent the next financial crisis.
Now former colleagues are joining elizabeth warren to engage that fight, but he fears that only a new crisis will inspire new laws.
First let's talk about this steve: sec case.
If they got him, how big of a deal with that before the sec?
I think it is good to stop this insider trading that is obvious there rampant.
A number of cases went up and i thought they were going after him.
I guess is that these are going after him for insider trading.
The problem i have is that without having tough work coming out of the crisis, there are two different paths that they have.
One, to be an enforcer.
I think she will do a great job on that.
In terms of writing the regulations to prevent a gigantic meltdown like before, and that she has not been so forthcoming.
The way that congress did it?
I talked about that at the time, they said the regulations down to the agencies to implement.
-- send the regulations down through the agencies to implement.
It is kind of the president and the leadership, the solution, glass stiegel, is in regulation for three years.
We are just sitting here without any real protection.
It is hard for the regulators.
If the congress had laid out a lot like they did with last stiegel -- last stiegel, but banks really -- glass stiegel , they are now stuck with capital requirements and cftc being a loophole derivative of that.
Betty liu, it is hard to believe that one-third of the regulations called for dodd frank have been finalized.
Maybe it is because, senator, it is not lack of will or lack of motive, but it is a lack of resources to be able to write regulations that will be effective.
You are absolutely right.
The house financial services committee is about regulations.
An unfair fight on the volker amendment.
A colleague of mine committed to a study from the regulatory agency.
92% of the contacts within the agencies, wall street banks, lawyers, people representing them, 3%. that is a very uneven fight in terms of real regulations.
Senator, let me play it for you, one part of the framework was bringing back glass stiegel, separating commercial banking from investment banking.
Elizabeth warren was on with us last weekend and this is what she set about bringing it back.
We passed glass stiegel and other banking reforms and we have 60 years of banking profitability, the best bar?
No crashes and an american middle-class the strike and then grew.
Can that really be traced back to blast the goal?
-- glass stiegel?
Ito-vaunted that bill with senator mccain and i am very pleased with senator warren.
She is exactly right.
60 years we did not have a problem.
The man from citigroup that started this thing, he is now saying that we should go back to it.
You cannot have fdic insured banks engaging in this risky investment.
And has not happened yet.
There does not seem to be much momentum behind it.
Does their need to be some sort of crisis again?
It bear stearns was not enough, of what is?
Remember, the market has gone straight up since 2009. you could get away with it for a while.
I will say it again, how much damage do we have to do to the economy in order to get to the first?
You do not sound confident.
Look at what is going on now, something like 92% of the derivatives are handled by our four largest banks with farm subsidies to invest in derivatives.
Banks are better capitalized than four years ago, but studies they show they are not.
One shows the fed coming out to show this leverage ratio on real capital, but when you include derivatives, they are very fully capitalized.
Senator, thank you for joining us.
Always great to have you "in the loop." coming up, we are switching gears.
Going against conventional wisdom, doubling down and magazines, we would get the company's ceo on that.
Where is the last place you would like to spend five figures on a what?
Sears eddie lampert wants to change her mind on that.
? ? the publisher of "better homes and gardens" said they would launch a print version of their all recipes web site at a time when many publishers are doing the exact opposite, shutting down their print magazines.
Scarlet fu sat down with the chairman and ceo and we ask why he thinks that people still want these on paper.
The results have been overwhelming.
First on the news then, the sales lift was about 40%. and then we sent out a trial magazine to about 20 million of our existing subscribers and we got 400,000 orders with the money returned instantaneously.
What signal did you get from advertisers that there was more growth for a cooking publication?
Food is our largest category, so obviously we're very well ingrained with food advertisers and they are extremely excited about allrecipes, but we are only able to -- in the digital format.
One thing that i kind of need to reconcile here is you are offering a two-year subscription for $12. you guaranteed advertisers a circulation of half of a million.
Why would they pay for the magazine when they are able to get the content on line in for free?
What will be different is the way the content is care rated.
Most consumers access us by searching for a recipe they already know they want to prepare.
What you will find in the magazine is an idea or an inspiration you have not thought of in the past.
We will take you to the website to execute the idea.
We think that pair with print for inspiration it is a better consumer experience.
A lot of people talk about the discovery process when it comes to brick and mortar, barnes and noble getting into trouble here, borders shutting down.
What are your thoughts on the death of big bookstores.
A different concept, in the bookstore you have the opportunity to access that exact content.
In the magazine world this is a bit different.
It evolves and changes over time.
Talking about the magazine, cooking, recipe publication, specialty and niece publications, are they in a better position than a news magazine?
I think it depends on the content.
If it is time sensitive, meaning that if he did not read it next week it is outdated next week, does have a much more challenging film going forward.
Seasonal, and holidays or not.
The information could still be relevant.
There were titles like people, you tried to purchase, it did not happen.
We still want the opportunity to be involved with them somewhere down stream.
They are certain of their brand.
We speak primarily to women every month.
Some of the brand is real simple, in style, and are beautiful in the wheel house.
You publish "rachel re." what did you think about the controversy around paula deen and an empire crumbling.
It must make you nervous to see an empire crumbling in days.
That can happen.
It is important to pick your partners carefully.
We have had a wonderful relationship over 18 months with rachel.
The business under our stewardship has rarely performed very well.
It fits well into our organization, but obviously those of the risks of celebrity media.
Again, that was "in the loop " -- again, that was scarlet fu.
? ? england is awaiting the latest member of the royal family this morning.
The most watched baby waiting watch since brad pitt and angelina angelie -- jlie.
Everyone is celebrating.
Ryan has the story.
Their first child did not -- will not just produce another successor to the crown, it will add $375 million to the economy.
Nothing short and royal opportunity.
You can customize these yourself, $60 per 10 for these biscuits, or $4 per cookie.
Two royal baby books, hitting the shelves just in time.
Then there is the roiled the plate, royal baby plug it, and of course the royal pajamas.
Why stop at buying something roil when you can let your child live like a royal and come here to the hotel and the book yourself and nursery sweep.
They have absolutely everything that your little roil could possibly need for $7,500 per night, including a royal caught found in a cornet with silk, made by the same company that designed prince william and uncle prince harry's a nurseries'. sounds like a lot of money, but it is a lot less than buying it.
Businesses may take in $100 million on booze alone.
They have been named a beverage in its honor.
If you find all of this nauseating, we might have just the present for you.
The royal babysit bag can be yours for just a bit more than the hind.
-- royal baby sec ick bag can be yours for just more than a pint.
Stay with us.
? ? it is that 66 minutes after the hour, meaning that bloomberg television it on the market.
Be sure to watch all morning long, down from the dow jones in the pre-market, watching names like mcdonald's with analysts' estimates being this earlier this morning.
Down over 2.5% in the pre- market, we are watching netflix all day.
They are currently up slightly on the market.
Coming up, the latest strategy for sears may leave you scratching your head, selling luxury items at a chain known for its downscale products?
You are watching "in the loop," live on bloomberg television.
? . . 30 minutes to the opening bell, this is "in the loop with betty liu." the countdown begins right now.
What we are working on is mcdonald's, reporting earnings earlier this morning.
Second-quarter revenue trailed analyst estimates.
We will have more in just a moment.
Netflix second-quarter earnings after the bell today.
We will get an update on how the streaming video company's expansion into original programming is working out.
The keys to to watch how many new subscribers the company pick up between april and june.
Subscription very important.
And the wait is almost over.
The duchess of cambridge is in labor.
She was admitted to st.
Mary's hospital eight hours ago.
It is the couple's first child, third in the line for the british throne.
Let's head straight to the markets desk for the countdown with economics editor mike mckee, kicking it off for us.
The dog is a growling, not barking.
Shinzo abe's coalition takes control and can push whatever economic reforms he wants.
The nikkei shows only restraining gains and the yen is higher against the dollar.
Supposed to go the other way.
The question for the next few days, are investors losing their enthusiasm for abe?
Can abenomics succeed?
Hasbro is down after the twin maker misses on profits and sales estimates.
Revenue is down significantly over the same time last year.
Watch those shares.
Halliburton shares are going higher.
Profits fell at the oil services company and equipment maker.
It is seeing a glut of tracking equipment but it is not hurting margins as much as analysts estimated.
The companies boosting boosting its share buyback by $5 billion.
Turning to the hospitality industry, the casual dining industry is booming with highs of 80% as stronger -- or stronger this year over last year.
I want to bring back julie hyman and economics editor mike mckee.
We saw with the numbers, mcdonald's missing on their profits and lagging here with their same-store sales numbers.
Their hiring is not keeping pace with the industry.
We are seeing a lot of these gains sort of on the tier just above, casual dining but not necessarily fast food.
Mcdonald's is seeing issues in the u.s. in particular.
When advisers said it was the law all caps large numbers -- the law of large numbers.
You already have 40,000 people working for you, which is just mind-boggling to think about, and to think about the size of the company already in the u.s. that is part of the issue.
Part of it is finding the right balance here of value and new product.
We talked about the mcwrap, which the company is put through extensive testing and research to figure out if that is the right new product for right now to get customers into their stores.
Also, they are trying to offer value to a u.s. consumer.
The u.s., even though it is a third of the company's revenue, is a very important part of the business, the part that appears to be suffering the most at this point.
Mike, the rest of the industry seems to be growing, and they are hiring.
That is the question, where do we go from here?
22% of all the jobs that were created were in the restaurant and accommodations industries.
It was a very important part of what we saw.
Now that has really fallen off, and in the last few months we have seen retail sales at eating and drinking assumptions fall back.
Julie mentioned that the economy is slowing in this quarter, and we are also seeing consumer confidence falter a little bit.
If people aren't going out you have this concern, will the hiring continue?
What is it about that?
Gas prices are not up all that much good they were up higher earlier this year.
But a general feeling of malaise and the feeling that the economy is not out of the woods, people still holding tight to their cash.
Restaurants like this are the ultimate in discretionary spending.
It is the easiest thing not to do if you are worried about how much money you have going forward.
We see job openings and that industry still nowhere near where they were.
And increased since the recession, but still way down.
Companies are being cautious about how many people they add in the second half of the year because they are not sure if consumers are going to come back.
John thompson talked about this economic uncertainty, saying that that is the reason for the shortfall, or at least one of the main reasons.
He brought up in the second half of the year that it will be tough, that in july in particular comparable sales will be flat around the globe.
Senior markets corresponded julie hyman and also mike mckee, our economics editor.
As you can tell, there are a lot of questions about mcdonald's right now.
I want to know what you think.
You can tweet me, @bettyintheloop, and i'm i just user question and give you credit for that when i talk to the man himself.
We will go through every aspect of the fast food giant's business and bring you that live, exclusive interview with the ceo.
All day this wednesday on bloomberg television.
Another ceo under pressure, moving and shaking his money, his sears ceo eddie lampert.
He is hoping that he can persuade you to think of sears the next time you are in the market for a $33,000 rolex . sears is selling upscale watches, handbags, sunglasses on the website, according to "the wall street journal," trying to position sears to compete with online retailers like amazon, which sells watches like rolex.
Let's take a closer look at what is ahead for sears and eddie lampert, the focus of today's turnaround trade.
Dominic chu has more.
Is this the right course of action for sears?
I'm not sure if you think of upscale items like that.
But when you talk about sears, they have a lot of things going for them, but they have to stem a revenue declines of the company.
Maybe this is way to go about doing it.
Take a look at what is happening with the overall picture.
Whether or not consumers resonate with seeing things like rolex or expensive, high fashion handbags and dresses, or not that will be their core audience remains to be seen.
This may be an identity crisis for sears and its customers.
Remember that would sears, we are talking about the midscale market, middle-class americans, maybe not the ones buying very extensive downs and watches.
What it comes down to four eddie lampert and sears is what they are trying to do with those items.
This marketplace was hatched in 2010, with 85 million items from different vendors.
They take the sales mission of -- sales commission of seven to 20% and this will be a big deal for sears.
97% of the sales still come from those traditional brick- and-mortar type situations.
It does and what the industry is puzzled by is why he is focusing so much on online and not investing enough money in the brick-and-mortar stores.
Those online businesses are huge, because look at this -- i want to show you why this is important.
You are talking about big-name competitors like amazon and ebay.
Those online marketplaces -- amazon has 98 million unique views -- unique users every month.
Ebay, 69 million.
Then they go back to sears, which has a respectable but still much less of a number at 18 million.
This will be a very uphill battle, and amazon and those guys have their revenues in place.
This years has been fighting revenue declines and that is why it is important for them.
Dominic chu, markets reporter.
Coming up, investors ready to hear about earnings from online video company netflix later today.
Some wonder whether the content strategy is built for the long term.
The cia and amazon -- why spies are in business with the world 's largest online retailer.
It seems everybody is.
? don't miss "bloomberg west ." double dose on weekdays, first on 1:00 p.m. and after the bell at 6:00 p.m. netflix, the online streaming video service, reports second- quarter earnings after the bell today.
Jon erlichman is in l.a. with more.
What should we be watching for in the numbers?
It ties into everything we have talked a lot about with netflix recently.
Remember last week everyone was talking about all the emmy nominations that netflix earned, first time to see that for an online video service.
The subscriber numbers are so important to that story.
The reason that fixes doing these shows and spending money on content is because they are trained to grow their subscriber numbers, which the company is said in this quarter the forecast was for more than 30 million subscribers in the u.s., and that is why people are often saying it looks like netflix now has more u.s. subscribers and then hbo.
But some of those aren't actually paying.
They're doing free trials, and an eight dollars a month, is not that much money per subscriber.
You want the numbers up so then they can pay for this expensive content.
We have seen the stock move up almost 200% in the last year.
What is going to keep that going?
I think we have seen a complete sentiment shift.
This used to be a very popular stock for short sellers.
Now they don't want to get in front of the train.
But there is so much momentum that people seem ok with the kinds of comments ceo reed hastings will make about seeing this service get to upwards of triple the size of hbo in the u.s. market.
There's is so much competition starting to bubble up right now, especially from the likes of amazon, that that is what people have to wonder about, whether or not indeed they are going to that level or they are in the sweetest spot they will be in right now.
Jon erlichman, senior west coast correspondent.
I want to stay with netflix and bring in a managing partner at boutique investment media tech partners and also our media analyst paul sweeney.
Netflix is always a great topic to talk about because they are such a game changer.
What do you think is going to keep the stock going?
As jon pointed out, it is subscriber numbers.
With "house of cards," they added almost 3 million new subscribers and they will be able to have another million or to gain in the second quarter when read hastings talks today.
From an investor point of view, the wealth card is -- the wildcard is carl icahn.
He has all most 11% ownership . he has made more than $1 billion on huge escalation in netflix -- he says he likes the business model.
I think he also might like to take a little money off the table right now, and that is the really scary thing because if he starts selling you will see that go right down to where it was last summer.
What is the biggest risk for netflix?
Right now now netflix has had this business of streaming video business to itself.
They have a great brand in the marketplace.
We have not seen much competition.
I think that is going to change.
I think the big tech and media companies are recognizing that a lot of the internet usage is going to online video and we know that ad dollars are following.
It is not just going to be amazon prime or hulu, but some technology companies.
Google talk about -- not facebook -- microsoft, intel, sony is in the business already with that kind of invisible streaming company that you can get for free.
But like sports rights -- as long as you own that, you are the content owner of that, it you are going to be sitting pretty.
I would not be surprised if disney does netflix with espn, just make it all sports, because candidly, netflix -- nobody else will be able to afford to pay the rights that espn wants to sell if they want somebody else to stream -- that would be huge costs.
Talk about fees and the retransmission fees that the cable providers and broadcasters are fighting over.
Over the weekend, i kept hearing ads from cbs talking about their battle with time warner cable, warning subscribers that you guys will not get your original programs.
It is steering subscribers into freaking out -- steering subscribers into freaking out about cbs off the air.
Cbs is the first, and time warner -- he wants to get a 40% hike in what he was getting.
Meanwhile, he is selling cbs content to a competitor, netflix, that goes against time warner cable.
He will probably get summer between 25 -- somewhere between 25 and 30% increase.
The retransmission fees are propping up network allen street right now.
It is pure profit, no cost.
You are saying it will be less -- the cable companies have to go along with it.
They cannot give up network content.
The leverage between the companies -- it seems every single time the district or is a cable company, they cave.
Summer rhinestones -- sumner redstone cost, and that content is king is proven in these negotiations.
We will be back in two you are watching "in the loop" live on bloomberg television, streaming on your phone, tablet, or bloomberg.com.
It is time for the countdown blitz.
Julie hyman starts with google.
And google glass.
The company is making an investment in a supply chain for google glass, investing in a maker of chips and modules for the headmounted display.
It is a combination of technologies with the ticker himx.
And this ipo values a grocery chain at as much as 296 million dollars.
Shares of the grocer, controlled by apollo global management, will sell for and is mated $14 to 16 -- an estimated $14 and $16 each.
Hollywood has now seen six big- budget box office bombs this year.
The ghost cop movie starring ryan reynolds and jeff bridges took in both $.8 million for seventh place.
-- $12.8 million for seventh place.
But horror movies still sell well.
Small budget horror movies.
"the conjuring" cost only $20 million to make and took in --. -- took in --. we are few minutes away from the opening bell.
It is 26 minutes after the hour, which means bloomberg television is on the markets.
Dominic chu has the latest on how futures are trading the last moment before the bell.
Going into the opening bell, just slightly lower.
We will call it mostly flat.
The s&p futures are down , so we will call it flat.
The dow jones down just about 22 points, and the nasdaq marginally higher.
We are still right at this record highs for the s&p 500. we have the all-important existing home sales numbers coming out at 10:00 a.m. and i could be a catalyst for that trait as well.
-- that could be a catalyst for that trait as well.
Let's count down to the opening with the top 10, the only trades you need to know about today.
Dom is staying with us and michael mckee is joining in.
Let's with number 10 and six flags.
The amusement park operator is short of wall street estimates.
They come as the invested getting a fatal accident on a roller coaster ride -- the company is investigating a fatal accident on a roller coaster ride over the weekend.
Number nine, sit!
Pets expresses taking off and -- taking off in premarket ratings.
Number eight is crocs.
They are facing an uphill climb after they were downgraded to neutral.
Shares of slipping after the research firm released its price market of $18 per share.
I can't find a joke in this -- apple, the company in damage control mode after a hacker tried to steal personal information by the apple developer website.
The site was quickly taken down and remains unavailable as apple plans to overhaul its system to rent -- to prevent future security threats.
Carl icahn -- dallas not the only thing he has been doing.
He increased his share in a truck manufacturer.
The company agreed earlier to allow him to nominate 2 directors of his choice to the company board.
Shares have been rising ever since.
Number five is glaxosmithkline, the pr fallout continuing after another executive told the government that employees may have broken chinese laws.
The alleged crime involves $489 million in expenses as well as trade in sexual favors, according to the chinese ministry of public security.
Incredible story developing there for glaxo.
Number four is ubs pitchers of this was that -- number four is ubs.
Shares increasing in the second quarter after a financial crisis settlement over u.s. mortgage bank bonds.
The new money isn't hurting shares either.
Number three is netflix.
Investors are awaiting the company's earnings after the bell.
The thought is that netflix is the best performing stock in the s&p 500 this year, but also the second most expensive.
With or without nma top -- with or without an emmy, the balance sheet faces scrutiny.
Think fracking -- this company beat estimates as the outside the u.s. boosted sales.
They extended their share buyback plan to $5 million.
Number one, mcdonald's. shares lower, as you just saw in the premarket, after the second-quarter profit.
They trailed wall street estimates, and a pessimistic forecast for 2013, with ceo john thompson expecting the rest of the year to remain challenged.
Their conference call is that 10:00 a.m. eastern.
Joining us from chicago, where mcdonald's is based, is todd horvitz.
When you see results coming out from mcdonald's, where they talk about how the macro is pretty challenged, you are saying i told you so, this is why you need to get out of stocks.
You know, i didn't really hear the question but i think what it was -- mcdonald's is assigned -- if you look at the overall earnings season, other than the financials, it has been pretty poor.
We are seeing a lot of mrs.
All over -- misses all over the place and the financials are being funded by the fed.
The markets are way up, but why are they way up?
Let's get this straight, because when we talk about the markets there have been naysayers for this market ever since you can go back to march 2009. anytime there is been a slight, slight pullback, the fed is still a big part of the picture.
Should investors still be in stocks if these central banks are always going to be there?
I think the fed is day trading the market.
That is one of my complaints about what the fed is doing.
I think they are too involved.
The market is up 130% from the bottom.
It is time for the fed to step away because every time we have had a five percent or six percent correction, the fed comes and says we will do more and we have had no real growth and a lot of the small businesses are in trouble and on implement his really not him -- and unemployment is really not improved.
We have not had a lot of growth with the help of the fed.
Let's see if the market can sell for staying without it.
-- if the market can self sustain without it.
I still wouldn't put new money here.
I think we are building one of the biggest bubbles and history.
This looks like the nasdaq bubble of the 1990s, a little like 1987. wow, that is big if it looks like 1987. thanks for joining us.
Always good to talk to you.
Talk portraits from the cme.
From the trade to the call, the vice president and chief investment officer for fiduciary trust company, which has over $10 million in assets under management.
His call is only 20% of this s&p rally in the first half of the year was really due to earnings . what was the other 80% due to?
We started at about 13 times earnings and they got up as high as 15 times earnings and is at 14.5 right now.
There is enthusiasm for buying stocks here.
Is a time to take money off the table -- is it time to take money off the table?
I doubt that anyone expected on january 1 of this year that the market was going to be up 30% this year or 40% annualized return rate.
It looks like most likely the market should trade sideways to a slight correction at some point in time because it seems to be a little bit stretched out at this juncture.
I know you are a little bit more pessimistic.
Michael mckee, you are looking at our growth picture.
The growth picture is not rosy at this point.
The numbers are coming in worse than expected.
Some people are even talking about the possibility if we get more bad numbers of a negative for the second quarter and that has got everybody marking on their third and fourth quarter growth levels.
That doesn't bode well for earnings at this point.
Correct, and you see the same thing with earnings expectations, taken down almost by a daily basis right now.
We started out expecting that earnings per share for the s&p in 2013 -- we had about a nine percent number.
We are at six 15% right now -- 6.5% right now with the expectations being cut and even that may be a stretch if we don't see strength in the macroeconomic background.
Given that, dom, you are looking at how stock markets perform in the second half versus the first half.
There is volatility to fear in terms of the first half versus the second half s&p 500 performance.
Maybe back in 2009 and a little in thousand 10, but things have started to become a little less volatile.
Let's not forget -- we just asked todd horovitz -- look at the s&p 500 over the past five years.
Should investors really fear any kind of pullback back out -- any kind of pullback?
Or should they view it as a buying opportunity?
The trend has been higher in every pullback since march 2009. mike, do you agree?
It will be like what we saw in 2008 and 2009 -- it won't be like what we saw in 2008 and 2009. i agree.
The world is awash with liquidity.
We think that will continue to support stock prices.
We are dissipating that gdp does get some sprints towards the end of the year and that translates to topline growth for company, which has been spartan so far in 2013. thank you so much.
Coming up, blackrock ceo larry fink does not think we have a social security problem in america, we have a retirement problem.
The royal baby watch enters the final countdown.
London's most important event since the 2012 olympics.
We are a few minutes into the session on this monday morning.
? breaking news right now on yahoo, just announcing an agreement to right back 40 million shares of the company stock owned by dan loeb.
Third point hedge fund has announced that three directors nominated have submitted resignations.
Jon erlichman has more on these headlines.
There is a lot of different perspectives on this but we know that dan loeb, the activist investor who forced a lot of change at yahoo, had an issue in that he owns a lot of yahoo stock, and that is turned out to be a good investment for him, considering you made an investment -- he made an investment in 2011 where -- when the shares were nowhere near where they are now, and is selling back of a portion of his estate -- of his stake.
We heard that this would be an issue for him, he was so locked into this large stake that it wasn't easy to get out of.
To have an agreement with the company where the company buys back a significant amount of that stock probably makes sense, but it does raise some questions, especially when we are still wondering about the future of the boardroom leadership at yahoo.
The company has an interim chairman right now shared are they going to find a permanent chairperson?
Could that be marissa mayer?
A lot of people like the fact that dan loeb was on the board and keeping an eye on what was going on, because to a certain extent it helps keep the financial focus, whereas marissa mayer is keeping the product focus.
That is some of the context.
You can see that in the initial reaction to yahoo shares, down almost three percent on this news.
Aggie for that, jon erlichman, our senior wes" -- thank you for that, jon erlichman, senior west coast correspondent.
Dan roth, you always bring us interesting stories.
Great piece by a.j. jacobs, saying that self-delusion is the key to any entrepreneur to be successful.
He says he wakes up and starts writing and he has nothing to say.
He just starts writing anything and he starts believing that he can write rid he wanted to be a better person and he hates going to hospitals.
His friend was in the hospital and he said, i'm a good person and i will go to the hospital.
He says that stuff works.
Do it and then you will believe it.
The thing that successful people don't do -- the one thing successful people so do is never give up.
What disney got fired -- walt disney got fired from her job because he wasn't creative enough.
He started walt disney.
Failure might make you go after things even harder than if you hadn't failed before.
That is good except -- that is good advice, saying to be persistent.
You have to believe that your next one is going to be successful and delude yourself into thinking you will never fail again.
The number five most read story came out from larry fink of blackrock.
Larry fink says we don't have a social security problem, we have a savings problem.
He says that putting people automatically to 401k's is a good start but we need to be riskier investors, and that social security and 401(k)s are not invested nearly at the risk level that they need to be to achieve where we need to be at retirement.
And with the stock market -- people have been freaked out.
On that notion, your number four most popular story is about a area bay -- bay area tech wages.
You are paying a lot more than if you are in boston.
If you are trying to start a tech company, $1.2 million in the bay area, whereas in austin it would be under $1 million.
Huge cost disparity.
It is making entrepreneurs think where they want to set up their company.
Higher cost of living, as you point out.
Dan, thank you.
Talk about interesting stories , it is time for "this v.s -- this vs.
That." it is alex rodriguez versus his doctors.
He says he is good to go, his doctors say otherwise.
He is one of baseball's most admired and hated players.
He had hip surgery in january and said yesterday afternoon that he is ready to make his season debut.
That is getting a thumbs down from his doctors, who say that he has a strain that will sideline him another week to 10 days.
The severity of injury comes as a surprise to rodriguez.
There is speculation that it is all part of the yankees plan to make sure that he never plays again, allowing the yankees to collect millions of dollars in insurance money.
Talk about millions of dollars, we are on royal baby watch.
We have a preview of celebrations and what bringing the baby means to the kurdish economy.
And wall street regulation -- to the british economy.
And wall street regulation is in today's global outlook, we are watching the st.
Mary's hospital in london, where kate middleton is preparing to deliver britain's latest royal member of the family after going into labor this morning.
Ryan chilcote is in london with more on the long-awaited baby.
I am sure it is a zoo there.
I enjoyed your tour of the economy that this baby has created.
So far, how are businesses cashing in?
Everything under the sun.
The royal baby business is expected to bring bridge and something like hundred $75 million, -- 275 million dollars, much of it on booze alone, that being champagne.
If kate does have the baby today i can imagine there will be even more booze than forecast.
No baby yet, but the duchess and duke of cambridge, as they are known, arrived at the hospital at 6:00 this morning.
That was almost nine hours ago.
Everything we have known since that point has come from 45- word statement from the house of windsor, where we are told that she is in the early stages of labor and that it is progressing well.
The fun part will be when we get the actual notification, the announcement of the birth.
That works traditionally.
A career will go physically from the hospital with something like a birth certificate to -- courier will go physically from the hospital with something like a birth certificate to buckingham palace and everyone will see that the baby was born and what time and most importantly, or what used to be most importantly, finding out the gender, because it used to be the case that if it was a girl, the firstborn was a girl, if she had a younger brother she would still be trumped in the line of succession to the throne.
Not the case anymore.
If kate and prince william do have a girl, she will be the queen of this country, third in line to take the throne after her dad and her grandfather.
What are the bets right now?
Bets are decidedly in favor of girl.
I have no money on it but that is the bad -- bet.
Scientifically speaking, it should come in three or four hours.
From first labor to actual birth.
Lots of statistics on that.
Thank you so much, ryan chilcote in london.
Royal baby watch, he never thought he would be on that beat.
Adam johnson is here to tell us what he is watching in the triple play.
You are not watching the baby.
I am watching a baby of a different sort, the fact that the fed is considering taking a baby away, a commodities baby.
All of these banks have huge commitments to commodities, and the fed is considering saying in effect that the -- that we don't want you in that business.
It speaks to this narrowing of risk that the fed is interested in pursuing for the banks.
Related to this, steve cohen, hedge fund trader.
As we know, there often -- there have been no charges of insider trading and the charges that he did not manage people and the question is what that means.
They are trying to squeeze him, they have been going after steve: for years -- steve: for years.
There've been parallels drawn to pursuing other criminals, where they weren't able to get them -- i shouldn't say criminal.
That is an unfair characterization on my part.
They are not able to get him on insider trading so they will try this.
"street smart," what is coming up?
We are joined by the ceo of a large advertising agency.
When you talk to guys like this, they have such a broad perspective on what is happening in the economy and what is hot and where the business is going and how you integrate social media.
We will be tuning in.
Thank you, adam johnson.
It is not noi