This is "bloomberg surveillance." it is a full year lou -- a full year bull market.
Why is america still afraid of stock market?
It is hyper hype over the hyperlink.
Elon mucks would have used bead over san francisco in the 29 minutes 42 seconds.
-- elon musk would have you speed over san francisco in the 20 minutes 42 seconds.
Good morning, everyone.
This is "bloomberg surveillance ." i'm tom keene, live from our bloomberg headquarters in new york.
Joining me is sara eisen and scarlet fu.
We need to be briefed because -- i think it is better european tinge.
At 5:00 a.m. we got news out of journey me, investor sentiment -- out of germany.
Investor sentiment improved.
Also in the uk, the home price rose to a seven-year high.
Even in japan, there is a better tone to the market will stop a report that the prime minister, shinzo abe, is looking at a corporate tax cut, added stimulus for corporations in japan.
7:30, eight kicks off with msi b, small business optimism index.
The biggie is when retail sales will be released, and they are set to rise for the fourth month in a row, thanks in large part to the booming auto business.
Then really a light day.
No significant earnings on the calendar.
Retail sales matter.
Retail sales matter.
It is not like a bernanke up or a boom up, but it is better.
One caution, the big chinese supplier of clothing and toys, the world's largest, missed estimates, citing -- good equities bonds, currencies, commodities, and it is a better feel.
The yield market story, 2.66%. the 30 year bond was at 3.70 for sent -- 3.70%. still, a pretty good market.
The euro completely reverses two days of gloom.
1.3311. in hydrocarbon, -- and hydrocarbon, -- second board, it is an eisen-free foreign exchange board.
What is this, the revolt?
12.80 one percent.
The steepness of the yield curve, 234 basis points, 2.3 four percentage points difference between the two-year yield, the 10-year yield.
There is branch near 110, gold well over 1300, 1331. we will completely rip up the script to get the dollar yen from sarah.
-- from sara.
Blowup the yen, 9792. angering this is how we are doing it, folks, there is a daily chart, the yen -- you just killed the monitor.
You will notice whenever the yen weekends, we will see japan's market take off, and everyone else follows.
Barry results with us today.
We have to the start with jcpenney on the cover of "the wall street journal." the board is now preparing to name a new director with retail experience as early as today.
It could eventually name more new directors as well.
At the same time, bill ackman has been pushing for the in the year removal of mike coleman.
-- he publicly released two letters he sent to the board criticizing them for not moving fast enough to replace mike ullman.
On the other side -- what is interesting is that bill ackman, such a high profile brawl that he had with carl icahn over the life, and here we are at jcpenney with other major hedge funds coming out against him.
On bloomberg.com, blackberry says it is putting itself up for sale.
Forming a committee to consider joint ventures partnerships and out right -- and an outright sale is even possible.
When you look at the market value, plummeted from almost $80 billion over the past five years to $5.65 billion.
They are done.
He has been dead on on this thing.
Where is the value?
Now that it has been split up, you can really start to look.
We will talk about that.
Dinner -- definitely where there is some value.
Mexico's president plans to open up the energy sector for business, proposing to change the constitution, open the door for foreign investors.
This could unleash billions of dollars from companies like exxon mobil, royal dutch shell, struggling to find new resources elsewhere.
It would mean a big change for texaco, loosening the grip.
-- from mexico, loosening the grip.
Their constitution currently prohibits entering into profit- sharing contracts.
We will follow jcpenney through this day.
Our guest host this morning, barry rickles -- brian blair is with us as well, senior tech analyst, wedge partners, with a lot of experience and skepticism on the new new in technology, and he will give us blackberry perspective as well.
Barry, are you 100% invested in this market?
We are pretty much always 100% invested.
We are heavily underweight bonds , and have been for some time.
We started to weight towards europe and emerging markets, which are laggards.
On the other hand, the u.s. has done fantastic and it has done so well for so long, we now have u.s. investors slightly overweight.
Equities, not as a function of a decision it made, but a 150% rally.
Suddenly they are overweight.
A great rotation, finally clicking in.
Liz and saunders said it is not clicking in.
Are we finally seeing bonds to equities?
It just has not happened.
What we are starting to see happen is bonds maturing and running off, and that money not getting put to work.
It is not like a great rotation that we saw in the 1980's when rates had gone all the way up.
Are you paying more attention to the fed or less?
Sorry, not familiar.
Said from stanford e-mailed in last night and said no one is in the market but the market is going up.
How do stock prices go up if no one is in the market?
Whenever i hear people talk about it, people not in the market, cash on the sidelines, that is nonsense.
Mom and pop may be ignoring the stock market at their barbecues, but the reality is big institutions, foundations, they are pretty fully invested.
The pros are in the market.
The fact that the cocktail party chatter, or the barbecue chatter is insignificant, that was always a marginal participant, and typically linked to the party when it came to -- 20 comes to equities getting in.
That was a beautiful dissertation.
-- i want to bring in brian blair to talk about how blackberry is putting itself up for sale after much speculation.
It is in dire straits because it could not innovate fast enough.
Apple has been on the fire -- under fire.
It now appears we might get announcement on september 10. what are you looking for from apple?
The new iphone will have the new operating system, the ios 7. we will see something similar, but it is going to be hidden, i believe, potentially under the home screen button.
What will that do?
How they actually implemented, it will be a combination of security as well as an e-commerce opportunity.
A fingerprint would be one way to identify who is holding the phone.
That is the first thing we will look for.
The second thing is a myth.
Priced -- is a mid-peer priced iphone.
I will think -- i will see -- i think it will be multiple bursts of color.
I love the photo apps.
We have not seen any evidence that apple will do a better camera yet.
A number of companies including sony are adding high-resolution, very large camera adapters that are attaching to your phone.
We will see more of that this year.
Back to the e- commerce aspect of this.
If this becomes my credit card, just scanning the barcode and i never have to fumble for a credit card, your phone is always in your hand, your credit card is in your wallet.
Is this a game changer for actual commerce?
Does this become the new credit card?
That is what people have been trying to work on the past five years.
If you are doing a starbucks action, who cares?
If you are buying something $100, $200, the credit card company wants to know that barry is using it.
I bank the -- the rithhololz app.
A probe that could lead to several former colleagues being charged in a $6 billion trading loss.
Excel will not face charges as long as he cooperates.
Ford remains the top selling car in the world.
In his consumers bought more than twice as many ford focus es than in the first quarter.
Last year it took over the corolla as the world's bestseller.
In same-store sales in china dropping 13%. china staying away from kfc because of an outbreak of avian flu.
That is company news.
Coming up for you, $7.5 billion.
That is what elon musk says it's hyper loop would cost to build california's oppose high-speed train, which many say is impractical.
Good morning, everyone.
Coming up, "market makers," 10:00 a.m. this morning, david kosten of goldman sachs about the equity markets.
-- david kostin, 10:00 a.m. this morning on "market makers.
Here as always, sara eisen with tom keene and scarlet fu.
After keeping the public in suspense for a year, elon musk revealed his plans last evening for the hyperlink, the new superfast mode of solar powered transportation -- of hyper loop thomas the new superfast mode of solar powered transportation.
He is suggesting a double- barreled shotgun design for people on this journey, eight hundred miles or so, closing the loop at either end.
The tubes would be mounted on elevated columns.
You are talking san francisco to l.a. what is interesting is that musk announced all this but does not plan to commercialize or develop the hyper loop technology.
He says he has too many other things he is working on right now.
You see the air cushion, the usage of air.
It is like an air hockey table.
This is not a true vacuum.
Not a true vacuum, absolutely.
And this is a contrast to what california is already planning, the $70 billion high-speed train.
Elan musk has criticized that for being too expensive.
He says his hyperloop will be about $7 billion.
A few years ago when barry ritholtz was -- 10. the most demanding technical problem is lateral acceleration, the side-by-side moves.
A vehicle traveling at 550, and you are saying much faster than 550 miles per hour.
It cannot undergo sharp turns, and too much air will create drag and heating problems.
It is not the technology of a smartphone, but it is basic physics, isn't it?
You mentioned the air hockey table, and these are all things that we know.
The initial plan is what we find at a bank.
The vacuum tube.
What is different about what elon musk is proposing is there is a little bit of air in there.
If there was a crack anywhere in the system and this did not work, his plan allows light air . this makes sense.
A number of physicists have looked at this and said it is real, it is possible.
You have to give major credit that this is innovation at the cutting edge, isn't it?
He originally brought up that this was supposed to help the traffic situation in l.a.. i don't think it will do that.
It will make his commute from san francisco to l.a. a little better.
Is this just rich people?
I don't know how you get by the earthquake issue.
Anybody who has ever spent any time in california, when stuff starts to rumble -- it is one thing when pictures are crooked.
At 800 miles per hour, there is not a lot of room for error.
Looking at this to see if this is realistic or -- a lot of people were giving him trouble for the tesla thomas and now they are in waiting lines.
He shook up the banking industry.
Might i point out we have a spanish train crash where the guy was going to bank fast?
But that was not high-speed rail.
The airplane crash in san francisco -- policy and human error has to be folded into this.
When you look at the tolerance of air pressure and speed in that lateral motion, we all know that.
When you take the shuttle to jfk, that is robots driving.
There is no human error.
As long as the engineering is sound, we have removed a lot of the human factor out of it.
A self-powered through solar panel device.
We need robots for -- absolutely.
Did we get physics in there?
The other topic coming up, physics to economics.
Investing -- does it really help ? how much do economics matter?
How much do they matter to you as an investor?
Plus, barry ritholtz, always with a provocative view on this one.
? this is "bloomberg surveillance." sara eisen with tom and scarlet.
Japan's prime minister is threatening the country's bureaucracy with the biggest shakeup since the u.s. occupation more than 60 years ago.
She's a lot they trying to seize control of the senior appointments at the government ministries.
A number of reforms from trades to strengthening the military.
A person's chance of getting dementia may develop when he or she is a teenager, according to a new study in the "journal of the american medical association." teenagers who drink a lot and have high blood pressure are at risk.
And former boston mob boss whitey bulger's facing the possibility of life in prison.
He is 83 years old and will be sentenced in november.
For those in boston, it is a huge deal, the effect he had on boston for decades.
Scarlet fu, what do you have?
I am waiting for the movie version.
Hollywood needs idea.
The challenges facing the president's choice for ambassador to japan.
From the american enterprise institute, a primer for caroline kennedy in "washington journal." air a good chance we will see a military confrontation between japan and china.
America would be drawn into any conflict.
What else does he say?
The demographics of japan, the aging population, how japan will pay for that, a huge debt load.
Barry ritholtz with us for the big picture.
I see a massive divide over japan up, japan down.
Which is it?
As long as the currency keeps getting weakened and the stimulus gets doubled or tripled, what we are doing short term they should be going forward.
We are coming off a multi-decade recession, a country that exports a tremendous amount of goods and services.
Clearly challenged by coria on the one side -- by korea on the one side and having enormous demographic challenges.
The people have finally recognized that shinzo abe is shaking it up, and that is what they need.
And you look at david haro versus carl weinberg, there is a huge gap.
Because it is such a giant experiment.
Will it end deflation and get them out of that long-running funk?
That is the question.
You can ask economists.
Our guest barry ritholtz says it is an art.
We will discuss next on "surveillance." ? this is " bloomberg surveillance." looking at futures, it looks like it is a quiet day in august.
We are awaiting retail sales report.
The bond market is doing better in europe and here in the sense of higher yields, meaning some enthusiasm.
The 30-year bond is up .34% which is frothy.
Even corn is doing better today.
It has been straight down.
I was with alex steele with commodities.
Wheat, copper -- now that i am back, you should be watching the dollar-yen.
Retail sales are due out this morning at 8:30 a.m. and how important is that for investors a lot of good research on this.
Why do we look backward at the gdp report?
Barry riff holtz is a looker of markets.
Brian blair what is with us as well.
It's a timeless question -- why are we fixated on economics?
We get excited about what just happened when instead, we should be looking at long-term trends.
Whether the monthly non-farm payroll event is 40,000, it is out of a labor pool of 150,000. who cares?
It is not relevant.
Fundamental analysis in a vacuum, technical analysis and a vacuum -- lending the man with economic analysis.
Which is more important?
Fundamentals tell you what to buy and technical tell you when to buy them.
The reason we call it fusion analysis is you cannot ignore one or the other.
That was a shameless plug for fusion iq.
Would you buy anything forever looking at a chart?
The fundamentals can tell you this is a good company with growing earnings.
Is that all reflected in price?
Brian blair is an analyst and covers this.
Do you agree you are not using the economic data to look at ?profits and growth i'm not using it.
The market is often out of sync with economic data.
If you take a look at when the recession started, it was not officially declared a recession until after a year after it started and stocks dropped 20% so how can you look at that?
This is breaking news -- bill ackman has resigned from the board of jcpenney.
He is still the biggest shareholder of jcpenney and he has resigned from the board because they are disputing what to do with the ceo and when to name a new permanent ceo.
George soros has weighed in and is taking the other side.
In terms of a stock rice reaction, jcpenney shares shot up in the premarket, trading at third team dollars $.70 per share.
-- 1370 per share.
This comes after the very public letter to his fellow board of directors.
He said that mike ulman is supposed to be an interim ceo.
What is he doing as a member of the company's board?
Perhaps that is a conflict of interest?
Ron tysoe - they are calling him a highly respected retail executive, 16 years at federated and macy's? he has been elected to the board as of august 12. which is yesterday.
And they intend to name someone else.
Is this a constructive soap opera?
I don't care about jcpenney.
They are not the premier retailer.
They are not the high-end.
This is a couple of billionaires fighting.
It makes for great drama and theater but for the typical investor, it is a sideshow.
When you own1/5 of a company, it makes your way -- it makes it difficult to work your way out of that company when it is so public.
Your head must be spinning.
They are trying to make sense of this.
You have this roving cast of characters.
What is the company doing to bring back test present to the store?
Brian blair, this is not your area because you do technology -- but i purchase clothing.
You've got this backdrop of the soap opera.
Do guys like you care about the soap opera?
We just look at the fundamentals.
What matters is not who is running the ship, are they doing anything to get consumers into the stores and what are they doing in the product line and refreshing the clothing that is bringing in customers.
It reminds me of the gap 10-15 years ago.
They refigured their clothing in a way that was hip and affordable and brought consumers in an gap had a great run as a result of that.
That matters more than who is at the helm.
People are not coming through the stores now which is why ill action has gone to the board to make changes.
Is he good or bad for the company?
I don't have a good sense but if things are working at jcpenney -- he was also the one that pushed for ron johnson.
They had a very aggressive sales process.
People stopped going.
We know the nonsense of 50% off.
When they went to that one pricing, people left the store in droves and bill ackman was behind the man who put that policy into place.
You have to think they are going back to the pre- ackman era.
ackman said -- he believes stepping down from the board is the most constructive way forward for jcpenney and all other parties involved.
This rise of activism -- it can work.
Do they need to take it this public?
One way you can affect changes make it public.
Where has it worked?
It works with blackberry and nokia.
Blackberry had two co-ceo's. is it working with dell?
That is not clear but change often comes because of a headline.
I think activism can work you make changes.
The risk is hedge funds worry not about years ahead but they are worried about tomorrow because they have investors that are looking for absolute returns a there is a risk of short term.
How do you balance the acuity of the hedge funds and the value of vanguard?
It depends on the circumstance.
If you have a situation like blackberry -- this is five years old.
The iphone is five years old and blackberry finally has a product that competes with it.
The time for people screaming at black every is not 2013, it was five years ago.
We are thrilled that barry rittholts and brian blair are with us.
Bill ackman is out at jcpenney . the future of jcpenney is what we will talk about.
Also coming up, a conversation on the uncertain future of blackberry, 138 dollars $.87 is the price of lack very during the peak in 2008 and yesterday closed at $10. this is" bloomberg surveillance." more u.s. troops may end up temporarily in the philippines.
The two countries will hold talks about boosting u.s. troop levels to counter a rebel insurgency in the southern philippines and china's influence in the region.
A federal judge ruled oklahoma can go ahead with its lawsuit against the president obama health care reform law.
The state says it is illegal for the irs to impose tax penalties on lawyers in states without healthcare exchanges.
Americans have not been this good about paying their credit cards in two decades.
Credit card payments being late has fallen to its lowest level since 1994. that is good news.
Bill ackman resigns from the board at jcpenney and scarlet fu is writing up a stuff about ronald tysoe?
He is a former low high- level executive in the retail industry who was named to the board.
Bill ackman has stepped down from the board and he owns 18% of jcpenney through his pershing square management.
What will he do?
Will he start selling off but judging by the stock reaction which had an initial burst, it has come down a little bit.
We learned yesterday the idea of back-to-school and school and christmas and the other idea is more about rebuilding.
Analysts believe that jcpenney has enough cash to last through the beginning of next year but what kind of traffic will they get in the holiday season?
Mike ulman came back but how long does it take to materialize into better sales?
Brian blair is with us.
What does cash burn mean?
For me, it is what you are losing per month.
How much are you losing every month of cash?
It is critical when i look at technology because if somebody has negative earnings and they are burning cash, that number becomes very critical.
That will come up in the blackberry conversation later.
Explain the usage of revolving credit, short-term letters of credit -- jcpenney has notes with banks where they can get money if they need it?
That's right, it is your ability to do that.
Where can you go for money outside your cash reserves?
Where are your options to reach out and get more capital?
The fascinating thing about this debate is that we have learned that hedge fund managers don't make for good retailers.
We look said jcpenney, sears -- i learned early in my career, stick to your knitting -- do what you do best.
That's why the new york knicks career did not do well.
I never did open heart surgery because there would be a trail of dead people.
It seems hedge fund managers have a debt -- trail of dead people.
Ronald tysoe is coming in and is a 16-year veteran of the federated.
Can he put the train back on the track?
Is it too late for jcpenney?
The idea of delegating authority -- i think there is a delusion that board members run a company.
That is not quite what happens, is it?
It is the guy at the helm, the ceo, is the one that makes it happen.
They can still reinvent themselves and jcpenney should think about remaking themselves.
They need to make it a different experience, something unique.
Isn't that what ron johnson tried to do?
Not very well if that was the case.
Target is differentiated and it used to be a low and the brand.
We will come back on this, jcpenney in the news.
We will talk about black area looking for a way to save itself.
What's it got left?
Brian blair will weigh in on what it's worth on " bloomberg surveillance." ? this is" bloomberg surveillance, co.
Worried are watching jcpenney shares on breaking news that bill ackman and the largest shareholder is resigning from the board.
They have appointed a former macy's executive to replace him.
We will keep you apprised of that one but in the meantime, scarlet fu has other company news.
The last few months of the b year will be busy for apple.
The new iphone will come out september 10 and the i had with a thinner body design will come out later.
Together they account for 70% of apple sales.
In south korea, shares of samsung are gaining the most on speculation there will be a stock buyback.
It has fallen 19% since january 2 and samsung is not commenting.
The facebook chief operating officer, sheryl heard is cashing in on stock.
She sold about $91 million of facebook shares after the stock went up its $38 ipo price.
Facebook is up $44 this year.
Let's stick with the mobile theme and troubled companies.
We know blackberry is shopping for options to save the company.
It was once a stock market darling.
Joining us is brian blair with wedge partners and barry ritthol tz.
What is the best option when it comes to black terry?
One option is for one of the chinese players like zte or lenovo to come in and say we are not going to compete at the high-end.
We will focus on the low-end.
The global hand site -- handset market is one point 3 billion.
-- is 1.3 billion units.
What is the valuation?
Right now, a five billion dollar market cap was mentioned earlier.
They have $3 billion worth of cash so what about the difference?
They have the operating system and patents and that is probably where the biggest?
-- where the biggest question is.
It is hard to put value there because it is getting lower every quarter.
I think the patents are the big question.
You mentioned there could be a chinese fire.
Canada might step in.
Would the canadian government come in and subsidize blackberry or invest?
It's very possible that the canadian billionaires might come in and save this gem of the country.
There was national pride behind the country and they would take it arrived at and have canadian billionaires and maybe a government entity come help rescue it.
The government could block a deal between a chinese company buying it.
You mentioned about half of the market is smartphones stacks doesn't that mean that the growth is in the other half of the market making its way to smartphones?
Is this a finite product line or can you sell $70 phones to appeal to lower-cost buyers?
That is one part of their business.
They are trying to sell $500 phones but are not being successful.
Android and apple are successful at that price range.
Could somebody by black very and focus on the low-end and make a $100 phone profitably?
No one is better than doing that then the asian manufacturers.
I think there could be a chinese buyer.
Google buys motorola, who else is a potential?
They bought that for patents.
We don't know what they have?
It is hard to gauge what the patents are actually worth.
They have wireless patents that go back at least 15 years.
There is value there.
Another company palm got absorbed by hp and basically disappeared.
What is preventing that from happening here again?
That operating system was different with no users.
This is an operating system that has over 70 million global users . in indonesia, it is they there and in latin america.
Blackberry is still the standard in some areas just not in north america and not in europe.
Did they for waiting until after the release of their they hyped phone that was a dud?
They needed to see themselves fail first before it they wanted to look at the options.
Didn't that happen three years ago?
It did but they wanted to come out with something totally new.
They found out it is not selling.
Thank you so much for your perspective on something you know nothing about which is retail.
Let's end it with the forex report.
I am watching the dollar-yan.
There is a weaker japanese yen.
This is on a report, partially, that the japanese government is considering a corporate tax cut to help business.
There is stronger economic data out of europe and investor sentiment that beat estimates.
U.s. equity futures are higher.
We will continue on jcpenney with bill ackman resigning from the board.
? breaking news -- bill act and resigns from jcpenney board and is replaced by by -- by a former federated board vice chairman.
The threepenny soap opera continues.
Cory booker is the mayor of newark, new jersey.
He supports capitalism.
It took 10,000 hours to learn how to host " bloomberg surveillance." you could be sara eisen.
Good morning, everyone.
I am tom came -- tom keene.
I had no idea how hard you worked at economics.
You were four years old.
Mommy, dollar -- mexico.
I always liked cash.
We've got a lot of overnight news to discuss.
Better economic data out of europe and german investor confidence is increasing more than economists were counting on.
The home price index in the u.s. is rising to a seven-year high and in japan, the prime minister is looking to stimulate business with a business tax cut.
In the u.s., seven :00 third -- 7:30 a.m. we will get the options index and retail sales for the month of july is set to rise for the third month in a row.
Bill dunkelberg will join us later.
At 10:00 a.m., we will get inventories with no major earnings expected today.
It's all about jcpenney this morning.
The company says bill ackman resigned from the board and he is the biggest shareholder and jcpenney confirmed it's got overwhelming support for the ceo mike ulman.
He is the interim ceo but he has their complete conference.
They also namedron tysoe to the board and will name another new director.
We are looking at the stock rice was shot up immediately and then came down a little bit.
How is activism working today?
It is a golden.
-- it is a golden era for activists.
We have in opportunity studied the investment world.
Are you satisfied now that bill ackman is just an activist hedge fund manager and not a board member?
I suspect he lost a courtroom battle.
He wanted mike ulman out and he is staying and he only has one vote on the board and has many votes when it comes to his shares but in the boardroom, only one boat and he probably lost it and he resigned and the stock moved up.
You've got ron tysoe coming in who is a successful expert at federated and other places.
I think this is a good thing for jcpenney.
Bill ackman is an activist investor and pushing for what he wants and try to get it and did not but he still might yet the last laugh.
Do you assume that mr.
Ackman will sell all his shares?
He is in a position now because he is not on the board.
It is not easy to sell 18% of a company like jcpenney.
It is like catching a falling knife.
I suspect he will not.
Alan questrum has been talked about.
I think he will let this play out.
This is a big deal.
A one dollar move is a tangible return to mr.
The board does not seem to threatened by that.
Let's talk about his strategy.
This is not his only contentious high-profile brawl in the hedge fund space.
We are not talking about herbalife and carl icon, we are talking about other companies, other prominent hedge funds backing the jcpenney board.
What is the strategy?
If you are an activist investor, this is what you do.
If you are a scorpion, you staying.
He did the same thing with canadian pacific in canada.
He was incredibly brutal up there to the ward and leaders in the corporate community.
He got astoundingly great results of this is heart of a theme.
It is what activist investors do and it is what carl icahn does.
Porter bibb is with us.
When you see this kind of turmoil, is this an opportunity for investors?
Many times they stand back and let the big players duke it out until they get the fundamentals.
Equity investors really look at the fundamentals of the business.
Sometimes when the noise gets too loud, they might step to the side.
They are not buying 500,000 shares?
I'm not sure about that but once they get the sense of the fundamentals about a is, the egg hedge fund guys might move away from the story and step in and make a decision.
Bill cohan, what is bill ackman's reputation now after this?
The consensus seems to be bill ackman is jumping the shark.
Between herbalife which is going bad, this is not a good situation either.
On the other hand, he's got canadian pacific and other things that have worked.
People are beginning to think that ego is getting in the way here of rational business judgment.
Porter bibb, what do you think of the strategy of airing the dirty laundry in public and making this available to the press and duking it out with everyone.
He is in it for money.
If you paid close attention to what they are doing, you don't want to invest too soon.
Dan loeb have the right idea of how to jumpstart sony . the stock was at $17 when you started your vacation.
It can bounce.
Wax it would be a dead cat pounce.
Let's talk about what is moving at this morning and that is breaking news that bill act will resign as a board member ty soe who has experience within macy's will take the spot on the board.
Bill cohan, how important is it to get someone with retail experience on the board and get this activist hedge fund manager out?
I think that is why the stock is bouncing because ron tysoe has an extraordinarily good reputation and retail.
I worked on the restructuring of federated back in the early 1990s and ron tysoe was the giant -- genius behind that success.
That's why i think the stock is bouncing.
What are his set of best practices?
This is a guy who understands turnaround, retail down in the trenches, what the customer wants -- this guy has -- so does mike ulman and if they get alan questrum that would be a troika.
As we look at the companies in turnaround mode, is there a reason or an argument to be made for making -- taking a company like jcpenney private?
Potentially, the greatest example of that might be dell.
Michael dell has told the marketplace this will be a long and difficult turnaround and the public market might not be the best toys for that.
Any decisions that management make will be very painful in the short term.
Public investors might not want to wait around for the turnaround.
Paul sweeney, thank you very much, porter bibb, thank you and william cohan.
They want turnover.
We will talk more about jcpenney and shares are rising in the premarket.
What else is moving?
This is a data data check.
A risk on trade this morning.
Sarah is noting a weaker yen.
That could be supercharged with retail sales reports in that key economic data is due at 830 this morning.
-- 8:30 a.m. this morning.
While you were gone, there is this feeling as we get through august -- a little better.
Much more on jcpenney and on ticketmaster and live nation's new move to go after a business that it tried to kill once, a $4 billion business, next.
? good morning, everyone.
This matters now -- howard davidovich with decades of exposure and experience in retail.
Bill ackman resigns from the jcpenney board.
Ron tysoe is in and who is he?
He was a sub for financial executive -- a superb financial executive who made tremendous contribution during the macy's bankruptcy and turnaround.
He is a financial guy and critically important because jcpenney's is on a death march.
They will run out of money.
They have already hocked all their assets and will have to go to capital markets or something else and close a ton of stores.
This thing has to be reworked.
Tysoe actually was key in doing this.
He is the perfect guy to have.
This is critical -- does he have enough gumption and heritage and skill sets to turn the bankers around?
Will he allow for jcpenney to get cash if they need it?
I have no idea about that.
If jcpenney continues on a death march, they will have to have a plan that the bankers can believe.
I think it will have to include rightsizing of the number of stores.
I think that is critical because i don't think they cannot forward to keep these stores open and half of them are losing money anyway.
That will be critical.
Also, there will have to be a plan -- there is no turnaround plan on the table i have seen.
Bill ackman never talked about one.
He put in a guy who destroyed the company.
They need a realistic land to stay alive.
Let me share the quotation from dell ackman -- it sounds like you would agree with that.
I certainly agree because i, frankly, have never seen a performance as crazy as we have seen at jcpenney in the last couple of years.
You have to think of the tens of thousands of people, many of them laid off and destroyed and lost their morale and are losing their retirement and everything because a bunch of clowns decided to fool around with this company.
Thank you so much, howard davidovich.
He said it is a constructive move for jcpenney and we will update you on that story.
? this is" bloomberg surveillance." the japanese prime minister is threatening the bureaucracy with the biggest shakeup since the u.s. occupation more than 60 years ago.
He is trying to seize control of the most senior appointment of government ministries and the plan would make it easier for him to institute a number of reforms.
A federal judge ruled that oklahoma can go ahead with this lawsuit against the health care reform law.
Oklahoma has challenged a number of the laws provisions because they say it is illegal for the iris to impose tax penalties on employers faced with health care exchanges.
Whitey bulger faces spending the rest of his life in prison.
He was convicted at 83-years old and will be sentenced in november.
We will talk about another company -- ticketmaster wants in on the game it tried to kill.
It has huge ramifications when you go to your beyonce concert.
Ticketmaster and live nation want to be part of the four billion dollars secondary ticket market.
The new system will list ticket sales along the resales.
They want to compete against sub hub which is on the by ebay.
-- which is owned by ebay.
You were wondering why scalpers would want to join in on this.
That's the question.
I don't get it.
Ticketmaster sold more than 143 million tickets last year but 80% of the market.
Analysts are looking globally at different industries.
I cannot get decencies to a concert anymore.
The whole system is rigged.
It is rigged.
Why would a big company want to get into a fragmented market and it is because they have the database and know where the customers are and can pummel you with market info.
It is all rigged.
Who do they go to?
Depending upon the show, there is a natural demand from the fan base and there is a rising problem of resellers and they are buying tickets, using automated technologies where they can go on the website and use the security of ticketmaster and by big blocks of seats.
This is not the first time ticketmaster has tried to link up with the reseller.
Why is this different this time?
Coming up on they are inviting the ticket scalpers themselves onto the ticketmaster ticketing platform.
It is like bringing your enemies closer to you to manage that process and it comes down to dollars.
Ticketmaster wants to get a cut of the fees.
This is a $4 billion resale business, why is that?
Why is the primary business allowing for the secondary business?
Why can't they get higher ticket prices or do something different?
They will, that will be the result of ticketmaster coming in to co-opt the scalpers.
It has been going on for years and years in sports events and broadway.
Now it has reached out to the whole country.
If a seat is $100 and it is being scalped -- is that a legal transaction?
It depends on the state.
Why doesn't ticketmaster up their price to $200? why don't they engage in dynamic ticket pricing?
That's what ticketmaster and live nation, who are one company now, it is like the airplane, you want to sell every seat at the maximum price.
It is one thing to sell 200 airline seats but another thing to price 80,000 seats in a big stadium.
That has been a challenge for the ticketing business.
In the last 10 years or so, the technology has come in to the ticketing business where you can optimize the pricing of your ticket.
Before that, it was independent concert promoters trying to fill the arena.
Who has taken advantage of the collection of data?
Live nation and ticket master control 80 % of the live ticketing market in the u.s. they are the big players in the business.
They want to take advantage of this big data.
Mr/. rattner joins us -- would you see beyonce in a lousy seat?
No, and the tickets are expensive.
If you don't get a good seat, you are not going.
I will only go if i have a good seat.
I think sub hub has become so dominant that ticketmaster will be hard-pressed to compete.
The consumer reaction will be that it will cost more if ticketmaster gets involved.
You go to a lot of yankees games because you are a red sox fan.
Stub hub works.
I was looking at scarlet fu-like setas behind the dugout.
Are the concert promoters and sports teams going to cooperate with ticketmaster?
More and more but it is a fragmented market.
It depends on who owns the venue and whether they want to.
There is fragmented ownership across the board.
We will talk about the moneymaking machine that is cory walker.
? good morning, everyone.
Breaking news this morning -- william ackman has resigned from the board and is being replaced by the former chief financial officer of federated, ron tysoe.
We are joined by kelsey advisory group.
You are an expert on merchandising.
What is the to do list for mr.
Tysoe and mrt.
Ulman in terms of merchandising.
It is being able to return brands to their core customers to drive traffic at competitive prices.
They have to drive traffic.
Do they need to compete with macy's or is there someone more direct or do they need a new jcpenney market strategy?
They've gone through so many strategies they have confused the customer.
Going back to private/national brands with advertising that drives people into the store is really the key to making it a success again.
Do they need to close stores?
That will probably happen over time.
Some of the rents on the stores are low so being able to stabilize the sales base is the key.
When you look at this in your decades of experience, put this in context of other retail restructurings.
This is rob oblique one of the most difficult restructured -- this is a bubbly one of the most read difficult restructurings because they have a balance sheet that is questionable.
They need cash to stabilize but having gone from different types of pricing strategies and traffic weakness they have seen, one of the most challenging changes in order to restructure.
Thank you so much, danan telsey.
Let's get more color on the till ackman role.
We know he is a large shareholder but no longer on the board.
Julie hyman, we called her in early to the newsroom to track some numbers.
Do we know how much it lacked and has lost on jcpenney?
Yes, another loser in retail.
Bill ackman still has the largest shareholder stake in jcpenney.
There is no indication that will change that he is going to reduce or sell off his stake.. he would do it at a substantial loss.
He has losses of $486 million which is the decrease in the value of his holding since he first started accumulating this stake a couple of years ago.
In addition, he has accumulated some 15.9 million shares through swap contracts that he bought back in september, 2001. we don't have the exact calculation on his losses there but we do know he is required to make cash payments to the extent that the market rises below $26.14 apiece.
The shares now or at $13.48. bill cohan follows wall street and we asked him what the reputation was for bill ackman.
He said many in the hedge fund world think he has jumped the shark.
Not only on jcpenney but also herbalife.
He had losses on target, losses on borders and he was still a 31% shareholder when borders filed for bankruptcy.
If you look in that category, his history has not been strong.
He did say he will back up because he did not have a history of doing so.
Even though his reputation might be damaged within the hedge fund world, this is typically a guy who has tended to stand his ground in the past.
Thank you, julie hyman.
It's not just losses on herbalife but other retail bets he has had.
Ron tysoe may be the answers and may have some momentum to make the stock price go up.
The stock rice is about $13 for g2 sense.
-- the stock price is about $13.42. ford says the focus is the top-selling car in the world thanks to china.
Chinese consumers bought.twice as many in the first quarter . ford said the focus overtook the corolla as the world's best seller.
Blackstone group is making a move into multifamily real estate.
They have bought 80 apartment buildings for about 82 billion dollars.
Blackstone has acquired more than 8000 single-family homes.
The few women who make it to the executive seat do not make big numbers.
Eight percent of female executives are women.
Good morning, we are on bloomberg television and radio and all of our interviews are on bloomberg+ and itunes and android.
With me this morning is sara eisen and scarlet fu.
We've also got porcher been.
-- porter bibb.
New jersey voters will vote to replace the frank lautenberg.
The rest of the candidates are expected get beaten up i cory booker.
How did he do it?
Just follow the money.
It has been stunning to watch him rack up the money.
How did he become this machine?
I feel bad for frank pione, the incumbent congressman from bayonne and has done everything right.
He has been a journeyman legislator and help shepherd health care through and done good environmental legislation and has recommendations from the heirs of frank left and bert.
He did not play stanford football.
You start with cory booker's staff, he is a phenomenon.
He has had eight with of destiny.
He takes the time to open the door for you and look at you like you matter.
I remember when he was tweeting to constituents when they complained about potholes, responding directly to him.
He opened his living room during hurricane sandy.
He has been able to raise money from all over.
If you can raise money from all over and look at side traditional sources, you have say in the party's future.
Frank pione is raising money from traditional to my credit sources.
That is kind of it.
If you look at where cory booker is raising money, it is distributed geographically, from new york, new jersey -- his third highest donors come from long beach.
He is also moving outside of that pack and getting money from financial industry but also at&t, time warner -- let's not forget mark zuckerberg making ace last by donating money to the public school system.
They met on opera.
I met sarah on opera.
What constituency does he not have?
Does he have the full support of the newark constituency, the working-class constituency?
He is popular in newark.
He broke the sharp james machine there.
He ran twice.
How did he do that.
? he is a stunt politician.
He was a rhodes scholar and want to yell law but when he moved to newark, he decided he would run for city council and want to live in public housing so he did that for his first two terms.
He had to deal with a lot of rumors.
They said he was financed with jewish money and there were do= ? dirty rumors.
Is he a one-time senator?
He's got a big plan.
To his credit, he has been mayor of newark for six years and he know whence to take the shot.
He was raising money to run for governor and did not run against chris christie because people like a winner.
Chris christie is a winner right now and he did did not want to suffer the possible ruses.
He picked his shot carefully but barack obama got bored in the senate.
Is he going to get bored in the senate?
You have to listen to old people tell you to wait your turn.
Elizabeth warren is going through it now.
Martin o'malley, governor of maryland, is stumping for him right now in newark.
Nobody knows who martin o'malley is but cory booker does.
Thank you so much.
Vote early, vote often.
That's not possible.
Coming up, the yankees beat the angels last night -- ? good morning, everyone.
I'm guessing there is one morning mover.
It is jcpenney.
You've got 3.20 8 million shares changing hands now.
The stock has been up and down.
It is up by more than 1.3%. jcpenney says he'll ackman has resigned from the board, ending his public fight to push the interim ceo out.
Liz dunn covers jcpenney and joins us by phone.
Ronald tysoe was named to the board of directors but how long will it take him to make his mark on the company?
His addition to the board is certainly good but this announcement is about the board standing behind miuke ullman and his strategies.
They are pointing to back to school as an opportunity.
I think they need to see some significant progress in the back to school period, they don't have much time.
How much time will their cash less of them?
I have heard varying forecasts.
And of this year or early next year is the range.
They burned through about $2 billion in the first half of the year and they have about $2 billion of liquidity right now.
Including cash anduntapped borrowing.
Things need to improve that they can make meaningful progress in the back cap.
It is about the gross margins and cutting off the wasteful spending.
Porter bibb is with us and covers the media industry and you have seen a number of turnarounds.
To you have a question for liz dunn.
The question is -- what is in it for the customers?
In cannot be a makeover as the yahoo changing of their logo.
They have made changes to the store and ron johnson had good ideas but they were pearly executed.
They spent too much money doing it.
They did not check in with the customer to make sure the customer was ok with the changes.
They are adding back coupons but there is no merchandise in the stores.
The distinction is the cast are in and getting to january, 2014. is that in doubt in at this moment?
I think they will make it through the year.
The fourth quarter is where retailers get a lot of their free cash flow.
Early next year is when it starts to get shaky to the extent that things -- do you see a plan or does mr.
Tysoe have to come out with that in days?
Mike ul;man will unveil a plan in conjunction with their second quarter earnings release which is what the company has told me.
All of this distraction with bill ackman saying he wanted ulman out was a distraction.
The jcpenney report earnings on august 20. nature versus nurture -- we will talk to an author next.
? ? this is" bloomberg surveillance." our guest host is porter bu ibb.
We have company news.
The last few months of the year will be busy for apple.
The company will introduce new models of the iphone and ipad.
The new iphone will come out september 10 and the ipad design will be does -- unveiled later.
Together, they make up 70% of apple sales.
Shares of samsung are getting the most in south korea on speculation there will be a stock buyback.
The world's biggest maker of smartphones has fallen 19% since january 2. samsung is not commenting.
Cherylsanberg is cashing in on the stock.
Reject sheryl sanberg sold $90 million worth of facebook shares.
Facebook is up 44% this year.
If you want to succeed, malcolm gladwell says 10,000 hours is all you need.
Just practice for 10,000 hours.
It is eight hours per day for 300 years.
It is a great debate.
Punch the clock and you can get it done.
The huge variance of that -- is itgenes or something special like pixie dust?
This is a great books in " the new york times" with a great review.
Is it genetics?
It definitely has to do with genetics.
It shows us that because of an individual's biological set up, his or her one-hour practice is not the same as the next person's. we are totally unique and how we benefit.
Can you bring this from the olympics or the nhl were major league ace ball to chess?
Absolutely, in chess, it is 11,050 hours which is the average to reach master status.
The ranges for people who make it in in 3000 hours to people at 20 i've thousand and have not made it.
Ken rogoff was the kid blindfolded by bobby fischer.
He did not do this and 11,000 hours.
What i tell my two boys is that practice makes a difference.
That was never controversial.
We would just hire athletes and have them show up at the game so that is not a controversial question.
We want to know how much practice matters and what difference it makes and what else matters.
At an elite athlete level, how much does practice matter?
When you standardize the gene pool, the more it matters.
That is what differentiates people.
In the music his nose, there was a guy namedcrosby, stills, nash, they all practice 11,000 hours and nobody predicted what those three voices would do.
None of them were perfect voices but it worked.
They loved what they were doing.
That is the ingredient.
You need the genes and the talent and the motivation but you have to have the passion.
Look at dufner who goes out after he has finished a round and is working on his swing, all night long.
What is the difference between dufner and tiger woods?
I have a chapter on people's genetics.
They feel certain reward for doing certain activities.
For some it is sex or drugs or doing sports.
Passion is a part of genetic talent.
Tom keene has long legs so if he took three years, how far apart would he be from running a marathon?
He would probably be fine.
You cannot have a sprinter.
I had a fast high school coach that said i could take gym off today.
A long pair of legs does not necessarily make you a fast runner.
There is a trend in specializing.
How does that play with economic incentives?
In the early part of the 20 centuries, they thought the average body type was good for everything and the reward for athletic status increased later.
Specialized body ties became worldwide and now we have really specialized body types like the lead female gymnasts have strong -- have shrunk.
As i shook reggie jackson's hand and his hand was a freak of nature.
I sat behind roger clemens at his drive and he could barely get in the chair.
Because of the media and tv and sports and the hey gal graffiti in the united states, are we losing sight of how unusual the gene pool is that excels a makes a lot of money?
We are and one of the best examples is in basketball where people don't realize -- i have nba body types analyzed -- if you are between 20-40 and you are a certain height, you are in the nba right now.
Derek jeter is huge.
Height, size -- he isn't huge.
Not within the realm of the yankees.
How do you bring this to the world of business?
People have the special talents so how do you find talented managers?
In one of the first chapters, i talk about skills that are not genetic.
It is the way people learn how to organize information and that is something that is probably indicative of good managers.
They do chunking information which is unifying it in context.
You can identify those skills in people.
That is what chess masters do and it seems like they can remember enormous amounts of information.
You just described the british education system.
They pick cap on something and sees it.
And they group it into something that allows them to process huge amounts of information.
If you give a random arrangement of a chessboard, chessmaster to not have that great memory.
I am sure that's a skill that some great managers have as well.
I would think economic incentive has to play a role.
It cannot be just about the physical.
I go through a chapter -- it is not just kenyan marathoners, it is just one tribe.
Stick around, we will say goodbye to tom who will go to the radio studio.
Retail sales will come in at a 30 -- 8:30 a.m. we will talk about europe again.
German investor confidence coming in better than expected.
We need to ask you about a- rod.
Does this look like the end of his career?
He won't be able to come back until 2015 if the charges go through.
I think his suspension will get knocked back a little bit but it will ruin most of the next two seasons.
He is old enough the yankees would be inclined to buy out the remaining part of his contract and deal with them.
I think this is functionally the end of his career.
You broke the news that he took ped's. what should happen next with the response of major league baseball?
I think they are going about it extremely aggressively.
They have realized the drug testing almost never works.
Their new frontier is investigation an that's why they are having some success in prosecuting.