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tv   Bloomberg West  Bloomberg  April 29, 2015 1:00pm-2:01pm EDT

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♪ cory: welcome to "bloomberg west ." i am cory johnson. here is a check of your top headlines. the u.s. government's buttered in the first quarter, growing at 2/10 of 1%. one bright spot, consumer spending, which rose 1.9%. the index of home sales rose 1.1% in march. that data from the national association of realtors. ben bernanke has another consulting gig joining pimco as
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senior adviser, where he will engage with clients. earlier in the month bernanke he signed as advisor to citadel. japanese prize minister -- prime minister shinzo abe speaks today to a joint session of congress the first japanese prime minister to do so. >> goes far beyond just economic benefits. it is also about our security. cory: abe also expressed deep repentance for japan's aggression in world war ii, offering condolences to the families of americans who died in that war. perrigo rejected the latest takeover offer from mylan.
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the perrigo deal would be mylan's biggest yet. it would help the company from being taken over by israel's teva. strong ratings for the ncaa tournament. hbo did profit slightly. now to the lead, it's twitter in trouble or is it a business that is misunderstood? shares getting hammered today down 22% of the company's earning report slipped out earlier than expected thanks to shareholder.com. the reason shares are down is this, twitter's user growth is slowing. twitter is also cutting its revenue forecast. it had much -- more trouble attracting advertisers when it
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was pushed to a new fee structure. we will talk about what that means with victor anthony at axiom capital management. victor, let me start with you. what was most surprising about these numbers despite -- besides the timing of the release? guest: they miss their own revenue guidance for the quarter. given they had over one month of operating results under their belt when they gave that guidance, when they reported fourth-quarter numbers on february 5. that was bad. i think the major negative coming out of the print was really on the call when they stated they had very limited visibility. i thought that was a huge negative for the stock, which is why you see the stock trading down 5% 6%. cory: why should they have such limited visibility? victor: they have a little bit
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over one month of results. they could see exactly what is taking place. anthony essentially stated that growth is slowing down after it accelerated in the first -- in the fourth quarter. in the first quarter, i mean. that is negative. it is hard to get positive on the stock [indiscernible] cory: sarah frier, what do you make of the user numbers? 320 million active monthly users. growth rate take up a little bit on a sequential basis. sarah: but not enough. twitter has been rapidly changing its product to try to attract more users. this is the fact after they have been trying for the last few months to up their user base.
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they change their homepage so it services more tweets. they have done these deals with google and other search providers to try to bring people searching for events, bring them into twitter. this is after a lot of effort to try to drum up that number and some people are expecting it to be higher than what we saw. cory: in the press release they blamed direct response advertising. i think of junk mail. what is direct response advertising for twitter? sarah: there's a difference between direct response advertising and brand advertising. direct response is advertising where they want to complete a certain objective. it could be signing up for something, buying something. it brings people closer to its action and what twitter is saying is that they upped the requirements for what engagement looks like on those ads. really, they are being a little bit clearer to advertisers about what they are actually getting
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out of that. the problem is the results failed. cory: when i put it into my model, first of all they give us less information now. one of the things i do in my models is i look at revenue domestic international, i look in revenue per user. revenue per monthly active user was down from the fourth quarter. i know fourth quarter is when a lot of advertisers spend the most, but it was down. more than 13% this time. is that disconcerting that revenue per monthly active user is in decline? victor: there is some seasonality tied to it. you had the fact that direct response advertisers you talk about hit somewhat of a wall in the quarter and so they backed off on spending on the platform. don't get me wrong, longer-term
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i am positive on twitter. i think there is a longer-term case that can be made for the stock. cory: i don't really care about the stock. i think the importance of twitter as a business is more of an open question today. is twitter going to grow and be something so much bigger than it is today? that revenue per user number, up nearly 50% but a much slower growth rate than it has been at. victor: right. you look at it as a business and step away from the stock, you still have three hundred million users. they talked about another 500 million users that come onto the platform. the challenge overtime is to be able to convert those users into
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regular monthly active users. i think they have a fair shot at it. near-term there are concerns about the business. there's an element of risk that came out of the fourth quarter results. cory: is there a sense that this is not -- the questions about dick costolo leaving are so old since the day he walked in the door. here he has one of the highest-paid cfo's in the business. we do know -- we do not know what is going to happen with you there gross -- user growth. sarah: you said yesterday this is in expectations game. twitter has over the course of the last year been so optimistic about its own prospects. 20 years down the road, here is how big we could be. here this quarter admitting they don't really have that much visibility in the future and in
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fact this revenue miss may have surprised them as much as it surprised wall street, that is not something wall street likes to hear. for a cfo among the highest-paid cfo's, maybe in public companies this is something that he might have to answer for. cory: less so now that his stock options are underwater. i'm torn because i like these guys personally but the struggles in this business are interesting to watch. it is growing. sarah thank you very much, as well as victor anthony of axiom capital. inks for your time. don't miss our conversation with dick costolo later today. he will be on "street smart." coming up, twitter earnings and how we got them. numbers leaked earlier than the company would have liked. crawling and scraping the web with a company called celerity.
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cory: this is "bloomberg west." a glitch in the ipad program used by american airline pilots delayed 40 flights in the last day. pilots are increasingly using ipads instead of those big, bulky books from their electronic flight bag. it gives them the manuals and flight plan. pilots had to return to the gate yesterday to access wi-fi to fix the issue with their ipads. shares surging today of the hotel giant, exploring alternatives to boost shareholder value, and no option is off the table. the owner of starwood hotels has hired lazar for guidance.
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penn national agreed to by the tropicana in las vegas from its current owner. the prize, $350 million. it comes as gambling in las vegas felt last year, ending four years of gains. selerity circulated the numbers from twitter before the close. selerity the real-time financial information company, it got the numbers thanks to its data crawling program which conducts a very thorough internet search and scrapes those results. those programs are not new to the world. think of google bots. joining us from new york to talk
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about searching and scraping the deep web is hilary mason founder and ceo of fast-forward labs and former chief scientist at attlee. this is interesting stuff. i remember in the early days of search engines, the notion of spiders that would go out and find the ends of the internet but it brings the notion -- what percentage of the internet is known to the state of google? guest: we don't know exactly. we know google and other search engines are working on deep web crawlers themselves to try to uncover those links that are never linked to you from another public page. cory: very interesting what they got and how they got it. can you explain how the scraping tools work? hilary: sure, it is a trivial bit of technology. it is probably 10 lines of code something a programming student could write. they were able to figure out
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what the likely structure of the next press release would be. they wrote a little bot to explore. the bot does what you do when you load a page in your web browser, it goes to a new web address, it simulates that and is much faster than doing it by hand. cory: if the url was investor relations/twitter q2, twitter q4, you might say what happens if we type in investor relations q1 and the results come up? hilary: exactly. i believe it was investor release id and then some number and they were able to increment that number, something like less than 400 digits, to get to the new press release. cory: is this like the cracker programs that hackers will use when they throw known words and number combinations to test whether a password will work? hilary: a little bit like that.
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in this case the page was public, it had been published to the website, it just not had been linked to yet. cory: on a level of stupidity, how stupid was the nasdaq for publishing this early, or is this just a really great program in almost any company could have been caught off guard by this? >> it is something people should be aware of in the design of their applications. cory: when i was a portfolio manager at a hedge fund, i would hire companies to do stuff like this and get a sense of new product releases or how many
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customer orders were flowing through our company or how popular a certain thing was. in my experience, the tools were crude and i could not get what i wanted to get. the numbers were a lobar the map. have these tools gotten better in the last few years? 9 absolutely -- hilary: absolutely. these tools are progressing rapidly. cory: do you imagine there's a scramble over the nasdaq now where they are trying to find a new structure for their url's so they can test the page to see that it's right but not know the world is there? hilary: i would advise them to consult a computer scientist, but yes, there probably is. cory: hilary mason founder of fast-forward labs. thank you for your help in figuring out how all this works. coming up, finding earthquake relief in nepal. ♪
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cory: welcome back to "bloomberg west." the death toll from saturday's earthquake in nepal is now over 5000.
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one nonprofit group trying to help set up a fund to provide critical medical supplies to its on the ground partners who are already in nepal. the group's founder and ceo joins us. great to see you as always, the what a horrible thing. tell us what operations were in nepal prior to this. hilary: we connect to local doctors working on critical health care for women and children to donors. donors can fund directly this work 100% of their dollar goes to supporting critical funds. cory: and using the internet to do that. donations go straight from there to your doctors. hilary:guest: we work primarily in central nepal which was really hard hit by the earthquake. my cofounder has spent a lot of time there and i spent most of
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my time in neighboring india. cory: describe the work they do. surgery principally, right? guest: medical interventions for maternal and child health care. prior to the quake, 64% of women in nepal gave birth at home, resulting in extremely high mortality rates. every four hours a woman dies in childbirth, and eight newborns die generally less than a day old. half of those women are dying because they are bleeding to death and it's because they can't give birth in a state facility. our work primarily with us to build local facilities and make sure they're are adequately staffed with community health workers. now it transitions to more emergency care and ensuring we have the infrastructure for women to deliver and babies to go home safe. cory: what have you heard about what's going on on the ground there? guest: there is tremendous need 75 percent of the infrastructure has been completely destroyed.
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health care clinics, local outposts where people can receive medicine, get primary care, most of the work that needs to be done in developing world medicine is primary care. it is triaging taking care of people who have relatively minor issues that can escalate if they don't get the care they need. cory: now those issues go from people who are at a particular time in their life to everyone in the country. there are so many people there across all places in nepal. guest: one of our main emphases is to work directly with organizations on the ground providing care directly to that beneficiary as opposed to funding an organization that has its headquarters in the capital that has many layers between the donor and the recipient. with samahope, you can see the doctors themselves on the site and see the work they do. once you've fund you get dr. reports in real-time so you know exactly where your money went.
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what is important is to fund the doctors already working on the ground rather than fly in lots of new people. there already a number of medical personnel trained in nepal. they just need equipment to rebuild the country. cory: what is the latest in terms of how much aid is getting there right now, as the whole world is looking at this and there is an outpouring of support? guest: it is difficult to get to. that is another reason to work with pre-existing organizations that already have a presence on the ground. luckily we have been able to get updates from our medical partners. we are a tiny team. we only have three full-time staff. there is a huge public outpouring. a lot of people have nepal in the hearts and minds and they are putting their money where their mouth is. cory: thank you very much, appreciate you giving us the latest. guest: it is samahope.org. cory: a yahoo! chairman will
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join us now. we will talk about the perils of the sharing economy, plus room for another ride sharing company. ♪
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cory: this is "bloomberg west." i'm cory johnson. let's get a check of top headlines. shares of lumber liquidator being hammered again today. the company posted a loss, $7.8 million in the first quarter. allegations that flooring has hidden excessive levels of formaldehyde. the ceo robert lynch said there would be a turnaround in the current quarter. >> in april, gross margin continues to be pressured by lower average showing prices to drive customer traffic and ship's in the sales towards hardwood.
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april features are and you will big sale and as a result has historically had a lower gross margin than the gross margin for the entire second quarter. cory: the company is replacing its chief financial officer. california governor jerry brown being more aggressive in fighting climate change and has initiated an executive order to dramatically cut emissions by the year 2030. the calls for 30% reduction in animation levels below 1990 levels, much more ambitious than the federal government's target. we are going to watch the floyd mayweather fight this saturday? i will. the restaurant chain decided not to show the fight in most of its locations. cfo james schmidt said the company did not feel comfortable with the cost, which is about $5,100 per restaurant. hbo on showtime has sued to
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block unauthorized live streaming of the fight. the cable network says it was alerted last week that the website boxing-hd.net was advertising live internet coverage of the fight. the network is seeking an immediate court order preventing that streaming. the sharing economy, it has given rise to some of the most test funded startups in silicon valley. but there is room for competitors in that space, and there are lessons that can be learned from what has happened there. i'm joined by the yahoo! chairman as well as andre. of relay right. -- ride. guest: we enable people to rent their cars to other people. cory: in the same way airbnb will let me rent out my empty home, my car sitting in the parking lot right now someone was to jump in that honda accord, i can rent that out? guest: absolutely.
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there are 300 million cars in the united states for 200 million drivers. it is one of the most underutilized assets out there. we are enabling people who have cars who are not using them to rent them out. cory: why invest in a steel? -- in this deal? guest: i think it's a good idea. everybody thought ebay was a crazy idea. nobody would fund that in 1996 because people worsening money around in paper envelopes. there was no electronic payments. i have seen crazy that did really well. two reasons i funded it, one was the ceo who is a dear friend of mine and was a rockstar for us in ebay for years. we got him to move from europe over to the bay area to work and driving product. we knew he was a rockstar, but we totally believe in the space. it's amazing to me, people are
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looking for ways to make money and yet there are all these idle assets that are underutilized that could make you money. cory: something like 90% of all cars that are owned are not being used at any given moment. it makes sense, right? guest: you pay a lot of money for them. i'm going to africa with my wife in august. i'm going to have to park my car for three weeks, pay a lot of money at the airport for that even if i do long-term parking and it is they're doing nothing. if i did the relay rides route i drop it off, they drive me up to the gate. i make money the whole time i'm gone. and it's better for everybody. cory: there have been sharing companies now that some of them are doing really well, like airbnb and uber. but they probably have had some
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screw ups along the way. what are the kinds of things you have been able to learn from in the perils of the sharing businesses? guest: the perils of the sharing businesses is all about connecting people in an effective, simple, and trustworthy way, and protecting people as they use a marketplace. from the very beginning we have put in place a really important safeguards in the marketplace. we have put in place $1 million insurance policy that enables people to share their car without having any risks on their personal premiums their personal policies, as well as protecting renters as they drive the car. that has been a big part of building the company from day one. guest: one of the things about ebay and a lot of these other marketplaces is there are always things that happened that nobody expected. what would you say are the exciting learnings that were unexpected? cory: exciting learnings.
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i would never phrase it that way. guest: there is always counterintuitive things that happen when you create a platform that enables you to try new things. one of my biggest surprises was the business at the airport. when we initially thought of relay rides and built its first version, we thought we would enable people to drive cars in cities, where a never could share a car to a neighbor and there is that proximity that makes things easier. but then as we grew the marketplace, we had a lot of demands from our community of car owners saying, there's a lot of business at airports, why don't you let me use my car as a car that i can deliver to the airport? we finally relented after a lot of people asked that from us. we launched the delivery to the airport option late last year and it has really taken off. now it is more than 1/3 of our business and growing more
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rapidly than p or two. car rental -- peer-to-peer car rental between cities. our average rental is for 5 1/2 days. it is the weekend car, the travel car. frankly, it was a surprise. we did not think it would happen that way. guest: how do you address the worry about people's fear about letting somebody else drive their car? cory:guest: it's all about helping people feel safe. the $1 million insurance policy we put in place really makes people feel comfortable that in case something were to go wrong, they would be protected through this policy. but more importantly, i would say we have really been good at screening people as they sign up based on their identity, their driving records. we have created a marketplace that is high-quality drivers
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and so what has happened is now the reputation is a positive one and people trust us because of our reputation more than because of the insurance policy. cory: a fascinating company. thank you for bringing it to us. get another interesting use of the sharing economy. want to make the internet faster? optimize trying to tackle that problem. ♪
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cory: a hiring freeze at alibaba. jack ma is concerned that the chinese e-commerce giant is expanding to quickly. he says the current level of 30,000 employees should be enough to maintain operations. alibaba faced slowing growth.
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russia calls off a mission to resupply the international space station after losing control of a rocket. nasa confirmed the unmanned spacecraft was spinning uncontrollably through space, launched from kazakhstan yesterday carrying 6000 pounds of food, fuel, and supplies. it will fall to earth and likely burn up in the atmosphere. as more devices and operating services more than ever before, high quality digital content on whatever you've got -- improving web performance and video transmission, akama. the copy reported first-quarter earnings with revenues of 15%, profits up 7% grade the strategy for making the internet work in all the weird places the internet shows up now, the ceo joins me now. you have been around for a long time, but i feel like the challenges are getting different
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because the places the web goes are so very different. guest: it is harder today than it was 15 years ago. people are accessing the internet with mobile devices. they are using cellular networks. they expect their transactions to be instant. it needs to be secure. these are big challenges today. cory: can you give me the cocktail party description of what your company does? tom: our goal is to make the internet fast reliable, and secure. we want to make it so that billions of people can go home and watch a high quality video over the internet. we wanted to be secure. we wanted to be instant, so when you click on that mobile device you get instant response times even when you are in a crowded city. cory: i guess the way i think of the company is you sort of figure out what content people are going to want in certain
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places, capture it, and spit it out to corners of the internet so they can get it. tom: that is an important part of it great we have our servers and software and many thousands of places around the world. increasingly we have our software on devices, we're over -- on over 100 million end-user devices today. the idea being that we can use our own communication protocols and our own routing layer protocols and application protocols to make it seem super fast, and to keep the bad guys out block the traffic so sites -- so the bad guys can't be stealing credit cards or private information, and they can't corrupt the content on a site. for example, news sites, where entities are trying to get their own story on the site. cory: a security layer that has always been important to you. has the way you manage that changed dramatically?
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tom: security is a lot more important today. you see all the attacks that have taken place. for the much every major enterprises concerned with security. that is made security our fastest growing business today. cory: when you look at the internet of things and this notion of using protocol information on all kinds of things, devices -- i've got my fitbit on my arm and those kinds of things, and we're talking about much more internet signals. does that change the way your business fundamentally operates? tom: it does not change how we operate, but it increases the complexity and increases the demand for our services. there are billions and billions of devices out there trying to access the zillions of petabytes of data. people expect the access to be instant. that is what we do. i think that helps drive our
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business forward in the future. tom: akamai ceo tom leighton we appreciate your time. "bottom line" with mark crumpton coming up at the bottom of the hour. he is in new york with a preview. mark: the federal reserve's open market committee releases its latest policy decision at 2:00 p.m. washington time. investors are looking for clues on what the fed will raise interest rates with policy all but having ruled out an increase at this meeting. our pre-and post round table includes diane's walk --includes tony chris enzi of pimco. i will see you at 1:56 just before the fed's announcement. cory: "bloomberg west" will be right back. ♪
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cory: this is cory johnson. this is "bloomberg west."
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hollywood designs people and places that do not exist. this is the daily task for a london-based firm that counts "guardians" as one of its designs. check this out. >> we make emotional experiences. visual effects in the past has been making things look real that don't exist. if you can't film something, we put it in the computer. it has gone further than this and it's more about creating emotional memories for people that they will keep with them hopefully for their lifetime. cory: i just watched "guardians of the galaxy" two weeks ago on an airplane. you made this character of a smack talking raccoon. what were you trying to do with that? it seems like there are so many ways it could have gone wrong.
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the raccoons really talk? mike: i reckon they do. most of the characters we create have to create emotion, have to interact with people. for us the challenge is keeping reality. it is a creature that is talking. we analyze science and how we create a facial performance from a creature that has to look real. because they are performing, we are also looking to get a great piece of acting here, a great performance. we look to the voice artist of the character. we video their face. the director will also get a physical performance from the voice artist, and then we use that as the foundation for the personality of the character we are creating. cory: you have a company that is separate from the movies,
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separate from the director in some ways. outsourcing significant parts of that -- how do you keep that from pulling away from the storytelling aspect of what a great film can do? mike: the real trick to that is having us integrated from the beginning. when we get involved in a film we're often breaking down a script from the studio before a director is assigned to the project. we then collaborate and move very closely to visualize this reality. that can often be making -- gravity making the impossible possible. throughout the process, the director will direct taxes on set. we will be directing him, there is a six foot creature here. we are looking at the technical he is getting the performance. when the filmmaking is finished we may have a two-year perk a mac -- period where we have to finish -- where we have to capture that live action.
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like paddington bear was -- it's all about making paddington give the performance and the director will stay on and work with our animators and technicians to get the performance from the cg character. cory: you have a potential workforce of 900 creative people. how does that work? mike: we have 1000 people in our global organization but they are made of the people like mathematicians, physicists, and computer scientists. we put them in teams with writers, directors animators, and artists to create the images. we need that makes of skills. you may have gone to college and be a scientist but you are working as part of a team to make an eye look real that all
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has to go into making a film look as good as it does. cory: the technological advances in your world of cloud computing is so important in terms of rendering and being able to do what you do and see what is working in ways you could not even five years ago. mike: yes that is true. the technologies and techniques we are using are constantly evolving because we are always being challenged with, show us something we have never seen before. that usually involves in or miss rendering -- enormous rendering. cory: the old way to render was spent $20 million on servers to do all the calculations so you could make a space ship 3-d or make a raccoon's mouth move. now it is what? mike: what we have to do is be clever in the way we write the code so we don't use as many lines of code.
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more faster processes. we use special proprietary software we will write so when a piece of light hits my eye it bounces off a surface and comes back into my eye, the computer will calculate that for you and render it great when of the great things i loved about "gravity" was if you render gravity on one computer alone and you wanted it finished today, you would have had to set the render off in 5000 bc. cory: cool stuff from framestore cofounder mike mcgee. it is time for the "bwest byte." brad stone is here with the "bite." brad: 180 the number of "seinfeld" episodes which will soon be on the subscription video-on-demand service through hulu plus. hulu plus won a bidding process to run "seinfeld."
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according to reports, they paid $1 million per episode. cory: $1 million per episode? mike: what surprises me seeing reruns is how dated it is. the technology, the fashion, the culture. but you know, apparently some people still want to watch the show, and there was a big bidding process for it. cory: african-americans who watch the show are in the single digits. white people who watch this show at its height, it was one of the most popular shows on television. it's interesting to me how some people just did not get it and some people cannot get enough. brad: i'm sure there's demand for it. cory: i was in grad skill -- grade school at the time, so i don't remember.
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we will see you tomorrow with more "bloomberg west." ♪ mark: this is a special edition of "bottom line." the federal committee decides on monetary policy and releases a statement on the economic outlook. in his last statement on march 18, policymakers said a rate increase at this meeting quotes remains unlikely. our chief washington correspondent peter cook is at the fed. we will hear from him in a few minutes. let's get you set up on this day, joining me this afternoon in chicago the chief economist. the head of global fixed income market strategies and j.p.
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morgan asset management, bloomberg news editor mike mckee, and standing by with wall street's reaction is our senior markets correspondent, julie hyman. are we expecting surprises? will this be a mulligan? will they say second quarter is what we're focused on? >> this will be a why meeting. it is only a question of how much weight they put on the weather, on the dollar, on the west coast port things and how much they say that is temporary and going to reverse. they will probably say inflation has stabilized. it will be interesting what they say about the impact of business . they will probably take june off the table after this. cory:mark: will they take june off the table? >> i certainly do think that june is off the table in our opinion in terms of the hike
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because as we have seen weaker data especially gdp numbers this morning, i do not think june we will be ready for a liftoff. we are viewing september as the first hike day. mark: diane, what are you expecting from today's fed meeting? >> the overhang of inventory sets us up for a weeker -- weaker quarter that we had hoped. right now the fed has to deal with the data they have, and it's not very pleasant right now. mark: are we expecting any change in language? mike: we will have changes to their economic assessment. the tea leaves for traders to look at -- the rest of the statement should stay the same. mark: michael mckee, meg mclellan diane swank in chicago. we will continue to follow this story.
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again, investors taking a look looking at the data, looking at the language, seeing when there it is that time. let's go to bloomberg chief washington correspondent peter cook. peter, good afternoon. peter: mark, the fed is not explicitly ruling out a rate increase in june, but they are acknowledging the recent weakness. the first interest rate increase, and they are a true picking that weakness partly to transitory factors, so that is something for fed watchers to consider. there is definitely new language on the economy. there was a slowing in the winter months, and the pace of job gains moderated, and the employment rate is steady. indicators show an underutilization of resources was little changed, and they al

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