Voters Have Spoken: Surveillance (11/06)

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Nov. 06 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Rett Wallace, Neil Irwin, John Sculley, Katia Beauchamp and Hayley Barna. (Source: Bloomberg)

This is "bloomberg surveillance." voters speak nationwide.

Emma kretz and moderate republicans score victories.

-- democrats and moderate republicans score victories.

Everyone wants twitter shares.

They price tonight.

We are looking forward to that.

If you are in school, you stay in school and you get smart.

Education means a lower divorce rate.

I am tom keene.

It is wednesday, november 6. good morning.

Let's kick it off with the morning brief.

Services expanded more than estimated in europe.

The recovery is building.

It has been slow-moving.

U.k. industrial production came out overnight better than forecast.

We owed it raised its profit forecast.

-- toy yoda -- toyota raised its profit forecast.

10:00 a.m. we will get a leading index.

Time warner, chesapeake energy, ralph lauren.

Solar city, activision.

Twitter is expected to price shares after the bell today, they expect to trade morrow.

-- tomorrow.

There are a few financial papers from federal reserve insiders speaking about longer stimulus for longer.

Lowering the threshold for unemployment.

On this wednesday, let's look at the data.

Futures up 10. 10 year yield 2.65%. the commodities lined up.

Brent crude was one of nine, down to 10604 -- 109, down to 106.04. it is time for our front page.

The most important stories.

The election results.

Let's give you a round up.

Starting with new york city.

Bill de blasio winning the may your old race -- mayoral race.

New jersey governor chris christie was reelected.

He is a noted tea party nemesis.

Democrat terry mcauliffe won the virginia's governors race.

It was unexpectedly close.

Alabama voters went mainstream.

The republican one over -- won over the tea party candidate.

Mr.

walsh won.

There are also a lot of education proposals.

It is all about the economy.

That is the number one issue right now.

Perhaps voters are changing their tune away from tea party candidates to more mainstream.

The economy was dramatically front and center in some of these polls.

Toyota racing its full-year profit forecast by 13%. the reason come a the weaker japanese yen.

It also helps restore confidence in the idea that the policies are giving the exporters the edge the prime minister promised.

It was more than general motors and volkswagen combined last quarter.

You can point to a toyota and you can point to the beneficial policies.

How is it impacting some of those who rely on domestic sales?

His japanese consumer spending up?

Our wages up?

We are not seeing that yet.

It is exporter.

Current see adjustment.

It is the easy solution to getting the global economy going.

If you look at the stock market, you see the enthusiasm.

You see the weakness in the japanese yen.

Will they get over the deflationary funk?

A surprise exit -- bart chilton stepping down from his post.

He has positioned himself as a fierce critic from the -- of the industry.

The timing here is interesting.

He made his announcement less than two months before cftc chairman is set to leave.

Beyonce sang that song and "cadillac records." i am not going to sing.

That will ruin the morning.

You have done before.

That was only one time.

That is the front page.

Rick wallace is with us.

He does a cute research on ipos.

He is decidedly opinionated about a small offering in christ today.

The off -- being priced today.

The author of "the alchemists" joins us as well.

What is the dynamic at twitter?

People are clamoring to get the stock.

Nobody is listening.

Today it is about getting the stock.

Tomorrow it is about understanding what the company does.

We have an opinion about what the company does.

There is an interesting story in the journal today saying that the estimates can range between 30% and 60% growth.

People don't have a lot of good data about what the business is.

People are very aware of a product they like and want to own.

We will get familiar with the business over time.

The fact that it is so familiar and people are so excited about it -- how does that translate into evaluation?

That is interesting.

When we initially saw the price range, it looked like they were comparing to facebook.

It was a discounted facebook.

Now when we look at it, it looks a little bit priced like yelp, interestingly.

Premium to facebook on evaluation facebook.

From an operating perspective, it looks a lot like pandora.

Neil, we start a three-day frenzy.

What are you focused on?

The ecb is the first stop and that is a big test.

We have 0.7% inflation.

When are they going to step in?

When are they going to do something?

Are they going to do a rate cut?

Might we see quantitative easing?

Citigroup making a big deal about the ecb balance sheets shrunk.

It has been a strong euro and a weaker dollar.

Will they adopt fed-like qe policies?

I don't get a sense that that is coming soon.

They have a strong aversion to buying government bonds.

Qe is a form of buying government bonds.

They will be resistant to it.

At some point, are the numbers just to telling?

They have all moved on.

It is like a whole new world.

One thing that mario draghi has picked up is the idea of forward guidance.

What is going to be different going forward?

The ecb has been very timid with regard to forward guidance.

They always keep the x itself.

They want -- exit valve.

They want to make sure they maintain flexibility.

They want to move to a hardened kind of -- we will keep rates low for long even as the european economy picks up.

A lot to talk about.

It is the first wednesday of november.

Company news.

Blackrock and fidelity.

They are under the microscope.

They are being examined by regulators as potential risks to the financial system.

The review is still in its early stages and the panel has not taken formal action regarding the companies.

The chinese company is going public.

It has hired six banks to handle its ipo.

The company has said to be looking to raise as much as $6 billion.

This offering will be in hong kong.

Wells fargo is under investigation in regard to its mortgage bond underwriting.

Attorneys in san francisco have been examining the bank for more than a year.

It is one of a number of banks under scrutiny.

That is today's company news.

Here is the number for you today.

5500. that is how many model s teslas or deliver in the third quarter.

We will talk more about tesla's results coming up.

"bloomberg surveillance" on bloomberg television.

Good morning.

Coming up, the former chrysler ceo, always opinionated, on "in the loop with betty liu." in the spirit of a twitter ipo.

Sara eisen here.

Tesla beat earnings estimates after the bell.

The stock has been taking a beating in the after-hours action.

What a wild ride.

It certainly has been.

Tesla's shares are down more than 10%. production this quarter will be around 6000 -- slightly underestimates.

The issue here is more about the fact that elon musk ishas has said that they are held back by part shortage.

The other thing they're focused on is the government credit.

There is a political risk going forward.

Vehicle credits were about $10 million per quarter, down 80% from the second quarter.

Tesla is very vulnerable.

California may revise the number of credits given to tesla.

I think we should note that even though tesla is getting killed in the after-hours trade, it is still up completely this year.

Elon musk has said that the stock is perhaps overvalued.

Let's listen.

The stock price that we have is more than we have any right to deserve.

It is not as though i think we -- i'm not going to say we deserve every penny of that.

I think it is more than we have any right to deserve.

Before the results, tesla was trading at about 294 times estimated.

The thing that gets me going here is that we are trading this as a tech stock.

It is an auto manufacturer.

They got a three percent -- 3% negative operating income.

How long can they sustain that?

Why does it trade like a tech stock?

Gm sold 250 million -- 250,000 cars in the last quarter.

Tesla trades like it will inherit a large piece of the automotive industry.

Is it like elon musk going press conference to press conference?

Or do you value it compare to auto companies?

Have you driven the car?

Too small.

They sell $80,000 cars.

They are not marketing the car because they have sold all they can make.

The market thinks this company will go.

-- grow.

There is something of the disruption affect and that is potentially what is making the stock a big momentum play.

This is also their first production car out of the gate.

It is the safest car in the world.

It broke the testing machine.

It literally went off the charts for safety.

The videos of the fires did not help.

Not for marketing purposes.

But in substance, they made a very, very safe car on their first try.

If you drove it, it is terrific.

They control their own distribution.

It is a good outing to go to the chelsea art gallery where they sell them here and take a first been.

-- spin.

Can never become anything more than a niche luxury carmaker?

Is there demand for a cheaper vehicle beyond the los altos hills crowd?

We will have to see.

It is a very nichey place.

Competition is looming.

The development time will come under pressure for tesla and that could lead to operational missteps here it skeptical that tesla can become the mass player?

They have an suv that is on the way.

The x looks beautiful.

They have a partnership with dime are -- daimiler.

It is being valued very far forward.

Apple are taking an option on long data.

This brings it right back to twitter.

Nobody knows what is going to happen in 2014, much less 2018. what they have in common is that markets are pricing in the certainty on one of many possibilities.

You have chrysler and you have the other two.

Elon musk owns the quarter of the company himself.

He is a credible engineer and can deliver a product.

Is tesla the kind of company that should be private?

Tesla is a great example of why companies go public when they need capital.

It is an expensive thing.

It is unheard of to do it the way that he has done it.

Many others have died along the way.

This busy wednesday morning.

Twitter's ipo is on the horizon, pricing after the bell, starting to trade tomorrow.

Will it be a successful business?

Our guest host says i'm a look at pandora.

Good morning.

Beautiful shot of washington bc -- dc.

Top headlines for you.

Homemade bombs landed in flowerbeds exploded outside a communist party office in northern china.

The autumn's auction season, a slow start.

It was the second straight night of disappointing bidding at the auction house, christie's. bart chilton is leaving cftc.

A frequent guest, a member of the cftc since 2007, his push for tighter regulation -- he notified the white house yesterday of his decision.

He will be leaving the commission in the not-too- distant future.

Gary gensler will leave at the end of the year as well.

I will be interviewing him next week.

The cftc is facing an enormous amount of pressure because they have been tasked with regulating the derivative market, yet they continue to struggle with even funding the agency to keep people working.

Time for morning must-read.

The idea of trchimerica.

Both countries are engaged in a lot of monetary easing.

Coordination and frequency are essential.

It is an interesting take.

Ultra-loose financial conditions are things that both economies are addicted to, he says.

Neil irwin with us.

What did washington learn in this bond market ugly summer?

I think the federal reserve learned how dependent global markets have been on what they do.

Had some of the froth been blown out of emerging markets, can they had forward?

-- head forward?

Everything was selling off at the same time.

Financial conditions are now about as tight as they ought to be.

When you get together, do you believe the janet yellen will be the central banker for the world?

I think there is no way around it.

One thing we learned through the summer and through the taper debate is how much the dollar is still the reserve currency.

What they do at the federal reserve still shapes the world economy.

Germany, whether its surplus policies are hurting the rest of the world.

Martin wolf says that germany is a weight on the world.

This is really gaining traction.

Not everybody can have a surplus.

Germany wants to portray their surpluses as competitive.

They need demand as well.

Neil are one with us.

Good morning.

This is "bloomberg surveillance," i am sara eisen.

Here with tom keene and scarlet fu.

Whether it is the fed earnings or economic data, features indicating a stronger start.

The european market at a five- year high.

Up 7 when i walked in the door, up 10 now.

It gets your attention.

10 year yield at 2.65%, 2.66%. we'll cannot get through 94, 94.21 on west texas.

Had at the meeting tomorrow.

Pandora was a gamee -- gainer , up by almost 9%, active listeners up almost 20% at the end of october.

The ceo says it is withstanding competition from itunes radio, it's market share increased after the introduction of that.

Tenet health care following -- gallin -- falling the most in almost two years.

They are supposed to be beneficiaries of the aca because they have more beneficiaries.

If we change the medical system, do we use less stuff?

There'll be more people admitted to hospitals.

But more people who get insurance -- these stocks have been on a tear.

The stocks have been on a tear.

It is a little unpredictable right now.

One stock we can add to gainers and losers tomorrow is twitter.

All indications point to a strong demand for the stock, likely to price its ipo allowed the recently increased range.

Can it be a successful business?

Is a long-term value for shareholders?

A lot of believers.

The true believers have the high ground as demand seems exceptional for shares.

Rett wallace has read the book "an initial public offering frenzy." he knows a frenzy when he sees it.

Twitter fits the bill, what is different about this versus facebook?

There are more similarities than differences.

In the last 48 hours.

No question, we are not the facebook ipo -- but the document reads the same, the disclosure is similar, the price increase has been similar.

They did not increase the number of shares poor -- shares personnel.

Hopefully we will not see a market malfunction.

Who has the responsibility to price these shares, is it a company, is a goldman sachs, j.p. morgan and the underwriters.

Or is it just the twitter vigilantes?

There will be a pricing call.

How many people on that call?

The lead underwriters and the company, they will decide what the price is, we hear it is 40 times 250 fries -- to 50 times oversubscribed.

You say facebook is the wrong comparison, it is actually pandora we should be looking to.

If you strip away the data business, twitter as a data business, they sell data.

If you strip away international and look at the u.s. advertising business, they have a mobile product, 70% of usage is immobile, similar to pandora.

Their sales force is about the same size as pandora.

Their sales force productivity and the amount of monetization per user is almost an exact match to pandora.

From a revenue perspective, they are similar.

From a cost perspective, different.

Pandora spent 50% of revenue on music content.

Twitter spends nothing on content.

The thing about pandora is it has been a way to play the rise of mobile.

They get most of their revenues from mobile, so does twitter.

Facebook does not at this point, it is growing, but it is not.

If investors want a piece of the mobile trend, it is a that -- a bet up.

Facebook has been catching up with the mobile environment, which has turned over since facebook launched.

Twitter and pandora are mobile native businesses.

Cpm's our -- are lower in mobile.

This is one thing that new insurgents are figuring out better than older companies.

One thing i am fascinated by with twitter, we understand it in the media.

What does your grandma need it?

Twitter put an about us page on their website to explain themselves, what you can use twitter for.

What does that tell you?

If you read the s-1 offering document, it is focused on its place in society.

Not long ago, when myspace was trying to make a comeback, they put out a derogatory bumper sticker that said "your mother is on facebook.

-- that turned out to be a good thing.

We hear a lot of churn, it is not clear what growth opportunity they have left in the u.s it is for us and our friends, maybe not for grandma.

Facebook mentioned during earnings last week on the call that teens are not spending as much time.

This is something we have talked about, the audience can move.

Myspace is a good example.

Sometimes the audience will pick up and leave.

You not good enough for twitter?

-- you are not predicting that for twitter?

No.

pinterest has been valued at close to $4 billion.

D.c. links with 1999, companies that are not making a profit that are valued enormously.

Not really, these budgets are going to move.

The advertising is happening, twitter monetizes a lot like pandora right now.

Could it get some of the budget it is asking for, that is what investors are betting on.

Neil irwin with us talking federal reserve.

His book is "the ultimate ear canal is this -- "the alc hemist." is this helpful to bankers where we can get back to agp -- a g dp bernanke is talking about.

They have had more impact on financial markets than the real economy.

How many employees does twitter have?

Not that many, that is not the company driving mass expansion in jobs, that is what the fed wants to see, improvement in the job market.

As much as the stock market is up, that is an indirect effect, a wealth effect.

Do you believe in a multiplier effect where the twitter's of the world down across america?

It is not just companies like twitter going public, our companies across the board saying stock prices are high, the cost of capital is low, i will build a new factory, hire 100 people.

Until that happens, this economy will not -- going back to tesla, tesla has less than 3000 employees versus 200,000 at gm.

The promise of innovation is efficiency.

Sara, brian white just publishing at cantor fitzgerald a $777 target at apple and news of their factory -- new mexico.

Moving production.

A moment in the sun for these technology companies.

Coming up on "bloomberg surveillance," want to save your marriage?

Stay in school.

Some numbers behind divorces.

Tom, this is for you.

Brutal.

? this is "bloomberg surveillance," i am sara eisen.

Here with tom keene and scarlet fu.

The oil industry challenging restrictions on exports of crude . one strategy is arguing that limits designed to keep exports in america violate international trade rules.

Larry summers says the u.s. will avoid another round of political gridlock in an interview in new mexico.

He said "those who shoot themselves in the foot really do it again." he said he has no plans to go into public policy.

-- the carcass of a woolly mammoth has been found.

The lower portion had been stuck in ice and still contained liquid blood.

No joke.

Mammoths died out around 10,000 years ago, some were 13 feet high and weighed 10 times.

-- 10 tons.

Can you imagine?

Liquid blood.

That is so cool.

I cannot wait -- i always thought -- that is where chewbacca came from.

Very cool.

39,000 years.

Fed policy.

Terrible.

Single best chart, not a woolly mammoth chart.

Not at all.

A tip for anyone looking to get married and stay married.

If you you want to -- if you want to avoid divorce, stay in school.

A college degree increases your likelihood of getting married and low if your chance of divorce.

This shows couples by education level.

The white line is college diplomas, the blue line is those without -- tom, did you drop out of school?

All lines are slipping down.

Buddy chance of making it to your 50th anniversary is only 55% if you do not have a high school,. -- a high school diploma.

I am wondering when you drop out of school?

It is a serious thing.

College educatioed americans tend to get married later, they could be more mature and more stable when they get married.

Deal irwin with us, his book is "the alchemist." my morning must read on the unmarried world.

This stuck out like a sore thumb about virginia and can cuccinelli -- ken cuccinelli.

He lost by massive, that word struck me, by two dozen points.

Unmarried women.

We are carrying -- paying more attention to demographics.

The republican party has a problem with women, can they solve that by 2016? you have been stuck in traffic in herndon, virginia more than a few times.

What does virginia say about urbanization?

Is becoming more and more about fairfax and alexandria.

It is huge.

Fairfax, prince william counties, loudoun county, these are large counties that are battlegrounds of the next election.

The same is true in a lot of states.

Does the east and west of richmond, henrico county across the heart of virginia over to the ocean, the same tension.

White-collar professionals, they are swing voters.

They might lean conservative but not like the direction the republicans have gone.

Can the republicans we -- win them back?

The christie formula out of new jersey.

Now it is speculation.

That came after hurricane sandy as well.

He wore a fleece.

Neil irwin with us.

Our twitter question of the day.

What is the subscription service you cannot live without.

Tom, it is birchbox.

We will talk to the founders of the makeup company in the next hour.

? this is "bloomberg surveillance," i am scarlet fu, joined by tom keene and sara eisen.

Some company news from the files of bloomberg west.

Apple got as many as 5500 requests for personal information in the first half of the year.

Law enforcement agencies requested information on everything from itunes accounts to e-mail addresses.

Apple said it wanted to share more details but was under a "gag order" from the government.

Samsung looking to strike more deals.

They are looking for acquisition targets across a wide range of deals.

They may set its dividend at 1% of its average stock price, doubling cash payout to investors.

Softbank will keep its stake in ali baba, it owns about 37% of the chinese e-commerce company.

An executive says the company plans to hold that state.

-- that stake.

Treasury official steps down, a step closer to joining the federal reserve.

The fed faces a reshuffle, not just at the top.

There are a number of open seats for the administration to fill.

Could the leadership changes hand at pushing tapering?

Neil irwin is the author of "the alchemist." he writes about central bankers.

How much does president obama have an opportunity to shape the federal reserve?

It is enormous.

He has to replace janet yellen as vice chair, a vice chair of supervision, a couple were governor schweitzer -- a couple more governor slots.

What direction does president obama won to go?

Are you thinking policy or more women on the board?

On the policy side, the president has said over and over that he worries about bubbles, he does not want to get back to the boom bust cycle over the last 15 years.

He wants people attuned to those risks.

For the vice chair job, does he go with jeremy stein, already a governor?

He is more hawkish than janet yellen, is that too much division at the top?

Are we anywhere near what stephen talked about at the townhouse in london, a third mandate -- the chatham house in london, a third mandate.

Janet yellen is a dove, she has been a little dismissive.

She mentioned price stability and financial stability in her nomination.

Implicit in that is not having boom bust.

The idea of the federal reserve is that it is independent and they can move on its own.

Yet the president makes these decisions.

Is a political process, he has to get whoever he nominates through the senate.

J powell -- jay powell's term is up in january, he is going to be reappointed, he is a republican, that can balance thanks.

Tom, you mentioned forward guidance.

The notion that the fed is trying to be transparent about what comes next.

How do we do what comes next if we don't know who will be voting at the fed?

That has been a problem with credibility, we went through the entire summer not knowing who will be the chairman.

We could go on for an hour about for guidance.

Here is a quote from "the alchemist." your 2014 -- do your 2014, gary greenspan -- the year 2014, very greenspanian.

"incramentalism proved a useful method for bringing more fed policymakers around to bernanke's point of view.

One of the trade-offs of the bernanke style, they are sometimes slow on the mark.

Julie -- de2, -- qe2, four months passed, bernanke was getting his ducks in a row.

Greenspan never do that.

No.

will janet elin moved back to the arm-twisting, follow the leader, there is a real chance at that.

Is there a need to reaffirm the fed independence in washington?

1950 one, how urgent is it for chairman yellen to say this is what we do, we don't do that.

It really comes down to will she have the timing right?

The minute interest rates rise, housing industries will freak out, congressman will say it is more expensive to finance that.

Will she have the strength to resist political pressures.

I want to bring in rett wallace, a busy year for ipo's overall.

The macro environment, are companies ready to go public before the window on the loose monetary policy starts to close?

Is that a driver?

Some companies that have filed the documents to go public over a year ago suddenly found that the climate was right.

That is a mixture of expectations of the future and also the current valuation climate and investor demands.

That is a good question in terms of this theory going into next year.

In your world, m&a action this year was subpar.

Much more action in the ipo market than the m&a market.

Is the next fed more aware of the equity market?

You mentioned bubbles, it seems like an academic bunch.

It is skills they need.

Jeremy stein, j powell have brought some of that.

Do you have any names?

Kevin worsham.

That is the kind of talent they need.

They have seven governors, they need people with that market expertise.

Who will be on your cover in three years?

Janet yellen, mario draghi.

We need 4 alchemist's if their policies actually work.

Neil irwin, "the alchemist" is his book.

On the forex market, the british strengthening on better economic news.

We saw more of that with industrial production.

Even in europe, the euro is stronger into the ecb meeting tomorrow.

That will come at 7:45 eastern time.

The press conference is more important.

He can't telegraph what is coming next and how they will respond to the unevenness in the european economy.

We will have that for you on bloomberg television, bloomberg radio.

Down to the jobs report.

In the next hour, former ceo of apple will be our guest host.

People talk about library.

Reports he was interested in making a bid.

-- he will talk about library.

? this is "bloomberg surveillance." nationwide voters speak.

Democrats and moderate republicans score victories in new york, new jersey, and virginia.

Education spending proposals are deleted.

Everyone wants twitter shares, they price tonight.

Does the tweet frenzy seemed 1999? cristina alesci in a moment.

By snail mail, i get my supply.

It is all about perfume, birchbox.

Good morning, everyone.

This is "bloomberg surveillance, i am tom keene.

Live from our world headquarters in new york.

Joining me, sara eisen and scarlet fu.

Our guest host for the hour, john sculley, former ceo of apple and pepsico.

Every time i put my restorative eye cream, i got it from birchbox.

But it is working for you.

$20 a month, a box of makeup.

The restorative makeup cost like $340. your skin is flawless.

In europe, services expand more than estimated.

Recovering building in europe, it has been mixed and moving slowly.

In terms of the u.k., good read on the economy.

Industrial production came in better than forecast, the british pound is rising.

British stock -- european stocks at a five-year high.

From japan, toyota raising its forecast, all about abenomics.

The weaker yen helping experts.

In the u.s., mortgage applications out.

Before the bell, some earnings, time warner -- just out.

Earnings per share $1.01, a date b-- big beat.

Reaffirming its full-year outlook for 2013. that goes along with 20th century.

-- 21st century.

Profit and sales beat.

All media, new media, twitter today.

Chesapeake and ralph lauren.

After the bell, cbs, whole foods.

The main event is twitter, pricing shares today after the bell.

They will begin trading on the nyse tomorrow.

Scarlet has other company news.

But toyota increases it half it forecast.

Raising its full-year outlook by 13%. benefiting from the weaker japanese yen, boosting earnings for the prius and lexus exports.

Toyota earn more profit than gm and -- combined.

U.s. attorneys in services goes -- in san francisco have been examining wells fargo.

The probe centering on whether the bank violated the financial reform and recovery act.

Under the microscope, blackrock and fidelity being examined to determine whether they pose a risk to the financial system.

The panel has not taken any formal action regarding the companies.

That is today's company news.

Are they under review because they have my 201 k. they are gigantic.

Today is the day twitter prices its ipo, it starts trading tomorrow.

Cristina alesci has been following the story from the beginning.

Speaking to bankers on all sides of the transaction.

Here we are, what do you hear in terms of the demand?

From an institutional standpoint, the long-term investors have gotten most of the orders that they want.

Most institutions have gotten all of the orders they want.

They are not pushing any back to the bank.

That actually means two things, one is that you have a pretty healthy book.

35% to 50% of the book is in the hands of institutional investors, which you want.

You want them on day one to reduce volatility, not selling out.

It probably means that twitter has the demand it needs to raise the range further.

They are probably being discouraged to do so because they don't want the perception of being greedy.

Can issue more shares?

They do have a green shoe, they may take those shares.

Make the green shoe green or.

Iran brady morning of the face but ipo, paul saying to me -- i remember the morning of the face but ipo -- facebook ipo.

Paul saying to me about that faced the deal, i have been able to come across 3500 shares.

I am hearing that that may be the bit that goes to retail to create the kind of liquidity people want in this stock.

You do not want too much.

People think that there is not going to be too much retail, they want it to stabilize.

I am talking to people around this deal, people that should be not telling me that tech valuations are getting frothy.

They are.

She sits over by sara eisen, she is glued to the phone all day.

She speaks really loudly.

Dealmaking, yeah, yeah.

You guys are seeing -- being very polite.

I would like to suggest that goldman sachs is taking a victory lap with this.

They do not want to take it prematurely, but yes.

Up until now, i have been hearing that they have handled this very well.

Even james gorman in his interview with erik schatzker gave them a nod.

They all want to be nice to each other.

How much does goldman make?

3%. they will get a portion of that 3%, more than the other underwriters.

They will get more shares to allocate.

John sculley, why do you have john sculley on?

Let's start with the development of apple and pepsico, his work with health care companies.

Have you seen this before, at an flow -- ebb and flow.

What is new about tech in 2013? we are still making the bet on the future.

In the case of twitter, it does something that a lot of companies -- no profit.

One of the things it does that everyone andes is that it is creating a conversation -- envies is that it is creating a conversation.

It is becoming the second screen.

It is a big story, they can make it profitable.

The debate this wednesday morning is -- is twitter like smaller tech companies, pandora, yelp!

-- rett wallace is on this.

Or is it like the big boys?

Twitter has legs, the potential to become a big company on the scale of facebook.

Only time will tell.

Companies have disappointed before.

And a lot of people are optimistic that twitter has something important and valuable and part of our life.

What does it do to avoid becoming myspace?

They have 90 pages of potential risk, one of them is that the audience will turn to something else.

There is always at risk.

We are seeing that teenagers are moving away from facebook.

They are going to find, -- vine, whatsapp.

There is always that possibility.

It is up to twitter to build out their thesis and improve -- and prove they are not going to fall into that.

Twitter is a little different because, when we talk about advertising you talk about the natural cap on advertising.

A success they don't want to clutter the f -- facebook says they don't want to clutter the feed.

People believe that twitter can get advertising right, it is not about quantity, it is about quality.

They will partner with marketers in a way that will make compelling content that they can charge more for.

And they can charge a premium for.

That is the distinction.

They like the ad model.

What else stood out was the frothy tech market.

How serious is a risk -- a risk in that?

That is serious.

Investors are treating tech stocks all the same.

If you look at the valuation of linkedin on a price to sales ratio, it is trading at the same price as the help -- as yelp.

Yelp has one revenue stream, linkedin has three.

Investors are looking very generally.

In your phone call, it is a bunch of institutional people, they have to own twitter.

Without a doubt.

That is what is diving detect violations higher.

Cristina alesci will join us in a bit.

John sculley with us.

Twitter, it is exciting.

Speaking of frenzies, the media frenzy we saw earlier in the year.

That continues with time warner regarding a -- reporting a beat, $1.01, consensus was 89%. -- $.89. reaffirming its four-year outlook -- full year outlook.

2013 remains unchanged.

The stock remains higher.

Media and technology, hot.

One stock not part of the technology frenzy is blackberry.

We will talk about that with john sculley.

We will talk politics, election results, the tea party, the gop, and the economy.

? good morning, everyone.

"bloomberg surveillance," i am tom keene.

This matters now to john sculley.

Former ceo of apple.

His present interest is applying technological progress to a health-care industry stock.

Healthcare.gov.

From the technology to the refined level you work at, your thoughts on healthcare.gov?

So many people have talked about the bellyflop it has made.

The way i think about it is imagine a world where we did not have cell phones, smartphones, atm machines and online banking.

Not of those things existed 30 years ago.

Not of these things that have been disruptive innovators have been treated by congress or special interest groups.

Yet we have turned over the health care of the future to people who have no track record of at -- of doing anything productively.

With the government work this out?

When atms came out they did not work 5% of the time.

$400, thank you.

Lily get better -- will he get better?

The question is not whether it will get better about whether it will solve problems that need to be solved: forward.

For example, five percent of the population represents 50% of health spending.

The other 95% of the population is the other 50% of health spending.

It can be treated more efficiently.

It is about keeping those who bill healthy, that is where the consumer era of innovations in health care services can be dramatically important.

We are going to rip up the script.

A rural or small city hospital for us is a leading institution, the mayo clinic.

I they going to get all the benefits?

They are going to get it through telemedicine.

We can do things remotely, including diagnostics and surgery, including patient relationships with doctors online.

One of my companies is in the tele-health area.

We are already doing that, a huge future.

Medicare inflation.

Can we sustain that?

I think we have the aging baby boomers.

There will be an increasing heart of the population falling into the medicare class.

Medicare is going to be more expensive, not because we cannot control costs but because we have more people in it.

John sculley i'm getting older.

Former ceo of apple.

A management shakeup.

Blackberry challenge.

"bloomberg surveillance, good morning.

? this is "bloomberg surveillance," i am sara eisen.

Joined by tom keene and scarlet headlines.

Homemade bombs exploded outside a communist party office in northern china.

The blast killed one person and injured eight.

The explosion came with police on high alert ahead of a gathering of communist party leaders in beijing.

The auction season off to a slow start.

Almost 1/4 of works up for bid went unsold at christie's. monday sales came in 30% below estimates.

The perfectly preserved carcass of a woolly mammoth has been found in an arctic island.

It is believed to be 39,000 years old.

The lower portion of the creature had been stuck in ice and still contain liquid blood.

Name of stipe about 10,000 years ago.

Some were -- mammoths died about 10,000 years ago, some were 13 feet high.

Very cool.

Just amazing.

Election night.

Elections in this country, new york took a left turn for the first time since my 289 -- 1989. in new jersey, chris christie held on.

We saw democrat terry mcauliffe narrowly win in virginia.

What does it all mean?

Greg with atomic research group -- potomac research group.

Good morning.

Good morning.

I love your note on virginia.

Let's link it into the business week cover every day, 10 percentage point difference between mr.

Mcauliffe and mr.

Cuccinelli became much closer.

What does it say about the health care plan?

This drop from 10 to 2.5 points in two weeks shows that cuccinelli scored points by making the election about obamacare.

All democrats have to take notice at how badly mcauliffe slipped.

To the president become a lame-duck president last week?

He has been one for months, maybe since march.

He certainly is now.

Whether it is syria or obamacare, democrats are deserting him in droves.

What about chris christie, a landslide victory.

Can his appeal translate beyond new jersey?

A great point.

And a lot of it is about personality, he is a unique figure.

We will see.

In one exit poll, hillary beat him in new jersey.

It is not like he is a shoe in for the nomination.

A lot of pundits became enamored of another northeastern tough guy, rudy giuliani, who did not catch on with the republican base.

You mention hillary clinton.

Democrats certainly will be pressing for some kind of change.

Does hillary clinton represent that?

That is the issue.

She has a lot of attributes, her gender makes her interesting.

Elections are about change.

What is her change?

What does she bring to the dance that is new compared to the last eight years?

If you look at the exit polls, the economy is front and center for americans.

That is the priority.

Is either party better for the economy?

Does either offer solutions that resonate with a struggling america?

Both parties talk past each other and argue and posture and to not have good solutions.

I would say that we always look forward.

Whether it is biden or hillary, you cannot look backwards, you have got to look for it, that is the achilles' heel of the democrats.

You start the season as of last night.

Will the process to the first tuesday of november 2016 be the same, are we going to go through the same iowa, here, primaries, then we go to the conventions, will there be a new new?

The cycle oblique unfenced -- the cycle will be condensed.

Both parties realize you cannot have 21 debates.

Let's see what happens in 2014. i do think right now that the dominant factor that will churn elections is obamacare.

John sculley with us, he has done better than good.

Was the election last night a defeat for the gilded age?

You represent that to some extent with your philanthropy and your executive success.

Was this a knock on the chin for the gilded age?

The thing i took away was that obamacare is really hurting the democrats.

The fact that there was not a wider margin in virginia than what it was is a good indication.

If we have not had the shutdown in the government, a huge mistake by the republicans, we might have had a republican in virginia.

Is this the beginning of the end of the tea party?

I am not willing to go there.

The moderate won in alabama, i was wrong.

I thought the tea party candidate might win.

He said obama was born in kenya.

No, it is premature.

In many areas, like texas, the tea party is still very popular.

A final question for you about some of the events in canada, rob ford said he will continue to state mayor of toronto even though he admitted to smoking crack cocaine.

Could something like this happen in the u.s.? u.s. politics are so crazy.

This guy in toronto's polling numbers have gone up.

Maybe that is a message for politicians here.

Greg valliere, he is amazing.

How does valliered do that?

A linkage of economics and business.

I did not think last night would be that exciting.

Really exciting, especially the signals on politics: four.

The subscription service that helps you find ed products.

? good morning, washington, dc the sun is rising.

We are here in new york talking about waterloo, canada.

Blackberry is in crisis.

The fairfax deal collapsed, the stock fell 16% on that news.

The company may run out of cash by next year.

Bring us up to date?

They had a burn rate that would eat up the investments by the end of next year.

Can it survive until then?

What is its strategy going forward.

It is not going private.

It will stay public.

A $1 billion investment from fairfax will tide it over for now.

John chen taking over from thorsten heins has to put in place a strategy to get it to that point.

Whether he is setting up for a sale or reviving the company the way he did with sybase is the question.

Joining us is john sculley, can you confirm reports that you were among those interested in a bid to buy blackberry?

My partners and i in canada were quite interested.

We followed it closely.

We never did make a bid.

I talked to prem watsa and he said his deal was going to close.

I said let's wait and see what happens.

I thought he was having trouble filling the book.

You backed off because fairfax was moving forward?

I didn't think he was going to get the financing, i was surprised when they did not have anyone by the company but injected more cash into the company.

They inject more cash and they have a seven year duration of the convertible bond yield.

They are not going out seven years.

What was the strategic interest for the future of blackberry that you observed that mr.

Watsa is creating value?

It is not complicated.

Decouple the hardware devices from the business -- the biz, blackberry enterprise services.

You have got to sell that to someone like lenovo.

One of okinawa by the whole company because the chinese would not be allowed to -- the chinese would not be allowed to light the whole company.

What are the patents worth?

I don't think that is the critical plug-in, i think the patents are worth somewhere around $1 billion to one point $5 billion.

The key thing is that they have a net worth of about 600 wireless carriers.

We have a company which is building all of the byod next- generation secure messaging for at&t. we could have something really interesting.

Went to decouple the hardware devices.

Going back to lenovo.

Lenovo actually pursued a blackberry bid, the canadian government stepped in and said no way because of national security.

Now that john chen, former ceo of sybase is heading up blackberry, does it make it more palatable to canada to sell to a chinese buyer?

John thain is very respected.

-- john chen is a very respected ceo.

Just because he had a chinese name -- he has ties to asian companies.

The canadian government was not going to allow a chinese company to own all of blackberry.

They might allow, we looked at this carefully, they might allow them to own the hardware part.

A company like lenovo could do a great job with blackberry's brand.

There is an outcome that could be very positive along the lines that you are talking about.

John chen has the right skills to be a person to do it.

John, are you out of the game?

The stock has only gotten cheaper.

That must be very attractive.

If the company decides to sell again, we would be interested.

In the meantime, blackberry actually is a licensee of our software.

We think -- who is we?

I have my own firm, inflection point, and i have canadian partners.

I don't mean to interrupt.

I want to hear this.

My partners are gordon mcmillan and shane, based in toronto, a canadian entity.

Attractive -- for the government.

We will continue this.

A frank discussion of blackberry.

A data check as we look ahead to economic data being released.

In terms of futures, elevated by 9 points.

S&p up at 1765. euro-dollar, a stronger euro.

Mario draghi could make some comments leaning towards an interest rate cut eventually, not many people are anticipating that will happen tomorrow.

At the press conference he gives, he might lean in that direction.

Good morning, everyone.

"bloomberg surveillance," on bloomberg television and radio.

All of our interviews on bloomberg tv plus.

On itunes and android, i am tom keene.

With the, sara eisen and scarlet fu.

My eye cream.

Your eyes are so healthy and youthful looking.

In the new digital economy, subscription commerce brands are redefining retail.

At birchbox.com, customers get a personalized experience.

They get beauty samples from over 500 high-end brands.

Half of its 400,000 monthly subscribers go on to my full- size audits.

Katia beauchamp and hayley barna are the cofounders.

The company is growing.

I look inside the box, is it worth the $10 or four men $20? we will tell you why.

We feel like there is value.

We do not quantify.

That is often the equation.

How would you find these products otherwise?

It is a lot of work, 100,000 beauty products our last -- are launched every year.

You have to find the best one for you.

We cut through the clutter and personalize the boxes.

We send you samples so that when you are ready to buy products, you are informed.

Does it save you money when we are trying to be conservative?

It saves you from wasting money.

We think about easy ways you could grab a beauty product on your way out at a drugstore a department store, you'll never waste money with birchbox.

We get rid of the product graveyard under our sinks and make every product you buy the product you want to use up.

Manufacturers have a limited supply of samples.

Do you run up against that problem where manufacturers say that is enough?

The key to growing the sample supply is getting our brand partners a return on investment.

They use us as a media and marketing and commerce tool.

The sample costs money, we acquire new customers for them, get them awareness, we get them sales.

We sell full-size versions of the products that we sample.

What is your conversion rate?

50% of customers that sample go on to our site to buy full- size.

5-0, half the people?

This is just the beginning.

When we launched, people were focused on the subscription.

We consider ourselves to be a new way.

The buzz is ginormours.

You are bored, you get birchbox.

That is a bad business strategy.

It is fun for everyone.

It is awfully -- also highly efficient.

That is a new trend, is not just about getting the right thing, it is the delight.

How are you financing this?

We have not raised money in over two yes.

We raised money in 2012. since then, we have been going on making money.

You claim you are about discovery, opening the box and finding something you never anticipated.

So much as e-commerce is about customization and finding your niche.

How do you bridge the gap?

Customers fill out a profile, what their skin tone, their hair type -- i did that.

We work with over 500 brands.

We will send each customer 4-5 products that they are most likely to love.

Is it aspirational, down in bergdorf under the dunkin' donuts sign.

If i get birchbox, i can look.

Think about how many steps.

You do not think i would say that.

Think about how many steps you skipped with birchbox.

You don't have to rely on advertisements.

You are in your customers bathroom.

You are a potential brand for her.

You could change her behavior, you have a chance.

He for birchbox, you were hidden in a store.

Or the customer lives in ohio and cannot walk into bergdorf.

We are providing excessive building.

-- accessibility.

Thank you very katia beauchamp and hayley barna, cofounder of urge box.

-- birchbox.

Tweet this @bsurveillance.

? good morning, everyone.

"bloomberg surveillance," a perfect day to speak to robert nardelli.

Better than good, bob nardelli, "in the loop with betty liu." this is "bloomberg surveillance," i am scarlet fit with tom keene and sara eisen prices its ipo after the markets close.

Goldman sachs is the lead underwriter, playing a big role is jimmy lee of jpmorgan.

He is one of the biggest dealmakers on wall street.

He has a huge rolodex, he has access to jpmorgan's deep pockets.

Cristina alesci minute -- met wi th mr.

Lee.

Jpmorgan has been winning a prize position and tax ideas.

One banker keeps showing up, jimmy lee.

He pulled out all the stops to win over silicon valley.

Lee dropped his usual pinstripe for a mark zuckerberg like sweatshirt.

For twitter titans dick costolo, he walked them their suvs after a meeting.

Lee has never even tweeted.

Tech or not, lee is front and center on any deal with size and stature.

What makes him so successful?

No beggar on the street has done more deals.

-- no banker on the street has done more deals.

Clients like dealing with someone as senior as lee.

Jpm is a big lender, clients need the bank's balance sheet.

They don't mind letting jpm have a piece of the deal.

Lee nabs big deals because he has a rolodex most bankers would kill for.

Jpmorgan needs lee just as much as league needs jpmorgan.

It is a deal that works.

Cristina is here with us.

Jimmy lee is a titan of dealmaking.

Who are some of the jimmy lee's at other banks?

We had a cast of bankers specializing in dealing with technology companies or in the product, equity capital market ipos.

At goldman, anthony noto, an analyst during the tech bubble.

He took yelp!

Public.

In california?

He is in new york.

And we have david lewitt -- david ludwig.

At morgan stanley, michael grimes, a gadget geek.

He lives in the valley.

Joining collins stewart who took to go public, a long-standing track record.

Jvm, we have a cast of specialists in tech and ecm as well.

John sculley, former ceo of apple and pepsico, do you deal with these guys?

I have no jimmy lee for 20 years.

He was the senior exec running the option for blackberry.

-- auction for blackberry.

A small world.

We will talk about that coming up.

What happens next for blackberry and four mr.

Sculley.

We will talk about election results, who comes ahead in 2016. ? good morning, everyone.

Tomorrow on "bloomberg surveillance," sir martin sorrell on the media business and the changes, the disruption of digital media.

Look for that conversation tomorrow on "bloomberg surveillance." and the disruption and hype of the twitter ipo, blackberry's problems continue.

Back with john sculley, former ceo of apple and pepsico.

He looked at making a bid for blackberry.

Let's dig into this.

Did you come to a point where you raised the funds to buy blackberry?

We were pretty confident we had the funds to do the deal.

We did not think that prem watsa would get his deal funded, we decided to wait, we thought the price might drop or there would be other bidders.

We were surprised when the company pulled back and said we are not going to sell the company, we are going to take an additional -- was it fair play?

Was it aggressively bid or an inside transaction?

I don't have the inside story.

There is no fair play.

How involved was the canadian government in your negotiations?

We were very close with the government.

We know that there was no way lenovo was going to be approved by the government.

I think blackberry can be saved, it may be saved by the current new -- john-john -- john chen.

Where do you see value?

Decouple the hardware device with the blackberry brand, put it on android devices so people can make apps.

The current one does not have any following.

Lenovo could buy that.

That takes the enterprise service business, which has a great never... hundred -- a grea t network with 600 carriers.

That sounds pretty straightforward.

The issue was not the strategy but the financing.

Banks were not willing to put up money because they do not believe in blackberry.

They have not been presented with the story.

We were already in the byod business, working with at&t building a worldwide platform.

Where is google?

Nowhere.

Why shouldn't they be involved?

It does not tie into what google needs to do.

This is not enterprise, not consumers.

It is about secured messaging, not google's focus.

Will blackberry put itself up for sale again, would you drive and -- dive back in?

We would take a look.

But we are working with at&t, we can build out a strategy even without blackberry.

We would have gotten there a lot faster as a worldwide brand if we had owned bes, blackberry enterprise service.

You set on what might allow one of, the chinese company, to buy part of blackberry.

How much more of a firm competitor would blackberry be?

Lenovo has proven, they bought thinkpad from ibm, they can manage a brand.

Chinese companies love brands.

This is a brand that is in trouble and can be revised.

-- revived.

I believe the brand can be revived in the hands of someone with a sales channel and a cost structure.

There cost shock sure is out of line with the following they have.

Thorsten heins is out, this is a management issue, and john chengdu that -- can john chen do that?

He did a terrific job at sybase, well-connected in asia.

Can they survive with $2.6 billion in cash, are they going to run out?

They have to move quickly to get the device business week -- decouple.

The may have to rationalize the organization.

Does the canadian government had a concern that this could be another nortel?

It could be a must someone steps in.

The board had to make executive changes, they brought in inexperienced person like john chen.

Trying to not do nortel.

This is what they should have done a year ago.

Making a bid for blackberry.

We will see if they take it in a different direction.

Never a dull moment.

Thursday, ecb, friday, jobs report.

Mike miggy has been looking at the jobs report and new important research.

The story in the fed watching world is two papers by fed officials, william english, head of monetary policy, he is a very large guy.

And dave wilcox, chief economist at the fed.

Two papers that come to the same conclusion, not enough is being done to help the labor market.

In the english paper, if you lower the fed's 6.5% target for when they might raise interest rates to as low as 5.5%, you get more bang for the buck and more growth.

In the wilcox paper, they worry about if you are out of work for so long, your skills atrophy, you cannot get hired, growth is lower in the u.s. the idea of histories this -- the idea of larry summers, this is structural.

. what is the idea -- what is the response of the hawks, plosser, fisher, they are not going to like this.

This is not tapering, qe, the level of the fed funds rate, less of a debate.

One of the arguments on wall street right now, does this mean you can taper earlier if you use stronger forward guidance, offering something to both sides.

What is the wall street read on the likeliness of this in the next few meetings?

A couple of big houses, including goldman, said they are going to start tapering in march and they will lower the employment threshold to maybe 6% to see if they can get a bigger bang for the buck.

To our viewers and listeners who go, ok, i get structural unemployment.

We are living in, ther

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

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