Wall of Worry: Surveillance (11/11)

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Nov. 11 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests include Bloomberg Manilla bureau chief Clarissa Batino, Henley Smith, CIO at Commonwealth Management and Spencer Rascoff, CEO at Zillow. (Source: Bloomberg)

Choose your wallet.

We talked to a money manager.

He is begging the money -- the wealthy to get out of cash.

Christmas 2014 -- a curved, larger iphone may be coming out.

The philippines assess the damage of possibly the largest storm and reported history.

Good morning everyone.

I'm tom keene, live from our world headquarters in new york.

It is veterans day.

The bonds market -- bond markets are closed.

It is one of those clumsy holidays.

It is an important holiday.

Memories and remembrances.

Kicking it off with the morning brief.

Some overnight news in china.

Chinese economy has rebounded, that is giving a boost for -- during a key reform summit.

It is there to set the agenda for reform for the next decade as the communist party pushes for more sustainable growth.

It is veterans day in the united states.

Bond market is closed, stocks are open.

We will get earnings from gogo.

After the bell, sotheby's. rupert murdoch, publishing business will come out after the bell.

Data check.

Let's get you started on the week after the jobs report.

Usually, it is a quieter week.

The 10-year yield has been a big mover.

It is up again.

Decidedly, we have a higher yield market.

Risk on.

Currencies go nowhere.

Brent crude over in europe is a little bit weaker.

You can see the dow, 15,000 -- 15,000 761 -- 15,761. the yen sort of becoming normal again.

Confirmation hearings for janet yellen later this week.

The devastation across the philippines after typhoon haiyan , flattening buildings, released a storm surge that may have killed as many as 10,000 people.

Rescue workers are rushing to the buildings.

China's government and local red cross will donate about $200,000. police and soldiers are being sent into prevent looting.

It is difficult to get to many locations because the roads are not there.

Typhoon haiyan has weakened to a tropical depression as it reaches the anon.

There is a new storm approaching the philippines.

The pictures are around us.

We will take you to the ground there.

We have our bloomberg news reporter who was on the ground there.

More on that coming up.

Amazon and the postal service are teaming up to offer sunday delivery.

Amazon is looking to broaden its reach.

It is looking to get past up -- packagers -- packages to customers every day of the week.

No extra cost.

It will eventually expand to other cities like dallas, houston, phoenix, new orleans.

It is a savvy move by the post office.

They are expecting package delivery to go up 12% this holiday season because of more online purchases.

They are trying to get rid of saturday delivery to save themselves month -- money.

Their team with amazon and rivals.

I am doing more online.

Are you doing online?

We don't have time to go to the stores.

Ebay already delivers seven days a week.

A random -- world powers failed to reach an agreement.

Sectors will be given broader monitoring powers over facilities in iran.

Implementing practical measures.

It is a lot of semantics, isn't it?

It is.

It started back burner and it really got front and center saturday night.

Talks are set to resume in a couple of days.

Israel's prime minister's fiery comments when it was in the works.

Let's move to our top story.

It has met all of the images across all of the papers.

The typhoon moving east to west, south of manila.

When you see the typhoon, what is the effort by the philippine government to get to the eastern side?

How easy or difficult will it be to get resources to those injured?

It is very difficult.

For instance, where some of the damage is enormous, the airport is practically erased with only the runway left.

The only flights that can land in an airport are the c-130 cargo planes of the government that bring in supplies.

The food that is much needed a cause the rampant looting that is happening -- people are hungry.

There are still dead people on the streets.

We know the philippines from world war ii.

When you look at it, is this a question of the u.s. navy and other navies coming into assist?

Will we put ships out in the harbor to assist?

The u.s. has sent reinforcements as well as written -- britain.

The hard-hit areas are reachable by sea.

The other issue is getting to the people amid the roadblocks.

Trees and debris on the streets.

That is one of the challenges.

To be clear, manila was not affected, right?

It was moving south of manila.

By the time it hit manila, it weakened to be not as bad as what it unleashed in the central philippines.

Give us a sense of the hard- hit areas.

What are the known for?

Are the agricultural areas?

It is essentially a trading ground.

For instance, one area is known for producing sugar.

Parts are producing rice.

We are already seeing damage -- estimates of damage and sugar and rice output for the year.

As you know, the philippines exports sugar and imports rice.

That may affect some of our trading -- trades for the year.

Thank you so much.

Our manila news pure oh juried look for our coverage on bloomberg.com.

There was a lot more going on this week.

Bloomberg view contributor joining us.

Happy to have him on.

Henley smith, also joining us.

We will get to those high net worth clients in a moment.

What is on the top of your agenda him a map -- agenda, and that -- matt?

The theme is going to be scandals and lawsuits.

We have the jpmorgan settlement coming up at some point where they're settling with the government.

The $13 billion -- it is a large part of the mortgage liabilities.

You also have bank of america -- they lost a lawsuit.

I wonder if these five coming out this week represent some type of closure here or perhaps it could unleash a new wave of more regulation, more penalties?

It is hard to know.

Jpmorgan is trying to reach closure with their deal.

Bank of america is still very much in the weeds.

Their deal miley to more deals for the other banks.

-- their deal may lead to more deals for other banks.

How angry are your clients?

They are very excited.

It is all about followthrough.

We will see if interest rates continue to rise.

That would be an expression of confidence, which is what we are looking for.

Have clients enjoy being up 24%? i don't feel that.

I think some have.

I think some are taking a little off their table and being smart.

I think the general feeling is that stocks will continue to rise as the year ends.

Doom and gloom, the world is going to come to an end stories about the stock market.

The question is whether the easy gains have been done.

That is what happens at the end of the year.

It taking a little off the table is not a bad thing.

We need optimistic company news.

Maybe carl icahn cantilever.

Transcoocean reaching a deal with the billionaire investor.

They will back to of his nominees to their board.

The move is to come after months of pressure from carl icahn.

Shire make the deal to expand its drug offering.

They are buying vviropharma for $2.4 billion.

Johnson & johnson and amazon are locked in a dispute your i. the dispute centers on the role of third-party sellers.

Coming up, bloomberg has the latest scoop on apple.

The company may be developing new devices for next year and we hear they have curves.

Randi zuckerberg, ceo of zuckerberg media.

She will be on "bloomberg west." she got up and started singing.

She is related to what's his name?

You know.

You could have heard a pin drop when she started saying.

She is phenomenal.

She can sing like you wouldn't believe.

Which he be happy about you talking about her singing?

This is bloomberg surveillance.

Sara eisen here with tom keene and scarlet fu.

Investors may finally be getting the innovation they have been wishing for from apple.

Sources told bloomberg that apple is developing new iphone designs.

And they are curvy.

You like curves.

You like curves.

Samsung introduced the phone tablet hybrid.

Apple is looking into a phone that would be 4.7 inches or even 5.5 inches, larger than the current 4 inches.

Would approach the size of the galaxy note 3. curvy glassman not be for the models that are released next year.

It might be for a later date.

I just, gold iphone.

-- i just got my gold iphone.

Is there anything else?

True pressure sensitivity.

That would mean that it would make drawing and hand write her apps better.

-- and hand writer apps better.

This is their normal sequence right?

They had the s version of the phone this time around.

They could have two new versions next year this time around.

Is this a one product company?

Is apple a cycle company?

They are definitely an ongoing business, but it is definitely keeping the buzz going.

It is consumerism 101. keep the buzz going, keep the products coming, a little bit of innovation, and continue to sell.

Matt levine is the king of buzz.

What is the buzz on apple?

I think that you hear the stories and it sounds incremental.

Aesthetic changes, curving the screen -- and someone is going to be buying that too?

Carl icahn has been pushing apple to spend a lot more money on buybacks.

The concern on the markets -- is apple making big new innovations or should they be doing something more boring like buying back stock?

Some concerns have to do with margins.

The margins tend to come down whenever they ramp up with a new product.

They need to ramp up with production and get the new supply chain and effect.

The result was that hit to gross margin when the new product comes along.

He got his before yours.

Why do i need a curved screen?

It is part of the excitement, part of the idea that they're one step ahead of where you want to be.

You don't even realize you are ready for it and then it will come out and you realize it is something you cannot live without.

Samsung already has a curved screen phone that it debuted earlier this year and south korea only.

It is different because -- i am excited to get my iphone 5s so i can take clear photos.

Did you appreciate?

I appreciated taking photos.

Viane, too.

Speaking of this frenzy, our twitter question of the day.

Are we in a tech bubble?

Other technology stocks.

It twitter.

We just.

-- tweet us.

This is "bloomberg surveillance." i am sara eisen with tom keene and scarlet fu.

Rescue workers are rushing to the philippines after super typhoon haiyan devastated cities and towns.

It may have killed as many as 10,000 people according to some estimates from philippine authorities.

Some of the hardest hit areas remained cut off from relief efforts as roads, airports, and bridges were destroyed by the storm.

World leaders failed to reach a deal to limit iran's nuclear programs.

They agreed on the proposed deal that -- but that iran was not ready to accept it at that particular moment.

Negotiations are set to resume in a few days.

In sports, check out this hail mary pass from cincinnati bengals cornerback andy dalton.

It comes as time expires and forced overtime.

But then the ravens kicked a field goal in overtime to win the game.

The analysts were scathing about that pushing the ball up.

You just don't do it.

You win your bet on this thing right?

It is like a volleyball game.

Ravens, ravens.

Giants one.

Three-game winning streak.

Morning must-read, are you doing it on the line -- eli?

Janet yellen's confirmation hearing begins on thursday.

Larry summers was president obama's first pick.

He says one case of over optimist him should be forgiven.

It is an issue of managing expectation.

Matt levine with us.

How will vice chairman yellen be greeted by the committee?

I think she is generally assumed to be the most qualified candidate.

No one is objecting to her qualifications for the position.

There has been a push for the audit the fed movement to hold up her confirmation.

I think most people think she will be well received.

How will she be received by the markets?

That will be the key.

I think yellen will be bernanke 2.0. news reports said she might be a little more hawkish than before.

The rub with bernanke is that he has not been a big seller of policy.

I don't think so.

I think the lack of confidence in this economy is showing.

Lack of confidence in the economy -- that is different.

I think it all flows upward.

If yellen and give us a little more confident markets, i think will be ok.

Does that mean mario draghi does a better job of selling policy?

Faq does.

-- i think he does.

Is quantitative easing worn- out?

How would that play?

I think quantitative easing is played out.

There's no impact there.

That is one of the reasons why you had that surprise move last week.

Trek to capture the market's attention.

With a 2.8% economy.

Beneath the headline, there is reason to doubt the confidence in this economic recovery.

Coming up, no reason to doubt the confidence in twitter.

The ipo has been hot.

We will take a look at what the valuation means for the next batch of public offerings.

We are following the massive devastation in the philippines from the yours most powerful typhoon and read resulting sturm sturges -- storm surges.

Dramatic images coming in this morning.

And now a new storm is also approaching.

Rescue workers from all over the world are approaching -- rushing in to help.

I have seen a 4 foot.

I can't imagine a wall of water, not like is the nominee.

Just a wall of water.

13 feet.

It has now weakened to a tropical storm in general.

It has made landfall in vietnam as well.

The damage will be a lot less.

It is hard to erase those images.

Sara eisen here with tom and scarlet.

We need a data check.

Let's be quick about it.

Futures fractional, but up.

2.75% on the 10-year yield.

That has my attention.

Currencies a bit jumbled today.

You are going to skip it?


99.60. where is twitter and the market?

It is down this morning.

41.05. its investors can breathe a sigh of relief.

The first day came off like a success.

That levine writes for bloomberg few -- view on the pseudoscience of public offerings.

What did you think when you watch on thursday?

I was thinking that nobody really knows what it is worth.

This is a company that has negative net income.

People are betting on it either being the future of the internet and the most important infrastructure of the internet going forward or potentially it comes to nothing and social media moves on from there.

Wood goldman's job was as the underwriter was to find people who believe in the story and will hold onto the stock for a while.

I think they did a good job of that.

The trade-off there is of course that you have the risk of -- if you want to avoid the facebook effect where the stock goes down, put it with really committed investors.

I thought your note was great.

This kind of cash flow where you try to gain the future and pull it back to the present.

And operating income line -- up the income statement of -13%. the concern is the extrapolation out.

It feels like 1999. what is the difference between now and december of 1999? it is a fair question.

I think you are seeing considerably fewer ipos with nothing, with no revenue.

Twitter is projected to be profitable pretty soon.

If you look at the facebook model, set as a profitable business.

You still have the worry.

10 years ago -- you are looking at cash values 10 years out.

10 years ago friendstr was a popular social network.

I found it interesting that the sec chairwoman said that it can be hard not to think that these big numbers will inevitably translate into big profits for the company.

The connection may not necessarily be there.

She did not name twitter by name, but interesting timing for her to shea that -- say that.

You sell that with groupon for instance, where companies are getting a little creative around what they are choosing to emphasize.

Even with twitter and facebook am a companies are pointing more toward monthly active users then toward hard revenue.

Frankly, it is arjuna with the revenue model is.

-- difficult to know what the revenue model is.

I want to bring in henley smith.

I know you look at the fixed income side.

The question is with a company like twitter the sensibility is that one day it will make money him of the question is should you pay this month -- much for it at this time?

How do high net wealth individuals look at a company like twitter?

It is a showpiece.

They want to have it in their portfolio.

A talking point?

Cocktail chatter, i guess i would say.

The difference between now and 1999 is broader use, more people involved him i think there is a bigger base on which to deal.

In 1999, that was not the case.

I take away the nyse.

We had people involved in the launch.

As opposed to facebook.

That was a big difference.

The way the nyse took us through that process was very encouraging.

That is my observation of twitter at this particular moment.

This is always a case.

The fever gets going.

And agreed gets going.

-- the greed gets going.

What about regulation g? mary jo white's sec said you can show non-gap, funny numbers, hopes and prayers.

You also have to show the general accepted accounting principles.

What do we need to do now more to help people be responsible or is it just to the human condition?

They are always going to be stupid?

Are we supposed to police idiocy?

My biases are sort of that people should be allowed to make their mistakes.

I think it is dangerous to sort of -- police.


One professional investors are paying $45 per share for twitter -- that is not purely to be able to talk about it.

Some people really believe that this is going to be the next google or potentially bigger and you hate to stop them from doing that and find out that you are wrong.

It is a gamble that informed and uninformed investors are making and it is hard for the sec to second-guess those decisions.

You have to bring in the environment right now.

It has been hot for ipos.

It has been hot for technology.

Low interest rates are here.

If that interest -- that window may be closing.

I think the zero interest rate policy feeds into this right now.

People are looking for yield wherever they can find it.

Sometimes these ipos -- you will see a lot of money flow in there because there is no place to go.

You have seen cash be a very high levels in these portfolios.

People are looking for something of a smart advantage right now.

One more question.

Do you give goldman sachs high marks for how they handled this?

I do.

After facebook it was important to have a successful deal.

You are always striking a balance between having the deal pop too much and have them leave money on the table.

After facebook, it was incredibly important that the deal trade well.

I think they struck the balance well.

Matt levine with us on twitter.

Coming up, $3.1 billion.

Alibaba's single day sales in china.

They topped last year.

I am sara eisen here with tom keene and scarlet fu.

Banks including jpmorgan are continue -- considering banning traders from electronic chat rooms.

Regulators are investigating for an exchange trading manipulation.

Mercedes-benz gained more ground on bmw and audi last month.

Sales rose 15% in october to more than 126,000 vehicles.

It topped the 6.7% growth at audi and the 5.4% jump at bmw.

At the box office, "thor" took first place.

It took an $86 million over the weekend.

It equally topped its predecessor.

I thought "bad grandpa" would be more your taste.

Me and the kids saw "bad grandpa" twice.

"thor" was emotional.

That is your neck and.

Bad grandpa.


It is a single best chart.

It is on china.

Retail spending.

You have to go to china for the new cyber monday.

Chinese singles day.

It is a made-up commercial holiday where the chinese symbol for the number 11. what happened is that bloomberg industries put together this chart.

The strength of the chinese consumer.

Spending on singles day ramped up in 2012. this is just based on alibaba's single day sales.

Cyber monday last year was about $1.5 billion.

Singles day sales in china will reach almost $5 billion this year.

It is showing the china boom.

How do you play china?

Dear clients come to you and go, i need to invest in china?

How do you respond?

Very carefully.

We are mostly domestic managers.

How can we do some direct deals?

Impact investing, those types of things.

I'm not too sure how they are playing china at this point.

This is why american multinational companies -- this is the consumer market.

This is why they can't afford not to expand in china.

And why they all have their plans laid out for the next couple years.

Have you written about the china boom?

I have not.

One of the things that i have written about is the small companies in china that ipo and the united states.

-- in the united states.

Colgate, palmolive -- north american growth is less than 2% per year.

China is almost 10%. this is and what some people would describe as a sluggish economy in china.

It is where the growth is.

That is very much in focus right now.

With the party meeting.

They are looking at the reform agenda for growth.

Remember when ibm blamed the uncertainty in china on their plunge their?

It has a lot of implications.

Lets to first look.

We will start with the dramatic images coming out of the philippines this morning.

Trying to recover from the massive typhoon haiyan, which struck over the weekend.

We have aerial shots here.

We know that rescue and relief efforts are struggling to reach some of the harder hit robinson is because rose -- provinces because roads are destroyed.

It will take a long time to get a final tally on the numbers.

Three or four major airports are damaged.

It went north of cebu, one of the major cities.

It was much closer than manila.

We are continuing to monitor the images and the story.

We also have a shot of london where 3-d printing companies are upping their game.

Here is a 3-d printer producing prosthetic noses and ears.


Kind of gross.

The prices for 3-d printers have fallen because there are more on the market.

It looks like and as.

My nose hasbro and broken more times than yours.

From your boxing?

Tiger woods failed to snag the turkish open title.

There he is.

He stood on a makeshift tea and watched several drives across continents.

Trying to promote the turkish open.

It happened over the weekend.

It is a huge deal.

In istanbul, between the haves and the have-nots.

This bridge is going to help even out logistics.

He came in third.

He did not win.

I don't know.

The last few much i have been watching, he has not been on his game.

Is still the most famous.

The marketing capability of the sky.

Coming up, the rich are different since the financial crisis.

This is bloomberg surveillance.

Let's give you some company news.

Apple developing new iphones with bigger and curved screens.

This is according to a person familiar with the plan.

At the new models would be apple's largest iphones and would rival samsung's models.

Amazon and the post office steaming -- teaming up.

They will offer sunday delivery in new york and los angeles.

The deliveries begin this week at no extra cost for customers.

Panasonic is ready to deal.

It can afford a deal of as much as $1 billion is a looks to expand its automotive and housing businesses.

It is heading for its first annual profit in years.

The real turnaround for panasonic came in car batteries.

Their stock has been doing nicely.


We're going to talk about the u.s. now.

Surprising signs of strength in the job market and tdp.

-- gdp.

This, as the senate confirmation hearings begin thursday for janet yellen to lead the fed.

Should we be scared for the end of quantitative easing?

Worry, worry, worry.

The affluent of america have been forced into more cash and less equities.

Henley smith is the chief investment officer at commonwealth.

What are your clients worried about?


They want to know what they invest in is what they invest in . they can wrap their hand around it and they can understand it.

You are seeing a lot of wealthy individuals kind of move away from the hedge fund space because they want to get under the hood.

They want to on tangible, liquid assets?

Do they care about fees?

That is a big driver.

Taxes are a big driver.

I think you are seeing much more direct investing.

Is your worst nightmare the next 90 days?

You are a bond guy.

What is going to be a push from the haves over the holidays into next year?

More equities or stay with bonds?

I think the bonds are played out right now.

We have had a 30-year run in bonds and that is coming to a close.

We are going to be look at february.

We going to go back to the public snafus again?

Equities will continue to have demographically -- naturally have a better flow.

If more retailers start to get in the market now, is that a sign that the pros should get out?

Orca this time be different?

When retail moves you move the other way.

We have been dealing with so much uncertainty the last couple of years.

If there is a big followthrough from what we have seen over the last couple of days, i think that will be a big thing.

I think you are starting to see next generational type of investors get back into the stock market and that would be a big positive thing.

Matt levine, henley was talking about hedge funds, about people shying away from that.

Their model was not -- steve: is potentially out of the game for outside investors.

What does that mean for hedge funds overall?

They charge outsized fees because they have outsized returns.

One of the questions that arises from sec capital -- how much of the performance was illegal activity?

Is the model broken?

Is the high-performance coming from places that cannot really come from?

In terms of the model and getting ready for 2014, i would go to henley smith.

Next-generation a, that is an emotional phrase.

What is going to be the shift about the next generation of investors?

The first generation is all about wealth creation.

The next generation is about wealth preservation.

The one after that is wealth representation.

I got a bell.

What that means is that their dollars are doing the right thing.

Impact investing.

Away from social responsibility.

They want to know that their dollars are making a return, but that they are doing good.

That is the trend we are starting to see.

This is social responsibility?

The conferences i have been in in the last couple of weeks have been focusing in on impact investing from educational, make a statement, represent our dollars and do well.

How do you do that in the fixed income market?

Smart investing and smart yields.

Erect investing like loans.

-- direct investing like loans.

I don't care about social.

I just want to make money.

This is a pie chart of 2013. i don't like pie charts.

This one screams smart.

39% cash.

We grew up in a time where having 10% cash -- you just didn't do that.

39% cash?

More alternatives.

That is what i look at.

You have to go like this.

Don't contort yourself.

Three 2008 -- pre-2008, now all of this uncertainty.

Cash has been a much higher allocation.

I think that will stay with us.

Henley smith, here on your money.

Thank you.

Matt levine, thank you so much as well.

The foreign exchange check tells two stories.

The indian rupee is that an eight-week low.

I also put in the philippine peso.

Strong dollar, weak peso.

In the next hour we will talk to the zilloqw ceo.

? will the housing boom lasted 2014? sotheby's, should they handle the auctions themselves?

First they need to sell the real estate.

And they john doerr mystics -- to enormous success for silicon alley.

The liens made, $2.33 per pop.

Good morning, everyone.

It is veterans day, monday, november 11. at 11 a.m. this morning we will remember sara eisen and scarlet fu.

My basic theme was doom and gloom about the equity market.

The chinese economic rebound giving a boost to leaders in a meeting going on right now.

The summit began on for saturday.

-- begin on saturday.

Upon -- the bond market is closed today.

Earnings from go go this morning, the wireless in-flight network after the bell, sotheby's, which we will talk about after, coming out with results that we will talk about later in the hour.

There is the morning breeze.

Amazon and the post office are teaming up, amazon will start offering some they delivery through the u.s. postal service in new york and los angeles.

Deliveries begin this week at no extra cost to customers.

We know that ebay already offers seven-day week delivery.

Transocean reaches a deal with carl icahn at $1.1 billion in dividends, saying they will cut costs, backing the nominees for the board, cut from 14 to 11 directors.

The news comes after months of pressure from crawl icon.

-- carl icahn.

Viral farm, price tag $4.2 million, selling their pill for attention deficit hyperactivity disorder in today's company news.

Devastation across the philippines after the year's most powerful typhoon flattened buildings in a massive reported 13 foot storm surge.

The reports now are 10,000 killed.

Clarissa, what is new in the last hour or two?

The president has just declared a state of calamity, also known as a state of emergency that will essentially make it easier for government to speed up relief efforts, making sure that there are no price think he's -- price increases in the hardest hit areas, making funds available for relief and construction.

In the philippines we have had a better economy for the last few years.

Insurrection in the southern islands away from the track of the storm.

How will manila project to the eastern philippines?

Say that again?

How will manila project resources to the eastern philippines?

By ship?

By helicopter?

I think it is both.

It is shipped mostly by c 130 cargo helicopters.

When you look at this, would you expect the death toll to rise?

The official death toll is currently at 1700 plus, which has risen tremendously from this morning.

This morning the official number was 255. 10,000 remains an estimate by some police officers and some local governments.

Thank you so much, clarissa.

The other international story at the top of the agenda, the nsa spying scandal continues to have backlash and repercussions in the business world.

They want to build a german internet and they want government help.

We go now to hans nichols from berlin.

I guess the question is now -- the backlash from the spying scandal, is it giving a competitive edge to the more domestic companies as opposed to american companies?

That has always been a danger, because of concerns -- because of security concerns, they think that with the cloud they will move to german-based companies.

It seems to be churning slowly.

Every day we get a drip, drip, drip, most recently john mccain called for the resignation of keith alexander.

It seems like it is bubbling up and there is more interest in having a german internet.

That is a real danger, this story jumping over to become one of industry and corporations.

No question that there is implication for the business world.

The transatlantic talks on trade between u.s. and europe are held as once in a decade or many decades.

A big deal that they start to take off, is there going to be any real impact?

There could, right?

Uncertain provisions of data sharing that could slow things down.

It may affect the trade talks, it may slow and impede their progress and in general everyone wants to get this deal done because it means more growth for both.

I know that tom is bored with trade stories.

Generally we will do them once per quarter, so we can talk about this again in two and a half months.

I will be reading all the trade stories so that you do not have to.

They are not boring.

I remember the day after the state of the union and this was announced.

The european ambassador to the united states joined us.

They were ecstatic.

It was hailed as something so major.

Symbolic and economic.

Europe needs economic stimulus.

It is reasonable.

Is this going to be multilateral or bilateral trade talks?

Are we trying to get back to delhi?

It will be somewhere in between.

That is the problem with it.

That is why this will take so much longer, the french will have an objection about their cultural preferences, their movies.

There may be something about the size of a license plate.

When you look at those things, it is not tariffs, those are easy to get away with.

It is regulations and how you harmonize them in vastly different economies.

Hans nichols, you can come on to talk about trade any day.

Berlin, we continue to see fallout from the nsa scandal.

Our guest this hour is trade talk free, spencer babcock.

Let's talk about the effervescence out there.

Is it like 1999? forget about twitter.

Is there anything else out there that is frothy?

Wax the late stays -- late stage venture capital market is frothy on the west coast, but another thing that is different is the size of the internet.

A lot of these business models that seemed crazy 10 years or 13 years ago, now they can actually work.

I know you recently came out with earnings.

Interesting parallels, right?

You are in what you call in investment mode, but investors are in love with it.

Reminds me of a recently announced ipo.

How about a moment of silence and honor?

You brought money down to the net income line.

How charming.

Quaint, isn't it?

We and other companies like twitter see a very large market size in front of us and therefore choose to invest.

In the court -- in the case of zillow what is depressing profitability is being spent on advertising.

And it is working, growing the audi instrument of the, we are separating from competitors, one of the biggest real estate sites in the u.s.. we are happy to make that trade- off.

But you are cash flow positive, right?

We are.

Where does the revenue come from?

Advertising or the aging business?

We have almost 50,000 real estate agents that spend $50,000 per year advertising with us in local markets.

It we are the largest real estate site in every city in the country and local real estate agents flock to advertise.

Text related companies are not so great.

It can be good on the first day of trading and outperform those that make money, but one year or three years down the line, according to research, things are not looking so good.

What is on your agenda for the next two years?

Driving the business right now is mobile.

60% or 70% of usage is on a mobile device.

That is where the growth is coming from.

To be clear, very quickly, you are not extrapolating onto 2016 even stay.

Thank you.

-- 2016? you can stay.

Thank you.

Wax here is a number for you, 74%, that is how much revenue has inclined at sotheby's. and the resignation?

Coming up.

? good morning, everyone there were doubters when -- everyone.

What is twitter like?

We need a clinic in going public 101. what is the biggest trigger?

Questlikes comedies want to have liquidity for their employees.

-- companies want to have liquidity for their employees.

It is not just liquidity itself, it is a means to an end.

Companies that are successful over the long term view it as just a milestone, but not an event in itself.

Does your relationship with the accountants, does the auditing change when you go public?

A little bit.

It starts to adjust about a year before you go public.

Most companies that are well run, frankly, are 80% of the way to being ipo ready for -- from an accounting standpoint.

The issue is understanding the leverage of your business.

Zillow, for example, if we hired more sales people, what would happen to the revenue?

Companies like groupon, who were not sure what would happen internationally and then really struggled, or facebook who was not sure how to monetize mobile.

That is the biggest hangup, understandably.

Three guys in brooklyn are wicked cool and want to go public in black t-shirts.

What is your device to them about what not to do?

They are already on the wrong track if that is what they are focused on.

They should be focusing on an enduring company.

At the revenue line?

It is all about revenue.

Investors are willing to pay for growth because they feel that profits will come later.

If you are in a market like real estate or other local services or other parts of the internet that are very hot, there is an expectation that profitability can follow.

Coming up, we are going to talk about the equity market record high.

Where are you in your investment for 2014? far more important, how is housing a part of this?

We will speak to spencer about the big surprise for this year and the double-digit return in cities like san francisco and new york.

Will it continuing to 2014? from new york city this morning, this is "bloomberg surveillance ." ? ? good morning, everyone.

"bloomberg surveillance," this monday morning, we look to the equity markets for a haiku.

Is that a haiku?

I do not know, i just know it is a great album i heart.

Are we in the tech bubble?

Bloomberg surveillance -- "bloomberg surveillance," i am sara eisen, we have tom keene and scarlet fu, our guest host for the hour is spencer rad cough.

A super typhoon has devastated the philippines and the official death toll is less than 10,000 but some estimates from filipino authorities say that as many as 10,000 people have been killed.

Some of the hardest hit areas have been cut off from relief operations.

Roads and bridges, all destroyed by the storm.

Iran and u.n. atomic monitors strike a deal for wider powers.

Attempting to reach an agreement to limit the nuclear program, john kerry said that u.s. and other major powers had agreed on a proposed deal but that iran was not ready to accept it at this particular moment.

The hail mary pass from a cincinnati bengals order back, 51 yard bomb coming at the time expired in against the ravens, but unfortunately the ravens kicked the field goal in overtime to win the game.

Even the giants.

Everyone's on a winning streak.

The patriots had a bye week.

That was good for us.

You know, it is fun.


Go, bengals.

Earnings are out later today, it is a pretty hectic few weeks for the auction house.

Recapping the events of october, the largest shareholder at sotheby's sent a letter to the ceo demanding that he step down from his place on the board.

Two days later they impose the penalty on any investor holding 10%. and then sotheby's shareholder, mark otto capital management called on the auction house to free up over $1 billion in cash.

Still, the stock is up since the letter.

The question is, is the attention that they are pushing for justified?

They made money on the bottom line, not bad.

Tomorrow in geneva they will do the important watch auction.

Oliver chen, ranking all-america in the institutional investors survey, joining us now on sotheby's. what is the deal?

They are making money, things are good, what is the tension point?

It is a spectacular bid -- spectacular brand with further opportunity to shore up the revenue base.

One issue is that the revenue is quite volatile.

That contributes to the risk to the stock.

If you think about monetizing a portfolio, they have real estate holdings that could be monetized into cash and those accounts receivables could be monetized 300 billion or $400 billion.

The way you are describing it, these volatile revenue trends being subject to outside forces, would that not make more sense?

Wax in a way it should be, they are the only publicly traded art auction house it is a duopoly.

Option condition margins are coming down as they compete for the finer lots.

Is is not a good target for activists?

I understand the financial engineering argument, but dan loeb is pushing for a strategy revamp with the new leader.

There could be a major shift that unlocks return on equity in terms of incremental revenue streams.

They could have retail, they could have more real estate.

They made 17.6% per year.

Not bad.

Where is the board on this?

There is potential he going to be a proxy war in march, an opportunity for the board to change over, but the board has diversified.

We will see.

I feel like activists are adding a unique angle to the story.

Sotheby's has a real estate unit, do they not?

They do, they franchise the brand is part of the strategy.

What is interesting to me is the sotheby's christie's tension with the activist shareholder angle.

Similar to the real estate industry, which is not been disrupted by the internet.

No one thought we would be sitting here later talking about sub beazer christie's, yet these industries are incredibly resilient, they are so infrequent and expensive, with complicated transactions, there is a role for the intermediary in both.

They will have the watch auction in geneva tomorrow, $200,000, that is the romance of sotheby's. i am sure that mr.

Loeb does not want to lose the romance.

What does he want to do?

Lose the romance?

Cheap in the catalog?

There is a balance between the romance and the expansion of preference, because it is kind of a could to her auction house.

-- could share -- couture auction house.

Licensing revenues there, two percent of revenue material, that could however be off for a brand builder.

Could you come back soon on holiday shopping?

I saw you modeling in abercrombie & fitch.

[laughter] oliver, always good to see you.

Coming up, another stock doing pretty well, a stock photo company.

We will talk to the ceo of shutter stock.

? ? this is bloomberg news, i am joined by scarlet fu, as always.

Company news right now, mercedes-benz, more on audi last month.

Selling over 126,000 vehicles, topping their growth.

Sales have been fueling the sales game.

Johnson & johnson, amazon, locked in a dispute, including overtired little and band-aid this year.

-- overtired little and band-aid this year.

-- over tylenol and band-aid this year.

The housing market and where it fits into this recovery, mortgage rates have not higher as new mortgages and pending home sales slipped in recent months.

We definitely heard it in the third quarter, mortgage origination declining.

One fact of real estate seems to be inclining, zillow, tracking daily, this quarter the online real estate company reported 5.9 million loan request, exceeding the number in the entire year of 2011. how is zillow changing the game for homebuyers?

You said your company was in hypergrowth mode, buying other companies, expanding rapidly, yet we do hear about the mortgage market slowing down.

Are you immune?

Overall the housing market is in great shape right now.

Home values are up seven percent , year-over-year.

We are back to around 2007 values.

A slowdown?

The brakes have been tapped on this recovery.

July, for example, 30 of the largest cities were appreciating , half or deep richey eight in.

Are you trying to disrupt the government aid?

Are you trying to do what you are doing with online real estate to the housing data that we get?

That is already happening.

Zillow data right now is already widely cited by folks in the media, bloomberg.

There is a lot to differentiate our data from others.

It has become widely used.

Speaking of, the valuation of my house is a lot lower than what i am charged in tax rate.

The rent is higher than what you cite in your data, why is that?

It sounds like you should challenge her tax assessment.

I have tried.

Those estimates, as we call them -- zestimates.

Jargon alert.

That is what you call it?

That is what we call it.

Obviously there are outliers three times a week, nationwide they are quite accurate, but it will always be -- there will always be exceptions.

Is it tougher in big cities?

It is tougher at the high- end.

There are fewer data points for the models.

Real estate is the local, though.

I have seen other houses impaired to mine in the same school district, and it is all about school district in the end of the day.

Absolutely, real estate is hyper local.

Homeowners can change the interment -- the information about their home.

If you want a better estimate, you can do something about it, but if you want to get a more accurate opinion, you should talk to a real estate agent.

We are a starting point.

In testament to all of this, i have seen you on the front lines of the debates on housing finance in this country.

How did you get such a good relationship with washington?

It comes from our audience.

It is not zillow, it is the 65 million people who visit there every month that politicians want access to.

I met with the president to talk about housing and mortgage finance reform.

We spoke to others in the center of the mortgage finance reform discussion.

How much do realtors hate you?

Are they friend or enemy?


Will -- more information means lower commission.

Not necessarily.

It is the same as investment bankers not hating bloomberg.

We have real estate agents spending thousands per year with us.

Spencer, it is good to have you here.

As we look ahead to the market stock opening, close for veterans day, futures are higher i one point, the 10 year yield is unchanged again, closing at 2.5% on veterans day.

Good morning, everyone.

All of our interviews are on bloomberg tv plus, bloomberg radio plus.

With me on veterans day, bond markets closed, equity markets trading, our guest host this hour is the zillow chief executive officer.

They say a picture is worth 1000 words, but on shutter stock one million images have made the ceo new york city's first tech billionaire.

With 20,000 photos every day it is poised to become the biggest player in the stock photography market.

John is here to talk about his company, driving growth in today's economy.

So, photo sharing.

This is like adding images online?

We are a two-sided marketplace.

Anyone can shoot a stock photo, get the model property releases, we will sell them by prescription.

-- prescription.

How much our photographers paid?

30% of the revenue.

It depends on the subscription plan.

It is really cool.

The news, the hindenburg blimp, but you are doing more commercial stuff?

Like, i need a photo of a bowtie, what do i do?


This all started to change when these professional levels started to get into the hands of the people.

Very cool.

I am intrigued by the idea of crowd sourcing.

How do you get all the pictures of the kim kardashian's. it figures you would go there, the trashy side.

Pictures from camera phones.

There are two sides, editorial and commercial.

We started with commercial because we have to start with something.

We have editorial images.

Can i make a living walking around central park with a camera in my hand taking pitchers of bowties?

$2.30? are there people making a living at this?

People make hundreds of thousands of years out of it.

I do not know where their costs come in line, but they are definitely profitable.

The other amazing thing is that most of our images are sourced from outside the united states, photographers and places where the dollar is a lot stronger.

It all comes back to currency.

That is interesting that you have a big international business.

Is it tough to keep up with photographers and getting companies to provide images for all these different regions of the world?

It is not easy, but we are a technology company and we provide dated two contributors to get them to shoot what they need to shoot.

John, you know spencer very well.

We are still limited by ipo good jillion errors -- gagil lionaires.

Obviously one year ago since going public it was a rewarding experience?

It really put us on the map.

We were here four years in new york to linda business, we wanted to move into some larger enterprise customers, publishers from the biggest media agencies in the world, by going public we were able to get out there.

Tying it into the twitter question today, are we in a tech bubble?

We have really proved that by, as you say, democratizing this and creating local network effects, you can build a huge business.

We will see this with grub hub, seamless, when they go public these companies that have built local network effect, it is not local by geography -- by local i mean by types of content, they attract two sides and they end up with advertisers and publishers on one side, consumers on the other.

We need to continue this discussion.

It is not just about twitter getting lucky.

It is the network effect, as you brilliantly say, knocking on -- your kids can go out with their cameras this week and generate photos.

They will take pictures of bowties.

What is the most requested photo that you get?


It depends on the country, but we are seeing a lot of the actors being sold and used in things like ipod and iphone apps.

The stock is trading at 60 times the earnings ratio.

Our question, are we in the tech bubble?

? "bloomberg surveillance," this monday morning, veterans day, real estate building a controversial walk by everyday skyscraper that will go up one julian's stories.

--jillion stories.

William macklowe, on with betty liu this morning.

I would never move to midtown.

Your apartment is the size of a shoebox, right?

It is a shoebox.

Very good.

Morning movers this morning?

Wax bonds are not moving, we do have some equities moving in the premarket right now.

What is interesting here is those vehicles that have taken a hit on share price market cap, there is a blog post from a nautilus owner whose car burst into flames.

He said he would actually buy the vehicle again, that the front of the car burned after striking an article in the road, but he gave it an endorsement, as it did not spread.

Again, the optics of these burned model's did not help.

Transocean stock, this is the offshore rate contractor with carl icahn, the billionaire activist investor paying about $1.1 billion in dividends and cutting costs.

This is after he had been on top of this company, pressuring them for months.

They are now going to offer shareholders a vote on a three dollar payout according to a statement from transocean.

I am looking at twitter, the stock is getting ready for its third day of trading and is right now down by seven percent in the premarket.

They just came out with a new recommendation for a new neutral over there.

The overall analyst recommendations are fairly oldish on twitter, but this would certainly be if it does decline the second day of declines after that 70% pop up.

We have two guests who can weigh in on this nicely.

Spencer from zillow, john from shutter stock, what is your device to the twitter executives as they look at these sharp swings?

Ignore them, continue on the business.

We are way early with these platforms, right?

They just started to build the advertising models for what they sell and they have to iterate on building the product.

What is a key metric for these companies?

User growth and engagement.

In the case of twitter it is daily active users invited by monthly active users.

How often do do they come back?

It is totally irrelevant.

They should ban talking about it within the company.

You are not allowed to check stock price at our company.

It is not.

If i catch you doing it as an employee, you are in trouble.

John, do you agree?

People are going to do it anyway and it is hard to stop people.

A little disagreement here.

Look, it is a measurement of your company by investors on the outside.

We will come back.

John, spencer, i want to talk to these guys about gift buying, coming up.

? tomorrow, "bloomberg surveillance," washington is open, the state of new jersey is open, judd gregg, should chris christie go hiking in the hampshire with more on politics and how it ties into the markets.

Looking forward to catching up with the senator.

Our guest host this hour, spencer rad cough, ceo zillow.

A litigious and company news from the files of "bloomberg west." apple is developing iphones with bigger and curved screens, apparently the new model for the largest iphone would rival samsung phones released earlier this year.

Expected to be released in the second half of the third quarter.

Amazon and the post office are teaming up, they will start offering sunday delivery for the postal service in new york and los angeles.

Deliveries begin this week at no extra cost to customers and they plan to expand the service next year.

Sonic is ready to deal.

The japanese electronics maker says that they cannot afford a deal as much as $1 billion, heading to their first annual profit in three years after cutting more than 70,000 jobs since 2011. that was today's company news from the files of "bloomberg west." we have two tech ceos with us.

Raising some interesting questions, not just for tech companies, that is why you founded it where.

Why silicon alley, john?

I grew up around here and i started the business here because it is where i went to school, but it has turned out to be a great place because 70% of our business is outside the u.s. . hiring really diverse talent, besides that a lot of media companies are here.

Virgin america, back-and- forth, san jose, what is the critical distinction between silicon alley, silicon valley.

I think new york is a great place to start a company.

It work through us.

-- work for us.

It is not about baseball?

-- worked for us.

It is not about baseball?

Expedia started in microsoft, we were all there together, they left to start zillow, so almost everything in seattle is there.

The talent pool migrated.

It was great for us, we were a big fish in a small pond, we had an easier time recruiting in seattle van we ever would have in silicon valley.

How do you decide internationally for two open up shop?

We look for places where there are media companies that we can sell to locally and find engineers.

That is one of the hardest things for us right now.

Berlin building on that tech team.

When you look at the development of this in 1999, i remember young companies like yours, do they want a bigger salary mix?

It is a combination of salary and stock.

People think we are building something.

While we are talking about those stocks, we want to turn to our agenda, the major stories shaping the day at the top of your agenda?

Wax the dow jones, a zeitgeist and if you forward, 6751, all weekend, doom and gloom getting out of stocks.

If you are in the market, for me in december getting things to slow down in a week or two as we get into the holidays?

This is amazing for everyone.

The pros and non--- pros who are watching, you have to do this in the market.

Elon musk talking about the exuberance in his sock, tesla, is that something that you would ever do, john?

For the most part we just kind of run the business and people will value was how they value us.

They are expecting very strong growth.

We have been delivering 40%, year-over-year.

Our earnings last week were 41%. the stuff that we have in our 401(k)? not zillow.

Is zillow in the 401(k)? we should.

Our agenda has to do with a company reporting earnings.

News corp., publishing the old- school newspaper magazine unit of news corp., reporting after the bell, their first full quarter since splitting off from 20 century fox.

In usa today -- "usa today," they wrote that rupert murdoch is enjoying a bit of a renaissance.

Remember, the split between news corp.

And the movie unit was forced upon him.

It was painful, but now he finds himself with a new company that has a rising share price, they're very purpose is to manage newspapers.

No one is telling him he should not he worried about newspapers anymore, he is back in the action.

It is cool.

It is really a real estate company now.

They own 60% of the rea group.

It is the zillow of australia, one of the most valuable assets there.

It is less forgotten about now.

Clearly it was forgotten about before.

Every conversation ends with real estate at his cocktail parties.

Is zillow a real estate company or a media company?

We are media company.

I would say you are disrupting both.

Because of the algorithms and the software.

That is how we attract the software.

Bitcoin, seriously, this is the agenda item, digital currency has it a record high, depending on where you look, everyone is bashing it, including tom keene, it is gaining in legitimacy and value.

Also on the agenda, u.s. senators are meeting to discuss the digital currency, it will be the subject of a number of rational senate hearings before the homeland security committee, they are trying to figure out whether the illegal activity is getting fueled by bitcoin.

I know that you don't buy it.

I am skeptical of bitcoin.

I just think that there is too much shadiness associated with a currency that is not maintained by some sort of government or central bank and i think it will blow up at some point with some big scandal where someone loses $50 million, $100 million.

I am a bit more optimistic.

Starting a currency backed b

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


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