tv Bloomberg Surveillance Bloomberg May 14, 2015 6:00am-8:01am EDT
tepid. does the new mediocre extend to the u.s.? mcdonald's is ms, shake shack is the burger of choice. this is bloomberg "surveillance," live from new york. i am tom keene. with me, brendan greeley. brendan: there was a summit this morning. they had a lot of things to do. i think one arab leader is at a horse show. tom: have you been to camp david? brendan: i have never been invited to negotiate. tom: the president leaves the white house at 10:00 a.m. that is there a and -- that is their definition of all-day. brendan: if you bring someone to camp david, you expect to get something done. tom: in our next hour, stanley mcchrystal. an interesting book about
lessons in iraq. we will give him some tough questions versus some of the wet kisses out there. top headlines. >> good morning. investigators hoping the fatal amtrak crash -- investigators want to know why the train was going so crash. the crash killed seven and entered more than 200. the ntsb has determined the train was traveling twice as fast as it could have been. >> the authorized speed through the curve was 50 miles per hour. when the engineer induced brake application the train was traveling at approximately 106 miles per hour. >> the ntsb says the accident cut off been prevented if the track had been equipped with automatic braking technology. that is already on most of the
line between washington and boston. amtrak service is still suspended, no word on when it will be restored. president obama is meeting at camp david with the leaders of six persian gulf nations. they will try to work out disagreements caused by u.s. negotiations with iran. saudi arabia's king salman will not be there, he sent a crown prince. the president praised the relationship with the saudis. president obama: my work and the government's work with these two individuals in the crown prince on counterterrorism issues has been critical. not only to maintaining stability of the region, but also protecting the american people. >> the saudis are skeptical of the u.s. push for an iran nuclear deal. the white house insists the absence of the king is not a snub. falling to the lowest level in almost 4 months -- stagnant
retail sales. undermining chances the federal reserve will boost interest rates. the dollar is down 4% in the last month. amazon, here comes wal-mart. the world's largest retailer said to offer a $50 a year unlimited free shipping service. a challenge to amazon's prime service walmart says one million items will be available in three days or fewer. do not get too excited. for now it will be available by invitation only. in pro football, tom brady is expected to appeal the decision in the deflategate scandal. the nfl suspended brady for 4 games after a report found he was probably aware two employees deflated balls in the afc championship. will he appeal?
brendan: i would like to announce, today is the first day in over a week that deflategate has not been on the back page of the "new york post." tom: go rangers. what's our morning must-read? brendan: 8:30 a.m., initial jobless claims. bloomberg comes out 15 minutes later with the u.s. economic survey for may. 9:45, our consumer comfort report. no comfort to tom. tom: a quick data check. the weekly report from the futures up nine. euro explodes 1.12, 1.13. confounding the parity. crude oil unch for the last two months. vix,13.
equity is given higher yields. greek 10 year does better than good. even the dollar shows canadian strength. the mood of america interesting. here's the peak int -- in the 1990's. here's the gloom. boy, did we come back. brendan: we have. tom: we have a long way to go. brendan: this is unfair. i will compare my mood to the mood of america. 1997, brendan greeley graduates college he has more hair. i quit a job because i wanted a vacation. this was unreasonable. unfair to compare us to hear. if we are back to here, it is good news. tom: this is where i bought all my stocks and this is where i sold my stocks. it is a very good survey and it
comes out weekly. look for our analysis later. to the global front and tying it into the u.s. living the new mediocre. christine lagarde got it right for 2014 and 2015. what then? can gross accommodation and the hopes and prayers of animal spirit and technology right the global economy? jeffrey dennis is one of the leading thinkers at ubs. he has seen angst about mediocre growth. he is with us. do you assume this gets better for the philippines and parts of africa and for eastern europe does it get better? >> i'm not sure it does across the board. it gets better and selective countries. in emerging markets, net oil importers do not seem to be spending the benefits of lower oil prices. we are quite disappointed that
growth numbers are not a little better than they should be. even in the emerging markets, it is not it is relatively mediocre. tom: you got a memo on greece. brendan: we have been looking at the negotiations, let's look at the economy of athens. is it an emerging market? grexit it is classified as geoff: it is classified as an emerging market. the index includes it as an emerging market. to us it is an emerging market without question. brendan: what traits, we are thinking about how it is classified. what traits make it like an emerging market? geoff: the weakness of the economy, it gdp per head is a lot lower than in typical developed economies. it has a relatively small stock market. relatively compared to the rest of europe.
in a lot of emerging markets theyv'e've got smaller markets with less liquidity. it does sit uneasily against the rest of the euro area here to which, is a developed region. brendan: it is uneasy and a bunch of ways. jostling to see what greece is part of. today there is an offer to make it part of the brics bank. clearly a political move. geoff: frankly it is pretty unrealistic. it is crazy. the brics bank has developed from the 4 brics. they're trying to create demand infrastructure spending, etc. to tack greece on as a way of giving extra funding -- brendan: jim o'neil agrees with you. tom: i think about the union bank of switzerland, you have the optimism of your american
economic team. how do you respond to the idea that the new mediocre could be some form of contagion to u.s. economic growth? controlled retail sales are flat the last five or six months. do you ascribe that to your world? geoff: i do not think so. it is quite puzzling about what our u.s. economic steam is saying. indeed, it looks like lower oil prices, because of the hit on the energy sector, has had less of a positive impact than anticipated. what they have started to factor in recently is what you mentioned at the start of the program, the strong dollar has had an impact on corporate earnings in the u.s. market. at the margin it has given -- at the margin, given that it is tough to export oil, it is tough on the economy. tom: can net exports diminish enough over the next 2, 3 or four quartilesers y plus c plus i plus g -- is it to pull down
gdp statistics? geoff: the u.s. economy is still going to grow at around 2.5% or 3%. the dollar is playing a marginal role. that is still struggling even though europe is getting better. brendan: i was surprised to see in the list of things you are curious about, brazil rally. is the new finance minister getting it right? geoff: off a very low base, he is. brazil has had a very deteriorating situation. he will have to try to fix that. he's trying to do that. politically it is difficult. brazil would probably have lost its investment grade rating. he's tightening fiscal policy into a soft economy. tom: that are yammering about capital flows. does a weaker real safe brazil
like a weaker whatever helps every country? geoff: it helps industrial companies export more. the problem brazil has got is you have lost the commodity and that is to the economy. they had a lot of consumer debt to finance. they are tightening financial policy. tom: sterling, cable stronger. geoff: outside my round. -- outside my realm. tom: you have a realm. ok. brendan: he has a realm. geoff: good for markets. tom: geoff dennis of ubs. stan mcchrystal with us. brendan: my realm -- burgers.
tom: good morning. cable to 1.58. what pound strength we have seen since the election. our top headlines. >> in boston, the cherry in the dzhokhar tsarnaev -- the jury in the dzhokhar tsarnaev case will start the liberations. the prosecution wants tsarnaev executed. his lawyers say he was radicalized his brother.
a hedge fund won the bidding war for the radioshack brand agreeing to pay more than $26 million. a scary looking crash at the brickyard in indianapolis. the driver walked away unhurt. he hit a wall and his car flipped. practicing for the indy 500. he's a three-time winner. those are the top headlines. tom: wow. thank you so much. let's move forward on bloomberg "surveillance," gulf leaders meeting at camp david with the president. a lot of uproar about this. we have geoff dennis of you yes -- of ubs. china being desperate as
economic growth slows down. brandon took command of the back end of the hour -- scotch scotch, scotch. a twist on the coverage of choice, whiskey. we digress on a thursday morning. we also digress over to hamburgers. brendan: it is not a normal burger. a big beat for shake shack. geoff dennis prefers the shakes. revenue surged up 56% to $37.8 million in the first quarter. stock up as much as 9% in after-hours trading. joining us now, michael hill alen. analysts had worried whether or not shake shack could expand outside of new york. that turns out not to have been
a problem. michael: in chicago and las vegas, sales were very strong. restaurant margins expanded. it gives confidence that shake shack can expand outside of new york. it could be that management is kind of conservative. brendan: i'm reading from an analyst, she said we remain on the sidelines given it rich valuation. given its small restaurant base and real-time exposure to commodities. we do not know enough about it because it is not big enough. michael: that is part of it. there has been a strong run-up in shares. the ipo price was $20.
it ran up and now we are into the 70's. there is a large valuation gap between shake shack. there's also a gap between fast casual names and the qsr. tom: i usually go to the financials but i will say it is the hardest thing is to expand. that starts and ends with acquiring bodies. if chipotle gets the marginal manager, how does shake shack get good people? michael: by paying them more. danny meyer wrote a book called setting the table. it is about getting good people by paying them more and training them well. it is a customer service business. getting people in the door and giving them great experience. tom: what is the worst practice
of mcdonald's that shake shack has to avoid? like a: great question. tom: my only good one. geoff dennis? what do they need to learn from the clowns at mcdonald's. geoff: they have lost their way. the menu got too big. tom: why do you go to shake shack? brendan: i've only been at once. the second time i tried to take my three year old and we could not get in the door. tom: the kids love it. brendan: let me ask you, we are looking at five international licensed openings. what is the peril there? michael: there is less peril internationally. they have a couple great partners overseas. they are franchising that business. they have great partners that have been in the business for decades.
it is a good cash flow business. tom: stake shack -- shake shack this morning. forget about shake shack, stanley mcchrystal will join us with all of his experience in our military. he applies that to best practices for management. stanley mcchrystal in our next hour. futures up nine, dow futures up 70. bloomberg "surveillance," good morning.
for those of you -- that is hockey across canada and the u.s. they defeat the washington capitals. the empire state building lit up for the overtime-winning new york rangers. brendan: martin wolf in "ft," we've been talking about the transpacific trade pact. he is worried about that and the breakdown of the wto process. "with limited political capital, the focus on plural lateral trade arrangements risks diversions from the wto." geoff dennis with us. do you agree? geoff: i think it does make sense. when the global financial crisis occurred, one of the predictions was that it would really start to set off a bout of trade
protectionism because growth was astonishingly weak. now as we come out of the recovery -- out of the recession and into recovery it continues to be disappointing. everyone is trying to get a jump. there is more competition in trade. if this leads to a splintering of the wto process, that is bad news for the global economy. this has been building up for the last 60 or 70 years. brendan: when you look at the tpp martin wolf is worried about trade policy as foreign policy. the drumbeat underneath the tpp is we have got to get there before china. it makes trade policy subservient. geoff: 210, that is true. i generally think as a real economic argument for tpp. they might be trying to ensure their position in asia is strong, i think there's an economic factor.
asia is still the strongest growing factor in the world. tom: we could go on about this all day. we continue a discussion on international relations. james st will join us, former nato allied commander will stop by to speak to us about camp david. brendan greeley and tom keene. bloomberg "surveillance" worldwide. futures up 9. ♪
that crashed her the train was going 106 miles an hour before it derailed in philadelphia. seven people died in the crash. 200 were injured. the engineer has been identified. his lawyer says he has no recollection of the crash. the ntsb says the crash points out the need for positive train controls and an automatic raking system. >> we have called for positive train control for many years. congress has mandated it be installed. by the end of this year. so we are very keen on positive train control. a son what we know right now, we feel that had such a system been installed in this section of track, this accident would not have occurred. quinn: the automatic braking technology has been installed on most of the rail line between boston and washington. president obama's asian trade
deal is back on track a day after democrats rebelled. today the senate will vote on two related bills that democrats want. senate will vote on the proposal to let the president speed up approval of trade agreements. >> taken together, the bills form a package of trade policies that are going to help our country create more high skilled high wage jobs in my state and across the land. quinn: many democrats have said the asian trade deal would be a bad one. they say it will cost americans jobs and depress wages. in nepal, a u.s. marine helicopter is still missing. the helicopter was delivering aid. six marines were on board along
with two nepalese. more recalls. today it was honda. honda is recalling 4.8 million vehicles. that pushes the total to 19 million or yesterday toyota and nissan recalled another 6.5 million cars. and washington d.c.'s sports fans know the agony of defeat this morning. in 27 minutes they suffered through two playoff losses. first, al horford gave the hawks a victory over the washington wizards. then -- scored in overtime to give the new york rangers a 2-1 victory over the washington capitals in the nhl playoffs. a hopping night in madison square garden.
tom: that was a fabulous rangers victory. on to go to play in tampa. hockey in florida needs its own translation. your overtime goal -- there we go. in it goes. from the point. proving once again that i am the worst hockey announcer known to mankind. who are america's allies? the chess players change but the chessboard continues. admiral stravidis joins us. i want to talk about general mcchrystal but david myers said, what is the significance of camp david? what does camp david mean to the military? what does it mean to the president? what does it mean to the visitors this morning? admiral stravidis: what it shows
us is the alliance is not holding together. when we see so many heads of state refuse to come to its summit, we have to worry about alliance management, it sends a signal of real fracture in the gulf states. brendan: should a relationship with saudi arabia be changing? admiral stravridis: it should because of the threat of iran. they are less worried about a nuclear weapon than they are about the confusion of cash that is going to hit iran in the short term if the sanctions come of which will finance has blockedf. -- which will finance has blood -- hezbollah. brendan: is there any way to reassure our allies that we are on their side? admiral stravridis: i think that is what the administration is trying to do but that signal is not landing.
and that is demonstrated by the lack of support from the sunni leadership in the gulf states. we will need to do more exercises, more arms transfers. we're going to need to push the sunni arab world together and lead. tom: in kissinger's world order -- what is stravridis' new calculus for our foreign policies? these are new creations. admiral stravridis: any time there is a big muscle movement in the international system -- the arab spring is an example. in newport, rhode island, we have got a spot for you this fall. when that arab spring movement occurs, we have to adjust. i think kissinger would say we have to adjust our thinking. in this case it means they sunni arab state alliance with the united states must be strengthened.
brendan: we have had an assumption of our partnership with the saudis for decades. admiral stravridis: we have taken them for granted. brendan: have they taken us for granted? admiral stravridis: a little bit. but we are the ones with a vested interest. it is their home. tom: we associate talk about. stan mcchrystal will join us in the next hour. one thing i have noticed in reading about lincoln is we love to beat up on admirals and generals. who is stan mcchrystal and why are we sort of over the recent years beating up on various senior military officers? is it a new vogue? admiral stravridis: if you look back at the civil war -- tom: mcclellan. admiral stravridis: fired a whole series of generals until we found a general that clicked. stan mcchrystal is the ultimate silent warrior. a special forces leader who has stepped up behind the scenes.
you should ask them what is the hardest challenge of his career and how did that book help them through it? brendan: i'm going to ask you the same question i will ask gentlemen crash -- general mcchrystal. does our current strategy relied too much on drones and special operations? admiral stravridis: i do not think so. i think this is the new reality and military warfare. it is a triad. we used to talk about the old strategic triad. today's triad is special forces cyber and remotely piloted vehicles. tom: is that too much technology? admiral stravridis: we have to get used to it. as much a technology shift as the addition of the reprieve rifle -- the repeating rifle. brendan: has that change the navy? admiral stravridis: not at all. there will be a conventional
role. but the spearhead forces are going to be this new triad. tom: we just had an election in the united kingdom. geoff dennis, how do we pull the united kingdom back into a closer relationship with washington? hank:jonathan: geoff: gosh that is a tough question. with the new government, it has a majority. it can do things without being in a coalition. i think there is a close relationship between the u.k. and the u.s. and i think that is on the assumption this is a relatively strong government. they can rebuild this relationship. i do not think it is broken anyway. maybe a little bit less strong than it used to be, but i think it's easy to rebuild. the synergies are there. now you have a strong government and the u.k. tom: admiral thank you for being with us. let's go to our twitter question of the day. what is the goal today at camp
tom: green on the screen. tom:dow futures up 72. it's time for our single best chart. what do we have? brendan: we have a good chart. geoff dennis on the desk with us. it is his. emerging markets is the subject of our single best chart. despite four years of consistent a performance, ubs says you should say overweight in asia. the blue is what is happening right now. the yellow is what happened last year. russia. it is been a good year for russia. at least the year that started 2015. china, poland, chile, mexico everyone is having a good quarter. geoff: in the case of russia, it was kind of lucky from a
calendar year point of view that a bottomed out at the end of the year. we had the follow-up the economy, the collapse of the ruble. the collapse of oil prices. and the concern about sanctions. the ruble bottomed out. as soon as the ruble bottomed out, oil prices bottomed out and everyone started to move back into russia. brendan: just today the russian government started buying foreign reserves again. geoff: i think the reason for that is, if anything, the currency has rebounded to much. they want to see it a little bit weaker rather than -- it is gone from 80 250 against the dollar. we think 60 is a better level. brendan: this chart is equity performance. do you see this as rebounding or a bet on the future of the russian consumer? geoff: i think it is a rebound. although the fundamental part of the story is that the economy looks like so far this year it will be slightly less week then we feared it would be.
we have a gdp number -4.5. a bet the economy is less bad than people thought. tom: 10 years back 17% per year. is your world a world of buy it and hold it? geoff: i think it is trying to pick the bottoms. no. the last cycle in emerging markets was selling. we went up 30% per annum. this is much more of a trading environment. the point we have made is that growth has been week in this cycle. also, investors measure their performance in the u.s. dollar. when the dollar is strong, which we have seen until recently, that chips away at performance. it has been hard to generate performance and the e.m. tom: 15 seconds.
i want to tease forward to brendan's work on china. i you desperate about china growth? geoff: no we are not desperate. we are a little concerned. they have had to ease interest rates to support the economy but it is not cracking. brendan: this is the face i make when tom says " brendan's work on china." tom: we are doing the china bloc next. brendan: right now we are taking a look at photos. number three, i love this one. in the southern indian ocean, and on target should -- unchart ed shipwreck was to tactic by drones. that is not the flight they were looking for. it is a 19th century cargo trip. it was spotted, an anchor was spotted. it has been they're headed for -- hidden for 100 years. in shanghai -- and i'm going to read this out. a shopping mall added four
women only parking spaces painted pink. the spaces are 1 1/2 feet wider than regular spaces and lit up brighter to make parking easier. quinn: make parking easier? how do you know that that is the reason? maybe it is for all of the groceries. brendan: it feels little where. -- a little weird. thank you. number one, san francisco. silicon valley launched its very own fascist wing -- fashion week. up top dragging that along that is a drone. every night has a different thing. electric motion wearable tech and crowd funding.
oh god. tom: shanghai. i went to the chinese exhibit in the basement of the met. thank you, anna wintour. remember the 9 year old emperor. they have a sexual rob -- have his actual robe. brendan: i was going to say about san francisco fashion week. the dress code was jeans and hoodies. it is whiskey with an e. i lotve scotch. this is that was the report on bloomberg television, streaming on your tablet, your phone, and bloomberg.com. ♪
the warning comes after a u.s. chip -- ship sales into the islands. an investor says he will watch before deciding what to do with his stake in dupont. it was peltz's first defeat. and there's there has never been a week like this in the art world. last night christie's held its second mega uacauction. the firm sold $1.4 billion worth of art this week. i know brendan you're curious as to who is bidding. 480 registered bidders from 40 countries. tom: coming up on bloomberg "surveillance," in our next
hour, a lot going on. we will look at the trade bill. peter cook will join us from washington. then we speak with stanley mcchrystal. " lessons learned" across many decades with our u.s. army mcchrystal. on his new book "team of teams." we have a power packed hour here on management and on both of their optimisms on america. brendan: it is always a good time to listen to the wise counsel of ron burgundy. >> i love scotch. scotchy scotch scotch. down to my belly. brendan: every day and become more like that man. the world may have moved on. here to tell us of what the industry calls "brown juice." welcome.
what we have on the table right now is glenn fidich. 12, 17 21 years. i want to show you some data that we pulled on growth and different kinds of whiskey. can we pull that up? the title of the chart is going to distress you. when we look at growth and whiskey, scotch only growing at 4%. irish whiskey growing at 100% of the u.s. and 25% growth in bourbon. given your investment in this class of whiskey, how do you keep up with that trend? >> the trend is that american and bourbon whiskey's in volume terms have had a very good trend but the value of scotch and single mal st scotch has had 10 years consistent growth. we are seeing that with the glenn fidich in particular.
maybe it is the competition at lower price points, but at the higher price points, the qualities of single malt whiskeys are still selling through. brendan: your company has made an investment in an irish whiskey. peter: we talked the company and revised its packaging. we built the distillery. that is up and running since september. brendan: this is huge. there are 15 new distilleries in the last two or three years in ireland. if you have a product, you know how it is made, ride build -- why build a brand-new distillery? peter: if you're going to be there in a 100 years time, it needs a home. brendan: you have people in ireland visiting they want to be able to see and feel and
touch a place where whiskey is made. tom: you go back to 1887. you made a study -- a wonderful book "family spirits," about people like you in this mystery that we have of how do you keep the family together not over one or two generations but made it work three or five? you have the glass makers from germany and your book. talking about your business. what is the secret sauce, the hot saur youce you have in the book? peter: there are two or three ingredients. the most important one is long-term commitment. and a desire, an almost overriding pride in manufacturing or products and understanding it and staying with it. not being overly probably financially demanding and therefore having an extraordinary strong balance sheet. so when difficult times come
because all businesses have cycles. you are able to not only ride it through, but when things are difficult are times that you can push on when others are holding back. tom: page 96 is the most important part of the book. the famimlyly in chicago holds a stanley cup. brendan: there is the family in louisiana which makes tabasco. geoff we're talking about this in the break. does this make sense? geoff: the family? yes, absolutely. the best comparison with that is what is going on in germany with the medium sized companies that pull kids in as apprenticeships. they do it the old-fashioned way and you breed loyalty. they produce good stuff. brendan: tom, i promise you we
deputy leaders. america says we care. america's retail sales are tepid. does it extend to productivity within the united states? management lessons learned from general to major to first lieutenant. stanley mcchrystal on delegating. good morning, everyone. this is bloomberg "surveillance" live from our world headquarters in new york. it is thursday, may 14. what an interesting hour. two books. brendan: i'm excited about the whole hour. a lot of news to talk about. tom: top headlines. vonnie: investigators want to know this morning why that amtrak train was traveling at more than twice the speed limit. the crash killed seven people and injured 200.
the national transportation safety board says the train was going 106 miles in our. -- an hour. >> maximum authorized speed through this curve was 50 miles per hour. when the engineer induced brake application was applied. the train was traveling at approximately 106 miles per hour. vonnie: investigators say the accident would not have happened if the tray cap audit -- the train had automatic braking. amtrak service is still suspended today. president obama is meeting today at camp david with six persian gulf leaders. saudi arabia's king will not be there. the president met with a prince and praise the relationship with the saudis.
president obama: my work and the u.s. governments worked with these two individuals and the crown prince are on -- on, terrorism issue has been naturally critical not only to maintain stability in the region but protecting the american people. vonnie: the saudis are skeptical about a nuclear deal with iran. the white house says the absence of the king is not a snub. the dollar is falling to its lowest level in four months. a report yesterday is the latest sign that interest rates will not be raised anytime soon. the dollar is down 4%. watch our amazon. here comes wal-mart. its's set to offer online shipping to customers for $50 a year. walmart says more than 1 million items will be available for delivery in three days or less. right now the service is by invitation only.
tom brady has less than 10 hours to appeal his deflategate punishment. the patriots quarterback was given a four game suspension. the nfl says he knew that football's were tampered with. those are the top headlines. we will see if he appeals that decision. brendan: i think tom is appealing any decision in the future. we are all hockey for the next month. moving on to the morning brief. 8:30 a.m., initial jobless claims. 15 minutes later, bloomberg comes out with the economic survey for may. at 9:45, we look at the consumer comfort report. back up to pre-crisis levels. tom: we will talk about that later. weekly confidence data with a better confidence in america. let me do a day to check. futures advanced.
back and forth over the last number of days. the euro goes against parity, 1.14. nymex crude holding nicely at $60 a barrel. the senate has notched for it on a slow track basis the president's request for fast-track status. there must be trade legislation. peter cook is in washington getting over and over time loss by the washington capitals last i. you -- last night. you got little sleep. watching a wonderful hockey game. is the senate and the house getting any sleep over trade legislation? this is beginning to have a certain energy to it. peter: the president might get better sleep over what happened. 48 hours ago, democrats did in the wake of his trade agenda, blocking it on the senate floor. he called 13 of them to the white house for a talking to. lo and behold things have changed are today they're going to have a redo.
the expectation is the president will get his way. they will start to move his trade agenda forward. there are some potholes ahead but it is looking better now after that conversation with his fellow democrats. tom: civics 101. does the trade deal get links to other legislation? peter: yes. one of the things it is linked with his trade adjustment assistance, help for american workers displaced by trade deals. what is not going to be linked is a separate bill dealing with currency manipulation. this currency bill is going to get voted on today. but if it shows up on the president's desk, he will be able to veto it. that is going to ensure that the trade deal moves for. -- foerward. brendan: what does this mean for the democrats? is everybody happy? peter: no. i think they realize these 13
democrats, that beating up their own president, even if he may be al lame duck is worse politics then backing free-trade. it is a very touchy subject right now. hard to overstate how tough it is been for some of these democrats who want to move a trade bill forward and take on the elizabeth warren wing the party. there is a big divide in the party. it will be one of those legacy issues. tom: thank you so much. we continue on trade. on the nation's productivity the ability to create jobs. is there such a thing as too much trade? this has baffled world leaders. we need to go back to the original gat after world war ii. there is no such thing as bad trade according to our guest. wonderful to have you here in support of your book "no ordinary disruption."
have we gone to the point where there is too much trade? >> i do not think so at all. i think we need more of it. countries that trade more -- trade of goods commodities products, services, and information, 10 to do better in terms of growth. trade that's 15% to gdp. tom: can we expand services trade like we have done with good straight? james: one of the things for the united states is that the united states has not exploited trade opportunities and services as much as other countries. germany is one case, where trade in services is a much larger portion of their trade in the world. tom: how do we incentivize that? brendan: i am wondering, with this focus on bilateral agreements and the multilateral agreement, only missing a chance to focus on global trade arrangements? are we losing steam with the wto or making that hard to pull off? james: i think we do --
one of the things we need to keep in mind is that the flow of goods services, and money is a big deal in all directions. one of the things that has changed is the locus of where that needs to happen. one thing we found that is extraordinary is when you look at the trade regime globally, if you look 20 years ago, this was dominated by a few countries and a few large companies. if you look now, it is different. you have got many more countries. many more companies, large and small. we are missing opportunities. tom: i would suggest you and richard dobbs are writing to the converted. sell someone this morning in the midwest of america that does not have the advantages of your education on why we need more trade. what is the arch reason why that person should not be afraid of their job going to china? james: smaller medium-size businesses. if you look at small or
medium-sized businesses, the same product category. these could be in the midwest or anywhere. when they are on a large label -- global platform like ebay their growth rate grows much faster. in fact, all small businesses on platforms -- tom: ebay loves that. brendan: is this concern about trade completely irrational? james: i think so in the following sense. if you are concerned about gdp growth, you have got to want more trade. if you are concerned about productivity growth, you have got to want more trade. brendan: gdp growth by its nature is an average. we all know the economics show that gdp growth is held with more trade. but the way that is just to be did is what this fight is about. james: when you get to a question of distribution, that is a different question. how do you make sure the participants in trade get the benefits of trade? but there is no question in
terms of economic growth, there is more benefit to more trade. every year, nowadays somewhere between 13% and 25% of global gdp comes from more trade. more countries -- countries that are more connected get more benefits. tom: we will talk about "no ordinary disruption." brendan: we will come back to trade in the hour as well. coming up, president obama is at camp david. camp david fraught with meaning. there have been agreements in the past. some have helped. some have not. when you take people to camp david it means you expect something to happen. our next guest may have some advice to the president. we are talking to general stanley crystal after the break. ♪
tom: good morning. euro advancing to a 1.14 level. going after parity. brendan: the leaders of six sunni led states are meeting at camp david today. the president needs to reassure them that his strategy on iran will not leave than probable. general stanley mcchrystal is on the desk with us. you have a new book out on strategy. we are going to get to that but first, is it possible to reassure these states or do
they live in a less reassuring world? general mcchrystal: i think it is essential to reassure the states. american legitimacy and credibility in the region needs to be reinforced overtime. we are not point to run the region, and they are going to have to decide much of their future themselves. they will form coalitions. but american leadership and american shoulder to shoulder support for them is going to be very important. brendan: but this is a real shift. it has been fascinating to watch saudi arabia take more ownership. how do we adapt as they are more willing to make these decisions on their own? general mcchrystal: there are two sides to that coin. one, we want the saudis to take a larger role. and we want them to form relationships. however, our role is still essential. and part of what we see them doing is a fear that we lack resolve right now. so we are going to have to hit that balance where they do more but they still can count on us. brendan: what specifically can
the president offer right now? what troops where? what training exercises to make them feel that whatever happens we are there? general mcchrystal: i do not think it is a case of numbers of troops or specific military actions. i think it is a long-term partnership and the dialogue. a lot of geopolitics is relationships. a lot is long-term relationships that you build and tend over time. particular in that region. that is key. this is a good step. tom: you -- refer to henry kissinger's world order. what is stanley mcchrystal's world order as it applies to the arab world? general mcchrystal: it is absolutely unknown. i do not think anyone can predict this. the tectonic plates are moving. there is a lack of political narrative across the region. when we looked at the arab spring, everyone hoped it would be moving towards democratic. tom: hope is dangerous word. general mcchrystal: it was
rejection of the status quo because there is a lack of leadership and a lack of a couple political narratives, we have these different ideas and groups competing. they will sort themselves out, but we need to try to help. tom: stanley mcchrystal with us through the hour. brendan: our twitter question of the day. what should the goal today be at camp david? let us know. this is bloomberg "surveillance ." it is may 13. good morning. ♪
tom: thank you for joining us this morning. james with us from mckenzie and general mcchrystal as well. our top headlines. vonnie: in boston this morning the jury and the dzhokhar tsarnaev case will start its first full day of deliberations. the prosecution wants dzhokhar tsarnaev executed for the boston marathon bombing. his lawyers say he was
radicalized by his brother. radioshack owns the name. -- general took over 1700 radioshack stores. a scary looking crash in indianapolis. but the driver walked away unhurt. he hit a wall. his car flipped. he was practicing for the indianapolis 500. those are the top headlines. tom: very good. coming up on bloomberg "surveillance" this morning, lots to talk about. we will look at the army with stan mcchrystal. we have our guest out with a new book. on to the mcchrystal book.
somewhere is buried -- lima 2.1. what ever pros say. stand down. the helicopters ground to a standstill. so begins the most important chapter of stanley mcchrystal"s "team of teams." the summary the general as spectator and that is by far the most difficult skill -- to delegate authority in real time strategically and tactically. i thought the chapter was brilliant going back to -- how do you give way to a colonel or an upstart major you do not trust? general mcchrystal: you have to be able to trust or you have to share with them the information that migrates to the top of the organization pretty cannot decentralize authority or empower execution unless you
empower them with understanding the same kind of understanding that you have so they can make decisions effectively. tom: here's one. "each agency fear that sharing intelligence would work against his own interests. competition made them reluctant to provide information. what if a partner agency did not reciprocate?" that is a leadership dilemma. general mcchrystal: do you cooperate or try to maximize your own effects? what we did in the task forces is we convinced everybody commented not matter what your batting average was. it only mattered if we won the game. as we pass information across the battlefield, we started to reinforce if you gave up assets on a given day, you would be paid back as it was appropriate. tom: is he describing the republican presidential campaign? brendan: it is interesting your building trust among units, not
just within them. i am curious. armies have to learn quickly in wartime. they do. how do you make sure that rapid learning that happened over the last decade continues into the next one? general mcchrystal: it is hard because militaries have a unique challenge. militaries fight a war and there is a period in the war where they study the last war. they'll most always get it wrong. we have had 15 years of war. i commanded the special ops task force for five years and we fought every night. we at a chance to learn, adjust on the basis likely never had before. tom: you came out with admiral stravidis in 1976 when nobody join the military. you went in at the bottom. the majors and the colonels out of vietnam said we are not going to do with the general state. what are those majors and colonels saying right now? what will the next war look like?
general mcchrystal: it is a great question. i think talking to young leaders that they are much more a believer in things like soft power, counterinsurgency, the importance of dealing with populations, because they understand the nuances. when i grew up, we rejected the an on. we pushed into fighting with big tank wars -- we rejected vietnam. we let skills -- brendan: everyone leaves an lesson in where they want to specialize. do we have to many officers of a certain kind that are training and a certain direction that we will not need in the future? general mcchrystal: what we need more of if people who speak languages, people who spend a long time in regions. if you look back at history, back in the 19th and early 20th century, the reddish army used
to send officers for long periods in places and they became fluent and the language and the culture. we are at a point where we need to be looking at that. tom: we need to show the flag. tell james what to do. from a military standpoint, what is the best practice for straight business from the military? general mcchrystal: i would say the first is when you get up in the morning and you have a long-term strategy and you think you're going to execute it, you had better give up on that. because nothing long-term is going to work. tom: you have one meal a day. and you sleep for hours. you are qualified to be an anchor on bloomberg. james: i'm struck by the idea of fighting the last war. one of the things that is different in the global economy is that much of our intuition about how the economy works is based on what we learned from the last 50 years. the future is different. we're going to need to get into that. tom: two books. "team of teams" and "no ordinary disruption."
everybody at mckinsey was a genius. james: wonderful period. tom: we will bill you, you get the check in the mail. and then there is this decline. we come back and the question is, is this the new normal, or can we return to the 1990's? james: we can return to the 1990's. one of the things that is quite striking is that we have several things going on at the same time. positive productivity growth. outward growth is growing. in the period you are going down is the period -- tom: stanley mcchrystal, there was the overlay of technological progress. is technology our friend or our enemy? i assume for you in the
military, technology is our friend. his technology our listeners' and viewers' friend or enemy? james: for a long time we thought technology was going to impact the low skill jobs. and keep safe the knowledge workers. what we're finding is that the vast majority of progress we've made in the last decade is in the middle. tom: right now let's get to our top headlines. here is vonnie quinn. vonnie: investigators are planning to talk to the engineer of the amtrak train who crashed -- that crossfit it was going 106 miles just before it derailed in philadelphia. the engineer's lawyer says he doesn't remember the crash.
federal investigators say the crash proves the need for an automatic braking system. robert some sumwalt: we have called for automatic train control for many, many years. congress has called for it to be installed by the end of this year. we are very keen on positive train control. based on what we know right now, we feel that had such a system been installed in this section of track, this accident would not have occurred. vonnie: automatic braking is already used in most of the washington-boston rail corridor located no word on when amtrak will resume service between philadelphia and new york. the trade deal is back on track -- the trade deal is back on track. the senate will vote today on 2 related bills democrats want and then it will vote on the plan that would let the president speed up trade deals. one senator called it a smart move. >> taken together, the bills former package of trade policies
that are going to help our country create more i still -- high skilled, high wage jobs in my state and across the land. vonnie: many democrats are fighting the duo, saying that it could mean loss jobs and pay cuts. the world's most recognizable that's one of the world's most recognizable economists is worried about a downturn. mohamed el-erian talked about it with charlie rose. mohamed: i don't believe you can run the american economy for another five years at this low speed. something is going to break. either we will tip into a much better world or we will get lower growth and get what channing yellen and others are worried about -- janet yellen and others are worried about financial instability. vonnie: he feels there needs to be any project to spark an economic surge.
alanna'-- atlanta's al horford scored with two seconds left to win over the washington wizards. and then the new york rangers scored in overtime knocking the washington capitals out of the nhl playoffs. the caps blew a 2-game lead in the series could it would be news if they were in the nfl tom. tom: yeah, they were not in the nfl. there was no deflated puck. rangers tampa, and the ducks of anaheim take on the dreaded blackhawks. churn here with futures up 10. once again, confounding certitude and consensus of weaker euro. a stronger euro as well. crude oil $60.40. brent crude this morning, $66.99 a barrel.
vix showing the good equity times. we have yet to speak of greece this morning. all quiet on the varoufakis front. 10-year yield as well. greece quiet this morning. brendan: this isis "bloomberg surveillance." i am brendan greeley with tom keene. last month transfixed killed an italian and american and in washington they are discussing who we kill abroad and how. general stanley mcchrystal knows these questions intimately. he has dealt with them himself. killing abroad, should be the job of the pentagon or the cia? general mcchrystal: at the end of the day i would argue it doesn't really matter. as long as they are tightly coordinated and intelligence is as good as it could be i would argue it is not a big deal. brendan: it's the end result is the same, why the incidents since -- the insistence over the
last decade that maintain the distinction that these are made by the cia and we don't talk about that publicly? general mcchrystal: there are a number of sensitivities. we operate in foreign airspace with the permission of foreign governments who would rather us not publicize activities. you have to get into the geopolitical realities of the area. brendan: but a lot of special operators are working with the cia. is that the right decision to give them so much operate operational capability? general mcchrystal: it was an evolution as it went forward with congress and the geopolitics of the ground. this is one of those things that is not black and white. you nuance it and based on the situation. tom: can i read from stanley mcchrystal's bible? 3, 2, 1. torpedo impact, 20 seconds. sean connery turns john bolton
and says "what books -- turns to alec baldwin and says "what books?" why are you quoting "red october"? general mcchrystal: that was one of the depictions of the heroic leader. tom: and you think that is fiction? general mcchrystal: it is more than ever a fiction. i grew up thinking i would be a hero on the battlefield. tom: every generation in her family's military. general mcchrystal: that is a fact. brendan: what was this heroic mission you thought when you were a kid? general mcchrystal: like a chess match when you have the chess pieces in front of you. human you for an beat -- you knew for an --you maneuver and beat mano a mano. what if they have all the chess pieces themselves and they can communicate -- tom: that is called stonewall jackson.
brendan: it changes with the chessplayer does. general mcchrystal: suddenly any hero leader can't deal with that. this is the realization i came to during the fight in iraq, because the situation in the new environment was so different. al qaeda was not a hierarchical organization that it needed mr. big to direct operations. tom: but now we are diffuse brendan, into the islamic caliphate. who can keep up with the players? brendan: i'm interested in this romantic vision of yourself and what it would be a america has this romantic vision of what special operations does pick are so apologized, and a film that is released -- they are so mythologized in a film that is released every three months. does this love of what special operations can do put too much of a burden? if we turn them into superheroes, do we expect them to carry the entire burden of foreign policy? general mcchrystal: i think it
is a mistake. special operating forces doesn't mean that are operating forces. they were designed for unique and specialized missions. if you use them for too many you will have the bad -- brendan: and there is a problem with retention in the special forces. general mcchrystal: they actually do pretty well because it is such a great place to work. tom: in this horrific train crash, we lost a young, young midget man from the subduction midshipman from the -- a young midshipman from the shores of young island. what is your advice thinking to someone applying to west point? general mcchrystal: if you get a chance to serve your country whether it is military or civilian, you come away changed. when tom brokaw describes the greatest generation, it is not because they want world war ii. it is because of the people they became from that experience of contribution. any experience in service changes how you interact with the world. tom: general mcchrystal, thank
the empire state building last night lit up red, white, and blue. someday it will be blue and white for the toronto maple leafs. it hasn't happened. rangers whipped the washington capitals. we say good morning to all of you from hockey land. brendan: thus begins a month of talking about hockey. tom: not even halfway through the finals. we're looking at the warriors too. basketball's there. brendan: don't even know where to go. neil ferguson -- niall ferguson is banging his drum again. "the labour party should blame cain for defeat." "conservative governments have generally done better. however the electorate has not always rewarded the tories for their economic competence. erik schatzker from "market makers" is on the set.
you have niall ferguson with you today. the little bit of his storing, a bit of a performance -- a little bit of a historian, little bit of a performance artist. erik: the historian in an blames john maynard keynes. the performance artist blames paul krugman. i will show you some excerpts of his piece in the huffington. "by his own standards, krugman's argument was lame. like his journalism on the united states, is writings on britain are characterized by extreme partisanship with a touristic level of knowledge." let's forget about touristic knowledge. extreme partisanship -- pot calling the kettle black? brendan: is pro or
anti-austerity the right way to look at the u.k. election? james: i don't think it is. the question is growth. one of the puzzling questions about the u.k. in particular is what is happening in productivity. how does it connect to the eu -- connect the rest of the world to the eu? that is something i hope cameron gets back to. brendan: i would argue niall ferguson has done a better job of selling union then david cameron was ever able to do. he wrote a book about the british empire. i saw hints of that, that this is the thing we built together but that is not heard in this debate over union. erik: niall is a scotsman and i
will be fascinating to figure out why he thinks the scots abandoned labor and one for the scottish national party. tom: fascinating by what he has to say about this. i thought the election was historic. erik: i'm fascinated by his unabashed hatred of all =-- paul krugman. brendan: niall ferguson will be on "market makers" this morning. this is bloomberg surveillance and hockey report.
tom: good morning, everyone. "bloomberg surveillance." let's get to our top headlines. vonnie quinn. vonnie: the chinese government is sternly warning the u.s. after a chase in the south china sea. the navy will closely guarded's territory. it comes after the u.s. set sail near islands claimed by china. a chinese forget pursued -- chinese for -- frigate pursued the ship. first quarter, sales were up to 1.4%, far below the estimates. shares advanced 22% in the euro zone yesterday.
record-breaking art sale. christie's auction brought in $1.4 billion. works by andy warhol and francis bacon went for cap prices last night. more of the world's wealthy are investing in art and there were 8 artist records set last year. tom: vonnie quinn, greatly appreciate it. looking for the into the 8:00 hour, the trade of the trade-off front and center. the economics of nuclear power and onto facebook and some of the challenges they have in investments, particularly bouncing off the verizon-aol merger as well. quietly in recent years, the dunbar team at mckinsey has developed a formula around 40- to 60-page research reports. they must be read with brilliant clarity on india's poverty.
spearheading much of these efforts are richard dobbs and jonathan wetzel. joining us this morning is mr. manyika among the three authors of "no ordinary disruption." what permeates your work is optimism that pushes against the mediocrity and pessimism that is out there now. how can you stay optimistic, given the challenges of weak economic growth? james: i am optimistic for several reasons. one is the great transformation that is happening globally. we have taken 700 million people out of poverty in the last few decades alone. we have seen china -- gdp per capita -- double its gdp per capita on the basis of one billion people per year. you have got to be excited about that. we have seen more than half the world enter what we call the consuming class. tom: then why do we have the fears we have of the 4
disruptive forces? james: because a lot of our intuition about them is wrong. if you look at the last 50 years, economic growth gdp growth globally, half of it has come from an extension the labor supported the other from productivity growth. that is about to change. the labor supply part of the budget drops 2.3%. going forward, our reliance on productivity -- tom: technological progress. james: is going to be extraordinary. tom: it is flying on one engine. james: we need to do two to three times as much work. brendan: the great economic debate of our time, is there going to be enough technological progress to create the economic growth we so fervently want? james: good news and bad news. when we look at the productivity progress and potential and you look around the world with
sectors and best practice productivity exists we can get something like three quarters of the productivity improvements we want just by getting to best practices. we know which sectors are high productivity. if you can get everybody, that gets you most of it. tom: i'm glad we have productivity could we can't run out trains correctly in america. james: well, we have an and for such a problem. tom: what do we do about it given the immediate, tragic news? james: it is tragic news and i can't tell you the details of what happened but our infrastructure investments -- tom: it is terrible. brendan: i want to talk about urbanization, one of your trends. that had been the story of chinese development for the last 20 years. when will he know when urbanization -- when will we know when urbanization has reached its peak? james: we won't know.
keep in mind that it is not just a chinese story, by the way. it is china, india, africa. africa is urbanizing at a phenomenal rate it what i find fascinating is that it is happening everywhere. one of the things is if you look in the gdp growth we expect over the next decade or so, something like two thirds of it is going to come from about 600 cities. something like 400 of those cities are emerging economies. we have to be thinking about how we get on productivity and energy out of cities. tom: i want to finish up with something i feel people don't know about you. you were at a job propulsion lab working with -- jet propulsion lab working with the mars rover. we have basically a dead man can but the triumph of what you did with many other people. how do we transfer that excitement to the greater american economy? james: we have to be doing the kind of things that people like elon musk are doing.
they are bringing new energy to what science and explanation -- tom: the battery thing he is doing is really twisted. james: oh, it is phenomenal. when we look at the disruptive technologies that can transform the economy, battery technology is one of the 12, because it fundamentally disrupt everything. think about how our infrastructure is built on the presumption that we can't store energy. tom: is it scalable? james: i think it is scalable. one of the questions is how quickly are people going to buy up these batteries? brendan: i would argue the other question is are regulators and utilities going to accept them? we have a political and migratory fight as well. james: -- regulatory fight as well. james: one of the questions we will have to grapple with is how the regulations deal with these disruptions and innovations. tom: the answer is they are not. james: they are not. they're legislating and putting up -- tom: a terrifically smart
effort. brendan: we are going to round out our morning with the agenda, where we look at the stories we are following today. i'm looking at the dollar, the story of the dollar's klein had been something we had just gotten used to. the trend has really changed. it is also going to affect something we are looking very closely at, bond valuations in the u.s. as well. tom: and linking that in very simply, it was sobering yesterday, the retail report. vonnie? vonnie: russia has invited greece to become a member of the brics banks could buy there is an entry fee, $10 billion entry fee. less than $1 billion to make an imf payment come how on earth is it going to come up -- tom: are any of the brics running on a two cylinders or one engine, however want to put it? vonnie: your book --
james: actually, india is. india has a demographic profile where the labor still works. china does not. russia, china, they will reach peak employment on the labor supply. russia already reached it and china is going to reach it in 2024. china in productivity and growth terms faces challenges that most of europe desperate brendan: -- does. brendan: but it is absurd to think that greece is in that group. james: oh no, not by any stretch. vonnie: and what would we call it anyway? gbric? tom: my story is cam david, various and sundry readers, and uproar on who is attending. it will be interesting to hear the substance. as we heard from general mcchrystal, dialogue is critical to driving our diplomacy. very quickly on twitter, what do we have? vonnie: we asked the question,
what is the goal at camp david? "repositioning and redistribution of gulf wealth." i don't know how you would manage to do all the -- brendan: i would argue the gulf states would want to focus on 2 before 1. vonnie: second answer, "convince americans that america's -- convince leaders that america is mutual." brendan: i'm not sure that is what they want to hear. vonnie: third answer, "singing around the campfire 'row your boat,'and end with firewalking." brendan: maybe there is a zipline they could try. tom: sing "complykumbaya." brendan: is there like a mckinsey secret ceremony where you all have to touch a skull or something? tom: james manyika thank you so
you are watching "bloomberg surveillance -- you are watching "market makers" in our new time slot. erik: coming up the trade deal known as tpp. senate leaders reach an agreement to hold votes. stephanie: facebook's push for your business. is mobile advertising the secret to success? and we want to hear from you -- do you like facebook ads? tweet us @marketmakers or tweet erik and me. do you click on them? i know erik doesn't because it doesn't use facebook. erik:. his -- here is the news in focus. >>