Fed Refills Punch Bowl: Surveillance (09/19)

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Sept. 19 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Hardeep Walia, Drew Matus, Ralph Schlosstein, and Sam Grobart. (Source: Bloomberg)

Chairman bernanke refilled the punch bowl.

Markets celebrate.

Microsoft brass -- will they meet with wall street analysts?

Patience is then.

In speaking up patience, patience has run out at blackberry.

They will fire 40% of their staff.

Good morning, everyone.

This is "bloomberg surveillance." live from our world headquarters in new york, it is thursday, september 9. joining me as always, still recovering from 2:00 p.m. yesterday, sara eisen with us and scarlet fu.

Sara, that was just remarkable.

Boy, did the markets react.

The celebration at the evening will continue to we will talk a lot about the fed and the big surprise.

First, in morning breathing.

British retail sales surprisingly sell.

Demand for food plunged.

Cold on this idea that the british economy was looking pretty good and into recovery mode.

Surely still advances, it is like the euro, weak dollar and up we go.

I'm just trying to out -- also on the agenda, 8:30 a.m., unemployment claims.

Nine: 40 5 a.m., another important weekly sentiment report from bloomberg.

Bloomberg consumer comfort comes out.

In a clock a.m., existing home sales.

A little bit lower than last time.

Pier 1, conagra, and rite aid.

Still an earnings mode.

Data check, this one -- let's look at equities, bonds, currencies, commodities.

Futures advance again off the enthusiasm from the press conference and from the announcement yesterday at 2:00. way over 1700 on the spx, 10- year yield was lower.

%2.71%. yesterday open in the $1.33 range.

This is record high for the s&p 500 and the dow jones.

Record high in the equity markets.

Angela merkel has the election.

Gold has almost $70 in the last 18 hours.

Dollar-yen, $98.97. today, australian dollar, you talk about a knockout effect.

92, 93, 94, stronger australian dollar is a punch bowl -- you have to wear a life preserver.

It is all one big trade.

Weaker u.s. dollar.

There is the markets getting our attention third time for the front page spirit we scour the paper it and a web.

Ben bernanke's face and his beard is plastered all over the place.

You cannot get all over them -- you cannot get away from this.

He did the unexpected which was nothing.

Because after all the foreshadowing and the hinting, the fed basically put off scaling back the monetary stimulus.

Some people were anticipating a scale back of $10 billion.

Nothing happened.

The market reaction was immediate.

He look at global stocks, five- year highs, the s&p and dow are at record highs, how long this lasts will be a question to debate.

Eventually they will have to taper, right?

But it looks like keeping the celebration going for a little bit longer.

We will discuss that further, but we wanted to our second story, which is jpmorgan.

Poised to pay about $900 million to settle a u.s. and uk's regulatory probe into the london welsh trading loss.

This is been a moving target.

Earlier this week where talk about $750 million.

Maybe even 9:00 a.m., these bank is set to announce deals with the regulators over its handling -- the number keeps rising?

Because we do not know if the new agencies are coming in and joining the group settlement.

One is refusing to work with the other regulators.

Jamie dimon has been very upfront with employees this week saying that they are going to be focusing more on legal woes, they're going to make an effort to simplify the business, get rid of -- simplification is important here to the other idea is that settlement does not close the other investigation.

It is still a magnet for these regulatory problems.

Our third front-page story, and this is something we will discuss further in the hour, is blackberry.

The wall street journal reporting that the smart phone maker is good and ready to cut its workforce by 40%. that is huge.

I would be equivalent to about 5000 jobs.

It comes after a blackberry already cut 5000 jobs last year.

And of course, the apple rollout, and samsung will have to follow up here.

Strategic options.

What is interesting is that yesterday, blackberry unveiled its smartphone, and absolutely no one -- drew.

We have a terrific lineup of guests.

Dovetailing off when sara and i did yesterday at 2:00. our guest host -- drew matus, deputy chief u.s. economist at ubs.

Also with us, harvey wall you.

We are up to bring him to you, formerly with microsoft.

This as mr.

Ballmer tries to not do a blackberry.

Great to have you both here.

Drew, we met with your colleague, maureen -- maury harris.

Things are so screwed up at the fed now, you don't look to tapering until next year?

I mean, it is just a simple metric of elimination.

October is too early since they basically blames the fiscal story on why they decided not to taper.

That is probably not done by the end of october completely.

Then you have to ask yourself whether the same said i would not taper when given the opportunity by the markets with very little cost involved is going to try to taper during the middle of the holiday shopping season and see what happens to the equity market and risk of the roman.

How big is the punch bowl?

Is it a new kind of punch bowl, or the old punch bowl?

They refilled the punch ball and everybody in the party is waiting for the bathroom.

We do not need more of the punch.

The problem really comes down to this -- getting out of quantitative easing is very difficult.

We know this because nobody has ever gotten out of quantitative easing.

This was the free -- get out of jail free card.

It was perfect.

The market wanted it, everyone was set up for it, and it's much as bernanke tried to backtrack and say he never told anyone this was going to happen, he actually did not step up and get anyone to does about themselves of the notion that tapering was coming.

He said we misunderstood him.

The fact of the matter is the guy has not been seen since mid- july.

Maybe if he wants to play this game, he should get out there and talk to people.

They cited the sluggish recovery, perhaps it is not solid enough ground for them to start to scale it back.

Isn't that something we should be worried by not celebrating?

There is that research that suggests the efficacy of quantitative easing is actually that there is not any.

They are doing and it do not understand why they are doing it because it is not add much to the economy to begin with.

So you make that argument for why they would not taper mortgages, but not tapering treasury seems risky.

It is like they were overly worried.

Just like having children and buying a home -- there is never going to be a good time.

If you wait for the perfect time, you are going to be childless and living in an apartment.

Tell us how you really feel, dramatics.

Hardeep, i want to turn it over to you because you follow the fed from an investment point of view.

How do you feel about the effect?

I think it was a lost opportunity.

We are always focusing on how do you make money and trade, and we have these indexes that chart different recoveries.

What we're seeing is a rise not just in expectations for the next taper but also in short- term rates.

They put that pressure back, so when you look at these indexes, you have to look across the curve and see what happens to that model.

Yesterday, for example, gold miners was off the charts.

It shows a weakening dollar, a lot of great opportunity in the commodity space, a lot -- i want to go to the heart of the matter yesterday.

This is where sara and i saw the markets really jump your this is hard to see, but here is the famous bloomberg a red sticky.

You hear us talk about it.

You can see that nicely worldwide.

Bernanke says -- we are tied to data on tape or, no fixed calendar.

Drew matus, i saw an abrupt move in the markets there.

This is a fed that has to react.

They cannot get out in front of this story.

The question is -- we do not even know what they are reacting to.

If you listen to his discussion of the unemployment story, at one point he said on the planet has been falling, that is good news for you, then he said the labor participation rate is falling.

He is not providing any clarity.

I think people said they took a setback from transparency.

That is not the problem.

They are as transparent as ever.

It is there clarity that is taking another step lower.

We have no idea what they're trying to focus on.

They tell us to focus on the unemployment rate, yet every time the employment rate goes down, they find a reason to believe it should not have gone down.

I might point out, ubs has ben bernanke optimistic on a better than good economy.

Not part of the doom and gloom crew.

Let's get an optimistic company news.

Here is scarlet fu.

That is the first orchard oracle shares are sliding.

Oracle warned that it would need to close some big deals for its corporate software.

Oracle already predicting weaker than forecast earnings for this quarter.

The company being battered by a slowdown in i.t. spending and competitions from salesforce.com.

Higher borrowing costs lead to even more job cuts that wells fargo.

Slashing 1800 jobs in its mortgage business.

Ducats are in addition to 3000 and the mortgage unit announced in a recent weeks.

Google is targeting health and well-being.

They are launching a separate company that will tackle the issues elated to diseases than and aging.

The ceo believes with a one-shot banking and health care there's a chance to save millions of lives.

That is today's company news.

We are actually sing not much growth in health-care spending, which we will talk about later, but also this idea that these companies jettisoning unemployment.

And google, -- this is a bold move on its part.

What i found interesting is arthur levinson, who is chairman of apple's board and former ceo of genentech, this is a high guy, for google to monetize on the changing demographics.

They will call a google stethoscope.

There you go.

Also rid of cookies.

I'm interesting -- i am interested in the health care.

Also 40% of blackberry -- plans to cut its workforce by the end of this year.

40% of the workforce.

That is another step as blackberry considers taking itself private, perhaps, one of the options.

We will talk about the prospects coming up on "bloomberg surveillance," @bsurveillance " on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.

? like that is a good one.

The brand-new issue of bloomberg "businessweek." on the cover -- what, us worry?

Tim cook of apple.

This is fantastic.

I spent 20 minutes with mr.

Grove art yesterday.

He will join us on "bloomberg surveillance" this morning.

If you don't care about tax, this is the one article to read this year.

It is a stupendous.

Here it is out on bloombergbusinessweek.com.

You can download it tonight on your tablet.

It will be on hard copy here tonight late, late, late.

On the newsstand tomorrow.

Superb -- i was stunned by the access sam was given.

He flew over to cupertino and spoke to not just tim cook but a number of others.

Pushing back on this idea that it is lacking and also the price of the new iphone -- it destroys its anti-tim cook crew.

They have a strategy and they are sticking to it.

Sam's conversations with these guys also come as apple unveils the ios.

It was released yesterday, although some people cannot access to get.

Did you download it?

I try to peer i did.

-- i tried to.

I did.

Do you like it?

I think it is great.

You think wow, it is not like apple, but it grows on you very quickly.

It is a dramatic ch ange.

Let's talk about the anti- apple -- that would be blackberry.

Sad news especially for blackberry employees.

The "wall street journal" reports that blackberry will cut its workforce by 40% by the end of the year.

As of march am a blackberry had about 12,700 employees.

Two years ago, 70,000 employees -- 17,000 employees.

Today, less than three big percent market share, and by next year, according to idc, less than 2%. any idea what the strategic options of this company are?

Strategic alternative, and perhaps it will take a page out of dell's book and go private.

That is certainly one option.

They do want to look for a speedy sale, perhaps, by the end of november.

What is also interesting is that yesterday, blackberry notched its new z30 phone to no fanfare.

No lines, nobody talked about it at all.

It's preparatory -- proprietary messaging system will make it a free app for android and ios users.

That is a valuable application.

That was there one thing that people really were loyal to blackberry about.

Let's look at hardeep walia with terrific respective.

What is the distinction of this creative destruction?

I think the -- it happens.

It happens everyday day.

People guess the price.

The writing on blackberry was on the wall awol back.

They failed to shift product after product.

You are seeing this in technology.

You miss a big step, and some are arguing back to apple, are they missed stepping by not having a bigger screen iphone, which is what the market expected.

Remember motorola?

All of a sudden it was deterioration.

This is a pretty bold maneuver that apple took here.

But in all these situations, it takes one move to leave momentum.

The reason you are with us as you have been in the actual meetings that microsoft in engineering develop it and corporate development.

I am sure were people say we are not getting it done, and we screwed up.

Why can't companies reverse that news?

I think it is an ability to execute.

Here is a strategy, it takes a long time to implement strategy.

Hardware especially paired the hardware cycles are very rich.

Now it is getting more complex as you integrate software into that mix.

Now it is not even hardware and software.

You are bringing in services.

That is not an easy undertaking for any company to make.

I would say it is like a bad movie, nobody wants to admit -- nobody wants to see.

Sticking up movies, everybody talks about experience, what about blackberry because it caters to a consumer, yes, is there still a black very experienced to invest in?

I have been short on blackberry for quite some time.

When he say consumer, really it is an enterprise play for blackberry.

We were joking before, a lot of wall street's folks tire of library, but that will change.

Dramatic, -- drew matus.

I have a blackberry.

Do you use it less and less?

It is the only fun i have, so no, i am a gadget person, so i have every phone.

This is a windows phone, the nokia 920. you have a windows phone over a blackberry.

Quite i have a windows phone, multiple iphones, android phone, i do not have a blackberry.

I think that says a lot.

From the enterprise world, they have done a good job of owning, but they are losing the momentum.

Quite that is a lot of fun, hardeep.

Very cool.

Coming up on "bloomberg surveillance," carl icahn is speaking out.

He is comparing corporate boards to feudal lords.

Morning mustard is next.

? -- morning must-read is next.

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

Janet yellen, the senior -- larry summers called her an excellent choice to become the head of the federal reserve.

She became the favorite when larry summers withdrew from the burning earlier this week.

Syria's president assad says he is committed to giving up chemical weapons in an interview on fox news, assad said he would have no problem meeting the conditions of the international agreement that bans the weapons.

Assad again says it was the rebel fighters that used chemical arms in the deadly attack last month.

And former heavyweight boxing champ ken norton has died.

Senior in the dark shorts fought mohammed -- he is senior in the dark shorts.

He fought mohammed ali and broke his jaw.

The pair fought again twice with all you winning both battles -- with ali winning both battles.

He was 70 years old.

Those are your top news headlines.

Very good.

Here is a scarlet fu good carl icahn, former corporate raider, current billion or investor dreading on paper.

He calls dell the latest example of corporate governance.

He writes that -- what baffles me that voting rights do not apply to public corporation spirit shareholders can vote, but boards just ignore them.

Feudal lords asserted the divine right to justify their lordly positions while plundering the peasants.

He is putting himself as a category at the -- he has got a bone to pick here.

He has been sounding off on shareholder democracy compared to the dysfunction in congress.

It was a messy process.

It was a messy process, but he has got other companies he is looking at including apple, which is a totally different process.

He got what he wanted because michael dell had to pony up more money.

I guess he is still not happy with the way -- do we know, did he break even, did he make money?

We don't know exactly -- it is still a mystery.

My morning must-read comes from bloomberg view, very interesting be take on a millennial's and all the complaints about jobs.

Megan mcardle takes it up and said get over it.

Hey, millennial, you got a raw deal.

While it is true that there are fewer guarantees, then there used to be, it is not true that everyone in the good old days had a navy patent lifetime employee -- implement.

Those people were always a lucky minority and they still are.

While there are challenges facing that younger generation, twentysomething, 30 something, it has been mike that generation after generation.

Drew matus with us ubs and you had your life blown up a couple of times, didn't you?



I will go back to what some of my older relatives told me which was your grandfather did not enjoy going to be cold mind everyday either, but he did it.

There is a bit of a suck it up mentality.

John guiness set in world war ii, they were just lucky to have jobs.

Way overrated all the analysis.

He they just wanted a job.

That is a big factor today.

Out-swinger question of the day -- what should be microsoft's strategy going forward?

Steve balmer faces analysts.

Tweet us @bsurveillance what you think should be the strategy for the company.

Very exciting.

At 9:30 p.m. eastern time, three of the most powerful diggers ons boards on a special edition of "portfolio." -- "sportfolio." we also speak with carmelo anthony of the new york knicks.

This is quite a lineup.

Adds up to gary bettman, the only audience he has been in in three years were nobody booed.

It was really a lot of fun.

They sold 97% of the tickets.

I would never have guessed that.

We were one of these are correct -- the suckers,,t t oo.

Huck -- hockey founda ns are devout.

All five of them.

Oh -- harsh.

She has been so rude, we will do a foreign exchange data check.

They continue.

Futures up eight.

Ok, sara, euro-dollar, strong currency, anti-dollar, 13561 euro.

Nymex, this global risk on field is a punch bowl, and you have got to have a test.

Gold jumped yesterday, $1307 was the close yesterday, but then we start -- what happened as a result is that miners took off, newmont mounting -- newmont mining up.

Who is a gander in us -- who is a gainer and loser?

Is ben bernanke a loser?

You have all the answer here from the tape or portfolio.

We have an index of precious metals that are reserved rating.

It was off the charts.

9% right after the meeting shut up, and this is after being down almost 50% for the year.

To see that spike, it has been precious metals, mining stocks is the biggest one yesterday.

Hardeep if you look at it, and sara, no we want to die to microsoft, but do you change your investment strategy off of eight conneaut bible at 2:00 p.m. yesterday ge -- off of econo babble yesterday?

This is a tilt, a modification, but it is like everything else, it is what is your horizon, there are trades, and there are strategies.

Microsoft, ceo steve balmer and top and that it is held an important -- hold an important meeting today.

It is planning a $40 billion stock i that and a 20% dividend . what is the strategy here?

How about the tactical execution?

They need to focus on integration, that is what they do, forget about it.

They need to innovate.

Microsoft -- they love to line up the dock spirit that is not what it is about.

Hardeep walia is with us, a lot of microsoft experience.

Here is now with -- he is now with motive investment.

Innovation, they're not doing, what is microsoft doing?

Microsoft has always taken the approach around this concept of integrated innovation.

How do we tie different pieces of the business together to create these powerful scenarios?

Quite like the government.

It is a pretty calmomplex process.

What you are seeing is sometimes it is hard to execute across the pieces, and it ends up being a strategic tax that actually hurts them.

There are a lot of places the see this.

You have an office 365 pleasant -- present, but if office was really competing, it was a ground rule of -- it is the crown jewel of microsoft, even bigger than windows, that is an example to curtail, maybe allow for surface and these window devices to take old.

What happened in an analyst meeting?

They show up, they go into a room, do they float to steve balmer?

I think it is a rough, tough questioning, q&a, there is a lot of reason they should, they bring in different senior executives, they talk about the overall strategy, and they break off different parts of the business.

But there is a lot of q&a, a lot of feedback to the company as much as there is mention -- information that it put out there.

One of steve ballmer's priorities will be to plant the flag in the living room.

Has microsoft missed the boat on that?

Is it so far behind and cannot play catch up anymore?

I do not think they are far behind.

There is a general question of is that important as part of their eggs -- overall strategy.

The xbox is important -- it is consumer.


When you look at market shares, we're just starting to tap into this entertainment product.

I think the problem is they are relying on xbox, i think they need an xbox tv specifically.

I am not much of a gamer, but i am a huge consumer of internet content.

Hardeep, when you are at microsoft, i wonder what you make about that's nokia deal, 7.2 billion dollars for nokia's handset business.

Talk about catch up.

One of the things we talked about in the past is what is the strategy.

Nokia is doubling down on the existing playbook.

They are really going with a, doing this integrative functional versus visual unit.

Nokia says we are going with the existing playbook and doubling down on whatever we have said in the past.

I look at innovation, though, the chart of microsoft -- here is the boom am a bill gates, genius, down we go, and i'm sorry, hardeep, this is a malaise.

I'm going back to boston consulting days.

How does a corporation break out of that, whether it is microsoft, cisco, intel, frankly whether it is the fed, how do you break out of that?

And that is a very hard question.

There are a lot of companies that don't. the author usually against.

Apple went through a similar malaise, went back with a vengeance.

They have to give very clear on the strategy, start executing, make some cultural changes to the business, and they have got to focus on the things they got wrong.

They got the cloud wrong, they got a huge opportunity now.

They got tablets wrong.

By the way, they were first on cloud, tablets, and mobile, which is the third they may have to get right.

They have to play fast catch-up, but it is not targeting specific dummies like apple.

They had a huge opportunity to go after blackberry.

They have a bit up $31 billion.

To me it is as a cash exercise, they are being irresponsible to shareholders.

Hardeep, you are at microsoft as a director of strategy.

What did you advocate for?

It was a wall that can a lot of things have changed, but my focus was on enterprise, and it was countering clinics.

Back when i was there, lennox is the dreaded enemy, we are not talking about that anymore.

They have done a terrific job in the enterprise execution.

They have got some things to fix on the consumer parts, but enterprise is not there -- how much did they need to change the corporate culture?

That is a tough question.

We have talked about the ranking system in the past.

They have adopted a lot of different things.

Ge did stack racking very well, but they did not have these integrated businesses that had to collaborate on.

They've got a different collaboration model working.

I think this functional unit is to help with these strategic and cultural alignment.

Crises can answer this better than anyone -- you worked on the board, do they need a ceo that is a boring management can do person like steve miller who was with us yesterday, a turnaround kid, order they need some the room -- va voom guy in a $300 t- shirt?

They need somebody who understands technology, but clearly you need somebody who can build a leadership team that i would posit that there were the a lot of changes with this new ceo.

There will be new lieutenant lieutenants that they bring in.

They will have to see a lot of changes.

Certainly seeteve ballmer will faces questions when he faces analyst your coming up in the next hour of "bloomberg surveillance," ralph schlosstein will be our guest to discuss the fed surprise.

Also the m&a environment -- evercore on the front lines.

That is all coming up on "bloomberg surveillance," on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.

? look at that beauty shot.

The sunrise over queens just eased over amid time -- over midtown manhattan.

Good morning.

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

In top headlines, iran's president says the country will never seek nuclear weapons.

Making the comments in an interview with nbc news, he said iran has never sought a nuclear bomb and "we are not going to do so." mexico's pacific coast is bracing for more rain and flooding avon as it tries to clean up from two storms that killed 80 people.

Hurricane man well and hurricane ingrid killed 30,000 people from their own, left another 40,000 stranded in -- kept hurting other people from their homes.

The creator of beanie baby toys will claim tax evasion.

The iris alleging -- the irs alleging warner held $3 million in a night count -- in an account.

I think we had 74. i used to make football teams.

I would have a football game of beanie babies.

Did you have been in abc -- did you have beanie babies?

I did.

Sara eisen had 100 47 beanie babies years ago.

That is not true.

I was not the one making philosophy that of vb -- out of beanie babies.

We look at the importance of chief financial officers, which means unintelligent chart.

Bloomberg ranked chief financial officers at the five largest u.s. companies to see what their pay with like.

Here is what we found.

Apples peter oppenheimer, the highest-paid, $69 million in pay , this includes stock awards and salary and incentives.

97% of that almost $70 million.

Safra catz of oracle, $32 million.

They have the ce -- cfo's of google, hca, and comcast.

What is interesting with those big numbers, and this goes back to my guys in and what he did -- mike eisner, excuse me, when he did disney, i look at that and say he did a lot of taxes.

How does the cfo pay go up against the ceo pay?

Tim cook got $4.2 million.

He is awarded one million apple shares in 2011 when he succeeded -- this is sorted by stock, where you may have a five-year, six-year, 12-year bloom where you get blown out and one-year -- maybe, and mike you decide tim cook.

One million apple shares -- and like you said, tim cook.

One million apple shares.

He will be tied to the stock performance.

A lot of those tech companies have founders as ceo's. which is why google.

-- larry page.

Payday dollar.

Apple's newest operating system went live yesterday, much fanfare and some delays.

We got a side-by-side comparison of the iphone 5 operating i was six and the -- ios6 and the iphone 5 c operating system.

What is the difference?

The actual experience on everything is very different.

Minus a couple of -- like the front pages, it is far more intuitive.

There is a quick learning curve.

Once you get into it, it is very beautiful.

If you are going to have a killer chart, hardeep, on the speed of these new phones -- it has a built-in flashlight.

I never even upgraded to ios6 because i want my phone to keep working.

I couldn't get it last night.

They are throttling everything.

I did the first one, i could not get it on my ipad.

What does throttling mean?

When you do not have enough bandwidth, if you use it up a lot, people were downloading to of these downloads yesterday.

That is like when the victoria's secret models on the internet, any site crashes.

What do you know about that?

I did a news article.

Oh, ok.

We are going to talk about the fed when we come back.

Everybody is all brawl appeared not just drew matus here at ubs.

Describe no pullback on its stimulus program.

Markets are soaring, but are there negative consequences?

That is coming up on "bloomberg surveillance." this is "bloomberg surveillance." i am sara eisen, here as always with tom keene and scarlet fu.

Scarlet have some company news for us from the files of "bloomberg west." wild -- walt disney is elaine to movies.

-- delaying two movies.

A sequel to "finding nemo" is the latest seven months.

They have already postponed the next "pirates of the caribbean" movie as well.

They want to avoid a box office flop after "lone ranger." sony predict they will sell five million of its new play station consuls by march of next year when its fiscal year comes to an end.

The machine will make its u.s. debut on november 15 and be rolled out to the two markets by the end of the calendar year.

It will sell for $399 and us compete with microsoft's next xbox.

And pandora winning a court victory over songwriters and music publishers.

The company was granted a court order to stop as cap from limiting the number of songs a licenses.

The ruling clears for pandora to have a category -- catalog of music.

That is today's company news.

Pandora -- company heating up.

Big deal.

The new ios 7 at apple radio or whatever it is called.


The artists have to get paid.

They have to get their benefits of all this technology.

We're talking about the fed.

Surprise move to do nothing.

They did not start to unwind its stimulus.

Markets cheer, the s&p and dow hit record highs.

Could it have a further negative consequences?

Like blowing bubbles or exacerbating income inequality?

Deputy chief u.s. economist at ubs, is the fed putting credibility on the line here, drew?

I think you can see that, the behavior of gold versus financial assets.

That is one of my cheap ways of looking at credibility.

If you look at the performance of those two, the fed took a hit yesterday.

Look, i understand i'd am aggravated i got my call wrong, and part i am aggravated because everybody got the call wrong.

I am an economist, i am used to being wrong.

At the same point, if you think about opportunities is in themselves to exit from quantitative easing, they are few and had a great 1 -- y? -- why?

Because the next time they tell us they are tapering, we will think they will blink again.

Because that is what they did yesterday.

We set the market operate taper, rates one of too much, we were a little scared of that, even though there was really no great evidence that it was slowing down the economy, that rising rates.

You and i both agreed to chairman looked tired yesterday.

It was very different.

I want to take this bigger and broader, macro economics.

I want to look at a chart, folks, which is my chart of the year last year, chairman bernanke at a news conference yesterday, this is my chart of the year -- this is the backdrop.

Median household income, adjusted for inflation, sara, we went up to 1998, and it is a new america.

Here is the data point reported three days ago.

Lower and flat income.

That is the ultimate challenge the government has and the federal reserve has.

We link this to an america flat on its back.

We do not have economic growth, do we you go -- do we?

With two things going on.

The housing market, very good paying jobs for people who don't necessarily have college degrees.

So it is the ultimate -- if you want to understand men across america, you don't look to manufacturing.

You and the chairman-based optimism on a better than good housing market.

In this september, we do not have accurate -- have that.

We have a lot of pent-up demand for housing.

We have not built up enough homes, or the amount of supply is probably restraining sales.

I think we have to really consider that, but at the same point, the whole income story is playing out because we also have -- if you think of all the things that are actually driving the economy forward in terms of technology, etc., what you have there are disproportionate returns to education.

We were talking about this in the break.

It is not just getting a college degree.

I think that is where people get lost.

It is getting a college degree in something that matters and actually having done something in your four years at college.

That is an interesting point, true.

If you look at the impact of fed policy, stock market rises, and it is the market impact.

This chart that tom shows on income, the inequality that we are seeing in this country, if the fed exacerbating that?

Know -- well, i think they made a mistake yesterday, so i would say yes, but it is unintentional.

Chairman bernanke more than any other fed chairman in history is worried about income inequality because they create instability and capitalism.

The problem of course is that capitalism historically is the best way to address income inequality.

What you end up with is some people who do really well, but if you look at poor people today versus the king of france in the 1700's, poor people today have a better lifestyle than the king of france did, would you not agree.

What they did yesterday is essentially an plate assets -- in plate assets.

-- inflate assets.

They savers would get hurt.

What would argue it is actually broadening -- jenny on has been good at this, is the chairman -- janet yellin has been very good at this.

If the policies for the hasseyves?

They are trying to address this and solve things.

Any sort of social planning tends to break down.

That is why capitalism tends to be the best -- we actually have an index called the income inequality index that actually tracks this.

It has been growing as a result lately.

So we do take a serious look at this.

Somewhere i read you should fact check it, but our coefficient is worse than brazil right now.

Inequality was one thing i was talking about, the other factor here is the bubbles.

Is there a risk of some serious bubbles in the financial asset market?

I think that there is a risk that every time you try to pull back, the market is going to have a disproportionate response to it, therefore you are going to continue with your same policy.

I am not sure it is a bubble.

One big problem is that the budget deficit is going to drop dramatically this year, and the fed's purchases as a percentage of net issues is going to go above 100%. so the fed is actually monetizing the u.s. treasury market, and they are doing so in a much more direct way, and they are saying they cannot pull back because of all of the spending issues that are going on.

We will continue this discussion.

Remember, 50,006 every sex -- 50676. is a weaker dollar across the board.

The euro is that a seven-month high, even the poor battered indian rupee surges against the u.s. dollar all on that decision.

Coming up in a neck hour, he cofounded blackrock, ralph schlosstein, the ceo of evercore.

Chairman bernanke refills the punch bowl.

Markets celebrate.

Economists recalibrate.

Summer is a distant memory.

Wall street confirms dysfunction.

It is found in washington.

The reviews are in, apple will not take the low road.

The 5s wins on engineering.

It is magnificent, i held it yesterday.

Tom keene joined by sara eisen and scarlet fu.

Our guest host this hour, a perfect time to speak with ralph schlosstein, ceo of evercore partners.

Joining us also, mike mckee as well.

The celebration continues.

Thank you.

I had a ball.

Ritter's retail sales disappointed.

They fell the most in 10 months in august -- retail -- british retail sales disappointing.

They fell the most in 10 months in august.

In terms of the economic outlook in this country, 8:30 a.m., initial jobless claims.

9:45, it weekly read on confidence is out.

And distinct home sales.

A few companies reporting earnings before the bell, conagra and rite aid.

You don't care about those companies?

We are at the backend of earnings season.

You are very cautious on earnings.

That is why been bernanke was so gun shy, a lot of people think.

Let's get to company news.

Jpmorgan is set to pay up.

The bank will announce this morning at 9:00 a.m. it will pay $900 million to settle u.s. and u.k. investigations into the london world trading loss.

The deal should be announced in a couple of hours.

Earlier this week, jamie dimon told employees to expect more of a regulatory battle.

Blackberry could slash its workforce by 40% by the end of the year.

"the wall street journal" reports the company may cut 5000 jobs.

Blackberry cut 5000 jobs last year as he tried to control costs and shrink operations.

Higher borrowing costs lead to more job cuts and wells fargo as well, cutting 1800 jobs in its mortgage business as refinancing slows down.

It is in addition to the 3000 in its mortgage unit.

Ben bernanke surprising the world, doing the unexpected -- nothing.

The fed did not start to pull back its stimulus program as many expected yesterday.

The dow jones industrials hit record highs.

Our bloomberg economics editor michael mckee joins us.

What is the fed so worried about that the -- that it did not take the opportunity that the market was hitting it and start to taper?

One is monetary policy , the other is communications policy.

They totally messed up communications policy, but there is a good idea -- there is a good reason for the monetary policy.

The fed did not disabuse the markets of the idea that they were going to taper markets.

Mortgage rates went up, the housing market started to plateau.

Confidence started to fall off and the fed got nervous about where we are going, particularly with the fiscal problems coming.

I think this is the real reason they did what they did, ben bernanke talking to milton friedman in 2002. he said you are right, referring to the great depression -- we did it and we will not do it again.

He leaves office at the end of january and does not want his legacy to be with an economy that started to get better and then fell off as it did in the 1930's. that was his research expertise, the depression, but what is the equivalency now of this central bank versus what they faced anywhere in the 1930's or even after world war ii at guadalcanal?

Look what happened in 1937 when the fed tighten policy, a different way but they tightened policy.

Confidence is fragile enough that ben bernanke felt they needed to do something.

Mike mckee, stay with us today.

Our guest for the hour, ralph schlosstein i'm -- ralph schlosstein.

He helped found blackrock in 1988. did you fall off your chair yesterday at 2:00 p.m.? i was a little bit surprised, but i think we are being too hard on the fed and chairman bernanke.

The reason is that, number one, from the very beginning, i think the last time i was here i said we should not be as educated about the beginning of tapering as the markets seem to be.

The reason is the fed said very clearly one of two things is going to happen.

We are either going to have a stronger private economy, in which case we can begin to pull back a little bit, or we are going to have the continuance of this until we have that stronger private economy.

I think yesterday the fed had it set up that if the economy was genuinely and incontrovertibly moving forward, they were going to taper.

What they said yesterday to me is that we still have a bias of risk on the economy weakening and not strengthening, and that we are going to continue to hold our policy until we are certain that we have that private economy.

You are the perfect person to talk to about this loaded question.

Is the outcome of what we witnessed yesterday nothing but a benefit to the haves in america through the market performance, the end performance -- is it a benefit to evercore and wall street if the expense of retirees -- at the expense of retirees western mark i don't feel benefited by this.

First of all, what the fed is concerned about is not wall street, not the markets, although they obviously watch that.

They are concerned about the real economy.

We have seen over the last few years that problems in the markets, declines in the net worth of the household sector through great weakness in housing and the markets feeds through to the real economy.

I think the fed is basically saying the real economy does not have enough results -sustaining private sector strength for us to be certain that we can pull away our support.

I think the worst thing for them would have been to taper, to have a somewhat weaker fall -- and there are risks out there in the fall.

There will be contractions in policy.

1.7% gdp in this quarter.

It is not a very vibrant economy.

I joke about the word efficacy, and the chairman uses it.

The pushback against ralph's point here is that is there any evidence in qe that it is working and helping the economy and being effective and not a trading risk?

He has a phd, that is why he uses that word.

The fed argues yes because rates go down and that influences behavior.

A lot of people try to sell -- to separate the rates going down and behavior.

We do not see the follow-on and we have not seen stronger growth.

How do you know what would have happened without this?

They do not want to change -- they do not want to take the chance.

The question becomes when do they move forward with the taper?

They are probably looking at 2014. data in october and december, they have these new criteria where they need to see growth.

You will not have that yet given where we are.

Ralph schlosstein, you talked about private sector strength, and we have seen it in selling debt, raising cash.

Verizon sold almost $15 million of bonds as it tried to cash in on the opportunity with the window still wide open.

Are we going to see more companies rush to that again now that the when you -- now that the window continues to be open?

I think it is a relatively unique phenomenon.

We had a lot of debt issuance in the first half of this year and the end of last year.

The big story in the capital markets today is the amount of equity issuance, not the amount of debt issuance.

We have record amounts of ipo's over the last few years.

There is a lot of private equity firms monetizing investments that they made in 2006 and 2007 and 2008. does that signal we are at a high come and that we have gone too far?

Going back to sarah ? 's point about the efficacy of qe, if they had announced what they did and nothing happened in the markets thomas and i think you could say that qe3 is not providing much if any support to the markets.

The reality is the fed -- the markets were anticipating a modest relaxation of qe3. they did not get it.

The fed clearly signaled we still have worries about the tight fiscal policy.

I am personally worried about dysfunction in washington.

We have the debt ceiling, the budget coming up.

We have a lot to talk about, ralph schlosstein with us and michael mckee with us as well.

I am still getting over what we saw yesterday at 2:00. it is interesting, everybody's opinion in support of ben bernanke.

We will talk with bloomberg businessweek's sam grobart.

This is bloomberg "surveillance" on bloomberg television and radio.

? this is bloomberg "surveillance." i'm tom keene.

If roger altman was here, we would know now.

That would be there boston red sox.

Ralph schlosstein , seriously, folks, he is worried about self- inflicted debt ceiling wounds.

We wear, washington, this time could be worse.

You have all your radar up in support of obama politics.

Why is this time different?

First of all, the last ballet was pretty ugly.

July, august, 2011, we were just talking about the markets.

The impact of that on the real economy was genuinely harsh.

We probably took a half point to a full point off gdp growth through the ensuing six-month period.

I think we are going into , starting the period of debt ceiling extension with much worse partisanship in washington today than we had in mid-2011, and that is something we should all be worried about.

If speaker boehner's focus is as it was yesterday, giving report -- giving support to republicans now so he can gather democrats to get this done -- i am not sure i understand democratic politics, so i will not understand republican politics.

I have empathy for speaker boehner because he is between two very big rocks.

On one hand it has been a tradition in the republican party, the so-called hastert rule that when republicans control the house, nothing will pass that does not have the support of a majority of republicans.

I have heard through friends and others who i know who are close to the republican party that the speaker has basically said today i do not know what would get a majority.

Should the president focus on vice chairman yellin, or should he open up the search for a new fed chairman, particularly after what we witnessed yesterday?

I think janet yellin is one of the number of very strong candidates.

I feel larry summers certainly was one among those as well . i am sorry he withdrew his name, but you could not be critical of the credentials of mr.

Summers or ms.

Yellin or one or two other people who have been mentioned.

The focus on washington with ralph schlosstein.

So much going on.

That's talk apple.

This is bloomberg "surveillance ." ? this is bloomberg "surveillance." sara eisen with tom keene and scarlet fu.

I guess this hour, ralph schlosstein.

Janet yellin winning the back roads -- the backing of senator chuck schumer, calling her an excellent choice to be the head of the federal reserve.

She begin the run for the next fed chief when larry summers withdrew.

Assad said it was the rebel fighters, not government troops, that laws -- they used chemical arms last month.

Exit kohl's pacific coast is bracing for more rain and flooding, or even as it tries to -- mexico's pacific coast is bracing for more rain and flooding.

40,000 people are stranded in acapulco.

Another storm is headed for the region.

Those are your top news headlines, and another extreme weather headline.

Extreme weather in colorado and mexico.

Where are the hurricanes?

I think we sort of kind of like -- we need an update from bonnie schneider.

Its talk about apple, on the cover of the new bloomberg "businessweek," an exclusive interview with the three men running the world's most valuable company.

You can download it tonight on your tablet and get it on newsstands tomorrow.

The critics held at apple's two new phones.

-- pounded apple's two new phones.

It is ios7 if you can download it.

Sam grobart did a junkets -- i was a junketeer.

This is a company that controls its access to the press carefully, and the opportunity to sit down with cook, the chief designer, and -- and you went right at it with them, didn't you?

Toe to toe, tom.

Dime bag that's what surprised you?

The message i saw there was we are not surprised by any of this even if maybe they are surprised by some of this, they will never trade that.

They are saying we will take the high road, we will be a high-end product, we will not fight everybody on a race to the bottom, and we can do well in the upper segment of the market.

They did a good job convincing that they feel comfortable with apple's position.

Our previous guest said only the paranoid survive in silicon valley.

What do they seem paranoid about?

I think they feel paranoid about intellectual property.

They still take that very seriously.

Continuing legal battles with samsung and whoever else is something they are very focused on.

They are also focused on their internal goals of building great products.

The thing that is great about your article, it is opposite what i call the media zeitgeist.

I don't measure our success in unit market share.

We are fixated on sophomoric ratios which they are not paying attention to.

There is an old quote from steve jobs in 2004 when he said our market share in the pc market is greater than bmw or mercedes market share in automobiles.

What is so wrong with being mercedes or bmw?

What was the phone you saw in asia?

The galaxy s4. do they completely refute the new phone?

They don't completely refute anything.

If you look what they did with the ipod, that became a line of products, from $49 up to $400. on the price issue, the idea is to compete in emerging markets where samsung is winning.

How can they do that if they are not willing to lower the price or the quality?

Another apple executives said there are no emerging markets.

Every market has an upper end or a lower end.

We will compete for the upper end of the market.

I have an important question.

The mac was once dominant, and it gave way to pc's and the whole windows operating system.

You would have to be insane not to remember the lessons of the 1980's or the 1990's. android is so fragmented, so many different versions which cause compatibility projects -- compatibility problems for users.

That was not the case for windows.

How much does the t-shirt cost you?

They are just spectacular t- shirts.

Did he give you one?

I wish he had.

He did complement my bag.

You took your man bag out there?

He said the edge of your bag is just -- yes.

I have no doubt he actually said that.

Do they care about the stock price?

Not as perhaps other ceo's and executives do.

Cook said i do not judge my or apple's valued by the market.

How did you get this interview?

I was out there and was supposed to see steve jobs.

It did not work out.

How do you get in front of not one, not two, but three guys?

I have been covering apple in various media outlets for a long time.

How do they respond to the idea that they are not the innovation machine they once were under steve jobs?

They categorize innovation differently, saying it is not just about new categories, not about a smart watch or tv device, it is about innovating the silicon in the chips, adding new features properly, in invading them -- innovating them fully.

We don't just take -- must read, sam grobart's cover on "businessweek." you can probably see it on your samsung galaxy as well.

Coming up, microsoft faces analysts on an important day.

What will steve ballmer say?

? this is bloomberg "surveillance." sara eisen with tom keene and scarlet fu.

U.s. equity futures are still in celebration mood -- celebration mode.

Scarlet fu has company news for us.

Jpmorgan is set to pay up.

The bank will announce it is paying $900 million to settle u.s. and u.k. investigations into the london trading loss.

It deals with four regulators should be announced in a couple of hours.

We are hearing 9:00 a.m. eastern time.

Jimmy dimon said employees should expect -- jamie dimon said employees should expect more regulatory battles.

Graham theft auto five rings up a record on its first day.

It hundred million dollars in sales worldwide.

-- $800 million in sales worldwide.

Oracle says it will need to close some big deals for corporate software if it is to remain on track for the year.

Oracle predicting weaker than forecast rockets for this quarter, being battered by a slowdown in i.t. -- weaker than forecast broadcast for this quarter, being battered by a slowdown in i.t. speaking of tracking technology ceo's, mark zuckerberg dissented on the nation's capital yesterday.

He has been pushing this -- dissented on the nation's capital yesterday.

He's been pushing the immigration bill.

His main push here is really immigration.

He found of the lobbying organization into promoting policies to keep the u.s. competitive in a global economy.

I was some pushback against that.

There was, but silicon valley where he is from is built on immigration.

We have some numbers that highlight that.

One study found that immigrants contributed to the majority of patents filed by companies like qualcomm or cisco.

They make a big deal here.

Clearly it is an initiative that is the other -- that is dear to his heart.

Angering did he wear a hoodie?

He did wear a hoodie to another event.

Let's hear mark zuckerberg on immigration.

Most of the folks i know who run tech companies feel the high skilled part of the issue is very -- the high skilled part of the issues acutely.

We all have a bunch of engineering roles we are trying to fill, and this is not a matter of hiring people instead of americans.

We will hire all of them.

The issue is that there are not enough talented people we can bring into the country, and that is a real issue people feel.

He has been very careful not to do away his political affiliation, saying he is pro- business, pro-knowledge economy.

He is not a democrat or republican.

Ralph schlosstein with us.

How do you become a corporate leader that lawmakers can listen to?

First of all, you have stunning success.

As long as you are independent , the benefit of that, which is quite strong, is that everyone will listen to you for two reasons.

Number one, you are undeclared, number two, you are being wooed.

The point he is making is so important, and i would challenge a little bit away we are portraying this this morning, that this is a facebook issue or a tech issue.

This is a united states of america competitiveness issue.

In the future, the country with the most telling, just like the company with the most talent, wins, and we are not attracting the most talent.

What is the playbook to gain access to washington?

They do not trust these guys, they are rich and on the west coast.

Is it writing checks and going through the standard lobbying procedure, or is there a different playbook for silicon valley on k street?

Unfortunately, money sadly is the mother's milk of politics, but let's give our elected officials a little bit of the benefit of the doubt.

Not that i can say we have seen much behavior in the last year and a half that deserves this.

But at some point an issue like immigration, both parties have to rise up and do the right thing for the competitiveness of the country.

If i were mark zuckerberg sitting in front of republicans, i would basically say you guys claim to be the party of growth and competitiveness.

This is the number one growth and competitiveness issue for the country.

Thing bank ralph schlosstein with -- route schloss teamed with us from evercore partners.

Stocks and equities futures , closing yesterday after federal reserve elected not to do anything.

There is tapering this morning, not that it will have much of an effect.

Double of claims at eight: 30 and existing home sales at 10:00 a.m. good morning, everyone.

All of our interviews on bloomberg tv come up plus the ipad, and bloomberg radio plus.

Tom keene, sara eisen and scarlet fu.

An amazing morning.

Ralph schlosstein joins us, from evercore partners.

Steve ballmer's has -- steve ballmer has a lot of explain to do.

The company is not waiting around.

It announced a stock buyback, reorganized.

Sam grobart is with us.

Of course, our guest host, ralph schlosstein.

Look at microsoft 's shrinking pile of cash.

Microsoft, intel, ibm paying dividends.

Should microsoft be using its cash this way?

I believe yes, and the reason is that they need to do one of those co-things.

They need to either use their cash, or they have to identify and significantly invest in some businesses that will provide real above-market growth in revenues and profits for the business.

I wonder if they are doing that.

The answer is not should they or shouldn't they, but they have to.

They have to placate investors.

They have to return some of the money.

Keep in mind microsoft earns $1 billion a month or more in profit.

Rick with a research note, the buyback looking for more -- sam grobart, you say apple in your water for article, being a bmw, being a mercedes, that is great.

If they are the bmw, the mercedes, or the maza roddy, what is microsoft?

It is trying to sell to everybody.

It is an enterprise business.

It is now trying to be a consumer b

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


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