This is "bloomberg surveillance." oil retreats as america's summer spurred what can america do you?
dell and mr.
Icahn faith also timbered 12. the "surveillance" movie review --"jobs" straight from the fact 30 good morning america one.
This is "bloomberg surveillance.
" i'm tom keene.
Joining me as always, sara eisen and scarlet fu.
It is a morning briefing, and i did not realize it -- it is a big economic day.
We have a heavy load of economic data.
8:30 a.m., the fun begins.
Housing starts and building permits.
Economists are looking for a big round number at 900,000. of course those building permits a key indicator.
May i suggest this could really move the market, particularly the 10 year yield.
Everyone is watching economic data, but especially ahead of that of september 18 fed meeting.
At 8:30 a.m. also we get nonfarm privacy of a -- productivity.
955 a.m., consumer confidence readings come about from the university of michigan.
Economists are looking for sentiments to hit a 16 year high.
Keep in a.l. for this event -- 12:30 p.m. eastern time, another step in the dell drama.
There will be a hearing today in a delaware court work roy con is arguing that he should be allowed to appoint directors in order to -- where carl icahn is arguing he should be allowed to appoint directors in order to profit from his stake.
We will dive into that in just a moment.
I read the earnings report carefully.
It is just a mix.
It was like a jumble of revenue, and the summary was profits is a huge makes.
We will talk about what it means for michael dell and silver lake and carl icahn as another votes -- how may times have they rescheduled this?
47. summer in austin, texas.
Commodities after a tumultuous thursday.
Futures, they bounce up four.
10 year yield, 2.77%. watch that off of housing starts at 8:30. euro-dollar, 1.3336. oil giveaway after the jump yesterday, $107.18. brent crude was at 111, now 109.52. call now with real confidence as the suez canal would be fine.
Aussie dollar, 0.91 72. the believe in china, australia, recovery, the stronger yuan.
There is your, abenomics goes the wrong way.
I will agree with you about china except there continues to be carnage in emerging markets stocks.
The cow -- we thought in the u.s. with the dow closing down more than 200 points.
In india, biggest drop in four years today.
Not only in emerging markets, but full faith and credit.
It is time for frontpage, we have scoured the papers and the web this morning for all the most important stories.
Scarlet, when it comes to the salon comment has to do with the u.s. economy.
Retailers are really telling us a different kind of story.
Merchants from walmart and kohl's to nordstrom's and made -- and macy's are giving cautious forecast, highlighting a fairly divided, uneven picture of the recovery.
Walmart, we talked about the yesterday, blaming the economy and high road -- and higher payroll taxes for that slower earnings growth.
Consumers are apparently only spending on the essentials.
No inflation and no wage growth.
It is a bit of a disconnect with the university of michigan consumer, visiting at a six-year high.
What would they do, not what they say.
Some of the indicators are optimistic.
Our guest is very optimistic.
The question is -- is the consumer and economy strong enough that the fed can start to scale back ec?
With all the horrific bond market yesterday.
Bring up the 10-year yield if we could, martin gilbert, we would like to see the search up.
We are seeing a hockey stick up.
There go bonds.
We saw two-year highs for the 10-year and the 30-year bond yields yesterday.
Mortgage rates, we're seeing it trickle through.
We also need to move on -- come on, we can do that.
Let's talk about dell because the earnings report have become a political football in this takeover battle for dell, whether it is michael dell or carl icahn.
The bottom line is the vote supports both sides of the argument occurred profits dropped by 72%. sales of $14.5 billion shows there are some value.
Carl icahn may be onto something.
Three people last evening said to me did they manage their report.
They implied that michael dell deviously managed the reports, and my answer is you can't do that.
Uk massage earnings?
-- you can't massage earnings?
Uk massage it, but it is fair play to put it all and if you can't, etc., but the idea that it was a devious report, i won't go to.
The revenue was there.
Can this business make money?
Whether you fact therei -- factor in expensive, that is a different issue.
Of course our last front-page story is the latest in egypt.
It is all over all of the front pages.
President obama giving his response to the violence yesterday.
He canceled the joint military exercises with the army, but stop short of actually cutting off aid.
This will be about $1.3 billion a year in military aid.
The death toll has been climbing , probably higher than the official toll, which is somewhere around 600 fatalities.
There are supposed to be more mass rally today to protest the violence according to the muslim brotherhood.
So the prospect of more bloodshed is likely.
Many news sources -- a lot of danger that we saw over there thursday.
That is our frontpage for this morning heard our guest host is our -- we demanded she show up.
Bloomberg news senior correspondent covering all of u.s. foreign cop -- foreign- policy.
And jp egger's is with nyu stern.
I go back to october 6, 32 years ago, 1981, and egypt changed with the assassination of anwar sadat.
They were divided then, they are divided now, how divided is egypt this morning?
You point out one date.
Another key date of course is the signing of the camp david accord.
Let's not forget that a big reason that the united states has seemed to be waffling on their policy , refusing to call it to a coup because it was forcing them to cut off the $1.3 billion in aid is because they feel like we get a lot from this cooperation with the egyptian military.
A lot of it is under the radar, counterterrorism -- what are we getting now by continuing to keep it flowing?
A bad image in the world, no question about that because obama went out there yesterday, talked about all of the american values, and then at the same time, these are the very same american values that the egyptian military is clearly not upholding at this way.
What you hear from our folks in the military industrial complex at the caa come -- cia, dod is we cannot cut them off entirely because we are getting a lot for that money, we get them stopping shipments of arms going through into gaza, we get them -- remember, just last week, they allowed drills to perform a drone strike to get rid of islamic terrorists.
So there is a lot of corporation protection of the suez canal.
With a 1956 mama yesterday.
-- moment yesterday.
Alix steel of bloomberg television making clear -- less about suez, but oil moves.
Oil comes back.
If we want to keep the stability, is it about the markets, or is a completely separate and simply about our foreign-policy?
I think it is both.
It is intertwined.
We know that especially here at bloomberg.
The issue is that most of all we are worried about what is our public stance?
What my sources are telling me off the record is that's quietly this military cooperation has already slowed down.
They have publicly said that the f-16s have not been delivered.
By default, any eggs that was opposed to be going to egypt since july 3 has not really been flowing.
But we want to give our options open because we think that still gives us some influence.
Is going to friday, prayers in cairo and then into the weekend.
Let's get to company news.
Let's talk about sac capital say no way to investors who want the indicted hedge funds to return billions of dollars quickly.
Steve cohen's firm telling clients the final payment will not be made until the end of the year.
American airlines back in court asking a judge to approve its plan for exiting bankruptcies.
That is even though the government loss against its merger with -- blocked its merger with u.s. airways will keep the plan from closing.
And samsung will come out with a smart watch next month.
According to people familiar with the plan, the device will be able to make phone calls, surf the web, and handle e- mails.
It will be called the galaxy gear.
Tom is lining up for it now.
Apple is believed to be developing its own smart watch now.
Are you going to do a smart watch?
I love the fact that they are getting into wearable technologies.
Let's ask our guest host, professor of management that focuses on technology.
This is a perfect for you.
There seems to be a race between the figure to the technology first, samsung versus apple.
Does it matter?
Quite i think it does in part because if you look at what is happened in the pc market, with the operating systems there, with the iphone, ipod, consumer adoption has really been driven by who has these leading technology early.
That will benefit -- that will build a sustainable path forward.
The question between google loss and things like that as well as which one of these wearable options is the right one to go with you.
Based on your study, is it the watch?
I think the watches a hard sale.
That will be hard to be useful and less there is a way to link it in with glasses or reflecting technology and the lenses.
We have to see what is coming out of the watchtower from here.
All right, we will have much more with you throughout the hour.
We will talk about leadership, which is your wheelhouse.
Coming up, the new movie on apple founders the jobs.
Does ashton kutcher really nail it?
We will see what the critics are saying and if there are any messages for investors who have been doubting apple.
This is "bloomberg surveillance," on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.
Good morning, everyone.
Bloomberg television, "bloomberg surveillance," and this afternoon, john sculley, former apple chairman, live, 3:00 p.m. on "streetsmarts." maybe he will be wearing wearable technology.
I am curious to know what he think about the new steve jobs movie.
This is "bloomberg surveillance." i'm sara-here as always with tom and scarlet.
Dell results out after the bell.
Earnings, profit down 72%. no surprise there, but sales actually came in line a little bit better.
Better than what analysts were anticipating, but unchanged from this time a year ago.
Net profit down 72%, $204 million of net income, about one quarter of what it made last year, two years ago, $890 million.
The better -- the battle royale is between michael don silver lake, which do the results help more?
It depends on who you are looking at and who you're talking to because michael dell has made the case that the company and the management cannot forecast accurately.
On the other hand, carl icahn is saying there is value, and you look at $14.5 billion in revenue, there is something to be said about that.
Look for the story as a bloomberg.com, very balance between dell and icahn.
The decision is the investor base has shifted.
Hedge fund managers and the latest filings almost tripled their dell take.
They now own a collective 18% in the second quarter.
In the first quarter, it was about 6.5%. that might tell things in michael dell's favor.
It was the certainty of cash and stead of certainty -- the uncertainty of some value being there.
J.p. eggers, do you take a net profit value, do you take the hopes and promises of carl icahn, or is this an a rational process?
A large part of the value that icahn is trying to get into here is the hopes and dreams that there is actually some money to be made in the pc is this.
Mostly i look at this and this looks like a classic move in the pc market towards perfect competition where there are lots of sales come a lot of action going on, and no one is making any money because the products are too interchangeable.
It a microeconomic august moment here at "bloomberg surveillance." perfect competition like a wheat farmer in oklahoma, or is it a duopoly, which is what icahn would want between lenovo and dell?
It is probably somewhere in between.
It is certainly not the wheat farmer in the sense that there is money to be made there.
But i think the chance that there is a duopoly propfit -- virtually no way because the smartphone and things like that are new products, so there is a huge pressure on the pricing ability of computers.
Carl icahn had a chance to talk to roger mcnamee about this , and he talked about the fact that the pc business is completely dead, and he has no clue what the future is for this company.
Is there any indication from the result, scarlet, that we know what the strategy is for turning it around?
Dell's strategy has been to cut prices on its equipment, pc's laptops, other related projects.
Buying the more profitable services like software and tech support on the road.
They are sacrificing profit from market share right now, which is lengthy 14.4 it -- $14.5 billion in revenue.
If you look at what analysts say, take a cue from steve miller and take the money and run.
A lot of the analysts say just over the deal.
Dell continues to be aggressively priced , clearly plays a greater is is is on revenue growth and long-term investors over near-term probability.
I have never seen this, one buy.
One lone analyst buy.
There are two sales and 22 holds.
The vote in sometime next month, but we do know that carl icahn is going to court today in delaware to argue his side of the case.
That is 12:30 eastern time.
We dive into dell.
Who is that lone analyst?
Bring him on.
Coming up, a number for you -- $241,080. that is the average cost of raising a child for a middle income family, so why on earth would you want to do that?
We will talk about because benefit scenario of having children next on "surveillance." ? this is "bloomberg surveillance," i am sara eisen here is always with scarlet fu and tom keene.
In egypt, the muslim rather it is calling for more rallies towo days after hundreds were killed in violent demonstration.
Any threads will be met by live fire.
Close to 600 people have already been killed.
A new report says the nsa has broken privacy rules house of the time since congress given -- david powers five years ago.
The "washington post" says most of the violations involve unauthorized surveillance of americans or server -- or foreigners in the united states.
Republican party leaders are aligning to punish to networks planning programs on hillary clinton.
The republican national committee plan to bar partnerships with nbc and cnn.
They call the clinton show free advertising for a democratic candidate.
Those are your top news headlines.
Is she a candidate even already?
Of course she is a candidate.
Time for morning must-read, which means we need some serious research.
Today's number is nine.
Let's start with scarlet fu -- two.
Our guest toes, india relock schumann -- indira l akshmanan, our guest host j.p. eggers, let's look at the dummy at the table, that would be me.
And we turned to ms.
Talking about the number of kids we all have, and op-ed was published, mom, dad, turns out brand-new data shows middle income family with a baby born last year can look forward to spending $241,000 to raise him or her.
She says, so i am sorry for making you buy me all those beanie babies.
I am honored you didn't trade me in for a pile of cash.
You would be paying that much for private college 15 years and -- 18 years now.
Right now pretty much.
I want to know what the benefit is.
Oh, they are wonderful.
Scarlet fu, it is an emotion, and i agree with j.p., the number is dramatically higher than that.
The summer has proven that just work and all -- working all day and going to prepare for sleep for the next day is not fun.
It is much better to have little people who throw their arms around you when you come home.
And ask you how the market is.
Indira, this is important here to we thought with ms.
Advantages of child care, should we go to two or three camps, your children are expressing asia this summer.
All these wonderful advantages, and there is a whole other america where this 241,000 dollars is a huge deal.
If you look at how the birth rate has fallen in the u.s., there is a childless nation here, sara, you are absolutely right.
There are a lot of people questioning why even have children.
Is the housing -- it is the fastest-growing household in many cities like new york.
The baby boom is worth an estimated $49 billion.
Chrysler go to tuition, j.p. eggers -- let's go to tuition, j.p. eggers with us from new york university.
Can you only talk to rich people got?
And why you still working on a tuition-driven model for the most part.
It is a very excessive school to go through.
A lot of schools have been able to with very large endowments offer huge grants.
The cost of going to college for most americans would be way lower than that.
It really depends upon what the school has been able to do at this point in time.
But certainly you either need to be exceptional in some clear way academically, athletically, performance wise in order to get a scholarship.
It is a very small number, or you have got to be able to pay to go.
There is a baby blocker app on facebook for you to censor people's kids.
Let's all leaned over the desk and write tuition quest -- checks.
It is our twitter question of the day, are you spending more or less?
Sweetest @bsurveillance a live shot before the sun comes up in washington, d.c. the city has taken on a new you look.
The washington monument has a scaffolding on it.
It has had scaffolding since the earthquake in 2011, but it has become quite the attraction because last month the city started lighting it up at night.
So there is some enthusiasm.
Quite remember the earthquake?
-- quite remember the earthquake?
Big support of the library of congress as well.
Morning shot of washington, d.c. we need a friday data check.
Really emotional day yesterday, particularly in the bonds.
It was an uncorrelated day.
Will we get correlated?
Futures up 4, 10 year yield come over member when it was like a 160, 180, 2.77%. euro-dollar, $1.3343. the headline on hydrocarbons as they are light by $1.5. we talk about how retailers have given a cautious outlook.
Dillards also coming in with comparable sales that were lighter than anticipated, but because of profit beating analysts' estimates, the stock guides -- climbed.
Homebuilders offered big gainers.
The group will rose because the homeowner confidence rose to the highest level since 2005. cisco a big planner, we talked about that yesterday and the link to nominal gdp, how it really can't get beyond that.
Any number of company, not to cisco, walmart and the rest.
I mean, it is soggy.
There are struggling out there.
Quite there is concern about the market markets, the economy, and there is now geopolitical concern front and center for investors and for the world.
In egypt, the death toll continues to rise, near 600 with at least 4000 people injured.
The muslim brotherhood has called for more poor test in the street after a -- for more protests in the street after a harsh military crackdown.
It poses a political challenge for president obama as well as other world leaders.
We saw yesterday from martha's vineyard, the president will be comments.
It is a new geopolitical game theory, decidedly off the post- american world.
Indira lakshmanan covers foreign policy for bloomberg news.
I was unaware that the united states support any kind of government, regime, whatever that uses snipers to shoot their own people.
I don't think we do that.
It was a really embarrassing , in a way, statement that the president was forced to make yesterday.
In some ways, it echoed the rhetorical press rules that his entire administration from john kerry to all the spokespeople have had to make over the last few weeks.
They say we support american values, we deplore violence, we condemn it, we support presold protest.
-- peaceful protest.
At the same time, they are not cutting off the eight.
The problem is right now we have the worst of all possible worlds because we look terrible to the world in terms of not calling it a coup, not severing and punishing them because of what they done.
At the same time, we don't have any influence with the military gallery's -- generals at the moment.
You worked at the "boston globe" and now bloomberg news, can a policy get out in front of an issue, or by definition are we reacting?
In this case we are reacting.
The obama administration's willingness to stay out right on the record from its spokespeople's podium, that our influence on the situation is limited.
They have said straight up -- this is for the egyptians to solve, and our ability to influence this is limited.
The problem with that as americans always like to play this role in the world where wiki -- john mccain does not agree with this -- exactly, you are right, and lindsey graham.
They criticize the president for the spirit all of his options our terrible -- the president.
All of his options our terrible.
We do nothing more see with a great president.
They do not listen.
For the past six months, we have tried to it and listen to have an inclusive political process and not to use violence, and they have not listened.
So we have a problem because we think we can influence and help egypt to democratize, but at this moment, we see that the tools for egypt democratizing and the conditions are not really there, and it makes our president unfortunately look -- american companies have been quick to react.
A lot of multinational companies hunkering down, closing factories in egypt and we got a statement from general motors, which of the factory just outside of court rope -- out of cairo.
We made a decision to close the office.
The safety and security of our employees is of paramount importance to us.
We will continue to monitor the situation.
Toyota close a plant, electrolux, j.p. eggers of in what used earns -- of nyu stern , howdy follow companies in egypt?
Clearly companies are saying they cannot do business and needed because the risks are too high.
It is too difficult to forecast in general.
Forecasting in egypt and that market is impossible.
I did not realize this, but egypt is actually the third biggest country in africa for auto vehicle production behind south africa.
They are a big market for cell phones as well.
Speaking of companies, if they don't have leverage right now, who does have leverage?
If not the u.s., the new gecko n who?
Quite a lot of people are saying the gulf states from saudi arabia to qatar.
What is wrong with that?
Why are we afraid of that?
We obviously want to give our leverage that comes with the 1.3 billion dollars in military aid that we give them every year.
What i would argue to the people who say if we take that away, the gulf states will get all of the leverage that we once had -- not exactly because what we can offer egypt and other countries that no one else can offer is american military equipment.
There is a whole complex that depends on this.
A lot lot of it around washington and the suburbs.
There are a lot of vested interests here.
Egypt cannot give from saudi arabia or any other state the high prestige military weaponry that they want from united states.
We have to think about the effect this is happening -- is having on business, travel warning, oil.
Jim o'neill put this on his in 11 list.
This was supposed to be one of the hot, next new countries.
Where foreign investment would just flow intertidal see how foreign investors can pour in.
Have you been to egypt?
I have been to egypt.
Greg i have not been to egypt.
I want to go on the cleo patrick -- cleopatra for.
Internal airfare, i would suggest that is a huge loss to the nation.
To lose that.
That has been the biggest loss for them since the protests has started in 2011, but the scary nightmare scenario here is what is the revolution that started in the beginning of 2011 ushered in something worse than what they were trying to get rid of?
Remember, the muslim brotherhood, which has been really repressed for its 85-year history, at least was allowed to stand in elections.
Now we have a situation where it looks like they're being wiped out entirely.
That brings me to my morning must-read, which was in the "new york times," there was a piece, an op ed called egypt blood america's complicity.
It is a piece written by someone who was a member of the freedom and justice already affiliated with the muslim brotherhood, and he was egypt's minister of planning and cooperation.
He says americans need to recognize that every passing day solidifies the reception among egyptians that american rhetoric on democracy is empty.
He goes on to finally say that when it comes to all these values of freedom, justice, and human dignity, that the message is muslims need not a product -- need not apply.
This is scary if our policy is sending out this message.
It is here, and we have got to get to friday prayers, and bloomberg news will have coverage of this all through the weekend.
Also happening this weekend, the latest apple products is out today.
Not from apple.
It is "jobs" the movie.
Is it as exciting as one of apple's new product launches?
This is "bloomberg surveillance," on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.
This is "bloomberg surveillance." i am sara eisen here is always with tom keene and scarlet fu appeared headlines, bracing for more headlines -- violence in egypt today.
The muslim brotherhood urging supporters to show their rage over the hundreds of deaths in the government crackdown.
Egypt's government is warning that if protesters threaten their personnel or, police will open fire.
Investigators say they found no evidence of engine problems and that crash in the ups cargo jet in running him, alabama.
They have recovered the plane's black boxes.
The two pilots were killed when the airbus a3000 crashed.
More ammunition for baseball fans who want to yell at the umpire.
Major league baseball is going to expand its video review system to include almost all umpire ruling.
Plus, starting next season, managers will get as many as three challenges per game.
Those are your top news headlines.
Oh, this is such a mistake.
The game is slow to begin with.
By 4.5, five hour game.
-- 4.5, five hour game.
I would say they get one again, double play.
Quite it should be a penalty, you cannot change at your picture last-minute.
I have a bad feeling about this.
I love baseball.
We like to review single best chart.
We were going to go back and look at this.
It was a spec yesterday.
My single best chart is on consumer roles.
They go america, maryland, they just downgraded these consumer discretionary sector as underweight.
The s&p consumer treasury index is relative to the s&p 500. consumers have been leading the overall market.
They are considered early cycle sectors.
It has been outperformed since 2008 when late cycle sectors take the lead.
You'd usually see these consumer discretionary stocks underperform by 7% points.
Baker america merrill lynch says the sector is broadly overvalued relative to history.
Citigroup was all wound up about this.
Comcast, disney, home depot, amazon, mcdonald's, ford, time warner, starbucks -- those are discretionary spirit overvalued and overweighted sector among fund managers and therefore people should start reducing their stake spirit it all comes back to the read on the u.s. consumers today.
We're going to get that confidence number.
The data does not necessarily match a six-year high, and neither do some of the retail earnings.
Is able are spinning, they are at the upper income strata.
Do you know about birchbox?
They send packages of makeup -- i would be all over that.
$20 a month for men.
It is a staple, not a discretionary.
That you would agree with that, maple -- make up is a staple.
First look -- our first look today is the trailer for "jobs," the biopic starring action -- ashton kutcher.
It was made for about $8.5 million.
It has garnered mixed reviews.
Have a look.
It takes guts to drop out like you did.
It comes with experience.
What are you working on?
A computer terminal.
Uh, steve, these are state-of-the-art, nobody is making things like this.
Welcome to apple computer.
Is this everything you?
Bloomberg sat down with ashton kutcher to discuss this film.
He said this is what he learned from studying jobs.
The big thing that is helpful is really just an understanding of compassion for the consumer, and absolute focus.
Absolute focus meaning there is a billion opportunities out there and anything that you can pursue, but there is only one that's actually going to get you to the promised land.
It is undeniable that there is a physical resume at there, but i was looking through some of the reviews in the newspapers -- rotten apples.
It is inevitably on satisfy, and adjusted not do a good job.
Life i have got a better one, bloomberg writing hollywood my sunday design a sleek i'll pick birth -- a sleek biopic worthy of steve jobs, for now he has gotten a dell.
Greg evans, the reviewer for bloomberg news.
I guess they're working on a movie off of mr.
Isaacson's book, but it was all about athletics.
How do you get aesthetics across in the movie?
It is tough.
One thing that an ordinary viewer and apple user, all of us who have our iphones, what we're going to love is the images they are going to show us from steve jobs.
I read about one were apparently the ashton kutcher character says they're trying to explain the apple, the original apple to someone on the phone is as it is like a typewriter mixed with your television set, and he just cannot get it -- cannot get across the idea of something that does not exist.
I remember the shock and awe.
Will be great is bloomberg's television throughout the day, we will be interviewing key players that are part of this story about the movie in about steve jobs, john sculley, former ceo, who fired steve jobs, will be on "street smarts," and ron wayne, one of the cofounders with steve wozniak and steve jobs.
Street, i wonder if that was sculley.
I think that was an early investor that they were using.
Like they will be fun to see.
Maybe we should see it this weekend, tom.
What do you say you?
[laughter] next up, we will talk about apple the company and the strategy.
Tim cook and activism and apple, carl icahn once more cash, how will the new apples irvine -- respond?
This is "bloomberg surveillance," on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.
This is "bloomberg surveillance." i am sara eisen here with tom and scarlet appeared we have a theme going on the show today.
Next step for egypt, for dell, for apple, for the airlines, and when it comes to apple, it is really the carl icahn effect or the tweet this week that added $70 billion to apple's share price and will no doubt encourage rats a new generation of activist investors going west to silicon valley.
Carl icahn single handedly brought apple back to $500 a share.
He is asking for a bigger payout from the ceo, tim cook.
He is not alone because we know that david i known -- david einhorn of green knight capital had wanted more cash too.
-- greenlight capital.
Return on investor since voice in about 42%. icahn's investment also include netflix.
J.p. eggers teaches strategy at nyu stern school of business.
Professor eggers, i'm curious, we are talking about steve jobs.
How would he have handled an activist investor like carl icahn?
Probably very poorly.
He was not a fan of being told what to do by anyone, certainly an outsider.
An insider might be a will to push back to some extent.
I think he would have stormed off and try to ignore icahn as best he could.
Construct that without tim cook will -- contract that with how tim cook will -- the reality is that icahn has enough power within the organization at this point.
Cook will certainly have to at least have some serious conversation.
What will come out of that, we will have to see.
It really depends on how much could have a clear plan in his mind -- cook has a clear plan in his mind.
He may be willing to give the catch back to icahn at this point.
Crexendo comedown division.
My morning must read is about detroit and a lack of vision there.
It ties into technology.
It is from the "new york times," stephan richter wrote that the air row of prosperity was not the manifestation of the american dream.
He is talking about manufacturing in the 1950's. instead, it was or should have been a warning sign that america was writing a fleeting wave of progress.
Almost nobody was looking hard enough at the future and asking what it would take to sustain success.
When you talk about this, that this wave of activist investors help give people a vision into the future?
Are they doing up for the company?
I think it is the exact opposite.
These are two different views of what you do when you come into the big windfall with a big pile of cash.
Icahn and the activist investor perspective is you take that passion give it back to shareholders and let them decide what to do with it.
Quite how does it increase value for the company?
It is not.
We're going to keep you stuck in the path that you are on adjusting to cash out of your business and given to shareholders.
As opposed to saying we think there is a new business model to invest in long-term back and kind of keep the developers organization.
Someone said this idea of corporations as utilities, a utility defined as a regulated institution to does -- to distribute shareholder return a cash back to shareholders.
Where are the three m's today?
Are you teaching in minnesota mining product -- model where they have to be five years younger or less?
That is a model that we are and able to see replicated from that perspective.
But if you look for what will the organizations to be around long term, and have a long-term impact on the growth of economy.
Innovation has become the absolute core and essence of what the organizations have to do.
Quite the fact that activist investors, this is not the first one, are circling a company like apple to try to milk the cash from apple, does it say something negative about the stepan company that apple has become?
There is a lot of skepticism in the post-jobs aero.
I think it is a very valid criticism because it is no question that jobs was the visionary and perfection is an micromanager then maybe think the perfect tool that we kind of love when we fell in love with them.
The reality is if a huge portion of that cash gets returned, that is going to stick apple in this adele spot where it is going to be milking the iphone and the ipad forasmuch as they are worth and kind of never being the next innovator down that path.
The market and income statement make it non-dell.
The fact is they are minting money.
At this point in time, but the reality is if you pull the cash out and stop the innovation engine behind that, what this is going to be as we are going to continue to ride this wave of this product down this trajectory.
For my point of view, that is what he wants, he was the cash out now, let me invest somewhere else committee can milk it up that way.
J.p. eggers, thank you so much, and indira, appreciate you coming up with some short notice.
On egypt and state policy.
Quite how about a fun filled friday forex report on the hour?
It has been a strong dollar week when it comes to currencies -- so exciting.
Quite a change in policy from the feds tapering by the dollar, less stimulus out there.
The euro-dollar right now is little changed.
Mine for the week of the japanese yen.
The dollar yen -- why have you guys been looking at it?
Why did you put euro yen up there?
Because when you look at equities, you want to see if it is correlated to euro yen heard coming up, the former continental airlines ceo on next steps for the airlines.
What is the president's next move?
President obama's options, they are limited.
The legal bills pile up for james die mopped and jpmorgan.
We speak to a jpmorgan bear about what's next for america's largest bank.
And how do you extradite a former trader from france?
Can you make him face justice in the united states?
Good morning everyone, i'm tom keane, live from our world headquarters in new york.
It's national lobster roll day.
With my sara and scarlett.
Our guest host for the hour is douglas burnes, a veteran criminal defense attorney and former federal prosecutor.
Sara, i have to say the feedback from the lobster section that we did yesterday -- strong?
People love their lobster rolls.
They're really hot.
I think the fact that you gave away the secret recipe.
Claws and knuckles, forget the tails, and lots of butter.
Today we have a theme going, next step.
We'll look at the next steps for key news story from the week, including j jpmorgan, but first i'm going to kick it off with a morning briefing for you.
A lot of economic data to watch today.
8:30 a.m. the fun begins with housing starts and building permits.
Economists are looking for a nice, big round number when it comes to housing starts.
Also unit labor costs and then just before 10:00 a.m., 9:55 is the university of michigan consumer confidence reading.
This one is very closely watched.
And economists are looking forward -- not a normal friday.
This is a friday of significant economic data.
I would suggest from 8:30 well into the 10:00 hour could move the markets.
Move the markets because it all comes down to the fed and trying to game out what the fed will do that september 18 meeting.
Will it taper or scale back?
It has to do that we've had a pretty steep selloff.
200 plus point decline in the dow yesterday translated around the world.
Also another item, 12:30 p.m. eastern, earnings disappointed last night.
Today a hearing in delaware court will discuss and take up the issue of whether carl i khan should be allowed to point directors in in order to keep the company public and profit.
I wonder if he goes to court.
I'm sure someone appears on his behalf.
That's what billionaires do.
According to people familiar with the plan, the device will be able to make phone calls, surf the web and handle emails.
It will call galaxy gear and tom is lining up for it already.
Apple is said to be developing its own smart watch.
Next week's earnings results and lists are predicting a wider loss for penney and ninth straight drop in sale.
And capital is saying no way to investors who want the indicted hedge fund to return billions of dollars quickly.
This is according to people familiar with the matters.
Telling clients the final payments won't be made until the end of the year.
Now some investors are worried that the government could freeze s.a.c.'s assets before then.
Let's go to cairo right now.
He has given us terrific perspective.
Angus flare is with us, one of leading english speaking economists in cairo.
Angus, good morning.
Good morning to you tom.
Tell us about the significance of friday prayers and how any turmoil after friday prayers could set us up for the weekend?
Well, clearly there's been a lot of violence in the last few days.
The court appearance finished and a number of marches coming together from around cairo.
They're trying to head for a place called ramseys square, which is just besides the main railway station in cairo.
The armie has positioned itself around the square, it's unlikely they will get there.
To try to keep the energy as low as possible.
But meanwhile, the city's basically quiet, most people staying home.
Let me ask a basic question.
Can i walk the streets of cairo this afternoon?
You would be pretty available, not just in terms of your height, but basically everybody's baton thed down the hatches.
Staying at home, watching everything on television and if -- the only people that will be out are the journalist and the muslim brotherhood.
The muslim brotherhood is calling for mass rallies on friday.
A lot of people are bracing for more violence and blood shed.
What is the to do list for the military government for next week?
Well, basically there's a lot to be done in terms of what's happening, try to keep everything calm.
It's been, as you know, it's been very violent in the last few days.
I think what you're trying to do is keep the city as calm as possible.
I think it's trying to keep the muslim brotherhood people from gathering in one place and trying the get life back to normal.
That is not going to be easy.
People want to get back to work, but at the miami, given what's happened over the last two and a half days, everyone is very concerned about violence and random acts of violence.
But i think that trying to have any form of reconciliation at the moment is not possible.
Emotions are still high.
Thank you so much.
Our guest host for the hour, is douglas burns, a criminal defense attorney, former federal prosecutor who has tried more than 40 cases to verdict in federal courts and has been with us throughout the saga of s.a.c., indicted by the government for insider trading.
Today faces a critical deadline, a midnight deadline for redemption requests from investors who want to pull money from the firm.
Basically what happened was they had adjusted their redemption policy.
And made it a little bit easier, in other words originally you could redeem your money by a certain point, then they relaxed a little bit.
I think what's going on now, people are seeking further and immediate -- they want them to feed off those payouts.
The fact of the matter is it's an official act, are they going to change the redemption policy again so i don't think they will.
Is it going to be a flood of money exiting?
Well, it's interesting because i face this issue all the time in criminal cases which is where people are saying are they going to tie up our house.
So as you explained earlier, is this criminal action going to harm me?
It's hard to say.
What is the next step for their lawyers?
What are they working on now?
Well, you know, it's interesting because the indictments fence the entity as we've discussed, you can't put an entity in prison so a lot less pressure then, if for example steve cohen had been charged.
But basically, it's a very good question because half of their job is what we just started off discussing is making sure there aren't draconian measures taken financially.
And the other thing is to work out a resolution with the corporation because corporations don't often go to trial.
And he's still getting paid the fees.
Yes, very good point.
Is it a growing concern?
What are the employees doing?
Would you suggest they've all got their resumes out and actively moving and mr.
Cohen knows every day he comes in two people are gone, three people are gone.
I think everybody's been saying it will be converted to a foreign which is a -- family office.
For the employees, god, that must be a scarlet letter to come from a firm that's been criminally scarred.
That's a good point.
I think yes and no.
A, we're in a hugely complicated economy and infrastructure and say i work there but i didn't do anything wrong.
You have decades of perspective on almost both sides of i'll.
Will this change the industry?
Roberts said no, he thinks it's a discreet event.
Do you agree?
I do agree.
I don't think it's any kind of earth-shattering landmark breaking case.
The southern district has been pushing really hard against insider trading, lying, covering up, which is this other matter with julianne grout and the other fellow -- jpmorgan, we'll talk about that in a bit.
Yeah, but the point is, basically, this is a big southern district case and the dust will settle.
Douglas berns with us here.
For bloomberg surveillance.
A quick data check.
Commodities, take improve, up four now, euro dollar, the headline, hydro carbon, down about a $1.5 50 all in all.
Over the last 24 hours,, aussie dollar, a bid to australia, stronger aussie in the last two, three days.
You say that yen.
97.46. had a week of yen strength.
I'm glad you ended with the japanese yen.
Huge story of the week.
And a lot of economic data today that could end up moving all those pairs.
Into straight market.
That's what i'll be watching.
Next step for the economy, next step for jpmorgan expecting fines from u.k. regulators over the london loss does.
This is bloom burying surveillance on bloomberg television.
? good morning everyone.
This matters to our guest, douglas burns has been on both sides of the prosecutoral aisle.
He's seen politicians of each and every stripe, and another time and place, proves lives, well, maybe sort of kinda like private, if not very private.
Things have changed.
Something we don't often talk about here , but whether you're in new york city or san diego, or around the world, is there such a thing as too much information for our public officials?
It's front and center, why is a pro like you even paying attention to mr.
Weiner, the mayor, is it of san diego?
Yeah, bob filner.
You look at the candidates, and it's like international news.
Is this embarrassing are?
Are they qualified to run.
I want to be fair.
What disqualifies you from being a public official?
I'm reading a biography, i'm at about 1880-1885. memo, bloomberg surveillance exclusive, they were as screwed up then as they are now.
But it is private.
It was private in 1880. yes.
I think you have to be fair to spitzer, filner and weiner.
How many politicians went through their career, potentially having done the same thing?
Does it preclude qualified people from seeking public service?
Well, sadly i think the reality of our discussion is that it depends how much of your behavior has been brought public.
So the point is, if they catch you, for lack of a better term then all of a sudden you may be disqualified.
But you go back to president clinton, that's just a private matter.
So my next point are voters willing to rationalize them, and yes they are, if they like the politician.
If they don't, down go the ratings.
Let's bring this over to the markets and over to the scandals of the moment, the dow, or an line business or mr.
Icahn in all that.
We want everybody to be angels don't we, but we have digital media.
The twitter -- you can't go out and have a beer, because next thing you know somebody takes a picture and it's on facebook and twitter.
There's no privacy anymore.
Are people guilty until proved innocence because of this technology?
With the human condition?
You're drawing a great distinction between public relations and law.
From a public relations standpoint it's a lot easier to be guilty and really hurt your career where as legally you can defend it and haven't done anything wrong.
It's always been the case essentially that criminal conduct will disqualify you, but what about this other stuff?
My advice from my vast entourage is simple.
Tom, stay out of the new york post.
We'll be back.
? here's our guest host for the hour, and in top headlines this morning, in egypt, the muslim brotherhood is calling for more rallies.
Two days after hundreds were killed in violent demonstrations the government says that any threat to its personnel or buildings will be met by life fire.
The death toll already near 600 people.
More than 4,000 people have been injured.
A new report says the n.s.a. has broken privacy rules thousands of times since congress gave its new powers five years ago.
That's in the washington post which examined documents provided by the leaker edward snowden.
Most of the violations involve unauthorized surveillance of americans or foreigners in the united states.
And republican party leaders expected to punish two tv networks planning programs on hillary clinton.
The republican national committee to bar presidential debate partnerships with nbc and cnn.
The r.n.c. chairman calls the clinton programs free advertising for a democratic candidate.
I'm lost, what does punch mean?
I don't know, do they have any legal -- is this like time warner cable, is somebody going to go black?
Can they punish them?
I don't think so, actually.
Why do i think if they were doing a ducu drama on richard nixon they wouldn't be punishing?
Because it would be a docu drama.
Will the u.s. government be able to bring two former jpmorgan traders from london that they criminally charged this week?
Our reporting indicates they're not even in london.
That's certainly the next giant step for jpmorgan.
And what does it mean for the bank itself?
It is really something.
Charles peabody is a jpmorgan, he is a bear, he is looking at the stockment he's concerned about the summed legal expenses.
Think $22 billion, that's about one year's net income for jpmorgan.
There are bulls on jpmorgan, what do they have wrong?
Well, i think the whole industry is facing at least a sickly cal rise in litigation cost, but that's part of a broader picture.
And the regulators and the administration want to remove the benefits of being big.
And you're seeing that in the way they're imposed capital restraints, the liquidity requirements.
Now, if you're too big to manage, they're going to raise the cost of litigation for being too big to manage.
$22 billion for anyone is a large number.
How is j.p. more dwan managing that and will you see that in the next quarters conference call?
The $22 billion is spread out over multiyear period that they've been absorbing since 2010. mr.
Diamond will say this is no big deal, business as usual.
Yeah, but this year, i think litigation costs for jpmorgan could be as high as $5 billion.
If they come to settlements with organizations like the fhfa.
There will be multiple settlements around this london whale with the s.e.c., with the d. o.j., with the u.k. authorities, so those -- well, i wonder is there any indication by these two charges, to charles's point here, that they're working on something bigger, getting a bigger fish?
Well, of course, the whale case, the point is, let's work off that.
They pulled in two minute nows but they want to use them to go up the chain.
Should diamond be worried?
Not so sure that's necessarily the case but certainly go higher.
One of the individuals who was charged was bruno's supervisor.
The u.s. attorney -- i realize it's very unusual not to charge this individual, but the point is to your point originally, they really do want to go up the chain.
That's 101. i want to ask you a question because i read both of these indictments, on the 26 page indictment, they indicated he was the one that duped seep your management.
So i would think it would be hard to go up the structure of the management chain -- no, i think that's a very good point.
But at the same time they really need to make sure and go forward.
Two different worlds with terrific experience.
How is this a distraction to management?
I mean, they are delegating authority, dimon, or mr.
Moynihan, or john reed years ago at citigroup.
Do they delegate the legal action?
That's what i meant by too big to manage.
They get so huge the senior management isn't consciously aware of what's going on in the sub groups.
The legal cost for making an error there are going to go up.
The question i want to ask doug, i'm hearing that the d. o.j. and the f.b.i. are continuing criminal investigations into the firm itself as opposed to individuals.
And they're working on what is called a deferred prosecution agreement.
Can you plain that?
That's exactly whan to s.e.c. capital.
On its best day, it's you know, we have decided that we're going to put some kind of supervisor control in and make sure the firm cleans itself up and there will be a large monetary fine.
On its worst day, cynics say, the chiselinging out a large number with the threat of criminal prosecution lurking, which obviously lawyers are not supposed to do that.
The real truth is somewhere in between.
But the reality is a it is to make sure that the problem is solved, compliance is there and extract good finding.
Charles, can you put a cost on the reputational damage to jpmorgan?
Well, you know, this is not the end of the reputational issues.
They're facing investigations into their credit card collection practices, their aluminum warehouse, payment protection.
But, in this london whale case, i'm wondering if mary joe white will use this deferred prosecution agreement to help extract wrong doing.
Well, we're going to have to come back to this.
Charles peabody, douglas burns.
No question, that story's not going away.
Also the justice department blocking a merger.
Good thing we have a lawyer here.
? prayers have just ended in cairo and across egypt, and she looks for violence, expected nationwide.
That is the language of her email to me just moments ago.
That from, again, our cairo news bureau.
A busy economic friday.
Boeing says the latest 787 called by a supplier, finding wiring defects in the fire surpression system on three of its 787's. the airline says that would twigger the wrong ex twinge wisher in case of fire.
The world's largest retailer says second quarter sales were cut by $680 million.
Wal-mart says it does not use foreign exchange hedges.
And the spanish billionaire has passed away.
He was 69. helped turn the holding company into one of the world's largest clothing retailers.
She was worth $5.5 billion.
Can't believe the currency exposure, shocking.
They need to talk to you.
I could see sara in bentonville, arkansas.
Oh, that's totally her place.
Not even close.
We'll talk about the markets now, a record high even though it was a rough week.
Stocks blip, why aren't they in style anymore?
There's less pressure to hold share prices at levels where retail investors, individual investors can build up positions.
Because they're not in the market.
This chart shows how nine companies went in the s&p 500 have split their stock.
The average since 19 6 is about 42. so we are way off the average.
The number of stocks, sara, trading above $100 as a bench mark is now at a record high of 64. you talk about the retail investor, the mom and pop investor, we know they have grown tremendously in popularity.
And that's one reason why retail investors are not paying much attention to the stock price.
Investors don't need to select individual names when they go in.
They tend to buy a basket of equity.
Programs like share builders.
You don't care about fractional shares anymore.
Mutual funds, pensions own 67% in 2010 versus say 24%. so this is a pro's run market, absolutely.
Do you have any specific company examples?
You remember how much that stock price is trading at?
$953. hasn't split shares.
Apple, about 500. dow jones average, unlike the s&p, if you have a high priced stock -- it's a price driven average as opposed to a market cap awaited average.
And warren buffett effect.
There's a warren buffett effect here.
He says when it's high, it attracts high quality investors and encourages people to think of themselves as owners instead of traders.
And of course buffett's own brook shires trade at $174,000. charles peabody with us, he knows the stock split when he sees them.
How do you handle stock splits in the banking business?
Or let's go even more -- i was going to say we hadn't had many because we've had reverse split.
This is really important, folks.
Rip up the script.
A reverse split is ugly.
Five dollars a share, do a 10-1 split.
All of a sudden you're at $50 a share.
Which created a short-term drop in the stock, actually.
But most of the bank stocks are just now in the last 12 months getting back to some kind of trading levels where stock splits can be considered.
I think studies have shown the most efficient trading sper view stock is when it's in the $30-$40 range.
So you don't want to split your stock if it's 20 or 10 or 15. but apple and priceline disproved it.
There's no push for them to do it.
I'm sure it's the last time we saw such stock price i'm guessing was in the 1920's. the average price is about $65.96. very, very cool.
Well, this is the last high ever.
That was very cool.
I just got email about stock.
Let's go to a data check.
Let's take a look at s&p 500. up five .s, a lot of housing data coming up.
Lot of eco data overall.