The the thank you so much you, paul hickey.
Always interesting market numbers and data to look at.
That does it for bloomberg on the market.
We're coming to you every 30 minutes.
Will be back in 30 minutes for the next market check.
"street smart" starts right now.
Correct the dell delay.
The pc maker postponed the takeover bid.
It got to come back with a sweeter deal.
And microsoft and google report after the close.
We will take it to the center of the action.
Plus, union does affect right on track.
-- union pacific right on track.
The ceo on the company's best quarter ever.
This is "street smart" with trish regan and adam johnson.
The s&p 500 breaking through its intraday high to its all- time record.
We have 60 minutes to go until the closing bell and we are staring every market for the last trade of the day.
We have a lot of news coming from google and microsoft after the bell.
And we have been talking about the fed, two days from ben bernanke on the hill.
Let's show you three charts that paint exactly what is happening with this market right now.
The dow jones industrial average, up 82 points.
No wonder chairman bernanke has more the the optimistic about the economy.
Fewer jobless claims.
You look at the 10-year and there are signs of growth.
Your higher yield on the 10- year.
How about five ticks.
-- up about five ticks.
And finally oil, trading up almost $108. very expensive to fill up your car, but again, signs of growth.
Maybe we need a little bit of inflation.
That will make bernanke a little bit happier.
These are the stocks in the to keep an eye on going into the close.
I will cheat a little bit on the first one, because it is an equity, but an e.t.f. it reflects how well financials are doing in today's session.
This particular e.t.f. is at its highest since september, 2008. we had better estimated earnings from companies like morgan stanley and sallie mae.
This is the second-biggest group in the s&p. it is doing well, the overall average is likely to be doing well.
And we heard from unitedhealth today, the nation's largest health insurer.
Maybe an acquisition in brazil.
That led it to beat earnings estimates as well.
And finally, one on the downside.
The nasdaq is -- has been the laggard today.
The the its forecast falling short -- intel's forecast falling short.
You're talking about google and microsoft reporting after the bell.
That will give us more of the picture there.
The correct thank you so much, julie hyman.
-- thank you so much, julie hyman.
The board of dow postponed a shareholder decision.
-- the board of dell postponed a shareholder decision today.
Carl icahn released this statement.
With one more week to win over shareholders, will dell co- founder find a way to sweeten the deal?
Let's go to round rock, texas just outside where the shareholder meeting was held.
The the the latest development is that michael dell and silver lake are not seeking additional financing from their lenders.
What this may indicate is it your shareholder looking for a bomb, you may not get it in the intervening period between today and when they report.
Basically, michael dell and soleil have been telling the special committee formally that $13.65 is their final offer.
They're hoping to slow down any shareholders better bluffing today and may be looking to change their mind.
This is the only deal on the table.
Change your vote mr.
Shareholder from no to yes.
You're not getting anything else.
You are either holding out, or voting against the principle betting on carl icahn.
Take a listen.
And let's make no mistake here, michael dell is not trying to be nice and help the shareholders are.
He knows he can take this company from $13.65 per share to of least $25 per share.
I want the shareholders to win as well, saying, no, let's keep this public and make the changes in the next few years.
He has been the ceo for several years and nothing has really panned out after multiple strategies.
Ityou have to question whether or not this is working and what is really different now.
It has just gotten tougher.
We think there's a lot of value versus the character -- the current share price.
Given the with a special committee has behaved, we would like to see some changes in the board of directors.
Regardless of all the york, the angry shareholders, the -- regardless of all that you heard, the angry shareholders, if the deal is voted down today, carl icahn could [no audio] correct a want to bring in a panel of experts.
-- i want to bring in a panel of experts.
Lots of ground to cover.
How does this just cancel the vote?
It seemed not democratic.
If a vote was supposed to happen today, why didn't it?
But that is not the way political election -- political election worked.
-- that is not the way a political election works.
If the meeting had started, that it would be different.
He would need a shareholder vote to adjourn.
But the proxy did authorize this.
What we be doing between now and july 24th?
But this is the highest stakes game of chicken and i think i have seen.
It is a long-running game and some house to blink between now and the next meeting.
I think it will all be trying to divide and conquer.
A lot of weekend phone calls.
Do you think michael dell will come through with something a little better?
I think you ought to come up with something to sweeten the pot.
I think he is -- i think he is going to have to come up with something to sweeten the pot.
I.t. he is waiting.
-- i think he is waiting.
Right now, they have ever won boxing, tweeting, stalking them, that is what they're doing.
It looks like they did not have the majority they needed.
Happy thursday it, by the way.
The most important thing here is how many boats were the short?
It is 180 shares.
Equates to about four -- 13% of the votes they need.
There are 100 million votes short.
Yes, they can contact one or two individuals, but these are probably not institutional.
These are retail, mom-and-pop spyridon will retail investors have an effect on this?
With them leading yesterday, it forced them to put off his vote and have to wait.
But i do think it is the mom- and-pop.
There are people in the room.
In the the debt is all they're doing.
They have names on the board and calling them one by one.
When will we see michael dell on tv?
He's got to convince the retail investors.
Where do we see more of him out there?
It is, again, a matter of who is going to blink.
There are institutions and they can talk about what kind of warrant or cpr that would work for them.
It has to be tailor-made.
And there are individuals who cannot accept the idea of a deal.
I don't think michael is the white knight in all of this either.
He is the one who is going to gain the most, quite frankly.
I buying the company a lot cheaper.
Correct he did a better offer on the short-term table, without question.
-- it is a better offer on the short-term table, without question.
We were watching a few months ago the clips.
There are two things here.
Carl icahn last week did the rope.
He basically announced to the shareholders to wait 60 days to exercise that vote.
That was for the retail price.
And the next day he did the warrants.
That is for the institutional rise.
The second thing is that u.s. stage three, vanguard, the blackrock among others.
They heard everybody because now -- know, maybe they are actually helping everybody.
They're saying, michael, we have not said we will tender our shares to carl.
We're right to all of our shares.
In other words, show us what you've got.
They voted bomb.
The correct id michael is going to have to come up with a plan.
The the -- they voted to bump.
I think michael is.
To have to come up with a plan.
He is saying he will not.
Until the final moment i would be saying the exact same thing.
But at some point, you ought to make a commitment.
Coffee, you teach corporate law at columbia.
He had you ever seen a situation like this?
Not that has gone eyeball to eyeball for this long with no one ready to plant.
It always happens, but it does not go this long and you don't have people being quite is adamant.
It is normal that corrective hedge funds oppose, but fidelity represents retail and vanguard represents retail investors.
You have a broader coalition telling the the dell they want something more than usual.
Since this thing came out in january, the stock has only moved about $3. if it is more private in terms of being able to control it, then you've got more to deal with.
The good news, we won it.
The bad news, we won it.
Where were your money be on this right now?
The majority of my clients are event driven fund.
There are likely to vote in favor of the transaction.
They want the $13.65 dividend , the 8¢ dividend.
Correct -- it is all those retail investors, 100 million?
I believe so.
You can make those calls.
Be very difficult.
The point is, 100 million shares, 13%. could they say, we're going back to the drawing board, we will look more at carl's third offered?
I just don't think the st.
Shareholder really believe that carl icahn, a financial manager, can run this company and turn it around in a matter of months.
And it has to be turned around quickly.
It is in danger.
The if the deal fails -- if the deal fails, michael dell still benefits.
He still walks away with money.
The stock is only up where it is because there are in theory, two deals on the table.
Are going back to $8, $9? what happens?
As above my pay grade, by which typically say if the deal does not go through, you would typically see it fall.
Yes, you would see it fall.
I wonder if people would step in and do a little bit more buying.
If you are voting against the transaction, you're voting for carl icahn.
You should be buying because to work.
To get at $14. what is that?
40%. you should be buying it goes to $10. will be back here tuesday night and wednesday morning wondering who's going to blink.
We are talking about inside in action coming next.
And what is threatening the japanese prime minister plan to propel the economy of japan?
Subtle changes could spell big opportunity.
Time for insight and action.
Subtle changes coming from around the world.
Take a look.
Here in the u.s., this is what we have learned from the chairman in the last few days.
Reduce purchases if data confirms improvement.
Meanwhile in the u.k., nine two zero voting against additional bond buying.
-- 9-0 against additional bond buying.
And the balance sheet is the smallest since a member 2011. and then there is japan.
High debt and low growth.
20014% debt of -- as a percentage of gdp.
That is way more than greece.
And growth down to 0.4%. that is painful.
They have deflation of three tents of a percent.
-- three tenths of 1% shinzo abe has a very spreads to the plan.
Do you want to see it?
Stimulate, stimulate, stimulate.
That is why a number of trading desks around wall street today are making it very clear talked -- clear call.
They're saying to buy the dollar, sell the yen.
If you look back over the relationship in the last 10 years, there's plenty of runway for the dollar to appreciate against the yen.
The the our closer happens to know a thing or to about the central bank.
Is a former economist at the federal reserve.
He is now a chief economist with dirt -- with jpmorgan chase.
Your reaction to what we're hearing out of ben bernanke in the semiannual testimony today?
I don't think he opened up many new things, but he did emphasize some things that were a bit more dovish.
All of those things for a little bit more dovish nuances.
Is this for we are seeing the reactions we are?
R.f. -- i certainly hope so.
" but bonds are also up.
But something for everybody.
Everyone is an obstinate -- an optimist today.
The jobless claims are down, things are looking better.
The taper time being september, the you think we will see that?
This was not a material shift.
It was just a new wants to change.
What he is telling you is that because we have these downside risk, if the data in july and august disappoint, then that's the deal.
And that is a little bit different from before.
Previously, it was whenever we get in july and august, we will average seven with the data.
But if you see growth in the second quarter coming in with a zero handle an bernanke saying there is growth risk in the future, i think it will be sensitive to what we have, particularly in the payroll data all about jobs.
How much longer will umaru out -- will the money printing in japan last?
Maybe not much more.
Details are coming up after the break.
And google reports after the bell.
There has been a lot of attention on the high-tech products, but is the root really there?
? this is "street smart" on bloomberg television.
Japanese voters will be going to the polls this began.
Prime minister shinzo abe is set to take control of both houses of parliament.
He wins the election and that is a list of one of the whole process.
There are 121 seats up for grabs in the upper house of the parliamentary election.
That is the equivalent of their senate, if you will.
They think they will win a majority, about 65 seats.
This will give them the strongest control of the parliament since 2007, but all that will be for naught if they cannot show the liberal democratic party that the -- that they can get economic growth going.
The reason that is important is they have to build up some kind of economic momentum going into next year.
There is a forecasted 2014 sales tax increase.
When taxes in general go up, you typically expect to see economic growth slowing down.
How much do you really have in terms overall performance?
We're board to give you the inside scoop.
? welcome back.
We're talking about union pacific, the country's oldest and biggest railroad.
They did it again, record profits.
Joining us now to explain how they did it, the ceo.
Thanks for being on the show.
Explain to our viewers, record profits, how did you do it?
It is a combination of a great franchise and an awesome team focus on creating value for customers.
That is what drove the results.
You are the largest carrier of autos and auto parts in the country, 25 straight quarters of higher auto sales.
What does detroit tell you about the auto business in the next six months?
They're actually pretty optimistic.
Their concerns are whether we have enough capacity and can be there for them and can keep it up, and we are assuring them that we can.
I look at the next six months and even beyond.
I think we are continuing to see the is very positive sales results.
And we're looking forward to a continued edition of that well into the future.
Coal is your largest cargo and you had made the comment previously that you thought coal volumes would come back, and a half.
Can you talk about where you're seeing from merkel customers?
In the first quarter, the the -- from your cold customers?
In the first quarter, your right to michael business was down.
And it is back up, particularly with the air-conditioning business in full swing.
Stockpiles have reached the.
Finally where there are a couple of days below normal, which we have not seen for several years.
Coal demand is good.
Natural gas prices are backed up enough for dollar range.
The trade-off between gas and coal has started to favor coal again.
We will start to see a nice colbern with the hot summer and that is good for our customers.
-- coal burned with a hot summer and that is good for our customers.
Correct of -- crux of out of your success has to do with the frakking trade.
How is that business doing right now?
Business is good.
If you look at the results for the second quarter, chemicals or up about 10% in volume and oil was up closer to 40%. we are in one of those zones right now where there is not a lot of destination capacity coming onstream, but it will happen for us late 2013, early 2014. the the -- the markets looked good.
What kind of pricing power the the you have right now?
-- coal prices in the second quarter came in at 4%. we're happy with that.
We're doing ok with that.
Pour% is a good mark for us.
What other businesses are you looking at right now?
Grex we're multidimensional.
We have six strong businesses, plus the strong franchise in and out of mexico.
Arkie franchise its business development.
Return about 10% of our business every year, so we have to keep that part by growing.
One of the things we're really excited about is the amount of interest that seems to be generated now for companies that in the past have located particularly in the eurozone, and even to some extent in mexico, they're looking at mainland united states and they're looking at a transportation infrastructure and the possibility of cheap energy prices and building a new facility.
Several of them have come on board and have made a decision to actually start building a major manufacturing facilities in the u.s.. we are really excited about the prospects for the future on some of those kinds of opportunities.
I'm glad you mentioned that.
The that has been a real theme, the manufacturing renaissance, the cheap energy, and even a laborer advantage.
For you that is real?
About six companies have made the decision, but they have not all announced publicly and we would like to make their own announcements, but we have had six companies in the last year or so to make the decision to locate on our railroad in the u.s. mainland.
We are pretty pumped about that.
There was a derailment earlier today in texas.
From what we know, one injury and seven cars came off the rail.
You invest so much money in safety, and i know you have measurement systems every other mile on the track, and yet derailment's still happen.
Can you give us a sense of where that is happening?
Is a complex issue.
There are all kinds of technology involved.
Big mechanical operations and things, and in some cases, even the effects of weather.
We always look at it from a very engineering focus.
It starts with some great operating practices that are well designed and carefully thought out.
Hiring the best people and real professionals to operate our trains.
And then investing in research and development.
For example, if you go back 10 years ago, one of the single most important factors in derailments was cracked wheels.
If you look today either at our top five reasons, or even the top 10, he will not find cracked wheels.
We used to have problems with expansion of the real during extreme heat.
Today, that very rarely happens.
Research and development in concert with well conceived operating practices, great training, and great people, that is how we get at it.
But there are a lot of things in our world that we cannot control and can result in an accident.
It is just like a terrible tragedy up in canada.
We will always learned even from their issues.
We will learn what happened and be able to bolster our practices and procedures to be sure that accident cause never happens again.
Thanks for being on the show.
"street smart" will be right back.
? technology titans are opening their books this week and after the bell will hear from both google and microsoft.
Both companies outperformed their peers so far in 2013. both are up today.
You have google which has missed sales six of the last eight quarters.
And analyst estimates that paid cook wrote will continue to stall.
Microsoft, on the other hand, giving with slowing demand for pc's and soft i wrote for tablets.
We have jon ehrlichman and other guests.
What will we be watching for from both companies?
On the google side, i have two words, no fear.
This is a company that is likely to generate well over $10 million in revenue.
It has happened in the last couple of years that there are quarters that have fallen short of estimates.
The would have thought recently that the stock will outperform apple in a big way?
Google has big plans that they're focusing on right now and that can hurt the bottom line performance.
And microsoft, it is like they have two issues to deal with.
They have to keep battling the likes of google, because it is moving like a freight train and the pc business is not looking pretty.
But last quarter to my room was worried about the pc sales and laptop sales, and microsoft cannot with a pretty decent quarter.
But there are some -- and microsoft came out with a pretty decent quarter.
But there are some headaches ahead for them.
Microsoft got unfairly labeled as a dinosaur.
Google seems to be one of innovation.
They have two different energies.
With microsoft, you are interested this time around with this big push they have made with tablet.
They lower the price on it.
Did that affect their inventory write-down?
But at the end of the day they have made this big push into hardware and they are in the middle of reorganization because of this shift in focus.
The software is just so enormous for the company and has been so profitable for them in the past.
It is a tough thing.
It is like q e. let me get over to mark for a moment.
Microsoft, what are you expecting the the today?
Do you think they can diversify significantly enough away from just software?
The tablet is important, obviously.
Windows is important.
The number that we think is much more of gordon is the move to the cloud.
The company is massively moving its business to the cloud.
Everyone has been focused on the pc.
If you realize who will brought -- bought android many years ago and took a long time for android to gains to get market share in the pc space.
Microsoft needs more time to gain credibility and market share in the tablet space.
More important than that is what they're trying to give in terms of data with moving to the cloud.
$1,030 is your price target.
You just of your target on that.
Might we at least see a bump beyond $1,000 in after-hours?
It is definitely possible.
Google has been up about 30% year-to-date.
We think it could definitely get to 1000 over the next 12 months.
We still think google can grow earnings about 15% in the next two years.
What is most exciting about google right now?
-- what is most exciting about google right now?
A lot of things are in their favor right now.
If you look at the mobile business, they're on the tailwind.
There also won a campaign in the second half of this year.
That should drive up mobile pricing.
We think it could start to inch up.
That could be a catalyst in the next few quarters.
It is still clear that google is the dominant search engine.
But it is starting to season competition.
Enough to take a dent out of google's revenue?
one thing we have to watch is where the dollars are going.
Facebook will be another one to watch.
Facebook seems to be doing a better job of getting the small businesses to give them some of their advertising budget.
Google dominates that particular market.
But recently, they have been joined to get more of the big brand advertising dollars, which facebook was better at it in its earlier days.
If you are running one of these campaigns, you don't make over the complicated campaigns.
He worked with what goes -- you go with what works well.
It it gives them the opportunity to look at the next engine of growth, but that comes at a cost.
But you're not talking of the same margin of search or something like that.
Cuts will be watching very carefully -- we will be watching very carefully.
Coming up, home is where the hardest, but it housing were the buyers are?
? time for chart attack.
There is no place like home.
All right, michael, walker through the housing -- walk us through the housing market and why it is getting better.
The the mortgage -- mortgage rates are increasing and because of that we often ask -- as when housing will get back to normal.
You have to think of it in historical perspective.
We have a growing population you want to scale the home sales by the size of the population.
We're looking at single- family home sales per thousand households.
Michael, what do you see?
The the effect -- if you look at where we are now and at the historical average, we are right back to the average that existed prior to the boom in the 2000's. if you think normal is wearing were in 2005, then we'll are far from that.
But hopefully, one of the lessons learned is that type of activity is unsustainable pre- 2000, we are right back there.
The the -- this also says that people believe that the mortgage credit is to die for housing recovery, halt -- that the the credit is too tight for housing recovery, home sales based on the population, this is average.
The the -- that is fascinating.
We are back to the long-term trend.
It -- the they are well below normal in terms of home building.
But we are catching up and it will be one of the areas of growth in the economy in the next year or two.
Low rate actually worked.
I think so.
And where from here?
Mortgage rates in the past two months were up about 100 basis points.
Normally, you'd expect to shave off about either 10%. we have seen little evidence that this has adversely impacted.
-- impacted demand.
The weekly mortgage purchase applications have been pretty steady.
The the -- in other words, looking at the date on the chart, right now we are at, let's say, 40 per thousand household, it is not that actually significant.
Write command was he not going increase.
It will pull in construction and supply the activity.
Coming up, the top 10 stocks you need to know about.
The close is next for you.
And coming up in the next hour, we have an exclusive interview with treasury secretary jack lew.
? if you missed everything that happened during today's session, don't worry.
We're getting you caught up on the only stocks you need to know about.
It is time for our top 10. coming in at number 10, it is dell.
Up about 2%. michael dell is not seeking -- he comes as those board postponed of -- as the board postponed an offer.
We will see what happens between now and then.
We are certainly watching that story.
Johnson controls, 88% today, rising the most in 8 years.
And announcing it will sell its home link product line for 700 million dollars.
Also seeking a buyer for the rest of its automotive electronics unit.
Pre-k's another company that will be out with earnings is number eight, chipotle -- another company that will be out with earnings is number eight, chipotle.
Facing increasing competition from -- competition, it has recently included new offerings in its menu.
Number seven is microsoft.
Earnings coming out after the bell.
Shares are down almost 1%. analysts estimating a profit of $.75 per share on revenues of nearly $21 billion.
Keep it here for microsoft results, coming out in just a few minutes.
Unitedhealth group very healthy today, up more than 2 -- 6% after reporting second- quarter profits that beat estimates.
They added almost 10 million new members thanks to the purchase of brazil's biggest insurer.
You know a thing is.
-- a thing or two about that, trish.
Company's political thriller -- netflix's political thriller "house of cards" received nominations for best drama and best actor for kevin spacey.
Are you guys fans?
It is an awesome show.
The only problem is, once i start watching it -- you cannot stop.
You do the binge.
It took me to like 3:00 in the morning.
"arrested development" got shut out.
I'm not into "arrested development." it is too far out there.
I play it straight.
I wear a suit and tie.
Number four, google down about 1%. reporting second-quarter results after the bell.
Google has missed sales six of the last eight quarters.
Analysts estimate growth will continue to stall.
Coverage of those results is just minutes away.
Knowing of about 2.5%, she -- boeing up about 2.5%. uk regulators say a beacon made by honeywell should the deactivated -- should be deactivated on all planes, renewing concerns about the concerns of the 787. that is just precautionary.
They have not confirmed that is what caused the fire.
Number two, verizon am a stock down more than 1%. the phone company has become a victim of its own success.
The resurgent demand for wireless internet cut into profit margins and boosted the need for network investment during the second quarter.
Coming up on our number one stock of the day -- it is morgan stanley.
Shares are up about 4.5%, climbing to their highest price in more than two years.
The bank reporting an earnings increase of 66%, beating analyst estimates.
We are looking at new records here.
The dow jones industrial average is up almost 0.5%. the s&p is also trading higher.
A new record on the s&p. a little bit of optimism out there.
Dovish comments from ben bernanke helping things.
Good economic news in terms of jobless claims coming in a little better than expected.
All of this adding up to some momentum in the market here it we are going -- in the market.
We are going to have the latest.
We have jon erlichman covering google, dom chu on microsoft, julie with chipotle.
We will get you the numbers as soon as they cross.
Let's talk about the markets.
Stocks, commodities, and bonds.
Let's kick it off with julie.
We are seeing that intraday record, closing record, the momentum continuing with the s&p 500's second day of gains.
Over the past 10 sessions, we have only had one down day for the s&p 500. investors are focusing on economic data.
Initial jobless claims, a measure of economic activity in the philadelphia region, both coming in better than estimates.
The philly fed report -- well better than estimates.
If you look at what was gaining the most today, tech was a laggard.
Financial , the second-largest group in the s&p 500. the xls reaching its highest since 2008. the kbw bank index -- highest since 2008. the strength that we have seen in earnings for this group, by and large fueling the gains we are seeing in these indices.
A big part of the gains that we saw today.
Let's talk commodities with su keenan.
What i could tell you is kind of a pop quiz.
What well-known economist said he really does not understand gold prices?
It was ben bernanke when questioned by u.s. senators today.
He says nobody understands gold.
He also said a couple things that gold is not the best inflation hedge, and the recent drop might not be a bad thing.
It could mean people are less concerned about extreme outcomes.
Gold rose 1% while he said this.
We also saw big moves in energy.
And natural gas, big rebound.
Down yesterday on the forecast for cooler temperatures ahead.
It was up more than 3%, bigger than expected.
Back to you.
Breaking news on google.
The earnings are out.
Let's go straight to dom for more.
Well come a i told you, sometimes when it comes to the bottom line, the performance and google can fall short of the estimates.
The earnings per share in the second quarter, $9.56 per share.
When the estimate was $10.80. that is clearly a missed bottom line performance.
On the top line, still a very strong revenue number overall, $11.1 billion, but it looks like some folks were looking for something more like $11.3 billion.
After of -- a 30% stock run for google this year, probably some initial concerns on that.
But the fundamental story of google is not changing in any way here.
This is a massive player when it comes to advertising and the growth in that business.
You continue to see some encouraging numbers they are sharing, some metrics they are sharing.
Paid clicks, which basically means people clicking on ads and the money that can be generated from that -- those were up more than 20%, about 23% in this quarter compared to last year.
There has been talk about a lower trend on that number.
This is actually a little bit stronger than what was estimated . another number that they highlight is cost per click.
The amount of advertising money that is being paid every time somebody makes one of those clicks.
What are the advertisers coughing up?
That number was down year-over- year.
You can get caught up in these metrics and google all of these things.
They spend time at -- explaining why these are good or bad.
You are seeing good growth at google, but you're also seeing a company that continues to spend in a big way.
Larry page, the ceo, does not hide behind that.
He welcomes that opportunity to look for the next big thing.
They talk about the fact that their capital expenditures are significant and continuing to climb.
What does that mean for the bottom line?
Short-term, longer-term, if they move into new business areas that do not have the same profit margins as traditional search?
We have seen that with the motorola business.
There has been a discussion about google making a move into the cable business.
What would that mean ultimately?
It is a bold company.
It makes big moves.
The stock has had a big move this year.
The top and bottom line numbers are probably raising some concerns right off the bat.
Trading down after hours about 4.5%. we have heard from so many tech companies.
None of them have really been that impressive.
Ibm, intel, ebay, google, microsoft.
Speaking of which, dom chu, microsoft coming in with both earnings and sales, missing estimates.
Tell us the details, please.
We have been talking about this idea that these tech companies have not really been overwhelming us with these nice beats pete we talked about intel earlier.
We talked about ibm.
Microsoft comes out with a fairly decent-sized ms.
In terms of earnings -- decent-sized miss in terms of earnings.
Estimates were for $.75. a pretty staunch miss for them.
Revenues coming in at $19.9 billion.
The average analyst estimate was for $20.7 billion.
Earnings and revenue missed.
Some new headlines coming out.
There -- their unearned revenue comes in at $22.4 billion.
Estimates were for $21.8 billion.
Business estimates are starting to come out.
Microsoft says they were affected by a decline in the pc market.
No surprise there.
We heard the same thing from intel.
Also coming out and saying they are going to cut their forecast for operating expenses for the whole year.
They saw operating expenses at about $31.6 billion to $32.1 billion today will now see operating expenses of about $31.3 billion to $31.9 billion.
Shipping their entire operating expense forecast -- shifting their entire operating expense forecast down.
The fourth quarter revenue window comes in shy of estimates.
Estimates for $4.8 billion.
Online services coming in below estimates.
Fourth quarter server revenues also coming in below estimates.
The key entertainment unit we have been talking about -- it's not the biggest part, but it encompasses a lot of their xbox entertainment, their interactive entertainment -- that revenue comes in at $1.9 billion.
Estimates for $2.05 billion.
Microsoft missed a lot of targets that wall street had set for it.
We are seeing a lot of shares react to the downside.
Earnings missed, revenue missed, a lot of business units miss on their business targets.
-- revenue targets.
We want to talk about one that did not miss.
A little good news out of chipotle.
Chipotle coming out one penny ahead of estimates at $2.82. really important is the same store sales number comparable sales drove only 1%. it was 5.5% growth in comparable sales.
Analysts were looking for a gain of only three .8%. the company came back and introduced some new menu items, like the new tofu filling, which is available new -- now in california.
It introduced petrone -- patron margaritas.
All of this prison and the helping traffic and boost comparable sales -- this presumably helping traffic and boosting comparable sales.
It sees sales in the low mid single-digit range for the year.
It had seen a range of flat to up in the single-digit's, so that might be a positive.
Operating margin down a little bit to 27 point six percent, a decrease of 160 basis points.
-- 27.6%, a decrease of 160 basis points.
Initially in the after hours, shares surged two above $400 -- surged to above 400. they are not now at that level.
The latest trade is around 398.13. still posting a pretty good game, better than 5.5%, on top of the 25% gain they have seen already this year.
Thank you very much.
What is most interesting is what is going on in this tech sector right now.
You look at ibm, intel, ebay, google, microsoft.
They are all missing.
All five have missed on the top line, on revenues.
That is a problem.
You can manipulate earnings with appreciation.
You cannot do that with the top line.
That is your close.
We will get you -- we will get you ready for tomorrow.
Here's a look at what is next on "street smart." treasury secretary jack lew.
He is talking to us in a bloomberg exclusive.
And president obama shows us the healthcare catch.
But our roundtable debates whether it is really going to work.
Les, a white house economic team waging war on the tennis court.
Stay tuned for your first trade tomorrow, all coming up.
It is a first on bloomberg interview with treasury secretary jack lew.
He is on his way to mask out -- to moscow.
Before he left, he sat down with the next -- with peter cook.
Peter joins us now with part of that conversation.
It sounds like he is going armed with a message?
He absolutely is.
After five months on-the-job, this is one of the first real opportunities for jack lew to compare notes face-to-face with some of his foreign counterparts.
He told me he will urge the urge the other g 20 nations, especially europeans, to follow the u.s. lead and do even more to promote economic growth.
You know, peter, i think these are important conversations that we have with the g-24 in finance ministers -- g 20 -- g-20 four in finance ministers.
We are seeing economic growth and job creation.
Not as fast as we would like, but it's moving in the right direction.
I financial system has stabilized.
We have better capitalized banks.
We be looking at europe needs -- we have been making the case to some of the emerging economies, china in particular, that they need to go through the internal reforms to get their economy moving.
These have been friendly conversations.
I think we have a common interest in a world where there is growth so that we can have the benefits put in our borders and across our borders, seeing job creation, those are the kinds of conversations i look forward to having at the g-20 meetings.
What other steps you would like to see the europeans doing that that they are not doing now?
We have been clear that it is a combination of fiscal policy that was decisive and that helped get the engine of the economy moving.
We had monetary policies that have been effective.
If you look at the world for years ago and the world now, very different.
Four years ago, the world looked at the united states and the financial crisis and there was a lot of explaining to do as to how that had happened.
Four years later, we are growing again.
Not as fast as we would like, but that really, in the right direction.
The core of our economy is recovering.
The resilience of our economy is clear.
The resilience of our political system has led to policies which have been effective.
But we still have more work to do.
You're in a place now where the example of the united states is actually a good one.
-- we are in a place now where the example of the united states is actually a good one.
The projections -- even wall street economists looking at second quarter, maybe under 1%. can we be offering that much advice to the europeans under that context?
If you look at the u.s. economy, i never miss an opportunity to say that we are relentlessly focused on people looking for work in this country, making sure they have the opportunity to find work.
The fact that we have made enormous progress does not mean we are all the way there.
Look at the core economy.
It is growing the neighbor should've -- the neighborhood of 2% right now.
It looks like it might be a little faster by the end of the year.
This was a year with tremendous headwinds.
We had a payroll tax cut that went away.
We had spending cuts that took effect.
Notwithstanding those very strong headwinds from government policies thomas some of them intentional, some of them unintentional -- policies, some of them intentional, some of them unintentional, the core u.s. economy is growing at 2%. i look at europe and 2% is far beyond their expectations.
In the headwinds will not be there next year.
We should be doing -- and the headwinds will not be there next year.
We should be doing better next year.
The work is not done.
We have to invest in our own country in order to make sure that everyone wants -- who wants a job has a job.
We have dory about education, research and development, infrastructure -- we have to worry about education, research, development, infrastructure.
Really quickly, on your trip, you are also stopping in greece.
Why right now?
The president will be meeting with the prime minister of greece in august.
He will be coming to washington.
This is a chance for me to have some conversations with the prime minister and the finance minister.
I have a chance to check in.
I'm looking forward to the conversation.
Are you satisfied that the greek crisis is, if not over, on its way to being so?
I've been following greece pretty closely the last couple years quest -- years.
I think it's clear that greece has moved in a very important direction in making reforms that they needed to make.
I have difficult decisions ahead of them.
I think it is great we have a chance to spend a couple of hours catching up and hearing where they are and how they see the prospects.
What about the notion that, sure, they would love a visit from the treasury secretary of the united states, but how about a little financial help from the united states question mark do you think you will be for this is -- from the united states?
Do you think you will be asked for direct assistance from the united states?
It is primarily a european challenge.
We have stayed in close contact with the greek government throughout.
I think it is important to continue that conversation.
Being in the area is a chance to check in on sunday -- i think it is a good use of a few hours.
It does not sound like a check is going with you.
Pre-k's lew -- lew will be heading to greece, offering more moral support.
We will have more coming up.
We look forward to that part of the conversation after the break.
"street smart " back with more from treasury secretary jack lew and peter cook, right after this.
And we have more from treasury secretary lew.
Peter, we have been very clear.
The negotiation in 2011 over the debt limit led to a very bad outcome.
It led to the sense that the united states was debating, should we or should we not default.
It introduced for the first time in our history a serious notion that there was a point of view that default was an acceptable option.
It is not appear it i think the congress learns that in 2011. -- it is not.
I think the congress learned that in 2011. the president will not negotiate over the notion that -- whether or not we should pay our debt.
For the first time in our history, we cannot introduce the notion that will not happen, that the united states will not pay its bills.
We remain very open to the kind of discussion that would bridge the gaps in fiscal policy.
We have shown in the president possibly did that we are willing to go more than halfway -- and the president possibly -- in the president's budget that we are willing to go more than halfway.
The three-year anniversary of dodd frank d --odd-f -- of dodd- frank.
The debate over this continues.
I tried hard to lay clearly out how we view it.
It is clearly important -- critically important that we intimate the outstanding pieces of dodd-frank.
I have set the end of the year as a deadline.
I think the urgency is shared by all the agencies.
We are going to see capital and leverage standards at a place which gives real assurance to institutions -- that institutions can't handle the risk that they take.
We will see mortgage rules that are clear.
We will see progress on the volcker rule.
We have a fair amount of work ahead of us.
But since the day i stepped into office as treasury secretary, i have made it right at the top of my list of getting -- i went for my swearing in the oval office to a meeting of the financial stability oversight council.
I have not let up since.
I am determined that we will do as much as we need to to end too big to fail.
And that's what were in the process of doing.
At me ask you about the leverage ratio -- let me ask you about the leverage ratio -- one of the things about financial reform, it is not one of the things that when we finished, we can take our eye off the ball.
When we finished the last pieces of dodd-frank, we have to maintain vigilance to make sure that we are still keeping up with the constantly changing financial system.
We don't get to take off a day or a year.
We are going to have to stay on the job.
Two last quick questions.
Leverage ratios proposed for the big banks go beyond the international standards that were set by basel.
Do you support those?
Are you willing to concede that they will put large u.s. banks at a competitive disadvantage with their international peers, even if you believe they are the right standards?
We have seen two significant regulatory bodies, the federal reserve and the fdic, put out proposed action that would very much increase the leverage ratio from the minimum set in basel three.
More from our conversation, we turn to -- more from our conversation with treasury secretary jack lew tonight and also on sunday.
We are looking forward to all of it.
Y for bringing us that exclusive with the treasury secretary, and -- thank you for bringing us that exclusive with the treasury secretary.
40 times they have effectively voted it out, even though it is law.
We will debate whether it is good or bad for the economy -- obamacare.
President obama fights for health care reform yet again after house republicans against his legislation for the 40th time.
Our broken healthcare system threaten the hopes and dreams of families and businesses across the country who feared that one illness or one accident could cost them everything they had spent a lifetime building.
And, step-by- step, we are fixing that system.
It seems like states and businesses are less concerned with the idea that one illness could cost them everything.
Instead, they are most focuses on the costs associated with the legislation itself.
What is the ultimate price of the president's health care reform?
Joining us is the vice chairman of new york presbyterian hospital as well as two others.
Welcome to all of you.
What will healthcare reform really mean for new york presbyterian's "bottom line, as well -- new york presbyterian's bottom line as well as patient care?
When they are not covered, they cost more, they get sicker, they do not come for health care as often.
If we have more people covered, that is fine.
There's a variety of other things, like the idea that they eliminated the exclusion, the capping of lifetime benefits, the people can stay at on their family insurance -- that people can stay on their family insurance.
There are certain costs associated with this, including the fear that you're going to run into a two-tiered health- care system.
That is a concern.
We don't want to undercut quality.
New york is the.
Is -- new york presbyterian is a distinguished hospital and legal -- and we want to keep it that way.
We agreed to take out cost.
We will take out $1 billion.
We will do everything we can to protect quality and make it even better.
There are efficiencies you can find.
The big concern here is, without any kind of market for -- without any kind of market force in play, the danger is that you are -- your costs really cannot be controlled.
That they could spiral out of control.
One of the reasons why hospitals were really behind the affordable care act and supported it is because the law dragon and a lot more -- law dragooned a lot more resources.
Is that a fair word?
There is taxation -- , i don't think it is fair to say hospitals are doing it because of that -- i don't think it is fair to say hospitals are doing it because of that.
We are doing it to provide healthcare and we want to see sustained high quality.
That is certainly what hospital say, but i think a lot of people are concerned that hospitals have too much market power and raise prices instead of focusing on -- i guess that is why there are so many hospitals that go out of business.
In the private sector, hospitals -- businesses go out of business all the time.
We want patients to be taken care of right, high quality, and some costs down.
And i'm sure such rates you charge insurers have declined as a result of that, or have they not?
Have the rates that new york presbyterian charges insurers gone up or down in the last 10 years?
I think they are going down.
The notion you have that people who are doing this business are there primarily because of financial issues is simply erroneous year i don't castigate -- simply erroneous.
I don't castigate groups of people.
But the economic incentives are to spend -- get people to spend more money on healthcare.
Hospital does not have incentive -- hospitals do not have incentive to get it to cost less.
We spend money to keep people out of the hospital and out of the emergency room.
We provide people who can speak spanish and help them navigate the health care system.
We reduce the number of visits and hospitalizations.
Why are we looking for more volume -- why do you say we are looking for more volume?
The data is overwhelming.
There is no issue between the left and right on how much we are spending on healthcare.
Spending keeps going up.
It is 18% of gdp, the highest in the developed world.
Because people are doing some good things.
In needs to be a lot lower.
We will work on that.
I want to bring you into the conversation.
Take it a slightly different turn.
As we debate on the economics and whether or not it is going to be good or bad for hospitals and patients, another concern happens to be small business owners.
If you are someone who is going to get that extra employer -- employee, it turns out it is going to cost you more in the way of healthcare.
Are you concerned at all that employers will not be adding to their staff as a result of obamacare?
This law is full of bad incentives and bad news for small business.
It is all about cost.
We do not expect cost to go down for those who purchase individual and small group lands.
We expect -- small group plans.
We expect them to go up.
The employer mandate remains a disincentive for hiring, which is bad for the half of the economy that is small business, a sector that has very little optimism and is in bad shape.
It is all bad news.
It's -- it's all -- not just about cost.
It's about quality.
We want to reduce readmissions.
We want to do everything we can to make healthcare in the country better.
Maybe you could comment on the "new york times" article which appeared earlier today which suggests healthcare costs for new york city residents could be cut by as much as 2/3. can you comment on that?
You just asserted that healthcare is automatically going up for everybody.
Lex i know the peace you are talking about.
I think it's an -- i know the piece you are talking about.
I think it is important people look past the headline.
New york is a case where it was already very expensive.
It could be different from other states.
It is a state-by-state, sometimes a locality basis in terms of how high the premiums are.
We don't think that is particularly relevant to the rest of the country.
I think there are variations, but you have to take it as it is.
There are going to be reduced costs for many people who have health insurance in new york.
If we could put that graphic backup.
New york is a very unusual situation.
Under the mario cuomo administration, they instituted a law that forced everyone, regardless of age, health status, precondition -- pre- existing condition -- young and healthy people drove out of the market.
That drove costs up and it made insurance unaffordable.
Very few states -- almostare actually similar to new york.
Here is the whole thing about obamacare.
-- almost no states are actually similar to new york.
Here is a whole thing about obamacare.
You are spreading costs out.
You have to think about it on the individual basis.
If you are the healthy 25-year- old who goes to the doctor once a year, in new york state, you are now going to spend, because of the individual mandate, 4000 thousand dollars a year on health insurance?
That is not a good deal for you.
You have to bring more people into the market.
You have to solve a national problem.
You have to make healthcare less expensive.
The problem with the affordable care act is all the regulations that it imposes makes healthcare more expensive.
In california, you can buy a really good individual health insurance plan for $90 if you're 40 years old.
If you are 20 years old, it is $70. people are now having to pay 25 -- $250, $300. it is not a good deal for young people.
If young people do not enroll, this is -- then the system will fall.
Do you wear the cost will be too significant and that young people will not participate?
-- do you worry the costs will be too significant and that young people will not participate?
I don't share that concern.
I do agree that there is going to be very billion -- be very ability -- be variability all around the country.
Coming up, the real liquid asset.
We are talking about water.
Is this commodity better than gold and oil?
We will talk talk about it here on "street smart." wimbledon has nothing on these guys.
We will talk about the tennis match of the economic world -- the one we have all been waiting for.
Our own guys from bloomberg are part of it.
We will be right back.
Time for our next big trade.
We bring you the boldest calls on wall street.
Gold and oil get all the attention, but what about water?
You cannot live without it.
Maybe neither can your portfolio.
Water utilities have way outperform stocks, oil, even gold.
But buyer beware ash water is about to get choppy.
Here -- but buyer beware -- water is about to get choppy.
It has worked so well.
Why would you not just day with a company like wtr water?
It is really not about the commodity.
It is not about water, per se.
It's about the characteristics of water utilities that you can play the water scene through.
Some of these treasuries are trading at very high multiples.
22 times for a company with gross earnings of 3%. even in the utilities world, it is excessive.
You are saying the safety trade is over.
You are really not buying water utilities.
The dividend yield is low, around 2% to 2.5%. you are buying the safety and the high expected body of growth.
Water utilities should be growing around eight percent to nine percent -- a water utility should be growing around 8% and 9%. show me an s&p 500 company that can grow at an expected value growth of 9%. it is hard to find.
Look at the chart of water utilities.
It's time to take a second look at those companies.
135% return over the last couple of years is not something that is very useful where we go up one percent -- up 1% a day.
American water, awk is a much better choice.
It trades at a multiple five times lower than aqua america and grossed three times faster.
That's a no-brainer to us -- and grows three times faster.
That's a no-brainer to us.
Aqua is a good company, but a bit of a black box.
It is a "trust me" story.
The other issue is water is free in this country.
At least for now.
You are really paying for the distribution of water.
You are paying for reinvestment, the changes of the water pipes.
You still have pipes from the 1800's. if anything, that kind of cap ex budget creates issues?
It really is not -- does not.
It is more electric that are getting the attention and political scrutiny.
Water utilities are spending such a minimal amount of money if you spread it out over the larger population.
It is more about how much you are willing to pay for that earning stream.
Is there a play outside the u.s. where water is scarcer and costs more money?
I'm sure there is.
You can play through water desalinization.
Shale water, clean-up for shale.
That's not something we feel comfortable with.
The water utility sector is low risk, low-bet a sector, not something i would want any of my companies to venture into.
It's part of everything, yet it sti