Good morning, everyone.
It is thursday, august 8, and we are live from bloomberg world headquarters, and you're "in the loop." i'm trish regan.
Betty liu is off.
Scarlet fu is watching the markets.
U.s. futures rising after a three-day slump.
It may all be about a crisis of confidence.
In washington, white house correspondent julianna goldman has the latest on u.s.-russia relations after president obama announced he will not meet with president putin next month.
Senior markets correspondent julie hyman is digging into the changing landscape of the advertising world.
Where it seems that google may be eating everyone's lunch.
And we've got a very special guest on to sound off on that exact story and much more, sir march sorrell, founder of w.p.p. good morning.
Great to have you here.
In the heat earnings season, crushing losses is send stocks soaring or plummeting, but over the longer term, surveillance surveillance's scarlet fu jones us with the very latest.
What have you found?
It is a mental game, and it boils down to confidence.
This is according to an assistant professor at the university of maryland eastern shore.
It's based on research on the website of the journal's social science research.
Some used oecd indicators to measure optimism in 31 countries, including the u.s., to judge whether confidence could explain stock performance.
Here's what he found.
The s&p 500 in white over the past eight years, as well as the oecd measure for business confidence in yellow.
Some saw a tight correlation between the two, especially during the financial crisis and the subsequent recovery.
But take a look at consumer confidence.
That's the blue line.
Gains and losses in consumer confidence track much more closely to swings in the s&p 500. in fact, markets in the u.s. are tied three times more tightly to consumer confidence than to business confidence, they say.
So what are some of the implications, would you say, of these findings, scarlet?
Although we're still in the midst of a four-year bull market, consumer confidence is essential for stocks to continue to rise.
And interesting to note here, consumer optimism climbed in june to the highest level than in any other month since september 2007, but businesses aren't joining the party yet.
They're the least confidence.
This difference could be a head wind for stocks going forward, so a warning here.
Scarlet fu, thank you so much.
We are certainly heard a lot about tapering in september from fed officials this week, but they've been pretty careful . to tie tapering to the economy, mike mckee has the real deal on what they're actually looking at.
A lot of questions whether it will come in september.
All right, we're going to go back to michael momentarily.
In the mean time, i've got sir martin sorrell right on set here.
Good morning again.
Good morning again.
What do you think when it comes to tapering?
Are we going to see that come september?
It sounds as though it's coming.
Obviously the markets can move.
We've seen it once.
Then there was a recovery when the bank issued a mild correction, and we're seeing it again.
But the markets had a good run.
Generally, we're seeing climbs make their numbers, but they're sort of getting ugly in the sense that they don't make the top line, but they make the bottom line, and so costs are where the focus has been, not just in the u.s., but around the world, as growth rates have slowed even in the faster growth markets when digital rates have slowed also.
But what we're seeing is faster growth in the fast growth markets and faster growth in dim tail, but our clients are very still, still cost conscious.
The rise of procurement, particularly close of the finance department continues unabated.
So they're conscious.
You know, they're worried about their earnings as they move forward.
Are they really -- come and explain it to you.
Heck, i'm tough.
But, you know, in general, do you feel like the economy is on strong enough footing, judging by what you're seeing from your clients?
The u.s. economy?
Yes, the u.s. economy, for bernanke and company to actually begin the tapering process as early as this fall.
I mean, i can't. you can't live on the money drug forever, you have to come up with something.
The crucial question is when and how fast.
If you look at worldwide growth, 3% real, 5% worldwide this year.
U.s. recovering a bit.
The squer didn't affect them in the second half, but it will be a stronger second half.
We're starting to see a stronger second half projected in the u.s. but in the context of worldwide growth, next year 4 herself herself real, maybe 5.5% nominal, slightly less inflation, not in the u.k.. but germany seems to be on the mend.
You've got the book ends in europe, because u.k. is ok, germany is ovepblg it's the stuff in the middle.
It's france, italy and spain.
Spain is showing some signs of recovery.
France is still in deep doo-doo, and i think they'll continue to have a tough time.
Italy is somewhere in between.
Spain, worry certainly seeing stabilization, but terrible unemployment level, 50% youth unemployment is socially unacceptable.
And that could have long-term social ramifications.
I want to go back to mike mckee.
We're going to talk more tapering.
So much talk of this happening in september, mike.
Do we really think it's going to happen?
Well, we showed you earlier why the better than expected didn't change the east situation for the fed.
The drop in hourly earnings, if it means americans cannot spend additional money, that makes today's reports from chain store retailers, and next week sales report, important.
Consumer spending, 2/3 of the economy.
We're going to find out if americans still feel they can shop.
There are a number of forecasts.
To pick one, the international council of shopping centers sees chain retailers reporting july sales up 5% to 6% on average, which would be a nice bump up.
Not a whole lot have reported so far this morning.
Mcdonald's up 1.6%. the forecast was just for a .3% gain.
Maybe that's a good start.
Well, you know, the flip side of that, and i'll just play devil's advocate here, are people actually trading down, going out to mcdonald's instead of going out to applebies, for example?
When you look at sales numbers, are we going to see the grow?
Is it sustainable?
Well, that's the real question.
Of course, going back to school season, everybody wants to see that.
Unemployment won't keep falling if companies don't hire more people, pay them more.
That's the chicken and egg conundrum of the economy.
Ordinarily companies' revenue should track nominal g.d.p., not that that would be great.
But look, revenue at s&p 500 companies falling short of even that.
It's going take something more to boost both, which leaves investors with something of a con undumb of their own.
Do the economic fundamentals justify current stock prices?
It's such a conundrum.
Mike mckee, thank you very much.
The billionaire hedge fund manager has managed to take advantage of obama's jobs act, designed to create u.s. jobs, even though he has no u.s. stats.
Under the act, companies with less than a billion dollars in annual revenue qualify as an emerging growth company, which are allowed to reduce financial disclosures.
Makes it easier for these companies to hire more people, or so the logic goes.
Loeb has shown bermuda-based third point reinsurance has filed an emerging growth company, or as an emerging growth company, so it can limit financial disclosures after a planned i.p.o., and he doesn't have to hire a single u.s. worker.
How about that?
In washington, everyone, president obama will travel to russia for the g-20 summit next month.
He will not meet russian president putin separately for a bilateral summit.
The snub comes on the heels russia granting n.s.a. leaker edward snowden asylum.
White house correspondent julianna goldman joins with us more on the story.
This is a new low, one could say, for relations between the two countries.
Jaw, trish, that's certainly what analysts are saying.
They're saying it could signal the biggest split since the end of the cold war in relations between the u.s. and russia.
What it certainly does is put on hold indefinitely the president's reset with russia.
There hasn't enough progress, officials say, a change of issues.
Iran fearing a missile defense, and of course, russia's decision to grant temporary asylum to edward snowden that would have merit this had face-to-face summit in moscow.
An obama administration official saying putting snowden aside, russians haven't responded to u.s. initiatives on arms control, trade, and also proposals for high-level talks and business forums.
The moscow summit would have been the sake of appearances, they say, and it would have been good p.r. for putin, giving him a high-profile opening act for the g-20 zpwrk that the u.s. is now taking away from him.
Russia had to know this would happen, right, if they went ahead and gave him asylum.
In other words, didn't they know what they'd be getting into here, julianna?
Yeah, it was no secret.
Once snowden fled from hong kong to moscow, u.s. officials quickly made that clear, trish.
Even though the president -- remember, back in june, he initially said the matter didn't rise to the presidential level, he and putin talked about the agenda for the moscow summit during a phone call on july 12, and at that time the president did press for snowden's return.
Russia saying that the invitation is still open.
They blame tensions between the two countries and the low in the relationship on the president himself.
Ok, so where's communication right now?
Cut off everywhere?
No, officials say they don't want this to blow up the relationship.
Both sides are still talking behind closed doors.
The u.s. really here just needs to look and act tough, both for domestic consumption, political reasons back at home, and to send a signal to russia that the current russian posture toward the u.s. won't be tolerated.
So obama and putin might not be speaking, but meetings are still going to be held at lower levels.
The president will be going ahead, as you mentioned, with the trip to g-20 next month in st.
Petersburg, and friday they'll be meeting between secretary of state john kerry, defense secretary chuck hagel, with their russian counterparts, and this could be a test in where the relationship is heading.
Julianna goldman, thank you very much.
I want to bring sir martin sorrell back into this conversation here.
When you think about russia right now, as julianna pointed out, we haven't seen tension like this sense the cold war.
The president being very critical of their human rights violations when it comes to gay rights.
Now, as we look ahead -- and we're seeing a reaction here in the u.s., boycotting of russian products by the gay community.
I'm curious, because i imagine you're heavily -- i'm bull initial russia.
On my shield, i have a russian bed because of my russian ancestry, ukrainian ancestry.
I'm half ukrainian.
But i'm very bullish on russia.
In fact, we have about a 25% market share in russia in the media and advertising area.
Are a lot of people advertise for the olympics?
First, you have the world cup in 2018, there's another big sporting event which hasn't been publicized yet coming in 2017. i mean, president putin is really starting to motor, i think, and take a much more long-term view of russian growth.
And the first move by the new polit bureau in china was to where?
That was the first external visit by the premier.
So i think russia becomes more and more important.
And the point about germany, eastern europe is becoming more preeminent, so germany, poland, which is a bit flat at the moment but will grow, and russia, the eastern movement of the world economy is mirrored in europe, so the east as well as germany, poland, and russia.
So i think this is not good news, because from our point of view, this is a big, big opportunity what are you seeing in terms of americans companies advertising there for the olympics?
Is this making them nervous, snowden, gay rights violations?
No, the big economic link in russia is to germany.
It was built very strongly between the german economy and the russian economy.
In fact, many john-german clients, if they wanted to try to get traction in russia, would use german conduits in terms of german influence to get into russia.
He went to become managing director of a gas prom subsidiary.
There's a very strong connection.
Germany is very key, and that bloc is becoming more and more important.
Sir martin sorrell, stay with us for the hour.
Still ahead -- what does sir martin really think of his frenemy, google?
We'll look at how the search engine is changing the advertising business next.
And billionaire elom -- elon musk is looking more and more like ironman.
Plus, "breaking bad" isn't just a hit on tv, it's a hit for the economy.
You're watching "in the loop" in today for betty loop.
Online advertising booming.
Even as sales are estimated to earn over 60% in 2016, startups are getting the cold shoulder by the public markets.
We're back with sir martin sorrell, c.e.o. of w.p.p. also with us, julie hyman.
Is google pushing the little guys out?
It seems that's at least part of the issue here, trish.
Fwoog he will controls 40% -- google controls 40% of the web advertising market, partly through with dominance in search, of course, and also because it's been making a lot of acquisitions.
On the one hand, you have google as this very dominant player.
That, investors tell us, can sort of negotiating ad rates in a favorable way.
On the other side, you have a very fragmented market.
Some of these startups, many of whom are not profitable, are having trouble when it comes to raising money in the public markets.
You can look at the examples here over the past several weeks.
Yume lowered its i.p.o. price.
Tremor individual sandow millennial media, both have tumbled since their initial public offering, each by about 19%. and then just yesterday, adap.tv announcing it was going to sell itself to a.o.l. rather than trying to raise money in the public markets.
And it is this irony here, because it is such an enormous market.
It's growing to $160 billion more than that by 2016. it crossed $1 hundred billion last year, projected to reach $118 billion, and then the $163 billion number could come by 2016, according to e-marketer.
You are definitely talking about a big pie, if you will.
It's just that google controls such a big part of it.
It's also important for silicon valley.
We've had venture investors pour ago lot of money into these web advertising and mobile advertising kind of startups.
By some estimates, anywhere from about $7.5 billion to about $13 billion.
The question is, when are they going to get their money back?
Lots of questions.
Thank you, julie.
I'm back with sir martin sorrell, c.e.o. of w.p.p. your industry is changing so dramatically.
Boy, hasn't it?
Always has been, but it feels more dramatic right now.
Well, compression of events.
If you look at the portfolio, that's according to records, and if you look at that, our biggest relationship is newscorp relationship, which will be about $2.5 billion of that $19 billion.
Google last year was $2 billion.
I tracked the first six months of this year, and we're up by around 25%. i think there's a strong chance this year google will be as big for us in terms of our media portfolio as newscorp.
Having said that, the other $85 billion is dominate still by media.
Bloomberg, it's much more new media than old media.
But you saw what happened with "the washington post." you saw the statement last night that the "new york times" is not for sale.
This is indicative of the travails.
Some of the consolidation we're seeing in our own industry poses not an issue for the new media, which is still only 18%, 19% of the market, not just online advertising and display, etc.
But the biggest problem for the regulators is going to be what position they take in defending or protecting traditional media, newspapers, magazines, free to air television.
Free to air television is starting to come under attack.
Big debate at sun valley about what is the position of free to air.
What will happen to free to air?
Is aereo stealing their content, as some people say?
Back to this advertising issue and the digital space, and how all of it's changing, you now have the ability to to directing target a market.
Shouldn't that be more?
Well, this morning we acquired a company which is right in line with what you're saying, 25% of our business is investor market.
A third of our revenues, we have the highest concentration of anybody in our industry, our target is in the next five years.
We will up at that target at the end of the month.
All to what?
Well, not finally determined, but you want to guess?
I'll let you know on august 27 and 28, i would say 40% to 45% within five years, and the same thing goes for fast growth markets.
Coming back to the digital question about google, the two strategic drivers of our business, fast growth markets, i'm saying we're going to up the target from 35% to 40%, and digital, exactly the same.
Statistically they're exactly the same.
So in five years, 45% of our business will be fast growth markets, and 40% to 45% will be in digital.
When does the scale tip over so it's actually more than half the business?
Well, there is lap over between the two.
I had the two together and say it's going to be 70% or 80%, because there's digital in markets.
To some extent, there's the leading venture capitalist in china talks about smartphones reaching 400 million in china as being the tipping point in terms of mobile advertising.
They're roughing at 200 million at the moment.
As you see the penetration of the smartphones increasing, not just in china, but around the world, i think that will be a key driver.
Of course, google, with motor oil a, the new hand set they just launched, will be a key factor.
It's all changing.
?? you're watching "in the loop" live on bloomberg television, streaming on your phone and bloomberg com.
I'm trish regan in for betty liu today.
The futures markets, 26 ticks after the hour, which means bloomberg tv is on the markets.
You can see we're slightly higher.
This is, of course, ahead of jobs coming out in just a short time from now.
We both two stocks we're watching, both related to elon musk.
Tesla reporting a profit, much to the surprise of analysts.
Shares are up ahead of the bell.
In yesterday's session, they really had a hard time.
But as soon as the news crossed, people cheered it.
Right now they're up about 14% in the futures market.
On the other hand, you got solarcity, where musk is chairman, tag a hit.
It reported a narrower loss thanks to a surge in demand.
Revenue did slip slightly from a year earlier as the company saw increased leasing of its panels.
We're on the markets again for you in 30 minutes.
Meanwhile, here's a look at our top headlines.
J.p. morgan could be indicted for practices tied to sales of mortgage-backed bonds.
The probe comes as investigators seek to wrap up years of abuse that is fueled the financial crisis in 2008. nestle has publiced acknowledged that organic sales growth is slowing as demand in europe wanes.
The company says its 6% second-half target won't be easy, but the maker of haagen-dazs ice cream remains committed to its nondiet products, which continues to add to top-line growth.
The wealthy are back in the real estate game.
Million dollar home sales have jumped, according to a new study, which says homes above a million dollars are setting at triple the play that they have been for the broader markets.
This spending spree was fueled by stock market gains and has put the housing recovery in the fast lane.
Ok, in just a few minutes, we'll get the latest read on the economy.
In the meantime, we're right back here with sir martin sorrell from w.p.p., economics editor mike mckee is standing by to break down all the economic data, and washington correspondent megan hughes is in washington watching another crop of earnings, this time fannie mae.
I want to first go to you, sir martin.
You say the economy is globally looking better.
Let's focus on the u.s., because we have jobless claims coming out momentarily.
Is the job market improving enough?
Probably not enough.
For the president to be re-elected at that level of unemployment was almost unprecedented.
I think not enough is the answer.
But i think, you know, the harvard business school talks about the different types of innovation and what we're seeing.
We're seeing people really focusing on costs.
They're missing on the top line generally.
Probably having lowered expectations, but by cutting costs, so in a way, they're getting their ugly in an economy which is growing, but growing slowly.
The other issue is, when you look at global growth, it's probable the u.s. will play a lower role, less of a role in terms of global growth.
The proportion of worldwide growth coming from ex-u.s. markets becomes more important.
You see it with our clients.
Companies that are fixed on the asia, latin america, central and eastern europe, will gain more than companies that focus on the u.s. so, you know, for example -- that's a different point of view we've heard as of late.
As of late, people have said the u.s. is still the best game in town, and that's why you'll see the growth.
The answer to that is you have a bit of both.
You don't ignore the u.s. you ignore the u.s. at your own peril.
People wrote off the u.s. and said japan was going take over the world, and look what happened.
It's very big.
It's 16 trillion out of 72 trillion, and the next biggest economy is china.
But in terms of the delta, which when we come on bloomberg, we really want to point to.
We want to point for like sales growth.
That's where you have to be positioned.
You have to be positioned in the digital, as we discussed.
We got breaking news on initial jobless claims.
They rose 5% last week to 3 33,000. coming in a little bit better than expected.
Let's go over to mike mckee to break down the jobs numbers for us.
Trish, this is good news, because through the month of july, you tend to throw the figures out because the auto companies are retooling.
They shut down.
The autoworkers can get jobless claims, but not really out of work.
Same thing with textile workers.
Now we're seeing it come out of that period to still low levels of growth, even though we had a slight up tick.
The level remains very close to the five year low we saw last week.
And we're seeing that in the four-week moving average.
It will smooth this stuff out.
What it tells us is companies are not laying people off.
In the last payrolls report, they did cut back on hours.
You don't to want see that trend continue, because that could foreshadow more layoffs, but it doesn't look like we're getting there yet.
On this temp rains data, it looks like we're holding flat.
We'll see if we start to pick up going into the fall.
Yeah, that's the big question.
You've been striking ailing very optimistic tone, i got to say.
I'm realistic, trish.
That's the british in you.
The u.s. is a little bit better.
We certainly saw them improve a bit, and generally we saw things improve in july, and our budget and forecasts and reforecasts for 2013 show a stronger second half than the first half.
We were forecasting our budgeting was about 3% like growth, with, you know, 2% in the first half and 4% in the second half.
I'm talking about globally.
What we are seeing is -- and america was affected by the sequester.
I think people sort of lost sight of that.
There were constraints on u.s. government spending as a result of the sequester, and it did have a mild impact on first half growth.
You know, most of our competitors, most of our clients are talking about a better picture in the second half, not just in the u.s., but in the rest of the world.
The chinese data today, it looks as though the new polit bureau is starting to get to grips with all the issues they have to deal with, and the five-year plan is about not the biggest quantum growth, but stable growth at around 7.5%. are they looking significantly better, or are we just muddling on?
It would be great if we could get 3% to 4% growth, sustainable in the u.s., that would be pretty darn good.
I don't look at it -- i mean, 3% worldwide, real.
3.5% -- 4% next year.
You can do our model works on that, and that basis will get low single digits, like for like growth.
Acquisitions can add a similar amount.
We can get a 7% top-line growth.
We can make our 50 basis points margin improvement.
We can get organic growth, so we get e.p.s. growth in 10% to 15%. so it works.
Yes, i'll take that.
Martin sorrell, stay with us.
Coming up, everyone, we're staying on jobs here.
Our bloomberg big number is $70 million much that's how much money "breaking bad" generated in goods, services, and wages in new mexico during its five-year run.
Overall the production employed a cast and crew of 120 people.
90% of whom were in new mexico.
They were residents.
This is according to the "l.a. times." the hit, no pun intended, were quick to capitalize by selling everyone from location tours to bath salts to promise "relax away the bad." as we head to break, the stars of "breaking bad" were here last week for an interview with charlie rose.
Stephen colbert showed up too and could be seen dancing around the iconic interview table.
And now we know why.
It was all in an effort to keep sponsorship tied to a musical group, daft punk'd. colbert did his own music video after the band cancelled.
Check this out heading to break.
After five years, what surprises you most about walt?
?? ?? ed blood-year blimp is perhaps the ultimate mobile advertising platform, often visible over large sporting events.
Now the tire manufacturer company is planning an upgrade for this corporate icon.
We get a bird's-eye view.
The blood-year blimp is soaring into retirement.
The ohio-based firm has announced a new generation will carry the company name onward and upward.
They run out of useful life.
They're basically obsolete.
They're world war i technology, world war ii tech knoll, upgraded with electronics.
But the basic technology is -- goes back a few years.
Goodyear's three blimps and their pilots fly more than 1,000 hours every year with a support team of 20 always on hand to help them back to earth.
The crew is very much attached to them.
But so is the public.
That's why they're so valuable to us.
The public loves them.
It's that positive image of the company that helps us sell tires.
But there will nobody death for this high-flying salesman, because the akron firm has opened their firm to a german company.
We have this long history with this iconic air ship that no one can match, and so we decided it's the right thing to do to continue.
It's based on the noya technology air ship already a familiar sight above german sky a. at 242 feet, this helium envelope will become the largest in the united states with double the range and speed of its predecessors.
We can go a little bit farther and faster.
This pilot has flown the new ship in germany.
It flies like a plane.
Y got the three engines.
It can land and take off like a helicopter, but it has all the characteristics of a blimp.
And at $21 million, it's a bargain, at least compared to the $2 hundred million the u.s. air force spent on this lockheed martin prototype.
These supersky blimps took to the skies during test flights, but never made it into active service in afghanistan, whether a smaller surveillance is already a common so it.
While big blimps may not represent a good investment for the taxpayer, goodyear clearly expects some continued lift for their own bottom line.
We're back with sir martin sorrell, c.e.o. of w.p.p. pretty cool, that goodyear blimp.
What's it cost?
Sort of designer-wise, it can be more effective.
I'm waiting to see what zeppelin -- i think i heard zeppelin was going to redesign the blimp.
What does it cost to have one of those up?
I've got no idea, but it is iconic, particularly at sporting events.
What would life be leak without it?
I don't know.
I want to go back to the ship we're seeing in the advertising market.
I mean, google, you're doing $2.5 billion in revenue.
Is this effectively just eating everyone else lunch?
No, not everybody else, but it is the most powerful feature of the new digital landscape.
You start with dominant.
They're extremely strong.
You see other moves by other people, but they're still dominant for youtube.
Social, google plus, not as effective as facebook, which is still the most effective social mechanism, branding mechanism in the world.
But they've been late to mobile.
Well, last quarter, it flipped up, and now they're trading above their i.p.o. last year it was about $300 million.
This year it will be over $400 million.
But, of course, it's much more.
The last thing, which is much more important, but it affects search swsm the big growth, and it's the relevance.
You know, we were talking in the break about the relevance.
If you get an app related to your search, it's much more relevant and less intrusive, so i think that's the balance.
They know what we want.
I mean, that's the benchmark.
85% of your purchase in the u.s. are search-influenced.
But the two stocks that i would be very bullish on would be personally goggle, actually, because of its five-legged stool, and the second one is amazon.
E-commerce gives the manufacturer the opportunity to rebalance the relationship with the retailer.
Really quickly, just have about 30 seconds left, and i know this is a big question.
But jeff bezos, that must be the british thing again, right?
Jeff bezos going out and buying this $250 million stake in "washington post," newspaper asset.
Is he going to be able to transform the traditional print media into the digital?
We've been saying for years, three things have to happen in traditional legacy media.
This is what regulators are really concerned about.
One, you have to have payrolls, which rupert, to his eternal credit, understood first, rupert murdoch.
Number two, you've got to have more consolidation.
Number three, in order to protect professional journalism, if you believe professional journalists know what they're doing and crowd source doesn't work, there's going to have to be some protection, either by people buying trophy assets -- you think that's really what it was, a trophy asset?
I think that's part of it.
But it's going to be really interesting to see whether the washington kindle can work.
It was interesting, the announcement said purchased by him personally, not by amazon.
So clearly they were concerned about linking the old world with the new world.
As somebody said to me, it's five times minus 50. the sfact that the don graham family decided to sell it is really intriguing.
We saw the denial that the "new york times" is for sale, and actual people will be very interested in the "new york times." it's going to be very interesting to see what happens to the "financial times" in the context of pearson, whether that asset will stay within pearson.
Somebody who was much more focused on journalism, on legacy journalism and new journalism rather than being part of the conglomerate, that might be a better home for something like the "financial times," or, you know, the "new york times" is very focused for obvious reasons.
"the washington post" is a very interesting decision, but is emblematic of what legacy media owners have to do, and it brings back to mind the famous quote, an log times into digital tennis.
That's effectively, at the end of the day, what it's all about.
And you weren't kidding.
You really can't answer it in 30 seconds.
Sir martin sorrell, thank you so much.
Great you have to here.
We'll see you again soon.
Chief executive of w.p.p. back more in two.
?? a very double issue, special double issue of "bloomberg business week" hits stands tomorrow.
It's the annual interview issue with one-on-ones with leaders and innovators from every corner of the business world.
We sat down with a handful of these unique individuals over ice cream, including jeremy stoppelman.
So many choices.
I personally like chocolate, so maybe chocolate.
Can i do a single cup?
Can you get away with serving any sort of urban -flavored products?
It might be an overlooked area.
We have to close that up.
For starters, going back a little bit to the origins of yelp, did not really work at first.
It didn't take.
Can you tell me about what happened there and how you figured out the way forward from that?
You talk to any successful entrepreneur, and they have a story of how they started out, had an idea, and then inevitably it changed.
That was definitely the case for yelp.
We want to create the next engineer ration yellow pages, and we thought word of mouth, capture that and bring it online, that could create something really powerful.
The question at the time was, well, how do you capture the word of mouth?
People aren't going to write reviews for fun.
That's a terrible idea.
We considered it, and we dispensed with it.
So then we built a site about asking friends for recommendations and buried in there very deeply, and accidentally, was a way to write your own review without being asked a question.
After lunch being we started looking at the data, and nothing's working.
We're pretty miserable.
One thing that we saw was that certain people discovered that feature and go crazy.
They write or 10 or 15 reviews in one sitting, and that was a bit of an aha moment, why are these people writing reviews?
It doesn't conform with our anticipations.
So then i sat down, and i just started writing some reviews without being asked a question, and that was where the light bulb went off for me personal, oh, i'm opinionated, i like to write reviews, this is really fun and satisfying.
You know, from that point, we just decided we were going to have to put the model on its head and a place to share your recommendations, not necessarily to be asked.
The idea that people could review local businesses was not unheard of.
There were other sites.
There are other sites.
But yelp has clearly become the dominant player in that space.
Why do you think yelp was so successful where other preexisting players maybe kind of falter and had fell by the wayside?
The thing that we uncovered was the power of the community.
By focusing on community, we were able to create a site that was unmatched and just kind of the quality and depth of content.
We attracted a lot of people that loved to write.
People were competing with each otherful one person would write in haiku.
Another would do a freeform poetry style.
People were really getting creative with it, and that showed we were attracting the right kind of people.
I have to ask you, because you're the c.e.o. of yelp, so kind of lightning round.
Favorite fancy restaurant?
Listen, i'm done.
I'm still working on mine.
I think we can do the rest of this off camera.
Thank you very much.
That was great.
I was going to say, sam, you were the only one eating the ice cream there.
To read the special interview of "bloomberg business week," just download the "bloomberg business week" app for free.
"in the loop" is back in two.
?? fannie mae will pay up to the u.s. treasury.
Megan hughes joins us right now.
Megan, how's are those earnings?
Very strong quarter, trish.
The george giant reporting $10.1 billion in net income.
For some perspective, that number was $5.1 billion for the same quarter last year.
This is the sixth consecutive quarterly profit, quarterly profit.
The company attributing this strong quarter to the significant increase we've been seeing in home prices.
Now, this solid quarter does mean that the company will pay another $10.2 billion to the treasury in dividends in september.
That means that fannie mae will have sent treasury a total of $117 billion bailout.
Remember, that's not technically a repayment.
Trish, back tousm megan hughes, thank you very much.
Well, it's 56 minutes after the hour.
That means bloomberg tv is on the markets for you.
U.s. futures are high air head of the opening bell with the broader markets, on pace to kick off the day in the green and possibly snap that three-day losing streak that we had seen.
One stock, i want to highlight, groupon, shares are soaring in the brett market as its turnaround plan starts to take shape.
Chicago billionaire and co-founder eric has been named permanent c.e.o., replacing mr.
We're going to be back with more "in the loop" in two.
30 minutes to the opening bell.
This is "in the loop " with betty liu.
Your "in the loop." indications that the labor market is improving.
Elon musk surprised wall street with second-quarter earnings that topped estimates.
We're also watching groupon, much higher higher in the premarket right now.
We went to go to our markets desk for the countdown blitz.
Cristina alesci kicking it off.
I know you will have more on tim horton in a moment.
Shares of green mountain coffee roasters -- rose.
The company said sales of its accessories fell 4.3% last quarter.
Markets are rebounding from a selloff.
Investors get hammered on tapering talks.
The average yield falling to four point seven percent yesterday, the lowest since june 4. i'm looking at fusion i/o. it makes flash memory technologies.
The stock is plunging this morning after reporting sales of fell short of analysts estimates and forecasting sales that fell short as well.
Analysts are saying, not good news.
Some of them like the stock because of this takeover potential.
The electric car company posted surprising second-quarter earnings.
For more on tesla's long and winding road, let's bring in our auto editor, jamie butters.
What do you think drove those much better than estimated results?
It was a combination of a lot of things.
They sold more cars, and they sold at a higher profit margin.
There were a lot of one-time items that really swung the results from a net loss to a pretty substantial profit.
The analysts' estimates were for a lot, even on an operating basis.
Clearly, they are pleased for the results.
People did not think it would be good news yesterday.
The stock ended the day off more than 5%. we're seeing a big turn around right now.
Why is it that people were so pessimistic going into this.
Going into the year, elon musk has said -- he said they would have a profit in the first quarter.
He pledged it.
There was a lot of skepticism about that.
That he said, we will have losses in the second and third and maybe be profitable by the fourth.
Then he was coming up and saying, even if you count the hit from the way their leases are structured, they are still profitable on an operating basis . may be who are already fans of elon, already enthusiastic.
They thought there would be a little profit and a dip.
He is saying it will be a solid operating process.
This stock has been on a tear.
Now that it has gotten a bit of good news and is on another tear in today's trading, are the stakes getting higher and higher for elon musk and tesla?
He's got to deliver now on a global stage.
What we're seeing now is, he's expressing a lot of optimism about their ability to grow.
There was a lot of skepticism about, can he even make a car.
He seems to have a market here.
They started selling cars in europe and are getting ready to move into asia.
Everything seems to be clicking.
There are still a lot of tests ahead of them them and a lot of challenges.
So far, so good, and that has people saying maybe this could be a luxury global carmaker that has changed everything with its solar powered charging stations at all this amazing stuff.
Jamie butters, thanks so much.
Turning to hotels, bloomberg has learned that hilton is getting ready to go public early next year.
Blackstone bought hilton $426 billion in 2007, in the largest purchase ever of a hotel company.
We want to bring in cristina alesci.
I guess patience paid off in this deal.
Why are they thinking about taking it public now?
A few years ago, it looked like blackstone would take a loss on that deal.
The reason for why they're going public right now is really truthful.
The fact that hotel stocks aren't five-year highs.
Investors are pretty hot on buying ipo's. in addition to the fact that they have restructured a ton of debt at the company, and they have grown -- we had the blackstone president talking about the fact that it is one of blackstone possibly investments -- blackstone's investments.
They have opened 1100 hotels . is blackstone looking to offload its other real estate assets?
What else do you think maybe in the pipeline?
People are really turning their heads.
Over the last couple of weeks, we have had news about a number of blackstone's real estate holdings.
Those are in the pipeline, ready to go.
To some people, this may signal the fact that lacks don't seize a pop in the real estate commercial market -- blackstone sees a pop in the real estate commercial market.
We think there's quite a bit of run room here here.
There is some money to be made.
Cristina alesci, thank you.
I happen to like this story.
If america runs on dunkin, what does canada run on?
Some might say it is accordance.
Bowing to pressure from two activist shareholders, cutting back on expansionist plans.
It seems as though it is a sales issue, a profitability issue in the u.s.. the company generated canadian $20,000 per store.
Canadian stores generated 100 82,000 canadian dollars per store.
They're much more profitable in canada.
They have had two activist shareholders agitating for change, agitating for it to cut back on expansion plans in the u.s.. scout capital management saying, we urge you to curtail the use of the company's cash flow to fund real estate or new stores in the u.s. tim horton appears to be conceding at least part of the point.
Not necessarily cutting back on it entirely.
The company saying it will increase its initiative to partnering with franchisees, and saying that starting in 2014, we expect to reduce capital being deployed in the u.s. segment.
The company saying it will be selling debt in order to fund a buyback of up to 10% of its shares.
That is something else that these shareholders have been pushing for.
What stood out the most to you?
We are looking at earnings that did beat analysts' estimates.
Same-store sales in canada up 1.5%. in the u.s., up one .4%. we have not seen a lot of change in the premarket in those shares, but will be watching to see how they continue . the shares are up about 16% for the year to date.
Thank you very much.
There is a tale of david versus goliath unfolding.
The little guys are winning.
This time, in new hiring.
Mike mckee is here for why on more u.s. small businesses are upping their headcounts.
They tend to do the majority of hiring in any economic recovery.
It is not small businesses, but start up businesses that really create all the new jobs.
If they are starting their businesses, if it was tim horton , not only would you get more doughnuts, but more people would be employed.
[laughter] adp, the payroll processors , is showing remarkable growth among small jobs -- small businesses, especially at the smallest and.
They are now outpacing the job growth of large businesses on a month-to-month basis.
That is not unusual during an expansion.
The small businesses are constantly being formed and add more people.
It may signal a turn in the economy.
These numbers are not backed up by the national federation of independent business.
The last couple of months, the trend has started to turn higher.
In another month or two, we may really see this.
You talk about startups.
When the economy is really struggling and people can't get work, it is almost in our human nature to go out and find and create our own thing.
That seems to be some of the data you are looking at, what people have done.
They are starting to form their own small businesses.
It is the dry cleaner, the clothing store.
You start to see people's dreams come true.
I was in conference with a lot of entrepreneurs a couple of weeks ago.
You start to see finance get easier, you start to see more encouragement to start businesses.
The ease with which you can start a business in this country makes our economy so nimble.
Thanks so much.
Still ahead, groupon veering away from its original business model.
Wall street really likes it.
Plus , a lot of us right in one, but should you invest in one?
The price to own a taxi.
? one stock we are following this morning is groupon.
Shares are up in the premarket.
Groupon named the cofounder eric lefkovsky permanent ceo.
I'm joined by tom forte, senior research analyst.
Your thoughts on the new ceo.
Both cofounders had division as far as what groupon groupon could be from local merchants.
Eric has done a better job executing on the vision.
What can he do that andrew mason could not?
The challenge for both will be turning around international operations.
They're applying their best practices in north america to their overseas unit.
That is where it will take time.
Does a company like groupon benefit from the challenges they have had?
Some of their deals are more discretionary purchases.
Giving a coupon to a consumer, offering to get something in a discount -- and a lot of their deals are for discretionary items.
They are necessarily net benefactors of the challenges in europe.
Can they really own the space , or will it be tougher than to overcome other competitors?
If you look at their 46 markets outside north america, they have the number one position in about 35 of them.
Their number one in many international markets.
Let's talk about stock at home.
Is it growing enough for you?
They had neck celebration in billings -- and acceleration -- an acceleration in billings.
Andrew came under some much criticism.
How much do you think the street will react to him?
The street views eric as a business individual.
And you're a visionary, necessarily loved by the streets.
-- andrew a visionary, not necessarily loved by the streets.
But eric is a professional, and your words, which they appreciate?
Thank you very much.
We're going to have more on what is driving sales of the golden arches.
? there watching "in the loop ," live on bloomberg television.
It's time for your countdown blitz.
Julie hyman is here.
Mickey d's. the figure topped analysts estimates as new wraps and breakfast foods brought in traffic.
Herbalife is gotten approval to sell its products in china, covering 12 cities.
The company got about 10% of its sales last quarter from china.
Everybody is using the chinese market as a big growth opportunity.
The growth and china has been one of the faster growth segments for the company.
This pushes the stock up further , which is bad news for bill.
Good news for shareholders such as carl icahn.
We are a few minutes from the opening bell.
We want to get to the top 10, the trades you do not want to miss.
It's happening right after the break.
? welcome back.
You are "in the loop." bloomberg tv is on the markets.
Julie hyman has the latest on futures in the last moments before the opening bell.
We can see rebound from three days of losses for stocks.
Futures indicating higher.
Chinese trade data showing better-than-expected numbers there as well us jobless claims in the u.s. showing a decline, setting us up for the jobs report tomorrow.
Investors are eagerly anticipating it.
We could break that three-day losing streak.
We are on the markets once again in 30 minutes' time.
These are the only trades you need to know about today.
Economics editor mike mckee joins us.
I want to start with number 10, eog resources.
The natural gas and oil producer reported a 67% jump in profit and raised its growth forecast for the year.
Number nine is amgen.
The biotech company.
Shares rallying after reports saying it is close to sealing a deal to acquire a pharmaceutical company within the next week.
The second-largest u.s. life insurer beat estimates driven by gains, prudential financial.
Let's move onto jpmorgan, number seven.
The firm faces a criminal probe by the justice department on the sale of mortgage-backed securities.
Number six, shares of the home improvement retail giant up in the premarket after j.p. morgan raised its recommendation from neutral to overweight -- lowe's. number five, dean foods.
The company reported second- quarter earnings that came in a penny below analysts' estimates.
Dean foods just completed the spinoff of white wave last week.
Number four, green mountain coffee roasters.
A 59% jump in third-quarter profit was posted.
Green mountain shares are still down in the premarket.
Number three, google shares.
New data from the research firm idc finds google's android software dominating the competition in smartphones.
The internet giant controls more than 40% of the online advertising industry and continues to make money on ads posted on mobile devices.
Performance certainly is electric.
The company posted a second- quarter profit that was equivalent to the loss that analysts had been estimating.
Tesla said results were driven by record deliveries and improvements in its operations.
Those shares have already tripled for the year to date.
Let's move on to number one.
Shares way up in the premarket for groupon.
Second-quarter revenue topped estimates.
Groupon is benefiting from a shift away from e-mail, selling more discounts to smart phone and tablet users.
Groupon announced a permanent ceo.
Here we are, on the open.
The market is set to open higher here.
Thanks to jobless claims, and chinese data this morning.
At the cma, larry levin, president of trading advantage.
What are we in store for today?
Will we be able to break that three-day losing streak?
I think so.
The overnight session, the s&p's were up about seven points.
I think we will trade above the 1700 level.
We will and that three-day streak and see a good day today.
I'm curious how much initial jobless claims are playing into this.
We also had economic data out of china, which would seem to be an encouraging sign.
I would agree with that.
That situation where jobless claims came out about an hour ago or so, we had a situation where the stock indexes up ticked.
People are paying attention to that, people certainly watching the groupon situation.
A whole lot of positive news right now that i think is going to help us.
The three-day losing streak is going to help us, also.
It is fairly rare to have four days in a row.
People short this market will be covering those short positions.
Thank you very much, larry levin.
We want to bring in bernie williams, chief investment officer for usaa investment solutions.
He hopes to manage $67 billion.
His call, it's time to put your money in european stocks.
They are cheaper and can outperform u.s. stocks.
You are starting to see the economy bottom -- you're seeing the economy bottom.
Leading economic indicators are increasing.
You are seeing consensus earnings starting to trend up.
You have been watching the tail of the taper, we like to call it.
For the last three days there has been so much concern that tapering is going to come sooner rather than later.
We have seen some reluctance on behalf of investors, selloff.
Might that be changing at all?
The question i would put to bernie is, can you as an investor transition over to investing in the economy away from the feds use if they do start tapering, what kind of threat to the 1700 s&p level is this if the fed goes ahead in september?
I think you see a replay of what happened back in may and june.
You will see a lot of volatility in the market.
You'll see bond yields go up or prices go down.
The equity market may react negatively at first.
He in the end, taper is good news.
It suggests the fed is confident of its economic recovery.
I know you are watching one of the stocks that bernie is bullish on.
Bernie likes facebook.
What is going on there?
He's not the only one who likes facebook.
We recently saw the stock climb.
The climb in the past several weeks has been amazing in the stock is now up 46% for year to date.
I'm looking at the forward price-to-earnings ratio.
It is now at 55 for facebook.
Great if you got in around the ipo price.
The question is now, entry point.
Do you want to get into a stock that is now valued at 55 times its forward earnings?
Finally managed to climb back above its ipo price.
People might be looking at this as an opportunity to exit.
One of the things we heard earlier in the show, they're doing more and more business with facebook in part because facebook has finally figured out how to monetize the mobile side of its business.
That seems to be the realization that the market has reached as well.
And one of the things that has been fueling the stock with its most recent earnings report, providing support to that idea.
Bernie williams, what is your price target?
They can earn maybe one dollar plus next year.
They are a very high-growth company with very good margins and free cash flow and they are just at the start or beginning of the monetization of their advertising.
We will leave it there.
Bernie williams, chief investment officer for usaa investment solutions.
Coming up,, the billion-dollar telecom, and masters of makeover.
The son of was cosmetic icon turned makeup parties into millions.
? are mover and shaker, apple ceo tim cook.
Apple is aggressively moving to for samsung phones off of u.s. shelves.
For cook , this is more about being number one than it is about money.
The $1 billion verdict apple one at trial last year against samsung equals less than two weeks worth of iphone sales.
Millions in legal fees keep rolling in.
Staying in tech, here's a look at the other top stories on our bloomberg west radar.
T-mobile led the u.s. wireless industry by adding 685,000 contact customers.
The company's strategies, to merge with metro and get rid of its two-year contract obligation appears to be working.
Germany's biggest phone company just upped its game.
Deutsche telekom reporting its first increase in three years.
The first thing it is doing with $667 million of hard-earned cash is deploying it in the u.s. and taking customers from verizon and at&t. the u.s. isn't the only hotbed for acquisitions.
Mega fun is planning to buy as well.
Catch all the latest in tech and media every weekday right here at 1:00 p.m. and 6:00 p.m. eastern time on "bloomberg west." billionaire news, the son of makeup legend mary kay ash, the third-largest in direct a seller cosmetics and skincare products.
Worth over $.3 billion.
Richard rogers makes his first appearance on our bloomberg billionaires index.
Editor of the exclusive index, matthew g. miller is joining us with more on mr.
The son of mary kay.
How about that?
When we look at new billionaires, it is easy to find billionaires in a bull market.
Mary kay has expanded in the economic downturn.
They can go out and find more people to do direct sales of their mary kay makeup even when unemployment is 7%. they still have a bit more discretionary income.
In the u.s. and in china, a huge demand for american cosmetics.
In china, the value of mary kay and other direct sellers has upped big.
Are they doing a lot of and use customer sales or is this bringing more people in that are maybe out of of work and are looking for an opportunity?
The end use is in the asian markets, when people are wanting more american cosmetics.
In the u.s., they added 90,000 new mary kay businesses.
Where are most of these businesses located?
I talked to my sister yesterday in dallas.
She told me that lots of her friends do mary kay.
She said the biggest growth area is in china and asia, where the end-use for the product is in higher demand.
Skin whiteners are a big thing.
And mary kay make some?
-- makes them?
You don't actually win the car, you get a lease of a car.
It is a company car.
It's not yours to keep.
But they pay the lease?
Thank you, good to see you.
Matthew g. miller.
Let's turn to the next story.
You will be able to hear about the wealthiest at bloomberg.com /billionaries.
Coming up, taxicabs.
? with kiwi underway, in