This is bloomberg "surveillance." the united states along with france and britain inch towards syria.
"new york times" hacked over night.
Shades the department of justice.
Is two or three or four companies?
Good morning, everyone.
This is bloomberg "surveillance." i am tom keene.
A busy wednesday, august 28. joining me is sara eisen.
We need everything.
A lot going on, particularly after markets yesterday.
Emerging-market stock hit overnight.
Mark carney will give his first major policy speech as governor.
He will hold a news conference after the event.
In terms of what to watch in this country, we get the weekly mortgage applications.
10:00, a report on pending or existing home sales after last week's pretty ugly new home sales report.
Before the bell, it joy global and express.
After williams sonoma.
Today's anniversary of the 50th march on washington.
He delivered his speech in washington 50 years ago.
At 2:00 president obama will make his address.
What a day it has been.
Use of the difficulties.
-- use all the difficulties in the market.
What were yield.
-- you saw the difficulties in the market.
This is the american west texas.
Brent was 110 now 115.45. gold elevated.
The emerging markets, the ruby is the word of worst -- worst of worst.
Green is the dollar versus the ruby.
-- the rupi.
The stocks and thailand got pummeled.
Surprising gold is not up more than $5. i agree.
Very tightly correlated yesterday.
That brings us to the front page.
When it comes to the most important story and the impact it is syria.
The looming u.s.-led strike on the country.
Hitting global markets.
Asian markets down for a second day.
Also, european stocks seeing the biggest drop in nine weeks.
You were looking at oil, but the correlation between the s&p and oil has been breaking down.
Moving in opposite directions.
I was reading a note yesterday saying this can play out, but it might be short-lived because of the unrest in syria.
You talk about the uncertainty.
And the surgeon oil prices only hurts the country like india and the economy.
-- the surge in oil prices only herds the countries like india.
Twitter pact by a group that says it is the syrian electronic army.
The group packed into registration services provider that handles the online address of the new york times.
Some users reported being directed to a syrian-group site.
I still have problems this morning.
Cannot do it.
Twitter was a whole new configuration for me.
April 23, the syrian electronic army opened for jefferson starship.
Syrian electronic army highjack the associated press.
The market reacted very quickly.
They are in support of president assad.
And it saying the western journalists are preparing the war too seriously.
There is a lot of uncertainty and would be wrong to say we're stuck in a hotel room.
We will talk more about this for sure.
Getting to the front page story.
We're looking at j.p. morgan.
Basing a slew of regulatory issues.
The u.s. is demanding j.p. morgan pay more than 6 billion to settle civil claims selling bad mortgage bonds to a mae and freddie mac.
Jpmorgan fighting the settlement, the single biggest penalty for the bank.
It might also pay a fine of up to 600 million.
That is according to "" street journawall street journal." the ft does a nice job.
Wall street bank underseas.
Criminal and seminal -- civil investigations into other things.
Investigation about chinese nepotism.
The energy market and probes into a metal worker housing.
Decode no question jamie dimon front and center.
Shout out to charles peabody who has been way out front on this some of the cost.
So much for the quiet of august.
The perfect time to speak to liz and saunders.
Chief investment strategist.
So she suggests it is safe to come out from under the desk.
Sam grobart wtih ith us as well.
How do we buttress ourselves, how we've remained calm?
How you keep calm when you see emerging markets thinking?
We have had an underperform on emerging markets for much of the year.
We want to the position earlier in the year.
I do not think the investor base is even yet fully aware of this.
When you look at fund flows, so much is still going into non- u.s.. they look at absolute levels.
They did not look good underlying conditions.
They look at level of gdp but not trajectory.
They do not look at inflation as a driver.
My question is as money comes out, it does that go to europe or do we stay away altogether?
To go there has really been no great rotation.
A lot of the money coming out is going into cash.
The money going into domestic equities or european equities seems to also be coming from cash.
Of want to pin you down on the chart we just showed.
Tacoma you are not buying brazil this morning ? no.
Are you buying coca-cola and the individual stocks?
To go we still have a distinction between the small caps.
What are themes this hour , we will talk about this later in the hour, a big and deja vu to 1955. the gulf are you surprised by this?
This is the rational conversation?
I think is a rational conversation.
Steve ballmer has been saying we need these divisions together, the only way we can do real innovation.
During that same time they missed mobile, tablets.
Where has been the great innovations that apparently the company the size of microsoft can produce?
We will talk the future of microsoft later in the hour.
Company news this busy morning.
Starting with breaking news on joy global.
They make all of their money in the metal and mining industry.
Sales coming in much better than estimated at 1.3 billion.
Issued a buyback of up to 1 billion shares and reaffirmed the forecast for the year.
Also talking about legal bills.
The nation's six biggest bank has run of 100 billion.
Bank of america accounted for 75% of this according to data compiled by bloomberg.
100 billion covers legal fees and settlements in more than all of the dividends paid out by the bank in the past five years.
Raynair cut -- told to cut its stake.
It can be of no more than 5%. they are bowling to fight.
Las vegas fans will pay the u.s. 47 million for failing to report suspicious deposits from a high roller.
58 million the positive.
Prosecutors say that should have raised red flags.
The gambler is being held in the u.s. awaiting extradition to mexico where he faces drug trafficking charges.
Tacoma what is joy global?
A big capital expenditure company in the world.
They sell all of their stuff of mining companies -- to mining companies.
These are indicative of what people are buying.
A precursor to how the markets are doing.
A lot going on.
Coming up, we will talk about the new york times being hacked by the syrian electronic army.
Still not working.
Who is this group and should other american businesses be were read as the u.s. edges closer to action in syria?
? the 50th anniversary of the speech on washington.
To the left of the chrysler building.
Distant to the south, downtown manhattan, the resurging downtown manhattan.
Good morning, everyone.
Scarlet fu is on an asian trip.
She is off on the far side of the planet.
To go a group called the syrian electronic army has attacked the new york times website.
Twitter as well.
The initial twitter post is blamed on technical problems.
Twitter was hacked in certain parts of the website were down.
This was work of the syrian electronic army or a group opposing to be pro-assad ackers.
The u.s. relies on how they get information.
Reportedly they got into the services provider mel bourne i.t. that basically deal with the addresses for these companies.
The second time it has happened to the new york times this month.
The first one was scheduled maintenance update.
It shows how problematic for a company like this getting increasingly dependent on line and vulnerable.
The wall street journal promoted tweets to advertise the pay roll was down.
Take note they were using twitter to say our site was hacked.
Here is nine hours ago.
Unavailable to readers.
I still cannot get on.
Here is their facebook page.
Whatever it takes, right?
They do have alternate means of publishing.
They have the facebook page and have been posting stories there.
Have also been doing corporate sites.
This has become the de facto home page.
Shows the importance of this to the companies.
Why can't we stop what is a mom and pop outfits with factory -- fancy computers?
Why can't people stop the syrian electronic army?
The base fire was off.
17 minutes solos.
Take out is no joke.
A scary prospect for american business.
And you can have all the systems in place and you forgot to look in one area, and that will be the place they exploit.
How will they make sure every i.t. provider is -- you have spent a lot of time of these companies.
How are they working every day to prevent these attacks?
To go it is an increasing issue.
The new york times recently moved the new york -- the corporate system to gmail.
That has a lot of people nervous as well.
The thing is digital subscriptions is pivotal.
Up 35%. so this is a growth business.
It is pivotal to the bottom line.
Lazard says every 100,000 digital users converted is 6 cents earnings.
This is like a short motown classics.
How do investors pay attention to what sam grobart says the move to a calmer world of investing?
To go this is just in addition to an extraordinary long list of reasons why i think the investing public is so skittish about this environment.
Whether you talk about what happened with the knights -- nasdaq, cyber security, flash crashes, the facebook deal.
It is sad how long the list has become.
I talk to individual investors all the time, and they have a myriad of reasons why they are disgruntled.
They feel it is not a level playing field.
Still at of loved market?
Being objective about it, that is a great thing.
You have to have sympathy for the investor.
New york times still down for me.
I guess some people have a way of accessing it.
We will continue to monitor throughout the morning, along with others.
5300. that is how many fiat workers are seeing the temporary layoffs extended.
It has been a six-year decline.
We will discuss more of the company prospects coming up on bloomberg "surveillance." ? this is bloomberg "surveillance." i'm sara eisen.
Top headlines, the u.s., britain, and france moving closer to military action against syria for the chemical weapons attack.
Any action would be aimed at the weapons, not designed to push the president from power.
The attack outside damascus killed as many as 1300 people.
President obama rhee doing the u.s. collection of telephone and internet data.
This is the first meeting that was put together following leaks from edward snowed in.
The final report back to the white house on ways they can maximize intelligence gathering while protecting policy.
Victoria duvall stunned at the open.
First win in the grand slam event.
She won the open two years ago.
She was ranked 296. talk about an upset.
Those of the top news headlines.
Time for the morning must read.
I have one.
Comes from a former clinton mightite.
Writing that the government is a good venture-capital list.
He writes every government program is subject to budget sequester.
He looks at the idea that if innovation drives growth, what drives innovation?
He said believe it or not, you get this.
It reminds me of that advertisement i used to see as a kid when whoopi goldberg would say this is what the space program can do for you.
Are you going after tang?
I grew up in that house.
Bottom line, is there enough policy aimed at promoting small business and venture capital and innovation coming out of washington right now?
Certainly you look at the relationship the white house has with silicon valley.
Clearly there are people who have the ear of the president and adviser when it comes to these sorts of things.
You were assisted president bush in the second term of economic policy.
I remember with the meeting on this, is it deficient?
It is not sufficient i suppose.
As a forced mechanism for getting the spending side down and a contributor to what has been a pretty significant plunge in the deficit, i think it is a pretty good thing.
Remember the panic about this earlier?
Total panic on sequester a number of months ago.
Just did not happen.
To go the point here is the government funding -- the point here is government funding.
Asian markets getting slammed, freezing for corruption?
That is next.
This is bloomberg "surveillance." i am sarah eisen.
Do fines impact of big banks?
This on hills and the news that the u.s. demand j.p. morgan spend more than 6 billion to settle allegations that it mishandled mortgage securities.
Due date impact of big banks?
Financially, reputation no damage, tweet us.
We had emerging markets that were really rocky.
It is not flat.
10-year deal to 75. but turn here with all of the uncertainty.
Looking at the big gainers and losers from yesterday.
One of them is dsw reported earnings.
Treatise highest since june 2005. that was the ipo price.
The ceo reiterated they raise the forecast for the year.
He does not see the company as a takeover.
Take a look at united continental.
Tumbling the most in 13 months.
Facebook received 11,000- 12,000 requests for data.
A fraction of the 1 billion users.
Keep your eye on that.
The dow is up 13% this year.
The s&p 500 up 13%. that could be about to change.
Syria really rattling investors.
For you see it and bring it immediately for word from labor day.
Markets caught a bid this morning.
That has evaporated.
Lizzie and saunders has seen this too many times.
-- liz ann saunders.
Will we finally have a correction upon us?
Chief investment strategist at charles schwab.
You have seen this before.
We really have not.
Offs we have had an interesting repeat pattern.
We saw it in 2010, 2011 and 2012 with macro concerns of a policy nature.
Anything from tend to a close to 20 percent correction.
This year pullbacks have been fairly limited.
I think this one will become a to.
We may be able to avoid that.
We're in unseasonably week time.
We have the forces of the fed meeting and the cluster.
As you mentioned earlier, the walls of worry has to be great for market sentiment.
Great for a long-term sentiment.
2.5 weeks ago when we put the note out, largely most of the traditional measure of sentiment had gone to a level of at least short-term optimism.
That has pulled back quite a bit.
This suggests we put a short- term bond -- bid in.
-- term wall of worry is still there.
Which industries can hide out in?
I do not know that you want to hide out in the traditional industry.
We still think the more cyclical areas like technology, industrials will be the best performers.
Don'at investors have a lot of exposure to emerging markets?
-- don't investors have a lot of exposure to emerging markets?
] you mentioned small-cap.
But about mid cap?
What is that and something you should look at?
The way we look at it is through quantitative ranking.
Many of the mid-caps look pretty decent.
Really an eye of the beholder.
You are absolutely right whether it is an analyst coverage perspective or you get lost in the shuffle.
What is your to do list?
Depends on whether you are more technically-oriented investor.
I am not happy or the significant other is not happy.
I have always said you should let your portfolio manager tell you when it is time to do something.
Do not try to figure out which yahoo!
On tv will have the right call on the equity market.
And if you are under exposed, to whatever the asset coming your portfolio is telling you it is time to do something.
Same thing on any other asset class.
You do not have to rely on your own market timing or someone else's. it can't reach it forces you to buy low and sell high.
Take a the same thing for bloomberg business week and bloomberg television.
Some of the names have been hit pretty hard.
Are they treating story by story right now?
I would say it is probably more the former.
Tech companies are counting on big corporate orders.
They tend to go where larger enterprises go.
If people start to pull back, and you look at someone like microsoft, they suffer a great deal.
They react exactly the same way that any other industry would.
What about valuations?
What do companies need to do to earn what they are worth?
Valuation is off to some degree.
You can find a raving bear on the stock market that can support the pace by looking at stock market valuation.
You could find a raving ball to support the case.
To go are you looking at trailing?
I think valuation properly, whether you look at traditional trailing basis is reasonable.
I think the market is reasonably valued.
Should we look at earnings or is it just about use of cash and what is holding up the markets?
They're going to raise dividends and buy back shares.
You have to look at earnings but focus on cash flow becomes increasingly important.
Cash flow is king.
We will talk about that.
Gold, commodities, the markets.
He would have thoughts that would agree.
Recent board the coast -- difficult half of 2013. specifically worried about u.s. profit margin peaking.
That is coming up in the next hour.
? this is bloomberg "surveillance." i'm sara eisen.
Switzerland moving closer to an agreement with united states of american hiding taxes.
This was government will decide today whether or not to accept a proposed sentiment and would pave the way for all swiss banks that involves find -- fines and disclosure of u.s. client data.
The largest pool of radioactive water in stored at japan's nuclear plant.
The plant was wrecked in the 2010 earthquake.
Plant operators trained to figure out how to get rid of the water.
Among the choices was put it in the ocean or let it evaporate.
Rents i is in the world in hong kong.
They rose last quarter.
This is partly due to the tight supply of office space.
That was done on the one clear day.
Problem i saw a report the other day that was pretty grim.
That was gorgeous.
Fiat extending layoffs for 5300 workers.
Just how tortured are the european auto makers?
We need to go to europe.
Mannes cranny joins us from our london team.
How tortured are we?
We're coming off a 19-year low.
There was a bit of a pickup in germany, uk, france, and spain.
Where is it still tortured?
Even though you have one blasting stock, up nearly 50 percent, but have a look at this.
You know jeep and dodge.
They are taking together.
They are down again.
What you said in london, interesting model working.
It is the fiat 500. there very stylish and popular and cute.
This weekend, are you getting one?
I will not be getting a car.
Remember, i told you about my driving?
They are selling 4000 of these things every month.
And that not necessarily turn them around.
What will turn it around?
He is taking capacity out of the system.
They can produce 3000 hundred cars.
He is saying if i cannot hash out a deal with the unions, i will tell you to stay at home.
5000 people to stay at home next year?
To go even if you are cutting capacity elsewhere.
They have 69,000 employees.
Suggesting moving the corporate headquarters to the u.s., which was playing chicken.
He is willing to make that.
I was up auto show when he first made a splash.
Everything was focused on europe.
It has become the fiat of america.
To cut the sticker price is irrelevant.
It will always sell for more than $28,000 want to add in options.
Go to a dealership in try to get a base stock a model.
There are not any.
I want to hear about this.
You were there.
I was thinking what is going on?
She gets to go to ferrari.
He is cutting production in those to make it so special and unique.
That's mark is pretty spectacular.
When you look at autos and what is happening, he said we still have over capacity.
They're all taking capacity out of the system.
The best-performing industry group in europe.
12 million car sales from a low level of 6 million a month back in 2008. we still have a long way to go.
Fiat out of detroit.
Helping us out from london this week.
Coming up, talking about microsoft with sam grobart.
Who should be the ceo?
Maybe the question should be should there be multiple ceos?
We will see where the value is coming up.
There is a live picture of the lincoln memorial.
50 years ago today martin luther king addressed the crowd.
His i have a dream speech 50 years ago today.
Later today president obama will address the nation on the anniversary of the day at 3:00 eastern time.
Here is the shot.
Martin luther king addressing the nation.
Taking a listen to the excerpt of this breach.
-- the speech.
I have a dream that one day this nation will rise up and live out the true meaning of its creed.
We hope these truths to be self evident that all men are created equal.
August 28, 1963. it take them i clearly remember -- i clearly remember the riots intentions.
Frankly, vietnam got in the way.
You wonder what would happen if we did not have this destruction of vietnam.
Not only what a fact -- effect of what happened today but cristobal on the other side.
We're going to talk about microsoft right now.
Maybe the next question should be how to deal with the many separate divisions.
Sam grobart looking into the question of breaking up microsoft.
Why would it make sense?
To go the feeling is there are too many divisions and not coordinated and would be better off to break up the company and split in two different companies.
Leaner and meaner divisions.
How would that foster innovation?
If you think about the way microsoft has function, it has been a model of dysfunction.
You have the separate systems incapable of working with each other.
The office group, windows group.
There is a graphic going around for a while showing the different divisions with guns pointed at each other like a mexican standoff.
What instances has a huge tech company split up and has worked?
When you consider for rise iverizn on.
You think about ibm, that has worked out well for them.
There is a vertical integration that samsung.
It is so bizarre and unique, it seems to be working for them right now.
Which is the most promising unit?
Tacom the xb hasox been the biggest consumer hit.
-- xbox has been the biggest consumer hit.
They make a pile of money.
78 billion and revenue.
They have a $77 billion in cash.
Can i say that this is manifest corporate irresponsibility to be a utility-like monster and to play cash like adults?
Peak of the problem is they have managed to miss all of the major trends in technology of the past 10 years.
Is this a case of a company not knowing what it is?
You have seen this before, large but he missed that do not want to be a large behemoths.
Many of them do not want to start to distribute the cash in a way that makes the perception about what the company is.
I agree with that generally.
The problem with microsoft is for a long time it had one mission come get as many people on to windows.
Just put windows everywhere.
They did that.
They won that battle.
The problem is they do not know what to do -- the financial statements still tell me they are winning but they have scored up the other area greatly.
Basically the problem has been you look at global strategy.
Windows phone not doing well.
The surface tablets has tanked.
Took a $9 million charge on that recently.
The internet still are -- they have bing that no one uses.
Runs like a swiss watch.
Nobody cares about it.
No one uses it.
What is the role an activist investor has to take in order to make this happen?
That is a good question.
You see people go in there and advocate for leadership change?
Value add less than 1 percent of the stock.
They seem to be more focused on dividends and buybacks than any sort of spin off.
I do not think they are focusing strategically on the company.
Thank you so much.
It is not the level of the dividend yield that matters but the growth and dividend, especially for companies that do not pay dividends now.
I think you are opening up a part of the markets for investors that will be for the first time dividend-paying companies.
No, but the initial start in the growth that matters.
What we have found is the screening process by looking at the level of deals.
Not understanding the fundamentals is even more important.
Microsoft 2.77%. its 16% five-year dividend growth.
There is an example.
To have to look at what the underlying fundamentals of the company are.
In the yield-starved world, investors were not bothering to look at fundamentals of the company, just the level of deals.
Five lives -- fabulous video on microsoft.
Currencies on the move with the turmoil we have seen from syria.
The dollar's stronger against the yen.
First time we've seen that in four days.
Colmar right now.
The indian rupi.
-- calmer right now.
The ransd a the weakest level since 2009. concerns about the emerging markets.
We will talk to the vice chairman of blackstone.
He has concerns about the second half of the year.
This is bloomberg "surveillance." ? this is bloomberg "surveillance." new york times hacked by the syrian and electronic army.
Who are these guys?
Can the housing market withstand higher interest rates?
Soybean prices are reboundin uining my daily amongedamame.
Alix steele here for scarlet fu.
Guest host this hour byron we in.
Decade that morgan stanley.
Trying to turn off his black berry.
You have that daily?
It has gotten pricey.
Pay attention to mark carney, governor of the bank of england today.
And he will be addressing business leaders.
At nottingham, england here in the u.s., as you did a point.
Mortgage applications just out.
10:00, pending home sales after pretty disappointing numbers.
We will talk about the nuances in the housing market out there right now.
After the bell we have william sonoma.
Worth noting coming 50th anniversary of the march on washington.
3:00 the president will address the nation on the anniversary of when martin luther king delivered his famous i have a dream speech.
There is a morning briefing.
We start with j.p. morgan.
The banks could be hit with the $6 billion fine to settle claims related to the financial crisis.
The claims related to charges they sold bad mortgages.
J.p. morgan is fighting the proposed fines.
New york times in twitter have been hacked by a group calling itself the syrian electronic army.
The site was an accessible for many hours.
The crew packed into millboard broadbent -- hacked into melbourne i.t. ryanair told to cut its stake.
Ruth it was told that affects the competitiveness.
They vowed to fight the order.
The world is watching as the u.s., britain, and france moved closer to military action against syria for the chemical weapons attack.
They now have the task of convincing the country to support limited force.
What do we know about it, and what will the president be doing today to sell this?
We heard yesterday the white house came out there is strongly to save the regime change is not the goal.
Talking about a limited use of military force.
Um targeting chemical weapons facilities and direct message.
Reports going to send a message to other countries beyond syria.
Not a message the white house wants to send.
Is an important.
And the administration that does not want to send a message that we're going back to our -- going back to iraq and afghanistan.
Within your research, reporting, what are the targets?
What recalling after?
That is one of the things we are sweating right now.
What are the targets that will send a message?
The kinds of facilities that not only store these but in the use of developing and putting them on rockets.
They also want to send a message.
There is certainly some with the administration who would like this message to be more than just that.
That this has to be something with force.
There has to be shock value.
There is a debate as to how far to go.
How many cruise missiles to go -- to send.
That is one of the things they are sweating right now.
What is the political process corn to be ones president obama decide on a course of action?
To go -- first of all, a notion they will declassify some of the intelligence that tells the united states the regime has something to do with the use of the chemical weapons.
You are also seeing not only international sales pitch, but efforts to consult with key members of congress, leadership.
Perhaps not convened the entire congress as a whole.
That will be a big question mark.
Democrats and republicans calling for the president to seek approval.
How important is it for the president to get international support on this move?
This is critically important.
This is the president that was critical of the bush administration for going it alone and foreign policy.
He has been reluctant to get involved until this point.
The fact that they have the arab league.
Very important for this administration.
Peter cook, chief washington correspondent.
Thank you for joining us with an update on the president's decision.
Going to be political on whether they will move further into the military action.
Our guest host this hour, we're thrilled to bring you byron win, chairman of blackstone.
Tend surprises each and every year.
-- 10 surprises each and every year.
Expect the unexpected.
Is here at the unexpected?
-- syria the unexpected?
The fact that the use chemical weapons is really unexpected.
For the second time a country has gone over the red line.
Was how is this is just the thing to think about looking forward over the next 12 months?
I thought because of decreased demand, the price of oil would come down.
Here the price of oil is higher than it has ever been.
Is it enough to further dampen the gdp, and how will that fold back into washington?
The gdp is dampened by itself, but certainly not a positive.
As you look at this summit geopolitical concerns, where did they break in terms of concern?
-- where do they rank in terms of concern?
Are not primary.
The market did very well during the iraq/afghanistan war.
It does not necessarily for the market, but causes another conflagration -- confrontation where american troops are involved.
We have gone through the first hour without mentioning debt ceiling.
There it is.
You and i are old enough to know there have been 45 debt ceiling crises before this.
How does byron approached the debt ceiling?
I just do not worry about it.
The united states has been accumulating debt since 1792. we accumulated six trillion in debt.
From 2000 to now we have accumulated a 11 trillion.
Almost tripled the debt.
Six trillion to 17. that is terrifying.
What is even more terrifying is this, we were paying 6% on the debt in 2000. 360 billion service the debt.
Today we are paying about the same amount.
You predicted interest rates would go up.
It is in your call.
Where will the 10-year yield beat a year from now?
The 10-year will be 3% for the year end.
This is such a distinction.
Hi year yield, cautious g.d.p. call.
The coho." the last time around nothing gets done.
So much has been politicized that it has led to an environment in washington where it is hard to just simply face the debt limit.
Something has been done about it.
The debt -- the deficit in 2010 was 1.5 trillion today the deficit is 642 on a 17 trillion dollar -- we will come back.
Way too much math for an august morning.
Take up the strength of recovery.
Well august rates hurt?
That is coming up on bloomberg "surveillance." ? morning, everyone.
Bloomberg "surveillance." i am tom keene.
This matters now.
The age old question of growth.
Government give up on austerity.
Globally and in the united states, some might call it tepid economic growth.
Because there is too much supply.
To many people making too much stuff.
Plenty of demand, but not growing demand.
That is not happening despite monetary policies.
We have heard these before.
We move on and get out of the idea of a two-month supply.
What is the process?
The process is over the years, 1947, the united states was 50% of gdp.
Today it is 23%. we're still growing and the venture economy, and that is not all bad but we'd like -- would like to be aware of it.
To cope raw i did not think we will become europe.
-- i do not think we will become europe.
They have structural problems more severe than ours.
We cannot do anything in washington about fiscal spending.
To cope growth could be internet and technology computers.
Could be quickly saw and housing.
What will be the growth driver that easy?
We will sit -- get some growth from housing.
The rising interest rates and mortgage rates are a problem there.
We will get some growth from energy because we are producing more domestically.
That is a positive.
There are two things out there.
In globalization is a job destroyer.
The internet is a job destroyer.
That is a separate topic.
Would you suggest we of growth without labor growth?
That has what we have had so far.
The traditional cycle in the united states is during a strong economy the unemployment rate is 5%. in a recession in this tent.
We are at 7.4 right now.
We will come back on gold.
Twa iota -- toyota.
Matt miller in michigan next on bloomberg "surveillance." ? this is bloomberg "surveillance."i'm sara eisen.
Guest host is byron wien.
The u.s., britain and france moving closer to action against syria.
Any action would be taken at the weapon.
The white house is planning to release intelligence on the attack last week just outside of damascus that killed as many as 1300 people.
This is the first meeting for the white house and the group put together following the leaks from edward sno wden.
In sports, a 17-year-old victoria default stuns amanda stousersur at the open.
Duvall ranked 296. that must have been exciting.
To go very exciting.
Takeover we are going to talk about housing.
What happened to the housing recovery?
Later today we will depending on sale members at 10:00. home buyers and home builder should all be watching.
Take a well the house a market cool?
A talks a combination of light inventory.
City by city.
Everyone is thinking of moving to a 3-bedroom walk in with walk in closets.
Walk in closets.
We need to talk to jonathan miller so sara knows where to look housing in miami, new york and around the country.
It has been too long.
What is new?
The dome the whole idea of housing interest rates.
I am relieved.
Fundamentals in terms of jobs and growth -- job growth do not support will% growth.
We saw the rates are below/ . are we still using suitcases of cash?
Ensomething like 50% of transactions are cash purchases.
Here in new york probably two- thirds.
It is a big number.
The career path is so bizarre that so many people are paying cash.
Are you still seeing big investors getting in on the difference?
Still getting feedback.
It is probably on the late side.
The benefits of going into that is waning.
To go -- are we mentally thinking housing as a performance for investment?
I think the fact is you cannot get much yield from any kind of credit instruments or save credit instruments.
Treasuries do not yield anything.
Even 10-year government only yield 2.5%. house prices are going to appreciate, could be a good place to put cash.
Investors have the view that rising mortgage rates will affect the recovery.
Look at some of the names, stocks are down 20-30%. are you seeing that?
People more skittish to go out and buy homes because mortgage rates are going up?
Not really, but i think that will happen.
By present and the 30-year fixed.
I think the fed -- rates were too low for too long.
There will not be that much damage in terms of loss of activity until we get over the 5% threshold.
Why are seeing so many cities boom, boom, boom?
Boston and new york city seem to be more of single-digit territory.
Part of it is because they came from such low levels but they're going up dramatically.
Las vegas of 25% from a year ago.
One of the hardest-hit markets.
He could you came from an utterly distressed market to almost one that is becoming speculative again.
You took in stride the rising rates in terms of buying property, but what pressure does that do to landlords and affect rent?
Because of tight credit, rents are exceptionally high.
I did not know if it will continue at the pace they have been rising, but the fact that people could not necessarily qualify like they could before, not like the last boom.
Historically tipping people back into the rental market.
I think as rates rise you will put more pressure on rents because you will reduce the affordability.
What is your outlook on how housing but into the overall recovery?
Will it lead us or hold back?
There is some negatives, but housing has clearly hit bottom.
Mortgage rates are up from 3.5%-4.5%. that is a serious problem for a lot of buyers.
Jonathan miller, thank you.
Coming up, we will talk about a favorite topic.
Major action in the crop.
That is coming up on bloomberg "surveillance." ? is this bloomberg "surveillance." -- this is bloomberg "surveillance." let's talk about legal bills.
The nation's six biggest banks have run up a whopping $100 billion in legal fees since the financial crisis.
Bank of america and an jpmorgan account for 75% of this.
This covers legal fees and settlements.
More than the dividends paid out by the banks in the past five years.
Las vegas san spent the u.s. 47 million for failing to report suspicious deposits.
Prosecutors say it should have raised red flags.
Jpmorgan bracing for a much as $600 billion in fines but related to the london royal.
The total could change.
And that is today's company news.
Take them another company to watch is toyota.
Executives coming from all over the world.
Matt miller joins us from michigan.
I know there is going to be a lot of talk about the japanese yen, but also a lot of talk about hybrids, which speaks to why they're coming only to michigan.
This is a great example of the yen and oil.
They have come all the way here to detroit.
They brought 28 cars with them to show the world.
Really to show the big three that they are still the master of hybrid cars.
They hardly had any competition a couple of years ago.
Ford and general motors have tried to take a back page of what fuel-conscious consumers want.
Not doing nearly as well.
Of the past 12 months they have released " the competition.
To get their smoking the competition on hybrids.
They have not made inroads here.
They have a partnership with tesla.
How will they break into that market?
Well, that market is not so big right now.
They are mostly concerned with the hybrid.
They are going above and beyond.
They are developing of hydrogen fuel cell.
I know the prius sold to a certain market.
I am sure it sells well at the university of michigan.
Can it sell to the rest of america?
Is america ready for a hybrid?
America is definitely buying them.
They make up 10 percent of what america sells globally.
They sell 250,000 per year.
Maybe it is not just for sensitive guys.
My mother drives a prius.
Tell us what else you up coming up in terms of coverage.
We will enter real bob cart er, of u.s. sales.
We will find out how they're doing overall because ford and gm have done very well in the mid-sized sedan market.
We will talk to the new head of the u.s. business.
Japan has brought him over to run the business.
Better ask about the outlook for the japanese yen.
Looking forward to your coverage.
Joining us from michigan, matt miller.
Byron wien with us.
This trend continues.
We have to get on the multinational bandwagon.
Take a we are in a multinational band wagon.
-- we are on a multinational been widened.
We have been global since the 1920's. tacoma who i do not think they are mutually exclusive.
I would buy a global fund.
I think europe is attractive.
I think it is undervalued.
We will come back with iran byron wien.
Futures little changed, indicating the was sparked market will stay near an eight- week low.
-- the u.s. stock market will stay near an eight-week low.
Good morning, everyone.
Bloomberg "surveillance." bloomberg television, radio, bloomberg.com.
All of that above you.
It is free.
I'm tom keene.
Sara eisen, alix steele.
After last year's drought, the soybean outlook for this year could only get better.
This was a fantasy.
Now it is getting caught up there.
This is hitting soybeans and a critical maturing period.
So now they're trading at record premium to corn.
Director and head of the agricultural committee research.
It just got back from a cropper tour.
What was the biggest problem?
That really drive in august.
Iowa was something we were expecting to see.
But having their reach into illinois and indiana was surprising.
-- but that reached into illinois and indiana was surprising.
The slowdown the crop development.
They're starting to get more stressed.
When we saw the pods, we have a lot of plants that did not very many pods.
When you were in texas, you went into your class, boring soybeans.
And there is a huge nutritional value.
Do we grow them for us or for exports to nations that really need it?
Tacoma what we're talking about is the ones that we crash.
There are other hybrids.
You do not know what is in the cosmetic.
You never know.
Talk about the trickle down effect.
A company like tyson foods, will they get hurt?
Up until the start of this week we saw food prices coming down dramatically.
We saw the poultry producers starting to expand.
Estes to high, those plants can revert back.
To go what is the impact?
-- what is the impact?
How high did have tuesday to seek a reaction?
At these levels it is not that concerned, but the crop gets worse, that could start eating away.
What did they have going for them is record beef prices.
May i suggest as farmers complain about the weather, -- you have areas of the midwest that have seen the biggest drug since 1930 -- not every year is not 1936. take the weather will always be the biggest risks and there will always be concerned about that.
July and august are critical times.
We have a frost coming up or could potentially.
Farmer wien would like to step in here.
I passed through a farm once.
One theory i have had is the global warming will make this wet weather trend consistently worsening.
Is that true?
Something to worry about?
It seems to be the weather is more unpredictable and generally worse.
More storms and hot weather, and that is bad for crops.
We have seen a large variation of the past decade or two that we have before.
I will also say we exceed record population growth.
Up until the panic of markets result emerging markets will be developing.
But not any one thing.
A combination of all of these factors together.
Soybean and wheat and corn have been totally hammered.
How much of this is financial?
Monday's reaction was a lot of short-covering.
We saw a lot of short positions on friday's report.
After that we sold off.
I think it is about flat this morning.
Thank you so much.
Twitter question of the day, do large fines impact big banks?
? -- think jpmorgan.
I'm tom keene.
Bloomberg "surveillance." we like to bring you authorities on any topic.
Betty liu will have one of those authorities on syria out of cambridge with a distinguished career in british diplomacy.
A former u.k. investor.
We're having a little technical difficulty with your microphone.
To go let me introduce sir andrew green.
Do not miss it.
Former united kingdom ambassador to syria in the early 1990's. i really look forward to that this morning.
To go citigroup piling up 130 billion in legal fees.
However, charles peabody, analyst has a cell call on citigroup, a bank of america.
It says all of this will contribute to a material cyclical rise in the bank, a reenergize crusade.
You wonder when this will take over?
Speaking of the latest, japan.
Apple planning to open up a brand new store in an upscale neighborhood of tokyo.
Shares down a little bit in the pre-market.
Going to the shopping district, an upscale shopping district in japan.
Construction set to began -- to begin by february.
So this is a bloomberg kind of spoof that apple is building a new store in japan.
The prime minister working very hard to end deflationary and get japanese growth back.
I have to talk about commodity.
This is a really interesting take.
At first the stock was up.
Better earnings and revenue.
Then what happened?
The company said in the fourth quarter it would reflect a transition to lower volumes.
Outlook unlikely to support revenue above $4 billion.
Expanding the cost cutting production program.
Mining sector is tied to demand in emerging markets.
You have all seen google self-driving car.
Interesting story from the japanese auto maker that sensible offer cars with self- driving technology by 2020. they demonstrated a prototype yesterday just outside of loss angeles.
A combination of cameras and radar sensors.
I do not want to get a license.
I can let it do it for me.
To go i am with you.
I will take it.
-- am with you.
For me, i think it would be safer for the car to drive its open for me to drive it.
It is debatable.
We will talk to you in a minute.
The vix expands.
Mark -- mario gabelli will counsel patience.
That is tomorrow on bloomberg "surveillance." i am sarah eisen.
Our guest host for the hour is byron wien.
Company news right now.
The sec working to settle a time warner cable dispute.
The battle has knocked cbs program off of some time warner systems.
The fight has been raging for close to a month now.
A spokesperson would not give specifics but said a commission is engaged at the highest levels to end of the disputenissan plans to sell self-driving cars by 2020. it is one of several major auto makers working on building cars that drive themselves.
Google has been developing self- driving technology.
Amazon allowing consumers to shop for items within that mobile apps.
These will sell goods inside amazon.
That is today's company news.
Time for the agenda.
Stories that are shaping the day.
It has to be the hack attack on "new york times." getting attacked claiming to be the syrian and electronic army.
The group hacked into melborne i.t. that handles the online addresses.
This is pretty pervasive.
It has been across the industry.
And remember, the ap that hit with a false claim that the white house had been attacked.
That calls turmoil in the markets as well.
The ceo warning internally they had to take care of the e-mails as well.
No one is safe in this new ad cyber warfare.
Still could not get it.
We need to talk to return ichard falkenrath, bloomberg contributing editor.
Clearly a threat for american business.
Who is the syrian electronic army?
A good question.
We know they are affiliated with the outside government but do not know exactly the relationship.
They use assyrian and domain name that the government allows them to use.
-- use a syrian domain name.
All othis latest attack is an escalation because instead of going after the news organization itself, they went to the domain name service provider.
This company was hacked to directly and why the web sites were disabled.
What is the likelihood they attacked -- they stop here?
The likelihood is zero.
They will keep going.
Nothing to stop them.
They have a sanctuary.
Presumably in places where they cannot be targeted by law enforcement.
They are causing a nuisance from the internet and distributing information.
Thank you for checking in with a valuable perspective this morning on this.
Electronic army, which many americans have not heard of.
-- syrian electronics are memy.
The latest, the government demanding jpmorgan pay $6 billion.
This is just the latest in the slew of legal headaches for jpmorgan.
Our reporter indicates this is a settlement, not necessarily a fine.
There are some in the other investigations right now.
When does this end?
It does not end.
Regulation is a real problem for the financial-services industry.
Does it matter?
Three straight years of record profits.
They are doing well in spite of it.
J.p. morgan is probably the team to beat in commercial banking.
It is a problem.
Is it the team up for washington to beat?
Do they go after the industry.
They feel the banking industry was part of the problem in 2008. it to go to you agree with that?
There were a lot of players of part of the problem with the banking industry as well.
More headaches for jpmorgan.
I am looking at what happened on the bloomberg screen.
It is blinking red and green.
Something happened with syria.
It became correlated.
A little less correlated today.
Equities, bonds, currencies and commodities and everything tightened up after the trauma yesterday.
One thing moving is gold.
Byron wien very vocal on gold.
Guinea to own a little gold.
I would have said that at the beginning of the year in you would have been hit pretty hard.
The countries around the world are debasing currencies come and gold is a form of protection.
Why isn't gold at 2000? the people who bought it for people in asia.
They bought it to hold it.
-- you go to the dynamic of the people in asia.
This is the indian government crisis.
Can the indian challenges fold over into other currencies come into gold in the equity markets?
Are they separate and discrete, or should we link with it?
To go separate and discreet, but there is relevance to the of the market.
What they are going through is not having a major impact on the other markets.
One thing i do want to say, when you talk about global -- joy global in the guidance downward, i think that is a trend in american corporate life right now.
Any companies that are providing guidance -- guidance are fighting low.
Do they continue to pay dividends and buy back shares or have we reached the limit?
I think buying back shares is the reason earnings are up.
When you take a hard look at corporate profits, they are not impressive.
You think that corporate profit margins may have peaked?
I think they are at a record high and will come down.
Aren't we seeing better demand to offset that?
Pico not enough for him -- not enough.
Everyone has seen an acceleration in the second half, and i am not seeing it.
Where are you for the equity markets out 12 years -- next year.
Tacoma 12-month they can be higher, but not a lot higher.
We have to temper enthusiasm down.
The markets are likely to move with earnings.
Emerging markets are down by you to get productivity increases.
Is a-rod done?
I have no idea.
Chairman of the blackstone group.
Time to get to the twitter question of the day.
We asked do large fines impact of big banks?
We had some fun answers.
Another answer is, they do, as long as it is accompanied by a strongly-worded statement.
Last, finding things is penalizing shareholders for management misdeeds.
I have heard is quite a bit.
Have to think about reputation of damage.
To go the whole point was they did damage during the financial crisis and now penalizing the shareholders again.
Enough going after big banks.
She says jpmorgan is facing downhill.
I would not want to be jpmorgan.
Didn't they to the government a favor?
They bought bear stearns.
Here we are, so talking about it.
Always good to see you.
Thank you for joining us, vice- chairman of the blackstone group.
We continue on bloomberg radio.
"in the loop" with betty liu up next.
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