tv In the Loop With Betty Liu Bloomberg August 22, 2014 8:00am-10:01am EDT
defeated by taking on the group .n syria sales rose at old navy, gap says it will open its first branded stores in india next year. day two of the fed summit in jackson hole, wyoming. interest rates our dinner conversation. mike mckee has a chance to talk about this with current princeton professor alan blinder , his is the economy maybe at a turning point. >> the economy maybe at an inflection point. not a dramatic inflection point. we are not jumping up to 5%, which i would love. if you think about the first half of the year, with the data we have, an average of 1% growth
. the second half is looking more like 3%. i think there is a reasonable chance that that 3% chance carries over. >> mike mckee is at jackson hole with more. talking about 3%, how is that an inflection point, why would 3% be something we should be getting excited about right now? >> it is not so much the level itself, that level continues into next year. quartersad some good followed by bad quarters. what alan blinder is talking about is the idea that the economy is finally at a point where it will grow on a self-sustaining way. that will cause the fed to finally feel it is time to raise interest rates. that is what everybody has been watching for from janet yellen, whether she makes an allusion to that kind of situation. >> what is the timing and terms of when rates go up? will be mid-2015,
you get the same answer when you talk to fed officials. i talked to a number of them say weay, they all are economy dependent. if the economy gets better faster we move more quickly. it is the opposite dilemma that the ecb president mario draghi has. a lot of people are going to be watching him closely. he is in a situation where his economy is in trouble. he may have to move faster. i asked alan blinder how does this play together, these international moves by these central banks, do they affect each other? >> the interest rates in all countries are going to react to the fed. we're going to get blamed -- not me, janet yellen. that, we are the 800 pound gorilla on the current bloc. whatever the -- on the economic block.
are some countries where it may seem appropriate to start the exit now. maybe england is one. there are many others, like the eu and japan, this is not time for exit. i do notxtent, exaggerate, they make their own fortunes. they're going to get dragged by the fed. and so, it looks like whatever janet yellen says going to have international repercussions. not just here in the u.s. >> we will be watching mario draghi carefully and closely as well. thank you, mike. checking back in with you soon. we want to move overseas, ukraine calling on this international partners to condemn the russian convoy across the border into the country. 150 trucks carrying what russia says is solely humanitarian aid without a red cross escort. we want to get more with hans nichols, joining us from berlin. me about the
diplomacy that happened over the weekend and how this latest development might affect any negotiations between the two. >> angela merkel scheduled to arrive in kiev tomorrow. if you want a sense for how difficult these negotiations are going to be, that is going to be on tuesday when president putin and president poroshenko will be meeting, look at what is happening on the border right now. let me explain the situation. you had an agreement between the red cross, ukrainian officials, and russian officials -- are the ukrainian and russian side, the customs control agents. the international red cross did not feel as if their safety could begin to. -- could be guaranteed. ofese trucks, 34 or 150 them, reports differ, they were not allowed to go forward because the red cross decided they do not want to accompany them.
we have a relief convoy being driven by russian troops into rebel controlled territory where the road has been cleared and is being protected by rebels. but with the ukrainians say is that they cannot guarantee the safety of this. this conflict would essentially be used to resupply rebel fighters. also, potentially -- this is crucial -- it could be used to fan out in a city like luhansk. if you had a bunch of convoys and trucks spread out, that would impose an effective cease-fire. ukrainian forces feel like they are awfully close to taking some of the cities. overall, the most dispiriting part aside from the fact on the ground of the breakdown, hot rhetoric coming out of kiev. saying this is a clear invasion and violation of international law. we seem to have taken several steps backwards. >> what kind of support of a going to get from europe to help combat this? >> earlier today in interview
with broadcaster -- earlier today in an interview in berlin, the ukrainian foreign minister talked about a merkel plan, a clause like herschel -- a quasi-marshall plan. they want ukraine to become more european. there may be elections coming shortly if they decide to dissolve the parliament ai in weekend. the with the ukrainians one is pressure on russia for additional sanctions if this is deemed by international authorities an invasion. >> the death toll in syria's civil war has doubled in the last year to 191,000, confirming what many has said, an imminent
threat to the u.s. and europe. secretary of defense chuck hagel emphasized the danger islamic state poses at a briefing thursday. sophisticated and as well-funded as any group we have seen. they are beyond iteris group. -- they are beyond a terrorist group. they marry ideology and tactical military prowess. they are well-funded. this is beyond anything we have seen. how -- >> how should the west confront this? former cia director john mclaughlin joins us. how would you characterize islamic state and the danger it represents? >> the way i think about it -- [no audio] al qaeda -- >> we're going to check your
audio and try to fix that. having some difficulty hearing you. we will be going back to former cia deputy director john mclaughlin. day inup, jackson hole's the spotlight. janet yellen and ecb president mario draghi speaking there today. what effect will they have on the markets? changing the phase of golf, can anyone make it cool again? we will be right back. ♪
talking about the islamic state and the danger it characterizes to the u.s. and the world. >> let's compare it to al qaeda before 9/11. damage.sed her and this this group has qualities that al havingould not imagine today. secretary chuck hagel indicated they controlled territory. they are very wealthy, literally hundreds of millions of dollars as a result of everything from kidnapping to bank robberies. they have access by virtue of the fact that they have literally thousands of fighters with western passports who can europeeely in western and come here. there are approximately 100 .merican among this group finally, i think they have a motive. they have a motive to attack in the sense that they are a direct competitor now with al qaeda. they want to show up al qaeda. attacking us here or in installations overseas is one
way to do that. . they also have allies. terrorism today is a network of networks. there are many other groups, including the one in yemen, a dangerous one that they can draw on for bomb making. it again so much traction in a relatively short amount of time? >> that is a complicated question and a complicated answer. the short version is that by virtue of the syrian civil war and the fact that there was in the syrian civil or very little west, this by the was their training ground underground for gathering strength. aven, almost a safe h much of the constitution by assad -- much of the was onration by assad
other groups. they gained a great deal of strength. they are a direct descendent of a group we dealt with in iraq, then called al qaeda in iraq. one of the toughest terrorist groups in the world. at that time, prior to his defeat, it was on innocent past. many of those people have passed on to this group, they see themselves as the heirs of that. they have experience in urban warfare and they have a lot of money. in syria, they gained control of the largest oil field in the country, another source of funds. >> what is your advice for the government, what do we need to do to combat this threat? >> i've written a number of pieces, yesterday secretary hagel said that a number of us have been saying. there are four or five things you have to do, defeating it is the wrong thing to think about it. the gradient over time, the way we have with al qaeda --
degrading it over time, the way we have with al qaeda, is the way. you got to go to serious, destroy leadership and deny a safe haven. they're able to run back into syria where they can remain unmolested. thatve got to go there, probably means airpower, not goods on the ground. -- boots on the ground. >> former cia deputy director john mclaughlin. ofning to our coverage jackson hole. i want to bring into economic , chief u.s. economist at barclays and head of u.s. rates and economic research. can she say anything that is going to move the markets today? do you believe she will say anything that might move the market? >> there's always a chance that markets will take her remarks one way or another. i don't think she is consciously
going to try to do that. we would expect her to take a familiar dovish tone that we have all become accustomed to where she talks about lots of slack in the labor market, various indicators, her it is beings called. that is what we think will be emphasized, given the theme. it would be quite abrupt for her to change gears and say she thinks the labor market is back to normal now. >> what might she be able to say about the labor market that will give you some insight into her thinking? toone of the things we have emphasize is that when you look at policy debates right now, there is a consensus view that we're getting close to the timing of when we should raise rates. it is about a difference of time. janet yellen, this is her exit strategy -- she is not loath to raise rates, she is loath to raise rates prematurely. she is saying that there is no
smoking gun. the unemployment rate is around 6%, there is no wage inflation. something she is going to emphasize today. pricing for this. what we need to see is someone she is going to characterize wage inflation. will she think that 3% wage growth is the time at which it is appropriate to raise rates? 3.5%? a verys 3.5%, that is dovish signal. from my own view on the outcome, the market is so completely pressed for risk for low rates and for an extremely dovish janet yellen, the scope for her to qualify her dovish message is greater -- >> it is pretty incredible when you think about everything the fed has done over the last nearly six years to try to get this economy going. such accommodative policy, and we do not have any wage inflation, how can that be? we arewage inflation
seeing right now is about what we should expect for a 6.1% unemployment rate/ . if you go back to 2000 four, we had very similar wage inflation. we only hit 2.3 as the tomployment rate went down 5.4%, we are seeing it sooner. that 21994, 2.5% when the unemployment rate was here. not terribly shocking that wage 2.5%.ion is 2.25% to she's going to talk about employment and jobs. are we going through a structural shift? should we anticipate we are going to be in a weak labor market for the foreseeable future until we can iron out the of these changes in economy? have the right benchmark. i would emphasize the right benchmark is not the peak of the housing bubble, to try to get
the labor market back to where it was then. that was unsustainable and i do not think that is realistic. there is a structural shift happening, in particular, a shift towards part-time jobs and away from full-time jobs. u-6ould not expect the unemployment rate to go back to where it was before the recession. >> ever? that really is a structural shift. >> we are shifting more and more jobs into the service sector, where part-time work is more prevalent. the affordable care act may give incentives to the players to keep workers part-time. >> we might actually see more workers choose to work part-time. because they can get health care via the government. >> absolutely. there's a lot of talk in terms of part-time work. if you look back at the last two years, the amount of full-time jobs has outpaced our time work.
it is not as if we are not making progress. this is a key underlying theme. i don't think we're going back to where we were. inmacare, we have issues terms of automation, robotics, skills mismatch. all these different things suggest you are not going back to where you were before. it is a function of momentum and progress, where is that tilting? tilting towards a better outcome. when you read her lips -- >> the dashboard or the lips. tone,is in terms of the issue becoming more optimistic we are getting to where we have to be. this is not the same type of recovery. at the end of the day, this recover operates at two much leverage. you need more growth, more inflation. if there is no smoking gun, you will not raise rates. any optimistic signs. thank you so much. we will be back with+++
loopu are watching "in the ." i am trish regan, and for betty liu. our top headlines -- traders betting argentina will have to do value the peso for the second time this year. the peso fell more than 1% against the dollar this week. how argentinaith will pay bond investors. a new ceo at home depot. the current ceo in november. profits increase for five straight years. a fight between al gore and al nasty. is getting the former vice president demanding al jazeera turn over
$65 million it still owes from buying al gore's current tv channel. accusing al jazeera of making up reasons not to pay him. he says the channel needs to settle with the cable operator. bloomberg is "on the markets." a mixed futures. market. jacksony ahead in hole. janet yellen speaking and mario draghi. seeing if we can get clues as to what the fed and ecb may be doing as we move forward. "on the markets" again in 30 minutes. a manhunt underway for the islamic extremist who murdered an american journalist james foley. among clues, the video showing the killing. chief washington correspondent peter cook has more. do authorities believe they have much to work with your? know, the executioner
didn't have a mask on. trying to hide his identity -- they left some clues behind according to a challenge officials who have looked at the video. heormer french hostage say may even recognize the man as a british jihadist who he referred to as john. i spoke with a former cia case agent to get an idea of what investigators are looking at. me technicians will scrub the video for metadata, looking for a timestamp -- location of the computer used to upload this video. they want to know who downloaded it, that could provide clues. they will focus on the video production. style shooting in broad daylight is very bold and unusual. it tells him they were not worried about being spotted from the air or drones. that and the desert background suggests that it was shot in syria away from the iraqi
border. if they can get more on the time and location of foley's murder, they can look for communication traffic around that time, a critical component. maybe the best clue is the voice on the video itself. >> this is james foley, an american citizen of your country. >> the british voice with a slight accent suggests he is from the southeast of england, most likely london. the audio will be matched to databases. u.k. intelligence officials tells us it is possible the voice and the man in the video are not the same person. to hear all this information and know what kind of clues they will be looking at. at the same time, do authorities eun the risk that thes terrorists are going to be able to get away because there is so
much information out there? how do you balance this? >> there's a lot of information but there are clues within this video. that is important. this was bold, but they did leave some telltale marks. 'se is the executioner physical appearance. there are things that they can determine from the images. there is no chance for a retinal toch, but eyes can lead facial recognition. 70% of the face is the eye area, that can be all they need. left-handed. be it is difficult but possible. all they amazing, things they are able to use in terms of technology, thank you. i will be talking to you later.
staying overseas, a boomtown in iraq, pouring billions of dollars into erbil's real estate sector. the threat of islamic state has put these ambitious plans on hold. >> just a couple hours from the iraqi conflict zone sits a small slice of the american dream, kurdistan's first self-sufficient -- subdivision. >> how much would one of these houses cost? $300,000.$250,000 to splits his time between northern virginia and northern iraq, where he founded american village outside the kurdish capital of erbil. >> developments in the gulf area, in lebanon and turkey,
they start to move to do business. and a european received funding from a private lending arm of the u.s. government. sectarian violence hardly encouraged outside investment. the oil economy has helped erbil develop supermarkets and high-rises at an unprecedented rate. >> oil companies are very important to improve the economy. staff members and family members of the oil companies, this will create cash and business to the area. >> many of the city's cranes area still, construction projecs are on pause. >> when isil attacked the made people, it
worried. people start to not invest their money in real estate. >> in 2012, his most expensive property sold for $600,000. local kurds, including government ministers, bought properties, hoping to rent them to families of employees of companies like gazproms. at least 10 homes are now unsellable and 70% of the communities ex-pats have been driven off. >> there is a slowdown. >> the café caters to fewer customers, leaving developers to debate kurdistan's future. >> business needs political stability to run. iraq should be stable and then we will boost business. >> across the region, stability may not return for some time. >> villem marx joins me from
erbil. tell me about the development there in terms of the regulations, government funding, you mentioned some government funding from the u.s. where else are they getting money to build? a lot of these big companies really have seen the boot time -- boom time in 2003. a lot of businesses involved in real estate made a lot of money contracting with the u.s. army starting in 2003. after the u.s. pulled out, they had a lot of cash laying around and they started to diversify. in terms of regulations, light regulation would be a fair description. >> do any entrepreneurs anticipate that they would be facing this kind of difficult situation? a question i asked a
lot of them, all of them said no. we have no idea this would happen. kurdistan has always been the safest part of iraq. this has been a gold mine, they have been making money. to suddenly have that threat and to have foreign oil companies say we do not want to work there is a real challenge. outside of the reluctance of other investors to be there and of the violence itself, based on conversations you can happen with the business community, what else did they say makes it very challenging there? what is really interesting to me, the idea that everything here relies on cash. you cannot go to a bank and get a loan to start a business, you have to build up cash reserves and invest them. when you are looking at 200 million dollar projects in real estate development, that is a huge amount to have lying around under a mattress. >> thank you very much, joining
>> waiting on janet yellen's speech out of jackson hole, wyoming. our next guest has a message, be realistic about systemic risk. martin feldstein issued a warning in a recent op-ed in "the wall street journal." mike mckee is there with him at jackson hole. good morning and thank you very much, dr. feldstein, for being with us. referencing your recent op-ed about the dangers of financial stability. to pull awayarts
here. do you expect that to be something that janet yellen would address here or sometime soon? how high is it on their agenda? >> she did address it to her speech at the imf, she said there were serious potential problems with instability, ms. -- mispricingets of assets. the question of whether there are the tools in place for the fed to do that. be whether they shouldn't thinking harder about the way that the low interest rates are a source of instability. >> does that play into what she may say today or after the september fed meeting in terms of what the fed is going to do?
the markets seem to be leaning that would be a dovish move. a 10 year note yield is in the 2.3 range. >> definitely contributing to this instability. i cannot begin to guess what she is going to say a little while .rom now i would hope that after the september meeting, they will focus more on the question of instability. since they would lay down the it is not on terror policy, it is prudential regulation. that would be a rapid shift i don't think they would do it that quickly. of fedpapers print views officials on a regular basis. we have heard from a number of toos, do we make much of their views? is it janet yellen who drives
the process? typically, is respectful of the chairman. the center of gravity is shifting towards the view that labor markets are tighter, inflation pressures could grow and therefore perhaps sooner rather than later is the time to start raising interest rates. >> what does that mean? that seems to be the fulcrum around which the whole debate revolves. july.me, march, not getting the markets ready by signaling -- they have indicated that they are data-driven and there is uncertainty. if they were to send more specifically that we could move in the first half of the year, i think that would help markets to be less shocked if and when they decide, which i think they should, to do that. >> alan blinder told me that markets only do one thing,
overreact. are you concerned the fed will not be able to control market rates when they start talking about policy rate changes? find themselves unable to control the long rate, , regardlessate of when and if they raise the short rate. as inflation indications come out, the market is going to push up the 10 year rate and the five year rate regardless of whether the short rate is kept at close to zero. have toigh does it clos go to affect the economy. we are at 2.3%, that is really low. >> it is that leads to a lot of seeking for yield by going out the curve, by taking lower quality loans, by buying junk bonds with narrow spreads. it is important for that rate to
move up from this very low-level. >> quickly, is the market going to move today? what is your bet on janet yellen? >> i would be surprised if this is a market winning speech. >> martin feldstein, thank you for coming out here. back to you. hopefully it is warmer in new york. >> thanks so much, live from jackson hole, wyoming. theng up, golf looks for fountain of youth. the game needs young players, will golf find them? some ideas. ♪
kids grew up where watching tiger woods, you would think golf would be on the rise. participation rates between the 18 and 24 fell. playing, it'sare all about detail. some savvy folks from the tech world have found ways to record detail. the tcu. before we get into what your company is doing, tell me why --ng people are not playing is it too expensive? >> the number one reason, there was research asking people why millenials are
dropping out, the number one reason is golf is boring. pickedline in golf got up by running and cycling. if you see the explosion and cycling and running, we think it with the factted that quantified self has taken over those sports. that, coupled with a fitness trend, that has really excellent rate of growth. our product will bring the quantified self aspect. >> golf is hard. i've late since i was a kid on and off. it is a really hard sport. it's a lengthy sport. chunk ofis a good time. i would also say it is a thinking sport. you really have to think about every single move you are doing.
we have a few ideas on how to make golf a little bit more fun. one might be to make the hole bigger. >> that snyder that has been discussed in the industry. another issue is the learnignc learning curve, you are always measuring yourself against whoever introduced you to go off and has been playing. we are focused on making it more fun for beginners. you are tracking your score, how many good shots and bad shots you hit. more fun. >> one of the most amazing things is that you can have a terrific shot. you will have one swing that is phenomenal and you will send it straight down the fairway. and then, this is my experience, the next thing you know you are off in the woods. it gets frustrating. you are working on technology to help us duplicate the good strokes there and get rid of some of the going off into the wild. how does that work?
>> it is a set of 14 sensors i would say this athletic intelligence platform we have created. it pairs with your iphone and records every shot you take. by recording every shot you take, we give you all kinds of statistics. we record your golf round and are able to quantify your strengths and weaknesses. here's a round at winged foot, i shot a 79. >> is that good? >> 79 is not bad, especially at winged foot. my number one weakness was my approach game. at providing that level of analysis to golfers, we will tell you what your strengths and weaknesses are. where you need to work, where you are really good and really bad. that kind of detail does not exist in golf. >> it makes you want to play more. practice improves and makes
perfect. once you play with the system, you almost are attached to it and you do not want to play without it and you end up playing more. >> is it an app? >> it's an app with sensors? >> you put sensors on the club. >> yes. one sensor for each club. we record the location of where you took each shot. we can show you visually how you played each hole, this would explain it better. here's the first hole i played, it shows you i hit my drive 253 yeards, then 163 yards. >> no sensor on the ball? >> it's on the club. >> we wish you luck, hope you can make golf cooler. arccos golf cofounders. speaking of tech in sports,
>> time for bloomberg's big num many423,000, how multifamily apartment units monthin the u.s. in the of july. only two other times in the last 25 years have apartments gone up so fast, the first time it happened was in february 2000, bubbleefore the dotcom burst. the second was january 2006, on the eve of the housing bubble is closure. have any this does not
of those trends. read more in the latest edition of "bloomberg is a sweet -- "bloomberg businessweek," download it for free on our ap., 56 minutes after the hour, bloomberg is "on the markets." happening on here, a day when we anticipate some news out of janet yellen. she's speaking in jackson hole, wyoming. the big event for the fed, expected to make comments on employment and structural issues in the job market. we will be watching carefully for that. family dollar says it is willing to consider a $9 billion takeover bid from dollar general, a twist in the dollar store battle. you are watching ""in the loop," i will see you in two. ♪
>> good morning. we are 30 months from the opening bell. we are "in the loop." here is what we are working on. open lower.y to the s&p 500 is starting the day at an all-time high. a big acquisition and the power industry. and, there is concern that the eight convoy that entered ukraine will lead to more fighting. david two of the symposium --
, andwo of the symposium janet yellen's speech happening in less than an hour. michael mckee is at the symposium. cited this week labor market many times. protesters there really driving it home. get moreshe try to people back to work in a time when the economy is not going that fast? balance sheet question. the fed has done just about everything it can do. we talked with some of those protesters yesterday, and it isn't clear if they understand the role of the monetary policy. they believe that if you raise interest rates it will hurt the economy at this point, and there
are arguments to that effect. but there are groups that we would be better off with rates starting to go up. at this point it is a moot point because the fed is not raising rates. the question is when do they start? the protesters are not want them to do it at all, but it is beginning to look, with the market improving day by day, that the consensus view of late 2015. we spoke to harvard university economist and he makes a will, the first quarter of the year. fed typically is very respectful of the views of the chairman. but i think the center of gravity within the open market committee is shifting toward the view that labor markets are tighter, pressures could grow and there perhaps sooner rather than later is the time to raise interest rates. everybody will be looking this morning to see if janet
yellen follows of those kind of comments with the views of her own on what the timing should be. most people we speak to do nothing she will venture that far. great you have the protesters out there, saying they do not what's the -- want to see the raised any time soon. there is also the school of thought that maybe it might actually encourage some and potential homeowners to go out and take a loan now as opposed to waiting until later because there is the threat of interest rates moving higher. finally, maybe it might help banks to incentivize lend more because they will get paid more for that risk. arguments on top of that is that you get misallocation of resources, people invest in the wrong things because they are reaching for yield instead of investing
productive activities that will be the economy. right now they're just tried to on some sort of a return their dollar. to see if anybody here makes that argument as well. >> would you talking to marty feldstein, did he voice any concerns that we might be looking at what might be called an asset bubble? people have ported to treasuries haven play. that could be frothy right now. and then you look at the market hitting a new high-end goodies, there does seem to be this disconnect between fixed income and equities. what is eating that means? think that means? will startear note to rise rather rapidly when the
starts to talk about rising. we are in situation where the economy is growing and picking up speed and interest rates are very low. we see in that averment that stocks go up. it is hard for them to say whether is a bubble or not. but of rates start to rise early next year, we will find out. >> that it's back to your protesters, some people are concerned the low interest rates benefit a certain class of people but not the entire economy. i look forward to talking to you throughout the day. one stock that we are keeping an eye on today is the gap. the u.s. apparel retailer profits,cond-quarter as shoppers snapped up deals.
tell me about the gap, to me about what is going on there. why were they successful with the old navy franchise >e? >> value matters. shoppers are getting discounts and good prices. is this model.t >> somebody who strapped for cash is going to be more the old navy. what about the gap? >> they're building 75 stores this year from their 2500 stores in the u.s.. have about 500 leases that expire every year.
there is expansion outside of the u.s.. looking to india right now, and it is following a path that's other retailers are looking at as well. what is cap doing, and who else is jumping in on this? >> it will be entering and the, and that is interesting because they haven't stores in china. india looks to be the next market where there are enough consumers to have demand. children's place entered india in a partnership, announced yesterday. outsidelly need to go of growth here in the u.s., and china and india seems to be the place to go to. >> thank you. family dollar may be having second thoughts. they may be open to a takeover offer. ♪
>> moving and shaking this hour we have the soon to be ceo of home depot. in november he will be taking over for frank blake come a and blake will remain as chairman. person for five years straight. now growth could be cooled off by sluggish wage gains and the threat of higher interest rates. taking with retail, the dollar store drama continues. family dollar is now considering a $9 billion takeover offer from dollar general but only if it agrees to sell as many stores as regulators require. it is the latest within an n familybattle betwee
dollar, dollar general, and dollar tree. joining me now is our panel. it seems as though they are really concerned about an antitrust issue. case is an interesting because it is what you define as competition. in one sense a good bill of the dollar stores, in which case there is less of a risk, or could be walmart and every gas station where you can buy -- >> would they not need to close nearly 700 stores to get this through the regulators? >> that is family dollar's take. they want that level of insurance. >> where does it stand right now? ball is in dollar general's court. family dollar is committed to the dollar tree offer which is lower than the dollar general offer. generals up to dollar
to take that. >> they are willing to take less money because they will get a guaranteed deal? >> greater certainty of consummation, one of the things that a board is entitled to look at and should be looking out to protect the shareholders. they have set themselves up because they have made about antitrust risk. if dollar general comes up and gives them a reasonable , then it is almost alternate knowledge that their price is better and that puts the dollar tree people in a bit of a bind if the board of switches and goes for the daughter -- dollar general bed. id. >> how much might that get inflated? that is exactly what the
family dollar board should be focused on. that is their job. their job is first and foremost to get the highest short-term price for their shareholders. would ideally like is a bidding war. if dollar general gives them the antitrust coverage to switch, then that really does in courage the bidding war back and forth, and that can only help the family dollar shareholders. >> does this deal make sense to you? they are very different acquirers. family dollar is much morally dollar general in terms of what they sell and who their customer base is. dollar tree is truly a dollar store, but ironically has a different customer base, a more affluent customer base. you see that in retail and in food habits.
in their fast food choices, what it tends to be is more affluent buyers coming in for specific items. it is hard to tell which company makes more sense for them, but they are all being driven by the fear of walmart coming into the small store segment. that is tough competition. >> you think about them a dollar that contrasts it. hat deal may make more sense because you get two different customer bases. >> dollar tree is by far the stronger business. they have the hardest margins, vicki the price point under a dollar. that is one of the defining things about the store. a lot of these dollar stores are not really dollar stores anymore. something in and buy for $15. at dollar tree, everything is in fact a dollar.
>> they are a different store. looking at a regulatory base where there has been signs in recent years that it is probably the case that regulators may be a little more accepting of a one versus two merger. is the the competition driver, and the other part is that this is a customer base that will not use online buying as much as the average customer. they are looking for a regulatory agency to protect the consumer. >> what happens if a deal does not take place? is it inevitable that something is going to happen because investors have gotten a taste of this? >> it is not necessarily. i think that is -- the most interesting quote was from the independent director.
he said they will not endanger the deal they have for the deal that might be. you can see that from a director's point of view but also thing from a land manager's manager'siew -- fund point of view. why would you want to put a big game at risk? >> thank you for being with us. we will be back talking argentina right after this. ♪
the second time this year. what triggered this abrupt weakening of the peso? isthe peso in argentina completely regulated by the central bank, it is not a free-floating currency at all. the way that it works is that when there is pressure is, or presumed to be pressures on the current cv central bank may speed up the decline. this week i said to them a little bit more -- this week they sent it up a little bit more. this is a little bit faster than they have been doing before. massive valuation in january and the idea is that they are continuing to face pressures of dollars into the country because they will not be able to borrow abroad because of all the litigation going on. pressure on the dollar will be mounting further, people will
want more dollars. >> what does this mean for their economy as they move forward? , you can thinkry back historically over the last several decades, it has clearly faced its challenges. this just seems like one more chapter for argentina. will they be able to get out from under this? >> that is a good question. the question is this administration, will they be wanting to do that? , there was a time right before this whole litigation debacle went out of hand where they seem to be regularmore into the policies. but it seems to be bad again. >> we are just a few minutes from the opening bell, it is a big day with janet yellen expected just bake within the hour. we will be going live to jackson hole, wyoming for that. we will be back with the opening
>> good morning. welcome back. past the houres which means we are on the markets. here is a look at the futures in the very final moments before the opening bell. we will be on the markets in 30 minutes. 10, thet to the top only stories you need to know. i'm going to start with hibbett sports. they plunged 21% with higher costs and expenses outspending the model gains. tuit.mber nine, int
they pushed us apprised loss for the quarter. eight, the profits beat analyst estimates by a penny. softer traffic levels and high promotional environments. >> home depot, the retailers making some renovations to the c suite. the gap, bargain hunters helped to boost think companies quarterly profits. they also raised its full-year earnings forecast and announced indiato open stores in
next year. >> gamestop, booming demand for its new consoles up to more the doubled the quarterly profit gains. than 10% up on the news. >> ebay. thats climbing on the news they could spin off paypal as early as next year. they have been telling potential candidates that the top spot at paypal is considering spinning off the unit. do not forget that carl icahn has been really pushing for a division of these companies. >> they always listen to him later. they always go back after hehting fohim, and do what said. >> foot locker. the quarterly estimates topped
analyst estimates. area. aeropostale, may shut down another 175 stores on top of the 125 closings it announced for its children's brand. the announcement of a mega the is powering shares in premarket. are at the open, the futures market is ever so slightly weaker. it is a very big day because janet yellen be speaking in jackson hole wyoming.
lots of central bank talked that we will be getting into as we get into the day of training. i want to bring in the chief , who says officer that with the rates going up you want to position yourself into dividend paying stocks and clear yourself of there is the opening bell on wall street. in an environment where we are -- we are highest hitting new highs? >> defensive rates are going up. will be highly correlated with how rates do. the increase in rates is going to be tied to an acceleration -- >> the increase in rates probably is not happening until mid-2015. >> that's probably right. >> how far in advance will the
market anticipate that? >> i'm not sure the markets will pull back. the exhilaration of rates is good for stocks. it will signal a stronger economy and better earnings growth going forward. within the stock market, where you want to be positioned is toward those companies with either good value or cyclicality and high free cash flow yield and away from the things that people under state. market idea that the would perform better if we were in a higher interest rate environment because it signals that things are good. y the ratesds on wh are rising. an argument against the big banks is regulation. whether it is dodd-frank or -- high capital requirements will drive returns lower for big banks. return a chart showing on equity for the big banks and
return on assets since the mid-1980's. it is below long-term averages. do you think that higher and increased lending that banks might see as a result of that will make up for the fact that the regulation will mean lower returns on equity? >> i think it will. we own bank of america because we believe, over the long term, the market is not giving them credit for the return they can earn on capital. yes, capital requirements will be significant way higher, but that is not priced into these stocks. >> one of the nice things about race going up is maybe the banks will be able to make some money on the money they are lending out. you could argue that banks are reluctant to lend to such a low interest rate environment. >> banks would make more money and you might also see people make bigger purchases. or maybe a pickup truck.
50, you are f1 excited about it as an investor. do you believe enough in ford's ability to switch production over in a timely fashion and keep up with the demand? can.think they they have a long time to think about how to manufacture this aluminum truck. i was just meeting with the top manager of the company and we are confident they will be able to manage this transaction. the demand for the truck is so strong that they are selling all they can build up the old one today as well. y strengthiven b in the housing and energy industry. >> what do you think about the fact that alan mulally is gone? is that a concern to you as an investor? what about how they have failed
to create a luxury brand that is successful with lincoln? >> if you look at where u.s. companies make most of their money, they make most of it in the truck market and fortis dominant there. as far as the leadership at ford, i'm confident in mark fields. they worked closely with each other for a long time. they have a productive culture that can bring them forward. going to be continuing to watch this market and continuing to watch what janet yellen has to say today. in a lot of concerns right now about a deflationary environment in europe. harder to fight then perhaps the situation we are seeing here during all of that will be coming up a. in a year when m&a activity has been fast and furious, a lot of
trend. u.s. companies requiring overseas operations to avoid higher tax rates they might face here at home. the strategy is being referred to as an inversion strategy. inversion deals. .e spoke with david steiner listen to this. >> we are sort of the poster child for tax reform. we need to have a more logical way to bring earnings back into the united states where they can be invested into the united states without a huge tax. companies that have a deep international structure can just move those earnings to a different international subsidiary. we are in north america. we brought that money back into the united states and paid the high tax rate do that. >> could a u.s. tax burden burst and m&a bubble ?
also here at the onset, the head of research for bloomberg businessweek. we have seen an uptick in these deals. is it primarily or at least a good part related to the tax benefits you get somewhere else ? >> the boom in mna has been because of the strategic imperative. we talked about that periodically this year. certainly, the tax benefits are an element to certain transactions. that is going to continue. >> it will continue until it can't. you look at what happened olitically in d.c. president obama recently speaking on this. it is something that will likely be tough as you get into midterms. >> just because it's easy
pickings and there are so many brand-name companies easy doing these deals -- the vast majority of these deals are not inversions, but there are a few and they are so big. billions of dollars and now it's in the newspaper every day. they think this is an easy target. we can get republicans and democrats to agree. >> i think if it was not a midterm election year, you probably would not hear a lot about this topic. it is a political issue. the real issue, the one not being addressed, is comprehensive corporate tax reform. said wes ago, geiger need companies of tax reform. we know it's an issue. wait until after the presidential election and we will have conference of tax reform. , congressreelected was the same congress, geithner
countries of tax reform. of course the companies that ,ompete with non-us companies big pharmaceutical companies glaxo and all these other non-us companies. they are global companies and they needed to compete on a level playing field. they are the ones that are going to be most prone to invert. >> we are at a competitive disadvantage. why aren't we doing more to make united states of america the place that every corporation wants to be headquartered in? why are we driving these corporations -- the tax dollars they would represent, overseas? >> in many ways, we may ultimately get more tax dollars
from these companies and their investors. medtronic has said that because of the deal, they will be able ininvest $10 billion more capital expenditures in the united states because of the flexibility that they gain as a non-us company. thejust had the clip from ceo of waste management. he had to pay 44% in taxes to bring that money back into continental united states. the u.s. companies have to pay or cost toy a next bring it back into the united states, either to investors or plans and research equipment. >> so why would they do it? >> we all take advantage of --tever tax loopholes or tax
would there be an unintended consequence? thatere might be a rule stops this, could they force countries to hurry up and do more inversion deals because they think there might be reform next year? that could very well happen. future, it'seeable not very likely that you will see a lot of difference in tax policy. there needs to be consensus. tax rules today are in place because of certain companies benefit from them. it will take a lot of analysis and a lot of lobbying to get a new tax code. >> you bring up really good points. might see ahat you rush toward more inversion deals because there is so much political rhetoric that is a negative right now in washington. we always appreciate having your perspective on this.
here is an interesting story for you all. earneds -- city's ceo more than his company did for running a bank. the9 million compares with ceos total composition of $14 million. citi is approaching companies. still ahead, it is time to say flying first class. why airlines are making flights for more business from the customers. customers. friendly ♪
enter to avoid provoking the russians. russia says the trucks have food and water for civilians trapped. 11as says it has killed israelis after an airstrike killed three hamas military commanders. hamas says israel will pay a heavy price. there is talk of smoke-free olympic games in tokyo. one possible opponent, japan tobacco. at the company with a state monopoly since 1985. american airlines is fading out first class on many of its long-haul flights. -- expandingng business class and installing flat seats.
pushing them closer to other carriers that have already abandoned or limited at first class. really interesting. i imagined that this might have something to do with the fact that a lot of companies say, we will pay for business, but not first. >> 100%. a big conversion between what first class isn't what business classes. people have known this for a while. people have been predicting the demise of first class for decades. if you look at who is up in first class, the cabin is rarely full. not that many seats. it is very unlikely that the people in the seats actually paid the full sticker price because the people who end up in first last are usually there because of some sort of loyalty status. if you look at the difference between first and business class, they're asking you to pay $3500 premium to go from
business class to first class. there is a very incremental difference. slippersrence between and pajamas and just pajamas. either place, you're going to get a white tablecloth, steak dinner. >> i just flew out to outlay - flew out to l.a. on the way back, i was business. there was not much of a difference. it was the same flatbed, same menu. if you can say that kind of money, why not ? >> exactly. you have seen a lot of airlines trying to do business class only. i'm sure you remember silver jet. >> that's an interesting one. it didn't make it. >> they were all very nice on the inside. the economics of it don't work.
economyly do need these seats to scale. what is the time -- what at the time of their meeting changes? loyalty -- the people who fly business class are doing so because they have a corporate arrangement between their company and airlines. the big take away is that it's not the end of first class. business class is becoming what it used to be. we don't have to worry. you will have a three cabin airplane. economy. premium, >> mcdonald's is naming mike e as the u.s. president. a new president of the usa in mcdonald's. that does it for this edition of "in the loop."
>> it is 56 minutes past the hour. bloomberg television is on the markets. we are 30 minutes into the start of the u.s. trading day. after setting up a record 20th close -- the 20th record close on the s and p 500 pulling back a bit. the dow industrial off by 18 points. with janet yellen's keynote speech just minutes away, let's see how treasuries are trading as well. little change right now. chipotle is
approaching a record high of $700 a piece per share. we are joined now by bloomberg 's leslie patton. what has chipotle been doing right? , they aref it is expanding really quickly and opening stores in the right locations. they are experimenting with some new stuff. they have tofu in some stores. they have recently rolled out catering, which seems to be going well. >> a push into catering, being innovative in terms of food products. what about expansion? you mentioned that they are opening new stores and essays. what about overseas? -- new stores in the united states. >> they're going slow.
they want to make sure they get things right. they have some stores in london and paris. they have different competitors there. different customers. they have to make sure they get things right. the marketing and food right before they can really expand quickly. they have said they're looking at germany. international expansion is definitely on their radar. with a are expanding southeast asian kitchen. any update on that? , they saide overseas that they are going slowly and the liberally with these other two chains. their focus is still the core, to pull a. that is where they want to grow. -- on the core, chipotle. in chophouse, they had a sandwich that did not work well. there are little things that
they are tweaking like that. >> getting back to chipotle itself, they have raised prices as ingredients get more expensive. what are you hearing in terms of getting pinched on these ingredient prices ? their price increase was pretty steep. 6.5% on average, which is pretty high. so far, they have not seen customer resistance to it. still, people are willing to shell out for doritos. r burritos. ♪ live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. >> searching for clues, jerry yellen -- janet yellen starts
speaking moments from now. >> server be annexed to a war zone. the fighting in iraq turns a rare real estate boom went bust. >> you have never seen a classic auto collection like this one. cars.building his own car storiesclassic are completely separate. makers."e to "market first, we want to get to the breaking fitness peer janet yellen is about to start her speech. ors are watching closely. >> if you are looking for something new from janet yellen that is going to change the debate or moar