Stocks Surge: Surveillance (04/01)

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April 1 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Ian Shepherdson, Ken Sena, Dan Slagen, Scott Galloway, David Plouffe, and Larry Tabb. (Source: Bloomberg)

This is bloomberg bloomberg "surveillance." the fbi investigates high-frequency trading.

April fools.

You feel like that on facebook.

Merck it surges in front of jobs data this friday.

Good morning, everyone.

This is bloomberg "surveillance." we are live from bloomberg world headquarters in new york.

The dow is at 20,000. tuesday, april 1. there is a lot of news flow.

No april fools year.

China's pmi fell to the lowest level since july.

Very different story in europe where manufacturing hovering near a three-year high.

German payrolls expected.

And japan a new sales tax.

Intended to lower the extreme government that.

Two numbers, i is some manufacturing as well as construction spending.

Throughout the day, the latest auto sales figures.

There is a ton of stuff.

Building to the all-important -- all-important unemployment number.

Only one to speak up, apollo education after the market.

One final note, this is for you.

Do you know who is going to the white house today?

The red sox.

The yankees begin their game -- season, to.

They have presidential support.

Stocks, bonds, currencies and commodities to get your second order beginning.

What a market day yesterday.

S&p futures continue to fall.

Euro does not do much.

Hydrocarbons still elevated.

The fix nicely below 1400, showing the power in the markets.

Rubel continues.

A stronger ruble and gold.

Story under $1300. the king at the dow.

This is up 14 months.

A certain character to it.

Some of the blue chips as well.

Janet yellen industrial average.

She telegraphed yesterday in speaking that the fed will be therefore longer times.

The actual word was like considerable.

At&t announced it was not small potatoes.

This is the kind of thing that continues to drive share prices higher.

By the way, adam parker pointed out 2.9% of the shares outstanding are being brought back the sheer.

Evaporate like that.

What a busy day for the front pages of the web.

So many stories of top contenders.

Leading with the fbi.

Now investigating whether high-frequency trading firms break the law.

Are they acting on nonpublic information to gain an edge?

Certainly a question about timing because michael lewis is trying to sell his book on trading.

This stems from a multiyear investigation of high-frequency trading that has resulted in 79 infractions.

You look at all of the different articles.

Sam i bloomberg news did us fabulous -- did a fabulous job to make you smarter on the debate.

I put that out on twitter.

Absolutely.

Something that will continue to rattle the markets.

Whether it is or is not.

The basic thing is there are mike rick -- micro examines.

My theme is goliath versus goliath.

Big versus little.

Little guy is less removed.

About big guys and public stock exchanges.

It is the twitter question of the date.

That is a good question.

Something michael lewis brings up as well, what is the best response to high-frequency trading?

What is the response from a regulator point of view?

The best response might be make sure you use limit orders.

Tweet us with your response on that.

Second page story is enrollment for affordable care act begins the same way it began, with computer crashes.

The federal website crashed at least twice after a million people visited before noon to meet the deadline.

Everyone was rushing at the last minute.

More than one million did sign up.

3.4 million added to medicaid.

Jammed in that the very end.

Only america.

Church hill said the thing about americans, they get it right, eventually.

Like the third front page story, the company has widened the recall.

The ceo getting ready to testify before congress today about faulty ignition switches that have been linked to 13 deaths.

If you add it all up, yesterday gm announced the recall of one point 5 million vehicles for faulty steering.

So far this year, 6.3 million vehicles recalled.

I have vague memories of cars years ago where the power steering would just go.

I have memories of that.

This is not the model t, the model a. those are the front page stories.

We need to go to a important phone call.

Kerry geithner is with bloomberg news and following the fbi story . when you look at this story, talk about a new fbi investigation or is this an ongoing investigation?

Looks like an ongoing investigation.

Like you said earlier, the timing is with the flash and the announcement that the attorney general new york state had opened an investigation into the same area.

A lot of movement going on in the space.

A lot of people trying to figure out what is going on here and if there is illegal activity happening.

You have seen these crimes are for.

Do you look at to this as a two-year, five-year, 10 year investigation?

Where do something like this lead to?

Really hard to say how long it will go for but we should look at the insider-trading convictions and the string of insider-trading investigation some prosecutors have had on this matter.

Those go back to 2007 and possibly before.

These cases have built on each other, and you get more and more as you go along.

I think this fits nicely into that area of the investigation.

When we talk about insider trading, we think about knowledge of the company.

This is knowledge of trading activity.

Have we ever seen anything like this before?

You do see things where you can take order of information and french run on that and use that information to get it ahead of your own order of information.

Typically you are right, for insider-trading you get information about a stock price.

You trade on that and not necessarily legal.

The actual fact of it is a little bit different.

Is this at bia investigation going to litigate the flash crash of may 2010 -- is this fbi investigation going to litigate the flash crash of may 2010? i do not know if this will push the -- focus on the flash crash.

That is something we saw the sec and other regulators focus on.

It is hard to make that assumption at this point.

I am not sure what else they are looking at or what specific, so we are really in wait and see on that.

One final question if we could as you begin your day on this.

Look at the idea of exchanges of public entities.

Would you describe a lot of what we are -- ascribed this that these are very much for profit entities with the board of director that once the most gain?

-- wants the most gain?

There is definitely thinking of how you set up a system to create a fair and equitable system as well as have profitability.

High-frequency trading and types of services for data feed, those are revenue streams that the revenues have.

So you probably do see a tension there.

I think that is what the investigations are trying to give the heart to.

Guest host this morning, ian shepardson.

Also joining us, ken senna and record managing director.

We will talk to him about the technology space doing better than good in the equity markets.

Itit is about confidence in the system.

Right now there is a complete upper or about worn exchange trading.

These do have an effect on the financial system and the economy as some point.

Correct.

It is also a political problem as well.

Lack of confidence or that it is rigged.

This undermines confidence in the whole array of financial activities.

Michael lewis laid to this.

He has a story about the guy at the royal bank of canada.

There is a guy and a white hat.

I get that.

Within that, this widens the gap when we say it is rigged between main street and wall street.

No other way to put it.

You take a teeny bit of money from a lot of people every day and begins to give the appearance -- fully version of confidence, too.

Ken senna of evercore partners, you follow the big tech companies.

A similar sense the game is rigged against small investors when it comes to tech companies and how you pursue projects?

I think there is an interesting parallel between high-frequency trading and how display advertising is bought now.

It is all about real-time and transparency across the space.

You are right, it is not like most advertisers better small.

They do not have the tools themselves but using advertisement networks to give them the transparency and slight edge in terms of real-time data.

Again, has to do with technology.

We did not have these tool -- toys five years ago.

The idea of things being real-time our fact.

I do not want to get you in trouble at evercore partners at if you do not want to talk about high-frequency trading, just say that.

Roger altman, red sox uniform.

That would be terrible.

Do not want to do that.

Getting to company news.

Starting with the senate had investigation subcommittee says that caterpillar dodge billions of dollars in tax says.

Carl levin says caterpillar avoided paying more than $2 billion in taxes by shifting.

Caterpillar says it complied with u.s. tax laws.

Company executives will be on capitol hill to face lebanon and the hearing on his report.

Bank of america may face another lawsuit tied to the housing crisis.

A judge has recommended be a lack of receipt.

The bank failed to us close the nature of 800 $55 million of mortgage securities and sold back in 2007. bank of america trying to dismiss the claims.

Obama and errol area on -- mohamed el-erian on plans to write a book about the rise and fall of banks.

The first book was a new york times bestseller.

His resignation from pimco triggered a leadership shakeup within the firm.

That is today's company news.

Coming up, amazon green lit six of the amazon prime services.

We will tell you how this retail giant tried to branch away from the way we think about how amazon does business.

This is bloomberg "surveillance." streaming live on your tablet, phone and at bloomberg.com.

We will be right back.

? it is new york city, the buses run on time, the streets are spotlight and adam johnson goes to bed at 8:00. april fools.

Which far did you shut down last night?

Pathetic i go to bed so early . which 3:00 restaurant if you shut down last night?

The beginning of the second quarter here in new york city.

Coming up, robert new delhi former chairman in the loop and will discuss travails of general motors.

Good morning.

I am tom keene.

With mia scarlet fu and adam johnson.

You get more sleep than my kids do.

I have to go to bed early to get up early to do this job.

Good news for tv binger's. amazon has highlighted more videos for amazon prime video.

They have renewed a second season of all the house, one of the first pilots it launched last year.

A political comedy inspired by chuck schumer.

Living together with colleagues in washington, d.c. amazon did not review you were data but user feedback was fairly positive.

That was one of the deciding factors in whether amazon would pick up the series.

Ken senna covers amazon.

The strength here is it is consumer data.

They know more about what we watch, what we buy and what we're thinking of buying than anyone else.

I think there is the near term opportunity in terms of amazon having a lot of data as far as what media we like and being able to use huger consumption or current consumption around shows they are producing to produce more shows but after tremendous amount of consumer data in terms of everything we do buy.

I think that is an opportunity for them if they decide they want to move away from charging content and moving more to add-based models.

I think right now they are monetizing the content more through layering it into prime subscriptions.

And the u.k. they increased from $49 to $79 and included prime instant video.

No time.

I would love to watch it.

I think there is a lot of opportunity to experiment with other models depending on what consumers choose.

Some consumers would rather not pay for prime.

Do you think this fits in with the strategy overall?

I think so.

When you look at amazon for me you look at the businesses.

The retail business produces a tremendous amount of consumer data.

The infrastructure business is doing ever higher levels of algorithms etc.. you put those together and clearly there is a big opportunity for advertising as well.

Do we need to start thinking about amazon as some of the parts.

The retail business, effectively a tv business and back office business providing cloud support for other retailers out there?

I tend to think of amazon, and they will describe themselves as very consumer centric.

The retail or consumer tries to satisfy on basis of price, selection, convenience but with a look at the enterprise consumer, a chief technology officer, it should not be as hard for them were much harder for them than for the average consumer.

If they want software, it should the integrated with the infrastructure they're buying.

I think the mission is to place a software marketplace on top of the infrastructure that they give away.

This is classic destruction.

Massive creative destruction.

Someone is losing.

There are limited numbers of tv watching going on every year.

Amazon is gaining market share from somebody.

Who is the losing party?

I still think for now you could argue it could be amazon because they are buying the content.

I think the mission is to say we want to make sure we're bringing folks to the platform.

At some point the scale will start -- start to turn in our favor.

As it amazon because they're pricing things below market?

That is a very long game.

We will continue this conversation later but one to tell you coming up in the next hour we will come up and high-frequency trading conversation.

Larry taff joins us.

Says the market is complex but not rigged as michael lewis alleges.

This is bloomberg "surveillance." ? good morning, everyone.

I'm tom keene.

We have a plethora of morning must reads today.

Listening to a smart one.

This one jumped out to me from frank bruni writing in the new york times.

Here is why.

You know what is happening this week, this is when you find out if you got into college.

College admission notices have gone out.

Do you remember what when you -- i do not know what else to say but the envelopes.

You either open -- you open them and are either it or out.

Ian shepardson you have one that is about ready to make the plunge.

The same britain?

It is becoming almost as manic as it is here.

Since i did it was a very low-key thing.

Now it is the full-court press situation.

Is it important to say that you write code?

I think it is great for almost any student who have experience writing code.

Beats lacrosse.

Wrench and spanish do not matter.

It is code or chinese.

I cannot remember anything from that.

It is something i would've rather spent more time on.

You have all this to come.

Lex i am looking forward to it.

Who will pay for all of this?

I am so glad i am mostly beyond it.

It was painful.

Coming up on 59,000 dollars at an ivy league.

The average price you pay is a lot lower.

Princeton will give loans at 1.3% variable rate loan.

There you go.

Coming up, the u.s. economic recovery remains stuck in the slow lane.

We will discuss how janet yellen plans to boost spending coming up next.

? bloomberg "surveillance." with mia scarlet fu, adam johnson.

-- with mia scarlet fu, adam johnson.

David plus will join us thomas a lightning rod of criticism.

He always starts a good conversation.

Doing a data check now.

Beginning of the second quarter.

Equity markets flat and miserable quarter.

The dow 18,067. adam johnson has some april fools gainers and losers.

Two of each on the plus side.

To stack -- to tech stocks, micron up about eight percent.

Different report saying it is going to be a solid quarter.

Oracle says software sales will be up 4.8%. oracle was up almost three percent.

On the downside, curate -- keurig selling one point 4 million shares.

Test thing.

It had a huge run-up.

Betty liu will buy one.

It would have its own car.

Doing well for us, no question about that.

Janet yellen spoke as the markets responded.

Made it pretty clear central banks will keep low.

Friday's jobs report set to show an increase of 200,000 payrolls according to economists we surveyed.

The guest host for the hour is ian shepardson.

Let me get you the take on it -- on janet yellen and different approach to monetary policy.

A little storytelling thing going on there.

The mood music was very dovish.

If you look at what she said, no different than the standard headline about tapering steady pace and contingent upon the data.

The thing is, you can only push this so far.

The data ultimately tells them what to do.

If we print friday to 50 instead of 200 and the next one is 200 as well.

The mood music will count for nothing because they will stop pushing for the fed to be more aggressive.

What she is trying to do while you have this data behind you, then you talk the self mood music and it works.

If the data starts to move against you you have to be nimble on the way back.

Homophones like she is stating the obvious.

Absolutely.

When the data tells you things are still in the low market, you go out and tell stories about individuals whose stories that the big victor data.

The fed is driven by big picture data when it comes to policy.

Individual stories do not cut it in the macros move the other way.

It has a limit.

The limit is driven by the data.

Where do you see inflationary pressures?

We talked about rising prices, coffee and orange juice.

Why does that not count as inflation?

Unless it comes back to wages, it is just a relatively price shift -- relative price shift.

The biggest thing is rent.

Is says there is pressure building because we have a very tight markets and are seeing a steady acceleration.

Here is the headache right now.

We begin the second quarter.

The idea of core pc inflation.

Down we go.

Thus inflation.

Is this the nightmare, the idea that within that all the blather in the mix that you look at every day, when inflation stays level we can see further disinflation?

I would be surprised to see further disinflation.

Some of the things pulling the chart down, financial services prices slowed down and picking up again and rent is gradually grinding up.

Window receive wage growth?

-- when do we see wage growth?

Anytime now.

With unemployment falling toward six percent, we should see a little bit of a report for sure.

Small companies complaining they cannot get the people they want to hire.

Usually that means they have to pay more for them.

I would suggest that is the most e-mails we get.

Someone in a suit and tie says a lot of small business people tell us we are crazy.

Small business accounts for two thirds of the hiring according to john growth.

Here is something that jumped off from one of the reports.

I read this overnight that healthcare services, effectively hospitals, account for 11%. and that hospital expansion goes up.

They have been going down.

They have slowed a lot.

Part because of the sequester and part because of obama care.

When the wage bills are rising at two percent per year and effectively seeing a margin squeeze, so we've seen consolidation, laos and this is not sustainable.

We saw this in the 1990's. the game is over.

The pressure built became unsustainable.

I think that will happen this year or early next year as well.

Such a big chunk being displayed.

So friendly and favorable coming down, down.

The margin pressure is too intense.

I want to go back to wage pressure and how they are not building up.

Ken senna covers financial companies.

These are the companies -- you cover social media companies.

They are not the employee and a lot of people.

Facebook has 6300 employees.

Certainly with most technology you see a certain amount of wealth move into probably fewer hands.

I think ian is probably a better person to stick to the macro effects of that.

Certainly the competition for talent continues to increase as well.

That is just a fact of silicon valley, and also throughout the u.s. and technology.

Fewer employees, higher pay.

We talk a lot about income disparity.

If you were to take out the guys at the top, is it really as bad?

A very small sliver of the population.

You get a lot of headlines.

In terms of the income flow, still pretty small.

The big story really is the median guy on the salary.

In real sense it has gone down or stagnated.

With wage growth at two percent and core inflation just below two percent, real wage gains are pretty minimal.

The high-frequency trading up for right now of mainstream versus wall street in your world of broader incomes and aggregation, is america widening out right now?

Are we getting ever wider as we enter the second quarter?

Unquestionably.

That will change as the labor market gets tighter.

We have had a long time of such low wage growth of people who have traction and income, entrepreneurs and people in senior positions have done very well but for the median worker, it has been very difficult but it will change.

We will look for that.

The tendency.

I can say that with a british guy on the set.

By 1860. guest host for the hour.

Coming up, abenomics couldn't be manufacturing misery in japan.

That is the single best chart coming up next.

? good morning, everyone.

Which lousy april fools joke will i fall for this year?

I am the biggest sucker for it.

Seriously.

What is the best response to high-frequency trading after terrific work on this.

Look for arthur levitt comments out on bloomberg news.

Look for that to really -- as a really smart article.

Getting rate to top headlines.

Here is adam johnson.

Unemployment in the euro area held at 11.9% in february, slightly lower than forecast.

The jobless rate there he rate we.

A record high of 13%. germany's labor market strengthened.

Sales of condos jumped 35% in the first quarter, the busiest artillery year since 2007. the average price rose to more than 972 dollars.

By the way, a 38% -- 38% of the sales were at or above the asking price, more than twice the number at year ago.

Finally, the tallest ferris wheel in the world has opened.

Topped out at 550 feet.

The rain might be short-lived as the skyscraping roles are planned for dubai in staten island.

What do you think the name of the ferris wheel in vegas is?

Highroller.

Get it?

What is with the ferris wheel competition between cities?

This is just such an uber competitive world.

You have to get your kids into the right school so they get into the right college so they get the right job and then they will be happy and on and on it goes.

Have to have a bigger ferris wheel.

You are this rambunctious when you go to bed at 8:00? i get too much sleep clearly.

Single best chart to save us.

This one on japan.

Abenomics supposed to say the economy but it could be manufacturing misery in japan instead.

This shows the misery index, which is basically the sum of the jobless rate and level of inflation.

On the first fiscal day of the new year, japan is raising the first session of the national sales tax to the highest level for the measure since 1981 once you factor in what that will do to unemployment.

It is said to go to seven percent.

Section an on chart.

Ian shepardson, you and your team have done a great job on this.

Behaviorally, what happens to a nation that moves from price decline to price increased?

Of big, psychological shift.

Expectations are falling, prices deeply embedded.

At a macro level and monetary policy level, this is a great thing.

Obviously deflation is very bad at the macro economic level, but from an individual level him it is kind of a shock.

So it is a big psychological turnaround, coupled with what is actually a very big tax increase.

Going up by three percentage point is a really big deal.

The last time they tried this it did not end well.

Temporarily i think there probably is because people buy stuff ahead of it and then they stop for a while.

The danger is that it becomes self-fulfilling to the downside.

A risky policy change.

This is an experiment because of it does not take hold, what are they to do next?

I do not know and do not think they know either.

The boj is wide open.

This is a key part of the strategy to generate the school sustainability.

As we focus on japan, it seems we always do economics and finance.

Facebook big in japan?

They are, but also have other messaging experiences.

I think facebook, when you look at line or whatsapp, which has distribution in other parts of the world, i think facebook is focused on the international market.

What about twitter?

The same model of social media that we do?

I think the messenger is really interesting.

Whether you think of line or whatsapp, you have to start to question, what is the differentiation between those and facebook?

They become richer in terms of photographs and video in groups.

I think as they look at those countries, they have to think, what is happening and what are the experiences?

This is the movie that is time lapsed.

I am like the ugly oldest son at the dinner table.

We are all right there.

There we are.

This is your world.

It is amazing.

It is.

It is beyond how we are playing there.

I think it has bigger ramifications when he think cross communication.

What does this represent?

Hardware is becoming commoditized.

Operating systems fairly commoditized.

When you think about the messenger, does that stand to become the new platform?

Does instagram have more momentum now than facebook?

From a growth standpoint.

We do not personally see a lot of growth that is particularly among "-- younger demographics.

I do think if there's some truth in terms of the data.

When you look at instagram, you say that has the growth and will soon have scale.

Whatsapp, same thing.

Growth and will soon have the scale.

They have not been monetized to any great degree.

Just given the fact that we know one another as we used those, it does not have the best tools.

Driving too many ads, then you can switch to another one.

Growth and skill and also has sizzle.

Is it real as a part of gdp?

The social media that we all talk about?

It is.

The advertisement sales are a significant business.

It is not the margin.

It is getting bigger.

These components are rising.

Ian named his boat, at the margin.

We will talk about the facebook effort to monetize.

Also, the advertising strategy for facebook coming up.

That is the next topic ken senna who covers facebook.

Ian shepardson.

Macro.

This is bloomberg "surveillance." the red sox lost.

The season is over.

? / this is bloomberg "surveillance." i am scarlet fu with tom keene and adam johnson.

Getting your company news.

Sheryl sandberg flashes her stake in facebook.

She sold more than half of her holding since the ipo in may of 2012. all of this according to a report in the financial times.

She still holds a stake of $1 billion in the company.

Hewlett-packard paying $57 million to settle claims leo apathetic are made missed leading statements about operations.

Telecom italia some -- selling the lawn headquarters as it tries to sell off debt.

The company's new ceo has been cutting costs as he tries to/$37 billion in debt.

It will remain at tenant of the building.

That is today's company news.

Facebook will change the way we interact with each other.

Also the way advertisers on to interact with all of us.

Dan slater helps companies by advertisements on facebook.

How successful have they been in helping facebook convert light into want to need?

You've seen a big shift from the branding to performance marketing.

We work with brands like ebay and waste here.

How receptive have advertisers been when you say you used to always go to abc and now we will start putting it on facebook.

12 months ago you saw direct advertisers on faith again we are seeing more of the brands.

We think the next shift will be consumer growth.

We will see a shift or two video and premium advertisement.

I like what you wrote in the notes, which is the choices for advertisers keep growing at the level of display advertisement has not increased.

If you take out facebook and video, you are left with six percent display growth.

One of the headwinds of mobile.

You certainly see newer players coming into the space showing exciting growth, but usually coming at the expense of older players.

A little bit of a rotation that happens.

Some of it is a song the best new tools, the best new data.

50% of facebook sales are mobile, right?

This is critical.

Is anyone going to do this?

I am looking at the instagram feed right now.

You tell me i am going to have an advertisement in here?

The majority will be the millennial group.

They started with three brands.

Ben & jerry's, michael kors and levi's. they also just announced a deal with omnicom.

Movies with transformers five on here this summer.

Whatever will target the millennial's. we think about his book in terms of performing.

No one is expecting right now click to purchase.

This is the point to both of you.

Critical.

If we assume it is branding, will it be successful branding?

Rightnow plenty of advertisers that would like to get in front of the millennial.

I saw a banner advertisement and it blended into the website.

It did not jump out.

Is that where we are going?

I think the question becomes if you are trying to target the millennial and show them an advertisement they do not want to see, are there other options for them to move?

We are so connected through one another through the app and found that are there other services that could replace?

I think they have to tread carefully in terms of how hard they push to make sure the quality of experience is still there.

What are the opportunities when it comes to wearable technology?

Eventually this is going to be a bigger issue.

I think when it comes to wearables, we talk about from mobile to in-store, which is perfect for wearable.

What will drive me to in-store?

The contacts base.

What is your comfort -- questions on conference calls this time around?

Ken senna of ever corker, what are you going to ask?

Is there a play on messengers with wearables?

When you think about where things are going, what gets folks to want to buy?

Hardware is becoming commoditized.

How you would run it is, to.

When you think about the messenger am a facebook like google and apple are going after developers.

A billion and a half users.

Lex thank you for joining us.

Ian shepardson.

Thank you.

First day of the quarter forex report.

The yen weaker.

Uighur japanese yen.

Australian dollar.

Commodities doing better.

We will be right back after this.

? the fbi investigates high-frequency trading.

A form of insider trading.

We had a terrible start.

The administration celebrates its millionth sign up obama care.

There is a grand canyon-wide artists and divide.

This is bloomberg surveillance.

We are alive from new york.

I'm tom keene.

Joining me, scarlet fu and adam johnson.

Joining us this morning, scott galloway.

David joins us.

April fools -- he will be a republican by the end of the show.

We're talking about china's pmi.

Its lowest level since july.

Different story in europe where manufacturing is covering your eighth rear high.

In japan, that new sales tax begins today.

It is intended to lower extreme government debt.

Good luck.

Here in the u.s., at sign 10:00 we will get construction spending and the latest auto sales figures.

Really only one earnings to speak of.

New is meeting today to discuss its response to ukraine.

One final note -- the red sox going to the white house today.

Put that on instagram.

0-1. new england saying, "i'm sorry." they won last year.

But what have you done for me lately?

Let's get to company news in the meantime.

In houston, she will face lawmakers today.

The general motors ceo will testify before a committee to answer questions about the omissions which controversy.

It will recall 1.5 million vehicles.

Gm has recalled 6.6 million vehicles this year.

Another executive appearance on capitol hill today.

Caterpillar officials will face questions from a senate panel over accusations that they dodged taxes.

The company avoided paying more than $2 billion in taxes by shifting profits f to a subsidiary in switzerland.

Bank of america may face yet another lawsuit tied to the housing crisis.

The suit claims that the bank failed to disclose the nature of $855 million of mortgage securities that it sold back in 2007. they've been trying to dismiss these claims.

That is today's company news.

Joining us now on an important story, the top story for global wall street this morning.

High frequency trading has been around for years now.

The fbi is involved now.

Reporting an ongoing investigation by the federal bureau of investigation over these matters.

With us now with terrific perspective, douglas burns of his decades of experience on different parts of the judicial fence.

Good morning.

Good morning.

What is the fbi doing right now?

Are they calling a people?

Help me with the csi -- what are they actually doing now?

Real quick -- traditional front lining is where floor clerks are getting ready to place a big institutional orders.

The call friends and colleagues and tell them and the friends and colleagues trade in front of the order.

Now, what the fbi is looking at is these complicated algorithms and computer programs that give split-second edges across the board.

Does that violate the law?

What they will do -- it will be extremely difficult.

There has been way too many over generalizations.

I don't want to call out the author of flashpoint.

To say the market is rigged is way too overgeneralized.

We have to break down and look at these programs and see who has specific advantage over other traders.

So the fbi is in the knowledge business right now.

They're trying to get smarter about these processes.

Please explain why this is important to the average american who probably has never placed 100,000 share orders in their life.

When you have a journalist writing a book that says the market is rigged, that gets main street and the average investors' attention.

What is going on here?

What the fbi wants to do is break down the argument.

If some people have said that high-frequency trading creates liquidity.

You have seen all of the articles and i've looked at them in the new york times.

I saw what arthur had to say about this.

There are good actors and bad actors.

The reality is, the average person wants to know, when i'm making trades, am i laboring at a disadvantage?

The jury is out.

We don't know that yet from a legal standpoint.

Other people have overgeneralized and said this is legal and they need to change the regulations.

It is case-by-case specific.

If you can show that in a particular instance that somebody traded ahead of others, there could it could be illegal.

You described mr.

Lewis's assertion that the market is rigged as overgeneralized.

Why do you say that?

How can you turn around and reduce hundreds of thousands of complicated trading principles that go on every day and come out and say, the market is rigged?

That's journalistically controversial.

I think it's a bit irresponsible.

Before we say thank you and goodbye, if there is some sort of smoking gun out there in the data, what would it be?

That's a great question.

I think the smoking guns are always things like e-mails.

Traders and executives get reckless and they e-mail each other and say, wow, we just made this a killing because we had that information.

Things like that.

The bad news is that it's very complicated.

You will need real fbi computer experts.

Thank you so much.

We will do whatever we can on bloomberg surveillance to make you smarter on this issue.

In this hour, david is with us.

Very much involved in the politics of the obama administration.

The development of the health care policy -- scott galloway joins us as well from new york university.

I want to give you a victory lap . huge vindication for the administration yesterday.

They dug a big hole and dug out of it.

The 7 million number is good.

It is probably -- people went directly.

Republicans had a miserable day yesterday.

Why is there such a divide between republicans and democrats if we are all getting the same syringe and same thermometer?

The republicans aren't eager for my advice.

Why are they so upset?

You will see republican saying, it's not really 7 million.

How many of those are paid?

Hey, we're glad people are getting health care.

We think there is a better way to do it and we have some ideas.

That would be the smarter approach.

Will we see higher premiums because of the strategy?

Republican saying this is a misallocation -- the rich paying for the poor.

They're comfortable so far with the mix.

I think next year, you will see more young people coming in.

As obama cares enrollment has now ended and people can look ahead to actually going to the doctor and having it covered by insurance, what does the administration need to do to make sure they reform the law?

This will go down as one of the better branding efforts in recent history.

Only obama can go on between two ferns and pull it off and get young people signing up.

Can you imagine if a past president tried to act that: to those kinds of risks?

It was posted be doa and it didn't happen.

It is here to stay.

Better work.

The fact that we now have something -- another example of young people subsidizing the old people.

That is the story we have to talk about.

In terms of retirement benefits and medicare.

So this goes the other way as well.

The government makes money off of -- when people sign up for obama care and they are gone, they are paying more than they're getting and services.

So we can subsidize all people who sign up for obama care.

Is a graduate student, we will come back on this.

He just got a cover letter with a monthly premium that is half of their free cash for the month.

I would argue the system still doesn't work.

A lot of people who pay that premium would agree with that.

It's going to be an expensive price.

We need to talk more about this.

We will do that after the break.

General motors -- company said it's recalling an additional 1.3 million cars.

? good morning, everyone.

Your guest host, david plouffe.

Some would suggest he significantly secured the reelection for the obama campaign.

Using big data as it has never been used before.

They crushed the republicans.

How would you perceive the republicans who respond to the technology of politics?

There is a huge technology gap.

Their biggest problem is talent.

There is very few people from silicon valley or other parts of the country who want to go work for this republican party because it seems backwards and tolerant.

Cash and intolerant.

Until the address that talent gap, my guess is they will try to catch up to where we were in 2012. by 2016, completely different world.

Are there frictions between clinton and obama?

What would you advise them?

The most important thing is message.

What is your message?

Where will you be different?

From a technology standpoint -- here's the thing about the campaign.

A few states and a few voters within the states -- you can know a lot about these voters will decide election and you can know the best way to approach them.

Their viewership habits, where they are getting information.

Information, information, information.

We use the phrase.

I thought it was brilliant.

The economy election.

Will it be the economy election?

In terms of a few states and a few people?

It is.

In 2014, the problem is where these contests are being held.

It's like playing a bunch of away games.

Yet, the republican numbers are not great.

In 2016, you have a much different elector.

Much more younger people and more single women.

The economy in both of those -- if the economy picks up as people expected to through this year, that will help incumbents.

It will help republican incumbents, two.

How does the president the lay -- empty you're covered.

Anything you can do on your own, do it.

You have to look for opportunities.

Maybe the beginning of next year.

We'll have an opportunity to bridge the gap.

Send in your responses.

Our twitter question of the day.

What is the best response to the debate of the moment?

High-frequency trading.

Stay with us.

? in morning, everyone.

Futures up.

It is rumored surveillance.

I'm tom keene.

Our guest at this hour, scott galloway of new york university's stern school of business.

David plug joining us as well.

-- david plouffe with us as well.

There is nothing april foolish about these headlines.

Signs of weakness in chinese manufacturing as the purchasing managers index for march at its lowest level since last summer.

There is a second index from the government which increased slightly.

Its lowest level since 2005. economists say the reports may lead officials to roll out additional measures.

Stay tuned on that.

Unemployment in the euro -- slightly lower than the forecast.

The jobless rate varied greatly by country.

Germany's labor market actually strengthened.

Less than half.

Diet soda -- sales plunging last year as people turn away from the artificial sweetener.

Falling 6.9%. coke saw a 6.8% drop according to beverage digest.

More than double the drop from a year earlier.

Those are your top headlines.

Scott galloway, you are the business school group.

One of the top 50 business school professors in the country.

What is wrong here?

Is the rebranding thing?

My sense is that there has been so much negative news from the last 10 years about our health and people are in fact starting to take more notice.

Ityou have great brands like to bonnie and whole foods saying it's cool to be healthy again.

What is the advice to coke?

You see coke going down for the first time and fast food under pressure.

It does feel like after 10 years of people saying -- it's finally here.

One goes out and buys the dasani.

It's much different than 80 years of coca-cola.

The big trend will be farm to table.

The carbon footprint of shipping bottled water from fiji -- it's hard to say you're being a good person or healthy.

It's not healthy for anybody.

You put in a plastic bottle and that cost oil.

What are we doing here?

Talking about general motors.

Another 1.3 million recalls for general motors late yesterday afternoon.

The new ceo is going to need that extra cup of coffee.

She is set to testify before the house and senate beginning today.

This is ugly.

Scott galloway, you are the business school guy here.

How does she possibly get in front of this whole thing when it's been going on for 10 years?

Crisis management boils down to the three same things.

Acknowledge the issue and over correct.

They have done everything except addressed the issue wouldn't actually happened and that is what they're getting heartache about.

She has been on the job six weeks.

She is fine.

I have to ask you about mr.

Ratner.

A lot of people got rave reviews.

Does this infringe upon the obama administration?

I don't think so at all.

It was one of the most important decisions the president made at the time.

There is no doubt that throughout the whole country, particularly in the midwest come it had a huge impact.

We will see if it affects our sales of new cars.

It's a terrible way to start your tenure.

Were you at any meetings at the white house?

I was not in the white house in 2009. i was part of discussions on the outside.

This is the entire industry looking like it was going to go over the cliff.

You are not focused on the recalls?

I don't think people are saying that we should not have bailed out gm or chrysler.

David plouffe can talk while tying his shoe.

How do you do that?

Speaking of the bailout of gm , that bailout means that gm is not liable for anything filed before 2009. does the company need to make an exception for that?

Bankruptcy is one of the great facets of the american economy system.

We love to forgive.

We love people to knowledge that they are wrong and apologize and get over it.

Our willingness to let companies fail and clean the slate and come back is a fantastic component of our economy.

Now we are thinking outside the box.

Is this whole notion of everybody who came to america came basically penniless and shirtless.

We are a bunch of underdogs.

Is that what it is?

What powers our economy?

Being an entrepreneur in europe is difficult because if you fail you are scarred for the rest of your life.

Venture capitalists like the thing that you have some scar tissue.

Its unique and a wonderful thing about our economy.

They have shed this whole government motors controversy and are putting out a good product and hitting big numbers.

The question is, does the slow them?

Jim just gets ever larger.

We will discuss high-frequency trading.

The debate has been reignited.

? this is bloomberg surveillance.

I'm scarlet fu with tom keene and adam johnson.

Time now for some company news.

We start with the head of the senate investigations subcommittee.

Caterpillar dodge billions of dollars in taxes.

They avoided paying more than $2 billion in taxes by shifting profits to a subsidiary in switzerland.

Company executives will be on capitol hill today.

Telecom selling its ballon headquarters.

The building went for $100 million.

The company's new ceo has been selling assets.

Pin codes former ceo plans to write a book about the rise and fall of central banks.

This according to a person familiar with the matter.

His first book was a new york times bestseller.

His resignation back in january triggered a leadership shakeup at the firm.

That is today's company news.

Can't say enough about the book.

When markets collide.

Outstanding.

A real must-read.

It is 2014. it is a bull market.

It is the second quarter of 2014. anthony dwyer is able.

-- is a bull.

It is the end of the bull market.

In april.

-- an april fools joke.

Why will stocks drive higher?

When are we going to buy?

5.5% for fixed income?

That's the story.

It isn't -- it is not the degree of growth.

It is and how fast the economy is growing.

-- it is not how fast the economy is growing.

Since the beginning of february, i'm starting to see the large cap simply do better.

Any number of things can be mentioned.

They really start to come on.

Why are they moving higher?

Last year, i raised my target 1760 above everybody else.

Then we went into an immediate correction for march.

It appears i've done it again this year.

The buyer technology stocks have been getting absolutely killed.

The momentum was killed in favor of the old line stocks you talk about.

That is what happened last march.

It turned out to be an excellent buying opportunity.

With the fed's zero interest-rate policy for at least another year, i see no reason to change that view that it should happen again this year.

You've been coming on the show for 2.5 years and you have been consistently bullish.

We have been giving you a hard time about it.

What would change that would cause you to say, ok, now the run is done?

Only one thing that kills a bull market.

The market correlates to the direction of earnings.

The direction of earnings is driven by economic activity.

Economic activity is driven by the statements of the yield curve which is driven by fed policy and that is driven by core inflation.

Until you get core inflation expectations going up enough to make the fed aggressive enough, this tape is going to go higher.

Will have corrections or long -- along the way.

Short-term interest rates are u -- you will not be at the market.

Emerging markets are facing headwind at a time when their own policies are too loose and the lack of structural reform.

These emerging markets also face political and electoral risk.

What would interrupt this bull market?

That's fantastic.

What happened is, from 1995-1998 , the market went from 15 times earnings to about 23 times earnings at the same time mexico defaulted on their debt.

China has slowed down to about 7.5% growth from 17% growth.

The emerging markets crisis failed.

All of those things happened as u.s. equity went up significantly.

Slow down growth to the point where the fed did not have to raise rates and valuations were allowed to expand.

Congratulations on your continued call.

It david plouffe with us.

Our bull markets good for politicians?

Half the country is not in the market at all.

Generally, there is a sense -- during our reelection campaign from of the presentation about the stock market created anger.

He said, i don't feel like -- it adds to the sense that directionally we are headed in the right place.

Futures are higher right now ahead of some key economic data.

Good morning, everyone.

All of our interviews on bloomberg tv plus and bloomberg radio plus.

Don't forget come on bloomberg.com, a wide array of videos.

Our guest host this morning, scott galloway from new york university.

David plouffe with us as well.

Formerly working behind the guarded gate of the white house.

Let's talk about high-frequency trading.

It may drive the u.s. and global stock market.

What kind of advantage to those with a fiber-optic line get over others?

Is it unfair?

Is it illegal?

Larry is founder and ceo of cap group.

A research and advisory group focused on capital markets.

You say michael lewis's assertion that -- who benefits the most from this complexity and fragmentation?

The investors benefit.

If you take a look at the high-frequency traders over the last 5-7 years, our view is that the amount of revenue has gone from 7 million down to one billion.

If you look at the brokers, there are pink sheets all over the place.

Those brokers ranks are getting smaller.

The investors are getting bigger and the hedge funds are getting bigger.

The book is talking about the high-frequency trading for a number of years.

And reuters this morning writing it's yesterday's story.

Do you agree?

Absolutely.

Roughly 1/7 as profitable as it was in 2009. is that a function of bad assets coming down so tight that you are playing for fractions?

It has come down a little bit.

It has come down a lot more before 2009. it has a lot to do with volatility and reduced volume and the brokers doing a much better job.

Here is leon cooperman from two years ago.

He was way out front.

Based on for-profit exchanges and stark markets and automated market makers.

Unless something changes, confidence shaking events will increase in frequency.

Then jump forward to what we see from bloomberg view -- we have a whole different story.

We have seen that here in the last couple of days.

The smart young whippersnappers billed heigh frequency trading firms that undercut big banks.

Is this goliath versus goliath?

Is this about for-profit exchanges goosing the market?

Take a look at what's going on with new york.

They're looking to sell off -- they're trying to bigger out how to reduce -- they were for-profit institutions.

Certainly the exchanges are a greater volume.

That is absolutely true.

It generates more revenue and more market data volume.

It generates business.

If you look at the exchanges that are really profitable, it is the ones that have traded and cleared aligned with them.

The equity's model has declined in value.

They're trying to survive.

You have investment and direct hedge combined with each other to deal with their economic -- it's a tough marketplace.

There is a lot of psychological damage from the financial crisis over the last bulb years.

People want to believe that the game is rigged because they feel like it is.

We always talk about financial markets coming down to trust your your point was an interesting one.

The bottom 50% of households only own a percent of stocks.

The thing that drives confidence is real estate prices.

A fascinating debate.

I love what you said about this idea of the back and forth.

It will be fun to have mr.

Lewis on.

We want to hear from you.

What is the best response to high-frequency trading?

What is it?

Answer however you want to answer.

Michael lewis will be on market makers tomorrow morning at 10:00 a.m. ? good morning, everyone.

A busy tuesday morning.

April 1. scarlet fu, adam johnson with us as well.

Joining us right now, betty liu on her april fools' day show.

It is going back to singapore.

I'm actually moving out of here.

Getting away from you.

She's giving you a hard time.

That was a joke.

I know you've talked about this hearing, testimony today from the gm ceo.

The former chairman of ceo and chrysler will be joining us to walk us through.

He has gone before congress four times in his career.

I don't know if it's something you would call a badge of courage or what.

In any case, he knows exactly what mary will be going through today.

He will be talking about that with us.

We will have him as a guest host in the 8:00 hour.

Sounds good.

She is set to appear this afternoon.

At 2:00 p.m. -- in washington it's 2:00ish.

Regulatory filings have come out and found that mark zuckerberg got paid one dollar a year in salary.

Give me a break.

One dollar a year?

The guy is the sixth richest person.

Much of his wealth is tied up in stock.

The taxes on that one dollar versus what they've made in $6 million in ordinary income, what happens to his amt?

He doesn't lose his exemption.

Big time.

Caterpillar is going to be appearing before a senate panel today, discussing offshore tax strategy.

According to a senate investigative committee report, caterpillar avoided paying 2.4 billion dollars in u.s. taxes by shifting profits to a newly created subsidiary in switzerland.

David plouffe, i want to ask you about this.

What caterpillar did is totally illegal.

It is in the tax code.

Somehow, it doesn't feel right.

Why is it that corporations are still able to do all this?

There should be another call for tax reform.

Our economy needs it.

There is agreement in both parties.

It's a damaging allegation.

Romney's overseas holdings bothered voters greatly.

It goes against the spirit.

People think, i can't take advantage of that sort of thing.

Caterpillar is seen as the great american manufacturer.

It will be a challenging route for them to get through here.

David plouffe gets hate mail from republicans.

Tom keene, don't turn into another mainstream media lapdog.

That will never happen.

We love your tweets.

We will discuss our agendas.

? this is bloomberg surveillance.

I'm scarlet fu with tom keene and adam johnson.

Our guest hosts this morning, scott galloway and david plouffe.

Time now for some company news from the files of bloomberg west.

Talk to swirling over what amazon may be unveiling at a new york event more.

The company is considering an ad streaming video service.

Amazon said there was no plans for a free media service.

The amazon invite said to expect an update.

Sandberg selling more than half over holdings -- half of her holdings.

She still holds a stake worth about $1 billion in the company.

Hewlett-packard settles the shareholder lawsuit.

It will pay $57 million to settle claims that the former ceo made misleading statements about hp's operations.

A lawsuit was filed more than three years ago after he cut forecast repeatedly and shifted the company strategy.

That is today's company news.

We like to keep our eye on themes.

Themes have become intense.

Aereo doubled down in defense, affirming their legally.

That will be later this month.

Joining us now on the phone after a terrific research note, the analyst, richard greenfield.

He quite in fatah says the odds are in his favor to bring down mainstream media.

Why should the networks quake?

The reality is, what areahat aereo is trying to do is allow technology to make things you could do your easier.

Think about google drive.

Google drive says you don't have to go out and buy a hard drive and keep buying more hard drives read they create a central storage device in the cloud and you use cloud computing to make your life easier.

What they're saying is instead of going out and buying a physical antenna and going out and buying a hard drive, a tivo and paying for that, you can rent the equipment in the cloud and to leverage that technology for watching broadcast television.

Broadcast tv is free over the air.

Everybody forgets that you can access ebs and nbc for free at home -- cbs and nbc for free at home.

What will this do to the phrase, antenna is king?

Copyright is on impacted.

The reality is, broadcast tv is made available by advertising.

If aereo works, they help the rating.

If you talk to anyone at cbs or any of the networks that are suing, they are a positive for ratings.

They only have broadcast tv right now at bloomberg.

The amount of time you will spend watching broadcast tv is far higher than the universe of cable.

The thread here is all about retransmission.

Let's not confuse this -- this is not paid by cable operators.

By satellite-tv.

That's what's under threat right now.

I want to bring in scott galloway as well.

He is the

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

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