Why Apple’s $14B Stock Buyback Works

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Feb. 7 (Bloomberg) –- Bloomberg’s Adam Johnson discusses Apple’s stock buyback and who’s next on Bloomberg Television’s “Bottom Line.” (Source: Bloomberg)

Welcome back to the second half-hour of bottom line on bloomberg television.

Thank you for staying with us.

Let's check some of the top stories we're following for you at this hour.

The video camera company go pro is shooting for an ipo.

Go pro's small cameras are used by surfers, skydivers go and others to record their exploits.

They will proceed after the sec reviews its filing.

Major tokyo based exchanges halted bitcoin exchanges come out and the price plunged.

An update for customers on monday.

Weather forecasters say snow heading for the northeast this weekend is expected to be light, leaving little accumulation.

Boston and new york were among the cities hit by two major snowstorm this week.

Hundreds of thousands of people lost power.

It is time now for the commodities report, su keenan joins the from the newsroom with details.

Just in the last few minutes, we saw crude oil teachers crossed the 100 mark for the first time since december 30. the lock buster storm has failed to materialize, but the oil markets being heated up by the weather because they are looking at the week data as an anomaly -- weak data as an anomaly.

One veteran says that prices could climb again on another snow dump.

Is winter effectively over?

The worst of the cold and snow could be behind us, but supply could continue to squeeze prices higher.

Looking at the energy complex the given bc oil posting a big gain for the week.

The view is that that data is being looked at as an anomaly, and we saw technical factors pushes above 100 as we went into the close.

Coffee futures, the biggest rally since 1997. sugar, orange juice, coffee, all pointing -- posting gains for the week.

What is ahead for next week?

A lot of concerns about power companies, new england power prices doubled last month was a lot of consumers will be getting a bit of sticker shock on their bills.

Half of analysts believe the fuel prices will be lower next week.

Some say the band still in the works as the concern about the global economy plays into the mix.

Is time now for our friday feature.

We go through the economic analysis for the next week.

The charger on today, joe joins us to join third the -- to go through them.

If you look at right it, -- at private hiring, we are going to move back to the overall trend of 180,000 per month.

There are some issues and report, specifically having to do with wages and the work week.

If you look at this chart, what you see is that you're broadly in line with the moving average on private payrolls.

I think that is really encouraging, giving the rebel and -- given the weather problems in december.

We will have another weather impacts report in february, and then another few months until another clean report.

What does this tell us about chronic unemployment, or the running underemployment?

If you look at the employment to population ratio, you have a army of reserve labor out there that is holding wages down.

If you look at the labor income proxy, which i draw from the report on a year over year basis , that is below the average of 23%. you join together the household data with the wage data, and this is a telling picture.

And explain to us why in 2013 demand for services only increased one percent on the average.

Is a structural or seasonal?

That are structural, more than just a purging of the seasonal taps -- temps.

That sets us up really nicely for next week.

What you're going to likely see in retail sales and their pace flowing -- slowing, auto sales also slowing after the big moves in the third round of the fourth quarter last year.

This will kick off the appetite next week, as well as janet yellen's comments.

She's going to give her first semiannual testimony before congress, how closely my cheesesteak to the fed's 2014 forecast -- might she sticks to the fed's 2014 forecast?

They are acknowledging some of the data streaming they have seen over the past two months.

They start to tamp down on expect nations of outperformance in terms of growth.

In terms of retail sales, what will investors be looking for?

What the chart was telling us there was on a year-over-year basis might will be slowing for two years.

We should not expect the consumer to bounce back and really drive growth.

That will be a function of is this spending.

-- business spending.

What effect is that having on portfolios?

Massive relocation on a -- reallocation on a global basis.

Pushing back money on expectations, the term structure eventually respecting -- resetting.

You are looking at the bloomberg economic surprise index, which tells you what is going to happen.

Equities are a bit overvalued, we have seen here in the last month and a half how the economics of prize as into the downside them and not surprising from economic point of view, it is following the fundamentals.

It has been a little shaky since the start of the year.

Investors want to look at not necessarily the top line, but would -- you want to look at expectations.

You have consumer adjusted spending, and if you see those turnover, you will have an adverse market reaction on friday.

Joe, thank you so much.

Let's go back out to east lansing, michigan, and president obama is about to sign the farm bill into law.

It was passed by the united states senate, and alan joins us now from washington.

It is a long time in coming, but on a lighthearted note, we're trying to remember the last time the president signed a bipartisan piece of legislation.

It has been one of the hallmarks of the last you years in washington.

A lot of the dissidents.

You heard resident obama speak earlier about how this is a piece of legislation that shows a different approach in washington.

A congress that can get some bills passed.

For our viewers who may need a little bit of an update, what is in this bill, and what is not in it?

What president obama is signing is a 10 year $956 million bill.

It includes farm subsidies, other little bit with the food stamps come and as of the to do with every american.

This is a piece of legislation that affects every american.

Quite how big of a fight with this in congress?

It took two years or more to pass, which is why you see the applause.

The house was divided on it, they rejected one version, passed some other legislation that got wedged together.

Now we have a celebration.

You see senator debbie stabenow, the secretary of agriculture, and they are all celebrating that this finally got over the finish line through bipartisan compromise that people do not think was possible.

One of the sore points of this, one of the areas the controversy was food stamps.

And a lot of families are going to be affected by this.

How difficult will it be?

You will see a reduction in benefits for 800 or 900 families.

That will affect people at about 16 states, they should be checking with her social services department to see how the states will be dealing with is 8.6 lane dollar cut over 10 years.

Even the congressional climate, a lot of democrats were thing full that it was not even more -- were thankful that it was not even more.

This is now a program that serves one out of every -- seven americans.

The president of the united states and east lansing, michigan, where he has just signed the farm bill into law.

The building blocks of imagination, now the lego universe is expanding again but to a theater near you.

Detail, in just a moment.

? the lego movie opens today, bringing the globally popular toy to the big screen for the first time.

Lego is seen -- has seen enormous growth about passing hasbro to become the second-largest toy maker in the world last year.

We take a block file -- by block look at the more than 80 year history.

Lego is probably the most opulent waiting world.

More than 560 billion pieces have been produced since the first were made in denmark in 1949. this has made lego the world's second-largest toy mayker, but blago is still -- lego is still owned by the original founder.

The company name is a contraction of late -- play well in danish.

They bought the first let's the -- lasting molding injection machine, and the design was such a success that any brick sold after the first ones will still fit together.

After suffering a major loss in 1998, and teetering dangerously close to bankruptcy, the company bounced back.

And apart -- in part by appealing to girls and adults.

By 2019, and there will actually be more lego people and real people on earth.

We are rolling, and action.

A new lego movie opens this weekend, freeing many characters in the lego universe to life.

It has only taken the company 82 years, but a reputation like to go does not happen over night.

It is painstakingly built, brick by brick.

Up next, your guide to the biggest newsmakers of this past week.

? it is friday, so we bring you encore, a look back at the most notable newsmakers from this past week on bottom line.

There is no such thing as a risk free energy system.

Whether that risk comes from hydrocarbons, whether that risk comes from hydropower, or from renewable powers like sun and wind but there is risk associated.

You make the trade-offs.

We have a fundamental problem with the cars in this country.

-- cards in this country.

They can be lifted with a -- by a sophisticated 12-year-old.

This is a company that is going to play a greater role in our lives.

Health care will be an overburdened system, so it is hard to our reach to positions and other organizations when you have to go in the stores.

They don't want to keep putting money into dollars, because they have a large amount of debt.

There's also this notion that their pay -- they are behaving responsibly -- irresponsibly.

I expect we will see most of the votes for a ceiling expanse and -- expansion coming from democrats.

Part of that will be the politics and numbers for reelection, it is never a popular vote, see will see john boehner just pulling the people he needs.

Social media can help television ratings, and not be a competition.

Using facebook, and using twitter, at online streaming, that can support people going to watch the games in prime time.

It runs on how well usa does.

A check of the top newsmakers from this past week on bottom line.

Another check of the equity markets on the other side of the break.

Bottom line continues in just a moment.

? get the latest headlines at the top of the hour on bloomberg radio, and streaming on your tablet, and on bloomberg.com.

That doesn't for this additional palm online -- that does it for this addition of bottom line.

Thank you for joining us, have a great weekend.

On the markets is next.

It is 56 minutes past the hour, which means that bloomberg television is on the markets.

I'm going to give you a quick look at the indexes for the day.

It a stunning quick reversal to gains across the board from a disappointing jobs number rig.

After three weeks of decline, the dow jones industrial average putting up more than 130 points.

The individual movers in this market, expedia, the online travel site reported war than 80% year-over-year growth.

Shares of its competitors are rising as well.

Apple's shares are moving higher , activist investor carl icahn tweeted earlier that the tech giant will unveil new products this year.

Everyone else in the world knew that, and it is only february, says they release new products every year, but the ceo tim cook also disclosed in an interview with the wall street journal that the company bought back $14 billion of its stock, and that does not hurt one bit.

That big surprise from apple, the question is who is next?

There it is, just so we understand but the numbers are all about.

A $14 billion buyback, 13% of the outstanding shares.

That is equivalent to 78% of the outstanding shares.

It if they were to keep buying at that rate, they would effectively be right it.

Why would they do it?

Because it works.

A chart where we have the buyback index.

Versus the s&p 500, it is crystal clear over the past year what has happened, if you buy back stock, it tends to go up then it you do not -- if you do not.

That way you can engineer higher earnings in the future, there are fewer shared, as your earnings go up.

As we look at the s&p 500, and

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


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