>> welcome the "lunch money." we tie together the best stories and interviews. i am adam johnson. we have a budget deal. why is everyone so down? payday and ipo. blackstone ready to cash in. 101.in we are in day three of our 12 days of it going. bmw is trying to decide where to build this new engine plant. of a steinway. we will show you how the pmo has been made for over 160 years. right over the river in queens.

deal and thiset one is on schedule. >> it is no grand bargain. it is not even a medium-sized bargain. it is a cease-fire. it means budget piece for the next two years. they do not tackle the big ticket items. >> no they do not. taxes, not in there. what is in there? >> federal spending is set at a trillion dollars. that will be controversial with republicans. it replaces $63 billion in sequester cuts with other savings. reduces the deficit by $20 billion or more. no major big decisions on taxes or entitlements. how do they replace the sequester? a grab bag. aviation security fee, federal no terry pension increases in fees. other savings there. >> the two people who made the murrayaul ryan and patty

, they know this is not perfect, but they feel ready good about it. >> this bill reduces the deficit by $20 billion. andur deal puts jobs economic growth first by rolling back sequestration. >> providing for some sequester relief. we are paying for that with more permanent reforms on the autopilot side of the spending leisure in excess of the sequester relief. that is a good deal. >> we set bipartisan spending levels, this deal allows congressional committees to proceed under regular order and give government agencies and the companies that do business with them the certainty they need to hire workers and make investments. >> this is a step in the right direction. >> there is always a price to pay when you compromise. >> we knew if we forced each

other to compromise a core principle we would get nowhere. that is why we decided to focus on where the common ground is. to close anot able single corporate tax loophole. i know republicans had hoped this would be an opportunity to make some of the kinds of changes to medicare and social security that they have advocated for. asidessman ryan has set our differences. >> you don't always get what you want. we still can make progress toward our goals. >> you do not always get what you want. that is ryan talking to conservatives like the tea party and other right wing think tanks. they do not like this deal one bit. they say it trades concrete spending cuts for future promises. john boehner, he has a message. >> they are using our members and american people for their own goals. this is ridiculous. if you are for more deficit reduction, you are for this agreement.

looking like he will have a handle on this fiscal go around. the budget deal will get the majority of the majority in the house. translation, republicans in the house will vote for this measure. add to that, democrats will back it. you have yourself a budget deal. >> the deal is something that ,ccomplishes deficit reduction permanent pension reform for government employees, and it does not raise taxes. is consistent with republican efforts to try to replace the sequester with permanent savings that make more sense. >> this was a hard-fought negotiation. i want to thank leader pelosi and my fellow conferees for recently asear as 12 to 24 hours ago that the way the agreement was taking shape would not be acceptable to members of the democratic caucus. .> i will support the agreement

they did an excellent job of describing it. it is not a deal anyone would want in the ideal world. wherea government democrats control the senate and presidency. this is a real step forward. i think every republican should support it. >> ryan lost some fans. >> i would give him the lowest grade for republicans to ryan. that he is a fiscal fate. it is his job to stand up and tell the truth and when he says we can raise spending for the to the pre- sequester level or for domestic, that is evident that we are going in the wrong direction. >> one criticism from democrats -- there is no extended -- extension of the jobless benefits for about 1.3 million americans.

votes.d cost him the final vote is expected by the end of the week. if you need a room and a hot ipo, hilton can help. 12 hours in tf. that is later on "lunch money." smoke them if you have them. the first country to legalize marijuana on a national level. do not book your plane tickets yet. one of the rules, no selling to taurus. -- tourists. ♪

>> the world's largest hotel chain poised to go public. a $2.4 billion ipo which would be the largest lodging ipo for hilton. this is a big win for them that got slammed during the recession. inckstone bought hilton back 2007. the equity group is expected to land one of the biggest private equity profits of all time. what about competition? >> there are two things we like about them coming to market. we will get more information about them. we are competitive. we intend to win. we love that we will be able to see quarterly numbers from them so we can measure our performance against them. it will make the hospitality space more relevant in the market as a whole. it is a good thing. we are excited by our business. we want more people to pay attention to our business and invest in us.

this may not be the best time to go public for any company. >> in a time like this where the markets are in dues about stocks, or we are at record highs, you cannot dismiss that. it becomes difficult to price and ipo. you know there is a lot of demand and you know people are induced. a lot of retail investors are enthused about equities. difficult ases opposed to being easier. be the best time to go public. here is the head of lodging research. it is a great time to take a hotel company public. stocks are up 30% year to date. most would argue that there is another three or four years left of the recovery. there is limited new supply. the economy is improving, jobs are accelerating. great time to be a hotel operator. what did blackstone do to

make it a leaner company? in the frontosts office as well as around the globe. they expanded their footprint by about 80%. they have 100,000 hotel rooms in the pipeline today. they are making moves in china. report is fabulous. you talk about and $18 share to enter this transaction. our institutions under pressure to acquire the shares at the ipo? is it like twitter or facebook or is it a more traditional deal where the guy is going to call up and say by hilton -- buy hilt on and they will say no. >> we say fair value is $20 a , anythinge a buyer around $18 or $19 a share, would not be surprised if it trades really well. the question becomes where is there more value?

bob knows what it is like to turn companies around. he works for cerberus. here is his take. >> this is probably the second largest ipo coming out. i think the value is there. they have done a fabulous job. if you look at the remodelings going on, customer satisfaction, they have done a great job. >> it is 100 something per room. >> against the industry is my point. they can command high price. they deliver. they deliver on consistency of expectations of their customer base. that is very important. >> what does this say for 2014? >> i am optimistic that will continue. we bought seven companies this momentumi think the

and the optimistic outlook should continue. >> you are familiar with the again/private, go public scenario here. what are the risks for hilton? >> by going private, we were able to do things you would not be able to do. aboute able to monetize $1 billion of what are non- earning assets. we were focused more on cash than the book value. if you are public, the analysts would give you a whack for that because it was below book value. you have to make sure you maintain the operational focus and the focus on excellence and continuous improvement in those operations. ipos are hot no matter what? selective.re being good business models are relatively easy to finance.

we are in antly as period where we do not have volatility to the equity market. and companiesors that we see, particularly in health care and technology, are taking advantage that there is capital area and >> is a giving your clients pause? make them think, if these guys do not see the buying opportunity, should i? >> there is natural evolution. thet of the companies are endgame for the lbo's that got done in the late 2000 and 10 -- 2010s. evolution.natural as the things become public, five to seven years after they become public there will be an offering. people are paying close attention to valuation. things will get done at levels

where they think public investors can make money from here. all of ourwatch hilton ipo coverage online at bloomberg.com/tv or on our tablet cap that is btv plus. up next, matt miller is going to be joining us for bitcoin 101. before that, apparently santa likes to swim. he will be hanging out with sharks and feeding stingrays in tokyo. it happens twice a day from now until christmas. i hope he makes it to christmas. ♪

>> we are celebrating 12 days of bitcoin. we are focusing on the digital currency. matt miller is back for day three. he bought bitcoins on monday, started spending them yesterday. today, he is talking logistics. >> a lot of people have asked me, i saw your piece. how does that work? know, i have put together a simple view from 30,000 feet. it starts with changing your dollars, your euros, whatever you have, into bitcoins. i illustrated this by putting a regular wallet with dollars and in a digital wallet here. >> that is what a digital wallet looks like? >> i would love to see with a clutch. >> let me explain wallace.

you have to get a wallet before you can do any kind of transaction. lookingnsumer that is to spend money, it works like a regular wallet. you spend out of it and you can get money into it. for a merchant, vendor, service provider, it works like a cash register. to make a transaction happen, each wallet has two keys. a private and a public key. if you are selling something or showting bitcoin, you someone your public key. that is your qr code that you see there. you can take a picture of that key with your wallet if you are abuyer and then it generates numeric code that is random. when those two things come together, your private key and key, ithant's public makes a transaction. those transactions go into blocks. you can think of it as a page on a ledger. there are hundreds or thousands of big mining operations that are competing to try to verify

and secure those blocks. as a reward, they get 25 bitcoins. digitalp a kind of armor around each block, each ledger page, and secure. they do it over and over again so the transactions are a reversible. about eightas risen thousand percent this year. how does it compare to gold? >> they are superior. if you take the industrial value of gold and you subtract it from the trading value of gold, what is remaining as the diversification value of gold. that is the value that bitcoin can address over the long-term. volatility, it will trade similar to gold. >> bitcoin might be poised to trade like gold. will it go down like gold? >> i think the proper way to

think about bitcoin is as a commodity, not as a currency. a currency requires price stability and bitcoin does not have that. to diversify way away from sovereign fiat currency. >> it could be more than just a gold substitute. you can buy tickets with it. >> i have been fascinated with bitcoin. i never put two and two together until a customer asked one of our travel advisors that they could pay in bitcoin. i got wind of it and thought, how cool would it be if we could provide a people to buy flights with bitcoin. i did some research and it is technically feasible, economically feasible, and we got it done. >> also very volatile. how do you protect yourself from the wild swings in bitcoin? >> to be honest, we do not have to. i have been getting all of this , it is so credit

wonderful that you are taking this risk, but we -- the second they come in, we have to pay the airlines in dollars. we are exchanging them immediately. we are not taking any currency risk at all. >> what kind of new customers are you hoping to capture by expecting after accepting bitcoin? >> we are reaching a different market. tickets to,000 pair australia with bitcoins. we are not selling a lot of 34,000 dollar pairs of tickets. we are appealing to customers we have not appealed to before. >> do you assume a $34,000 pair is a politeitcoin underworld transaction? that is not something cerberus called up to make that transaction, did they?

>> i don't think that is fair. there are many have clinical -- criminals that buy tickets in dollars. a $20 bitcoin is now worth close to a thousand. they made their money that way. the people i have talked to, i have e-mailed a lot of bitcoin customers. they are heroically well- intentioned. they are passionate about trying big banking and big government out of the currency market. the big banks are paying attention. jpmorgan applied for a patent on a bitcoin like payment system. it includes an online wallet which would let users transfer funds from a bank account or credit card. there goes the anonymity of bitcoin. we are going to be going around

the world. the first, ukraine. howard buffett is investing in rwanda's future. that is next. ♪ >> bloomberg tv is on the markets. let's get used -- you caught up on where things stand. stocks are falling. by dow jones is off five -- about a hundred and five points. -- hundred nine points. the nasdaq is down by almost 42 points. budget deal failed to lift the mood on wall street. two stocks we want to highlight, the first shares a surge in the most of a year. variety is reporting that

discovery communications may make a bid --. we are also watching groupon. outperform.ted to more on the markets and 30. ♪

>> this is "lunch money," streaming live on bloomberg.com, your tablet, and your smartphone. i am adam johnson. moving pictures -- of the video is the story. people lining up to say goodbye to nelson mandela. his body lies in state in pretoria. as many as 2000 people an hour are expected to file past his casket. his body will be transported saturday to a village where he spent his childhood. his funeral will take place on sunday. call it the selfie seen around the world. president obama has been criticized for posing in this picture with david cameron of england and denmark's prime

minister. it was not yesterday at the immoral service for nelson mandela. the photographer who captured the image defended the politicians, saying the atmosphere was relaxed. been nameds has "time" magazine's person of the year. they said he has worked quickly to capture the imaginations of millions who had given up on this charge. pope francis becomes the third pope to be chosen as time's person of the year. it was a long, cold night in ukraine's capital. police withdrew after clashing unionrotesters in kiev's square. they are protesting president yanukovych's decision to snub and eu trade deal in decision -- in favor of a deal with russia. in kiev. [speaking ukranian]

>> u.s. assistant secretary of state victoria nuland met with anukovych to work out solution. >> president yanukovych knows what he needs to do. i made it clear to him that what happened last night and what has been happening here is absolutely impermissible in a european state, a democratic state. >> we turn to africa, where rwandan president paul kagame is making progress rebuilding his own country. he has a fit and howard buffett. here they are with betty liu. this is the best president on the continent. no one -- one reason why it makes sense to have president the bestr want a has business environment of any country in africa. tohas worked very hard modernize and bring technology

to create a really good, dependable set of rules to operate by. having been to almost all the countries on the continent, rwanda really stands out. what i really like when i get to wear one is that it works and it works well. >> what works, specifically? we talk about doing a project like we are working on a border project that i talked about earlier this year. when you show up, you figure out who you need to talk to, and things start to happen. that y sound like not a big deal, but there are challenges in some countries. many people who remember -- think of the headlines back in the 1990's and are meant that the genocide with over one million people killed in your country. it is a piece of your past that i am sure you are trying to overcome when you talk to businesses. >> india. we have come from -- indeed.

we have come so far. we have moved a long distance to making sure we create a business environment. having that history and going through the different strategies and coming to a point where we have established ourselves. people can come and invest -- >> and see for themselves. all the years i have talked with uconn a howard, i don't think i have ever asked you this -- talked with you, howard, i don't think i have ever asked you this. why africa? >> i first went to africa when i was about 19 years old. i was amazed, i went to south africa. when i was in south africa as a kid, we had some experiences that made me realize what apartheid was. i never forgot that. it was shocking to us -- >> what was it? >> we were told that when we got

-- we were on a ship, we went around the world in 4.5 m onthd. in four .5 months. we were told because you are white, you cannot talk to anyone who is black. three of my friends did and they got beat up. it is a rude awakening, it was not what we were used to. >> what is the lesson for you with the passing and legacy of nelson mandela? >> it reminds all of us that we are equal. we are different. people have equal opportunity. different, people are different. people being different does not and should not be the source of hate, disagreement. but rather, we should use the differences we have for the common good of countries and nations. and in this case, for the

continent of africa. >> you can watch the full interview with mr. buffett and president kagame online at bloomberg.com/luxury. or go to our tablet app. bmw may be heading to new america with a new engine factory. we have the details next. and a tour of the steinway factory in astoria, new york. a lesson on how to tune a p&f. ♪ -- tune a oh piano. ♪

money" on "lunch bloomberg television and streaming live on bloomberg.com and your tablet. in motors, engine growth. building engines in north america for the first time. it is part of expanding production to capitalize on

the u.s. asnd in european growth stalls. according to people familiar with the matter, the plan will be either in mexico or the u.s.. a decision is expected next year. manufacturing in the u.s. helps reduce the effects of the dollar's moves on foreign on non-usarkets company earnings. bmw is trying to maintain an edge over audi and mercedes, ed to surpass vow bmw by the end of the decade. david tweed shows us around bmw's home. >> this is the area -- is ba varia. a country, its economy would bigger than austria or finland. this is a small town with a big factory that covers enough land football fields.

it belongs to bavarian motor works, bmw. dayproduces 1500 cars a from this plant, nearly 300,000 of jeremy's total auto production. >> we are not only producing 1500 cars every day, we produce parts for our worldwide network. a distribution center for our worldwide network. >> germany's car industry represent about 4% of the country's gross domestic roddick. the growth -- the export driven economy is the biggest in europe. set up itsof the only american factory in south carolina in 1994. we will take you to queens, new york, where they have been making stanley ps4 -- steinway

pianos for 160 years. ♪

the 160 year old piano maker steinway has a new owner, john paulson bought the company in august for $500 million. he has pledged to preserve their quality. we went to see for ourselves. plays]music >> at the steinway piano factory in astoria, queens, tradition rules. theyare made the same way were made 100 years ago. >> the musicality is the first thing we look at. you can implement technology and save money, time, and improve the instrument. there are other times when technology cannot do the

job that a craftsperson can who and is an that wood artisan. there are certain things that artists -- there are certain things that robots cannot do. says its method of handcrafting every piece of the instrument is what sets it apart. that shows up in the price tag, 0,000 for a new concert grand. head of restoration has worked with piano's up to a century old. >> you worked on it from the outside -- the inside out, but you sell it from the outside in. >> 160 years has not disrupted steinway's following, like musicians including billy joel and wall street titans such as john paulson, steinway's newest owner. lay the final touches on

the piano, adjusting manually every key to get sound. there are no cutting corners, no machines. everything is handmade. you have pride in your work. most people -- that is the way we do it. [piano music plays] >> who are all these people doing the work by hand? steinway's ceo told "surveillance." >> it is an extraordinary situation in our factory in astoria. we have third-generation and fourth-generation craftsman. they maintain quality control. workers who are not committed to the same level of excellence are not invited to stay. those in recruiting and the quality control are in our

current workforce. >> if you go outside the u.s., will you make piano is in the u.s. or those countries? committed to the two factories we have in new york city and hoamburg, germany. >> you are selling the same piano? >> we typically supply our chinese customers with piano is from hamburg. there are minor differences between the hamburg piano and the near piano. >> like what? >> in the new york piano, we have a squared off arm. run this twoe have factories and over time there have been small differences. >> what is the appetite for a $150,000 grand piano. >> let's use china as an example. years, americans have

had the opportunity to own a steinway. there is no installed base in china. people my age are up during the cultural revolution were music and western music was not loved. are 35 million chinese children taking piano lessons. that is an astounding number. we hope some of them will ultimately own a steinway. >> the final stage of creating a steinway? shows usny's tuner how. [piano music plays] >> you can watch the whole interview with the steinway ceo at bloomberg.com/tv or go to our tablet app. enjoy this as we had to break. [piano music plays] ♪

passing hour, bloomberg television is on the markets. i am olivia sterns. weeks lefthan three in 2013, start thinking about your investment strategy for next year. betty liu and cory johnson asked is forhat his outlook

the new year. tonext year, we are going see lower interest rates, not higher interest rates. the economy in the third order was a misnomer, three .6 gdp was 1.6 and final sales. oil is going to come down. the market can go up, but we are profit margins -- >> you do not see tapering? takes $5 billion or $10 million a month, it is not doing any thing. >> you do not see the fed doing anything? >> the fed can lower the amount they purchase, which would not have a huge effect. the key is what the economy is going to do. we think it is going to muddle through, lesson 2% growth in 2014. christmas has been a terrible period so far. the inventories are up 7% on

retailers, final sales and black friday were down 3%. gdp is going- 3.6% to be 1.5% in the fourth quarter. we are over the hump on profit margins. you are going to see a case-by- case basis. as crude comes down, some of the oils may have problems -- >> $80. >> housing will have a resurgence because rates are going to be 2.5% on the two- year, not 3%. >> how are you picking what to invest in? >> we had a good cal on the housing stocks, they moved 100% and two under percent. correction, we are down almost 30% and everyone thinking interest rates are going to go through the roof. >> rates have come down a little bit. >> we think they are going to come down more. price is up 10%, that is good. they will moderate. >> i don't see how you see rates

coming down when you think the fed is going to do some tapering, not a lot. >> the economy is not going to be good and we're going to do to average -- we are going deleverage over the next couple years, rates are going to stay low. everyone is panicked that rates will go through the roof. >> let's go oil. the oil business. given the lower crude prices, what do you think is more at risk? >> i look at supply on oil. we're at a 30 year high in supply. in 1990's when this happened -- >> part of this is higher prices. down toe price comes $80, you will have some difficult situations in my opinion. it will also help the airlines on their second leg. the earnings are going to be somewhat suspect. there are a lot of good oil companies. drilling activity will pick up. it is 70% of the s&p -- the stocks are starting to correct.

some of the oil stocks are going to have a problem. >> of winning the -- avoiding the e and p companies or the supply? >> you are starting to see that with baker hughes and some of the other companies saying business has slowed down. >> that on housing. the argument for why you would want to stay or get into housing -- we have seen a lot of games already. it will be more difficult to repeat those returns. are goingk is gains to retain you. housing will probably be up in a substantialrs amount. the earnings are going to have their second leg. >> that was steve. we will be back again on the markets in 30 minutes. "bloomberg west" is up next. ♪

the on housing, make argument for why you would want to get into housing when we have seen the gains. it will be more difficult to repeat the returns. >> we think the gains will continue. we think husbanding will probably -- housing will be up and the three years earnings will have their second leg. we will be back on the markets in 30 minutes. bloomberg west is up next.