It is quiet out there -- the wall street summer of discontent.
Cap rate a wins asereo goes down in flames.
Scarlett has a dentist appointment.
What is your excuse?
Good morning, everyone.
We are live from our world headquarters in new york and this is open to bloomberg surveillance." scarlet fu and adam johnson are joining me so let's go to the morning brief.
We are preparing for the big game.
I did not think i was into it but i am totally into it.
Bank of england governor mark carney is speaking right now talking about stability within the u.k. financial system.
It has moved the sterling?
Yes, a stronger sterling.
There he is again speaking to u.k. lawmakers about stability as well as housing in the u.k. in the u.s., we got several economic indicators coming out at 8:30 a.m., initial jobless claims, personal income and spending.
It was reaffirmed of great caution.
There is a huge optimism out there.
Health-care costs is driving gdp in the first quarter.
At 11:00, we got the kansas city fed manufacturing activity.
A lot of economic data and we will keep you up on that and earnings coming out for the bell, lenhard, conagra, and nike after the bell.
Lennar came out and second quarter earnings.
At 12 noon for the entire " the merger surveillance" team, terminal training class.
This coincides with usa versus germany.
President obama will speak in minnesota at a fundraiser.
Secretary john kerry is in paris for middle east talks.
What else do you need to know, soccer?
Do we have a chance?
There is a 72% chance the usa can advance into the next round.
They don't necessarily have to win against germany.
This is our twitter question of the day -- usa versus germany at 12 noon eastern time, what's your excuse?
Let's do a data check -- a nice moving lower yields.
The vxx is 11.59 so a little improvement off of an ugly monday.
Brent crude is well under $115. this is caution, recession,gloom, the difference and recession -- up we go when we rolled over a little bit.
We are miles from the acclaimed recession signal.
In other words, if that two-year, 10 year spread widens, that's good news.
We are miles from a recession call.
We have looked at the front pages and the webpages and here is scarlet fu with your front page.
U.s. authorities go after yet another european bank.
The new york state attorney general is suing barclays over dark pools, the venues that allow investors to invest without alerting the broader market.
It is said the barclays misled investors who traded him dark pools.
Are remember when dark pools were first created and i was trading on the street.
The original premise was not to cross it upstairs.
Everybody sees the order, i don't trust this, this is the basic idea.
If i go to a dark pool, it's like i have a valet and nobody knows what i am doing and it is more discrete.
So nice to see you, we will take care of that.
You have stock for sale.
We shall endeavor to do so in a quiet matter.
All you need to know about dark tools.
We need to let you know that new york attorney general eric schneiderman will join us on bloomberg television at 3 p.m. with trish regan.
Next story in our front pages is the supreme court rulings, two big ones and the reactions -- one of them is called a big victory for privacy rights in the digital age.
The supreme court unanimously ruled that police made warrants to search cell phones when they arrest someone.
This will probably extend to tablets and laptops as well.
Is good to see a unanimous vote.
They just crush them.
There was another vote --6-3 in which the court handed a big victory to the broadcast networks in what may be a death sentence for aereo.
They say it violated copyright law by capturing broadcast signals and retransmitting them for a fee.
Aereo gets the content but was not paying licensing fees.
One of our themes through the morning is aereo.
People just stop when i talk about this.
We will check in on this conversation with david bank of rbc capital markets.
Finally, gopro priced its ipo last night and will start trading this morning.
It is worth 400 $27 million at the top end of the range.
It trades under the nasdaq today.
What's the buzz on this?
This is a camera company which is trying to bill itself as a media company that's why got a premium valuation.
Can you effectively say what is now a channel on youtube and turn it into a standalone entity?
Call it whatever you want.
It priced at the top and the the range, $24. coming up on bloomberg television, the founder and ceo of gopro came up with the idea while he was surfing will join "market makers" at 10:00 eastern time.
Off of the front page, peterchachini is our cohost this hour.
Ben hall is with us as well.
Does no pro signal top of the market?
I think it's a fantastic product that has a long way to go.
I was hanging out hawaii and people were crowding around and had not seen it in real life.
The market cap i'm sure his nasa but so my people have not uses yet.
I look at this like i looked at ebay when it went public.
You actually -- they actually make money?
They make a square rectangular product that mounts to your head.
It's not the most beautiful thing out there.
That's the best part.
There is something in the prospectus which said something about the risk section.
The risk is that users will actually get hurt while they are taking these videos.
Then will you sue go pro?
Maybe there is a bad halo effect.
Can we get shots of ben and tom right now?
They can switch glasses.
I don't know where tom is sitting right now.
It is like hardware.
Ben's cool glasses.
Peter cachini is with us as well.
This is really crucial to keep the animal spirit going on wall street.
It is, ipos and m&a activity in the driving the animal spirits for six months or so and activity has picked up in and helps to keep valuations up.
The rest of wall street is a little quiet and we will talk about that later.
How critical for the major firms are their equity departments right now?
Fairly critical, clients are obviously down.
We have been struggling with the low-volume environment for a number of years.
Coming into summer, it feels fairly quiet.
To good guess with us this hour on the pulse of wall street.
Don't forget our important interview with mr.
Schneiderman from new york state later this afternoon here on bloomberg television.
Coming up next, the supreme court ruling onaereo suggests it's lights out for the company.
What does it mean for cbs and abc and nbc?
We will discuss this with david bank of rbc capital.
This is "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire.
? good morning, everyone.
The government of the united states shut down at 12 noon today.
They will be watching usa-germany and we hope you enjoy the game.
This is "bloomberg surveillance." i am tom keene with scarlet so and adam johnson.
There is an informed conversation on aereo.
The supreme court decision is likely to be a fatal blow to aereo which will upend the economics of television.
Rbc capital markets managing director david bank said this is a big win for the broadcast networks and their owners and a bigger win for tv broadcasting companies.
Is it now business as usual for broadcasters since this ruling was widely expected or will it embolden them to be more aggressive in pursuing more revenue from cable operators and distributors?
I think it's business as usual.
I think the biggest impact is for investors.
This was a big overhang for investors waiting for this ruling.
It literally came at the second to last possible day and it was an overhang for the stocks as opposed to operations.
I think broadcast companies will seek higher and higher revenue streams as time goes on but that was going to happen anyway.
It's not like broadcasters were holding back or delaying investments and decisions he cousin this.
I don't think so.
That was a bigger problem for investors than it was probably for the operators.
Am i going to see a higher cable bill out of this?
Does it go up five dollars because of this decision?
You might be one of those people but the average american watches about five hours of television per day.
That's even in the year of the internet and all these other alternatives we have.
If your bill goes up five dollars for cable per month, that is the best value for entertainment you will find for anything.
The answer is possibly but it's not really a problem.
Let me bring in the morning must read -- this is from noah feldman -- ben is representing the cloud world, how damaging is the david banks world to your world?
How bad is this decision?
The supreme court said we don't want this to be a wide base ruling that affects cloud computing.
They want to make sure their current ruling does not impact the growth of the internet.
There are prior rulings that was pro-individual controls.
The supreme court rule says if it walks like a duck and quacks like a duck, it must be duck.
Dom chu value copyright?
That's a business decision that needed to be worked out between the parties.
There was a large distinction between remote dvr cablevision and this case and that remote dvr was access to content that you essentially bought or owned whether or not it was on the premise or in the cloud.
The issue here was does the consumer ever pay for the content?
I think there is a clear distinction between cablevision and what occurred here.
I think the court to go back to that and say if you pay for the content come you should be able to store it.
I saw bmi came out with a statement on music licensing.
Defend yourself against the sanctity of copyright and america.
If i listen to music over the radio, it's free to me.
As a radio station owner, i don't have to pay the fees to play that music.
If i'm an internet radio station, i have to pay.
There is an inequality on the way it's being created across the new economy.
We are looking for more sanity across the board so we need to figure out consistently how the copyright rule will work.
If i get the content for free, i don't have to pay for it.
It's got to get paid for.
"i love lucy" reruns.
There won't be any of the consumer does not pay for it.
"i love lucy" is a tv show from a few years ago.
I seem to remember that.
The thing that aereo kind of did -- it introduced the notion of a la carte because it was pulling in specific feeds and allowing you -- what does this mean for paving the way were ultimately you can pick and choose what i want to watch.
What i feel is one of the most interesting parts of the story is the aereo technology could have been developed by the incumbents.
It could've been done by comcast or time warner but it was developed by a disruptor.
I think those kind of pushes in terms of the movement towarda la carte - some people would argue that the consumer wants -- i think those forces will come from incumbents -- will not come from incumbents, they will come from the disruptors.
I would expect that it does not indicate a move toward things likea la carte which will come within the system.
You said this was an overhang for investors.
What are you recommending to investors?
It is game on for cbs.
That was the biggest overhang there.
For fox as well, this was a significant overhang.
Two stocks we like a lot and some of the smaller broadcast stocks have a huge overhang.
I think it was up 14 or 15% yesterday.
It is safe to get back in the water.
Google has removed search results following the eu privacy ruling.
It is in a response request from people seeking the so-called right to be forgotten.
Google has begun removing search results after eu said it needed to do so.
What does this signify?
Google has to abide by the laws.
Can google remove the results?
It's a matter of eu having a different stance, particularly germany on privacy issues.
David bank and then huh with us.
We will be joined by one of the giants of technology, john scully, the man who ran apple in the 90's and he will join us in the next hour.
This is "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire.
Aereo ? . ? we have breaking news -- elko is said to be near a deal to buy them aerospace parts maker of the u.k. this could be announced as early as today, alcoa.
Earnings are still down 85% from 2007 and maybe the signals they are trying to come back.
It's about adding value.
Aerospace parts is very specific.
It's added value and that's what they are trying to do.
Alcoa is close to making an offer for the company.
Let's get to the morning must read -- this is from the coach of the u.s. men's national team at the world cup -- the men's team have a critical world cup game thursday against germany.
This went viral on twitter last night.
He's not pan american citizen, he's a german citizen coaching the u.s. team.
Do you want this?
Who are you rooting for?
I root for the u.s. germany looks pretty good.
Yes, they are probably one of the strongest teams.
We are looking for a draw.
Did you read the story yesterday where ghana flew through my in dollars cash over to brazil to give to the players.
I think they said they would boycott it they did not get paid.
No one was bitten yesterday at the world cup.
Our twitter question of the day is usa versus germany at 12:30 p.m. eastern time -- what's your excuse?
? good morning, everyone," bloomberg surveillance." let's get to company news.
It's not a recall but it is bad news for gm -- it is telling dealers to top-selling 2013 and 2014 cruise models.
Some of them may have defective airbags.
They are made by a japanese company.
The cruze is the top-selling gm vehicle.
Barnes & noble is shedding its e-reader division by next year.
It never really caught on.
It was overshadowed by kindle.
There is another modest perk for ikea workers.
It will raise the minimum hourly wage as 38 u.s. stores for the new averages $10 70 six cents per hour which is a 17% increase.
Ikea setting a minimum for each store based on the local cost-of-living.
Hooray, i'm ecstatic about that.
Pay people more money.
They work hard and they deserve it.
This could be the solution which is individual actions which overcome the federal debate.
There was that seminal paper written about 10 years ago where it is look at what happened in new jersey when fast food restaurants upped the men on wage and did not have a negative impact on jobs.
Is this a good move for companies to take it upon themselves to raise the pay for workers rather than wait for the government?
I think that is the way it should work.
Companies have to make individual decisions based on their businesses.
If they make the decision that will in cross product dimity and incentivize workers and reward workers, of course, that's exactly the way capitalism is supposed to function.
It is throwback thursday.
Futures are flat.
There is your data check.
Let's get to the moment on global wall street.
It's quiet, it's the summer of discontent for trading desks whose oxygen is agitation or volatility.
Many of the facets are truly a mystery to market pros.
Peter cecchini has terrific expertise in the derivative space.
You are on a bond desk.
How distorted is the view from the counterfeit gerald bond desk?
I sit on the equity derivatives side within the equities division.
We have an incredible credit business and an incredible on the business.
We are suffering from the same lack of volatility whether it's in fixed income or equities or derivatives that everybody else's. do you blame janet yellen?
I blame central-bank policies worldwide.
There is a synchronized shift and i don't know how coordinated it is but we have not seen this in our lifetime.
Yes, that is responsible for much lower volatility across asset classes.
What do you do?
I am fascinated by how your world gets the bonus season in february.
What is the to do list and janet yellen, bill dudley and stanley fischer are not helping?
Is to generate good ideas for clients.
That is really the one thing we can do for our clients.
That sounds sort of cliche but that is the truth.
If a client wants to trade with the larger bank, they can do that but if we say and do things in a differentiated way, hopefully they will send their business to cantor fitzgerald.
That is understandable.
Akamai was trading -- back when i was trading, commissions were six cents a share and now it is 1/10 of that.
How do you justify the desks full of traders?
That's exactly why we have seen the downside we have seen over time.
It has been somewhat gradual but it is fairly persistent.
There is not a lot of growth in bodies in seats on trading floors.
Where is the dynamic?
You are one of the major bond desk some wall street.
Is it that the big banks make decisions?
Is it game+ for cantor fitzgerald?
Who will win from this lack of volume?
And away, it's a great opportunity.
As talent leaves the big banks and becomes available, we can pick that talents up and deploy it towards our ends.
I think it's a great opportunity for us to grow our business.
We have been doing that.
With the low volatility in the equity market and bond market tom, and a desperate hunt for yield, what new products are capturing investor in tension -- investor attention?
On the new product front, i think it's a return to the same and away.
-- in no way.
We have certainly seen a resurgence in clo's. if you look at the 2013 data -- it may or may not be a factor.
You can make the argument it is a sign of fraud -- froth.
What are you doing at 12 noon today?
I am working.
[laughter] the official answer.
Ben, you are a disruptor and you constantly had to reinvent your own business.
What is your lesson for wall street about adaptation?
When you are in a leadership position in any company, you can look at the long-term of the business.
You've got to serve your clients and if the clients do well, you think they will come to you and it's the same thing for may.
I need to serve my advertisers and uses for well -- quite well or i will not stick around for long.
We will continue this conversation but we want to tell you what's coming up next -- the single best chart will talk about specialty drug pricing and how is contributing to rising health care costs and perhaps leading to a re-rating of gdp.
We will be right back.
? good morning, everyone.
Scarlet fu and adam johnson is joining me this morning.
The iraqi largest oil refinery is now a battleground.
Militants are staging a second attack of the complex north of baghdad.
Iraqi forces are using helicopter gunships to drive them away and american officials say the iraqi government is getting high-tech help and tons of ore supplies from iran.
They report that iran is putting surveillance drones over iraq.
Dc search equipment is being sent to help them meshing -- missing malaysia and airline.
The plane vanished on march 8 with 239 people aboard.
The san francisco giants -- the pitcher allowed one base runner to get the second no-hitter of his career.
This first one was also against the san diego padres.
The san diego padres are the weakest team in the majors.
I think is the second major no-hitter of the season.
There have been more butmlb at bat is the greatest software ever.
I went to my iphone and watched the last three that's. b --ats.
It was beautiful.
He grew up in bellevue, washington.
His dad was an engineer at boeing.
There is this science involved in pitching.
He is hit or miss?
That's right, but he has done an amazing job in the season.
We talk every day -- this is not dizzy dean on saturday afternoons with black-and-white tv.
We can see it on twitter, hd, crystal-clear, no header.
That's why sports is fetching the dollars in the media markets because they are figuring out how to get digital and if you need to have it come you need to get cable, too.
The celebration of baseball -- let's move onto our single best chart.
It is on the increase in specialty drug pricing.
Health care costs led to a bigger gdp.
Pricing specialty drugs has gone up quite a bit.
Prices are skyrocketing from $87 billion in 2012. according to price waterhouse coopers, four percent of patients you specialty drugs amounting for 25% of total u.s. drug spending.
If you look at treatments, it could cost $84,000 for a standard 12 weeks of treatment.
$1000 per pill.
New york magazine did a fabulous article on sloan-kettering and cancer drugs.
$80,000 in treatment.
It's a raging debate.
The average drug takes between 11-15 years to develop.
It takes money to justify that kind of development.
This goes into the economic debate.
You follow this closely, the lousy gdp number yesterday was ms.
Health care costs.
The affordable care act has caused a lot of unintended consequences including lower workweeks.
Those are things it is difficult to account for those things when you are making forecasts.
It's a new dynamic and it's very hard to forecast that sort of thing.
One pill costing $1000 took me by surprise.
Think of the development cost and the time to employ scientists.
If you are paying a group of scientists for 12 years, eventually you have to get paid back.
That is the problem.
Health care costs in this country account for 13% of gdp which is very high.
Perter orszag suggests we will get some movement here, some migration down with costs.
Earlier this morning, half an hour ago, google announced the removal of search results after a european union court told at last month to respond to requests by people who did not want stories linked to their names.
Hans nichols has left dodge and washington and is in europe.
That means that ugly hate mail on hate -- on hans nichols disappears?
I will google you and we can do a little google off and see what comes up.
The standard is irrelevant, inadequate or no longer relevant information.
Google faces a two front war in europe -- one-off privacy has been clouded altogether with the nsa and the eavesdropping andtwo, antitrust.
On the privacy issue, they got this blistering court decision from the european court of justice and google has vowed to comply with the spirit of the law.
We now hear that what they will do is have a process so people can glance and purify their online search records.
It's a question of process and how they do it.
Purify your past -- can google walk away from this?
the long-term of their business, that's a question better put to eric schmidt who was just here in berlin trying to make nice with the tech community.
In terms of their ability to conduct business and europe if they do not comply with this court ruling, it would be very difficult.
This is the easier one for them.
You just have a process or a form, there is something about a bankruptcy you don't want a potential employer to know so you scrub that from your records.
The harder issue for google is antitrust.
That is also in the works but they really face a difficult challenge on antitrust in the same way that microsoft did in the late 1990's. isn't this effectively a check and a balance?
If someone said something about you, it was out there and now you have recourse.
You can actually take them to court.
You don't need to go to the court system anymore.
There is a dangerous precedent that people can censor each other with act -- without actual due process.
This is not a good thing for the internet.
I believe you are in berlin today, give us a sense on the ground in germany about this game at 12 noon today.
It is intense.
You do not want to be driving around anywhere in germany when the games are playing.
The whole city is shut down because they have the public viewing.
We did a piece that will play on bloomberg television later.
You want to understand who is making a lot of money on beer sales.
I have a good metric for you, toilet flutters.
We pulled up the berlin water work toilet flushes and there is a massive spike at halftime.
The beer drinkers have to be there at halftime.
Beer sales will increase by 1.7%. brazil is expected to see a 3.3% increase on beer sales if their team goes deep.
97% of the profit in brazil is inbev.
We will have drinking and football and soccer later.
You are a font of information.
Some of which is good and some of which is tmi.
[laughter] the water information is fantastic.
I will dig it up or other cities.
You can see that halftime the spike in paris.
It's a great metric.
Of the was watching the game.
You look at who is flashing their toilet at halftime and that tells you.
You are not like this when you were in washington.
Hans nichols with too much information.
Let's get him to send us the data and we can make that a single best chart.
Coming back on "surveillance," keeping media companies keeping millenial's happy.
This is "bloomberg surveillance." ? it is our twitter question of the day -- this is "bloomberg surveillance." i think we will be showing clips on "money clips." let's get you company news -- we start with the maker of the affordable camera that captures facial videos.
Trading shares of gpro start trading this morning.
They are popular with fans of extreme sports.
The stock sale could boost its market value to almost three billion dollars.
Razr wants people to put a new set top box for gamers.
Says the new unit will let gamers navigate with voice control.
A report from facebook on the ethnic makeup of its workforce shows a wide gap in diversity.
87% are white or asian and other minorities including hispanic, african-american come and make up only 30% of staff.
-- 13% of staff.
That is the latest company news.
Ben huh is with us on technology.
How did this get started, how did we decide that we need to announce diversity?
We have a bad problem when it comes to technical talent.
You see technical engineering teams where it is 90% men.
Starting there, you've got a problem.
I think they did some soul-searching.
Are they disclosing it to the universities and schools?
They have known about this for about 10 years.
A lot of the startup companies, like air company, we make contributions to try to promote women in engineering and change the balance of the demographic but it's very difficult.
Have you found?
Man and woman and you hire the woman instead was less qualified?
Is hard to do that because it's a very competitive environment.
We cannot hire someone who is less talented and that shows when they show up to work.
We absolutely try not to do that.
We have a structural problem in our schools were we are not teaching everybody equally when it comes to technology.
We gear boys to that role.
My youngest daughter is a math major.
I don't buy the argument.
It's about the individual person and their family background.
She's your daughter so -- seriously -- it starts with the family.
Social pressure starts to get to the students and that's a problem.
Girls who love math in their younger days come a think differently in their high school days.
Less shift to your blog.
You had to lay off 35% of employees.
Why is the shift from desktop to mobile so hard?
We have a monetization problem.
Every time we switch formats, you go from tv to print or desktop/internet, it took the number of years before revenues on desktop-internet caught on.
Internet companies lost money for years.
Now we go from desktop-internet to mobile and there is not good enough at products that are great on mobile.
Does twitter have the same rusher with their skill that you have?
Twitter has the same problem.
They just released the ability for you to install a software application from the twitter feed.
Facebook is copper -- is conquering the problem.
They have a huge massive search for people.
A lot of other companies are trying to figure out how to make money on mobile devices.
Thank you both so much.
Governor connie moved to stirling early -- governor carney moved to stirling earlier today in the u.k. brendan greeley is crushed over the stronger real in the next few days.
He will join us in the next hour.
Coming up in the next hour, we will have john scully telling us about his latest project.
? it is quiet out there.
The wall street summer of discontent.
Copyright wins, aereo goes down in flames.
Adam johnson has a haircut at 12 noon and scarlet has a dentist appointment -- what is your excuse?
This is "bloomberg surveillance." it is thursday, june 26. i am out the door at 11:00 a.m. johnson.
Our guest is john scully, former chief executive officer of apple.
Also, jonathan gullible from rbc is with us.
We will start in england where the bank of england governor mark carney is speaking about stability within the u.k. financial system and has been addressing housing.
Those issues there are as important there as they are here.
We have three economic indicators coming out at 8:30 a.m. -- initial jobless claims, personal income and spending and later, the kansas city fed manufacturing numbers.
We gotlennar earlier this morning on -- we got lennar earnings earlier.
Conagra will come out before the bell.
President obama speaking at a fundraiser in minnesota.
I can tell you when something to say.
The banner says obama in minnesota and kerry in paris in the nice headline says johnson in a bar at noon.
[laughter] i am trying to learn this cure is game called soccer.
John kerry is in the middle east.
12 noon, usa versus germany.
There is a 72% chance that the u.s. advances even if it loses to germany.
That's very exciting.
Our twitter question of the day -- the coach of the new york men's team has put a form letter together for you so you can hand over to your manager today.
It's very exciting.
It will be hard for the u.s. to win but a 72% chance they can advance even if they lose.
Let's get back to the banking business and the challenges of domestic and foreign banks.
A state's attorney general is out front of the securities and exchange commission.
Charles schneiderman says barclays did bad things and took liberties in marketing materials and deceived prospective clients and did not shine a light on the black box known as our schools.
You are our ex pert.
What is a dark pool?
It is a trading venue that investment banks and other companies set up so you can go and trade stock anonymously.
You can trade a big chunk of stock without losing the market and they are set up that way.
We don't know what goes on there and that's what ag schneiderman is looking to crack open with this case.
Is this another witchhunt?
This case is not appear to be.
You had employees, former employees of barclays coming out of the woodwork and sharing some pretty dadmning alleged evidence.
It looks like they built this case around and performance.
-- around in performance --informants.
It shows that barclays misled its customers and how it was trading and using it start will with their orders.
This goes back to michael lewis and high-frequency trading.
The company neglected to tell the institutional clients.
It gets to the fact that whenever you trade stock, it has to be between the best bid and the best offer and that's what the dark rules did.
There is concerned that in order to get the volume, there might be a trade outside the bid.
They are flooding their own dark pool basically with their customer orders to make it look like they're dark pool is bigger than it is.
Why this aggressiveness with foreign banks?
Is this a trial balloon before they move on to u.s. banks?
This one does not have anything to do with the fact that barclays is a foreign bank.
It operates one of the largest dark holes on wall street -- dark pools on wall street.
They went after the big feis.
--fish and they found evidence that backs up their case.
Might i suggest a barclays is perceived to be in london and across the pond.
Credit suisse, bnp paribas and now barclays.
Does anyone go after american banks anymore?
I think jpmorgan paid 20 billion dollars.
It's not an insignificant amount.
To american banks have dark pools?
Goldman sachs has a well-known dark pool.
A lot of wall street banks operate the same way.
When i was still on wall street in 2000, we were starting up our hedge fund and morgan stanley advertised the blackpool as a selling point.
This case is not about high-frequency trading.
It's about how barclays misled its clients and they are using the margin act to go after the bank -- the martin act to go after the bank.
I wonder if there is something political here?
Eric schneiderman set forward his insider trading 2.0 initiative last year and is trying to peel back the layers about the things we don't understand on wall street.
High-frequency trading fits nicely into that.
This case is the first thing we have seen on high-frequency trading.
We have not seen any cases from the sec or the fbi.
This is the first out the door and it looks to be a pretty good case against the bank.
Thank you so much.
Much more on this through the day.
New york attorney general eric schneiderman will join us on bloomberg television this afternoon on "street smart" at 3 p.m. eastern time.
Another top story g iso pro.
Shares begin trading after the company priced its ipo.
Their shares are $24 per share.
The move could boost its market value to almost $3 billion.
Let's bring in our guest house for the hour, john's l.a. -- john scully.
This is a company that makes hardware.
They are a gadget maker but they are trying to position themselves as a media company, content generator and they have succeeded with the ipo pricing.
Is it sustainable?
I think it has a good chance of being sustainable.
It's a very clever brand building concept.
They have focused in on extreme sports, amateur performing sports.
You take these cameras and attached to your head or surfboard and attach to your bike.
It enables people to create content and the content is being put up on youtube.
I don't know how they will monetize this thing but it is a very good product and a clever positioning.
Have you been surprised they have not been taken out if the technology is that good?
Why wouldn't google or apple take them out?
There is always that possibility.
They are the only company doing this.
There are 20 companies building different kinds of cameras but this company has done well.
They are about $1 billion in revenue and they are profitable.
There is a value to being first in, isn't there?
There can be but you could get arrows in your back.
Did you ever get arrows in your back?
I sure did.
Jonathan gullible --golub, it seems like there is new technology and old technology.
What do you tell investors?
It's interesting, the old tech is quite economically sensitive.
If you are buying pc's, they are sold when the economy picks up and it is new technology whether it be twitter or google or something else, those companies increase their growth regardless of whether the economy moves are not.
I think the risk may be much lower than people think on new tech because it does not require the economy to drive it.
Do you see the new technology companies paying a dividend and a time soon?
Do you want them to pay a dividend?
What you want is for them to have such a rich area of opportunities that they are almost forced to diversify their capital into growing the business.
When investors return capital, they think of it differently.
Thank you so much for being with us.
We will spay to john scully on aereo coming up.
Let's do a data check -- boring.
Flat, flat, flat.
Brent crude is $113. the news flow out of iraq is quite a little bit.
Maybe things will get interesting once company start reporting earnings.
Alcoa reports earnings on july 8. ? good morning, everyone, this is "bloomberg surveillance." it was pre-google when john scully ran apple.
To me it is interesting, what does google need to do to be more cohesive like apple?
We have had a good window on both companies because apple had its developer conference and googled finished up their developer conference this week.
I see both companies in very strong positions but going in different directions longer-term.
Apple has done a great job of integrating its products and taking it to the next level.
It is building a future that is about platforms on top of platforms.
They are moving into health kits, streaming music and various other verticals.
Google is also adding these platform on platforms.
They announced a number this week, everything from home to auto to fitness.
Where the two are different is that apple builds these beautiful products with no compromises that are highly integrated and google is going for a creative leap because they have endless cash flow coming from where they have a monopoly.
We think it will be about smart personalized systems.
I look at google is more of a set of add-ons.
Does google need a big product to make a big cohesive push?
I don't think so.
Apple is about people product.
About -- do you have an iphone6? [laughter] i have all the products.
I have every product apple makes in a few they don't make.
I don't think google needs the big product wins that apple clearly is superb at.
Google is looking beyond that.
We are going from the world of tools to the world of very smart personalized digital assistants.
I think google is ahead on that.
How do you connect all the stuff together with predictive analytics and looking at far out ideas and taking the home and making its mark.
This is more of a creative leap strategy than what apple is doing.
Thank you so much.
It is an exciting time in technology.
Coming up, team usa is in the grip of death.
Our twitter question of the day -- ? good morning, everyone.
We are using -- we are rooting for the usa.
Our guest house this morning is john scully, the former ceo of apple.
Jon golub is with us as well.
He cannot give us a pin in -- an opinion on usa and germany.
I know what his opinion is.
Barnes & noble is turning the page on nook, shredding its digital reader business.
It will spin off the business by early next year.
It never really caught on.
It was overshadowed by the kindle and the ipad.
A modest perk for workers at ikea, it will raise the minimum hourly wage is 38 u.s. stores.
The new average will be $10.76 per hour which is a 17% increase.
Ikea is setting a minimum for each store they stumble local cost-of-living.
At the top of the hour, alcoa is buying firth-rxixon.
It is expanding further into manufacturing.
The alcoa transaction, jonathan golubn is with us.
This is part of your spirit and optimism to see alcoa in these mini-deals that add up?
We are looking for animal spirits.
A lot of deals we are seeing is using offshore tax money.
If that's the cause of the pickup, that does not tell me anything.
If it's company doing deals that you are talking about, it's a big deal in the market responding this way.
I look at the consensus estimates tracked by bloomberg.
Oil and gas earnings are forecast to rise 23% this year and materials, 18%. what is driving that?
You mentioned to sectors that are really economically sensitive.
Oil prices are up in the expectation is that some of this is noise in the middle east but a lot of it is a good economy.
The discretionarysuite of sectors is expected to do pretty well.
The yield curve begins to flatten and a two year yield surges relative to the 10-year note.
There is always an ambiguity in movement and yields.
Many would suggest kerflatt ening.
Reaffirm why you push all this aside?
The most important thing is this slower recovery is likely resulting in a longer recovery.
That means we are not year five of a seven-year cycle, maybe year five and a 10 year cycle.
If that's the case, you'll continue to see p/e continuing to rise.
Will the price to earnings ratio advance because money moves from bonds into stocks?
Yes but the real money moving into equity markets is coming from cash on the sidelines.
It's money funds and lower yielding paper that is moving more than anything else.
We have a pickup in inflation that the fed does not see actionable.
What happens if bond yields start to rise?
Our equities as attractive?
When yields are really low, rising yields push multiples higher because equity investors think the world is becoming more normal.
This year, the last 12 months, the stock market is up 16% and 26% of the 16 happened on days when yields rose and the stock market lost 10% when yields fell.
In a bizarre way, the market likes higher interest rates.
We have seen three examples and central bankers who have tried to pivot and is has not worked.
Bernanke try to do it and janet yellen try to do it and we found mark carney did that last week and now had to backtrack.
When can they pivot?
What is the catalyst?
If you have an interest rate of two percent and you go to three, that's a 50% increase in a mortgage.
That's an enormous difference.
If you are at seven percent and go to eight, that is a small interest rate difference.
They have all said the same thing.
The idea of someday volatility returning, what will be the catalyst to get follow fertility going?
Do you pin it all on central banks?
A lot of it is but if you look at the way volatility behaves over the long run, when you get in the middle innings of a recovery, it starts looking like credit spreads.
What is the risk of the next recession?
What's the risk of something bad happening?
Forget about central banks, the economy tells you that volatility is likely to remain low as long as the cycle extends further and central banks are telling you they have your back.
We are talking about low volatility and high complacency.
Is that reflected in the venture capital world?
Something fundamental is going on now.
We have had a middle-class economy which has reached out to conspicuous consumption.
It's just not affordable going forward.
I think there is an adjustment which is opening up huge opportunities for disruptive businesses that can have very attractive pricing but very great customer service.
And they have cheap money to keep it going, that helps.
Coming up, how big of a win as the supreme court decision on aereo for the broadcasters?
? good morning from rio de janeiro -- we wish we were there -- that is a live shot of brazil as team usa gets ready to not face-off -- dropped the ball?
Not get on the ice.
They are getting ready to play germany.
They are getting ready to kick it.
This is "bloomberg surveillance." we will start in iraq were the largest oil refinery is now a battleground.
Militants are staging a second attack of the complex north of baghdad and iraqi forces are using helicopter gunships to drive them away.
The iraqi government is getting high-tech help and significant amounts of war supplies from iran.
The report that iran is directing surveillance drones over baghdad airfields.
Search equipment is being sent in the hunt for the missing malaysian airline.
They are shifting their focus to his own further south in the indian ocean.
They say a new analysis shows flight 370 was on autopilot during its final hours.
The plane vanished on march 8 with 239 people aboard.
The death toll is at 21 after a powerful explosion at a crowded market in the nigerian capital.
This happened as crowds were at weathering area they were watching the world cup game against argentina.
Police believe boko haram was behind the attack.
They have killed daily 100 people in the last three months.
Iraq is being pushed aside with all these other events.
Ukraine is front and center but we are not focused on that.
Ukraine has quieted down a little bit.
There has been a real back-and-forth between the sanctions increasing or not.
Our troops being withdrawn or not?
We are talking about 12 noon, usa versus germany and brazil.
We have our bloomberg reporter with his face painted.
What are you hearing?
You have heard the u.s. a chant " i believe we will win." is that as good as a gets?
I believe we will maybe tie.
I read the german papers this morning.
They don't take the american team seriously.
The american team is coached by a german who was on the national team and won the world cup in 1990. the newspapers just talk about knocking klinsman out.
This is a much better team than america has had before.
Annie have is to assist x you might use based on past performances.
Jurgen klinsman's comments say that other teams are favored more than american teams as far as their travel schedule.
That fueled the fire a little bit.
The stands are mostly filled with brazilians.
All of the brazilians that were there were rooting for the ivory coast.
I asked the family in front of me why them and they explained it's a south-south thing.
They are either rooting for the team that is not european or is not playing argentina.
You flew into the airport in the north that was not even finished.
How bad is the infrastructure?
I have been pleasantly surprised.
I had some brazilian friends and they warned me about this.
. i felt safe here.
I picked my way through the morning papers today and yesterday.
The front page article was everything is so clean and municipal services work in the buses run on time and you see a police presence, why cannot be like this always.
There is a difference between the face they are showing to the world and what it looks like when there is no world cup.
I see a huge military police presence here.
Glad we are able to focus on the games.
It has been an incredible show.
Go usa we can tie.
Let's get a data check.
Not a whole lot going on.
We have economic data on the calendar including jobless claims and consumer spending.
Good morning, everyone.
We have a wide selection of digital media to listen to our interviews and conversations with people that matter.
Make note of bloomberg.com and go to the bloomberg radio+ channel.
I am time keen -- i am tom keene and john skelly is with us.
We have to talk about what the supreme court ruled yesterday.
It's what's going to be a fatal blow to aereo, the startup that plans to upend broadcasters.
They said they are selling program online without paying licensing fees and violated copyright laws.
It's a big win for tv broadcasters.
The retransmission gravy train is at top speed.
The fees have been very lucrative for the broadcasters, will we see more of an effort by these companies to safeguard their content and make sure no future aereos make a run at challenging their business model?
I think the supreme court case was a huge win for the broadcasters primarily because the court simply upheld and validated the copyright value of the broadcast signals and that is important for the broadcasters.
Over the last five or six years, they have been able to charge significant fees from the distributors, the cable companies, the several companies -- the satellite companies.
They are getting up to $4 billion of retransmission fees going to the broadcasting industry and that is growing double digits every year.
That's a revenue stream that they had to protect.
Its business as usual for these guys -- not looking to build on their victory or change things?
No, the ongoing negotiations between the broadcasters on the pay tv distributors are ongoing every year.
They charge big increases every year.
We see that as a concern every once in a while.
Cbs might go dark in new york like you saw lester and we will see more and more of that.
Paul sweeney, someone else from the bloomberg family, meghan mccardle - says - why did aereo think it could get away with violating established copyright law in the first place?
I think barry diller and the management of aereo thought they had found the narrow loophole in the copyright law that would allow them to bypass the copyright issue and redistribute the signal.
They thought there was a demand in the marketplace.
Maybe consumers don't want to pay $85 from onto get this huge package, maybe they want to pay eight dollars per month.
They thought they found a loophole but the court shut them down.
When you get your cloud tech people together with media people, how big is the argument and what does it mean for the future of cloud and tech?
We spent a lot of time talking about that yesterday.
We feel this court really does not impede the growth of cloud computing or cloud storage.
The court went out of its way specifically to say that this was a narrow interpretation of the copyright law.
I hear a lot of whining on the west coast?
They are very concerned.
They are starting to think about the unintended consequences that may develop down the road despite the fact that the court said we are looking at this in a narrow way.
John skelly is our guest host, is that the case?
Are you worried about innovation being stifled because of this ruling?
I don't think so.
This is such a narrow decision.
They found that you could treat a personal performance that you have a tiny receiver at home and you had an opposite transmitter for each of those people.
It was such a narrow concept, trying to basically disenfranchise everybody that they ganged up on them.
What should broadcasters due to innovate?
They spend money focusing on aereo but maybe they lost the faith of their customers?
There is a lot of question marks about this industry being complacent.
Coming up, neck woodman ceo of go pro will be with us and they go public today.
? good morning, everyone.
It is thursday, much is going on with futures negative1, and i feel strongly that betty liu has the best excuse i have ever heard to be off.
What is your 12 noon excuse?
I have mine, the u.s. soccer coach gave me my excuse oh i don't need to be on air at all.
Just blame it onjugen.
What is on tap for us?
We will talk about everything from the world cup to the nba draft which happens tonight.
I heard you guys talk about aereo and the implications for the television world.
We've gotneqal hendry who did not believe aereo was going to win this case and he was spot on.
He will be with us but also senator al franken who will likely wait in on this decision.
He has been on this net neutrality bandwagon saying that the sec needs to not --the fcc needs to have an even playing field.
Neal hendery is incredible.
We saw the no-hitter last night and that's all about copyright.
They own the rights and get the money so they can pay tim linthi cum pitch a no-hitter.
Betty liu, thank you so much, "in the loop" begins at 8:00 a.m. ikea is increasing its min wage by 17%. the new average will be an dollar $.76 per hour.
Ikea setting a minimum for each store based on the local cost of living.
John skelly, you ran pepple -- you ran pepsi and apple.
How do you pay people the right price?
This is more an issue with the politicians than it is with business leaders.
Business leaders know the minimum wage is probably going to have to go up and many of them are making that decision.
It's a nice lyrical issue in an election year.
Is it unfair for businesses to toss it off to politicians?
Should businesses be leading the charge?
I think some of the smarter business leaders are raising the minimum wage.
, regardless of what the politicians are doing.
You have thoughts on this as well.
This is about competitive labor markets.
If you want better employees , pay them more money.
You pay employees more because if the markets require0 and you want quality people, you will have to pay for it.
It can be a political issue but it's not.
It's a meghan him again business issue.
Jonathan golub is with us as well as jonathan skelly.
Coming up, will team usa make it through the group of death?
Our twitter question of the day -- ? to give you a quick sneak preview -- tomorrow, the ceo of chpotle will be joining us on surveillance at 7:00 a.m. on television and radio.
Did he invent the burrito bowl?
He is a god.
Coming up at 7 a.m. on friday morning, this is "bloomberg surveillance." our guest host is john's l.a. -- john skelly and jonathan golub.
Let's get you company news -- the maker of the camera that captures this sensational video is gone public.
Go pro begins trading on the nasdaq today in the $24 range.
Razr wants gamers to put a new console on top of their televisions.
It says the new unit will let gamers navigate with voice control.
A report from facebook shows a wide gap in diversity with their employees.
More than 90% are white or asian.
Other minorities make up less than 10% of staff.
Similar reports from other silicon valley firms say other minorities are underrepresented.
That is the latest company news.
Let's talk about a major theme for technology -- venture capitalists puts scale front and center.
Can you scale an iphone to millions and billions of users?
John scully is the former ceo of pepsi and apple and knows scale.
I think this is a massive question for modern technology.
How important is scale to new debt to these new things?
I think it's tremendously important but i think we have an opportunity of something we did not have a decade ago.
To build a beautiful smart phone, fashion product, everything is commoditized.
You are starting to see that you can build high-quality products.
That is why apple is moving upstream and adding on top of that.
We also have the network effect.
People are passing on recommendations and comments to other people and scaling these businesses at unprecedented rates.
Different from your tenure at apple, there is the new productivity that we have and it goes transnational.
You have the apple product made in china and then you have the network effect of that entire process speeding up and getting to scale.
I think we have something else and that is the world i was a part of starting back in the 1980's was about holding tools.
-- building tools.
Tools were powering the knowledge worker now computer systems are so smart and they have so much network effect that we are moving into very smart personalized digital assistants and this is shifting the power to the customers and it will change everything.
Jonathangolub, this is about scalability on wall street.
There are new rules within the technology on your wall street.
Yes, the impact of the downturn has been that the cost of running these trading operations is much larger than it has been in the past.
If the economy weakens, that could be a problem.
You are not making six cents per share anymore.
It is tough to scale at those prices.
What is the equivalent -- android is an open software system, so what is the equivalent on wall street?
Etf's, you are seeing the whole business changing again.
This ale in electronic trading of one form or another and the use of algorithms deciding how to execute -- the industry keeps reinventing itself.
I think it's the scale of shadow banking that is growing at an incredible rate, $72 trillion in shadow ranking which means it's outside the range of the regulators and corporations are lending to corporations.
It's a low interest rate world and you chop or two to use.
How does tim cook have a different challenge with a different scalability versus what you are steve jobs faced?
Tim cook is focusing on being able to continue the vision that steve jobs had come a very different than what larry page is doing at google.
He is still looking for the next really big creatively.
He's got so much capital coming in.
He is able to place a lot of bets and does not have to build a small number of beautiful products like tim cook does and can place a lot of bets and as a creative leap, it will probably happen to google.
You now run john skelly ventures so where are you placing your bets?
I am active this year in sailing companies.
We bought two companies this year over there in asia.
We spec to have more m&a deals this year.
We just started a business in india where i will go back to and a couple of weeks and we are starting our own smart phone.
We so we could sell products that were very high quality at a disruptive rise versus the international brands like apple and samsung.
This touches a part of the market that just can't afford the apple products are samsung products.
That's an example and we will take that throughout the emerging markets.
That sounds exciting.
Let's take a look at the stories shaping the day.
Tom will focus on something that has been exacerbating the markets -- the complacency.
And the quiet that's out there.
We saw sterling of this office this this morning but i would look at the bond-yield curve and the debate over what that means.
There is always the debate when the bond curve moves around.
The two-year higher and the 10 year curve came in a little bit and it's always a raging debate.
It needs to be watched more so because we are in this quiet time.
On my agenda is barclays.
New york state officials are going after the european bank for its use of dark poo