Ukraine’s Pending Truce: Surveillance (2/21)

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Feb. 21 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Rafi Mohammad, Nela Richardson, Ilya Arkhipov, Jeffrey Hayzlett, Ian Bremmer, Peter Cook, Antonio Baravalle, Bre Pettis, and Lady Fiona Carnarvon. (Source: Bloomberg)

This is "bloomberg surveillance." from kiev, it independence square with the headlines coming out right now across the bloomberg terminal.

There is political chaos in kiev this morning.

A truce has been reached.

Is ukraine reels from uncountable kills.

Yesterday, ukrainian debt was slashed to triple c. the heated debate over the minimum wage in the united states has become a maximum washington headache.

And can 99 cents per year, can it justify mark zuckerberg's $19 billion acquisition?

Good morning, everyone.

This is "bloomberg surveillance." we're live from our world headquarters in new york.

This busy friday, february 21, i'm tom keene.

Joining me, adam johnson and alix steel.

Scarlet fu rumored to return next week.

Let's get right to the morning briefs.

The corporate news flow and, of course, the political news flow just amazing.

And economic news flow as well.

We start in the u.k. retail sales falling foreign forecast in january, led by a drop in food and clothing stores.

U.k. also posting a smaller than forecast budget surplus.

Taxes from income and company profits actually fell.

Here in the u.s., 10:00 a.m., we get existing home sales, definitely looking in on a read of housing markets, and we have earnings trickling out before the bell.

Dish and charter.

After the bell, we get noble group o. schedule today, president obama will meet with the dalai lama this morning.

China not so happy about that.

Yeah, always a political pull there.

Let me do a quick data check here.

We've got ukrainian bonds on the move.

Adam johnson will have it for you in a moment.

Futures up three.

Everything doing better.

10-year yield, a risk on field.

Euro over the last number of days, 1.3709. nymex crude down to a 102.35 handle in the last 24 hours.

Still showing buoyant equity markets in the united states.

Here's the ruble until moments ago, a weaker ruble this morning, 36-1 let's call it.

Chinese currency churns there, not off the dalai lama, but off asian news, and again, brent crude over 110 earlier this morning, does a little bit better.

We scoured the papers and the web.

There's only one story this morning.

Adam johnson has it for us.

We're talking about the ukraine, and there are a number of bullet points that are coming across.

These are taken from the website in the ukraine that is being posted by president yanukovych.

Here's what we know.

Again, tom, we're all reading these for the first time.

President yanukovych urges a return to the 2004 constitution.

He is calling for early presidential elections, though there's no timing as to those elections.

He's also calling for a national unity government.

Recall yesterday, we talked about the western side of the country splitting sandoff trying to form its own country.

And we saw the bond market move immediately.

It's been an ugly morning for associated ukraine market data, and it's gotten better in the last 20 minutes.

Bond prices up and the yields down a little bit.

The yields falling the most since russia bailed out ukraine back in december, so clearly a little bit of optimism in the markets.

What's your insight?

What stks out to you?

Hans was on with us yesterday.

He's a wonderful guest.

He's the only american who has served on the debt restructuring company for greece.

What are his thoughts?

His thoughts are -- and i don't mean to turn this into a mercenary buy-sell sort of a situation, but he said if all you can do is just buy or sell, he said buy the ukraine.

They will figure this out.

You go long ukraine?

He said you go long ukraine.

It's scary, but they will figure this out.

The country will not split much there's too much at stake.

Europe wants to keep it together, as does putin.

My insight off the bloomberg screen was when the kiev mayor stepped away from the president.

That was, i'm guessing, 7:00 p.m. last night.

To me, that was great.

Ian bremmer to join us here in our next hour of "bloomberg surveillance." adam, what else do we have?

Let's talk about the announcement at the royal bank of scotland.

They're going to potentially lay off 30,000 people.

This is according to the f. it the t. this is a staggering number of people, 1/4 of the work place.

R.b.s. got the largest bailout in history.

That was about five years ago.

But the u.k. government still -- u.k. government is up for elections in 2015. there's going to be pressure for them to get capital back from the 46 billion pound bailout here.

Should we have a moment of silence for meredith whitney?

She was beaten up like a pinata for telling people that would be 100,000 jobs or more worldwide.

Understand there's a government angle here, but this is about retail banking.

It's not 30,000 adam johnsons, is it?

No,, no it's not pinstripe-wearing bankers going around the city.

They're gone.

They are gone.

A quarter of their staff, that's incredible.

Can you imagine if bank of america does that, the reverberations of that?

Speaking of which, you look at wells fargo.

I'm going use a rough number, roughly 6,500 cuts since october in the mortgage origination unit because of rising rates.

They're not refinancing.

Jobs actually are tough to come by in the banking industry.

I walked by their stage coach on third avenue, i just want to sit in it.

You could probably buy it.

You can do that.

There will an loft people standing outside with you now.

Looking at the fool.

It's possible.

No one will call you -- well, what is it, adam?

Number three, we're talking about president obama.

He's putting his new budget -- and by the way, what's surprising about this is what's not included in the budget.

There is no cost of living increase for social security checks, and president obama had said last year he would do that.

He is not offering it because republicans have not closed the loophole.

Business as usual, guys.

It's $56 billion, and he basically said republicans, i'm not listening to you, i'm not paying attention to you, i'm doing exactly what i want and the way i want it unless you guys do something else.

Which is part of the problem with washington.

That's what everybody says.


Nobody is compromising, and that's the whole issue.

Tom, those are your front-page news items.

And again, we'll look ago the ukraine for the entire morning.

As we look, it's really moment by moment, screen by screen, the headlines coming out of kiev.

The senior economist with bloomberg government, and, of course, front and center, i know "the wall street journal" gives it a big splash today.

It's a political document, do pros like you just assume that in the silly season every budget is a political document?

Everything in waumbt is a political document.

-- everything in washington is a political document.

There's nothing that's not political.

Aye, it's a political document laying out the priorities of the democrats and of the white house.

It's been very contentious, but we did see a compromise budget at the end of last year, so we have at least numbers everyone can agree on, a baseline.

That's the biggest.

So what does this $56 billion spending plan from obama actually mean?

Well, first of all, it lays the direction of where the priorities are, and it gives republicans something to go against, they've already laid some lines in the sand about what they would and would not compromise going forward on a variety of issues.

So when we see their version of the budget and we match it with the democrats, we'll see exactly how austere next year's budget is going to be.

Is that austerity still in washington?

Yes, there is.

The government is not hiring.

You don't see that.

That's one of the places you see it the most.

Can i rip up the script here, adam?

You can help me here.

The vector on the budget has been outstanding as a percentage of g.d.p. it's falling.

In other words, the u.s. government is spending less money.

Why is the president not taking a more aggressive victory lap over the fiscal situation of the nation?

You know, it's just -- it just depends on where the downward trajectory is laying.

Is it in nondiscretionary spending?

These are the priorities of the democratic party.

So are we seeing decreases in preschool care?

Are we seeing decreases in unemployment benefits?

That's not a victory lap for the president.

And now we have to get into the subtleties of the politics and spin.

To tom's point, why is presidential approval right now near all-time lows, call it 42%, 4 %, near all-time lows, when, in fact, the budget is some rippinging, why can't he capture -- why can't he capture the moment?

That's a great question.

I'm sure he's asking that as well.

I don't think americans feel the recovery to the extent that it has occurred.

The sentiment is lagging the actuality.

Nela richardson with us through the hour.

We are thrilled to bring you the smartest guy on the planet on what's called price theory.

He's the founder of culture profit, a consulting firm.

But what he really looks at is this mystery known as pricing strategy.

That is front and center.

It wasn't the 1% windfall.

It was the zuckerberg windfall buying whatsapp.

We'll talk about this through the hour.

Can they pull it off?

Does 99 cents work for mr.


Well, a classic way that he should start thinking about this is a two-part pricing, like linkedin, so have a basic price and an advanced price.

Or even a free price and then a price up but the bigger opportunity is monetizing that proprietary closed network of 450 million users.

On its way to 600 billion.


They're really going to control the last mile to the consumer, right?

Everyone is texting these days.

Like an idea is a person-to-person payment, how easy would it be for me to text you the money i owe you?

So e-commerce.

And it's a great way to use the network.

T mobile has announced the plan.

Do you think t mobile will be able to make it work?

They don't have the knelt work that whatsapp does.

Too small?


You are the pro on this.

When you saw the headlines come out, of course you were watching your bloomberg terminal, when you saw the headlines, what was your gut reaction to this gut reaction?


I don't think analysts have been thinking enough about the commercialization of the network, and that's really where the money is.


we're thrilled to have him with us today.

Really, a number one guy on nickels and dimes and how you price things like bow ties, which is a science.

It's very pricey?

Well, people want to buy bow ties.

I only know of one who buys them.

As i'm saying, very spnssive.

Company news on a friday morning.

Here's alix steel.

Jamie dimon won't face a showdown at this year's shareholder meeting.

Investors withdrew the only petition that would have pressed the board to name an independent chairman.

Last year he survived a proposal to split his chairman and c.e.o. roles.

A boost in pay for citigroup's c.e.o. the bank hiked his compensation 25% to more thanned shds million last year.

The pay package was for his first year on the job running the firm.

Now the compensation included a $5 million cash bonus.

Their profit rose 84% last year.

Whatsapp and its competitors are hitting the phone carriers.

They grabbed almost $33 billion in texting fees from carriers last year, according to research firm, and that figure is forecast to keep rising.

The firm predicts they've take away $54 billion as smartphone users look for cheaper ways to message.

You have to think that phone carriers are not going to go quietly into the night with that.

That's serious cash that could balloon.

Yeah, talk about some serious cash.

Newscorp chairman rupert murdoch just got divorced last year, so he needs a new bachelor pad here in new york.

Murdoch agreed to buy the top four floors of a building near manhattan's madison square.

It's called one madison.

You ready for the price?

$57 million.

I looked at that.


But you decided against it, a little small?

Well, here's what he's going to get for the money.

A little more than call it 10,000 square feet.

It's spread out over a triplex penthouse, and another full-floor apartment beneath it.

I assume that's where you put the staff.

He can open up a bank at crith suisse.

It's right next door, right?

They can just wire the money updares, man through the tubes if you need the physical dollars.

Murdoch will have floor to ceiling windows, wraparound terrace.

How come when i got divorced i got a pup tent?

Floor to ceiling windows, i don't like them t. really stresses me out.

It wouldn't really be for me.

Well, use the fabrics.

I'd give it a pass.

Yeah, by the way, wendy, former mrs.

Murdoch, gets to keep the fifth avenue pad.

Save us here, adam.

Do i look british today?

You look very british.

"downton abbey" in the next hour.

The real lady is her name, going to be joining us.

You can get her take on whether or not you're actually brettish.

No, i'm not.

I look like an american dork.

Well, whatever.

At least you wore red, white, and blue.

Ok, a number for you -- 307 million.

That is how uber has raised.

I think that's what they charged me last night.

Google ventures and amazon's jeff bezos are part of this thing.

Can the company transform the way we get around?

This is "bloomberg surveillance," streaming on your tablet, your phone,

We're talking uber after the break.

? good morning, everyone.

"bloomberg surveillance." terrific news flee out of kiev in the ukraine.

We're following that closely.

Ian bremmer to join us in the next hour.

I'm tom keene.

With me, adam johnson and alix steel.

Alix, get right to the next story.

Uber, do you guys use it?

I've never seen it.

Adam, are you a user?

I've used it.

I don't necessarily like it.

It's too expensive.

Oh, interesting.

Well, it's actually the cover of this week's "bloomberg business week." it's on uber and how it's trying to disrupt the taxi industry, city by city.

Uber, along with other ride-sharing services, saying it's basically as easy as getting a taxi as booking a resmbings on open table or checking a price on amazon.

Like, adam, price gouging has really been something that's been a negative critique of uber.

Seinfeld's wife had to pay $415 to go cross town during a snowstorm, and she tweeted about it, how upset she was.

And you have no recourse.

It's not like you can say, hey, i don't want to pay that, no.

It's the price.

That's part of the issue in terms of regulation, because you don't have any sort of insurance as you might with a yellow taxi.

Of course, boston and chicago taxi operators are suing cities.

You've actually written about this.

Uber's price gouging is the future of business.


You like it.

I do.

It's important to emphasize that most of the time uber, especially uber ex, is cheaper than taxis.

In boston, it's cheaper.

The question is, is this surge pricing really a negative for them and is it going to kill the business?

It comes down to what uber stands for.

Is it low prize or is it we'll get to you in five minutes?

In other words, uber service.

So adam, what would do you if you were the c.e.o. and all the sudden there's a lot of high demand during a snowstorm, and you can't meet your service levels at one or two?

In other words, it's a market economy.

We live in a market economy much this is unregulated.

If people are willing to pay it, you charge it more.

I understand that, but somehow it doesn't ring true.

What's the compromise, raffi?

How do you balance that?

An economist said i think the max should three times the price.

But the problem is, once you do that, you're going to hurt your service levels.

It's a decision.

I would agree, uber's sort of brand is everyone's private driver.

That's not true during the surge.

The most interesting thing in this uber article, in new york with taxis, once they hit their target of revenue for the day, they're done.

So in a rain storm, they're done very early.

So uber, in essence, is the only car on the road, and therefore, market forces force them to ask for more money.

There's a recent article where someone complained about paying $73 for 3/4 of a mile.

You could have walked t. or tried to hail a cab.

What is this about?

They teach this in fancy economic courses.

It's about price discrimination, which is a valid theory.

We see that on airplanes every day.

What is wrong with an economy, business class and first class, in limos?

I don't understand why uber is a bad person for getting whaver they can get.

Well, i don't think there's anything wrong with it.

I think what they've done a poor job of is explaining the strategy.

This week you talk about netflix, and remember what happened to them a couple of years ago.

Then all the sudden their consumer ratings are high, and netflix has toughed it out, and what uber needs to do is explain the strategy and get people to understand it better.

And understand demand, as economists would say -- excuse me, elasticity is a jargon alert.

It's a massive jargon alert.

But people will pay a little more.

They might pay a little more, but there's a point at which they stop paying.

You think the number is three times?

No, they have an algorithm where they're constantly flexing the multiple.

So they are trying to figure it out by the minute.

And revenue is growing -- and revenue is growing 20% a year, so they clearly have not hit the point.

Well, if it's profitable, we'll see more competition and that will bring prices down.

Welcome to the friday edition of bloomberg microeconomics.

We've got it for you here on "surveillance" this morning.


The latest issue of "bloomberg business week," you can download it, plus you can go to the free app.

It's on the ipad, of course, and you can read all about uber, again, the latest issue.

Fascinating, really amazing article.

The number for you today -- 39%. that's president obama's proposed increase of the minimum wage.

How is it going to impact america's largest retailers?

One retailer already coming out in support of it.

We're going to talk about it coming up.

This is "bloomberg surveillance" on bloomberg television, streaming on your tablet, your phone, and

? good morning, everyone.

"bloomberg surveillance," we're keeping you up to date on kiev, europe, brussels as we speak, real doubt about the effectiveness of the new agreement.

You see it in the ruble, spiking up.

You can barely see it, but markets really move off each and every headline as they come out.

This is a weaker ruble, as the e.u. says they need to see an agreement.

Let's get to the top headlines this morning.

Adam johnson?

China warns president obama over a planned meeting with the data llama.

The country's -- with the dalai lama.

Beijing accuses the dalai lama of supporting the independence of tibet.

China wanted the president to cancel today's meeting at the white house.

We'll keep you posted as to whether that does indeed happen.

Still no sign of the winner in the $425 million powerball jackpot.

The one winning ticket was sold in this store in california, 10 miles north of san jose.

The ticketholder gets a year to claim the prize.

The owner of the gas station gets $1 million.

Not bad.

It's part of a system to give retailers a slice of the winnings.

Those, tom, are your abbreviated top headlines.

It's abbreviated busy, busy morning.

Here's alix steel.

David brooks was talking about capitalism facing its greatest moral crisis since the great depression.

He writes, facebook agreed to pay a price equal to $345 million per whatsapp employee.

Meanwhile, the middle 5360% of earners has fallen to 45% since 1970. nela richardson joins us now.

What do you think about that, the widening dispar knit income inequality has never been greater in this economy.

I mean, except before the great depression.

It's because the rich, the wealthy, the technology workers are making such high incomes compared to the rest of america, where incomes are stagnating.

So it is an issue.

Is there a so-called multiplier from what all those tech types are doing in new york and in silicon valley?

Well, except for buying $57 million penthouses, wealthy people tend to save their money.

They tend to invest.

They don't tend to spend.

So that trickle-down theory doesn't trickle down so much when it's just in savings and not others.

Well, income tends to live hand in mouth in essence -- more so, the more income, the more likely you are to spend out of your income, yes.

Nela, yes, it's one of the debates and one of the problems we're all trying to face, income inequality.

Clashes in kiev, they are still happening.

They might even be getting worse.

The ukrainian president vows to initiate early presidential elections.

We'll talk about it.

This is "bloomberg surveillance." ? good morning, everyone.

"bloomberg surveillance," i'm tom keene.

With me, adam johnson and alix steel.

We will go to kiev here in a moment.

Very quickly, let's do a data check for you.

Stocks, bonds, europes, commodities, euro shows much of the markets not moving, but weave seen somewhat of a weakening in the ruble off of brussels headlines in the last 10 minutes.

Hydro carbon a little bet south of where they were yesterday.

Gainers and losers?

Tesla, of course, closing at a new high, posting forty results that beat estimates.

Vehicle output also coming in heavy.

Production rising 56% this year.

Wal-mart also falling on the dismal earnings from yesterday.


It's an interesting thing going on right now, huge, huge news flow out of kiev.

Adam johnson, we've got a report from kiev, don't we?

We've joined by the bloomberg reporter staying at the hotel ukraine, which is right on independence square in kiev.

We have heard a number of different conflicting reports.

There's a plan, there's a deal, there are elections, we don't know the timing.

You are right there.

Exactly what is happening?

Shed some light for us.

Hi, yes, we hear the same reports as you from the administration that the president agreed for the elections without giving the time frame.

Previously it was reported it may be as late as december this year.

Also it took hem a while to come back to the 2004 constitution and he also called for national unity government.

I talk to people on the square, and they are not happy with this proposal.

They are not happy with this.

They don't accept this compromise.

Right, there seems to be a great divide here, ilya.

I noticed last night where the mayor of your kiev stepped away from support of the president.

How crucial was that?

It was an important move, but as well as over dozen of yanukovych party lawmakers fwreet the party and the parliament condemned the violence yesterday, and they adopted a resolution calling for troops to withdraw.

It's a big change, but it's change.

I've just spoken with policemen who came from -- well, the western part of ukraine.

It came with 14 other policemen today, they do decide the protesters, and they came with -- he said that they came with guns, and they are among the protesters wearing police uniform.

Ilya, that's a very important distinction right there.

That transition, the police are now joining the protesters.

Why are they doing that?

Why are they willing to leave the government, their employer, and side with the protesters?

The main thing so far, the police has arrived not from kiev.

It's not the kiev police.

It's the western ukraine police, which is a little bit different.

This was not their position before.

But still, it is a big thing and people are really encouraged with the development.

Ilya, aside from the square, what's it like on the ground?

What's it like to get food and gas?

How is it like to live?

Can you repeat, please, the question?

It's getting noisy here much ape outside of the square, what's it like to live?

How is it to get food?

People getting -- there is no way to get food in a normal cafe at a restaurant.

In downtown, they all close.

Businesses are closed in the downtown.

But there's plenty of food on the square, and along the street and in any houses which protesters have occupied, people from all the town bringing warm clothes, warm food, they cook food here.

There is enormous amount of organization, but just talk to the guy yesterday who's been like for months helping protesters just by driving goods from other parts of the city.

Thank you so much, ilya reporting with our team in kiev with bloomberg news.

We'll keep you up to date.

In brussels, headlines still coming out, real doubt about the tentative -- and i mean tentative discussion approximate of an agreement in kiev.

The president in the united states, campaigns for a higher minimum wage.

Talk about a fiery topic.

One american retailer preemptively stating its stance.

Gap stores has announced plans to boost hourly wages to $10 by next year.

This affects 65,000 workers.

Another retail giant, wal-mart, announced it is neutral on the issue.

She is never neutral, nela richardson does research for bloomberg government and has looked at this issue.

Who's winning the battle right now?

Who's winning the battle?

The american people tend to be supportive, whether republican or democrat, on raising the minimum wage.

It hasn't been raised in a way that kept up with inflation.

If it were to do so, it would be $10.50. from your prism, there is a genuine possibility or likelihood we'll see a federal increase in the minimum wage?

Look, it's great politics.

He already see states and local governments raising the minimum wage already.

I think it's an incomplete policy, it's a very blunt instrument t. doesn't do -- the c.b.o. said this week, it doesn't list the number of people across the poverty threshold as one would like, brings in a lot of teenagers, some second-wage earners into this market.

It's a blunt instrument and incomplete, but it is popular.

The c.b.o. report that you are citing is what republicans have been pointing to, even costco as well, that it ultimately destroys jobs because it raises the cost of hiring people.

What is the best argument you have seen on the other side?

What's the data on the other side that says, no, there's a multiplier he snect you pay people more money, and they'll spend?

The economic research says there's a slightly negative aspect in terms of jobs, so that research is all over the place.

But in terms of spending, you know, increasing incomes does lead to increased spending in the economy for the same reasons we talked about before, low-income people tend to spend more of their income.

Within this political discussion, we're thrilled to have with us one of the great guys on pricing.

Labor has a price.

It's called the wage.

This is a chapter nobody reads in macro economics 101. rafi mohammed with us, with his wonderful work on pricing.

Labor has a price, doesn't it?

In america, how much of a fiction, how much of a distortion is our low wage labor?

Well, i think it goes back to our uber discussion.

The market is setting the price.

But i want to get to your point, adam.

You talked about the economic multiplier, and this is something people talk about a lot, but that depends on people keeping on buying.

And if the prices go up, that economic multiplier is not going to work.

I think the data is indecisive about what the net effect is.

In fact, it's probably negative for the economy.

It's a policy issue, not an economic issue.

I'm interested in terms of what part of the minimum wage debate in washington, is it because president obama can't get more welfare money?

As we know, lot of minimum wage workers are on welfare.

Right, i think that is the heart of the political scandal around the minimum wage.

Look, this is a policy that you can ask gap and wal-mart to contributor and you don't have to worry about congress, and that's my major criticism.

If it's a social policy, as i think it is, then federal dollars need to be behind it.

We can't expect wal-mart and mcdonald's and gap to pick up the slack for what the administration would like to see.

But the redistribution, instead of coming from the government, it's coming from business.


Ok, i'll go with that.

There's a lot of americans that don't agree with what you just said.

What causes their polarity?

Why do they not agree with what you just said?

Agree in terms of that the corporate sector should -- the public sector should step in on this, that private enterprise will find the correct wage.

Well, there's two issues, right?

There's the competitive wage, and then there's social policy.

So if you want to do something to rid income inequality and help people cross the threshold, there needs to be social policy.

That's a big if.

I'm putting it out there without making a stance.

The question for me, is wal-mart and gap in charge of defining that social policy, or are they in charge of setting a competitive wage?

Right, because if i'm an investor in wal-mart, am i criticizing wal-mart that they're overpaying what the market is telling them to buy?

Do you think that's occurring this morning, wellington or fidelity calling up and saying, why are you raising the minimum wage?

I got to make some news here.

Help me, rafi.

Well, it's about .4% is what you pass on pricing for a 10% increase in the minimum wage.

That's interesting.

I mean, that's chump change for us.

It makes sense that prices would rise, but maybe, rafi, you can address this.

The former advisor to the white house noted that when fast food workers in new jersey were paid a higher wage, it did not have any negative impact on unemployment.

That would suggest that actually wages are too low.

Do you not agree?

Well, this is one of the top princeton professors, and as a former economics professor once said to me, the way he analyzes data is like sausage t. tastes good, but you don't want to necessarily know what goes into it.


So my point is, i'm trying to understand the rationale, the economic rationale of that study of why there was no effect, or perhaps a positive effect, and i don't see it.

Well, great conversation with a number of diversity of opinions there to keep everybody arguing.

At least, adam, till cocktail hour this afternoon.

I think you and i, with the beverage of our choice, arguing about the minimum wage, i can see that.

Thank you.

Rafi, this is great.

This is great.

We'll be having it -- alix, you can join as well.

Gee, thanks, guys.

No, no, you guys do your thing.

Coming up -- did the polar vortex actually cool home sales in january?

We're going to have a little chart that you want to see.

This is "bloomberg surveillance" on bloomberg television.

We're also streaming live on your tablet, your phone, and

We'll be right back.

? good morning, everyone.

Futures up four.

Dow futures up 35. it is our twitter question of the day.

It's an important one, as we look to the 7:00 hour.

Which company needs a marketing makeover?

Which company needs a marketing makeover?

There's a lot of challenges out there.

That will be a broad theme for our next hour of "bloomberg surveillance." that's out on twitter.

It's time for a chart.

Here's adam.

I want to talk about housing and the correlation between housing and weather.

You got to take a look at this.

Our single best chart, the coldest january in two decades, cooling home sales.

You got to believe there's a correlation.

Ok, so the average difference from normal temperatures, you see how cold it is.

That's why we are way down on that chart.

Now we're going to overlay housing prices, and the extent to which housing data comes in better or worse.

That's the bloomberg surprise index.

And you can see, obviously, it is trailing, way off following the cold weather down.

Nela, what i really want to ask is you specifically, the economist here at the table, housing took us down, and yet to think that housing is going to reinflate and take us back up seems sort of simplistic.

Ultimately, what is going to lift us?

Is it corporate growth?

Is it earnings?

Is it unemployment?

What lifts the economy back to where we need to be, above 3% on g.d.p. growth?

If i could answer that conclusively, i'd be a rock star.

Well, you are a rock star, and that's why you're here.

What lifts us up?

Housing has been, over the last 50 years, the key driver in lifting us out of recession, and the reason why we're not lifted as quickly as we want is because housing has stagnated.

It's really a bummer in terms of economic growth.

I think what lifts us out is actually the start-up culture, the technology, as much as you don't like to admit it, it's uber and uber-like things, the things that can match up technology and services, put them together and really put some oomph back into the economic status.

Well, but, you look at uber, -- not uber, but whatsapp, how many employees were there?

55. 55 employees, right?

Bad example there.

But the start-up culture, startups are a key driver of deprothe.

There's been a lot of analysis on this.

There's a professor that's been a key force in understanding destruction in the economy.

I think that's where we are.

We are restructuring.

There are some jobs that were lost in the economy, a lot of them housing related, that are never coming back.

We have to look for new sources of growth.

Startups is the one place to look.

In small numbers, aggregated together, they become an economic force.

Well, i'm watching today, first lady michelle obama actually joined tonight show starring jimmy fallon last night.

She was talking about fitness.

Take a listen.

Yeah, yeah.

Ah, ah.

Michelle, you're pretty strong.

Well, thank you, sarah.

I do try to exercise every day.


Because i think exercise is eh.

Exercise is not eh.

I mean, i kind of want to talk about how fitness is great, but i also want to talk about will ferrell in drag.

That was pretty funny.

Fascinating to see where this show is in a month or two, if they keep the traditional leno crowd f. they lose them, where do they go?

Have a "is the n.l." feel to it.

It's really interesting.

Really interesting.

New technology coming up, we're going to talk about whatsapp and talk about facebook, and will it cost more now that facebook owns it?

We'll discuss this coming up next.

This is "bloomberg surveillance" on bloomberg television, streaming on your tablet, your phone, and

? good morning, everyone.

"bloomberg surveillance," an incredibly busy friday morning.

I'm tom keene.

With me, adam johnson and alix steel.

Al ex steele has the company news this morning.

They're from the files of "bloomberg west." samsung rolling out a new phone next week in barcelona.

That contrasts with the galaxy 4 intro last year at a splashy event at radio city music hall.

Samsung has been facing a slump in profit growth on competition from apple and lenovo.

Well, groupon shares, tough morning, down 14% in premarket trading.

The company forecasts profit below analyst estimates.

The company blaming higher expenses tied to acquisitions and marketing.

Groupon said two companies bought last month will hurt profit by $20 million in the current quarter.

Hewlett-packard's profits topping estimates.

The p.c. maker won new orders from corporate machines and servers to run data centers.

Sales for the quarter were just over $28 billion.

That's a billion more than forecast.

That's today's company news from the files of "bloomberg west." i guess it's better at hulett.

Yeah, they saw the economy deal sort of hanging over their head, and the lawsuit there.

How is that going to play out is a big question.

I have on my phone my hewlett-packard h.p. 12-c, which was made in 1986. adam, do you have one too?

You guys can be nerds together.

It was downhill.

I don't know about this.

I'm right there with you.

It's an h.p. fest.

There it is.

If you can get that, ok, folks, it's downhill.

It's from 1986. i'm in the middle of naturalive nerdville right now.

I still have my original h.p. from merrill lynch in 1980. i can literally amortize your home.

Dike your mortgage right here.

Alix, your hair cut, what do you think?

I don't know.

This puppy costs a lot.

You pay one dollar a year, keep it texting the the philosophy worked for facebook.

The whatsapp you love today, will it be the whatsapp of tomorrow?

Pricing expert rafi mohammed of culture profit is here with us now.

Are they going to be forced to change their model in order for facebook to recoup their money?


First of all, mark zummerberg has said we're going to keep the price at a dollar and not going to advertise, so he's handcuffed on that.

The one thing they can do is go to the linkedin premium model.


Got to help me out with that one.

Nerd alert.

Another nerd alert.

So you get the network by a lot of people joining because it's free, and then you monetize it by offering them the best version.

So that's probably the way they'll go on the consumer side, and then on the retail side they'll try to monetize that network.

It's a great network.

It's a closed network.


But what about the backlash of security?

I've been reading a lot about whatsapp users are worried about facebook knowing so much about them and using that to monetize.

How can facebook find the right balance?

It's an interesting question, and certainly something they're doing on the facebook site now.

I think it's up in the air.

I want to ask you as a finance guy, if i've got my fancy calculator, i can do a discount model of a transaction.

Are the people out in california with these huge valuations, twitter, facebook, are they playing at a different discount rate than everybody else?

Are they growing so fast, so dominant, and are they so profitable with any given dollar that they play by a different financial rule book?

What i think they're really looking for is the next big thing.

And so given that they're going to control the key last mile, what was attractive.

Now they sort of have a canvas they can now paint on and try to have new ways to monetize t. but can they justify $19 billion because they're growing as an industry so rapidly?

It's a different $19 billion than for microsoft or exxon.

I don't think so.

I think it's really that they see hope in this.

It's about hope?

And by the way, we're all capitalists here.

A big part of hope is all moanization, which what's app has actually figured out how to do, unlike twitter, arguably facebook sort of has figured it out.

That's the difference.

That's what sets it out.

This thing actually makes money, right?

Dollar per person, yeah.

But the problem will be, what will consumers tolerate?

Part of the appeal is it's simple.

Keep it simple, stupid.

If you start adding all the stuffy been saying, what did you call it?


Won't that turn people snoff we just to want keep it simple.

The beauty of premium sths a choice.

The consumer can choice whether they want to upgrade or not.


Always keep it simple, stupid.

Another price issue right now is the amazon prime.

What's going to go up?

Amazon prime, they charge $79, and it's free two-day shipping.

You get to stream the movies.

You also have access to the kindle library.

They're thinking about raising the price.

You say that's a bad idea.

I can understand why.

What's the solution then?

First of all, amazon has to be worried about their growth.

Their p/e ratio is 600. their operating margins have gone from 4.1% in 2010 to 1% last year, and the growth has gone from 40% to 22%. prime is such a key part of their revenue model.

They represent 36%. so what amazon really needs to do is unbundle its service.

There's no reason why -- so split all those services up and charge different rate for each of them?


On the shipping, i think that unlimited is a very hard pricing strategy.

I think they should give options much like a cell phone carrier to get people to self-select which shipping option works.

It's back to price discrimination.

It's 101. can we handle options?

I like cheer choice.

Good, better, or best is one of the easiest and most profitable strategies for a company to go to.

In fact -- say that again.

Good, better, best?


Are you buying it, tom?

Do you like that?

Unbundle it?

No, i think there's not nearly enough price discrimination in american pricing.

Tom, you probably always have the best, correct?

No, i don't. no.

Rafi, this has been great.

Thank you so much, particularly after this history being -- historic transaction.

Nela, my deepest sympathies, you've got to go back to washington.

One inch of snow, be careful.

I know, i might slip and fall.

Nela richardson as well.

Here's the forex report.

The back drop is it's going on in ukraine, the latest headline is real doubt about whether the so-called announcement, is it tentative?

It's definitely not signed.

There's a ruble, 35.86. it's a weaker ruble across dollar, as well as across the ruble baveket.

Dollar canada, the loonee, once again on a weaker track.

There's a raging debate about what the commodity currencies will do in the next month.


Coming up in the next hour of bloomberg television and radio, we're going to speak to ian bremmer on the crisis in the ukraine.

You don't want to miss it.

Good morning.

? this is bloomberg surveillance.

There was political chaos and care of this morning.

Live photos of independent square.

Early presidential elections ordered.

Slashing ukraine debt.

Thank god it's friday.

That means more than the usual coffee.

The reality of owning 5000 acres of downtown abbey.

This is bloomberg surveillance.

Life from world headquarters in new york.

It is fried friday.

I'm joined by adam johnson and alix steel.

Our guest for the hour, jeffrey hayzlett.

We have too much to talk about today.

A busy morning.

We start over and u.k. retail forecasts dropping.

Also posting a smaller than forecasted budget surplus as taxes and income and company profits fell.

We do have some economic activity here in the u.s. existing home sales.

The next read on housing -- we will be watching for that.

I $3.5 billion buyback of charter coming out after the bell.

President obama will meet with the dalai lama this morning.

China is unhappy about that.

Adam johnson on today's company news.

Rbs set to slash thousands of jobs according to a report with financial plans.

He received the biggest bank bailout in history.

The british government has not been able to cut its stake of 80%. a lot of banking news.

Here we go.

Jamie dimon will not face a showdown over his shareholders meeting.

Investors have withdrawn their petition that would have separated the ceo position from the chief executive position.

He faced a similar road and survived last year.

Moving on, we will talk about citigroup.

There is a boost in pay for the ceo.

Michael's compensation rose by 25%. the pay package was for his first year on the job running the company.

The compensation included a $5 million cash bonus.

That is your company news.

Focusing on banks.

The headlines, fast and furious across the friday in kiev.

Independent square with some -- alec still brings us up-to-date with what's going on in kiev.

Some movement towards a deal.

Germany had an interview with the ukrainian opposition politician.

He said that they are willing to do everything to ensure a peaceful solution.

Again, that is the ukrainian opposition politician telling germany's press that they're willing to do everything to ensure a peaceful solution.

So perhaps we are inching forward to some kind of deal.

Lots of the violent and chaos that we saw yesterday is what we have seen in the last two hours.

A real sequence of european leaders articulating.

Once again, from the cayman islands, ian bremmer joins us.

He is the founder of eurasia group.

I can't say enough about his background in time magazine.


bremmer, we've seen much of what you have predicted.

The mayor of kiev pulls away from the president.

Can the president of ukraine state president?

It's very difficult for him to stay president.

But it's also very difficult for him to resign.

That is why we have seen the violence we have four days.

There's no question that headlines this morning, much better for everybody.

But, calling for snap elections is not likely to be a workable solution.

The president said after all this violence, being with the somehow opposition cobbling together the government and taking part in the snap elections, that sounds like something the russians and the europeans can agree to.

Does not select a solution for that position to accept.

The russians are quiet this morning.

Is putin waiting for the end of the olympics?

If you are waiting for the end of the olympics, he could avoided the violence this week.

He pushed the president with us to billion dollar -- $2 billion to support.

He is in different to the international reaction.

Obama saying this is not about a cold war approach on syria or ukraine.

The russians worked really hard to come up with something that they believe will keep the president in power.

The politics on the ground in the ukraine have gone too far to make that possible.

It is possible that we have some breathing space.

I hope that will work.

Even that is difficult to predict given how divided the opposition presently is.

How does the country result the fact that the western half of the country has now said it wants to separate from the eastern half?

Not only that, but you have russians that it said that they would declare independence.

The russian officials saying that the russians would go to war over the ukraine.

This level of instability in the west and southeast just don't belong in the same country.

You have to create peaceful conditions more broadly before you can answer that question.

Breaking news out of russia.

Russia announcing it as many questions of how the ukraine could repay the bailout -- that $15 billion bailout.

They will wait for to stabilize.

What happens if he is out of office?

Will russia hold back their money?

It depends on who's in office.

If you are having elections, the snap elections, you will have elections that the observers are going to be will come in and say they are free and fair?

Or elections that the russians will feel happy with the outcome?

Those two things are not mutually compatible.

The faster you want to have those elections, the harder it is to come up with something that is free and fair and observable.

Ian bremmer joining us this morning.

I don't see any u.s. headlines on this.

Is the president saying -- staying silent on this?

We are getting from the white house no word yet.

They're waiting to see what shakes out.

Europeans are to some extent as well.

We have not heard as much from the opposition side of things.

They want to see that shakeout.

Before they suggest that they support whatever is happening.

Is it time for air diplomacy act out thit?

You have joe biden as the lead voice here.

They don't want to escalate this in terms of u.s. issues.

We talked about this before.

Ian bremmer made the point just a few days ago about the fact that we have not had the president engaged directly on this.

Joe biden spoke with the ukrainian president yesterday.

So did putin.

Who are the ukrainians analyzing this morning?

The opposition's allies -- they don't think they have any.

Serious and a strong message.

We will talk to you.

We like this diplomacy and democracy.

When the chips are down, don't expect that much more.

Biden was making initial statements on obama, caring noticeably absent from the poetic -- from the diplomatic mix.

The united states is not want to be seen as escalating this with the russians.

Obama saying this is not about cold war approach.

Frankly, given where victoria nuland -- she is nowhere near the stalks.

That is because she would be an inflammatory presence.

You have the right approach with europeans and the russians here.

That's a lot about the actions of american power.

Thank you so much.

Alix steel come you have some further headlines here.

Russian finance ministers pigging and speaking in hong kong.

Basically saying intervention might wind up being a waste of foreign currency and gold reserves because the local currency will depreciate regardless.

Ubs put out a very sharp note.

The team at ubs have a significant evaluation and a forecast for the ukrainian currency.

You have to wonder if its just finance their wars part of the deal that the opposition say that don't want that russian money.

That was clearly part of it.

We'll have to see how russia plays out in the next couple of days.

Let's do a data check.

The stability away from what we see in the ukraine -- futures approved to 275 again.

That may be a good feeling of a good week.

Coming up, the coffee may be more expensive than expected.

We will talk to the ceo of the oldest coffee brand.

? good morning, everyone.

Jeffrey hayzlett is our guest host.

They always try to control the message.

What do you do when the news flow is challenging echo look at walmart recently.

The train wreck of hp over the last couple of years.

And pepsi-cola and coca-cola dealing with tepid revenue growth in the marketing follow.

It is really a time of struggling and trying to get a message.

How do you find that message?

You and i were participating yesterday in a thing called social media week.

We are finding that more and more corporations are losing control of that message because more and more information is out there and people can weigh in.

Very tough.

They just don't trust.

Even walmart has been having problems.

Even in china as they are not being trusted as a world price deliverer.

The corporations that you advise, they are part of the twitter vigilante.

This is not like j and j and tylenol.

It used to be that companies could control the message and would believe that they could get right down to the people and say some of this is what is happening.

We control things -- you can only reach us from 8-5. now come with happening as everyone has a voice.

So that comes out a lot quicker.

Somebody told me to ask you what somebody does with corporations when there is a tweet out there, i hate your airline service and i hate your product.

That has to be the biggest nightmare.

Those people were saying that beforehand.

They just have a voice for that.

You say, i understand you hate me, so what?

You can do that.

I tweeted that when i was a chief marketing up officer at kodak.

The guy was relentless.

My team said, be nicer.

It does not mean that you can't directly get back to people because some customers are not right.

Where they are right, you need to knowledge it and get right down to it.

Companies, let's take hp.

They have to get their house in order.

That is the first thing you up to do.

You have to run your business right.

If you suck online, you suck off-line.

Our twitter question of the day -- which company needs the marketing makeover?

Which company needs a marketing makeover?

You can tweet us.

On business week cover, huberuber all the rage.

Stay tuned.

? it is our twitter question of the day.

Which company needs a marketing makeover?

Tweet us.

Think about it.

Good morning, everyone.

I'm tom keene with adam johnson, alix steel.

Adam johnson has our company news.

A lot happening right now.

The political crisis in the ukraine slashes the debt rating.

The rating company also said expected financial support from russia is becoming increasingly uncertain.

This is just crossing the line right now.

That just broke.

That is coming across the wire.

We will keep you posted.

China warns president obama over a planned meeting with the dalai lama.

The country's foreign minister says that the sedan will impair u.s.-china relations.

China wants the president to cancel today's 10:00 meeting at the white house.

Still a final winner for the final jackpot.

It was sold at this convenience store in california.

About 10 miles north of san jose.

The ticketholder gets the full price.

The seller of the ticket is $1 million.

That bullish headline, the ruble goes down.

Every headline, we see the ruble is a proxy for the tension in the ukraine.

I need a cup of coffee.

You like your espresso shot at 3:00 every morning.

I gave up coffee.

The ceo just signed a multiyear agreement.

Do you have a cup of joe with you?

Tell us a bit about the deal.

Is the ideal partner for the u.s. market.

It is an incredible, booming market for coffee.

They are the right partner to work with.

Your coffee is about 70% of the cake upmarket.

It has that high-end, premium brand.

How do you compete with that?

We came from the land of espresso.

Italy is the land of espresso.

What we want to do is explore our capability in coffee.

We are roasting, blending coffee and espresso worldwide.

We say that we can come to an agreement and work again on espresso.

You are the marketing goo here, jeffrey hayzlett.

-- marketing to root here, jeffrey hayzlett.

All of a sudden, coffee was not cool.

Espresso was cold.

How do companies do that?

Part of it is advertising and showing people what they're doing and what's cool.

They're going to the machines.

The machines that do it -- i have one of these in my office.

Because it's so convenient, my wife can do her chai tea and i can have the espresso.

Antonio, we grew up on sanka.

American copy was terrible.

You single-handedly taught us about coffee.

Now we have everybody doing this.

How do we differentiate in the espresso coffee wars in america?

Espresso is the way to make it.

It is important that 80% of all espresso-based beverages are in the home.

If you have starbucks cappuccinos, it's seven dollars.

We can bring it to home with a price that is completely different.

It is $1.2. we bring that home, you are still getting great margins and still getting a price situation that is an home and out of home.

I own an espresso machine.

I make a double everyday.

My question to you -- why should i switch from espresso which i love to your lavazza machine?

For a simple reason.

We are managing more than 50 40 different coffee countries.

It is for generational companies -- four generational company.

You have the pot on the fire and you are brewing your american copy.

Investing what you are doing -- that you are doing is you're not wasting coffee.

You get what you want and i get what i want.

Alex gets what she wants.

That is the difference.

That's why should be switching.

If i don't want espresso, i want another -- english tea.

We have the count is coming up.

I can't get that from you.

I don't want to come to your house.

That's what is happening.

A machine that is multipurpose that serves all kinds of different flavors, tastes.

You sound like a marketing guy.

This sounds good.

Antonio, thank you so much.

Coming up, 3-d printing changed.

A new company is seeing consumer growth.

How they're breaking the 3-d mold, coming up next.

? good morning, everyone.

I'm tom keene.

With me, adam johnson and alix steel.

Futures up 32. alec still has the company news this morning.

Vodafone tricks today.

The company is selling a 45% stake in verizon wireless.

It will leave at half the size of what it was.

The company will pay out a 2 million shareholders and consolidate its shares.

The move leaves vodafone with the market value of $100 billion.

Fortis targeting one million sales in china this year.

The top executive in the country says they expect the chinese auto industry to grow eight percent in 2014. fortis hopd is hoping to top one million sales in china.

The figure is forecast to keep rising.

Smartphone users look for cheaper ways to message.

There is a little nugget that is just crossing.

Under armour just renewed its deal with the u.s. skiing team.

-- skating team.

Not winning any medals.

They were worried that the suits were grading drag some out.

Under armour is going to keep the contract.

It is not traded this morning.

That has been a huge story.

The growth of under armour.

Bloomberg tv spoke with kevin plank about this controversy over the suits.

Let's listen in.

I'm in sochi right now.

We're making modifications and adjustments, which is typical for what you do with this type of level.

So, this is part of the game.

We are making suit right now with our team underground.

We are going to put our guys in the best position to bring home gold.

Will this have any brand image impact on them going forward?

No, not because they did not do well.

Is a fabulous american story.

He started off in his grandmother's kitchen.

He is billed as company -- built this company up in baltimore.

To see a brand development to go up against nike and adidas --

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


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