Ukraine Blames Russia: Surveillance (04/08)

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April 8 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Tobias Levkovich, A B Mendez, Richard Falkenrath, Kevin Roberts, and Chris Crane. (Source: Bloomberg)

This is "bloomberg surveillance." moscow is orchestrating detainees protested eastern ukraine, according to kiev.

The imf and brussels watch from a distance.

Earnings season begins with alcoa.

Tobias love goodrich -- tobias levkovitch joins us.

Connecticut holds off kentucky.

This is "bloomberg surveillance ." live the from world headquarters in new york, it is tuesday, april 8. i'm tom keene.

Joining me, scarlet fu.

He darkens the door -- way too early for erik schatzker.

He joins us this morning.

I stayed up and i watched a little bit of basketball.

Four games, three games left in the nfl -- nhl season.

Only one of canada's seven nhl teams made the playoffs.

The worst in 41 years.

Because of that, we have tobias lebkovitch.

The bank of greece that -- bank of japan refrain from extra stimulus.

They say the country's economy can maintain its pace of recovery even after an increase in the sales tax last week.

U.k. industrial conduction rose more than economists forecast in february on a surge in factory output indicating economic recovery of a sword.

In britain, wage growth accelerated in the fastest pace in seven years.

Economic data as well and earnings, of course, we have alcoa coming up after her the bell.

I know scarlet is focused on jpmorgan.

Let's do a data check.

A quiet economic weekend.

Futures churn, 10-year yield is important, moving to 2.70. crude is still elevated.

Onto the next screen, little more substance.

The vix shows the angst out there, and gold back above 1300. the yen, a little bit of a risk off field to the tape overnight.

Here is a what they are looking at in ukraine.

This is the currency of ukraine back 20 years.

Lousy, week.

The imf into the meetings this weekend -- or as another bout of weakness in ukraine.

That is the tension of the ukrainian currency as they try to management.

It will dominate the discussion of the imf.

Let's get to our front page.

We went to all the papers and websites to pick out the front page stories and the first one goes off of what you were talking about, the spontaneous protest taking place in eastern ukraine.

U.s. accusing russia of instigating this unrest.

Several hundred rogue russian -- several hundred rogue russian protesters.

This is similar to what happened right before russia annexed crimea.

The u.s. says there is evidence some of the protesters may be paid agitators.

Alexei am fascinated by the game theory.

The idea that the protests an advantage to you two, disadvantage -- an advantage to putin or disadvantage?

And don't forget about moldova.

Use all bloomberg headline on moldova.

-- you saw the bloomberg headline on moldova.

Transnistria, a little russian sliver of moldova.

We make jokes about it but it is the respect they want to join russia much the way crimea did.

It is a self-proclaimed republic at this point.

And the moldovan efforts to cozy up to the ooh much as the ukraine did is threatening the survival.

Richard falkenrath will join us for the entire 7:00 hour.

Banks are getting ready to report their first-quarter earnings number and citigroup will miss a key possible -- profitability target after the fed rejected a plan to return cash to show holders.

This was return for tangible equity.

This is not a headline number.

It is a way for investors to compare the profitability of one bank to another.

A big deal for michael corbett, the ceo.

He is a credibility ceo.

He came in to correct the mistakes on the likes of vikram pandit, for example, or even before him, sandy weil.

And the first 15 months under mr.

Corbat went well and then they uncovered a $40 million fraud and then they failed a stress test for the second time in three years.

Each bank are you most focused on?

I think you have to look at the two banks reporting first.

Wells fargo, because it is emblematic of how to run a bank will.

You could argue that an quibble with certain things.

Maybe too large a share of the u.s. mortgage industry.

But wells fargo has produce more revenue growth than other banks.

Just a quick note, this citigroup also severally agreed to settle claims.

It will take a $100 million charge in the first quarter.

I want to get to the final front-page story.

A huge verdict by federal court jury in louisiana.

Eli lilly and a japan cup they were ordered to pay $9 billion in punitive damages.

This is the seventh largest award in u.s. history, the companies hit the cancer risk of a drug in the u.s. it will probably be reduced because the supreme court said punitive verdict must be proportional to compensatory damages and in this case the plaintiff got about $1.5 million.

The -- they can appeal.

That is our front page stories.

Let's get started.

April week after the bold predictions of december.

They adjust, recalibrate and they polish their crystal ball.

Tobias levkovich from citigroup, the proprietary measure -- your investments into -- let's go to your important comment out of tobias levkovich in his research note at citigroup.

It is not earnings, it is not revenues, it is not cash flows.

On the brighter side, florida appears to be the clients' favorite to take the and cw championship, but there still seems to be support for a surprise ending too.

You go right to the heart of it.

Your world is not too much different than picking brackets, is it?

What's my world is not at all of picking brackets.

I come from a long line of short people.

I don't play basketball.

I am more hockey.

I know you are or hockey, but within this, gaining the stock market is not much different than picking the final four?

One in quintillion possibility of getting the bracket right -- it is probably a little more difficult than looking at various factors that historically had important impact on markets.

What have you learned from your survey?

Investors continue to be bullish.

They were not as bullish as they were at other points.

One of the questions we asked investors is whether they thought there was a high rub ability of 20% gain or decline.

What they are telling us is it is almost an even split.

We have not seen it in about two years.

They have been generally more bullish about the markets.

They are a little less convinced of the direction right now.

And the gyrations we have seen in the high growth momentum stop, innovative disrupters.

You think of the biotech stocks, the cloud computing names, social media.

I think people are worried about how it could spread.

In your surveys you found the u.s. is once again the most favored investment destination in the world.

Why is that, even after the rally that has driven stocks this type and all this question marks about the momentum trade?

Two different factors.

One of them reflects the issue of where do they think there is growth coming about.

Europe is turning but turning very slowly.

Japan, there have been new concerns about.

Certainly emerging markets, a whole bunch of concerns.

The u.s. seemed closest to -- i help -- hate this term -- escape velocity.

And investors react.

As the u.s. market have done better, particularly in the latter part of last year and early part of this year, they just kind of responded and said, ok melissa will continue.

They get caught up in the momentum as well.

I am interested in a little historical perspective.

When you talk about the shift of sentiment, people growing more bullish or less bullish relative to each other, on the prospects for the stock market, how accurate a predictor of that of the future?

When you look at sector preferences -- for example, they like i.t., they like financial industrials, in that order -- historically when i look back over seven or eight years, those survey points are often viewed as a contrarian perspective.

That has not been the better way to play this.

Investors have told us what they like -- and other words, listen to the crowd.

Right, follow the trend, follow the flow and don't try to fight against the.

Tobias levkovitch joining us and later we will delve into the dichotomy of the high-tech flyers coming back to earth and some of the blue chips doing a little bit better than good.

Right now on this tuesday, company news.

We are not done with banks because barclays settling the first libor rigging case in the u.k., striking a deal with home care provider who accused it of selling products link to the rate.

Seen as a test on whether customers can sue banks over manipulation of rates.

Samsung and south korea posting a second straight drop in quarterly profit.

Weakening demand in high-end smartphones.

The accountant on the fifth iteration of the galaxy asked to boost sales.

It goes on sale this friday.

They cut back a marketing of that phone to keep margin stable.

Nbc back in first place.

It will close out the tv season with the biggest audience of viewers ages 18-49 in primetime, at least according to the ceo.

He says the wind says the network is gone from fourth place to first place.

It was boosted by coverage of the winter olympics on sunday night for all.

-- football.

Did you watch the ncaa basketball final?

I want to sleep, woke up, and watched it.

Connecticut the the odds and beat the favorite to win the championship.

The huskies surprised kentucky to win their second title in four years.

Most outstanding player scored 22 points.

At the start of march madness las vegas said connecticut had 100 to one odds to win it all.

The coach from kentucky said it was amazing, the young players.

Of the kentucky guys were all freshmen.

They have more years ahead to come back.

You conn's women could make it a week to remember because they will be playing as well.

They will tipoff against notre dame.

And they played in front of two presidents.

I thought it was great to see president bush and clinton sitting together.

Having laughs.

Which is great.

Of those are our company news stories and the sports event in the morning before we turn our attention to hockey because we are all a bunch of hockey fans.

And maybe ends . for those not from canada,levkovich is barely on speaking terms with erik schatzker.

Laxity happy about.

-- lots to be happy about.

Coming up, we will dig the burden to the samsung earnings.

What does it mean for the smartphone market?

You are watching "bloomberg surveillance." we are on bloomberg television, also streaming on your tablet, your smartphone.

And don't forget about us on bloomberg.com.

? ? good morning, everyone.

Robert -- bob saget will be with us.

With pimm fox 5:00 p.m. this afternoon.

There was a documentary a while ago where he was trying to tell the world's dirtiest joke.

I don't remember what it was but it was a big hit.

Just talking about the world's dirtiest joke?

Now, if we actually got the world's dirtiest joke.

Qwest coming up next -- this is "bloomberg surveillance." with tom keene and erik schatzker and scarlet fu as well.

An interesting company for the morning.

And apple of cupertino -- samsung reported unaudited results for the quarter and posted a second straight drop in quarterly profit.

Operating rocket fell -- a little bit higher than analysts were looking for but sales missed estimates.

The story here, not just for samsung but for apple, high-end product sales are slowing down because of market saturation and increased competition from lower and smartphone makers let the chinese device makers.

The stalled demand lower prices.

The first quarter is typically a week selling season for all tech companies.

You wonder how much of this will set the tone for the rest of the year.

It may just be an anomaly but we do know samsung will be launching the products in the next couple of weeks.

Samsung galaxy s5. do any of you use it?

Your wife does.

See is the only galaxy user in the house.

She battles of consulate.

We can't face time with her, which may be a positive sometimes.

[laughter] surveillance exclusive.

The home life of tobias levkovic h. upgrading tuning s5, the average selling price might be slowing down.

I am fascinated by not knowing what samsung is.

Multinationals -- i have a handle of bhp billiton from australia but samsung is an enigma.

Is it supposed to be that way?

It is in a lot of homes today and a lot of hotels in terms of the tvs you are turning on.

I admit, we have samsung tvs in our home.

We have seen lg drive it.

I think samsung has been a better job.

I think you are more connected than you realize because the particular phone are samsung manufactured.

In the apple phone an ipad?

Yes, they had this frenemy relationship for a long time.

They continue to play out.

What the bank of montreal say ? if they maintain their outperform rating.

They talk about average selling price looking this more -- quarter because of the increased competition.

They're looking ahead and wanting s5 lunch will mean.

I am not big on product mania, but the whole move around the apple stuff will be fascinating.

We might get an iphone with a larger screen.

This time for real, it could be a real revolution.

I just find it fascinating apple felt the pressure from samsung and both are feeling pressure from the lower end cell phone makers.

It goes around and round.

It is a value proposition.

Our you willing to trade up to the next greatest s5 in the case of galaxy or do you need the iphone six?

How much are you willing to pay for it?

What's -- you get a bigger screen to compete with someone with a bigger screen -- i think there has been an interesting debate between old tech and new tech.

It is not that old tech was really cheaper.

Very quickly, the only blackberry user in new york city, erik schatzker.

You have a blackberry.

I don't just have a blackberry.

There are lots of people with a blackberry -- i have a blackberry with a virtual keyboard and they may be the only guy in new york city that has one.

Is it because you are a virtual canadian?

I am a real canadian.

Electorate is from canada.

I don't, you don't. i actually do.

We outnumber you.

Canadians taking over america continues.

Coming up in the next hour, eh, we would talk about the future of nuclear energy with the head of the country's largest operator of nuclear plants.

This is "bloomberg surveillance" on bloomberg television, streaming on your tablet, smartphone, and bloomberg.com.

? ? good morning, everyone.

I'm tom keene.

With me, scarlet fu.

Joining me this morning, erik schatzker.

Top headlines.

Let's start again with russia telling ukraine to stop all military preparations in the east or risk a civil war.

After ukraine sent police forces in eastern regions to stop progress in protest.

Demonstrators seized government buildings in some cities.

The u.s. has accused russia of full minting the unrest.

The u.s. is warning china on the yuan.

A treasury official says the u.s. would have serious concerns if a recent weakness is a sign china moved away from a market determined exchange rate.

The yield on is falling 2.5% against the dollar since mid-february.

In san francisco, a smart car flipping spray.

Police are looking for vandals afflict poor little cars onto their sides in their rooms.

Police are trying to determine whether the flipping's are a prank or an example of growing tension among some residents blame the tech industry for the rising cost of living in san francisco.

How to take turns to smart car flipping.

Can you fit into one of those?

I can't fit into one.

My basic fear is a flip and it rolls down the hill.

It is san francisco.

It is possible.

That is incredible.

Down lombard street.

Or whatever.

It is ugly.

That will be a theme of "bloomberg west" at 1:00 p.m. at 6:00 p.m. this evening, on car flipping and tipping in san francisco.

Let's go to morning must-read.

My morning must read is from megan mcardle -- what happens to the homeless in a cashless society.

It will cause the market change in the streetscape of the city.

And handling -- neither laws nor custom has ever been able to fully eradicated the technology just right.

Not just credit cards the digital payment.

Guilty, guilty, guilty.

I never carry cash and a cheat people out of it.

It is not good.

I never have any coins on me, i never have any dollar bills.

I think we are all in the same boat.

We will be right back with more, including a look at tech stocks under pressure.

We will be right back.

? good morning, everyone.

I'm tom keene.

Erik schatzker and scarlet fu with me as well.

Let me do a data check.

Slow economic week.

Futures flat.

Negative one is flat in my world.

Crude is interesting, it will just not go down.

Elevated.

Not seeing much movement in prices affected by ukraine this morning.

Our twitter question of the day, @bsurveillance.

Thank you for your interest -- is this the beginning or the end of the bull market?

That @bsurveillance this morning.

Let's go to erik schechter, with our gainer and loser.

Removers movers.

Pepsico gaining 1.6%, the biggest gain in a month.

The company announced a new snack mix.

Combining chito's flaming hot and doritos chile limon flavors, two lackluster brand a single back.

You walk into the bloomberg world headquarters and the first tee off -- kiosk right at the bottom.

Cheh-toes.

Solar city dropped, the biggest drop since november and solar city trading at the lowest point since december 18th and is the biggest loser in the russell 1000. here is one reason -- federal investigators will spend the next year combing through solar city's books in an effort to show the company overvalued sales contracts in order to claim millions of dollars in federal -- until things went bad.

Michael lewis says you can't trust the stock market.

One thing you can trust before, cliches britt all kinds of them.

Here is a hackneyed phrase that is come back to vote.

Corrections are healthy.

Mendes covers internet, media, and e-commerce and he joins us on the phone.

Mr.

mendes, are you peddling that nonsense that corrections are healthy for the market?

Like not fearing the reaper.

I am not sure what nonsense you are peddling -- but -- i know, i know.

Good morning, guys.

Thank you for having me.

Recently the s&p has been trading above 18 and a half times trailing price-to-earnings.

Historical average of about 50 and a half times.

Certainly in what i cover most closely, internet media, e-commerce, and software as a service, you see price to sales multiples on 2014 revenue estimates, 15 to 20x range, to see them higher probably is not healthy sober alternative probably is the best thing.

Bottom line line, it is all about valuation?

For the most part.

If you look at the kind of global macro environment, for some time the u.s. market has kind of been the tallest midget, to use another hackneyed phrase.

Yes, valuations are getting steeped in the u.s. and there is a slow, grinding economy but things here are better than most of the rest of the world.

If you don't have a better alternative, it is challenging.

But at some point, the valuations maybe get a little bit out of line relative to expectations with people having to deal with the uncertainty of a midterm election.

We have seen s&p at 1845, the dow at 16,000 200. -- 16,200. rollover -- i did a tweet, how low can twitter go?

Tobias levkovich with us from citigroup, do you partition the highflying tech stocks substantially away?

From the blue-chip tech stocks -- not let the late 1990's by any stretch.

Even tech as a sector is basically flat on the year.

So we have to really look at the differences of where these specific problems are.

I agree, the valuations are really out of whack on some of these highfliers.

Quite ab mendez, does it stop the ipo market for tech?

I don't think so.

For the end of last week -- you can see investors, may be primarily retail but the stock does not perform that well without significant institutional demand.

For companies individual and institutional investors have known for years, coming to market, these fairly established names, there is still appetite.

I think it probably slows things down a bit.

I think you will see some the lead, for those who had weaker demand.

But for blue-chip ipos, i don't think anything is changing right now.

What happens when alibaba finally lists?

Yahoo!

Has been trading basically as a tracker stock for alibaba's valuation.

What happens then?

I certainly think it is positive for yahoo!

-- you hear the phrase, by the rumor and sell the news.

It seems people are selling well ahead of the news.

I shake my head with the valuation, ex-valuation, it may show negative valuation because they continue to do acquisitions that people have trouble understanding how they are going to create value.

I don't really think anything significant happens in the space.

It certainly draws attention to e-commerce and how will amazon compete internationally, how will they respond if alibaba becomes more active in the u.s., as they signaled they may.

I don't think it has major ramifications for the market outside alibaba and e-commerce other than bringing attention to the fact that e-commerce continues to be one of the highest growth areas of retail.

Is this bifurcation we are seeing a reallocation within tech?

In other words, the money coming out of twitter, the money coming out of yahoo!

And facebook, is money going into, say, intel or microsoft or hewlett-packard?

Doing quite well this year.

If you look at the sectors within the s&p, consumer discretionary, consumer staples, health care, telecom, a lot of the more defensive sectors have become more in vote -- vogure.

Intel, cisco, microsoft, hewlett-packard -- you see the flight to quality in the environment where people see uncertainty increasing.

An,b, thank you very much.

Ab mendez, we put him in the hot seat and the man stood up.

You might want to stay up for this.

Tonight -- mars, earth, and the sun will all be aligned in an almost straight line.

This happens only every two years.

March reaches a point in its orbit where it lies directly opposite the sun in the earth's sky.

Mars will rise around sunset -- sunset and will -- will be remain visible all night long.

Last year six lined up -- the sign of a great stock market.

Astrology comes in to become doesn't? astronomy, or one of those?

We have all been accused of being space cadets.

[laughter] we forget about this.

It is a big deal.

I wonder if it has to do with the cold -- is it spring yet?

What it is spring, and there will be el nino, too.

Now el niÑo does have impact.

Agricultural commodity prices.

How do you play the drought in the western united states?

It typically pushes up grain prices and -- going back to my old days.

Commodity prices with the australian dollar stronger in the little bit of a bit in commodities recently?

You have to believe the u.s. dollar would have to weaken to generate that.

According to a survey, 90% of clients believed the u.s. dollar would strengthen.

But they are always wrong.

It generally has been a better thing to follow the crowd and not fight it.

We will continue this conversation on equity assets and other assets because we will show you a new way to look at equity bubbles.

This is "bloomberg surveillance" right here on bloomberg television.

Streaming on your tablet, smartphone and bloomberg.com.

Single best chart is next.

? good morning, everyone.

I'm tom keene.

With me, scarlet fu and erik schatzker.

Let's get right to top headlines.

We will begin with the bank of japan deciding not to add additional stimulus to the japanese economy.

Allison makers -- policymakers believe they can maintain a recovery and hit the goal of two percent inflation even with an increase in the japanese sales tax last week.

He expects of the affect of that sales tax to dissipate by the summer.

Industrial production in britain stronger than forecast in february.

It rose 0.9%. biggest jump in eight months.

Just 0.3% was predicted.

Factory output surged one percent in a month, far stronger than the 0.3% gain forecast by economists surveyed.

An auction for the chicken cup, this porcelain cups sold for $36 million at sotheby's in hong kong.

The cup has been described as the "holy grail" of ceramics.

The buyer is not identified thus far.

Those for the moment are the top headlines.

Chicken cup?

It is a translation, no doubt.

I am sure in the catalog was written in more flowery language.

Wasn't that on tyrone's table on "game of thrones" last night?

I think it was.

Took a sip from it.

Very this.

Sotheby's. tobias levkovich with us from citigroup.

Skull of a smart single best chart.

-- scarlet fu has a smart single best chart.

Prepared by goldman sachs global research and we highlighted three of the 10 sectors in the s&p 500, industry weightings.

Energy is at the bottom, tech at the middle and financial at the top.

At one point or another in the past years each was biggest in terms of weightings.

Energy in the late 70's, market cap in the s&p 500 peaked in 26%, in the late 90's, technology stocks, 32%, and financials just before the financial crisis, their group weighting peaked at 22%. interesting to see the changes over time, but reflecting industry fundamentals and the shifting composition.

Tobias -- financial stocks, of all the different sectors, are financials what moves year to year?

What's not as much.

-- not as much.

Tech is 17 or 18. you have to look at the earnings contributions as well.

If you want to think about valuations and bubbles, you have to look at five times book value, 30 or 40 times earnings.

If you look at historically, it is not necessarily the sector but the valuation.

That is where some of the social media names and biotech names got to.

At the peak of the tech bubble tech never generated more than 16% of s&p 500 earnings but now the increase it makes up 19%. 18% of market cap and 19% of the earnings you don't freak out.

I do not -- people derogatory was for intuit is old tech -- if old tech as servers and new tech is applications, is that really old tech?

I know you don't mention individual companies, but the cisco old tech?

John chambers would say, no, no.

Apple, they are not sure where it belongs.

But if you start thinking about the facebooks and the like.

I want to rip up the script.

Is the dow jones industrial average a fiction now, because companies will not split their stocks, and apple and google are not in there and maybe they should be in there?

I don't know if it is a fiction.

It has changed over the years and it continues.

I am pretty sure it will change over the next several years as well.

How do we put it?

Some of the companies get taken out of the dow jones eventually disappear as companies.

Not a turbo concept to adjust to changing times.

Will they add names?

I am not part of the committee.

Right now we have three photos for the day.

Where television gets visual.

We will begin with this photo.

Pro-russian activist, at an administrative building in ukraine.

These are guys you definitely don't want to mess with.

Some were cleared out and someone not cleared out.

Sort of murky.

The question is whether they were hired by russia.

Russia alleges they were hired by the u.s. as well.

Russia is telling ukraine to stop all military preparations in the east and you have pro-russian spectators spontaneously -- that is a word you brought up earlier -- yes, exactly.

Seizing official buildings in donetsk.

We will spontaneously have richard falkenrath in the next hour.

Photo number two in a northern neighborhood of aleppo in syria.

We are so used images.

People dallying -- gathering in an alley that was hit by explosives.

The question is, who dropped the explosives, the government forces or the rebel forces?

The belief is it was dropped by a government helicopter.

As we know by now, more than 150,000 people were killed and another 9 million displaced.

That i see over the weekend a million people i now -- are now believed to be in lebanon?

Similar results that -- remember in the iraq war over a million went to jordan.

Some of the borders are quite fluid.

The imf, tomorrow, the afternoon, a terrific panel -- syria so destabilizing that you change or investment outlook, say, on turkey?

I would ask willem the question.

I don't think so.

If you look at a lot of people who study this and the council on foreign relations people, a number of issues, the sunni-shiite split and if you look at protestant and catholics in europe split, it took 300 years to clean up and some people believe -- like the canadians and maple leafs split.

Same thing.

Took a hundred years.

Thinking about displacement of syrian's and fluidity, porosity of borders, is syrian refugee aid to 13, believe it or not, performing king lear at a refugee camp in jordan last month.

100 children were cast in this experience adaptation.

According to the united nations, more than half of the registered refugees in jordan are younger than 18. it is touching, but at the same time, it just breaks your heart.

At least there is a silver lining.

That is phenomenal.

Eliza, thank you.

That is fabulous.

Much more coming up.

Next up, box every raised their 2014 games in a brings a brings of parts what question of the day -- is this the beginning of the end of the bull market?

Tweet us @bsurveillance.

We are in bloomberg television, and tweeting on your tablet, your smartphone, and bloomberg.com.

? here is a "surveillance" exclusive -- washington is in a fog.

There it is.

We will go down to washington and friday to clear the fog.

Really looking forward to joining peter cook in washington as we look at the spring meetings at the imf.

I will have a conversation with madame lagarde, thursday morning, scheduled for that.

Hoping the fog will clear before the managing director of the imf waxes on the future of imf.

This is "bloomberg surveillance." i'm scarlet fu with tom keene and erik schatzker.

Let's get you company news from the files of bloomberg west.

Active is an -- activision ceo taking a pay cut.

The salary cut: side with his gaining control of the videogame maker.

A group of investors led by him bought a 25% vacant the company.

Uber launch date for your -- and launched a courier service which features messages on foot and bike.

Prices for delivery range from $15 to $30 depending on how far the items have to travel.

China oks in microsoft deal to buy nokia's phone business.

The regulators approved the purchase after winning pledges that the transactions will not result in higher fees for the nation smartphone makers.

Nokia said the approval will allow the deal to close this month.

That is today's company news from the files of "bloomberg west." your lousy 401(k), warning, the conversation could get ugly.

Children should leave the room.

Tobias levkovich joins us, from citigroup.

The great schism -- divide between a plunging highflyer and the use of cash blue chips.

They are boring but doing better than good right now.

We speak to mr.

Levkovich about the mysteries of the equity market.

The polarity right now i find fascinating between biotechs and all of these other things and i see a list into retirement accounts.

What is going on?

This has been a eye for cato market.

I am not sure children have to leave the room.

Not that frightening.

People have been focused on biotech.

Actually consumer discretionary has been an area where you have the worst performance in the martha.

Some of those names particularly that have been hit very hard.

A lot of investors made a mistake.

They were looking at a move from small cap to large cap, growth of value of move toward quality but it really has been a momentum break it one more question here and moving to an important matter -- are you advising our viewers that they should add to blue-chip positions this morning?

We said all year you should be going on weakness.

We still think the market will struggle in the few months.

Sentiment metrics are too strong.

Over the course of the year, though, i think you will see 1975 under s&p. what we do is we rip up the script when it is important.

Tobias levkovich with us this morning.

Where did you grow up?

Montreal, canada.

Erik schatzker with us.

Where did you grow up?

Toronto.

And they are on speaking terms.

But seriously, important news out of quebec overnight.

Quebec elections.

Tobias, let me start with you.

Where -- why the liberal victory over the french speaking party, why is it important?

Keep in mind, the liberal leader is french-speaking as well.

This is a particularly french-speaking part of canada.

It takes the idea of sovereignty referendums off the table.

They -- he was trying to walk that comments he made earlier about this.

But a create economic stability.

How does the rest of canada view quebec, this troubled peace -- breathing a sigh of relief.

A former executive of quebec -- raised the specter of separatism when he announced his candidacy but, tom, you will love this.

The liberals have a majority government in quebec, a let it with 41% of the vote and one of the liberal representatives, the former chief economist of the bank of canada, and the former executive who worked for the bank of canada's montreal office.

Ok, fabulous bid to buy is, thank you so much.

We will have more.

Stay with us.

? orchestrating spontaneous protests in eastern ukraine.

Brussels watches from a distance.

The china nuclear industry is still recovering from march to 8, 1979. defense is the best offense.

Good morning, everyone.

It we're live from our world headquarters in new york.

Tuesday, april eighth.

I'm tom keene.

Joining me, scarlet fu and erik schatzker.

Our guest host for the hour, kevin roberts.

Also with us, richard falkenrath to speak on ukraine.

To get the morning brief.

Policymakers say the japanese economy can maintain its recovery even with last week's increase in the sales tax.

U.k. production rose more than forecasted.

That indicates some economic recovery.

Here is another recovery data point from the u.k.. wage growth accelerated for the past seven years.

Companies reported stronger overseas demand.

We have some economic data here in the u.s. coming at 7:30 a.m. on the small business optimism survey.

It has been ugly and has gotten better recently.

The survey this morning at 10:00 a.m. alcoa kicks off.

Citigroup will miss a key possibility target.

This according to the wall street journal.

It measures for return or tangible common at what he is one way for investors to measure banks against each other and comparing profitability.

The scones after the federal reserve rejected citie's plan.

They settled a lawsuit over mortgage funds.

They will pay $1 billion to settle claims related to mortgages sold in 2008. illegal defeat for eli lilly and japan's ctakeda pharmaceuticals.

They hid the cancer risk of their diabetes medicine in the u.s. the supreme court says punitive verdicts must be proportional to compensatory damages.

In this case, the plaintiff got $1.5 million in damages.

Nbc is back in first place.

The peacock network will start up the season with the biggest audience of viewers ages 18-40. that means the network has gone from fourth place to first place in under three years.

It was boosted by coverage of the winter olympics and sunday night football during the past season.

That is today's company news.

We saw market moves in the ukrainian currency and russian paper as well.

If you protest the mother will come.

Their russian troops.

The protesters in eastern ukraine desire to distance themselves from kiev.

He have desires economic austerity measures to appease the imf.

They desire no protesters.

I'm confused.

Richard falkenrath is not.

He is a bloomberg contributor.

There is a theory confusion right now.

What should we focus on?

We should focus on p utin's long-term strategy to ensure that the government in ukraine stays reliably pro-russian in its orientation.

I don't think he is obsessed with the short-term calculus of what's happening in the streets in these particular cities.

Can ukraine straddle and be pro-russian and pro-nato at the same time?

Very difficult to see how.

That is one of his red lines.

He will not permit the expansion of nato or the european union in the ukraine.

How does he accomplish that?

He does not do it by militarily carving off the eastern province.

I think what he is going to do is let the ukrainians do his work for them and put them on so much pressure that they essentially fall before him.

There's a lot of questions about the spontaneous unrest that came up last night.

The west accuses russia paying agitators.

Russia saying u.s. mercenaries are involved.

There is a lot of back-and-forth.

I can really substantiate this claim made by the russians.

The counterclaim that there are russian intelligence agents inside the protester groups is right.

That is not disputed by anyone.

With the special services infiltrating spontaneous protesters, i think there is genuine sentiment among ethnic russians in eastern ukraine and backing them up with 40,000 troops 30 miles away.

They are going to sit there for as long as this crisis goes.

Always ready to come in and impose a military solution if the ukrainians failed to solve it, which they gave every sign of going.

What does mean that the pentagon has sent a guided missile destroyer into the black sea?

I don't know what they're trying to accomplish with that because there is no military scenario.

Even if there were, one guided missile cruiser in the black sea would just get destroyed by the russians.

I'm a little puzzled.

They're maintaining the international rites of passage through the -- i know you were looking at a couple of newspaper articles in terms of trying to answer who's to blame for all of this tension in the region.

What have you found?

There's a general sense that the u.s. and the west miss read a vladimir putin ended for a long time.

They're guilty of -- i think they have looked at him for a long time and now listen to him.

And seeing russia as they would like it to be rather than how it is.

The foreign minister wrote in the guardian over the weekend -- this line is incredibly telling where he writes the world today is not a junior school where teachers assign punishments at will grade he is.

This is important -- what is the language right now between the leadership of the united states and russia?

They are talking past one another.

The russians are speaking a link which of power and the rest of the world wishes that were not so.

But it is.

This goes to the imf meetings starting on thursday.

Would we see the world outlook today?

Today.

The chief economist will be on market makers.

She will be with erik schatzker and stephanie ruhle at 10:00 a.m. does ukraine take over the imf meetings?

They have to accelerate this aid package that has already been announced.

There is no way that ukraine is not considered regular imf conditionality.

You say they miss read putin's intentions for years.

What did they think it was up to the e? they permitted nato to march right up to its borders in the baltic expansion.

The baltic republic are now in nato and they are in russian airspace.

How could you possibly have pulled that one off?

They're upset about it.

Which should be our response to the efforts in russia?

Our rhetoric and policy needs to get in line with the power reality.

The power reality is, we are not going to reverse this.

The russians have interest in that region and they are protecting them as we have in other parts of the world.

Until we recognize the power reality, we're going to continue saying things and encouraging local agents in ways that go beyond what can actually be a woman.

Richard falkenrath will speak on china in a minute.

The ncaa men's basketball final -- connecticut beating the odds and the favorite to win the championship.

The huskies 160-54 to bag their second title in four years.

He was named most outstanding player.

Las vegas said connecticut had 100-1 odds to win it all.

How did your bracket do?

It was completely blown up.

This was a fabulous game.

What a game.

A great tournament.

Is it even possible to of called kentucky a favorite?

One of the highest ranking final fours.

That was not too surprising in terms of the players and teams.

What do you mean higher rankings?

There has never been a 17 -- in terms of numbers.

Basketball is not my thing.

Let's go back to hockey.

I did pretty good.

On my bracket.

I'm looking on bloomberg were they keep track of this.

My bracket was pretty good.

But you did not win the $1 billion from warren buffett.

That's the data check today.

Also, the futures are down.

We actually want to bring you our twitter question of the day.

Is this the beginning of the end of the bull market?

? good morning, everyone.

I'm tom keene.

To our guest host, kevin roberts . worldwide chief executive officer of saatchi & saatchi.

General motors is struggling in each and every way.

The light has been snuffed out by the recalls.

Mr.

roberts has seen all this before.

Gm is decidedly not toyota.

What a mess.

Saatchi & saatchi.

Shoots i shoots in.

What do you do?

Reach out a simple piece of advice.

When you have a problem, fix it.

Three months and come she's taking control and leadership.

She stood up and said, hey, we got this wrong.

If this is what we did wrong and this is what we are going to do and we are on our way.

Ken feinberg distributes checks out.

That has to be taken as a positive.

The real question is, does gm look back to their past or do guys like you say, no, look forward?

It's a combination.

You have the legacy and the path.

They have built loyalty and good cars.

Over the last 40 years come a they ha, 2 or 3. what are you going to do now to fix this problem?

What are we going to do now to bring back quality and reliability?

Use digital media a constructive tool for companies in trouble?

It's more than a tool.

It's a way of life.

We are alall have to understand that we have to communicate with people.

They are in control now, not the brand.

Yuan for you went from a full page tylenol add to all the tweets and facebook.

It's not the tylenol add that was successful.

It was the quality of leadership.

They took steps to fix it and here we are back again.

Today, the consumer is the medium.

The person has the power.

Kevin roberts with us.

We have so much to talk about, including china.

Coming up, earnings up this afternoon.

Scarlet fu will take you over the headline data of j.p. morgan and wells fargo.

This expectations may be a little ugly.

Stay with us.

? good morning, everyone.

I put a question of the day -- is this the beginning of the end of the bull market?

That's i front and center question right now.

Is this the beginning of the end of bull market?

Thank you for your many responses.

This is bloomberg surveillance.

I'm tom keene good with me, scarlet fu and erik schatzker.

Kevin roberts, chief executive of us are of saatchi & saatchi.

Richard falkenrath with us on ukraine could we will talk to him on china in a bit.

Right now, here's erik schatzker.

Let's talk about some top headlines.

You're going to begin with this 1 -- the west is warning china.

America would have serious concerns with the recent weakness in the currency.

A sign china has moved away from a market determined exchange rate and one that is fallen 2.5% since the middle of february.

Industrial production in britain stronger than forecast in february.

The biggest jump in eight months.

.3% was predicted by the economists we surveyed.

Factory output far stronger than the .3% that was forecast.

I love the story -- police are looking for vandals who flipped four of these little cars onto their sites and groups.

Was a prank or growing tension -- was it a prank or growing tensions?

Arnold schwarzenegger did it.

He could flip one with one arm.

But he is now playing ping-pong.

We will talk about the energy sector.

Lance to build natural gas and certain government policies are driving prices lower.

That makes it harder to justify investment in them.

One of the nation's largest operators of nuclear power plants, they operate in 47 states and canada.

Chris, welcome to bloomberg surveillance.

Thanks for having me.

I know several power plants have been closed prematurely.

Tell us how you are adopting your business model -- adapting your business model.

We keep looking at our cost structure.

You can't cost cut your way to these low market prices but you have to be as efficient as possible.

The other thing we're looking at is the market construct and market design.

We are not confident -- compensated for the reliability we have in our nuclear plants.

When we load a nuclear core, we are able to operate 418-24 months straight through versus a gas unit that may get cut at any time because of lack of supply.

What do you think is the right response?

One is the reliability aspect to be looked at for how firm and fixed the fuel is.

Reliable assets to secure the grid, which is a national security issue.

The other part is the environment benefits.

It's a huge amount of generation that is carbon free.

Over 60% of the nuclear power that is generated in this country is carbon free.

One of the things charming about you is you actually know something about nuclear energy.

Most ceos don't. you have done this for commonwealth edison, baltimore gasgas -- what do we get wrong?

Homer simpson works at the nuclear plant.

That's my knowledge of the nuclear business.

I've been lucky enough to never watched this show.

The nuclear industry is manned with very professional men and women.

Highly trained him highly qualified.

Our operating staffs go to training for a week every other month.

They're constantly being -- technology is being reinforced in their standards.

Nuclear power is extremely safe.

Kevin roberts with us.

We are getting over three -- what is a brand guys say to chris to get over the image we have of nuclear energy?

Share.

Bring people enter it what you are doing is a good thing for all of us.

The story you have to tell needs to be agains -- you go there and it's the most inspirational thing.

2000 phd's and you find out what they're really doing.

At the trick for you guys is to tell that story in a way that is slightly more emotional.

What is the story when it comes to the outlook for nuclear power globally echo we are still dealing with the?

Public perception on nuclear power is different around the world.

You are seeing in asia a huge expansion.

China's units coming on will have 100 by 2030. japan after fukushima is having issues.

They're seeing the image come back on.

Europe has been the most problematic.

Germany shutting down units.

It is a strong place in the future.

David crane is the ceo of energy.

What you say to his view that energy in america needs to become more decentralized?

Putting generators in your basement is the key to the future.

We get to debate a little bit.

He referred to me as his brother the other day.

We don't think that the demise of central station power is imminent.

We do think the grid needs to prepare itself for much more decentralized generation.

It has to be a pairing.

The subsidy is the issue.

Think you so much.

The ceo and president.

We will discuss chuck hagel in china today.

? this is bloomberg surveillance.

I'm scarlet fu coming here with tom keene that erik schatzker.

Let's get you some company news.

Barclays in settling the first case in the u.k.. striking a deal with a home provider which had accused it of ms.

Selling products linked to the right.

Samsung electronics posting a second straight drop in quarterly profit.

It behind smart phones -- they're counting on the fifth version to boost sales.

It goes on sale this friday.

Samsung has cut back on some marketing for that phone in an effort to keep its margins stable.

Tesla is not targeting corporate car buyers.

Electric carmaker setting up a financing firm too help businesses lose its vehicles.

They will help to delay the cost of leasing and offer loans to boost its business.

That is today's company news.

Can you imagine if we got to work in a tesla model s? have you been in one?

Yes.

Game changer.

It may be the nicest ride i have ever been in.

Can you believe that?

Did you buy one?

No.

i live in brooklyn.

You drove the zamboni at maple leaf garden once.

Only here on bloomberg surveillance.

I need to change gears.

Very good.

It thethe most reviled industry in america.

Banking.

There are also among the biggest advertisers.

Has image ever been more important?

Kevin, image management.

Advertising.

Is it the way to go for banks?

Absolutely not.

If they have to fix their products and service.

They have to get to the basics.

They won't advertise their way out of this until they start delivering products that people want.

What do you figure citigroup spends a year on advertising and marketing echo=? almost $2 billion.

Jim spent about $4 billion a year and car commercials -- gm spends about $4 billion a year.

They have to build the trust again and start sharing that in ways that consumers want to be involved with them.

It's not about telling people anymore.

How do we get them engaged and involved?

Are we now at a point where we are drowning in advertising?

This is not madmen where you sit around and go, tobacco, brilliant.

Those days are gone.

We are drowning the message.

Nobody's yelling for help.

They're loving this choice because they are in complete control now for the first time.

They can participate or not.

They can use their ipads and phones.

Is fragmentation of platforms good for the advertising industry echo the more time people spend not watching the same thing and not reading the same magazine and not watching television.

Instead they run facebook and twitter and snapchat.

It's fantastic.

Power has now moved away from media and brands into the people.

For creative people, which is the heart of advertising, they aree not madmen.

This is a challenge for us to build relationships with people wherever they are.

You have big data telling us more and more predict ability and more and more targeting.

But really, it is still fundamentally about the idea.

Will you or will you not watch game of thrones ease and four?

Yes you will.

Will you watch on tv or on your mobile?

You will choose.

We have to be there wherever you are.

When samuel l jackson breaks into a game of thrones with a commercial for capital one -- you were sort of there.

This multitasking thing is a huge deal.

We need to leave that to the experts.

Let's get you a data check in the meantime.

Kevin is our guest host for the hour.

The ceo of such and such saatchi & saatchi.

We have optimism coming out shortly.

It just came out.

It was an increase.

Small businesses are more optimistic right now.

Futures still down by 2.5 points.

Bloomberg surveillance on bloomberg television and bloomberg radio.

All of our digital media, a place to go for smart conversation and our interviews.

With me this morning, scarlet fu and erik schatzker.

Up at the crack of dawn.

Look for his important interview at 10:00 a.m. this morning.

It with olivia lahn chart of the ima blanchard of the imf.

The mystery of china -- there are many mysteries.

One of them is china's military.

Chuck hagel is in china.

Richard falkenrath assesses it for us.

It is one of the great mysteries of american foreign-policy.

Do they really have a military?

Do they have a west point?

Do they have fleets and divisions deployed abroad?

Yes, they do.

They have had a comprehensive alterity reinvestment program for the last 15 years.

We know they have cash.

This is really a country who is bringing its military up into the first class.

They have some basic capacities to project power abroad.

It is primarily focused on the region.

Your work, the idea of, is it an offense or defense?

They want us to believe it's a defense.

Is it?

It depends on your perspective.

They clearly want us to see it that way.

They have a number of different difficult territorial disputes.

The islands with japan and vietnam.

For the regional space, this is the real source of concern.

Given the great shift in power that is occurring between china and the u.s. over decades, our allies in the region are very nervous about who is going to take their side if there is another dispute.

You talk about how the u.s. is not accepting the political reality with russia and ukraine.

Are we doing that with china gekko ? to a greater degree we are.

The president is much more personality driven.

But we are candidate with china is engaged them rather than contain them.

We want to maintain a ring of capable military alliances around the periphery of china while getting the chinese to not feel encircled and friend by us.

That is the essence of the dilemma and that's why secretary hagel is talking to chinese military officers right now.

If you're talking to them, how can you be engaging them.

We have something which looks very much like a containment strategy.

We have been reminded in crimea that hard power is back in vogue.

Are we going to see hard power back in vogue in that part of the world as well?

The east china sea with the disputed islands.

The country on china's periphery think so.

And they are worried about this.

Whether it happens or not is hard for me to say.

There is no question that our allies who neighbor china are all worried about this.

The message that is coming out of not just crimea but also serious is there is no world policeman.

This is getting back to the 19th century.

Nobody is writing to the rescue if they get in this fight with the bigger guy.

How do you see the whole protest laying out?

That moment has passed in taiwan.

We were confronted with it in the late 1990's. chinese-taiwanese relations are on a good level.

The worst relationship in the region is japan and south korea.

The northern asia -- you have a great focus on the middle east.

Is china part of the calculus you see for the future of southern asia and the middle east?

I think it is globally.

We are looking at the world through the view of china.

It is the most important dynamic market in the world right now.

We have to be there.

That's why chuck hagel made the trip over.

We will be back with more surveillance.

We will get the latest weei outlook from the imf.

We will have more on that in a bit.

? good morning, everyone.

Bloomberg surveillance.

I'm tom keene.

We are thrilled to bring you erik schatzker this morning.

Greeting our world headquarters is -- in the loop with betty liu at 10:00 a.m.. we are old pals from the days when we had to wake up in the morning.

It would be very hard to match that combination right now.

Are you looking for a job?

Wall street is hiring.

Have you seen the amounts of people that have left wall street?

We knew this trend was going to happen.

It has just accelerated.

Jpmorgan -- the list goes on and on.

You see not just here in north america come, but also overseas.

Roger will be joining us.

The chairman of -- he has spoken out, not just about politics and about the economy, but also on what is going on on wall street and how he is hiring at his bank.

And this is front and center as we have jpmorgan and wells fargo earnings.

Thank you so much.

This is interesting.

This is the other side of the world.

All of the stereotypes we have about new zealand.

We will destroy them or not.

The all blacks are enjoying massive tv airtime in the u.s.. a 60 minutes documentary.

A history of the haka and the aura of the national team.

We will bring in kevin roberts of new zealand.

He knows rugby.

He knows the linkage of the united kingdom to new zealand.

I love your code today.

Let's start with the all blacks.

The what part of the new zealand culture is that?

They are the spirit.

The leading edge of everything we stand for.

I was on the board for fall years when the game went broke.

They're coming to america in november in chicago.

The first time in 35 years.

They will play the u.s. eagles.

National pride.

There is the obligatory photo of the duchess and prince or whoever with the maori.

Kate and george are there visiting.

They're lined up with the maori tribe.

To me, it's such a stereotype.

Explain this, please.

In new zealand, they are the indigenous population.

They're totally integrated.

Maori are in every work of life and our leaders and so on.

They are not a minority.

It is the core of the nation.

Many of the values of new zealand today are rooted in maori mythology.

Thank you so much.

We will talk about more about the escalating tensions and unrest in ukraine with richard falkenrath.

This is bloomberg surveillance on bloomberg television and radio.

We will be right back.

? this is bloomberg surveillance.

I'm scarlet fu with tom keene and erik schatzker.

Our guest host this hour, kevin roberts.

Richard falkenrath joining us as well.

Let's get you some company news now from the file of bloomberg's

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

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