tv Bloomberg Surveillance Bloomberg May 5, 2015 6:00am-8:01am EDT
charlotte elizabeth diana olivia is too young to vote, and in cinco de mayo mexico celebrates a booming exports economy. good morning, everyone. this is "bloomberg surveillance." we are live from our headquarters. i'm tom keene. joining me, olivia sterns and brendan greeley. olivia: since 2006 the fbi had been investigating one of the suspects in the garland, texas, shooting. agents reported him talking about fighting nonbelievers of allah. two gunmen were shot and killed. they had opened fire on a security guard before being gunned down. the terrorist group islamic state has claimed responsibility through the isis radio channel also warned there would be more attacks on the u.s.. in baltimore, streets remain called after a week after riots
broke out after the death of a black man in police custody. there were some tense moments after a false report that police shot a man yesterday afternoon. last night on "the late show with david letterman," president obama said event in baltimore and elsewhere have caused the country to address the issue of racism. president obama: a lot of the things we have seen in ferguson or new york or baltimore have been going on for a long time. we are aware of it because when you see something on video it is a lot harder to deny and communications have improved. that is a good thing. olivia: the president said it is just a handful of police who have caused problems for their communities and other police officers. the imf is warning the eurozone you will have to take a haircut on greek debt. the financial times says the imf is telling greek creditors it may cut off support to greece unless they agree to write off
significant amounts of sovereign debt. greece is facing a cash crunch. investors are refusing to give greeks any more bailout money until the country agrees to a ballot reform. brendan: ceo of ubs sergio armani has agreed to wealth management. ubs talks to the justice department about settling an investigation into currency markets that are at an advanced stage. president obama's appearance on "letterman" last night was his eighth and final one. letterman will host his final show. president obama: i know you like michelle a little bit more than me. david letterman: she was here a little bit more than me. president obama: i am sure you
are not alone. but i am not going to let her have all the fun. brendan: the president told letterman that when they leave their jobs they can go to the local starbucks and swap stories. get to our morning brief and 8:00 a.m. eastern. disney reports earnings at 8:30 a.m. eastern. former arkansas governor -- tom: another republican in the ring! brendan: mike huckabee announces a bookstore -- sorry, a presidential campaign. tom: it is good to have you back. me and olivia cannot come close. brendan greeley, back. how about a data check -- flat flat, flat. boring today. when i walked in the door this morning, crude oil nudging. on to the next screen.
you have equity markets. the german 10-year, 0.44%. that is a higher yield. there is brent pushing up to $67 a barrel. let's go to the bloomberg terminal and look at a long-term chart act in 1955. there is a trend. there is a regression which shows the slope. there is the 1980's double recession, nothing like what we have seen. this is the employed jobs growth. we are miles from an extrapolation of what we knew 50 years ago where we ought to be. brendan: i think one of the things the recession taught us is to look farther back. this number predates the recession. amateurs talk unemployment rate. pros talk workforce participation. that really tailed off. tom: going back again to eisenhower in 55, this is two
americas. this is a better skilled america , and this distance -- that is the theme of this week, and, frankly, of the american economy. olivia: there is certainly a debate in the fed going about -- going on about what full employment is. now they are saying it is below 5% suddenly. i wonder what it was back in the 1980's there. jobless claims never's have been fantastic. the last 15 years, -- jobless claims numbers have been fantastic. tom: the jobs report is friday. we will discuss it later this hour. first, the state of your american economic growth. capital labor, innovation, technological progress, even technological disruption. ian shepherdson will not translate that strange beast -- productivity. what are we lacking that causes
us not to have jobs growth like we had in the 1950's, the 1960's, the 1970's. ian: what we have learned not just from the u.s. but from other countries that have had financial crashes it takes many years to get back onto the path you were on before the crash. tom: do you blame it on corporations with a lack of investment in ireland? ian: no it is fundamentally about the unwinding of excess leverage. it takes years is not even a couple of decades to fix a problem like what we had in 2008. we are maybe halfway through that. tom: did you notice that someone with a british accent can say it takes decades, and it sounds less bad? brendan: do we have politics that are up to the task of dealing with a decades-long problem ?
ian: sweden had a crash like this back in 1920, 1921, but they got back. you can do it, but the idea that you can do it within the space of two or three years and everything will be back how it was, that just doesn't work. olivia: how much of the great russian from the mean is actually demographic? in the 1970's, now what we are retiring. ian: you will never see that regression line being met over the next 20 years. growth is trending at 275, maybe 300 a month. the jobless claims numbers down to a 15-year low last week, but the trend is at an all-time low. i am pretty confident we are going to keep going on the growth side. we will not close the gap. tom: do you agree with professor
blanche flow of dartmouth, that the unemployment rate is flat-out higher than the good news of .6%? ian: is no doubt it is higher. but last week the employment cost index, wage inflation began to creep higher. tom: we are going to show that chart later in the hour. princess charlotte's birthweight or ian shepherdson's eci. ian: everything we got said nothing happened that in march except a week payroll number. -- except a weak payroll number. brendan: when you bring up sweden, as was sweden -- was sweden just lucky to get it back this time around? ian: they are still pretty scared.
the swedish example is interesting because the buildup in leverage before the crash in the early 1990's is similar to the buildup we saw in the u.s. and the shape of the crash in the banking system is also similar. if we use sweden as a guiding light and see how long it takes to get over it -- what we failed to do was be patient and to recognize it takes many years after a gigantic crash. you get a very long period of unwinding the excesses and fixing the banking system. it stretches over the whole banking system -- the whole economic cycle. olivia: obviously you are bullish on the u.s. economy. one thought has been the drop off we saw in energy. will that bounceback? ian: not in a hurry. we were probably lose three quarters of a percent from this year. which is huge. it will come back eventually
but we are not seeing the false -- of falling gas prices to consumers. olivia: why not? ian: it takes a long time for them to realize how much better off they are and then to spend the money. spring, late spring, early summer, the consumption rebound should start. brendan: ian shepherdson advises patients. ian: patience is a virtue. markets do not have it. olivia: coming up, we are going to look at disney disney reporting results in less than two hours. will a blockbuster opening weekend at the box office be followed by a big earnings report gekko everybody wants to see "the avengers: age of all ultron." ♪
tom: good morning, everyone. "bloomberg surveillance." coming up later this morning, he is out the door -- john chambers -- i guess outgoing? i refuse to believe he will have nothing to do with cisco. on "market makers" at 10:00 this morning. really looking forward to that discussion. john chambers, with a long history of struggle, and really doing better than good at cisco in recent years. brendan: a historic trip for john kerry -- on an unannounced visit to somalia. he landed moments ago in the capital of mogadishu. he is the first secretary of state ever to visit the country. he wants to show support for the government fighting al qaeda. hillary clinton's attorney told
lawmakers she will testify at the same time about the benghazi attack and her e-mail. the house asked for separate sessions on each subject. 25-year-old brian moore dies two days after being shot in the head by a suspect. fellow officers stood in honor as his body was taken away from the hospital. the suspect is facing a murder charge. more with the suns, nephews, and cousins of police officers. tom: we will look at the u.k. elections this thursday. francine lacqua is joining us. pimco is out with an important note -- there optimism on mexico. we will look forward to the job economy in friday's report. ian shepherdson is with us this morning. olivia? olivia: disney is on deck for reports later this morning.
between "the avengers: the age of ultron" and "star wars," would appear that mr. eiger has jumped light speed. he is a self-confessed marvel freak. what are investors looking for in the results? brendan: let me take you -- >> let me take you to the numbers. 600 million more than this time last year. in terms of net income, 1.87 billion dollars for this quarter, and in terms of earnings per share 1.10 versus 1.11. just off a penny. brendan: dougan -- olivia: guggenheim has raised their price target citibank has raised their price target.
is it all about the movies? ramy: it is all about the movies. brendan: you used the word thrusters. amazing and awesome. ramy: disney is apt over ads movies and parks. you talked about movies -- they brought in $15 billion in revenue just in the past year. of course, marvel lucasfilm, we are looking forward to that. as well as parks. they took it last year about $7 billion and also in ads, they took in about $8 billion last year. brendan: disney had amazing success with their own programming with "frozen, but the story of success with movies is the story of acquisitions. marvel, lucasfilm. what is next to acquire, or do they have to make up the growth in the coming years with their own programming?
ramy: so far there is no other talk of acquisitions, but in terms of the marvel universe they have several other films they are looking toward. over the next five to several years, they have been working toward this whole marvel universe over the past decade and pushing ahead to new characters, new movies, toward something i think in 2019. tom: mr. eiger has delivered 16.4% shareholder return over the past 10 years, massive dividend growth. what is thought about acquiring shares this morning? ramy: no one is talking about sell side, it is all about by side this morning. looking at the stock price over the past five years and longer i think it has been up by about 160%. everyone is saying buy, buy. 23 out of 38 people said buy.
the rest said hold. tom: where does the persistency come from? it is not staggering from movie to movie, they have gone beyond movie to movie. ramy: that is setting of what is to come. movies is the first thing. then there is merchandise, the parks. there are roller coasters themed off of this. it is providing something that people can ride and buy. tom: ♪ let it go ♪ olivia: are you going to see "the avengers," tom ge? tom: i am going to wait for the next "frozen." brendan: i believe we made a mistake and i would like it corrected. tom: coming up in the next hour we will get charles calaveras'
tom: good morning, everyone. "bloomberg surveillance." we go to the morning must-read it here is olivia sterns. olivia: morning must live comes from david einhorn, who slammed to the industry yesterday at an investment conference or said investors are bullish on oil prices and should avoid singling out shale -- >> pioneer spends $14 on field
operating expenses and another six dollars on corporate expenses. subtract the historical of 28 and pioneer loses $12 for every boe it develops. that is like using $50 bills to counterfeit 20's. olivia: vince, thank you for joining us this morning. everyone seems to have been different map about how much it costs to drill a arrow of fracking oil. why is it so difficult to figure out the marginal cost? vince: i think when you consider the capital intensity of these businesses, you are not buying them to share in your cash flow. you are buying them, given that they are a depleting asset, for the reserve growth. for their ability to replenish that reserve growth, to take that resource and develop that reserve and eventually produce out that reserve base.
olivia: what david einhorn is saying is that cost in production and cost of revenue is less than the cost of production. is that true? vince: on an actual cash basis, you have an f and 8 -- i'm sorry, and ella we -- and loe -- that is your cash cost. you have something cost in acreage, in developing the acreage. what you are concerned about here is the cash cost relative to the current price of the commodity itself. brendan: and that is dropping right? that is something that bloomberg intelligence has been in front on -- that it is not static. they are getting better at it as the price drops. vince: the completion cost is roughly 60% 2/3 of the overall cost.
that is coming down as the emp's are generating these cost concessions from the service companies. you are roughly 20% or 30% down on the production side. tom: here is mr. einhorn's comments. down he goes. we made it back halfway. my question for you, the market knows a lot of what mr. einhorn was criticizing. is he talking his book? is he adding new information, or did you know already everything he said? vince: i am not sure we chartered new territory here. we were down 50% on the overall commodity. the names in general are elevated relative to historical valuations, but but that seems to be -- tom: are his investor comments appropriate? vince: valuations are what they are. you are not buying these names
for cash flow, you're buying them for replenishing the assets for reserve growth. olivia: what tom is getting at is that our toward a question of the day -- we asked you, what you think -- is activism good for business? david einhorn has come out swinging, saying it is doomsday for american fractures -- for american frackers. tweet us @bsurveillance. ♪
unless greece writes off significant sovereign debt. the european commission is saying that the impasse over greece's fiscal crisis is strangling the economy. the ecb says the greek economy will grow just one half of 1% this year. >> it seems all of the protections for greece are subject to a high degree of uncertainty and discussions about policy measures are continuing now between the institutions in the greek authority. olivia: euro zone finance ministers are refusing to give greece more bailout money until the country agrees to economic reforms. congress may be close to giving president obama the room he needs to finish negotiating the nuclear agreement with iran. it would give congress the right to review or reject any iran
deal. a senate committee approved the bill, but senators marco and tom cotton have proposed changes that democrats opposed. republicans may agree today to end the debate and set up a vote. my cut can be will become the lit -- mike huckabee will become the latest to enter the provincial race for republicans. he is an ordained baptist minister who won eight states in the 2008 primary, including iowa. a new "wall street journal"/nbc news poll has jeb bush leading by 23%. hillary clinton has risen from 36% to 42%. she has been hurt by controversy. brendan: a chain of bakery cafes is getting rid of 150
preservatives flavors and colors to serve only "clean food" at panera. boxer manny pacquiao will undergo shoulder surgery this week. he says he injured the shoulder while training for last week's lost a floyd mayweather. he may face disciplinary action in nevada for not disclosing the injury before the fight. tom: you would think -- brendan: he has never been a guy to manage bad news as an excuse. olivia: the stakes are also high in britain. it is two days before britain's least protectable election in 30 years. our european editor at large francine lacqua, joins us from ♪ london.
in british newspapers, they are full of stories about ed miliband's strategy for getting into downing street. what a minority government led by ed miliband, if in fact labor gets less votes than the tories, be viewed as legitimate? francine: we need the leaders to actually try and get a little bit of momentum going. this is what we heard from the voters that we have been speaking to about david cameron. we just do not know at this point because 40% of people are still undecided who they will vote for. so depending on coalition partners or at least their allies, they could have some kind of legitimacy. at the moment, everything is up in the air because so many people are undecided. neither party -- none of the parties -- have been able to win over the electorate. they have either been considered k.g. on their policies and
giving mixed messages which is why voters have been putting off deciding. brendan: what people really want to see is a royal baby. what i am really curious about is what used to be the kingmakers. where are they? are they are even -- are they even going to play a role? francine: a lot of insiders say they may surprise us. when you look at the polls there is a 3% to 4% margin of error. so when you say 3%, 20%, or even 30% what voters are angry about, the coalition has largely been worse because we are in a much -- this is an economy that is getting better. a lot of things that they wanted
to push through, they have not. and actually it was seen as -- what is seen as, as you would say, presidential, we have not seen on the character front. that is what voters are seeing again and again. they had more hopes for him. olivia: brennan, you say the liberal democrats used to be the kingmakers. they were the kingmakers in 2010 when everyone got excited about nick clegg, and now the country has moved on. francine, what are the big issues for global investors at stake in these elections? francine: the biggest issue -- and we have had a lot of european chief executives commenting on this -- is an eu referendum. let's say it is a government led by labor. they are not seen as business friendly. so a lot of possibly big companies may decide they want to be elsewhere instead of in london. but if you look at the conservatives the big word
there is eu referendum. they are going to try to negotiate with the eu to have a better deal, but they have promised the eu referendum by 2017. the problem is, you never know which way they go. olivia: francine lacqua joining us from london. still with us, ian shepherdson of pantheon economics. you reside in london. what do you think? is the tory scaremongering right? ian: i hope so. i do not want them there. please go home. please restore the market to something rational by leaving. tom: is the united kingdom as polarized as america? ian: not quite, but he -- but it has become a lot more polarized over the last few years. tom: can you draw a parallel between this election and the last american election? ian: the far right is analogous
in some ways to the tea party, undoubtedly. they are holding cameron's feet to the fire over this referendum, which he probably would not want to happen if it was up to him. he knows it is a vote loser. this whole thing across europe where the main center parties on the left and right are seeing support eroding in favor of the extremes, which is why you get uncertain outcomes. instead of most people choosing one of the two big parties, they have five or six to choose from. brendan: moving to the u.s. and mexico -- in honor of cinco de mayo, we are not looking for the worm at the bottom of the bottle. we are looking at the case for investing in mexico. it happens to be strong. it is coming up next in single best chart. this is "bloomberg surveillance ." available to the royal baby on bloomberg.com. ♪
that is not mexican independence day -- -- that is mexican independence day. mexico is the subject of today's single best chart, the great depreciation. the chart shows the peso has been weakening for a long time sharply after the north american free trade agreement, but also prices there where the imf and the u.s. and others have helped bail mexico out. there is an uptick at the end as well. our guests with us on set -- pimco has been bullish on mexican debt since before 2001. they are still bullish now. what is the case? >> bill gross was always a huge fan of mexico. we found comments from him dating back to 2001 raving about mexico. when he left mexican -- when he left pimco, there was a selloff in assets. they have massive exposure to
mexico. indeed, shortly after his departure, they came out and a few of the investors there said they liked mexico, but yesterday they published a four-point blog post laying out the case for mexico. it starts with the fact that mexico is not as exposed to oil prices as everyone thinks they are. brendan: let me bring up a chart because this is what came out of that note. we are -- we think of mexico as an oil economy. it is not. it is a car economy. katia: they do rely on oil for 30% of the revenue because of panic's and -- they export a lot and they are the number one car exporter to the u.s. 80% of the goods go to the u.s.. they are really going to benefit from the uptick in the u.s. economy. tom: is nafta successful?
katia: that is a huge topic of debate. brendan: what is the natural weight of unemployment? katia: mexico is our largest trade partner. ian: no one there will tell you that mexico has not been successful. tom: we did not transport detroit to monterey? brendan: import of auto parts -- mexico has surpassed germany japan, and canada. kochconsciouskatia: there are questions of the social impact immigration. now what the president is pushing for with the opening of the oil sector, it is supposed
to be the best thing since nafta for mexico. olivia: what happens when the fed finally does heighten? ian: what the currencies have been getting at passover in the last few months one thing that will happen more or less today than in the summer -- they will come under pressure again. tom: go back to the single best chart again. in shepherdson, will you was plain how it major country can put up to two decades of currency depreciation? my text says they cannot do that. ian: in an emerging market with a higher inflation rate that we have seen in the developed world you have to expect currencies and nominal currencies to depreciate. katia: they are doing all the right things, but the problem is it is not fair. the peso sells off when the u.s. is doing better? that doesn't
make any sense. the peso should be doing better. they are saying in the long run it will be black rock that is very big. brendan: giving a thumbs-up or a thumbs down to an entire country -- very nicely done. olivia: what are we doing here? samsung released their latest app, for the galaxy backs six edge. apple made a commercial for its gold edition apple watch. both have images of liquid metal pouring making the product. imitation is the highest form of flattery? item number 2 -- remember we
sent an expression of machine -- an espresso machine? into space? the machine was cleverly named the iss presso. brendan: and she is wearing a star trek uniform, which i think is far more important than espresso. that is amazing. tom is using his "i have no comment" face. this is tom's "i have no comment" phase. tom: ok. what's next? olivia: tom loci fashion, so he will surely weigh in here. look at this -- bad girl rihanna in all her glory. she looks like belle from "beauty and the beast." tom: she wore this one day to
work. olivia: rihanna did he? brendan: that is amazing. i could not pull that off. she can pull that off. olivia: look at this. here we go. the royal couple of hip-hop, beyonce and jay-z. tom: this raises a lot of money for the met, no doubt. olivia: it does. spearheading this incredible night of fashion. brendan: can we give another shout out to katia this morning? tom: yes. mexico. ok. olivia: we asked you is activism good for business? we heard a lot of big calls from
tom: good morning, everyone. from new york city, "bloomberg surveillance." here is brendan greeley. brendan: the boston marathon bomber shows emotion for the first time since the trial began four months ago. dzhokhar tsarnaev's aunt tried to testify but could not control her sobs and had to leave the stands. he himself wiped his eyes with a tissue as she was led from the courtroom. david goldberg is said to have died from head trauma after collapsing at the gym of a private resort. he apparently fell off the treadmill and suffered blood loss. he was one half of the silicon valley power couple, the husband of facebook chief operating officer sheryl sandberg. apple is launching a made for apple watch program, giving makers a list of design requirements.
apple's watch straps are interchangeable, attached to lugs that slide out from the watch face. they are made from apple approved materials. tom: we have another good hour for you. greece with charles calomiris his unique perspective on the debt work down in europe. we look at an irish recovery. brendan greeley -- giving us perspective on ireland. and john levy will join us. we talked to him about something we do not spend enough time on -- family housing and the rent-buy decision. we begin coverage to friday question -- to friday's morning jobs report. we are nowhere near the so-called escape velocity of rising wages and plentiful
good, and better jobs that would perhaps signal a better america. ian shepherdson is at pantheon economics. what exactly are we waiting for to say it is a job economy that we love? ian: we have had the first hint of wage growth but one falling number is not necessarily a trend. we need sustained evidence that wage growth is really accelerating. tom: wage growth has not gotten back to that pre-2005/2006 level. brendan: also we've had page book -- wage book readers saying that -- ian: it has got to be more broad-based. the last report was that we were seeing frequent reports of wage growth, so the language is getting more exciting. but the hard data is not following through.
companies are screaming they cannot find the people they want, and they expect to have to pay them more. but the wage growth has not gotten the same traction that we have seen in the surveys. the fed does not respond to surveys. they wait until they see it in their official numbers. it is coming. olivia: how broad is that qualitative wage growth? employment is picking up. walmart and mcdonald's and target have all now come up and are going to raise what they are paying for minimum wage. are the hourly workers urging more money? ian: we have been getting raises, but they have been 2% 2%. we need to start moving up to the middle of the range, which is about 3%. at the moment, that has been happening only in areas where there are real shortages. the development of retail and fast food has suggested that at the end of the market we are seeing a little bit of traction.
tom: are those quality job? ian: well, they are better than no jobs, but i would like to see faster growth. tom: you are at 275,000 right now. that is a big number versus everybody else. ian: i do not know the consensus. olivia: it is above consensus. ian: it is the trend. tom: why can't the president take a picture of that and move the on employment rate down below 10% or wherever we are? is the unemployment rate bogus? ian: yes and no. it is bogus in the sense that when you are looking at the broad macro picture from the specter -- from the perspective of individuals. employers are reluctant to hire people who have been out of work for a long time. they look at the pool of people changing jobs. brendan: this nascent labor crunch -- will that be better
for negotiations for hours and conditions, or mostly wages? ian: mostly wages. as the economy recovers faster, they want more hours. they want to work harder, longer. we are at the cusp of that starting to happen now. olivia: why is productivity stuck in the doldrums? ian: the demographic factors are a big part of it over the last decade but in the last two or three years, it has been a problematic demand. i am convinced that demand is stronger. productivity will be dragged by this. it is very cyclical. tom: ian shepherdson, thank you so much for getting us started. moving friday on the jobs report. let's look at the four x report. -- at the forex report. as we go to greece, that will be the lead topic of our next hour of "surveillance." the euro at 112 yesterday
europe by tomorrow. the imf suggests they get it down. cameron and miliband dash to an election. princess diana olivia -- she is too young to vote. and parties argue whether i should finish that jar of formula three. we talk herbalife. good morning, everyone. this is "bloomberg surveillance." we are live from our world and orders in new york. it is tuesday, may 5. i am tom "herbalife" keene. joining me olivia sterns and brendan greeley. top headlines -- olivia: the group's official radio station made the claim about the shooting in texas and claimed more attacks. two guards opened fire. one security guard was wanted before police returned fire, killing the gun man. the fbi had been investigating one of the suspects since 2006.
agents had recorded him talking about fighting nonbelievers of allah. a week after riots broke out over the death of a black man in police custody, the city of baltimore is returning to normal. there were tense moments after a false news reports that police shot a man yesterday afternoon. national guard troops are continuing to withdraw from the city. president obama set events in baltimore and elsewhere have cost the country to once again addressed the issue of racism. president obama: a lot of the things we've seen in ferguson or new york or baltimore have been going on a long time. we are more aware of it in part because when you see something on video, it is a lot harder to deny. and communications have improved. and that is a good thing. olivia: the president says it is a handful of police who cause problems in their communities and for other police officers. the imf is reportedly warning
you will have to take a haircut on greece debt. "financial times" saying that they may cut off and less lenders agree to write off significant amounts of its sovereign debt. greece is facing a crunch, and finance ministers are refusing to give the greeks more a lot money until the country agrees to more economic reforms. i think we just copy and paste that sentence at this point. brendan: [laughs] shares of ubs rose today to their highest price since the financial crisis. first quarter profits almost double. 's ceo has reorganized the bank to focus on wealth management. meanwhile ubs has talked to the justice department about settling the investigation into rigging currency markets. ubs to have to pay about $50 billion. and letterman featured two men
who will soon be losing their jobs. this comes a little more than two weeks before the final show. the president told letterman he knows he is not the first choice when it comes to getting guests from the white house. president obama: i know you like michelle a little more than me which is ok. [laughter] [applause] i assure you you're not alone but i'm not going to let her have all the fun. and mainly i came by to say goodbye to biff an d paul. brendan: the president told them when they leave their jobs, they can go to the local starbucks and swap stories. disney reports earnings and tom will sing the "frozen" theme song as he always does when we talk about disney. 8:30 a.m., trade balance data. 11:00 a.m. eastern, former arkansas government my coco become a in a surprise to no one, announces his presidential campaign -- former arkansas
governor mike huckabee in a surprise to no one, announces his presidential campaign. tom: a weaker euro as crude hovers. greece spreads are higher. even baby sharla is involved. what can greece do to find carmen grounds with the rest of europe? charles calomiris has made a study of athens and the people searching for a better political economy. also with us john levy. we will get to multifamily housing here. professor calomiris, on greece somebody has got to pay the price. the imf is suggesting a debt write-down, the bond comes at 100, it is at 80, and they want to push it down to 50 as a general. why can't that happen? prof. calomiris: it can happen and it has to happen in some sense. overall, there is not enough money that will come out of greece to pay its debt.
of course, most of that debt come about 90% of it is a held debt, and that is of course taking a haircut too. tom: is this part of the discussion or part of the non- discussion right now? prof. calomiris: it is definitely a part. writing down the great does not solve the problem, and the greek government is missing the opportunity to find an agreement for reform. that is the real story. olivia: i want to jump in with the sprint fourth-quarter adjusted earnings per share, $1.7 billion versus 1.6 6 billion dollars, looking for losses to subscribers. 200,000 in losses, the story is once again t-mobile is the only major u.s. wireless carrier that is actually gaining new customers. brendan: one of the things we see strategy wise for sprint is there following t-mobile down the rabbit hole, lowering their average revenue per user as well. olivia: somehow my phone bill
keeps creeping up. charles calomiris, wind gusts chancellor merkel accept that there is going to need to be a third restructuring, a third bailout? prof. calomiris: this has always been understood. olivia: why didn't she admitted? -- she admit it? prof. calomiris: because from the beginning, the germans agreed that they would go along with a debt restructuring as part of a reform plan. the key point here is all along people have understood the arithmetic of this. this is not news. the news is that the greek government decided not to go with combining this right on with reform. they basically have been playing a crazy game of chicken with europe. brendan: if i understand greatly, the term on that hangover of debt for greece, the terms are long so greece is declining right now to play the game we call extended for 10 which ireland has been playing for a wild, and instead they want that debt negotiated right now. prof. calomiris: the problem for
greece right now is the need to come up with funds to pay off their debt service and obligation. they cannot get those debt servicing obligations rolled over unless they can get the agreement of their creditors and that is why it is urgent, and they will be urgent, within the next month, something has to -- tom: i am exhausted by urgent. olivia: i have been covering the greek debt crisis since i was francine lacqua's field producer in 2010 in brussels. brendan: even then -- and for the last, what, three months, we have been reading the same headline post up at libya is right. greece is about to run out of time, greece is about to run out of money. i have asked in meetings that those two headlines be banned. [laughter] prof. calomiris: what you are missing, brendan, as there has been news all along. once they get up to the border of missing a payment, the ecb or somebody throws another billion dollars at them, throws another
$1.5 billion at them, that is the interesting news. olivia: after five years, we are added new, more daunting moment than ever because rather than being granted an additional week of assistance from the ecb tsipras has actually taken the excess cash reserve from the local towns and musicalities and those local governments because he is so struck for cash. brendan: i have been curious through this whole renegotiation, before they were elected, tsipras and -- said they were going to go after those who have not paid their fair share. i have not seen a restructure plan to redo that. it seems like such an easy thing to do. prof. calomiris: it is not trivial to raise taxes, of course, and you will not get tax collection to change.
it is easy to say we will hit the plutocrats but just like in the united states, you not raise taxes unless you had a lot of people. right now greases moving it the opposite direction. olivia: what are the odds of an exit? prof. calomiris: high. denial, postponement of reform followed by the election of tsipras what happened roughly when it happens, and then eventually, this guide cannot think straight. the problem is we are being analytical. intervened the possibility that he cannot think straight. here is good evidence for it. in the midst of all of this what is the new story coming out of greece? that he wants to release greece's worst terrorist, who has killed many people including americans. why? what does that gain him? nothinig. but when you name your son after che guevara, what do you expect? he cannot think straight.
olivia: to play devil's advocate, he was making a good faith effort by sidelining varoufakis. brendan: isn't it crazy that is impossible that he is crazy north by northwest, i can do it because this is how bad is going to get if you do not give me an agreement? prof. calomiris: i do not think it is like pointing a gun in my head and telling me this, if you not give me a gun, i'm going to shoot. brendan: it works. prof. calomiris: i do not think it works this time. olivia: looking for much more from charles calomiris and john levy. do you think activism is good for business? our twitter question -- do you think activism is good for business? ♪
tom: "bloomberg surveillance good morning, everyone. "bloomberg surveillance -- tom: good morning, everyone. "bloomberg surveillance." brendan: i went to ireland, not yoursto report, mostly to drink into sleep. this was in the "irish times," this morning by cliff taylor -- so this is one of the -- tom: that is the zeitgeist.
brendan: yeah charles calomiris, that is one of the thing you hear a lot, the irish took their medicine. they are very bitter about this. they are not hanging angela merkel in effigy or burning things in the streets, but i spoke with the finance minister there two years ago, and when you look at what he did to negotiate with europe and what yanis are fo varoufakis has done for greece, michael noonan worked hard to do what he could for europe and asked for small things and return and got small things in return. that was ireland's approach, but it is not mean they are not angry. prof. calomiris: the irish should be angry because the irish deal is now called the irish error. where was germany's pressure coming from? not to impose losses on the holders of irish bank debt. olivia: private holders. prof. calomiris: right.
german banks held 6% of german gdp of irish bank debt in 2010. italian sovereign debt in 2010, and 6% of german gdp in the term of spanish debt, and they wanted it to be borne by someone other than german banks. brendan: greece has a great problem, ireland had a property market problem but ireland bailed out europe. it is basically them bailing out senior bondholders. tom: brendan, go to this "irish times" article. explain the purpose of this. brendan: i have been to ireland a couple of times and what i have not seen if the change in the number of for sale signs on private home. repossession orders -- that is such a huge ultra issue in ireland. "repossession orders rise by more than 500%."
the bank of ireland gently restructuring, working with homeowners, there is a cultural movement in ireland to keep people in their houses. there is a huge difference between there and here. tom: later this morning, john chambers at cisco will join tom: "market makers," of course the chief executive officer. look for the any 10:00 hour. a simple churn in the market this tuesday. it is "bloomberg surveillance." stay with us. ♪
tom: "bloomberg surveillance." we are counting down to friday's jobs report. adp report in the 8:00 hour tomorrow. top headlines -- here is brendan greeley. brendan: historic trip for john kerry, on an unannounced trip to somalia. he landed in the capital city of mogadishu. he is the first u.s. secretary of state ever to visit that country. he wants to show support to the government in its fight with
militants linked to al qaeda. meanwhile, former secretary of state hillary clinton has agreed to appear for questioning on capitol hill. she will do this only once. her attorney told lawmakers she will testify at the same time about both the benghazi attacks and her e-mail practices as secretary of state for a house panel had asked for separate panels on each subject. police in new york are mourning the death of their own. 28-year-old brian moore died after being shot in the head by a suspect. the suspect is now facing a murder charge. moore was the son, nephew, and cousin of police officers. olivia: the market for multifamily homes is roaring back above its 2008 peak. total construction is at the highest level since 1987. i will not remind you how old i was then. demand is surging, and they are rapidly approaching the cap of how much the government will let
freddie mae and fannie mac lend. john levy joins us. what happens when the gse's hit their ceilings? john: they started slow and raised spreads to camp down the demand. with a do is go back to the regulator and say the market is so good that we would like to do more. my guess is they will get more of an expansion above their $60 limit. olivia: so perhaps the ceiling is elastic. what is the why? obviously multifamily homes are destroyed portion only used for rentals. -- are disproportionately used only for rentals. john: we had a synonymy of finance. what we are seeing now is it is coming due and people are saying i had a 6% mortgage, but i can refinance at a 4% mortgage and do it now, so the market good rates are 200 basis points
less than they were last time we played this game and it is bringing a lot of people off the sidelines and saying this is a unique opportunity. tom: charles calomiris with us colombia, john, i want you to continue with this discussion. is virginia going to have to secede from the unit again to get fannie and freddie straightened out? [laughter] to be honest, we will all be older when this gets straightened out. prof. calomiris: i think we are still in the early innings of this. john and i were talking in the green room about financial bubbles in the economy and there is a cost to being able to refinance at 4% and pulling people in with these low interest costs. i agree that the gse's are probably going to relax the ceiling. after all one intent was to pump up this bubble more with 3% down payments and there is no question -- john: but that was on a single family site, not only multifamily site and it is kind of a different world, right? prof. calomiris: but they are
also pushing on the multifamily side with very us sort of concessions. so i think that the politics is all pushing -- tom: but olivia, the thing i remember from years ago was the condo boom of, i think it was the 1980's, there was a condo on every corner. olivia: i was like four or five . brendan: you have to do that every time. olivia: how does the quality of loans compare? prof. calomiris: they are a lot better, actually come and rates are lower, so it is easier to stay current. john: if you say what is the difference in the term risk, then it is easier? of course you are paying for percent money and not 6% or 7% money. if you talk about what is the maturity risk, that is a different story because that is at the end of 10 years, now we have pumped up the leverage point. we have kind of the leaddelayed that point. brendan: we have been talking
about rates, but what about terms and conditions of the loans. are we starting to see a more relaxed approach to how they are going to restructure that credit? john: there is no question, and the easiest way to look at that is to look at the percentage of loans that have an interest-only come in other words a non-advertising component. if you look back in 2010, when you see -- brendan: interest-only, is there a big police siren above your head? john: not necessarily, but 70% of the loans are interest-only. tom: on rent versus buy, do you two grizzled veterans feel of the millennials will be left behind it will not have that buy-a-house appetite? will they be in multifamily forever? john: no i think they will buy. we will see single-family grow in many areas.
tom: do you agree, professor? prof. calomiris: absolutely. we are still at an early phase in terms of this in a cycle time, so we will see incomes picking up and when you see that, the combination of those low interest rates with incomes -- tom: folks, we go to someone in the trenches, one o. sterns is out there looking. what have you learned? olivia: the new york housing market is very hot, lots of all-cash buyers. but if you can afford the down payment, my mortgage payment will net out to less, a couple of hundred dollars less a month, than i am currently paying. tom: can she get a 5% on mortgage? prof. calomiris: absolutely. olivia: i can get a 3.5%. tom: you said 3.5%? prof. calomiris: re: talking about the rate or the down payment? olivia: the rate. you have to put 25% down
happening for the last 15 years. this is the mystery. john: we are looking at the late 1990's. brendan: one is simple demographics. men have been leading the workforce is about here. women have in making up the difference until right about here, so one of the things the recession has done for us is forced us to look at data that has been there the whole time but had been hidden in otherwise good numbers. olivia: you can also look at us and say there is a structural regression from the mean because of the demographic. the baby boomers are retiring and the white line is never going back to the red line. tom: two americas. guys like danny branch from blanchflower at dartmouth. brendan: i would agree with olivia.
most of the two americas data we see, the end of the 1970's, the begin of the 1980's -- tom: that is when the red sox had -- brendan: exactly. olivia: that is an anomaly. brendan: this is right here, demographics, gender and age making its presence known. tom: do you realize this is a semi-long chart? olivia: can we do it on a systems analysis basis tom? [laughter] brendan: is this a type one or type to construct? tom: it is a massive type one statement on america. olivia: 7:30 in the morning. [laughter] tom: ok. patrol is over. there we are right now as we look at the bloomberg terminal which we do a lot here at our world headquarters. let's get to our top headlines right now, ms. sterns. olivia: the "financial times"
has reported the imf has told creditors it may cut off support to greece unless it right off significant amounts of a sovereign debt. the impasses over greece's financial crisis the strengthening the economy. the greek economy will grow just .5% this year. >> it goes without saying that all our projections for greece are subject to a high degree of uncertainty since discussions about policy measures are continuing now between the institutions and the greek authority. olivia: refusing to give greek more money in until the country agrees to more economic reform. a deal may be in the works on iran. interpublic authority to all but bill backed by both parties in the white house. it would give congress the right to review or is reject any i
ran deal, but senators marco rubio and tom cotton have proposed to end the debate. mike huckabee is taking another shot at the run for president. he is making his formal announcement today in arkansas in the same town that former president bill clinton was born. he won 8 states in the 2008 primaries. the nbc poll has jeb bush leading the republicans with 23% of a potential vote. meanwhile, the sheriff people with a negative view of democratic front runner hillary clinton has risen from 36% to 42%. she has been hurt by fund-raising controversy and her e-mail practices. brendan: foot companies are dropping artificial ingredients. a chain of bakery cafés are getting rid of artificial
colors and flavors. panera -- one problem -- how to serve bacon. bacon is made with preservatives. manny pacquiao will undergo shoulder surgery later this week. he says he injured his shoulder while training before last saturday's loss to mayweather. he may face an issue in nevada for not disclosing the injury before the fight. tom: currencies get my attention at $1.1143. euro weaker, and some of its massive data about what greece does truly in the next 24 hours, maybe a little longer, maybe 30 hours stop go on to the next board where we have some nuance. the dollar index was 100, and we're not getting near 5% on the dollar index here. a weaker dollar all in all and
the german bonds still vaulting higher, taking a paucity, but .44% shows that mr. gross was onto something a week ago. so there is the data check this morning. olivia: this is "bloomberg surveillance." i am olivia sterns here with tom keene and brendan greeley. here is brendan. brendan: herbalife, remember that company? they report after the bell. you'll remember them as the company bill ackman does not light. the company lowered the 2015 outlook last order. bloomberg's cory johnson is with us on saturday. he drinks an herbalife supplement every morning. cory: yes. brendan: when will the story end? cory: to me, that story, the story of bill ackman versus herbalife, bill ackman versus the wall street bulls, who cares? olivia: i care.
i think it is a huge deal. the top performing hedge funds manager has stuck his neck out with a huge short that is not paid off. cory: first, it has paid off somewhat. almost every level in almost every geography, whatever herbalife was come i do not care fair selling whichidgets or drilling for oil, the more you look at the numbers, the worse they look. if you look at the free cash flow, it is very bad. if you look at their biggest growth market, you see big problems. then you start to look deeper you look at the accounting, how they accounted for what they were selling into these markets you look at the currency factors they were able to exploit when it was looking good for them and how this was hurting them on the backend, it is a business with a lot of problems. you do not need bill ackman to see that. brendan: we got him to talk about how to short sell or rather how not to. bill: i think shortselling is inherently good for emerging
markets, but it is not a great and productive use of time. brendan: so a little less on how to do it or how not to do it. cory: i was a short seller in an earlier life, or a fund manager i had a lot of money dedicated short, and i will say shorts will listen to what bill ackman is doing and say why go public why have these discussions out loud? if you are short a crummy company, you want an air pocket and he took that air pocket away from herbalife. he told everyone it is going to happen. brendan: is the obvious conclusion from what you're describing that he waited and waited and waited and they did not implode? he has been trying to drive them into implosion for two years. cory: it is deflating rather than imploding. tom: to defend cory's stance, mr. ackman is a little bit money and you deflate before
you plunge. what would be the catalyst to allow mr. ackman to look like a genius? cory: i think it will be the numbers. tom: i agree. cory: we do not have to wait for an investigation or anybody in handcuffs. it is the business. tom: we go to one c. calomiris. total noncurrent liabilities is deep down in the syllabus, isn't it? talking about what is buried on the balance sheet, do they? it is not sexy. what cory is talking about is not what is hot, and that is where ackman is looking. prof. calomiris: free cash flow is what we teach. the criminals is exactly the right to look at. tom: cory, free cash flow? cory: i think we might have a chart. olivia: hey! cory: look at where free cash flow was six quarters ago. olivia: and now you're coming on
to make a bullish case? cory: no. i would not make a bullish case period but certainly not for herbalife. brendan: ackman did not say it was a crummy company, he said it was an illegal company. he said it is a pyramid. cory: the company selling things to people who sell things to other people who sell things to other people, they recognize a lot of sales through the channel as opposed to end customers. brendan: there is a periodicity it goes up in the summer, people want to lose weight, and goes back down in the winter. our blithe nice and flat. they are selling to people who want to sell , it does not matter who buys in theend. -- in the end. cory: is a club atmosphere. the buildings people sell, they are not allowed to put signs up the cup they sell in the same communities and they are not
gorgeous in new york. for those of you at the hockey mad stanley cup in north america. let's go to brendan greeley on business. brendan: cue tom silently singing "let it go" as i speak. disney reports earnings at 8:00 a.m. eastern. "in the loop" anchor betty liu joins us. betty: you have got the right idea, though, the movies are killing it. brendan: let me put a fine point on all of this -- it a lot a.m., earnings, what are you doing? betty: 9:30 will be the conference call with analysts. they are killing it with the movies -- "avengers," almost $200 million at the box office. was a little bit lower -- olivia: there was a fight. betty: exactly. essentially marvel, pixar,
lucasfilms are all doing well for disney. they have not missed consensus since 2011. for four years they have beat consensus, and it beat by between 2% and 10%, the stock usually goes up in the weeks after the earnings report. also if you do that fancy function, or not so fancy, pretty basic anr on the terminal, not one sell recommendation on disney. bob iger is doing great, firing on a most all cylinders here with disney. there is a little bit of a dollar headwind for their operations overseas, but look, their media networks, $5 billion in revenue, parks and resorts, 4 billion, studio a little bit less at $2 billion, but we will see all of these numbers that it :00 a.m. brendan: olivia we were talking about disney with ray this
morning, they acquired marvel, but they also made amazing marvel movies, so it is execution, not just clever acquisitions. olivia: some critics cannot is that why. betty: iger had, kudos to him, had a strategic vision as to how he wanted to expand the marvel franchise was in the disney empire. tom: it is interesting, going back to walt disney and the failure of "pinocchio" and trying to figure out "no white" and all of that -- trying to figure out "snow white" and all of that. olivia: they have been able to smooth out the edges. brendan: the property no longer lives in the bronxox office. olivia: they have been able to
weather the death of the dvd. betty: i'm surprised brenda did not scream when i said "star wars." brendan: you know why? what is the has a look at any future for is copyright reform. at some point, the trademark is going to run out and they will have a big problem. olivia: break point. tom will be first in line for the sequel of "let it go." disney earnings on "in the loop" with betty liu coming up next on bloomberg tv. ♪
tom: good morning, everyone. "bloomberg surveillance." i am tom keene. let's get to olivia sterns. olivia: a grim milestone in nepal, the death toll is now over 7500. today, rescuers were digging through thousands of tons of earth from a mudslide caused by the quake. it wiped out an entire village by a popular trekking route. up to 200 there may have died. and surveymonkey's ceo died of head trauma after collapsing at a report. the 47-year-old goldberg
apparently fell of a treadmill and suffered blood loss. he was the husband of facebook chief operating officer sheryl sandberg. president obama will operate the commandment of the marine corps to be the next chairman of joint chiefs. he is a former commander of u.s. and allied grand forces -- ground forces in the middle east. dunford is finishing his second two-year term as the country's top military officer. tom: bank of america blinks with their institutional shareholders. they said no, you cannot cram through. brian moynihan will see where that goes in the next coming months. michael male joins us now, for decades that credit squeeze following the banks. he has been the most active voice at bank of america. you have got to play by the rules. mr. mayo is this a victory lap
for you? mike: i do not take it personally. we try to be independent. but i am not sure this is enough. i think they are operating under the premise it is easier to ask for forgiveness than it is to ask for permission. i am not sure that is the right way to go. tom: does brian moynihan get out of front of this and relinquish the chairman duties? mike: that was one possible scenario because he will be chairman for perhaps as long as a year and a half against the spirit of the shareholder vote from 2009 so i think their plan is that brian moynihan is going to stay chairman's ceo until they actually have a vote. they will have a vote including the next scheduled meeting. tom: mike a pair and contrast as moynihan and jon stump of
wells fargo, wells fargo trading at a substantial premium. is wells fargo overpriced, or does brian moynihan have a lot to of catching up to do? mike: they have a lot of catching up to do. john stumpf does not try to be a diplomat, he does not go to davos for example. brian moynihan -- what is the plan for the next five years? it is not clear. tom: we have chairman and ceo combinations of roughly 47%. callister's force the banks to -- calsters force the banks to separate. mike: if you are bank of america and needed help through the crisis with acquisitions, then i'm sure there is an extra layer
of protection for the shareholders and that is the chairman. it is better to have that extra layer of protection for shareholders as opposed to a voicedid that regulators will move into. tom: mike mayo thank you, he is with clsa americas. how much money should banks have on the books? for a rainy day, leverage at some point always kills, yet that is where the money is made. eight years on from a financial collapse, it is still the raging debate. john levy is with us from john levy real estate in richmond and charles calomiris has made a cottage industry of leverage. professor, are these without front here still? do the swiss get it and we do not about saving money for a rainy day? prof. calomiris: yes. that is the quick answer to a good question, just yes. they are a smaller country than we are. they had a very scary experience
during the crisis, so their political economy of regulations, which is very different from ours, they cannot afford to make this mistake. olivia: the response from the crisis was to batter down the hatches. is that the move that we should be seeing in deutsche bank today? prof. calomiris: i cannot say whether deutsche bank should take that specific move. i have not looked closely enough at them. but i think you're right that it makes sense in today's environment to move toward stable, fee-driven income as opposed to unstable, sort of deal-based and riskier sounding sorts of transactions, absolutely. brendan: people argue that germany actually needs a strong investment bank abroad, and that is one of the reasons why deutsche bank has to hold onto that capacity. the bigger question for me, charles calomiris, is what are banks going to look like in the future?
we are seeing banks make real decisions -- asset management, shutting off real retail operations -- will we see different things for different purposes? prof. calomiris: that is a good question. we have never been in a moment where we were more uncertain about what the future of banking will look like. in europe, despite all of the consolidation within the continent, what we are seeing is the balkanization of lending. we see banks reverting to their own economies. we see banks in the u.s. turning down deposits. tom: let's go to the chart. for those of you on bloomberg radio, i will put this out later -- jpmorgan sharply outperforming deutsche bank. john levy with us from richmond virginia. from your interesting view, what is your opinion on opinion professor calomiris' view? john: moving them out of that would make a big difference. tom: is deutsche bank your
friend in the multi-family business? john: deutsche bank as a friend to a lot of borrowers because they are able to move big chunks of money, but we also see what i call shadow banking. banks have been able to -- banks have been forced to revise under the basel three amendment. their place as may be moving on and shadow banks, banks that are non-banks, are starting to move in and take over their opportunities. brendan: a quick question back to you, as basil three adequate? john: i do not know if it is adequate not. i do know it is changing the way banks look at the commercial real estate business, and all of a sudden it is taking more capital, there is more equity needed, so that is what is bringing up these kind of non-bank or shadow banks is that people who are used to putting a fairly little amounts of equity are now having to put up dramatically more. and they are willing to pay more to these non-banks because they
will give them the leverage that the regulated banks will not give them. olivia: but it is still not clear what these new regulations, what basil three, is going to cause the european banks. that is what we heard last week when deutsche bank announced a strategy overhaul. they do not even know what the new regulation is going to cause them. john: that is clear and real estate -- you can go from one bank to another and say what is the impact. they do not know. olivia: professor calomiris, quickly, if you had a magic wand and could fix one thing about dodd-frank, what would it be? prof. calomiris: wow. tough question. there are so many choices. [laughter] i will give a professorial answer, which is we have to stop thinking about banking regulation the way lawyers do. as a list of thousands of pages of rules. we have to start thinking about it as establishing centers for people to manage risk reasonably, and dodd-frank just never got there. from the very beginning, the
reason we are seeing banks and so much trouble, despite all of these increases in regulation, is that the regulations are not smart. so the reason that we are going to see growth in the shadow banking system is because they are going to come in and do the deal that makes sense to do that are overly costly for the banks because the banks are going to go back. tom: twitter question. olivia: big response -- we asked -- do you think activism is good for business? first answer -- second answer -- look at carl icahn. the companies he is invested in do very well. perhaps for shareholders. third answer -- majority owners of the company's push them to the limits for profit. love it. i would encourage everyone to go online, bloomberg.com, and check out stephanie ruhle's interview with bill ackman, who issued a very robust defense. tom: professor, thank you very
drilling industry. is he right? we will drill down. judging by the stock price mcdonald's turnaround plan, a big thumbs down. plus, an exclusive interview on a big gambling that. finally making it onto the gaming strip. tim wilmott on why he wanted this for so long and he got it. the international monetary fund reportedly said be ready to take a haircut on greek debt. the imf wants creditors to write off large amounts of sovereign debt. if they do not, it might end support for greece. the country facing a cash crunch.