Is America in Recession?: Surveillance (11/04)

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Nov. 04 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Lakshman Achuthan, JP Eggers, Justin Wolfers, Brad Hintz, Jonathan Gruber, and Michael Cawley. (Source: Bloomberg)

This is "bloomberg surveillance." the most controversial call in market economics.

Is america and recession?

Lakshman achuthan joins us.

Twitter prices wednesday to join nyse thursday morning.

Blackberry is so 2007. can blackberry make a to 2015? this is "bloomberg surveillance," i am tom keene.

Live from new york city.

The marathon, sara and i did not run it.

Sara eisen and scarlet fu as well.

I ran 26 feet.

Who is less likely to run a marathon, we are you?

-- me or you?

It went off without a hitch.

Some overnight news after the weekend.

In china, communist party leaders enter a policy summit this week.

Services and manufacturing, this weekend not manufacturing rose to the highest level this year on the back of solid reports.

Manufacturing that are everywhere.

-- better everywhere.

Even in the u.s.. 9:45, we get the ism.

As you think about economic data, jobs stay is on friday.

Some corporate events, 8:00 a.m., kellogg.

After the bell, office depot and hertz.

5:00 is the deadline for fairfax financial to make good on their offer to take library private.

Some speculation that my have -- they might not have funds to make that happen.

President obama will be speaking tonight.

He will be meeting with the chicago blackhawks.

Chicago pride.

They are doing ok, san jose is doing better.

A data check.

Stay with bloomberg surveillance all week, ecb, jobs report on friday, and ipo wednesday.

A small one.

2.62% 10 year yield.

Weaker euro.

Nymex crude was 97, look at that as an indicator of economic spirit.

94.6 x -- 94.66 . our second board, the vix is 13.28. 0.11% in germany, 0.1% in japan, those are the relative yields of the big boys in economics.

Here is my chart of the week.

This goes to how important thursday is.

The rollover in this inflation.

This is a big deal.

Nothing like kicking off monday morning with this inflation.

It speaks to the softness.

We will talk about ask with -- that with lakshman achuthan.

Yellen will be focused on draghi.

Time for our front page, all of the most important stories.

An update on the airline merger.

It is on the cover of "the wall street journal." are you letters went american airlines -- regulators want conditions for merging.

The doj blocked the merger saying it would hurt consumers.

It cited 1000 routes where competition would suffer.

These are happening weeks before the antitrust trial in washington, setting a 10 for more negotiation.

A trial may not take place.

What is the read, are they going to make these concessions?

They knew they would have to make some concessions after the doj -- this is later on, reagan -- this is the interior washington airport.

Reagan was already under debate, now more?

We will see how this plays out, reagan is a big issue between the two airlines.

A guilty plea from sac capital as early as today.

The new york times and ft are reporting that the hedge fund run by steve cohen will plead guilty to securities fraud and pay more than $1 billion in fines to settle criminal charges.

If that happens, sac will become a family-run shop and stop managing other people's money.

They will return the money for pension funds by the end of the year.

The sec continues the investigation -- criminal charges are not settled.

I love this sentence from the ft, the sec is seeking to ban mr.

Cohen from the industry.

He has not been charged with criminal wrongdoing.

It is bizarre that they are going after someone who has no charges.

They are going after the firm, not the person.

So unusual.

The new york times talks about a new witness.

What a stunning turn of events for steve cohen and sac capital, considered the premier hedge fund.

Our final story, the week of twitter's $1.6 ipo, it begins trading thursday on the nyse.

Ipl's -- ipo's are hot.

Record low yields on zero interest rate policy has created an environment where people are seeking a higher return.

October was the busiest month for u.s. listed ipo's since 2007. 33 companies -- the container store double -- they shot up 100%. talking about this earlier, twitter and the ipo.

Joining us to talk about the economy and bring over a little finance with the economic cycle research institute, lakshman achuthan.

Do you reaffirm your recession call?

Yes, absolutely.

A recession began last year.

It takes quite a wild to recognize a recession vomit which is why they wait a couple years in some cases.

-- to recognize a recession, which is why they wait a couple years to come.

The culinary data could be revised negative.

For -- the preliminary data could be revised negative.

For q1 and q4, you are running at 0.25 percentage point annually.

The numbers could be anywhere from 2% to 4%. you are in the range of a mild recession.

How do you explain the animal spirit?

You mentioned manufacturing.

The ism has been popping up.

Decades ago, our group pioneered the use of those numbers, they are early in the month reads of production.

That is why people look at them, a quick read.

It is a derivative value.

We like those indicators.

However, it is over the last three years, their correlation with the target, production, has collapsed.

You have negative correlated relationships between the ism and production of the last few years in the u.s., china, germany.

If it pops up, it is not a positive free.

On the stronger manufacturing, but what about the stock market?

Twitter is ipoing in this booming environment.

How disconnected are the markets from your theory?

They seem a little disconnected.

I think we can understand the story why that may be.

Setting the table, in three out of the last 15 recessions, you have had the stock market rise during a recession.

It is not out of character that that could happen.

Do you attribute it to the fed>? -- the fed?

We have quantitative easing, the bigger picture.

Five years ago, there is a backdrop of week growth in developed economies punctuated by more recessions.

Recessions kill inflation.

We have central banks around the world at near record lows in interest rates, they are missing policy targets of inflation.

I will come back on the stock market.

They are using the stock market -- they are trying to pull a wealth effect lever by jacking up risk assets to see if that will transfer to the economy.

We have not the that happened.

We will come back, lakshman achuthan.

The ecb is a friend center on thursday.

Cost-cutting paying off at hsbc, pretax half it rose 2.4 -- $4.5 billion.

They have cut 46,000 jobs over the last three years.

The firm is being investigated for foreign exchange trading, one of several banks under scrutiny.

Warren buffett's focus on power and railroads is a boost to profit at berkshire hathaway.

His holdings made up 40% of the company's operating income last quarter according to a regulatory filing.

The two countries have generated at least 30% of berkshire's profit every year since 2010. ryanair predicts its second profit drop in two months.

Predicting well below estimates.

They will ground as many as 70 aircraft to cut costs to compete with rivals.

We will speak with the company's deputy ceo later on.

Coming up, one company we are going to talk about his blackberry.

Today is the fairfax deadline for its offer to buy blackberry.

We hear it is having trouble lining up cash.

Does it open a door for others to buy blackberry?

That is our twitter question of the day.

Who should save blackberry.

Facebook, linked in?

Tweet us @bsurveillance.

? good morning, everyone.

Front and center, puerto rico.

The governor of puerto rico will be on "market makers." 10:00 a.m. this morning.

In the ft this morning, talking -- now is a critical time for puerto rico.

Their governor, this morning.

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

A deadline in a potential blackberry takeover.

There may be more than one company interested in buying.

It was all coming down to fairfax financial, that may not happen.

Let's wait for whether fairfax comes up with anything, the deadline is 5:00 p.m. for fairfax to firm up its $4.7 billion bid.

Fairfax could ask for an extension for today's deadline.

This is the canadian warren buffett.

The thing to keep in mind is that if blackberry makes another deal without fairfax, it would need to pay a breakup fee, $157 million.

Who else is in the running?

The cofounder of blackberry is still in this.

They are teaming up with cerberus capital, a private equity fund.

Qualcomm could be involved as well.

They are a maker of chips, the majority of their profits comes from licensing patents.

There was some talk about facebook being interested?

Facebook executives did meet with blackberry executives, nothing really came out of that.

They were meeting in mid-october to gauge interest.

What happens if there is no agreement, the worst case for blackberry?

The price goes down, a got a boost after that offer from fairfax.

We continue to look -- maybe some people were waiting for the plunge to come in and look at it as a distressed asset.

Have you seen the new blackberry?

There is nothing distinctive about it at this point, even though touchscreen does not make it a better bet.

We have seen this in the sales numbers.

On september 20, the company was taking in a $20 billion charge to write off unsold inventory and it cut its workforce.

Justin wolfers will join us in the 7:00 hour.

Lakshman achuthan with us.

This is supposed to be good for the economy.

Is this churning a constructive you forward for the economy?

In the theories of cycles and creative destruction, sure.

Maybe blackberry should have had a creative destruction earlier.

Some times, well-intentioned efforts to subvert the cycle can have negative effects.

It will limit your rebound.

Here, a recession could be cathartic.

If you deny it, there has been a lot of denial of what is going on.

It limits your ability to rebound.

In this as well is ontario and canada.


One more name into this conversation of potential bidders, lenovo.

The cfo of the computer maker told bloomberg in january it is considering a deal.

They sign a non-disclosure agreement, there is no confirmation.

The thing that goes back to your point, tom, stephen harper said that blackberry is an important player in the communications space.

They need to consider whether they would allow a company like lenovo to buy library.

The buzz on the new ipad was huge.

The ipad air?

Did you wait in line?

Earth day -- birthday, christmas.


We are going to talk about blackberry.

The deadline is today for fairfax.

5:00 p.m. it is our twitter question of the day.

Who should buy blackberry?

Tweet us @bsurveillance.

Justin wolfers of michigan on the fed, the economy, and health care.

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

I'm it had a scrutiny, the trial of former egyptian president mohamed morsi is underway.

He is charged with inciting violence last december.

More than a dozen members of the muslim brotherhood are on trial with him.

They could face a life sentence or the death penalty.

India preparing to launch a spacecraft to mars.

They would be china and to pam -- and japan to have a spacecraft orbit the planet.

India's prime minister believes that it will yield technological advances, making it worth the investment.

"ender's game" took the top spot, 28 million dollars for lions gate entertainment.

"that grandpa -- "bad grandpa" was a second.

Scarlet fu will save us.

Tim cook, ceo of apple, taking a public stance in the wall street journal.

Workplace equality is good for business.

He says that embracing individuality is a matter of civil rights.

It turns out to be great for creativity.

We urge senators to support the nondiscrimination act.

He points out that apple already has antidiscrimination policies that go beyond federal policies.

Interesting to note, "out" magazine named him cook the -- tim cook the most powerful gay person and it's power list back in april.

He is writing as a ceo, what is against the legislation?

There is no real movement perhaps the way tim cook sees it should be.

It is not often he comes out.

Whenever we say about this, everybody is distracted by nsa and

And apple's product.

The ipad air.

Morning must read.

The new york jets, that was pretty impressive.

Matt klein on the capitalist yoke.

Capital requirements are too low to ensure systemic resilience.

If politicians and regulators decide to limit leverage, shareholders will face pressure.

Klein linking compensation and future animal spirits with banking with the desire for more leverage.

Getting close to bonus season, finding out how much they are allotted in 2014. it is like november 1, where do we stand?

Expectations are being managed.

I am trying to keep track of the investigations at these banks.

Foreign exchange, collusion.

8 for jpmorgan, one for citigroup.

Hsbc and the foreign exchange.

We will talk about it with one of the top banking analysts out there.

The economy is in a sluggish recovery.

That is conventional wisdom, is it wrong?

We will talk to lakshman.

"bloomberg surveillance" on bloomberg television, streaming on your tablet, your phone, and

? this is "bloomberg surveillance." i am sara eisen, here with tom keene and scarlet fu.

Coming off of for -- 4 up weeks in the stock market.

Futures continue higher, 10 year yield has gone to 2.61%. euro-dollar week or two thursday, will the ecb lower interest rates?

Euro-dollar, 1.3510. nymex crude is an indicator of the j, 97 to 94. -- the lethargy, 97 to 94. fridays and manufacturing data was surprisingly strong, the data is not conclusive.

We have a jobs number friday, you can expect the shutdown to have an impact.

A busy week of data.

He is a piÑata for economic optimism.

Disagree with lakshman achuthan.

There is still a recession.

2 quarters of negative growth.

Or is america flat on its back?

What portion of america is in recession?

A recession is the country.

The entire country went into a recession last year.

Mir 2% gdp, advisers say 2.4% is a recession.

You need to understand the data.

As you know, this data gets revised heavily.

Your initial prints are not what happens in your rearview mirror.

If we were sitting here just before leaving -- lehman, eight months into that, you would be looking at q1 and q2 with 3.3% growth in 2008. that is a lot better than 2013. in retrospect, weaver integrate restructured -- in retrospect, we were in the great recession.

This back casting is questionable.

When you look at the headline data, nominal gdp for the first half of 2013 is recessionary.

You have not had nominal gdp below 3.6% outside of a recessionary context in the history of the data.

Your data is telling you now if you are willing to look at it.

If you look at inflation, prices, which are related to economic activity, they are at or near record low readings.

Not only in the u.s., but in the major economies around the world, central banks went to the lowest interest rates on record.

They have all failed on the policy goal of having an inflation target, they are blowing through to the downside.

The forward-looking indicators on prices are going down.

You have a point, data backs you up.

It is worth mentioning that this is a controversial call.

Not a single wall street economist says we are in recession, not a single policymaker.

I get it.

Is it semantics?

It is a very clear definition of what a recession is.

My mentor help to find -- helped define recession.

There is a very precise definition.

What do you see?

I have been around for a few recessions.

We have never said that there is a recession that people agree with.

We are looking at things people don't look at.

They look at models, we look at patterns.

What is your pattern right now?

One of the more problematic things as the interest rates.

Also, housing, as early as march -- rate up -- before rates went up, before taper talk, our leading indicators were down.

Then you had taper talk.

We are seeing what is happening now.

Lakshman, what has gotten better when it comes to the u.s. economy?

I do not see a lot at the moment.

Not manufacturing?

Those ism indicators have a negative correlation at the moment to the target, production.

The reason you're looking at ism is derivative value.

I want to get this chart in.

You can look at this interview on your ipad, bloombergtv + two percent -- bloombergtv plus.

2%, we are not where we were.

On a gdp basis, how do you define recession?

Nominal gdp under 3.6%. real gdp?

You have got to get negative in real gdp.

Gdp does not define recession.

It is also jobs, incomes, and sales.

The vectors of all of those are not going up.

The revisions -- you have nailed the inflation call that is front and center with mario draghi on thursday.

Is janet yellen going to enjoy the pressures that mario draghi faces?

In europe you saw cpi.

If you look at harmonized cpi, against the u.s. and japan, it was below 1%. in september, it fell below 1%. the only one with a rise in cpi is japan.

You have production about the u.s. going the way of japan.

What has this done to your business and your index?

A lot of people say lakshman, you are wrong, we are not in recession.

What backlash do you face?

In 2012, early 2012 with regard to people we talked to who manage money, we made the point clearly that you can have a rising stock market inside of a recession.

When the fed is targeting asset prices as a policy lever, you connect the dots.

David temper, famous for saying i am going to go along because there is qe or fundamentals increase, not both.

Everybody is talking about the revival that has not occurred yet.

When i talk about the three recessions, you had stock market rises, one of them is very important.

Which one?

1927, 1967. i remember that -- 1926, 1927. ireland that.

You have stimulative policies.

They rose after that, it turned down in 29. lakshman achuthan with us, a historical perspective from ecri.

Want to predict the national deficit, look at jobless claims.

Our single best chart.

Coming up on bloomberg television, streaming on your tablet, phone, and

? this is "bloomberg surveillance." i am scarlet fu, joined by tom keene and sara eisen.

Some company news from the files of bloomberg west.

We start with samsung.

Having a little bit of problems.

Nokia and samsung extending a patent deal for five years.

The new agreement starts in your a stash starts january 1. the deal boosts for nokia as it tries to generate income after selling its handset division to hikers off.

Blackberry is in a deadline to determine its future.

Fairfax financial holdings has until 5:00 p.m. this afternoon to make an offer for the company.

They made a preliminary $4.7 million offer six weeks ago but has been struggling to line up financing.

Today's deadline will push fairfax to show how legitimate its offer is.

All but he'll listen trying to capitalize on the run its share price -- alcatel lucent trying to capitalize on the run in its share price.

That is today's company news from the files of bloomberg west.

The big event of the week is the ecb reading.

For everyone else, the twitter ipo.

They try to avoid the mistakes of facebook.

A professor at nyu who focuses on technology companies will join us.

Also with us is lakshman achuthan.

Twitter ipo in a soft economy.

You have been studying this for decades.

The goal for twitter, of late the facebook mistakes, bring down expectations.

Will it work?

Expectations are lower because of the experience with facebook.

Twitter has done a good job being clear that they want a slow growth trajectory, work things out over time.

How does this company change from what we know once it becomes public?

The biggest change we typically see is a change and innovation.

Pre-ipo, innovation is internal and done by their own r&d staff.

After going public, the switch is to go into m&a. you are one of the best people on this.

Amherst, orton -- wharton.

You get married and things change.

What is it about going public?

Why is twitter different friday from wednesday?

It is a lot about the degree of exposure and expectations.

The role of those expectations play.

Before you go public, the list of people you are responsible to is small.

When you go public, you have a responsibility to shareholders.

Sound like a marriage counselor.

Once it is publicly traded, they switch into m&a mode.

Twitter has already been acquisitive.

They have purchased the fourth largest number of deals after facebook and groupon.

The largest privately held a choir of all time -- acquirer of all time.

They have already moved into the m&a mode.

They just need the capital to dund -- fund that.

Twitter has to prove it can make money.

One morning must read from the wall street journal, andy, former hedge fund manager.

Twitter revolutionizing advertising.

He distinguishes twitter from facebook and others.

It enables a conversation a month a group of users -- among a group of users.

Word of mouth is the best way to sell anything.

Big-ticket fraud acts require a discussion.

-- products require a discussion.

Do you agree?

The level of engagement and the consistency is different.

They've run the risk on the advertising side of falling into the facebook plan.

They can't attract interest because they are a fun, safe environment.

But the minute advertising takes over, it is hard to keep them there.

You are sitting with the twitter crew in new york.

You tell them this is the company you need to be like.

What company?

Amazon, facebook, alan mullally -- alan mulally's ford?

I would say craigslist.

They do not need huge assets.

They could have been successful staying private or smaller and keeping a strong user base.

There is no burning reason to grow rapidly from an outsider revenue perspective.

What changes to the management when a company goes public?

They are calculating net worth, how does that change what they do in terms of managing the company.

4 years, 10 years down the line?

There will be an exodus, people come and to like the start up environment.

They were there to make sure that they could cash out.

Once they get out, they will move on.

There will be turnover, especially on the tech side within twitter over the next 5 years.

The engineers?


What do you see from your students right now?

Twitter is still that they want.

Most of my students in the mid- to late-20's have moved on.

Is there the advertising dollars?

As far as advertising is concerned, there is.

They are network-based businesses.

The more users, the more valuable.

The market tends to shift towards one or another.

There is enough money, i am not sure there are enough users.

Twitter has 200 million users?

Facebook has one billion?

Will twitter go to indonesia, china?

They have a twitter in china, just not twitter.

Absolutely, they are already there in some places.

They are looking for growth.

The concern about censorship will become big.

J./p. eggers with nyu, is it a frenzy?

Twitter is the anti-phase but ipl.

-- anditi facebook ipo.

Can't we have a stupid ipo thing?

We are going to look at photos making news.

The new york city marathon, a triumphant return.

Nearly 50,000 runners braved teh he cold.

They went across all five boroughs.

They girl cost -- they go across the verrazano bridge.

It was canceled last year because of hurricane sandy.

This was exciting.

Let's move on.

As they were waking up for their jo theyg, -- the jog, they may have caught the partial solar eclipse.

This was a hybrid, some parts of the globe experienced a total eclipse.

Others saw one where the moon does not totally blocked out -- it is dangerous.

A solar eclipse is a lot brighter, you have to be careful.

The next time you can see a total eclipse, august 21, 2017. that is a total eclipse in the u.s. this -- the london roads over the weekend.

The royal automobile club holding a car run.

Only cars built the 41905 are eligible -- before 1905. the royal baby is in the backseat.

Before 1805 -- 1905. coming up, we will talk about the state of thinking with the former lehman brothers cfo, now with sanford bernstein.

On television, radio, streaming on your tablet and your phone.

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

The trial of former egyptian president mohamed morsi is underway.

He is charged with inciting violence last december.

A dozen members of the muslim brotherhood are on trial with him.

They could face a life sentence or the death penalty.

A growth forecast for the u.k. is raised, the confederation of rish industry predicting the economy will expand 1.4%. they say the recovery is more solid than easily thought.

China's communist paet -- communist party at a policy summit.

The president may be more confident tackling reform.

Time for single best chart.

If you want to protect the federal deficit, watch jobless claims.

It is a leading indicator.

The yellow line is jobless claims.

The white line is the federal deficit as a percent of gdp going back to the late 1980's. as jobless claims fall, you can see the gdp.

There was a brief spike, this is temporary.

He expects jobless claims to drop in the next few months.

The federal deficit right now is about 4% of gdp, lower than reagan's second term.

He says it should fall to 3% by the end of the year.

He is optimistic?

Lakshman achuthan pushing against darden.

A lot of people are optimistic.

What are they getting wrong?

First, i am optimistic.

Cycles turn.

We called the u.k. recovery, the spanish recovery.

Those were some of the worst hit recoveries -- worst-hit economies.

They are getting the same thing wrong that they got wrong in march and july.

A lot of pushback i got when we were talking was that the fed is tapering, the economy is doing better.

The government shutdown?

They did not know about the shutdown in july.

Fiscal policy was a risk.

That is like the weather forecast.

This effect, will it be negative or positive, the revisions will tell us.

Going down, this is one that the revivalists, it is just around the corner, they have been saying for a long time.

I think they will be wrong.

Having me back -- cap me that in a few months.

Jp editors -- j.p. eggers is with us as well.

Can we have a buoyant economy outside the struggle of america, do.

Them together -- do you aggregate them together?

There are so many interdependencies tween tech here and elsewhere.

It is difficult to put them together, you have to look at them in isolation.

A nice way to wrap up.

A lot to look forward to with the twitter ipo.

Eggers and lakshman achuthan.

A strong euro starting off the week, gains in u.s. equity futures.

Dollar yen, 98.65. ? .. twitter tries to contain the frenzy for a thursday opening.

The nexus of banking finance and the american economy at this hour -- and europe gets crushed this morning, michael o'leary tries for a group hug with his customers.

I am tom keene live from our world headquarters in new york treat it is monday, november 4. joining me as always, we did not run the new york city marathon, sara eisen and scarlet fu with us.

You are sore from the marathon run?

We have an economist guest host and marathon runner for our guest host today.

We will get you caught up on overnight to news.

In china, communist party leaders entering a policymaking summit with the economy on the upswing.

Over the weekend, nonmanufacturing purchasers index rise to the highest level this year in october.

9:45 eastern time, new york index.

We will get september numbers this time around.

Some corporate events to watch today, at 8:00 kellogg earnings are out.

Later office depot and hurts read -- and hertz.

We will talk about who else may be interested in blackberry.

President obama will be speaking at an event, organizing for america.

Regulators want big changes in him -- big changes if american and usa rays are to merge.

The justice department has sued to block the merger, arguing it would hurt consumers.

The doj cited 1000 areas where competition with suffer.

Sac capital may strike a plea agreement.

The new york and financial times reported that steve hot -- steve:'s hedgecock -- steve cohan's hedge fund -- the $6 million plus it manages for investors will be reportedly returned by your end.

And eric schmitt blasting the national security agency.

The chairman responded to reports that alleged the nsa spied on the company's data centers.

He said that it is true it is outrageous and potentially illegal.

He made those comments in an interview with "wall street journal." our top story carrying of us -- carrying us through the week is the most-watched ipo since facebook went public in may of 2012. it is getting more than enough demand for its.

Cristina alesci joins us.

What is the buzz from the roadshow?

How likely is it that twitter raises the range?

They are at a critical juncture.

They know they have enough demand to sell this entire offering.

Now the question is do they raise the rank seattle the question is there is an argument in favor of increasing the range.

You reduce the volatility on the first day.

That is at least with the bankers will say and put a cap on how high it goes.

The flipside is you risk alienating investors who have been very clear with twitter.

They do not want to see the range increase.

What i am hearing is that the twitter executives are very receptive to investors.

They do want to leave some money on the table for them.

This is a 27% discount to linkedin and facebook.

What is the bracket?

17 to 20? it could go to 22, 23? they could have a successful offering at 22, 23. some trust is out at 50. is this going to be stupid?


the bankers and the executives here are very conscientious.

Let's not forget, this company is still generating losses and the losses are widening.

The losses keep getting bigger.

The distinction here between facebook and twitter is that you have these continued losses.

Investors are willing to be patient about those losses.

So long as user growth -- you do not want those shares you are getting, i will take them.

You and everyone else want my shares.

I know they are losing money, but are they going to outline a timetable for when they think they can start making a profit?

They will not.

A lot of analysts are modeling this out.

Their same rights to any 15 -- they are saying by 2015 they are expecting a profit.

The investors that i spoke to said they are patient with these losses as long as the monthly average user rate keeps growing.

What they have seen is a slowing of that rate.

It is still growing but at a very slower rate.

What twitter is saying is we have to increase engagement with our users, which is measured by completely different metrics, which is the timeline views and how many times they reviewed -- they refreshed the timeline.

We haven't seen great numbers their either.

What are says we have to increase engagement but they are not being specific on how they are going to do it.

That is causing a lot of concern among investors.

Cristina alesci, thank you for joining us this monday morning.

I am sure we will be talking to you as we get the twitter ipo.

Wednesday, the stock skits to trading on thursday.

-- stock gets to trading on thursday.

Some talk, others do.

Sarah and i ran the new york city marathon in our dreams yesterday.

He is within university -- with the university of michigan, one of the nation's foremost economists at the nexus of public policy.

It is wonderful to have you here.

A pleasure to be here.

How do you run a marathon and then get up at 5 a.m.? did you sleep last night?

I just ate last night meal after meal after meal.

When did you hit the wall?

We hit it at 85 feet.

Mile 20 two central park.

Very good.


Is this your first marathon?

This is number 10. i don't understand crazy marathon runners.

Let's talk about something else, the federal reserve.

We know you have some strong opinions about the fed right now.

Everybody is trying to figure out when the taper is going to happen.

I was struck that all the commentary is going to be one they're going to tie into policy next.

It is not completely obvious.

Why do you say that, that is the first time i heard that.

I'm a -- inflation seems to be targeting central banks.

You cannot see it anywhere.

They see inflation starting at 1.2%. one of your charms is you come out of australia.

Australia, new zealand, and sweden do this differently.

When you hear "forward guidance," wise america so clumsy when others have rules that seem to become her about their banking -- seemed to be calm her about their banking?

We haven't seen the zero level down before.

Frankly it is difficult.

The fed is getting a little bit better at it each month.

I think the federal that -- the fed right now is a lot clearer than the european central bank.

How important is a thursday meeting for the european central bank?

Deflation, deflation.

You have written about this with betsey stevenson.

This is great.

Should we be worried about deflation?

In europe or here?


It is not hard to see that we are getting a inflation forecast of 1.1% in either direction.

It is staying low.

The fed never hit inflation target since it announced it.

There is a real risk that we stay below the target for many years.

You have come out in support of the next fed chairman.

What do you think will be the biggest distinction between janet yellen and ben bernanke?

I don't want to over emphasize anything.

There is an enormous income -- in norma's the, navy -- in norma's economy between the two.

You have communicated with the public, with "the new york times," and in your other writings, much better than most economists.

Why have -- what is the struggle in speaking to the american people?

I spent six years learning how to become incompetence a book.

You have to become bilingual.

Most of the people that have bested one language are not very good at another.

You have to be social savvy, too.

He is big on twitter.

Justin ran the marathon.

A quick data check, we look at equities, bonds, currencies, commodities again.

The ecb meeting on thursday, futures like it, up four.

The 10 year high of that she 10 year yield is higher than a week ago.

-- the 10 year yield is higher than a week ago.

97. the 94 .54 for crude.

We have health care with gruber and m.i.t.. coming up, we will talk about the status and king -- the state of banking.

Justin wolfers, you know him on twitter.

It is the incredible sink -- incredible shrinking u.s. deficit.

Good good news.

I am struck by how much the deficit continues to dominate the conversation.

A b in 2009 it was two percent of gdp.

We just saw 4.1% of gdp.

The deficit is at the same level as it averaged under president reagan.

A lot of people talking about more stimulus.

Matt schapiro has done terrific work, saying maybe it works, maybe it doesn't? does the stimulus work?

I think that is a grilli good question to ask for or five years ago.

Economics were flat-footed.

We had a massive experiment with the stimulus.

It had different effects in different states and different countries through time.

What we have learned since then is it strengthened that it strengthened the case that fiscal policy can be good for an economic -- that is strengthened -- it strengthened the case that fiscal policy can be good for an economic downturn.

In michigan we are in intensely empirical place.

We generate data there, we crunch data, and what we want to do is use economic theory as a lens for processing data.

The challenge students are going to face is different than what you and i faced.

You grew up in an area where data was scarce.

I grew up in an area in my students are growing up in an era when there is a tidal wave of information coming out.

What they need is economics as a framework for interpreting that data.

M a are you saying -- are you seeing -- are you seeing that insight from washington?


It is one of the most depressing times to be an economist.

There is an enormous is connect between what we know how to run in economy and what the clowns in washington are doing.

I have never seen a disconnect any larger than currently.

You ran a marathon, that is very cool.

Coming up, this is an important conversation.

A conversation with dish network chairman, charlie ergen.

Will you be able to watch espn on his different properties?

Them our guest host for the hour is just and will first of the university of michigan.

-- this justin wolfer from the university of michigan.

Mohamed m--more than one dozen members of his muslim brotherhood party are on trial with him.

A growth forecast for the united kingdom is raised to the confederation of british industry is printing the economy will expand 1.4% this year.

That is slightly higher than earlier forecasts.

The business lobby says the u.k. recovery appears to be more solid than previously thought.

And his game to the top spot for the weekend and the box office.

The movie took in $20 million for lions gate entertainment.

The comedy bad grandpa was second.

Those are your top news headlines.

Bad grandpa can make a nickname for suspect that can be a good nickname for surveillance.

Keep it up.

Just joking.

Barclays is among five major -- five major banks who suspended currency traders and made a program to market manipulation.

It is hard to keep track.

Them a it is a -- it is a parlor game of regulations.

He has observed our national bank follies from the university of michigan.

Running us is rather from sanford bernstein.

-- joining us is brad from sanford bernstein.

It just never ends.

Let's talk about the foreign exchange brouhaha.

How would -- how serious is this?

It is going to change the market.

You are going to have people watching how the market is made.

I am not certain it is going to lead to large class-action litigation.

The reason is foreign exchange is -- it does not have the secondary effect of libor.

For our american viewers and listeners, this is a big deal.

Compare this foreign-exchange mess with libor.

Libor is much larger.

That is because libor -- if you are manipulating libor you are manipulating the prices not only on your loan but the entire derivatives market, plus the list of derivatives market is in euro dollars.

It is flowing across the board to we are only now beginning to get class action actions in the libor case.

The class action issues are going to be interesting.

Remember many of these are matchbooks, libor on one side, libor on the other.

Will the courts bifurcate the books?

If they allow that, this is a huge deal.

Is complicated and just one in a slew of investigations and potential hurdles and lawsuits.

Are they becoming a bigger headache than the interest rate environment for banks?

I guess because litigation is so opaque the market tends to overreact to it.

I look back to spitzer and the analyst issues, which is negotiated settlements were terrible on the thanks stocks.

In the end they turned out to be a good time to buy the banks.

This too shall pass.

If you look at the 12% settlements that you got -- that came out with gpm last week, 12% of a claim amount, underwriter costs liability is pretty percent.

-- the underwriter's liability is 20%. as we look ahead to the banks and what they should be focusing on, james gorman, the ceo of morgan stanley, spoke with erik schatzker on market makers about capital levels.

He listen to what he said.

We have been conservative the last several years relating to capital and capital management.

At times we have credit -- we have been criticized for that.

Job number one is to get capital base in prime shape.

Number two is to create enough earnings were you can position yourself for incremental capital buyback.

We just started that program.

We are going to take a very balanced approach here.

That isn't exactly the cost of capital, is it?

Use of cash is a big debate.

What should be the top priority of a gorman versus a diamond, versus a blank fine?

Demo they have to return on one side and they have to make sure the risks levels they are taking is below another.

The theme for the week -- the london school of economics talks about the struggle for profitability.

Are these banks going to be profitable after eight quarters.

The normalized earner, they always talk about normalized earnings.

When is it going to occur?

-- innocence, yes.

-- in a sense, yes.

We do not have booming trading with the markets should have been supporting fixed income.

We do not too badly when the markets went again fixed income.

M a we are going to get you back for longer-term.

Coming up, trying to be profitable and please its customers, can they make it work?

Let's get you some company news right now.

Third-quarter pretax profit at u.k. bank rose 30% to $4.5 billion.

60 businesses have closed, slashing 46,000 jobs over three years.

It is one of several banks under scrutiny in that growing investigation.

Warren buffett's focus on power and railroads, the big boost to the bottom line.

Mid-america energy made up 40% of the company's operating income last quarter.

This is according to a regulatory filing.

The two companies generated 30% of brookshire's profit every year since 2010. blackstone making an even bigger bet on china.

Blackstone will invest $400 million in the company according to people with knowledge of the matter.

Another story we are looking at, the ongoing negotiations between dish network and disney.

The two companies are trying to hammer out or renew their contract a month after the last one expired.

The question is art this customers at risk of losing espn?

That is the crown jewel of every cable network.

That is what everyone wants.

There is clearly a lot at stake in al hunt sat down with charlie ergen in an exclusive interview.

We have had a lot of good talks and negotiations.

I am cautiously optimistic.

It has not been our best relationship.

Disney has not been our best and our focus is to go out to make that the best relationship going forward.

This contract expired on september 30. the big snag is over the ads giving technology -- the ad skipping technology called hopper.

I know justin, our guest host, house some strong thoughts on dvr.

It is amazing the technology shift folding into finance.

Dvr is one of the greatest inventions.

Here's the simple logic, you can watch our tv show in 40 minutes.

The average american watches three hours of tv in the night, we can make that get done in two hours.

This is the equivalent of getting four years added to the end of the 100 year life.

I think you go one more tv.

As long as it makes them happy.

I guess it is revolutionary how you pay for hollywood.

There was a big issue on going forward.

We all pay for it by sitting in front of the tv grid i like the new york times angle.

This isn't broadcast fees.

This is over the future of television and digital and the way we watch tv.

There is so much at stake.

Neither side wants to give up too much.

How does this folder into your observation of how we behave?

We want to watch three hours of tv and two hours -- in two hours.

We would like the continent to be creative, whether it is the new york jets or new orleans saints.

There is a distribution issue.

Is very eager that mary e gallant terry and.

You have to do that with warren buffett or whether you are a working last show.

-- working joe.

Research shows that fees will increase by 1/9. hbo works.

I will go with that.

If you are not willing to pay it it is not producing at all.

Isn't that the basic logic of the market?

Espn is so valuable and people are so attached to their sports.

That applies the style going forward.

If dish loses espn it loses a lot of customers.

This is a basic offering of any cable package.

The road hallow -- wrote about how -- m a will was it like your first michigan football game?

It was fantastic.

They kept interrupting the dan segments for the big blocks to go run into each other.

The university of michigan had a bad loss.

It was dreadful.

Are you impressed that i know that?

How did you know that?

It was on at a bar in a restaurant.

Sara eisen was at a bar.

A data check, here is scarlet fu.

Let's take a look at how futures are trading.

Four straight weeks of gains for u.s. stocks.

Five points higher for s&p futures.

The 10 year yield at 2.6 one percent.

Remember the big ecb meeting is coming up on thursday.

There is talk that the central bank may cut interest rates as early as thursday.

Good morning everyone, bloomberg surveillance.

Bloomberg radio plus out on itunes and android.

With me is sara eisen and scarlet's -- and scarlet fu.

He ran the new york marathon , just in wolfers.

Ryan air cut forecasts.

It is the biggest and most profitable airline in europe, trying to be a bit nicer.

Michael cawley is our guest.

He is the ceo at ryanarir.

I have flown them, perhaps some americans have not.

It is no thrill preview get what you pay for and you pay a very cheap sticker price.

Why are you trying to be customer friendly and catered to a nicer and gentler audience?

We have always been customer friendly because we are the most popular airline in europe.

We carry 81 million passengers.

It is being highlighted that we are making some changes.

I suppose we are making changes right now.

We will begin quite a high level of growth from september 2014 onwards on the back -- we want to find an offer a little the closer to what our customers are telling us and make some fairly modest changes.

Been the most popular airline, you run the risk of alienating and losing a lot of the reasons why you are already popular.

Do have evidence that friendlier and customers -- that friendlier customer service sells more tickets?

The way i shop for airlines is by price.

I think we are in a commodity business.

We have the best service in terms of punctuality, the least flights canceled.

This trip will crown a service.

We have beaten all the rest carriers and all of the european carriers for each of the last 10 years.

However there are some things around the edges like allocated seating and excess charges for reprinting of boarding passes.

Which we are going to reduce and change over the coming months so that we can more popular with our customers.

Does that mean charging for toilets is completely off the table.

That was something you were considering a couple of years ago.

Did you seriously consider that?

We were trying to create more space in the cabin by putting more aircraft in, taking over the -- taking more seats in, more revenue-generating seats, lowering the cost for all passengers as a consequence, and perhaps losing one of the bathrooms in the process.

We are simply highlighting the fact that the cost to do anything and the value, i can then transfer to my passengers.

You are going to charge me extra to watch transformers on ryan -- on ryanair.

We are too busy taking advantage of the biggest travel opportunity on the planet.

Am i you can do like virgin atlantic and why not do a transatlantic -- the bilaterals on that -- we have complete freedom fight in the new countries.

We have the complete freedom to fly within those countries without speaking to a governments are not consulting with anybody -- with a buddy.

-- with anybody.

In dublin, shares were down 12%, a disappointing forecast for investors.

What would you tell people that have been on the ryan of space air ride?

-- ryanair ride?

Them i would regard the shares of the current level as being at an excellent value.

I think the management has a very big position of this.

All of us have a huge vested interest in making this work.

I think it is determined trend is long-term opportunity.

We have a cute -- we have a huge cost advantage.

Thank you for joining us.

Michael cawley is to ceo -- is the ryanair ceo.

Market makers on bloomberg television.

Ally han drove padilla of puerto rico -- alejandro padilla of puerto rico today at 10 am.

I got kurtosis between my toes.

Kurtosis of the market.

It is the commonwealth of puerto rico.

We are going to go to new york city.

The marathon was held yesterday.

Our guest host ran and it.

It turns out there is a fascinating difference between the way men and women run the marathon.

That speaks to behavioral economics.

It is not just that men are from mars and women are from venus.

The way men approach things is they need an external target and push themselves towards it.

Women just focus on doing their best.

The yellow chart is men.

It shows how they are focused on an marathon.

Four hours, you can see the spike there.

There is definitely peaks in the round numbers, whether it is two and a half hours, three and a half hours, four and a half hours, etc.. women have a slower distribution of their time.

Reportedly they are focused on just getting the best time possible.

You use round numbers as targets.

They are going to run at up to 58 or 359. pam is janet yellen not going to risk a large number.

Women run better strategy in marathons on average.

What you want to do is what is called a negative split, run the second half faster than the first half.

Men go out too fast the first part, motivated by their goals and -- tire themselves out.

Women when -- women ran faster in the second half.

I ran a really good first half.

The second half iran in very slow.

-- i ran in very slow.

I was looking at a 352. we look up everything.

Researchers everywhere.

It is out on twitter.

She is in awe of your marathon time.

What do you do with your hair when you run a marathon?

I start with pigtails and then at the halfway point it is a ponytail.


The economics of america.

This is bloomberg surveillance.

Our guest host this hour is justin wolfers.

Time now for some company news from the files of bloomberg west.

Nokia and samsung extending a patent deal for five years.

This new agreement starts january 1 and calls for samsung to pay nokia licensing fees.

The deal is approved for nokia, who tried to generate income after selling its handset the vision to microsoft.

A deadline to determine blackberry's future.

In fairfax financial has until 9 p.m. today to make a more definitive offer for blackberry.

They made at preliminary $4.7 billion offer.

Today's deadline will push fairfax to show just how legitimate its offer really is.

And alcatel lucent trying to drive up its share prices.

They want to raise $2.7 billion in stock and debt.

The stocks have doubled in the last seven months before today's trading.

That is company news from the files of bloomberg west.

The latest dispute over obama care is the upcoming cancellation of thousands of low cost and low coverage insurance plans.

Republicans say it breaks the president's promise that the people can keep their plants.

The white house calls the plants substandard and no longer legal under the affordable care act.

Jonathan gruber is the economist that loves to say -- he was a key adviser on romney care.

He was at m.i.t. where he was covered by a cadillac plan.

John, let me start with you.

What is the distinction between a romney-care and what we are seeing right now?

Is this better than romney, or the same plan?

It is the same plan.

It is fundamentally trying to leave people alone if they love the insurance they like, by and large, and try to fix the system, which is fundamentally broken for people who do not have insurance from their employer, by ending the ability of insurances to discriminate against the sick.

In massachusetts we cover two thirds of our uninsured with broad support.

It will be successful what to get up and running nationally.

I wanted to get your thoughts on the latest flareup, that is the jobs coverage.

How many people will this affect and our republic -- and are republicans right to get angry over it?

Let's start with the facts, the vast majority of americans are unaffected.

The minimum benefits are less generous than what everybody has in employer insurance.

The only people affected are the small minority, about four percent of americans who buy their insurance on their own, the individual insurance market.

In that market, about half of those people are two percent of americans read they will ask -- they will be asked to buy more generous insurance.

It is often misleading, people will get the dem than the policies.

Actually, there are some americans they'll have to buy out.

They are buying out for good reasons.

The los angeles times, writing brilliantly on this -- why do we hate change in public policy?

Everybody is screaming.

John says the changes are not that great.

We have some pretty strong interest rates here.

The screaming is not coming from the people who are going to be covered by a obamacare.

There is a huge expansion of insurance for people who do not currently have insurance.

Those people are not represented in the debate.

You have a small number of people who are getting their policies changed, in many cases improved.

You have a much larger group and potentially we're are going to lose money.

Michael schultz destroyed this debate about five days ago.

No matter how you look at the debate.

14% of americans are now going to gain access to insurance.

The technology is not there and it does not work, with

This is out of your expertise but how big of a threat is for this in the actual law for the longer-term as a continuous?

I think it's a long-term it is a threat but we have to recognize the timing here.

We are panicking over very short term numbers.

The first month in massachusetts that people could sign up, 120 three people dead.

Now it is 36,000. march 1 is the day the individual mandate becomes effective.

Them and if we do not have a functioning website by then will we have two -- have to delay mandate?

Pamela it's defined what functioning means, you don't have to and roll over the website, you just have to shop over the website.

It is something people can go on and shop effectively.

Justin has a question for john.

A looks at about four percent of the population are going to have to change their plans.

You tell us half of that?

Sure i can.

The other half really consists of three groups of people.

One group is people buying sham insurance, insurance which is not really insurance.

It leads to in potential financial encrypt.

The second are individuals that have insurance that does not cover key benefits.

The third is benefits that have enormous did dr.

Bowles, $15,000 deductibles.

That is where michael he'll take went when -- what would do or governor romney advise the president to do to drive forward this debate for the benefit of all americans?

I think the president needs to recognize to fax.

-- recognize two facts.

This is a prophet i call incremental universalism.

It is getting there incrementally.

80 plus percent of americans are not touched by this law.

The winners vastly out number the losers.

There are many times more winners than losers know matter how you find.

Just because one or two people are getting letters or a small enough people are getting layers, that is a small price to pay for the millions of americans that will have financial security.

I just want to mention you are already getting hate mail here in at bloomberg surveillance.

Thank you for eliminating some of these issues.

Jonathan gruber is a professor at m.i.t.. that brings us to today's agenda, looking at the major stories shaping the day.

Thursday, i am not sure what the ecb will do.

All eyes on economics -- the work radio plus, bloombergtv plus out on the ipad.

This is a huge deal to see inflation come in.

Is it a critical point on inflation or is the fed and other institutions, do they have time to observe what happens?

Would start with the ecb, when you have an employment at 12% and inflation at one percent -- have unemployment at 12% and inflation at one percent and falling, you're doing it wrong.

As much as we can it be upset about the fed here we are not systematically creating -- they should lower rates on thursday.

They should do everything they can to pick the european economy back up to inflation is too low.

They also have a rate decision to make in december.

The ecb out on thursday on our agenda.

Scarlett has to between her.

This is a big week, the final week of the roadshow.

On one say the company will price its shares and on thursday it will trade in the new york stock exchange.

Of course this is a much smaller offering than facebook.

And that -- in the back of everyone's minds we will take a look at how it does.

It is a big deal for the ipo it is the most heavily anticipated -- related to this, this morning is jobs day

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


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