This is "bloomberg surveillance." it is job state.
The debate rages over america's economic growth.
Is your paycheck rising?
Wall street is simply stunned as the securities and exchange commission crushes fabrice tourre.
We speak to two experts on the path forward.
Our cristina alesci back and forth and back and forth.
She is back in texas pretty will michael dell be working for dell in 12 months time?
This is "bloomberg surveillance ." i'm tom keene live from our world headquarters in new york.
It is friday, august 2. joining me on an incredibly busy day, sara eisen and scarlet fu.
We've got the fabrice tourre announcement.
Wendy of company news.
Let me kick it off with a morning briefing.
The news for toyota.
At raising its profit forecast net profits surged a record in this quarter, rising 94%, thanks to a weaker japanese yen.
In the u.s., the biggie, 8:30, that is when the government releases the jobs report for july.
Economists expect 185,000 jobs added during the month and that the employment rate ticked down to 7.5%. we also get numbers on personal income and personal spending.
At 10:00, the factory orders.
It is almost a wage report today.
Everybody with central-bank theory, everybody looking at wage dynamics.
We have seen some improvement in the last few months.
Will it be enough to convince the fed that they do not have to be concerned about inflation?
That will be one of the key points.
We will get the average hourly earnings within the job support.
I will be looking for the trend growth, fortune and may.
They keep the trend of 200,000 jobs.
Also some company earnings to watch before the bell.
Chevron, cablevision, aig, and viacom.
Then berkshire hathaway.
10:00, the dell special meeting.
Let's look at the data check.
A record high.
1707 on the s&p 500. futures are flat.
258 up to 262. risk on, yields higher.
The euro finally gives way.
It does not get to 1.3 three.
Hydrocarbons elevated, even with the shell and exxon news.
We will cover that later, the big write-down.
At eight: 29, what sara eisen and scarlet fu will get, -- 8:20 nine, what sara eisen and scarlet fu will get, look at the equity markets, the dow, the ten-year yield, and then gold -- see that moves at 8:30. a big drop under 1300. we look at dollar-yen.
This tracks yields.
It is closely correlated with the reaction of the u.s. economy.
Stronger dollar, weaker yen, that jives with better data.
Those are the four that i look at.
You shared her secret.
As we always do, we have scoured the papers and the web for the stories making the front page.
The most important stories and the job support.
On bloomberg.com, we are all over the job support.
It comes after the federal reserve made no changes to its stimulus policy.
It failed to signal a start date for its plan to taper its bond purchase program.
You mentioned how the stock market is at record highs.
The s&p 500 crossing pass 1700 for the first time ever.
The dow about 15,006 hundred.
That adds pressure on this jobs report.
The vix coming in.
I go to your years of experience on the equity desk.
Yesterday was different.
It was up by a lot.
Do you think they were trying to get out in front of the jobs report?
It is hard to tell.
You also had the ecb meeting, the boe meeting.
Two major central banks.
No sign that the extraordinarily low interest rates and extra qe will be removed.
Is the record high due to larry summers and janet yellin -- yellen?
The unemployment rate falling to 7.5%. that is another level the euro -- the federal reserve is looking at.
Shareholders of dell will be convening for third time today in texas to vote on the ceos $24 billion buyout bid.
It comes after carl icahn sued the company and the board.
This happened last night.
Can we get cristina alesci's for good from miles -- frequent flyer miles?
She is there today.
We will check in with her later.
They did not have enough votes to move forward before.
They potentially could cancel today.
We will find out from christina when we check in.
The big one, the fabulous fab is found guilty.
A federal jury finding the former goldman sachs trader fabrice tourre liable for misleading mortgage investors.
The sec accused him of intentionally misleading participants in the 2007 deal which was known as abacus.
It involved john paulson.
He helped choose the securities.
He made a $1 billion bet.
Fabrice tourre faces money penalties, a possible ban from the securities industry.
He has become the symbol for the financial crisis.
We've got to terrific guests and the next hour.
First, bloomberg contributing editor neil borofsky with terrific experience in prosecution.
He is a former tarp special inspector general.
Bill cohan will join us later.
Stunned is what the ft said.
I was stunned.
I was surprised.
According to the press accounts, the sec was having a rocky time.
The defense counsel seemed to be scoring its points.
When you try enough cases, it is hard to get into the minds of those jurors and what they think is important.
This one, they found the sec proved its case.
Crude this case to the jury.
Was it a jury of peers?
Sure, american citizens who showed up.
They did their post.
They qualified through the jury selection process.
These were not a bunch of lunatics and people not qualified.
Have people ever faultlessly during the trial in a court case?
It is not a good case -- a good sign.
We fall asleep here.
Stephanie ruhle has been on maternity leave, but the story was too big to pass up.
She has been up all night working her sources for us.
Her years of experience on wall street.
She joins us for a special treat.
Thank you, sara.
It is extraordinary.
The sec proved their case to the jurors.
Word on the street is the sec did not need to prove their case.
The street says this is extraordinary.
This jury to convict fab from the get-go.
If you look at what his position was at goldman sachs, fabrice tourre was a cog in the wheels.
He was not somebody leading the business, making majors decisions -- major decisions.
Many people are saying, where is jon corzine?
He is a relatively midsized guy.
Was he of noxious and over-the- top?
People on the street are stunned.
How is this going to ripple across wall street and the investment community?
It is such a lower mid-level employee becoming the poster child for what went wrong.
It is shocking.
People feel like, look at this guy who is the scapegoat.
What is extraordinary is, let's assume that he did tell investors on the other side, you've got paulson.
Investors are thinking, paulson is doing this, i want to do the same.
Nobody knew who paulson was until it became the greatest trade ever.
This fund existed for over 10 years simply as a merger fund.
It wasn't like at the time -- this is a critical point.
This is one big retrospect look back.
Stephanie nails this.
When this trade was constructed, the people on the other side of the trade were dying to get this deal done.
Nobody knew who john paulson was.
Then in this new wants, this show of this court case.
We are not sure how the portfolio -- nuance, this minutae of this court case.
There is frustration that this mid-level guy, kind of a loudmouth on e-mail, has become the face of the financial crisis.
That is a valid criticism of the sec.
They are chasing minnows while the with that big fish swim free.
-- while the big fish swim free.
Where is the person, one or two above mr.
One of the jurors even acknowledged, this guy was kind of the scapegoat, but they also said, this is one guy we will not let get away.
You have covered goldman sachs for a long time.
You have spoken to a number of executives including lloyd blankfein.
What is going to be the reaction at goldman today?
I have not spoken to them today.
In my opinion, goldman is going to be quiet.
They have no upside in speaking out.
People i spoke to over the past two weeks at goldman while they have been looking at this trial said, wow, they must have this locked up.
His lawyers did not even put him on the stand.
They thought the sec's case was so weak -- guess what?
They were wrong.
Stephanie ruhle, certainly a treat.
Thank you for joining us from maternity leave.
We look forward to you coming back in the next few weeks.
I have a quick question -- what does goldman sachs' next move?
I'm guessing the defense counsel wants to see with the penalty is.
Before they get out in front.
They do not want to criticize the judge and her potential ruling.
She doles out the punishment.
A lot is within her discretion.
It is going to be a wait and see.
He has moved on.
He is getting his doctorate in economics.
He may not be all that interested in returning to wall street.
His demeanor after the trial was not a man crush.
His defense team was seen more beaten-down as he did.
-- then he did.
What continues this discussion.
-- let's continue this discussion.
Toyota will boost its full- year operating profit outlook by 8%. the move comes as a weekend increases the value of japanese cars sold overseas.
Toyota says net income will climb to $15 billion for its fiscal year.
That is a six-year high.
Of america bracing for another round of legal battles.
The bank says federal and state agencies may file more lawsuits.
Bank of america has already set $45 billion on litigation settlements and refunds tied to home loans.
Rbs names and new ceo.
Ross mcewan will replace stephen hester on february 1. mcewan is head of the banks uk consumer business.
. that is today's company news.
Another company in focus.
Will the third time be the charm for michael dell?
Another vote is set on the proposal to take the company he founded private along with silverlight.
We will discuss the chances of that going through with cristina alesci from texas.
? coming up on bloomberg television, robert of aig.
Much more with benmosche.
9:00 a.m. with betty liu.
This is "bloomberg surveillance." i'm sara eisen with tom and scarlet fu.
It is also another day and another dell vote.
I feel like i'm getting deja® vu.
For the third time.
Michael dell will have to decide whether he will decide to go forward with the vote or not.
10:00 a.m. eastern time.
It could mark the shareholder vote the third failed attempt.
Bloomberg's deals reporter cristina alesci has been following this story from the get-go.
She has taken one too many trips to round rock, texas.
Will this vote take place?
That is still a question.
What is clear at some point yesterday, there were negotiations underway between the special committee and michael dell in getting to the right price, one that is high enough to justify a change in the voting dynamics, because as you mentioned, the last two times, there were not enough votes for michael dell to win this.
We will have to see how it plays out.
One thing is for sure -- shareholders have a certain amount of deal fatigue.
The special committee and michael dell have done an excellent job of tiring people of hearing and feeling the impact of this deal.
Especially on the stock price.
Whatever deal they put on the table, it has a higher likelihood of getting shareholders who are on the fence to change their minds.
The question is, can the special committee do it in a way that will not put them at risk of losing lawsuits like the one that carl icahn just put on the table?
That carl icahn lawsuit.
As that influence other shareholders to move the needle?
Carl icahn does not want influence anybody except the courts.
He wants the courts to step in and force this vote to happen today.
He said, enough is enough.
All of these delays are just doing one thing, ensuring that the vote goes in michael dell's favor.
I know you of talk to each and every shareholder.
Are the shareholders the same now as they were three months ago or six months ago?
It is a whole new group of people.
Who exactly are the shareholders in question?
Tom, that is a central issue in this deal.
As you know, one of the things that the special committee has agreed to do in theory is to move the record date.
That is the date that you have to be an owner in order to go ahead and vote on this deal.
What has happened between the original record date, june 3, and today is that there are a lot more in this stock.
Those guys were betting that a deal would get done at $13.65. we have a lot of those people doubting it.
That is what you see in the stock price right now.
That is why michael dell and silverlake want to move the date to allow more of the short-term investors to have a say.
I think this is the key thing , this is a new group of shareholders.
Dels board have said that they seem to want $14 a share.
You mentioned that michael dell and his group had been in negotiations.
Are they moving towards $14 a share?
Here is the thing -- $14 a share, what has to happen is the special committee has to protect itself.
It is already a target of many plaintiff lawyers.
What basically we heard is that it would not change, the rules of the game that were negotiated from day one, unless it's got a high enough price printed that is the only way it could justify changing the rules of the game midway through the game.
Basically steering this deal to michael dell.
$14 a share, the herd, was a starting point -- we heard, was a starting point to get a significant change in the voting requirement.
A lot of moving targets.
Cristina alesci, hang tight and round rock, texas.
Near borofsky is here with us.
You are a lawyer.
I know dell is not in your wheelhouse, but what stands out to me is, what happened to shareholder democracy?
If he can get away with delaying a vote a third time, is the special committee working in the interest of shareholders?
It sounds like a decision will be made by the delaware court.
There is a part of us -- can you imagine if we had an election for president and it was going one way or the other, and they would say, let's change the rules?
That happened in 2000 with bush v gore.
It does strike the fundamental sense of fairness.
The board by doing this it gets a fair and higher price.
That will be the benefit of the shareholders.
A lot of whom were getting in recently to try to take advantage of this deal, and likely would vote for it.
It is ultimately democracy -- who are the current shareholders?
Will they benefit from the steel?
-- this deal -- this deal?
Maybe we will see about.
We know we will have jobs data at 8:30. they cannot delay that.
Also in the next hour, we will look on this job stay at utah.
Goldman sachs has been adding a lot of jobs in utah.
We will talk to the governor in the next hour of "bloomberg surveillance" on bloomberg television and radio, streaming on the bloomberg tv plus app and at bloomberg.com.
? this is "bloomberg surveillance." i'm sara eisen here with tom and scarlet.
Starting with russia and the united states, a meeting between the two countries is in jeopardy after russia's decision to grant asylum to edward snowden.
The fugitive was given temporary asylum after being confined to a moscow airport for a month.
The planned a summit between president obama and russian president latimer putin is scheduled for september.
The state department is closing a number of u.s. embassies the sunday due to a security threat.
The embassies are located in predominantly muslim countries and are said to include facilities in the middle east and south asia.
The closings are precautionary and due to security concerns.
Secretary of state john kerry says the u.s. plans to and drone strikes on suspected terrorists in pakistan.
Kerry made those comments while in pakistan while the strikes have fueled hostility towards the united states.
The second story i think is a big deal.
Richard haas talking about that tension yesterday.
Thanks to richard haas for being with us yesterday.
How about morning must-read?
My morning must-read is on the raging debate over who should be the next fed chairman, janet yellen or larry summers good as recline rights that there is one reason why so many -- larry summers.
Ezra klein writes summers' allies say that he is a tougher and ago -- negotiator than many of his critics say.
Especially when it comes to things like the dodd frank law.
I want to know if they can figure out what to do with the target rate.
Back to old-school fed policy.
We are way too competent it.
Somebody -- too complicated.
Fabrice tourre, and his conviction in the civil case could the former goldman trader, what stood out to me was the wall street journal's very opinionated take, from the op-ed journal -- p[ortion neil borofsky, will that be an outcome?
What we have seen is the sec has had trouble bringing these high- profile cases, not only to trial, and also in their favor.
Which is why i think this case is not terribly important in the pantheon of the financial crisis -- it is remarkably important for the sec.
When mary jo white took over, she said, this will be a bolder, more aggressive sec.
They announced a change in policy where they would not allow targets of their investigations to settle without admitting or denying guilt.
Meaning they will take more cases to trial.
They lose this, and it takes a lot away from that threat.
They have not proven they can go into a tough case, a complex case, and win.
Much more with you.
Is the american manufacturing renaissance for real?
We will take a look on this job staying next.
? this is "bloomberg surveillance." this is our twitter question of the day.
Did the government go after the wrong person?
We are talking about the fabrice tourre conviction of guilty from the security and exchange commission.
Misleading investors over the complex mortgage backed securities.
A lot of people say the government is going off -- after the wrong person because he was a junior, mid-level person at goldman sachs.
Perhaps they should find somebody more high-profile.
People on wall street, people not on wall street.
That is certainly dominating the front pages and headlines.
But it is also job stay.
Let's do a data check right now.
This comes off the huge market move yesterday where we saw over 1700 and the futures.
1702, 2.73%. the high-yield range.
1.32. hydrocarbons are up.
Gold again, decisively under 1300. one of the big gainers in yesterday's training -- trading.
The biggest advance in the year.
That gas rising -- rising to more than 7%. a big contrast to big oil companies like chevron.
Some decliners, avon products, falling after the u.s. government rejected the company's $12 million offer to settle an investigation into whether avon products executives bribed foreign officials.
That drama continues.
It is job stay.
We are going to take a closer look at made in the usa.
This idea of america's manufacturing renaissance, you for the president talk about it, but is it for real?
We will be looking through the various industries, breakdowns, retail, construction, and manufacturing.
You look at the idea of a full-time job.
The labor arbitrage has changed between china and the u.s., what we get paid versus what they get paid.
Harold certain portions back -- pushes back.
His book suggests the american manufacturing renaissance is decidedly real.
Julia coronado is with us as well.
She is a north american economist at bnp paribas.
She knows there will be exactly 12 manufacturing jobs in this report this morning.
To talk to you first, how -- hal.
Julia is in the real world.
Why are you so optimistic?
We see fundamental economic trends changing.
We see costs and china rising rapidly, growing at 15%-20% a year.
That is making a difference.
Why can't those jobs go to vietnam or mexico?
Some are going to mexico and vietnam.
Some are coming back to the u.s. we see company after company look at places like vietnam, x ago, -- mexico.
Do we need a government policy on manufacturing?
I'm not a big believer in government policy on manufacturing.
The free market should do its work.
The free market will do its work.
What is interesting about what you do versus julia, you're not necessarily looking at the monthly data on the economy.
You have your own surveys.
What do they show?
At least 40% of companies over $1 billion are looking at bringing jobs back to the u.s. this is something taking place in the boardrooms now.
Runtime after 2015, this will be a bigger trend.
Julia coronado with a more cautious view.
You rely on me for the pessimism.
The line we get, it is part- time america.
If you look at full-time jobs, and you pop -- population of just them, the decline in full- time jobs is just breathtaking.
Is this part-time america?
There has been a quality of jobs issue.
It is something that chairman bernanke has noted.
The numbers of jobs has been impressive, given gdp, but if you dig down into the details, lots of part-time, lots of low- wage jobs.
In inside base by, there is this series, wages and benefits.
Should we be happier because our benefits are so rich, or is it really true that wages are not there?
Wage growth has been extreme a subdued across sectors.
There is no indication we have cleared a major -- the labor market in the sense that some industries see wages picking up.
That is partially contributing to part-time america.
You do not agree that we are seeing a new increase in wage growth?
There has been very little indications of wage growth.
Wage growth has stabilized at very low levels, but it is certainly not rising anywhere.
The heart of this matter -- it is sort of like jobs overall -- cyclical, part of a normal recovery, or structural, more indicative of a longer trend?
Maybe to you and to your optimism, when it comes to manufacturing growth post- recession, is it cyclical?
Right now, the economics do not favor it.
But if you continue this growth rate in terms of the wages in china, the jobs have to go somewhere, and a bunch will come back to the u.s. why?
Why aren't they going to brazil?
We have some of the highest competitiveness in the world.
The u.s. over the last 40 years has become fixed -- substantially more competitive.
He produced 2.5 times as much with 30% less labor.
-- we produce 2.5 times as much with 30% less labor.
What about oil prices and our natural gas production?
Our natural gas is going to be a big advantage for us.
It will add another one million jobs to the table.
Julia, do we have a competitive enough exchange rate to be a manufacturing powerhouse?
That is always an issue.
Countries are always trying to keep their currencies week against the dollar.
-- weak against the dollar.
They actively manipulate their currencies to do so.
What should we look at at 8:30 this morning?
The headline payrolls number, and then of course the composition of that.
Which industries are creating jobs?
What is the quality of those jobs?
And the unemployed rate, will it hold steady or go down?
That is something that will matter for the fed.
What about wages?
Every research note i see goes back to wages, supposedly improving wages.
That is the big debate.
Supporting chairman bernanke and the much more cautious like you.
What should we look for in wages at 8:30? we will get the average hourly earnings.
It is one of the key indicators of wage pressures good we can break that down across industries.
It has stabilized.
It has not shown of any signs -- shown any signs of upward pressure.
It is the key to the cyclical versus structural debate.
Wherever we are when the labor market clears in terms of the unemployment rate where the level of jobs, a wage growth will tell us.
We will start to see wages go up.
We will see workers with getting power, -- bidding power, bargaining power.
That is what we watch today.
Is there a company or group of companies that are exemplifying what you are talking about?
We see lots of companies do this could we see large companies like ford and mcr doing the same thing.
We see smaller companies -- we should be watching for the hiring announcement?
There are hiring announcements coming out every day.
Jobs grow, jobs shrink, it is a normal phenomenon.
What we will see is a significant increase because jobs will be returning because the economics of producing in the u.s. are better between lower energy costs and higher fuel costs.
This is why love "bloomberg surveillance." we have one just saying manufacturing will work, and another guy done in washington totally disagreeing.
The president went to amazon this week to a warehouse to announce the jobs, but really it was a warehouse full of -- nobody agrees with julia coronado.
I do not think that is true.
We will have to see.
8:30 this morning.
We will go to need the headline data on bloomberg radio.
Looking forward to that.
Thank you to julia coronado who will stay with us.
Coming up, the jobless rate is not tell you everything about the labor market.
We will tell you next in our single best chart on "bloomberg surveillance" on bloomberg television and radio, streaming on the bloomberg tv plus app and at bloomberg.com.
? this is "bloomberg surveillance." i'm sara eisen joined by tom keene and scarlet fu.
In top headlines, an italian court's decision to uphold silvio berlusconi's conviction on tax fraud has increased tensions in italy's parliament.
The ruling deepened the divide between lawmakers loyal to the media magnate and former prime minister and his opponents.
While the conviction was uphold, berlusconi's ban from up -- from taking public office will be reviewed.
In a summit between the united states and russia, it is in jeopardy after russia's decision to grant asylum to edward snowden.
The planned summit between president obama and russian resident vladimir putin was scheduled for september.
A jury has found former goldman sachs banker fabrice tourre liable for his role in a mortgage deal that lost investors $1 million.
He was one of a team of goldman employees that worked on the investment.
The verdict is a victory for the government.
Those are your top news headlines.
Single best chart.
It is fabrice tourre-free.
The key to the unemployment rate lies in the participation rate.
The participation rate, by the way, measures the percentage of the population working or looking for work when people drop out of the workforce.
The unemployment rate falls.
We have seen the national unemployment rate fall from 10% down to about 7.5% right now.
Taking a look at the different parts of participation, adjusting for it, and what happened was the participation rate in october 2009 and we had 10% unemployment was 55%. since then, it has dropped to 63.5%. most of the drop is due to that decline in participation.
What if we started participating more?
Like we used to.
67%, the 2002 level.
Unemployment would jump to over 12%. this is a raging debate.
We have someone here with terrific experience at the federal reserve on this issue.
Julia coronado, chief north american economist at bnp paribas.
Where are you on this debate?
I think we are going to see labor force participation start to rebound, very modestly, but it is definitely already starting to flatten out.
We are about where we were last year.
If we are creating 200,000 jobs a month, there is no reason that some of those time age and younger workers that left the workforce are not going to come back.
Will this change fed policy in that the chairman is frustrated he cannot get the unemployment rate down to where he needs it?
Actually, i think the unemployment rate has been dropping faster than they expect because labor force participation continues to decline.
They have all along expected a phase where participation rebounds and the unemployment rate stays sticky high for a while.
That is a good thing.
Why doesn't ben bernanke talk about the rate when he looks at the unemployment rate?
He has been lately.
In his last two speeches, he specifically talked about underemployment, our time employment, the rate.
He is still fixated on 6.5%. that might change.
Under discussion is the possibility of lowering that 6.5% threshold because he said it in boston a couple of weeks ago -- the unemployment rate understates the weakness in the labor market.
Sara and i have talked about this back and forth.
There is a huge part of america that is not making this debate.
They feel the unemployment.
They do not have the paycheck.
11%, 12%. that is why the u-6 is important.
14%. speaking of snapshots, first look, some photos making news today.
We will start in israel where is really police are firing tear gas at israeli-arabs.
A are protesting against the israeli government power plan for -- power plan.
The protests could displace thousands of bedouin residents.
Now to taiwan, a shot of the legislature -- legislator who yawned next to a barricaded entrance after a vote on whether to build a fourth nuclear power plant in taipei.
He is yawning, but it turns out -- a brawl actually broke out.
These guys are always throwing punches.
They were throwing bottles of water.
We might be better off in our legislature if we had more fisticuffs.
They are throwing water on each other.
Come on, scarlet.
It is a great way to release the tension.
Throwing glasses of water on harry reid.
This looks like scarlet's kitchen over the weekend.
We will go to washington, d.c. here's a shot of the scaffolding surrounding the martin luther king jr.
Memorial because there was an inscription, and the statue sculptor is trying to remove it.
It is somewhat controversial.
It was an abbreviated and out of context quotation by king.
The repairs should be finished for the 50th anniversary of king's famous march on washington.
I hope they do not get green paint on it.
I do not think they will.
They have scaffolding.
Futures are up to.
Got futures up 20. it is still this feel after a big yesterday.
Record highs at the dow and s&p 500. the yen is weaker.
When was the last time you had an e cigarette -- e- cigarette?
It is more like this versus a normal cigarette.
The sales have caught our attention because they are on fire.
The business is getting bigger.
So big that they tobacco is getting in.
We will speak to the ceo of one brand next on "bloomberg surveillance" on bloomberg television and radio, streaming on the bloomberg tv plus app and at bloomberg.com.
? i am scarlet fu joined by tom and sarah.
In today's company news, apple looking for a helping hand from the white house.
The president and the u.s. trade representative have until midnight on day to overturn -- sunday to overturn an import ban by the international trade commission.
Some older apple iphones and ipads infringed on a samsung patents.
Michael dell hoping that the third time will be the charm with shareholders of the pc maker convenient for third time today.
To vote on dell's $24 billion buyout bid a good activist investor carl icahn suing to stop the company from the voting procedures on the deal.
The vote is scheduled for 10:00. hewlett-packard and its lawsuit against two taiwanese companies over price-fixing for lcd screens.
Hp had accused companies of conspiring to set prices and alleged it had incurred $1 billion in damages.
No word on why hp dropped the suit.
That is today's company news.
If michael dell wins the vote, is it like a hat trick?
I do not think it is a win.
A long road ahead.
A lot decided today.
We will take a break and look at the growth, the explosion of e-cigarettes.
What do you have in terms of statistics?
Sales of these tobacco-less cigarettes are approaching $1 billion worldwide.
That is small in terms of the overall cigarette market, 1%, but traditional tobacco companies are paying attention to the upstart.
You've got altria which makes marlboros.
British american tobacco, a launching their own e-product.
Njoy is now in 60,000 stores.
Even goldman sachs put out a recent research note on this.
We will talk to a private e- cigarette brand, mystic, produced by north carolina-based valentine france.
Thank you for joining us, john.
Now the big guys are getting in the game.
We welcome them.
We think it is good for the industry.
It brings credibility to the electronic cigarette industry that has been around now going on about 5-6 years.
It started back in 2008. why don't i see more on the street?
Why don't we see regulators?
You see them on the street more and more.
We are in over 25,000 locations.
The largest retailer in the world, walmart, carries our brand.
I think you have right eight in new york city.
They carry the brand.
-- right te aid in new york city.
A carry the brand.
Revelation will wait -- regulation will wait for october.
Do they cause cancer?
Today, we would tell you they do not have the cancer-causing agents of the typical tobacco cigarettes.
Have there been studies on this?
They are going on today.
We look to the science of the industry and of the chemical.
To answer your question, there is testing going on today done mostly by the industry and our manufacturing.
How about regulating by age?
We absolutely support its.
We are part of the advisory council.
We do look to regulate by age could we do not sell the product -- we advise our retailers to sell it like they do tobacco.
What do you think about all of this?
Is the market for your product existing smokers who want a healthier alternative, or are you also able to get new smokers, people who have not been traditional smokers to come in and do the e cigarette thing -- the e-cigarette thing?
Our market is 100% focused on the current tobacco smoker.
An alternative to tobacco.
We are not trying to lure new smokers into the business.
Can it be used as a way to put smoking?
We do not advertise it that way.
It is not a sensation device.
-- cessation device.
It does help people reduce their need for traditional cigarettes.
To altria, the chart says all you need to know about the tobacco business.
How would you like to make 20.4% per year shareholder return for the last 10 years?
There is a lot of money there that did not come from e- cigarettes.
Is this an add-on or a substitute?
Some analysts will tell you that it is going to in 10 years be as big as tobacco.
Tobacco is a $90 billion industry today.
That is a big deal.
We talk with them many times.
10 years is pretty quick to get to $90 billion.
Today we are at $1 billion.
$2 billion next year is what we predict.
A lot of e-cigarette startups.
People can go onto alibaba and buy packages.
Does that help or hinder the consolidation of this?
I think it hinders.
We are working with the fda.
We think that internet sales will probably not be here because of the age restriction we talked about.
We welcome that.
Our business is 90% brick-and- mortar.
We do have a website.
We do age verification.
Thank you so much.
The electronic cigarette grade a lot in the next hour.
We've got a forex report, pre-jobs.
The u.s. dollar, as you can see, it is flat.
Stronger against the japanese yen.
That is the one to watch.
See the health of our economy.
We will zoom in on utah and talk to the governor about how he is getting jobs over there.
All coming up on "bloomberg surveillance." ? this is "bloomberg surveillance." an important job state today.
Chairman bernanke bets on rising wages to rebuild american confidence.
Wall street simply stunned as the sec crushes fabrice tourre.
We will examine which options are left for the goldman sachs vice president.
Go west, young wall street.
Finance jobs and other jobs, they can be had in utah.
We speak to the governor at the governor's conference.
This is "bloomberg surveillance ." . we are live from our world headquarters in new york.
It is jobs data.
Sara eisen is with us and scarlet fu as well.
It is exciting.
It is not just job state.
A big win for the sec.
A big day for michael dell.
Another dell vote set to happen.
Let me kick it off for you with the morning briefing.
Toyota raising its profit forecast, also saying that profit soared to a record high, rising 94% thanks to a weaker japanese yen.
In the u.s., the jobs report is due at 8:30. economists are looking for 185,000 jobs to be added during july.
For the unemployment rate to take down a bit to seven point five percent.
Also at 8:30, numbers on personal income and spending.
Which is important.
There is a nice add-on of other data.
10:00, factory orders.
The markets are at record highs.
The dow and s&p 500, record territory.
Company news to keep an eye on.
Earnings from chevron, cablevision, aig, and viacom.
After the bell, berkshire hathaway, and 10:00 a.m., the dell special committee meeting were cristina alesci is for the third time.
Where is round rock?
She does get to have barbecue there.
He have confirmed that.
It is not all that bad.
It is a jampacked day could scarlet, some other company news.
Michael dell is hoping that the third time will be the charm, because shareholders of the pc maker are convenient for third time in texas to vote on michael dell and sober likes $24 billion buyout bid.
-- silverlake's $24 billion buyout bid.
This vote is scheduled for 10:00 a.m. eastern time.
Toyota raising its profit forecast.
The automaker boosting its full- year profit outlook by 8%. the move comes as a weekend increases the value of japanese cars sold overseas.
Net income will climb to $15 billion for the fiscal year.
Bank of america bracing for another round of legal battles.
The bank saying that admiral and state agencies may file more lawsuits related to mortgages and underwriting.
Be a they has spent $45 billion on litigation settlements and refunds tied to home loans.
Those are the latest company news headlines.
Scarlet, you have been following this.
Viacom is the newest team to line up with the buyback of $10 billion.
A one penny miss on earnings.
That use of cash that goes along with the bernanke put -- especially for these media companies.
They have tons of it.
Over to the legal surveillance beat, he was found guilty by among others a graphic designer, school principal, and the principal said, fabrice tourre played the game.
That was the exact phrase predict the guilty verdict stunned wall street.
William cohan is the author of "money and power." he knows the managing director.
He joins us.
When you look at all of this, could there have been a trial of his peers, or did he just have to go with the graphic designer and principal?
I think this is a testament to one of the failings of the so-called jury system of your peers.
I find this verdict mind- boggling.
As we have talked about, wall street is like the army.
It is like jack nicholson.
You follow orders or people get hurt.
Fabrice tourre was merely a foot soldier in the army on wall street.
He was doing what he was told to do.
He did not design the security.
He was executing the orders to get it done.
I think floyd norris in today's "new york times" was exactly right.
It is like gambling.
You have just now convicted the guy for playing the game.
I saw in the bloomberg news coverage -- i thought all the newspapers were great and -- were great.
A telling paragraph.
This was a woman within this transaction -- there was a basic idea of saying, they did this, etc., but nowhere in the trial did the woman involved actually say that.
She testified she was misled into believing john paulson was investing in this transaction.
She was not able to recall any instances where the guilty party falsely said that paulson was investing.
I am lost.
That paragraph makes no sense whatsoever.
Tom, look, i did a lot of research about this for my book.
I remember a man i used to work with, he met with ms.
Schwartz at the bar of a hotel in jackson wyoming to go over -- in jackson, wyoming to go over, discussing what would be in the security.
How could she not know that paulson was involved?
It is mind-boggling.
pellegrini, he is a slick, fancy guy.
You put him in front of that jury, and do they look at him as the evil wall street incarnate?
I'm sure they must have.
Paolo is a very interesting wall street character.
I'm sure he did not play well with the jury.
He has been quite befuddled.
I think what this is is more symbolic than justice done.
As one of the jurors said, he was a bit of a scapegoat.
This is one quote that did not get away.
That is garbage.
Tom, for the to hedge fund managers at bear stearns to get away with not being convicted of destroying or hedge funds -- their hedge funds, this is a travesty.
To me what stands out, shouldn't fabrice tourre feel a little bit let down by his defense team that were so confident that they did not but witnesses on the stance?
I think that is a very good point.
I'm not a lawyer.
I do not know but legal strategy.
You are right, it showed a degree of confidence that overplayed their hands, to continue the metaphor of the gambling.
I think they had reason to to be confident, but obviously they do found that.
Thank you so much, the author of "money and power." breaking news.
Dell is said to be near a buyout deal with the special committee.
Michael dell and sober light.
They are speaking to their $13.75 a share bid.
There will not be a $.13 dividend.
This is according to a bloomberg news headline, according to sources familiar.
Mergers and acquisitions, cristina alesci will join us later from texas.
I am lost.
A special dividend?
At the close, shareholders would get $.13 on top of the $13.75. $13.88. there is also an eight cent third-quarter dividend.
This -- is this in an effort to change the voting process, to sweeten it so that a special committee will let them change the rules?
Let's look at the back-and- forth predict the special committee get the $.13 dividend.
to get the guarantee of the eight cent dividend.
They will move the voting date.
They will change the record date on shareholders.
I will agree to the absentee change on voting that michael and silverlake want.
Is this a different shareholder than six months ago?
Are these kind of arbitrage shareholders motivated by these terms?
That's why the record date is so important.
It seems obscure.
To prose it is not.
Where does this leave carl icahn's loss out -- lawsuit?
1 we will see soon.
The arbitrage community came in after jim.
That is why moving the record date is so important.
Compare and contrast the motivators of the arbitrage community with the buy side community.
The long-term institutional investors are willing to be ancient.
They want it right now?
They wanted it yesterday and i have never seen this in my career.
It has gone back and forth.
Our variance at the gate.
Even more interesting -- barbarians at the gate.
Thank you so much.
We greatly appreciate it.
A quick data check.
We continue the movement from yesterday.
At 8:30, i look at features, the ten-year, the dollar-yen.
A weaker yen today.
Gold under $1300. hydrocarbons advance.
That is west texas intermediate up nicely.
Rent crude, 109. -- brent crude, 109. higher oil prices.
A higher dollar-yen, which almost 100 again.
This is a whole different jobs report than we usually see.
It is exciting.
We got to discuss the fabrice tourre case.
We will talk to the utah governor about how he is attracting financial jobs to his state.
We will also talk about the energy boom we see in this country.
The question is, why aren't the big oil companies seeing profit boom?
Exxon and shell both disappointing.
Stay with us.
We are just getting started.
? this is "bloomberg surveillance." i am sara eisen with tom and scarlet.
Moments ago, we learned that dell after months of drama is set to be near a buyout deal.
Michael dell and silver lake raising their offer in terms of a $.13 dividend.
Let's go to round rock texas, rock, texas where we have cristina alesci tracking the story.
How does this news change the calculus for what happens today?
Probably not too much today.
We will probably see the special committee and michael dell saying, we will need more time to talk to shareholders given the fact that a whole new deal was on the table with the dividend and the potential change in voting requirements . we need more time to talk to shareholders.
We likely will see a postponement.
This feeds into carl icahn's argument that this whole process has been handled in a way that really has postponed things and delayed things until the deal could go and michael dell's favor.
Jeff mccracken is here, the head of the m&a team at bloomberg news.
You have learned this stuff.
Working dollar $.75 per share.
Do you agree that it will not sway anything today?
A change in the record as we were talking about.
This drags on for weeks.
Are you kidding me?
Doesn't that make them vulnerable to lawsuits?
I'm sure it does bring i'm sure it makes him vulnerable to lawsuits in the next few hours.
-- it does.
I'm sure it makes him them pulled herbal to lawsuits in the next few hours.
Was this for michael dell?
I think it is both.
Realizing they are not getting the vote and the $.10 bump was not enough.
What happens the signed -- behind the scenes today for michael dell and mr.
Silverlake and mr.
A lot more fighting and probably a lot more harsh words.
Keep in mind that delaware does allow boards and special committees to adjourn meetings and to move them, especially in light of new facts like this.
The question is, is this price high enough?
Is it justified?
The courts will scrutinize this.
They do not like it when boards go ahead and move dates around and try what would seem to be trying to steer the deal in one party's favor.
Especially in the absence of any real material new events happening.
It is not like there is another bidder out there or anything like that.
Michael dell is paying a lot more than he originally anticipated.
Does he have a feeling at which point he will say, no more?
I'm sure he does.
He has not disclose anything.
We heard best and final several times over the course of several months.
Jeff mccracken, thank you very much.
Out with that story months ago -- minutes ago.
Cristina alesci, thank you very much.
I think the story will continue.
She should just get permanent residency.
How ferragamo is beating the italian recession.
I went there to find out.
? this is "bloomberg surveillance." i'm sara eisen as always with tom keene and scarlet fu.
Our guest host is jeffrey mccracken, who heads bloomberg's mergers and acquisition team.
In top headlines, summit between the u.s. and russia is in jeopardy following russia's decision to grant asylum to edward snowden.
The fugitive leaker was given temporary asylum after being confined to a moscow airport for a month.
The plan summit between the president and russian president vladimir putin was scheduled for september.
The state department is closing a number of embassies this sunday due to a security threat.
The embassies are located in muslim countries and are said to include facilities in the middle east, africa, and south asia.
The department said the closings are precautionary and due to security concerns.
Secretary of state john kerry says the u.s. plans to and drone strikes on suspected terrorists in pakistan.
There he making those comments while in pakistan where the strikes have fueled hostility towards the u.s. egypt to watch this weekend as well.
Real strident language yesterday.
We have been seeing an elevated crude oil price.
That is what we will talk about now.
America's manufacturing renaissance.
It is not doing that much right now for exxon mobil, royal dutch shell, bp all reporting some concerning results.
Exxon was the big one yesterday.
A big rocket miss -- profit miss.
Exxon is struggling to boost production.
Shall also taking a massive shell charge.
Another name to add, chevron seeing sagging out but because of cost -- the cost of production has been rising.
Oil has become expensive.
It is widely predicted.
Our guest knows the differences between upstream and downstream.
The former president of shell oil, now with citizens for affordable energy.
Sanford bernstein predicted this five years ago.
We knew we were going to get to high-cost reduction -- production and this new technology in the u.s. what is the surprise in the announcements yesterday?
I do not actually find anything really surprising, tom, because you do not manage these companies on a quarter to quarter basis.
A our project-managed kinds of organizations.
They take a long time sometimes to get the capital expenditure in line with production, and there are times when you have heavy investment, later investment.
I have been predicting that we would be finding this exact kind the difficulty in this time for a very long time.
When you look at the reservoirs around the world and some of the big plays out there, whether he disease to africa, the arctic circle, brazil, these places may take a very long time.
The industry is not near anywhere -- is not anywhere near ready to produce great you are relying on older reservoirs to get the same output.
With shale formations, you are dealing with rapid rates.
Are these companies too big to make a profit?
No, it just takes time.
Of course, investors are not always patient.
Within the industry, there has to be a patient's -- patience where you are bringing technology, capital, and humans together to struggle with the earth to release those molecules.
It is not really a wall street dream to be investing in oil companies that struggle against uncertainties that many other companies do not face.
One of the problems for these companies -- i know exxon is a good many -- good example -- they have been investing in natural gas.
Will that that ever pay off?
Yes, it will.
When this country gets its house in order and we stop playing politics with energy and we turn natural gas loose as a transportation fuel.
Natural gas needs a new market.
There is no better new market than transportation fuel.
Lng export is fine.
The real market for natural gas in this country, it breaks the opec hold on price, and number two, it brings more hydrocarbons into the supply chain.
That would raise the price of natural gas and make the xto acquisition at exxon very profitable.
Jon, as an oil guy, i'm confused.
Do you want federal energy policy, or do you want them to get out of the way?
It is more complicated than that, isn't it?
What we do not need are the day- to-day politics driving energy policy.
That is not.
What we need is a long-term plan.
I have argued in my book "why we hate the oil companies," we need a new governance policy, where we can set policy over decades, not over election cycles.
When you have election cycle- driven federal policy, whether it is the problem we have with biofuels, the lack of access and the five-year plan that the obama administration has put forward, you really screw up an energy industry badly.
That is what the politicians do.
It just cannot work on an election cycle basis.
You've got to have a longer-term view and plan.
No question the politics are at play.
It also got jeffrey mccracken who leads our m&m team at bloomberg.
-- m&a team at bloomberg.
Everybody was hoping for some m&a activity.
It has been very quiet.
As quite a year is i can remember.
Chesapeake has had a few things.
It has generally been pretty quiet.
I'm not sure the reason why.
Maybe john has some ideas on why we have not seen it, multibillion-dollar transactions.
I do not think it is a good bet.
The big guys are so big that if you really become even larger, it is even more difficult to manage.
There has been some acquisition activity in the equipment business.
I was on the love can board.
It was acquired by ge.
And the services and equipment business, there has been a bit of m&a. at the large production level, there is a point at which you cannot manage greater size.
John, thank you so much.
Coming up, the ceo of manpower on jobs day.
? this is "bloomberg surveillance." i'm sara eisen as always here with tom keene and scarlet fu.
After more than 80 years in the business, the ferragamo brand consistently remains one of the most successful luxury and fashion brands.
It has even outperformed in the markets and is going public -- after going public in 2000 11. i traveled to the company's headquarters in florence, italy to find out.
The wedge, the invisible sandal, and the heel, iconic styles that have stood the test of time.
Always innovating, always bringing new materials, new ornaments, new designs, new trends, but with consistency, maintaining the real value of what ferragamo products are.
At headquarters, a 13th century building on the river in the heart of florence, just steps from a famed museum.
100% in italy.
Always based on the same process.
It is where in 1927, salvador ferragamo, became -- began his iconic designs.
They look very up to date.
The shoes are made all most completely by hand, and the family still plays a key role in management, even after taking the company public, and in other famous fashion families have avoided.
-- something other famous fashion families have avoided.
We realized that it was his dream to diversify in products, in markets.
One of their key strategies is going global, even when competitors were holding black and -- holding back.
The different starting in 2008, 2009, 2000 10, we opened 10 stores every year.
The new focus, renovating stores around the globe to keep them relevant.
The next step is to increase the size of the stores.
To innovate, improve the quality of the image of the stores.
While still maintaining the integrity of their product.
They are in the luxury world.
They are very durable.
There is some practicality in our product that probably helps us during difficult times.
Our customer appreciates it.
What woman does not present -- appreciate a closet full of shoes?
We have always seen in the deep crises, after lehman , the first thing women went back to buy was shoes.
The music is like alitalia airways.
[laughter] in the history of bloomberg surveillance, you have never seen two women more focused on the shoes as we just saw.
You have never seen a company more focused.
I have become a lifestyle brand, making purses and belts.
I'm looking at you, jeff mccracken.
They stay true to their roots, which is shoes.
I love how the sun -- son still calls him daddy.
I love that it is reflected in the stock price.
If you look at ferragamo shares, up 62% over the past year, outperforming lvmh, which only gained 17%. a lot of m&a talk.
How family is it, versus the others?
Is it really a family business?
They've brought in an outside ceo to go public in 2011, but the family, the eldest son still plays an active role.
He is a chairman.
He has a plan in place.
They do not want more than three grandchildren running the company at a time.
They have to meet strict qualifications.
This is part of the dna, the made in italy, staying true to the style.
A lot of people are talking about a possible deal.
Would this be a good target for lvmh?
Either for lvmh , or you might see them trying to branch out.
You do see a lot of european companies, you see them trying to get outside of europe, trying to branch into emerging markets or the united states so they are not reliant on the continent.
The loro piana acquisition, ferragamo so much bigger and broader.
You saw how many different countries they are in.
What are you wearing today?
That was very cool.
Can i go to italy with you next time?
Company news, scarlet fu on a job stay.
Aig will pay a dividend for the first time in five years.
The insurer will pay $.10 a share orderly dividend.
It is the first payout since the federal government's rescue.
Aig reported a 17% drop in profit.
Rbs naming a new ceo.
Ross mcewan will replace stephen hester.
Bmw chips away at mercedes' first place lead.
Sales rising 13% in july, helping it cut mercedes' lead.
"bloomberg surveillance." bloomberg television and on bloomberg radio, streaming on your iphone, and android, bloombergtv plus out on the ipad.
I am tom keene, and with me, sara eisen and scarlet fu.
Our guest host is jeffrey mccracken, head of our bloomberg's emanating, raking the dell news moments ago.
-- and then 18, breaking the dell news moments ago.
-- m%a team, breaking the dell news moments ago.
Also following throughout the morning, t