Winklevoss Bitcoin ETF: Street Smart (07/02)

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July 2 (Bloomberg) -- On today's "Street Smart," Trish Regan and Adam Johnson find your last trade of today and first trade for tomorrow. (Source: Bloomberg)

Of course, if you have suggestions, go ahead and tweet it to him.

If you missed one of the shows, check out the website for our ipad app.

"street smart"continue the conversation about bitcoins.

The winklevoss bitcoin etf.

The harvard twins.

The newest entry into the bitcoin world.

We examine what this says about the legitimate need of the digital currency.

Plus, zynga's new chief gamer.

The farm bill creator takes a market executive to revive its business.

We will talk about the caning pioneer.

And drink up, america.

Two days before the country's birthday, the latest facts and figures about u.s. beer consumption.

U.s. stocks and a bit of a tailspin, giving away gains that we saw earlier today.

Welcome to the most important hour of the session.

We have seen in nearly 180-point swing in the dow today.

Pretty incredible.

Quite a range.

We have some better data, so we started off well, but time for the big picture.

The three things that you need to see to get a sense of what is happening today.

We opened up with the dow industrial average on the far right early this morning, but well over 100 points, but now we are down 66 points.

Concern playing out in the markets.

The one bright spot, autos.

If you look at that sub sector in the s&p 500, that is still holding on to gains of 1.7%. despite the fact that the s&p 500 could not hold its 50-day moving average, people say we still want to own autos.

Americans are buying more cars than they have since december 2007. the tug of war playing out here in the dow verses the autos, look at that, really playing out on the 10-year.

If people try to figure out which way to play this.

Do you go with the market as a whole, or do you go with this large part of the economy, the auto sector?

Right down, back to unchanged after several trips up and down.

Let's get to the big three, the stocks that you need to be watching into the close of trading.

Dominic chu has more.

Let talk about three stocks to the downside.

Constellation brands.

One that you will want to watch.

They reported earnings this morning that came in below analysts' estimates.

Sales also slightly below the consensus estimates.

This is a big beverage and alcohol company.

Most well-known now because they own the distribution in the u.s. for big names like corona, pacifico.

Keep your eye on davita health care partners.

There could be some medicare budget cuts, the amount paid to kidney dialysis centers.

They are the second-biggest provider of those services.

This will come for public comment first, so helping human services will ask the public about any comments about whether the proposed cuts will have any impact.

Remember, berkshire hathaway a big shareholder in that company.

The fda has stopped testing -- the company has stopped testing one of their controversial hepatitis drugs because there may have been some abnormal results.

Achillion losing a quarter of their value today.

Down sharply to the downside.

Three names that you want to watch today.

Onto our top story, bitcoins are back in the headlines.

The winklevoss twins have filed an sec filing to create an exchange traded funds for the on-line currency.

The goal is to give everyone a chance to get into the bitcoin craze without having to go through those hard to access on the exchanges.

So here is the question, it is the creation of this bitcoin etf a sign that this has emerged as a credible asset class, or is this just an extension of the bitcoin craze gone wild?

With me is a credit setter of bitcoins.

We also have our very own etf expert here at bloomberg.

Walk me through our and etf for bitcoins may work.

I am in london this week for bitcoin london.

I will say, the winklevoss twins are not the only one working on this idea, interestingly enough.

It definitely depends on how they want to structure it.

I have spoken to a couple of people who are looking to do bitcoin etf-type products.

There are also a lot of people doing similar bitcoin-related products.

Does this mean that i could basically use my dollars to invest, effectively, in bitcoin, without having to purchase bitcoins?


Behind the scenes, you are really purchasing a bitcoin, so it is an exciting and easy way for people to participate.

David, does this strike you as an example of something that will help to legitimize bitcoin as a currency more so, or perhaps, as was suggested in the intro to this segment, a pop.

I think the bitcoin started off as something about overthrowing the government.

It has grown into investment properties.

Now is looking at just moving money around the world.

We reimburse companies overseas and bitcoin is a convenient alternative to paypal.

Anything that brings more government scrutiny and investors into it and attention is really good.

Eric, is this going to work?

It could.

If you look at something like gld, one of the people that helped to design it, they are helping them put this perspective together.

That seemed to work just fine.

$30 billion in assets.

If they can pull this off and have people trust that they are getting an actual value, just like gld, it could work.

The question is, there is a lot of risk.

Could this be outlawed?

Is it secure?

It raises more questions than answers.

It reminds me of the physically- backed diamond etf which has been sitting in sec registration for two years.

A lot of buzz, but nothing yet.

If you look at the prospectus that came out with the winklevoss proposal, there are a number of caveat.

If they somehow lose the electronic key, the code to the bitcoins, you may lose your investment.

That is like the gld saying, somehow, if our stash of gold is rob, we are no longer liable.

How do you quantify that kind of risk?

Exactly, and that is why this thing was panned so badly in the press and on twitter.

This was just one of the many risks highlighted.

Another one that was interesting was, the sponsor has no experience managing an investment trust.

That one was interesting because they do not.

There are a lot of red flags in the prospectus here, and there were highlighted time and again in the press.

You cover etf's every day.

This is an example of something so thinly traded where you could see a lot of volatility.

We have seen a lot of volatility in the overall price.

How will that be mimicked in the etf?

Will there be less volatility in any way?

I do not think so.

It looked like the pricing would be based on the average between the high and the low.

It seemed sketchy in terms of how this would be priced.

The idea of tracking something with this much volatility also brings to mind, should retail investors get into something like this?

In a way, it reminds me of the vix products.

Is this something that is an investment for the long term, or something to gamble on?

David, walk us through expensify, a platform where you can use bitcoins.

We use mobile phone to scan receipts, we import information from your bank into our website.

We do expense reporting for millions of people around the world.

What does this have to do with bitcoin?

That is what is exciting.

We have users who need to reimburse across currencies.

The options today are quite poor.

One of the overlooked benefits of the coin is that it is great for moving money from the world.

We use it as a currency, which is unusual, because most people look at it as an investment vehicle.

It seems we have come full circle.

Currencies are and exchange tool, and all of us on wall street look at them in ways to invest.

You are a guy that runs in exchange for bitcoin.


Why do i need to invest in an etf when i can just go to your web site and by bitcoins myself?

I could not have said it better myself.

Seriously, this targets a different kind of end user.

This targets more of the buy-in holder that has bought stocks in the past, gld.

We are targeting more wall street, day traders, anyone that has used an on-line forex trading platform.

So there is a difference in your view of using bitcoins as a means of exchange for currency, just as you would any other, and using it as an investment, the with the foreign exchange traders would use it.

There is a total difference here?


There are so many ways to look at bitcoins.

Personally, i have moved beyond that, and i look at it more as an ip address for money.

It does have really cool uses as a currency, stored value, and so forth.

I want to share with you and exclusive statement we have from the winklevoss twins.

They told us -- this was the reason behind etf creation.

Thinking to the panel.

We appreciate you being here today.

Coming up, more americans are buying cars, but adam is looking at profits in the parts.

And we examine the real cause of the crisis in egypt, as protesters continue to storm the streets.

You are looking at a live picture on the streets of cairo.

? more americans are buying cars, and we are buying car parts.

Take a look at this.

U.s. auto sales, coming in today, still getting the final tallies.

They have been coming in since early this morning.

The point is we are practically back to 12 million units on an annualized basis.

That goes back to 2007. people held off for so long and finally starting to loosen their purse strings.

That is good for the economy but it is also good for the component makers.

If you are buying more cars, they are making more cars, and that mean that they need to buy autoparts.

You can see how the trend is playing out, recently started to accelerate.

The auto parts makers are most leveraged to the auto business.

Yes, you can buy ford and gm, but many of them have these cross structures.

Now when they come back, they have what is called operating leverage.

We decided to look at the various auto parts makers, looking at who has the most leverage.

We are looking at the price you are getting compared to the growth that you get.

Visteon now at 47% growth.

Delphi, 0.8, magna, 0.9. the biggest bang for the but, if you want to put it that way.

Our) is a huge fan of auto stocks.

He has 30 years of experience on wall street and things that investors should all drive away with a bit of -- in their trucks.

You look for?

Yes, they are the type of company that has great design ideas.

I especially like their pickup trucks.

The f-150 -- biggest selling truck in america.

On top of that, you have housing and the energy industry, great buyers of pickup trucks.

We could be looking at the best sales since 2007? are we talking about here?

Have we seen all the upside potential?

Going back to 2007. i think we maybe just beginning at this point.

The reason why, we are still in the process of an economic recovery, imbalanced significantly by quantitative easing.

It is the effect of fracking or priming the wells, out what the fed has done, and as our economy gets better, people will keep on buying pickup trucks.

You look at the average age of the u.s. fleet, about 11 years.

That is several years longer than we have seen historically.

There is so much pent-up demand, you believe discoing?

I think so.

It is a combination of pent-up demand, and the one built -- a wonderful thing about high-tech stocks, there is a quick expiration date.

It costs money to replace or by anyone.

I also like eaton corporation.

They make a lot of parts within the automobile industry.

Industrial equipment.

They are among our favorites.

Outside of trucks, a number of industrial and go along with secular trends.

Honeywell and boeing.

We mentioned this in december.

Airplane sales have been huge.

One of the strongest components we have seen in new orders.

Remarkably, they weathered the bad batteries and all of that.

The remarkable story.

Honeywell pitches in as well with all sorts of things with airplane engines.

A lot of that is being reflected in the stock price.

You sound optimistic enough that things will move forward and these companies will benefit.

The latest reading of gdp, 1.8%. considering what is coming online beyond this, if we have europe anywhere from a year and a year and half behind us in the recovery process, we have that new government in china beginning to get a grasp of what they need to do.

I would not say they are fumbling -- it would be arrogant of me to say that.

There have just such significant change to do with moving from an export-driven economy to a domestic-driven economy, but if all that comes on, it all works well.

We are a world that is very much linked.

Japan is an example of an economy doing quite well right now.

The abe effect has been extraordinary.

That is right.

One become back, we will talk about that.

The japanese prime minister trying to increase consumer spending.

But first needs to get past the housewives.

They control the purse strings in japan.

We will get into that in today's global economics.

And is can be crushed crushing farmville?

? this is "street smart." you can also watch us streaming on your tablet, phone, and on

We have a little vocabulary lesson in our global outlook.

The bank of japan has not used this word to describe the japanese economy and more than two years.

Want to know the answer?

The word is recovery.

It has been a long time since we have heard about recovery in japan.

Joining us to talk about it is dominic chu.

It is all about vocabulary.

Fed speak has found its way to japan.

This is how the minutia matters when it comes to central bank speak.

We scrutinize every were the central bankers say, whether it is ben bernanke or mario draghi, and of course, the bank of japan using the word may be recovery, as opposed to "the economy picking up" which is what they're using now.

If the use this word, it could signal that things are getting better.

A different shade of gray.

It may signal that perhaps you have some momentum for the japanese economy.

Abenomics, this colloquialism that we are using for a package of regulatory overhauls, monetary, fiscal stimulus, all this happening to prop up the economy.

This might be one step to say, if this is a "recovery" it may be a good thing.

The other thing i wanted to bring up -- i know you will appreciate this.

It is almost a fourth of july.

Lots of drinking.

We will talk about that.

In japan, the men get allowances.

The women are in charge of the household.

The japanese husband's monthly allowance has dropped to the lowest level since 1982 commack and they are spending more of their budget drinking out.

An average of $30, up 21% from the same time last year.

This is a survey that a japanese bank does of 2000 people in japan to find out what their monthly allowances are and what they spend on going out.

So is not a good sign in that allowances are going down.

Maybe the women are just keeping more money for themselves.

Speaking of women, some experts say that the women spending patterns are actually a leading indicator of the economy and then spending patterns are a lagging indicator.

The women do not loosen the purse strings for the men.

First they spend on themselves first.

No commentary, just saying.

They are like the cfo's of the family.

Just ahead, the zynga shakes up its management, but is it enough?

Three takes for you.

? . all right, zynga is pushing the reset button.

The struggling game maker has hired don mattrick to replace their founder.

Shares are reacting positively to this news, but there is a bigger story here of course, stocks are down 70% since going public in 2011. as of last month they had to fire one-fifth of their force.

The demand for their games is sizzling big time.

Is don mattrick the answer to their problem?

Where is the reset coming too late?

Cory, can they pull it together?

Looked, he is the right guy to hire.

There are not about people in the gaming industry with more executive experience at all levels, managing new software, old software at electronic arts, going to x-box, running a $3.5 billion business.

Zynga could only dream of that kind of revenue.

And this new platform on x- box live, he created that from scratch and it was an enormous success for microsoft.

Intelligent, hard-driving, well liked, unlike mark pincus.

What is there to work with?

There is a lot of cash, a tremendous list of likely gamers, and they have come out with better games.

It is exactly the kind of assets you want to build a gaming company out of.

Easy leap -- easier said than done.

How do they do that?

How do you know what is really going to fly?

But people will get excited about?

In my view the issue is not a ceo issue.

Say what you about pincus, but under his tenure some 250 million people even in the last quarter, which was not good, played their games.

They never had an issue giving people engaged and excited in their games.

The problem is they target a very casual market.

People that would not even describe themselves as gamers.

By definition those people do not spend a lot of the discretionary budget on video games, so as a result, earnings are tough to come by.

Only 1.7% of the people that pay their games actually pay for them -- play their games actually pay for them.

Even if they come in and do a 180 and said they are no longer a casual gaming company, that they will attack the core market, that is a market that is very competitive, very concentrated, and zynga has zero assets to bring to bear.

Where do you think the company will go?

Quite frankly, i think this is a bit of a head fake.

It is difficult for me to see where they can take this.

I would be more negative on the stock if it was not for the fact that 60% of the market capital was held in cash.

It is difficult to call it a short, but this is not a turnaround situation.

It is not that they're doing badly, they are doing ok.

Cory, what do you think of this?

But korea's think -- and is saying that people will not pay for these.

A great point, the percentage of people that pay is so anemic.

I do not give stock advice.

Warren buffett gives the stock device.

Dhunna swing at a pace that is still in their love and you have a company not doing the things that they are trying to do yet.

And we are not asking you to give stock advice, to be clear, but to weigh in on whether or not you agree.


So, absolutely, it sounds like they do have challenges in front of them.

With that in mind, let's turn to john, looking to trade this.

What do you think of the options market?

I think that cory and daniel made some good points.

What impresses me most is this track record with x-box online, he was really able to grow the social component for microsoft with x-box and has a proven record with electronic arts.

One figure that strikes me is he really grew the base from 600 users to about -- six -- 6 million users to about 50 million.

That is impressive.

About the company itself that is most intriguing, and their record in online gambling.

At one point they held a 15% market share that they gave away the caesars.

Sounds like you are optimistic.

For my trade i will be looking at the august 4 call.

Originally it was about 12 cents, stocks pulled back a bit, the risk was $10. by break even point would be around $4.10 per share, all the way until august 23, i think that this should continue to rise.

We will leave it there.

Thank you.

Over to you.

Cracked open a cold one, summer beer trends after the break.

Pop if you cannot beat the heat with a brew?

Your best guess it could be headed to be your best bet to be headed to the casino.

Mgm, keeping customers at the table.

? ? ? this is "street smart," on bloomberg television.

If you are shopping for your fourth of july barbecue, what is on the menu?

Burgers, dogs, babies and beer.

The question is, what do you buy?

But beer drinking was hit hard during the recession and has been struggling.

Craft beers may be the solution.

Alix steel is here to take us inside the craft beer industry.

In kind of a sucker for craft beer and that is the saving grace for this industry.

15% last year of the u.s. beer industry, the segment is pretty small, about 10% of the market.

Consumer is basically one more for their dollar and higher alcohol content, which crafted year as, of with that innovative taste.

-- kraft beer has , with at that innovative taste.

They are actually opting for wine and spirits over beer.

They have raised their prices over the last few years.

Wine and spirits keeps innovating, whereas beer has leveled out.

Against the gap between ordering a martini and ordering a beer is -- i guess the gap between ordering a martini and ordering a beer is getting smaller?

People want more for their money.

A mass market beer with lower alcohol content, or a higher alcohol content local beer, the money will be made there.

Blue moon, that is considered a craft beer.

Sam adams.

The problem is a lot of other companies are catching on in innovating in the same way.

There is nothing new.

Curious about the big guys getting into the craft beer business, a favorite of our next guest.

A clear rose -- claire rose craft beer distributor.

Tell us about it.

Thank you for having me, first of all.

You hit on it before, millennial drinkers are going for something that has more flavor.

There is a story behind each of the breweries.

You can take it to that bar-b- que, the golf course, take it voting.

Long island, the territory of the service, very resort driven.

A lot of people down on the beach.

More sophisticated as well.

Lot of people asking for wine and spirits.

People whose palates have evolved.

I do not want to say it is lack of education, but there are a lot more offerings.

And the subtlety of a beer.

Give me a break, it used to be give me a bud.


With higher alcohol beers as well, imperial stout, bottled wines, this is what people want to drink right now.

Of the beer industry is not ready doing that great.

-- the beer industry is not be doing that great.

2007-2012, through the recession and the beginnings of the recovery, looking at states like vermont, minnesota, new hampshire, you cannot draw a distinct parallel between employment -- north dakota has one of the lowest unemployment rates in the country.

There is something to that.

Yesterday it became completely legal in the united states to home rule in every state.

A lot of home brewers are moving into the craft beer segment.

Like sam cooke, from sam adams.

The real stuff.

Seeing how they can compete.

There were 2200 breweries in the country last year.

I was talking to mark at billions capital and he said that these companies really need to decide what they want to be.

Do they want to be big, mass- market popular?

In that case, do not worry about the taste.

What is incredible, and you can speak to this, barry mclaughlin, molson coors controls, with consolation through corona, 90%, three companies control 90% of u.s. beer market.

A lot of consolidation.

How does a guy like you push your way in?

Using the higher quality ingredients is what -- ingredients is one thing.

Locally sourced, craft beer makers do a great job with that.

Local hops on long island.

They just brought in a hot harvester from europe, which is big.

Long island breweries, there are almost a dozen right now, doubling over the next couple of years, that will be able to use locally sourced.

Premium priced?


And it is great, there is a story behind it.

The guy down the street, his wife goes to pta meetings with your wife.

You can share the beer that he made at the barbecue.

It is definitely a nation that is growing bigger in our country.

Barry mclaughlin, thank you for joining us.

Alix steel, indeed.

All right, let's take a look at these pictures coming in right now from egypt.

These are live shot of cairo, protesters continuing to gather with a lot of momentum.

We are going to examine the root cause of this crisis and talk about what is next in egypt, right after this.

? ? the political showdown in egypt has escalated as hundreds of thousands have gathered to demand the departure of president mohamed morsi.

Suspending the petition for the islamic dominated legislature, headed by the country's chief justice if he fails to reach a solution with his opponent by the end of tomorrow.

As we await developments, michael mckee joins us with the latest.

The real reason that egyptians are taking to the streets bella all lot of it has to do with dissent over this islamic constitution that he pushed through last year and ongoing anger to rein in what many see as police brutality.

Egypt and problems come down to what they always do in these situations, the economy, some call it the worst since the great depression.

Business is pulling out, the pound is falling, raising import prices, this is a country where they subsidize food and fuel and of those costs are going up at a time when the government money is going down.

Inflation is that 11%. unemployment at 13%. 25% of the people living below the poverty line.

The revolution has not produced what people want.

Coming up, a great start?

A little bit of chart attack action.

? ? time for chart attack, where we bird -- where we bring you three charts that we hope bring the money.

We're talking up the 10-year and the implication of higher rates.

Three charts, walk us through it, starting with a short-term view of the 10-year.

This is year to date and from december through last week we went from 1.79 to 1.53, 1.63 last friday.

Last i looked this afternoon we were at 1.48. by the way, a gigantic move for the 10-year.


It really put -- really put the marks on the radar screen.

A lot of that we would have to think was the market basically testing levels, going from 1.79 to 2.53, headed in the 2.6 type of region, just saying it -- how far do we need to go so that investors will feel comfortable about inflation?

You are getting at the difference between short-term and long-term.

Let's slide the camera back in and we will show you a longer- term view of the 10-year.

What looked like a scary move, year to date, is just getting us back to the trend?

Exactly, a trend where the spike the ec here is when we hit 5.3%, up 5.29 overnight in tokyo in june of 2007. since that time lot of trauma in the markets.

Where we are today, we would have to double to get back.

We're looking forward now to our third and final chart, we are talking about sectors that do well and do not do well when rates are rising.

Talk us through it.

Here you have something is very counterintuitive from what to expect, from 2000 at the end of june 2006, when the fed raised rates 25 basis points for 17 different times.

During that time utilities did not do so bad.

Usually they would think -- thank gosh.

Look at that, 68%. growth in the economy.

That is the whole thing.

The fed raises rates because there is growth to justify it.

Understood, john.

Way to walk us through that.

From beer and bourbon to cars and trucks, we have with you need to know coming up next on "street smart." +, in the next hour, how are casinos keeping gamblers cool in the summer?

? ? ok, if you missed everything that happened today during the session?

Do not worry, we have everything you need to know about, time for the top 10. jpmorgan, shares are up, upgraded to a strong brought -- to a strong buy with a more favorable outlook for earnings trades.

Diminishing london flail concerns.

Wind energy, got to talk about this one, falling the most in three years after disclosing an sec inquiry into the deal to buy a drilling companies.

Concerns about the accounting behind the deal, trying to increase their oil reserves.

Stay tuned, debate on this one has just begun.

Another big loser, dropping the most in 21 months on concerns over potential medicare pay cuts, the dialysis provider came into the industry as a whole by about nine.

[no audio] close of the trade on july 8. after handing over control to the stock bank in a 21 when $6 billion move.

Transocean falling nearly 2.6%, drowned out -- downgraded to neutral from buy, they will not pursue becoming a limited partnership.

Citi also lowered their price target for the shares.

#5 is not a stock, but how about an index?

South of the border, down about 4%, plummeting the most since april 2009. not america's biggest economy moving into recession this year with a negative impact brought by tighter monetary policy in the u.s.. curbed capital inflow.

I do not know if you could blame u.s. monetary policy.

I was down there and did a lot of reporting, the company -- the country has a lot of problems of its own.

A lot of bureaucratic red tape, struggling with inflation again in a long history there in brazil.

It really has been struggling to get affectively out of its own way.

This may not be helping much either in terms of investors being willing.

You have reported about all of the growth and money being put into those soccer stadiums instead of education and all of the other issues creating so much instability and unrest.

World cup, the olympics?

That might be a big enough push to get things going, i do not know.

You would think, but they still have a lot of challenges.


4, up about 5%, american greetings.

They have raised their offer for the greeting card maker.

The move comes after stocks rose above their previous bid.

Lee johnson, down a boy -- down about 5.5% today.

The chinese government is investigating companies for violating anti-monopoly laws.

Well, number two, an alcoholic beverage, constellation brands.

Down 4% after they reported first quarter earnings and revenues that missed analyst estimates.

Partly pressured by costs related to the acquisition of group mondello.

Coming up on #1, we hear the closing bell, general motors and ford, reporting details that were at 6.5% on pickup, with ford in u.s. sales at 13% in big pickup.

There you go, close of trading.

We will see how those fallout on the dow jones industrial average.

You want to go straight to dominic chu to get a recap of this market.

A pretty volatile session all over the place, ending down about 3/10 of 1%. if you look at the overall swing, the s&p 500, we moved from peak to trough today by 4%, maybe more if you look at it from a high of the day to the level of the day, things largely unchanged in the s&p 500, we are going to call it down about one.

. very much flat on the day.

The dow jones, three points on the downside as well.

Price action on the day, dipping towards the midafternoon, finishing nearly unchanged.

The nasdaq, down one whole point again, 3/1 hundred of 1%. the s&p 500, a telecom services, that was the big one higher.

If you can even call it that.

It was one of a few sectors in the green by the time the day was over.

The biggest decliner, down one full percent, the industrials.

One of the more cyclical sectors finishing the day down about 1%. you had about 197 stocks up in the day, 298 down, 5 unchanged.

Below send the wrapup for stocks back over to you -- we will send the wrapup for stocks over to you.

For the rest of your market roundup, michael in chicago, and john is still with us here in york.

We wound up flat on the day, it was a full round trip recession -- full round-trip session.

How do you think we will move on?

There have been so many concerns about the fed, the economy.

We got some good news on auto sales.

What have you got?

I think that you actually find it rather well.

Why, thank you.

You know, i have to say that.

The economy as a whole right now is taking the cue from the payroll.

Even though they skewed some of their forecasts down, it does not look that positive.

It to the economy side we are looking at payroll numbers and of course with marketing in particular, those seem to be the most forthcoming headwinds into the market this week.

Really catching i i is, specifically -- catching i i is, specifically, crude oil.

-- catching my eye is, specifically, crude oil.

We have done this in the past, where something is brewing in the middle east particularly that makes people want to be risky and take on those assets and deal with them accordingly.

The markets feel as though something is about to happen, we just do not know yet but we will see on the forthcoming sensitive commodities, crude being one of them, showing what we have only a couple of times in the last 20 years.

But you are pretty optimistic?

Most certainly.

Also right now we would say that the summer sharing right now in this pre-holiday -- summer churn right now in this pre- holiday market, things are comfortable.

But at the same time there is a huge migration moving from grossly overweight fixed income into a more traditional rated equity with corp.

In good shape and business leadership looking to spend money in the second half of the year.

At this juncture in the would certainly have a positive opinion.

Here is the thing, we keep talking about this great rotation and i understand the bonds part, so where is the money going?

This is the thing, we have to expect that some of this may be sidelined and earmarked for stocks.

Ultimately going to options, people betting options before the move into the equity markets.

This is a migration back in stocks, slow selling, six years putting $1 trillion to take out $4 billion in equities.

You do not turn an aircraft carrier on a dime.

This thing does not turn around overnight.

All of these sales data, they look very good, yet people are not reacting positively in the market.

The s&p, not as big a move there, but when are we going to see people really starting to recognize strong economic reset as a very good thing?

I would say that that is going to take a while.

A few quarters out.

Let's be honest, this is not as rosy as most would believe, but it is not doing and who either.

Euphoria in the streets, we really have been surprised by these numbers.

The comment that your guest just made about grossly overweight, that is absolutely hitting the nail on the head.

Effectively it weighed down the bond market for quite some time.

In the equity markets you could see that precluding laying down equities, meaning that the slope is higher, but not to the degree of musab for the last six months.

Fundamentally and technically, just as mentioned, we are taking a cue from these commodities.

It smells like something is brewing out there.

I agree, the markets are staging for something.

We would also expect a catalyst, the payroll number may do that this friday.

We would also have to say indeed that trish looks radiant.

All right, thank you.

What you think things will look like this friday?

That number, 165 k, looks reasonable.

The thought here is that it will be mildly treated.

People are beginning to get the effect.


So great to have you here.

Thank you very much.

Michael, thank you.

Breaking news from washington right now, regulators or releasing four more living wills from the biggest banks in the nation.

Peter cook has the details.

These are the plans where if these banks were to run into trouble, they would wind down these institutions so that they did not cause more damage to the overall system.

They have already had their recent wills released from the fdic and federal reserve.

Wells fargo, hsbc, royal bank of scotland.

Bigger names have already had their public portions released by the fed and the fdic.

Looking at these quickly right here, there is not a lot of sensitive, proprietary information within these public disclosures, but they are again significant.

Bob franc, the regulatory changes that went into effect after the financial crisis, this is a step from federal regulators to showcase how they would wind down these institutions and to ask the firms themselves to provide a road map to do that.

That is one of the institutions for banks, this time around, with more to come mandated by don franc.

This is one of the only pieces of regulatory news that we got today.

Walk us through the banks what news?

Like -- bank swap news?

A big day for financial institutions.

Banks in the country will have to meet higher capital standards, at least 7% against risk related assets from what we have seen previously and changes, exactly, to how those will be persuaded if titans.

There was some softening in the final rule for regulators and smaller banks.

What they did not give exempted as many of them pushed for over the last couple of months.

The big news, perhaps, that the biggest banks in the country will face tougher standards for liquidity and leverage, still to come today.

Those will, again, have significant changes over what was in the past.

Harmonizing with international regulators as well.

Thank you for bringing us that information.

Peter cook, thank you.

Here is a look at what is next on "street smart." and apple believer.

Their stock has fallen 30% in the next year.

Our next guest expects a complete turnaround, saying the time to buy is now.

Plus, calif.


We show you how california is making money in all the wrong places.

And since citi torture.

How is las vegas -- seen city torture.

Las vegas -- sin city scorcher.

Las vegas.

? ? okay, we have some headlines crossing involving time warner cable and apple.

For the details we want to go to jon erlichman, joining us from los angeles.

Walk us through this news.

Let's start with this potential deal between apple and time warner cable.

As we wait for their potential next-generation television they have a hockey puck box called apple tv.

They have signed up a lot more media players in recent months.

The nfl is one of the more recent examples, access to that content if you are already paid subscriber to those various services.

Bloomberg news is reporting that apple may be getting closer, within months, to a deal with time warner cable where, again, the idea is if you are a cable subscriber, you can get access to some of that content on apple tv.

They may be showing more of a willingness to work with in the pay-tv world that already exists.

There is a lot that goes into the negotiations as part of what they will offer if they give in to the business in a bigger way.

Speaking of negotiations, they are also reporting that a senior executive at hulu is joining apple to help with content negotiations, dovetailing into another hulu story right now, the potential sale of the company.

At&t, part of one of the bids, they have their own market negotiating team.

Perhaps for a guy like pete, this executive may not have known what his role would be once they were potentially sold and apple came calling with an offer.

Two developing stories, interesting in the converging worlds.

One not just have an apple tv?

Why do you need to partner with the likes of time warner?

Is this admitting that they cannot really do it on their own?

I think it is really, really tricky.

Think back to the success that apple had with the itunes and ipod, it was a different situation where the music industry was watching all of their music given away through services that will allow people to basically just highjack the music.

This case is a different situation.

This is still a very profitable media industry where there are concerns about court cutting, etc., but there is a strong infrastructure in place.

There is no doubt that they have the ability to come up with a television that would wow you, but if they do not have the content you are used to, people will pout about that.

We will see where it goes from there.

Jon erlichman, thank you very much for helping us put some perspective on that.

Time for our next big trade, where we bring you the bonus calls on wall street.

The people behind them?

Very apropos, we are talking about apple.

You just heard the breaking news.

21% so far this year, margins have been shrinking, obviously creating some pressure.

The iphone, losing market share to android.

Our next guest has just upgraded to a strong buy.

Let's ask him to explain exactly what is going on here.

I tell you what, before we get into your thesis, maybe you can comment on the breaking news that we just heard, where we potentially have a deal between time warner cable and apple tv.

Explain why that is significant, from your point of view.

Hard to know the details, but clearly they continue to be interested in tv and media and eventually they will be in the tv market.

They are not trying to replace cable companies.

They did not try to replace or replicate wireless networks when they released the iphone.

Likely what it will become is how you get your long tail, -- long tail content.

In other words time warner cable is giving you the access and apple becomes the front end, the package, the pretty thing that you see them like a silver plated faucet?

That is what you see, not the plumbing behind it.

Ok, i think i get it.

On to your thesis about apple, this stock just upgraded today.

Explain this to the viewers.

The valuation is beyond a little bit cheap, it is a lot cheap.

At the time of upgraded was about 11% cash flow yield and unless you can build a case that these earnings will not be going down perpetually, it is hard not to be overweight the stock.

The reason behind the timing of the upgrade making sense, it is a new product cycle here.

Nine months from the launch of the iphone5. although it was a big success in the u.s., it was not so much of its success outside the u.s., where there were no lte networks.

We are within a couple of quarters of lapping those low gross margins.

I think that this is more of a one time blip down the margins.

If it was not for currency and memory pricing headwinds, i would say that they would be headed up already.

We would at least see the visibility towards flat if not slightly increasing gross margins going forward.

As it starts getting better, the stock has reacted positively.

What does it look like in japan?

I do not know, look, part of the bigger picture, folks think of apple as a smart phone company, but the importance of ios is not the product, it is the ecosystem, the operating system of the future.

The first iteration of this was not in smart phones and tablets, which are basically thin pieces of glass, but the system is going to develop new products down the road.

It could be a box.

There are 14 -- it could be a watch.

There are 14 car manufacturers that have been discussed.

The ability for them to kind of locked consumers into the ecosystem is powerful.

Making applications that drive you to purchase iphones and ipad now that you have ios in your car, on your television.

It goes way beyond the argument of the smartphone market being done growing.

It is reasonably close.

There is still a lot of growth left in this mobile computing marketplace.

We know that the stock is trading very cheap right now.

As of next year it is trading at 420. basically $220, six times x, which is cheap.

In the last 30 seconds, how do you get to $532 on a valuation basis?

Couple of things, they are buying back a lot of stock and paying over $12 per share dividends, so i think the cash balance will be around $150, maybe a bit more than that next year.

That is basically an s&p multiple pe on the next year's earnings, trading at a significant discount.

Once the earnings growth turns positive next year, the chances of this getting a multiple in mind is pretty strong.

Raymond james, thank you for coming on and explaining the case behind apple.

Coming up next, headed down the grocery aisle.

The big bet on supermarkets.

And california is a state with the most tax silos with a surplus, but they still cannot get their act together.

Explanations after this.

? ? in the supermarket chain harris teeter -- high end supermarket chain harris teeter, on the sales block.

Obviously not distressed, get a buying spree from cerberus, buying a lot of brush restores.

Let's bring in our deal expert to help explain it.

Lots of angles.

What is going on?

This is really a tale of two cities, the guys crushed by wal- mart, operating on razor-thin margins.

Those guys with a lot of value added, the consumer who wants pressure foods that are organic.

Cerberus has been concentrating on that first part of the market, stressed for the razor- thin margins.

Hear it then made a by for supervalu brands that were discussed.

Now they are going after harris teeter.

They have great margins when it is compared to rivals.

Like 150 others, balanced out?

They actually operate within a territory where the population is growing in a lot of people are retiring in north carolina rather than florida.

To your point, consolidating the ones that are not well run with the ones that are might help them to gain leverage with suppliers in growth for harris teeter.

You can see how this deal makes sense, but it is a bit of a head scratcher for many in the business.

Is harris teeter ready to sell?

A great question.

They are doing fine, why would you want to sell?

But a reality is that one of their big competitors is entering their market in north carolina, public's -- publix, they were supposed to be a potential bidder but they decided to open up their own store and no one wanted to compete with publix, because they have such a fantastic brand.

Harris teeter management could be a bit scared here, possibly giving cerberus a lot -- a leg up.

Others in on the deal, like kroger, their stock has been trading as well.

It will be more extensive -- expensive for them.

What are they looking for?

10 seconds, by the way.

Because it is dragging on so long, the company may not get the shares they wanted.

All right, we will watch.

Thank you, christina.

Have you seen this?

How the lottery changed my life.

You know that coming into a lot of money can really mess you up.

? ? welcome back to "street smart." we want to show you where markets closed.

Kind of a curious day today.

The dow jones industrial average, we started up and then trailed off, it turns out we were just three steps.

The bowling travelers in particular lead us down lower.

The big losers in the dow jones that would have been flat, exactly where the s&p 500 finished.

Down only 5/1 hundred of 1%, ironic because we had the best vehicle sales we had seen since december 2000. people were actually spending money, but traders decided to sell on that news and even see where the nasdaq finished flat on the day.

A mass exodus out of the pimco total return fund, we will tell you about the world's largest mutual fund from last month.

Withdrawals, as investors are fleeing bonds in anticipation of federal reserve papering.

Americans are buying new cars and trucks at the fastest pace since the month of june.

Drivers finally opening up their wallets, and encouraged by attractive finance officers and the improving economy.

The fate of edward snowden remains unclear.

This is after he was refused his final bid from russia.

He applied for sanctuary in over 20 countries, most turned him down flat, but officials in venezuela and bolivia are considering his request.

Wikileaks said that he remains in limbo at a masked -- moscow airport.

Those are your bloomberg top headlines.

Last month we brought you a feel good story out of california, anticipating their first $1 billion budget surplus after being in the hold just a couple of years before, but things may not be as good as they think year.

Analysts think that california is not doing enough to address its long-term problems, mainly their pension obligations.

The executive director at california common sense, along with steven miner langer.

Should california be using this extra money to address their billion dollars in pension issues?

Even the governors seem to think that they should be.

Among other things the california teachers' pension fund has said that there $3 billion to $4 billion per year in additional money -- just covering the obligations they already have?

Exactly, the teachers' fund is on what the state calls a path to solvency over the next couple of decades and they need about $4 billion per year for the next 30 years, so they might as well start now.

Bottom, people have made the point that there are all of these social programs that they would like to see in california, things that did not get through as a result of budget cuts.

Why not divert the money to those programs?

Structural issues, like outstanding pension obligations , when the state practices budgeting the way that it to be does, they wind up getting services.

In california moves into estimates, it jumps into these programs.

As soon as these revenues dry up, the first thing to go are the same programs.

At the same time you actually have these structural issues that get worse.

It is hard to give extra money to health care costs when you have more and more people who need medicaid expansion.

But it will cost more and more.

Investment opportunities, the stock market is gone -- down, all of a sudden it is just -- what is the big news of $60 billion?

Ultimately it is paying attention to these unaddressed structural issues, acknowledging that be have to figure out a way to get back on track and that the $4.5 billion that they need, an additional $4.5 billion every year, has to come from somewhere.

Price they have got a little bit of patting now, why not take advantage -- what they have got a little bit of -- they have got a little bit of padding now.

The problem is that california has a history of doing this.

In 2003 when they put our of schwarzenegger in office, he borrowed $10 billion to fix that particular problem and they are still paying that money off from 2004-2005. the problem is that when a fix that problem, and then the housing bubble, they did not put that money into fixing the debt.

Jerry brown worries that this is a pattern that keeps repeating itself.

Also think about the business of the state.

Eight other technology companies there, they are all great.

A tax-free state that is trying to say -- come here with your business and a lot of companies have left.

At the same time we have a job integration rates or with those companies likely to go to texas.

The problem is this debt, debt is taxes collected on the future.

Jobs are leaving, none of that is good and you wanted to add to that?

At the same time we have microeconomic sectors.

Silicon valley is doing quite well.

Sacramento and los angeles are doing well, but we have 25% unemployment in these counties.

We are still looking at a very fragile economy.

We just released a report today on this, we are already paying 22% more on bond interest.

That debt is still growing.

At this point pension obligations have at this point tripled since 2007-2008. clearly there are a lot of problems out there.

Do the voters recognize this?

This is interesting, voters voted for jerry brown's tax increase because he pushed it and said this is what i am going to do with the money, the legislator -- legislature is superseding his own wishes.

We will have to see how the voters respond.

It will come down to leadership on their part.


He has a tough task, obviously.

Is there a national story that we can take away here?

Illinois, you think about the law across the country.

Illinois does not have a surplus right now.

They do not have that problem.

Most states do not have a surplus right now.

They do not have that problem.

California has an opportunity that many states which they did have.

Autumn carter, you where the executive director for california for common sense.

What is the common sense solution?

Ultimately we have to address these structural issues in order to guarantee that we will have the quality of life accessibility.


Those are things that are problems that we need to know how to fix, but to fix them we need to address these pension obligations and retiree health- care rising costs.

Medicaid has increased 65% in california.

This is happening in other states but ultimately it is up to the state to decide the smart is that for dealing with recognizing informing the plan with these issues.

Thank you very much for joining us there today.

Coming up, it is 115 degrees in las vegas today.

Mgm, they are making the most out of that heat because they are keeping it cool inside, making sure that you gamble.

We will talk to them about how they do it.

This is a fascinating story.

? all right -- ? all right, 114 degrees in las vegas today.

Temperatures, 117 degrees.

And gm, keeping it cool.

-- mgm, keeping it cool.

We have the senior vice president and chief sustainability officer with us now and she has more on how they are keeping their 18 million square feet cool.

How do you do it?

A lot of air-conditioning, i imagine?

You are right about one thing.

People that own homes here all consider ourselves energy managers.

We figure out how to keep our homes cool and reduce those energy costs when those heat waves come through.

It is kind of the same thing when he won a big resort.

Sell, city center, this is all you guys?

As i understand it, they have had some very energy efficient ways to do this.

A walk us through what that means.

It comes down to three ways of mannered -- managing energy and making a building greener.

It starts with how the building is constructed and move into how we operate.

Thousands and thousands of sensors to route these buildings give us precise data and information about how the building uses energy and what the temperatures are.

The most important part is the people element.

We use those ideas to continually reduce the energy in cool down the buildings.

People that work 24 hours per day sitting in a star trek-like command center where they manage five high-rises with over 15 stories in each one.

Can you give me any sense of what an air-conditioning bill would look like at a place like city center on an average day?

And what it came to when it was 150 degrees outside?

It is interesting, the buildings at city center were built outside so that they did not come in like an average building.

The way that we did that was rebuilt exterior is on those buildings that have highly efficient last engraving that was tightly constructed.

The energy saved is about the same period what is interesting is we have these big coolers, like air conditioners out in the plant.

The capacity is enough for 7000 homeless.

Think about and air-conditioning plant that blows a pretty good amount of air conditioning.

Let me ask you about something else making news right now, you are the first commercial solar project happening at mandalay bank.

Tell me about what this project is.

Well, we are very excited about this.

This is mgm resorts international partnering with a rooftop for re on the conference center.

The conference center in the resort is about 10 acres, if you can imagine that.

What about actually generating electricity and senate -- selling it back to the utility?

Well, we could do that.

We do have our own power plant at city center.

We generate 50% of this requirement.

This solar array is on top of that conference center and we can use that energy, happening during the hottest parts of the day.

What do you think this new program will save you on an operating basis?

Well, the thing about solar that is interesting is that it is just a matter of getting a solar project business case up.

We have been looking at solar for over seven years.

We looked at the different arrays.

What is for the game changing is we have an array that is in a business interest profitable for shareholder interest.

Certainly not making money on it.

Do you think that people gamble more in a heat wave?

It is a possibility, certainly.

Lots of our traffic comes from foot traffic.

We see people walking up in front of hotels.

I would say that that has reduced the loss.

It could be why people stay longer.

Those ones do not want to go outside.

Thank you so much for joining us here today, cindy.

Fascinating conversation.

Coming up, another one, it could be a classic car auction for the history books.

We will tell you about the treasure trove, yes, of the vintage chevy is in nebraska.

? ? crocs getting a makeover, trying to move past their namesake.

Making wedges, sneakers, even leopard print.

You like those?

Rainbow twisty twist.

The ceo wants to attract new customers over the next five years with international expansions planned.

Deirdre bolton sat down with the ceo himself , trying to get a sense.

Love him or hate him, you know the brand.

You can go on youtube and find the video called cutting crocs, some people put them in a blender.

There is a blog,, but all kidding aside all of this is part of why they are giving themselves a style makeover.

What you will notice right away is the 300 new styles with analysts saying that it looks like the spring catalog from j. crew.

We went to a store on the upper west side to check out the designs -- there is me, shocking.


You like the rainbow twist?

Why not, why not.

You can see this clear shift away from the claude image.

I spoke with the ceo about how he is working hard to attract new customers.

Three years ago, more people that would not consider the brand as a foot wear brand that they would purchas

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


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