in beijing. billions ofen chinese consider sam some are apple. -- there will be a girl you and there will be four at every crossroads. it is friday, january 17. i am tom keene in. -- i am tom keene. a lot of going on. >> happiness on the high street. the u.k. summed up the recovery that retails rising more than forecast. in fact, you a lot more than forecast. anonymous nine percent surge in department stores during the holiday season. if you want cleaner, it will cost you. 4%hner protection could cost

to 30. housing starts, building permits, they are expected to climb a little bit. industrial production is supposed to be up. at 10:00 a.m., the university of michigan confidence numbers. how my doing? >> these are important numbers today? >> if they are good, that can build on the idea that the jobs number was an aberration and that the economy is moving along. looking backwards, not forwards, we will be getting earnings. everybody watches ge as an economic oh other. at 7:15, they out last of the big angst. senator -- big banks. senator tom coburn of oklahoma will be leaving the senate. he is also on the banking committee overseeing the fed and on the intelligence committee. he is tied up in all of this nsa

stuff. bonds, currencies commodities, when you look at them today, up, up, we go. 10-year yield continues to come coffee, delhi go. your goes nowhere the snake -- euro goes nowhere this week. sterling was weaker earlier on the economic data that mark -- the michael is talking about. the renminbi, i'm watching. best buy, after what we saw yesterday, just extraordinary decline in best buy. that servers you up when you think you know what you're doing. whoops. the buy, no question, humility item of the week. french page --

our first front-page story, the president will ask andmmendations from a panel the government must do a better job at protecting people's civil liberties. this comes as the laser ablation on the and as you -- that the nsa collects more than 200 million text messages a day. , tom -- ou are texting >> i feel bad because i'm boring the heck out of them reading my text. early reviews is that the president is not going to take a very strong stand today. >> on our second friend pay -- alan r -- on our second front page, there are googled sunglasses. they could be a blessing for theirics who pricked fingers up to 10 times a day to draw blood.

googles is that the lenses are still five years from coming to market. >> i will let cory johnson of bloomberg west try these, not me. our third from page story, old technology, intel down about 5% in the free market. chipmakerbiggest reports it may fall short of estimates. falling business orders for server chips, consumer pc demand also. >> they used to be seen as a real economic bellwether. but no one is buying pcs anymore. we are all buying tablets. but their chips are going to pcs that nobody's buying. >> the share for michael processors is lesson 1% here in microprocessors is less than 1%.

>> excuse me. can we have a moment of silence todaychael mckee's tied -- tie today? [laughter] do want to get to our twitter question for this morning. which quarterback will have the best weekend? libby colin kaepernick? would -- will it be colin kaepernick? is it going to be tom brady? he has been bullish when you .eren't here in howard ward

youre thrilled to bring richard falk and wrath with his work in the white house on this issue of the pros and. everyone is saying that it is a big speech. why is it? >> ea hasn't spoken definitively about what he will do the -- do with the intelligence apparatus. i am with michael mckee. i think it will be an equivocal speech and announce a few internal process changes and open some topics for discussion. >> is in a lose-lose speech for the president? question away. -- >> in a way. the tech community sees this as a serious risk factor. with your work with reagan-

gorbachev for million user go, it is a different world today. >> it is a different world. we didn't have cell phones. one of the questions raised by this, if the president does not action, people don't want to buy u.s. technological products because they don't know what is in them. >> that's right. it doesn't have a good way of incorporating the modern economy and the needs of the tech community, club community, the service providers. presidentckly as the capable of moving the needle on this? law andthings require that moves very slowly. and there are things that he can do quickly with a signature with an executive decision. those are policy measures.

he can do those immediately. he will say he has already done some of them. for 2013,market call simply, howard do you reaffirm your optimism? >> yes, although i don't think we will have a 30% year. would exit youwe offstage to therapy. [laughter] why don't i read about in the newspaper the morning that cni loans are at a record level? earnings are at a record lover of -- record level. why is this news not front center? >> why is it? >> i just don't get it. the news is very positive. year, of course, we have the fiscal drag going away. we have strength in exports. we have the personal consumption

rising and that will improve as unemployment continues to come down. ande got home construction commercial construction kick into place. >> all of these metrics are in place but corporate america is him buying into this. we've been waiting for that for a on-time. >> the new is at a record level is atnow -- the new cap x a record level right now. the investment is there. we have an industrial renaissance taking place right now. there was deferral of a lot of capex for a long time. uncertainty,ic regulatory uncertainty. now the --

the shift comes after holiday sales of the consul disappointed. nintendo announces it will sell less than 3 million in consuls for the year, down from an earlier projection of 9 million. continuing with the category of dismal forecasts, shell says that fourth-quarter earnings will be considered lower. profit will be about $2.9 billion. the previous estimate was 4.9 billion dollars. shell bryans -- show blames -- shell blames lower production. awards will be paid for many senior bankers in casual -- in cash and really. bonuses -- in cash immediately. quest that has been a huge

uproar. >> it all has to do with when it was deferred in equity shares. howard shore is saying forget about all the gloom. things are pretty good. >> it is the high and low and the contradiction we see out there today. coming up, we will talk about albert -- about apple. china mobile finally coming to fruition. the stakes are pretty high for both apple and china mobile. if you miss any variant of use, you can watch them on bloomberg tv.

>> good morning, everyone.

tiki barber this morning with betty liu on "in the loop." with me,u is always braving the surveillance week. michael mckee is with us this week. >> the national security agency 08 -- already knows this, but apple increasingly relies on china for its sales growth. that effort, they hope, is getting a boost today. apple is beginning to sell the iphone in the nations largest mobilephone carrier. is interesting here because tim:, the ceo of apple, is in beijing today to kick off the ceo of apple, is in beijing today to kick off this thing. sixnegotiation deal began

years ago. 763 million subscribers. for apple, that means a company now has access to more than 700 million potential new customers. we don't have any financial details on the partnership. but it will be sold in 3000 locations across the country, a boon.n to -- a big >> there are concerns about apple's image in china. "new york times" reporting that very few people showed up to see tim cook today. >>. orders are already at one million before today's launch date. some different analysts have some different forecasts. others say that he could boost it by 15 million for the full year because of this deal with china mobile. we will see how plays up. the question is the icing is not

that great, specially in china. if you have an unsubsidized phone, the price could be $700 versus a locally made phone which would be in the neighborhood of $300. >> here is the apple juggernaut coming out of 2009. up we go. everything is great. i'm with larry haverty on the street by the iphone store going by, by, by and that was wrong. we made it back nicely. is part of this the international expansion and proof that the world will buy apple and not just dumb america? >> the international expansion is a big part of the growth story at apple for the years ahead. no question about that in china -- no question about that him and china has been a piece of that. but the key thing here is that apple's marketshare hasn't receded. apple's market share has solidified and is poised to grow.

>> three apple executives said that they would not give up the high ground of an aspirational product. do you have confidence india and china will pay up for an aspirational product? >> absolutely. i believe the apple brand in china is really still extremely strong and very much an aspirational product. this is a company that had near riots at their beijing and shanghai stores a couple of years ago when you phones were introduced. >> that was a couple of years ago. that is the key. >> that is the key, but, i'm telling you, scarlet, the apple brand will be very strong in china. are subsidized phones available for heavy data users. they will give you the phone for free if you get the highest data plan. >> so they are targeting a certain kind of customer. do investors look at it as a growth stock or a value stock? >> it is cheap. it is surprised by intel which is no growth.

it is a value stock. cash flow yield. an ongoing execution of a share buyback. it will learn about $45 a share this year. is price for no growth. yet we think it will have double digit growth this year. it will have close to triple digit growth next year. >> let me bring in my new toy with a picture of scarlet fu on it. let me ask you the basic question. can the nsa listen to my phone calls? can the nsa read my messages in my e-mails? >> no. you are inside the united states. the fbi could with an order with the pfizer court -- with the fisa court. person.own to be a u.s.

this is an issue for china because they have their own version of the nsa and china mobile is a state-owned telecommunications provider. what apple is essentially selling is one more device of the chinese authorities can use to keep tabs on their own population. >> so anyone in any given company, ibm in beijing, if they has this, american or china national, you would suggest a security apparatus can really look right into it. >> yes. it is running on the chinese network. the wiretapping occurs up the network level. it is a subject of negotiations when companies like apple going to the market. what features do they enable or disable for governmental electronic surveillance? apple has not disclose that. there's no doubt in my mind that they will be cooperating with the surveillance of the chinese want. that matches your shirt. >> i got this so that i could see it at 2:00 a.m. in a piano bar room it is great -- in a

piano bar. it is great. >> you better erase that before the nsa gets to that if you travel. we have much more coming on "bloomberg surveillance." nba commissioner david stern and -- itcoming commissioner doesn't always have to be about [indiscernible] this is "bloomberg surveillance."

>> good morning, everyone. mr. mckee has top headlines as morning. dozens of people wounded when an explosive device

was thrown into a truck carrying antigovernment protesters. demonstrators have stays daily marches every day this week. they want the figure second elections to be postponed. in the u.k., retail sales up more than forecast last month. easily topping estimates for just a [indiscernible] gains at department stores in smaller shops helping to fuel the rise. bitcoin moving a step closer to something. some people say mainstream, but i'm not so sure. but the sacramento kings starting to accept the virtual currency for everything from tickets... -- from tickets to hot dogs. whenll talk about bitcoin we talk with the ceo of the company behind the first bitcoin atm. >> you know i'm skeptical.

now, here is scarlet fu. this is the author and editor of a construction trade magazine. he says, if you can't find skilled workers, maybe start an apprentice program. companies typically want others train employees. maybe donald trump was onto something. >> we could have some a sitting next to tom. suggest labor economics are sobered by the success of a german model. it is the new new, isn't it? is there a shortage of workers. real problem with a shortage of skilled workers in a number of fields. absolutely. whether they can be resolved

through policy at the educational front, i don't know. it seems like it is becoming a chronic problem. >> you and i were younger when we first talked about apprentice programs and we were going nowhere for the most part. >> i'm going to look for some apprenticeship programs for mike to kids ran out -- for my two kids are now. --eral electric's rent general electric spent $15 billion. we will look at that next.

>> good morning, everyone. we await general electric earnings. let's do a did a check that's -- let's do a data check.

euro-dollar, 136 03. nymex crude $94. let's get to gators and losers. >> let's get to gainers and losers. that's one of the losers was best buy. we just got results. $.53 a share. it matches the analyst estimates. ge always manages the consensus. in terms of orders, up 8% for the period and a backlog. it seems a little bit shy of analyst estimates. the third quarter, orders actually increased 19%. >> as you look further into the

data pages and pages of come out, everybody would generate electric puts an organic revenue growth which is revenue growth of existing businesses. it is a smoothed out number, something that mr. and melvin and his team really focus on. revenue up 5%. a globally speaks to economy of you -- economy view away from the united states. geif it's coming from capital, banks have recovered, but that is not the economy getting better. it is coming from their industrial companies that much better. >> the challenges they have had in china as well as other multinationals. scarlett, what must you see? >> in terms of industrial margin's, up 100 basis points. also, the company is well- positioned to achieve his 2014 framework.

no change to that, which is total revenue growth of about 0% to 5%. us, big onard with industrial stocks. is gen industrial company with a bolt on financial? >> with a boat on -- with a bolt on financial and a bolt on health care. it's not a really apples to apples industrial icon he well -- industrial like a honeywell. energy has become a big part of their business. so it is a bit of its own hybrid. >> john rice runs the international shop for immelt. is this a global company masquerading with any -- with a mailbox in the united states?

>> it is a company with tremendous global reach. ge wasold days, g was -- considered a gdp stock. be a company growing with gdp. organic revenue growth is what they're try to capture. something in the 4% to 7% range. aviation, power, water. saying that we ended the year with great strength. come outot going to and say -- >> he's not going to come out and say, well, that sucked. >> earnings-per-share at every company -- you have to look past that -- but g is said to be one of the more transparent companies. they work very closely with analysts. as an investor, do you feel like you really know ge and what is going on? to ge underot put

the category of being one of the most transparent companies when you come down to the granular level on the division-by division basis. i think they've improved on that in recent years. but if you are back 10 years ago, it was regarded more of a black box. >> certainly the financial services side. >> which was nearly 50% of their earnings back then. ge capital makes up about 32% of operating income. what is interesting here in this earnings report, ge capital and ge aviation had operating profits that beat analyst estimates. but the industrial segment, power, water, oil and gas, energy management all coming in later than anticipated. this is creating a competition where capital keeps beating on assessments and the industrial side does not come up with enough. >> but again, part of that is energy management, oil and gas

business which they have that is a little but separate from their true industrial businesses. but i do hope that ge stays course with this program they have had in recent years of trimming down ge capital, reducing the contribution of ge capital to the total. that is what the street was them to do. they will have a higher multiple earnings if they continue. >> given all the different settings -- sectors you are looking at, what are you making your decision on? >> that is a good question. wantan argue that, if you an energy company, by energy game if you want an industrial company, by industrial. if you buy an industrial conglomerate, there is some safety and that in terms of smoothing out earnings over a business cycle. but it is a pretty unexciting enterprise. at&t they you old putting grandma sportfolio? >> sort of.

provided they continue to work down the exposure of ge capital to the total because that presents a financial risk. come isiting enterprise that enough to get people excited and 2014? >> i think ge is a solid investment. i don't own it in my growth fund. we own shares in some of our other funds. but you have the three percent plus dividend yield that was raised just last month. you have tremendous cash flow, share buybacks taking place. 6%, 7%can get 5%, earnings growth, it will probably be the market. >> richard falkenrath, how do to ourpanies fold in international expression and expansion given the challenges we have on security?

>> they generally avoid this topic. there is a little bit by sector, but this is an uncomfortable area. they have to be affected by what the president has to say today. >> it is so diversified and so broad. frankly, they will see depressed demand due to the fact that they are seen to be corporative with the u.s. government on spying. >> this is a real competitive issue, particularly with china. , taking chinaance from coal, u.s. versus france is important. >> sure, if you are running a ge this -- ag these days, you have to be a bit of a diplomat. it came in premature as intended. >> they are up 1.5% in the premarket trading.

so some it is he hasn't, but not a whole lot. >> we will take a look at the link between fed tapering and the record rally. we are available on bloomberg television, serving on your tablet, your phone and bloomberg.com.

>> good morning, everyone. futures of six. michael mckee with us this morning. >> we will start at the white house. president obama in announcing changes to the government surveillance efforts today. but the president will put off decisions on phone records and internet data collected. the speech is the white house response to the release from former nsa contractor edward snowden. working too much. but for the eighth straight year , the number of golf courses 157ing in the u.s. -- courses closing last year. yes 14 u.s. open according to the national golf foundation. only 14 new ones opened

according to the national golf foundation. instant replay ages here. the owners approved a plan to use replay to correct missed calls. call.anager can one thing managers cannot challenge is baseball's neighborhood play at second base. that is where the shortstop feels the ball and throws to the second baseman. >> late in the game, seventh- inning, a guy on second, a guy on first. he's making it to third so they are going to heave the ball from right field to third base and we have to stop like football and have a committee meeting? >> that will stretch of the game to five hours. >> exactly. >> they will work hard to keep that from happening. of theed those pictures umpire conference.

no more managers going out and throwing their hats and yelling and screaming and dirt. >> they will keep doing it. they are playing to the crowd appeared that is part of the theater in the game to see the manager store map. they have to do it. >> do you agree they have to shorten the game? >> it can't be four hours all the time. >> what would earl weaver say about the replay? he's with god's team. [laughter] >> he is with the baltimore orioles. they are in the american league, right? baltimore who? out goes the federal reserve's balance sheet. basically, this chart shows the total assets on the balance sheet of the fed, the yellow line command of the s&p 500, the white line, a very close correlation in the past two years, basically moving in lockstep.

we are in the pitcher days of the old market right now. with the fed starting to taper, the yellow line getting a little bit -- it will still move higher, but a little less steeply. what happens to equity prices? >> this is a raging theme right now as we go to doubles. mccain -- as we go to doubt most -- as we go to davos. that qe in the report had an effect on bonds, has an effect on real estate and they both lee -- and they boldly stated that it does not have an effect on equities. did qe have an effect on the rise in equities and the lack of correction of equities? >> i think there is no question about it, tom, that, by repressing interest rates, you not only -- and the process of buying bonds and keeping rates down, you not only helped bonds in the housing market, but you absolutely help stocks. it is insane to think otherwise.

>> i got a terse note from cancer brandeis -- from catherine bandai's. is and she brande disagrees with mckinsey. >> what is the true price of stocks? >> we don't know, do we? we are going to find out. we want to get the fed out of the market. the sooner the better as far as i'm concerned so we can return to real normalized price discovery. >> will you stay invested as you await an uncertain outcome? >> absolutely, tom. there are enough danger flags out there. friendly, ben bernanke will leave office to a standing ovation based upon his record and what he had to deal with. but so did alan greenspan when

he left office. bernanke's final chapter will be written for another few years. remember, 2000 five, ben bernanke said we won't have a housing problem. 2005, ben bernanke said we wouldn't have a housing problem. he gets it on youtube. >> going to go down under, firefighters fighting a 45,000 hectare -- what is a hectare? a fire sparked by the extreme heat that has been leaking during over the south of the continent. and a lot of stories about the australian open and how it is affecting the tennis players. every day this week, temperatures over 100 degrees which seems odd because it is so cold here. some matches had to be suspended yesterday. winter currants have washed up enormous quantities of

trash meanwhile on the beach in indonesia. an annual phenomenon during the winter does right into being a major indonesian tourist attraction in the summer. brazilhermen in gathering from copacabana beach as a lightning storm of dover rio de janeiro. powerrains causing outages. that is a cool picture. >> very cool. surveillance knowledge for you this morning, what is it, hector? it is 2.7 acres. we apologize for this on a friday morning. it's too much information. osby.n blame mr. >> you are dating yourself. i am dating myself.

>> on the beach. >> coming up, we will talk with the ceo of the world's first bitcoin atm machine. i had to take advantage of bitcoin markets.

x this is "lumbar surveillance." >> this issed -- "bloomberg surveillance." a new lens will use a tiny wireless chip and a sensor to .easure ibm is beefing up its cloud unit. expand services for the cloud. maybe ms tried to keep up with customers as they -- ibm is trying to keep up with customers as they buy more cloud servers. spending on video game consoles at a three-year high in

december. hardware sales jumped 28% from a year earlier to $1.3 billion. this is according to npd group. since the best showing december 2010. that is today's company news from the files of "bloomberg west." we need to talk about bitcoin. if you don't know how to get your hands on bitcoin, you can now do so through that coin atms. the ceo of robocoin is the first atm of bitcoin. welcome to surveillance. questec is so much for having me. >> first of all, how does this work? how does the digital kiosk work? can a newbie like myself acquire bitcoin to an atm? >> totally.

we have created the easiest way for people to buy and sell. it is as simple as going to the machine, tapping buy and trading in your cache and scanning your digital wallet or printing out a receipt and, -- trading in your and scanning your digital wallet or printing out a receipt. we actually sell our machines to operators. operators hook in their online exchange account so they actually hold their inventory in an online exchange. one of the exchanges we use is called bitstem. >> how do you account for the rapid and violent moves in bitcoin value? quickly build some impressive technology, some of which is patent pending. basically, operators are holding their inventory therein fiat or bitcoin. we recommend that they hold in fiat. the software takes from their fiat badge and delivers to the

customer, wielding our customers with risk free profit. >> let's look away from the atmi deal with bitcoin. this is a terrific op-ed this morning. this is in "the financial times." you should read every word of it whether you are pro or con bitcoin. jordan, how do you respond to the esteemed economist john p pierre landau.n- >> we are seeing tons of transfers. we see people using bitcoin is a store of wealth and a transfer of money. really bullish.

naturally, there will be a lot of hoarding. as we make the currency more useful, i think our mobile machines move around the world faster. >> every news organization loves to talk about bitcoin but very few people use it. and most of the bitcoins are being courted by people at this point. so when you put your business on together, how many people will use these atms? >> that is an unbelievable amount of people. is a line outside of a coffee shop in vancouver. new york, itor will be unbelievable. >> thank you very much. >> there it is, you debate on bitcoin. falkenrath, where are you on the coin? >> i think it is a novelty. it has a buzz factor that people are really into, but i don't think it will take off. >> it is really in demand in places like asia.

there is a big debate over whether it is a legitimate currency. why are some markets more hungry for bitcoin than others? >> etiquette has something to do with where are tech experts. you have to be -- i think it has something to do with where are the tax experts. -- the tech experts. >> thank you so much. >> i am off this weekend to the land of the $11 number two value meal. i spend nothing in switzerland. it is insane. swissmportant one is your- through the distortion of the -- the important one is euro swiss through the distortion.

a slightly weaker swiss franc as a strong euro at the end of the year. >> coming up in the next hour, "bloomberg surveillance was good on television and radio, albert robertson talks to us about banking. ..

>> the need for a robust national security agency. morgan stanley report as james gorman its call for less trading for less trading. and can you trust china's economic data? morning, this is "bloomberg surveillance." we're live from our headquarters in new york. i am tom keene. joining me as always is scarlet fu, our chief correspondent michael mckee, and our guest host, truly one of our most popular guests, robert albertson. also joining us is richard falkenrath this morning. >> we will start in england. retail sales up more than forecast. 2.6% in december.

climate protection may cut global gdp four percent per year . that is according to the united nations. housing starts and building permits expected to fall a little bit. that will move the markets. industrial manufacturing coming out at 9:15. we have ge earnings coming up in just a few moments. morgan stanley reports the last of the big inks. -- big banks. one of the reliable conservatives in congress. on givingsident plans a speech at 11 a.m. the head of the nsa will no longer keep full colorful

records under the president's plan. we had the latest development million nsa elects 2 met -- nsa collapse 2 million messages -- nsa collects 2 million messages per day. this news that the nsa will not keep phone records under the president's plan, is the surprising? >> not really. is one of the most controversial subjects, basically what happens right now is the telephone providers are ,ompelled to turn over metadata which number calls which number at which time, in bulk form to everyone. the nsa queries it to subject tight controls. of that shocked a lot of people when it came out. of there's going to be calls for some sort of her change -- some sort of change to that.

in three years are we going to need a new -- >> it depends on how it is implemented. if the intelligence community still has swift and efficient access to it, it will have no impact on our security. the implementation details matter. >> what does a meeting with guys like you with any given president -- what is it like to sit there when you and your senior people are in the oval office and argue about national security act obama it is a heady experience. -- national security. is a heady experience. people talk about real threats, real thoughts. the realism of what is happening with individuals trying to kill americans collar's the discussion about how to organize the program and authorize the

policy. that is not the case in most media discussions about it and frankly most legislative branch discussions about it. >> i guess it is called section 215 two and this program of both data collection or at least the nsa holding. what does it mean to the carriers? very nervous about this. it is not going to and section 215. section 215 is not going to change as an the book apparatus. it is easier for the carriers to comply. they send a massive data sets to the nsa once per quarter. it is out of their hands and they can do what they wish with their own records. it is possible that president obama's proposal -- he will create a bigger burden on the telephone providers to retain that data and make it accessible to the nsa with a court order.

>> will cut of precedent does this set for the collection of e-mails? -- what kind of precedent does this set for the collection of e-mails? them i have to quarrel with your premise a little bit. people still use phones a lot. -- >> i have to quarrel with your premise a little bit. phones a lot.se the telephone metadata is still very useful and becomes available very early in the investigation and allows you to figure out what is happening in ways that e-mail traffic is more difficult to do so quickly. of it.e is so much more >> the signal-to-noise ratio on the internet is far higher than telephone. >> how different from china is what we do? if we are going to put restrictions on what we do, are we going to be fighting with one hand behind our back? >> the u.s. government has had

objections to chinese companies selling their telecommunications equivalent into the usb -- into the u.s.. the biggest part of this debate is not about foreign spying but about how you spy on your own people. in the united states it is tightly constrained. china is not constrained at all. worldwide on bloomberg television, the president's important speech. this has been an uproar. robert albertson, sandra o'neill. paragraph, chart, paragraph, semi-fancy log, chart. what are you writing about right now? what is the number one thing you are focused on right now? >> i am obviously watching what is going on in the earnings -- >> revenues and earnings.

we are finally seeing a bottom in margins. it stops going automatically down every corner -- every corner. we are said -- every quarter. we are seeing a bottom on financial revenues. quartersaw this last was very encouraging. we have a revenue stream that is accelerating moderately. >> we will go through this in the hour with morgan stanley. scarlet fu with the headline data. have you ever seen such an interesting differentiation of the major banks? you mentioned this in the meeting this morning, it seems a distinct. fortress dimon different from fortress gorman. jpmorgan is a hybrid of many many businesses, including capital markets, where

is morgan stanley is corporate stacks. i see a difference in terms of focus and leadership and -- >> strategy> -- strategy. >> to some extent, strategy. >> who comes out ahead? >> everyone wins there. >> to our listeners winning? >> anyone over the age of 55 or 60 certainly does. >> i win, scarlett loses. >> only by age. o> we have a lot more t discuss. we want to get to company news. google is diversifying into contact lenses. these lenses will use a tiny wireless chip to measure the -- to measure who close levels that

--measure who close levels measure glucose levels. intel had was hit -- intel was hit by a drop of demand in pcs in asia. and morgan stanley changes the way it pays bonuses. morgan stanley deferred a hundred percent of bonuses. they will now just have some portion to defer. >> it is a huge deal. differ.e to >> for a while people hated it. look at stocks, bonds, currencies, commodities. upities launched higher, six. we have a dampening of

enthusiasm at 2.84% on the 10 year. crude is at $94.47. >> are you going to miss the games? , i am going to miss the games. >> which quarterback is going to have the best weekend? wilson or maddie or brady. this is "numbered surveillance -- "bloomberg surveillance." ♪

them a this matters now to our guest host. robert outwards and of sandra o'neill -- robert albertson of sandra o'neill. focused on the too small to survive banks. community banking is important and critical. highly distressed. why our community banks struggling and how much do they hate jamie dimon? it is important to start

looking at the numbers and thinking it through. the capitaleased ratio 30% in large banks. they are setting aside for judgments and finds. so much money that they are exceeding the original tarp number. >> we are re-targeting -- re- targeting -- re-tarping. over half a trillion dollars. go down to the community banks, it is the other side of the story. been very fortunate because we have banks that are small and are close to communities and small businesses. capital port? penalty arc capital stock. if they no longer have the potential for profitability. a billionunder

dollars in assets, there are 600 banks. i would argue the bulk of them are flat. they are basically close to being zombies. this is simple arithmetic. bank -- theyon cannot earn a reasonable return. these this into context, community banks do not have the $1.5 trillion in capital and are stuck. back-office stuff. m if you back off jpmorgan, you benefit those 6000 banks? you have -- >> you have to stop pushing down restrictions and burdens. they have no impact on the strategic issues.

>> when i talk to community bankers in heat there is a directness that they agree with mr. albertson's statement. would be the amount to the nba has grown in the last few years. it is based running success for david stern. what a success. ♪

>> a busy friday morning. scarlet fu and michael mckee with me. robert albertson with us from sandra o'neill on the state of american banks. islet's take a look at what happening in bangkok. dozens of people wounded. thrown into device a truck carrying government protesters.

they want the country's february 2 election to be postponed. rising in the u.k.. forecasts increased 2.6%. it was the strongest december since the government began tracking sales in 1996. earl weaver paid for the orioles. planning to use replay to correct missed calls. each manager can challenge one call per game. if they get it right to they can get a second challenge. >> let's get to morgan stanley. the stock is trading higher in the premarket. ofis after it reported a lot messy one-time items in its fourth quarter and orders. -- fourth-quarter numbers. whether it is the tax benefit or legal reserves, earnings per

share are up 15% that are up $.15. a $.2 billion in fourth-quarter revenue, the consensus was for $8 billion. incomes, commodities, trading's, analysts are looking for north of 800 million. equity was in line, someone -- some say missing the mark. global wealth management, this is the part of the business the ceo is emphasizing. the pretax margin is something he has fixated on. it has improved tremendously in the past quarter. 19% pretax margin, forecasts will rise 22% by the year of 2015.

the first read on this is positive in that the stock is trading higher. >> robert albertson with us. -- it is amazing how this is a different morgan stanley from five or six years ago. ofave the clearest memory talking to john mack about their trading platform. >> there is no more of that's in the big investment banks. trading of that nature is gone. they are all searching for steadier earnings. i'm not sure that is so good for everybody. look at what happened last year in the bond market. thatsts are not staring at

thing. they are looking at the rest of the pieces, which is the future of all these companies. them a he talks a more broader more. you have >> i want to highlight what james gorman said in the press to released -- in the press release. he comes about the fourth quarter demonstrating the consistency in business model. this business model, focusing on equity, trading, and the brokerage business, the stock was the best performer among the 10 biggest global banks. that is a vote of confidence. it has all been taken behind the woodshed. and focus one out what they can do best.

the m and a side, the underwriting side, it is a natural response. i am impressed with how resilient they have become. it doesn't matter, they pulled it off. >> now that they are focusing on the equity side, what litigation issues remain outstanding that could knock them down? , history. -- >> history. game.a rather unfortunate it is far cheaper to sell the -- to settle. that is causing half the problems and credits. the large banks are being hit. we are training capital from the system. >> with your tickets of experience -- with your decades of experience, would you tell a 25-e -- would you tell

year-old or 27-year-old going into banking today? >> i would suggest they wait a few years. me rephrase this. some family friend is going to call up albertson and say, would you talked my dollar? -- talked todoll my daughter? >> we have a challenge here. days a monthe four off -- >> it is a vastly different business than it was 10 years ago or 20 years ago. that doesn't mean it is not the right place to go but you have to go in there a lurch. -- go in there a lurch. -- go in there alert. >> we have much more on banks and a lot in business. up, new homes tumbling as a big banks.

we see originations dropping 26% in the fourth quarter. if you miss any of our interviews, you can watch them on bloomberg on apple tv. ♪

>> i am scarlet fu with tom mckee. let's get some company news. ge reported earnings in line with analyst estimates. ge also saying it was on track

to have double digit growth in earnings. a bleak forecast from nintendo a profit.icting holiday sales disappointed. and shall with its own warning. the company sing fourth-quarter earnings will be significantly lower. estimate was for $4.9 billion. today's company news. we talk a lot about football because the playoffs are this weekend. do you watch basketball? >> no. >> he doesn't watch basketball at all. the nba commissioner is retiring after 30 years. >> i had no idea. them a is amazing because the

revenue of the nba -- >> it is amazing because the revenue of the nba sort. from 118 million back when he started in 1982. a stunning return. on the cover of our new issue of "bloomberg businessweek." we look into the question of ceo succession. is thatinteresting here you look at what is going on with david stern and how that is an example of successful ceo that of it -- of a successful ceo. >> they did this and a gradual process. they build a consensus over time. while they are not a publicly traded company, it is still an example. they work very much in the world of large corporations. espn.partners are the revenue is $5.5 billion.

>> even though david stern's title is commissioner, his job is that of a ceo because he has shareholders to answer to. >> that is what we talked about. his like the commissioner as you think of it. now the league his immediate property. the that means the ceo job is going to be managing merchandising and marketing. the first thing they're going have to do is manage tv deals. we sat down with the brooklyn nets owner in london to talk about the key ingredients to winning a championship. >> you need very good

professional staff. only with money, it is impossible to reach championships. >> david stern left quite a legacy and set the path for adam silver with the way he dealt with the players union. it was a bit of a mock -- a bit of a lockup five months back -- five seasons back. >> the owners, when it became apparent silver was going to be the next commissioner, they asked for more time with him. that is really one he did it. they basically one that's negotiation. they expected a pretty big cut in the share of revenue that goes to the players. they voted 30 to nothing. >> scarlet gave the numbers, pretty impressive in terms of the business as a whole. does he have the challenge of trying to keep that going?

we are starting to see drop-offs in some of the markets that don't do as well as others. the national hockey league sells far more tickets than the nba. is there a problem on the horizon? >> i think the leagues are struggling a little bit with the live experience. people can have such a great experience at home. their money comes from television and that is where the focus is. that is certainly something that they will be paying attention to. >> it is the cover of bloomberg businessweek. talking about the digital space. let's get to a data check. >> i just want to mention that general electric chair -- general electric shares are trading higher than morgan stanley.

we have economic data coming up. housing starts at 830. ahead of that we have futures gaining. -- 10 year yield taking yield taking lower. -- ticking lower. phone,on her tablets, and on apple tv as well. michael mckee, our chief economic correspondent,'s scarlet fu with us -- correspondent, scarlet fu with us. >> a lot of the money banks make space.thie mortgage fargo, they are falling at the fastest rate since 2011. is the housing party over? a potential slowdown in 2014 ahead? in new york city

and san francisco real estate markets. he has a book coming out next march. atis pretty obvious that this point we are not going to have 2013 all over again. >> 2014 is going to be about slow and steady. we are not going to see sexy news articles. it will be a slow year. 2013 was a big comeback for the housing recovery. >> is this a relative change? 2014 is still going to be very good. >> prices will be up around the country. we are not going to see the 30% double-digit gains in most parts of the country. >> what is a behavioral metrics right now? sellers have negative

-- >> a lot of sellers have negative equity positions. they are excited to get out of their home. >> what percentage of american selling is underwater? , there are still millions more underwater. -- >> there are still millions more underwater. now the you look at the rise of mortgage rates -- >> you look at the rise of mortgage rates -- >> the refi ended in october. in april and may it was crazy markets. 26 offers and another. people got scared. the rates went up a small percentage point. they were afraid of another bubble. is potentially another bubble because what has been driving the prices has been largely low interest rates. away toack up a third where we got in trouble before. him the recovery in home prices

has not been followed by the recovery in starts, and actual homebuilding. this is not an interesting that is -- an industry that is getting back together. this is a refi cycle that has to come to an end. bubble does not impress me, it scares me. just the refi cycle booming, but you had institutional investors buying up a lot of the existing homes on the market. does that slowdown this year with mortgage rates higher? i know they paid that -- i know they paid in cash but with this idea that the housing market slowing down -- >> you'll see a lot fewer sales to the point that there will be lower inventory. there is no inventory. a lot of those guys were buying those homes in the late 2012 to turley -- too early 2013. rates are still really low. my parents bought at 14% in the 80s.

metric is home starts are still below their worst points in memorable history. it just has not come back. it needs to. all the other economic data that we get on housing and what you see in the real world. >> you can see what is going on in your local economy, you see buyers that want to buy homes. it is much busier than they were two years ago. buyers are more cautious today. this mean for the average person? are they going to be able to take it vantage? there's not much going on. >> a lot of people are out of the market. >> some fascinating -- >> thank you for being with us today. >> the ambiguity is amazing.

>> not ambiguous at all. us -- tweet-- tweed us. ♪

them a it is time for our

earnings calendar. morgan state -- >> it is time for our earnings calendar. that eatanley beat as analyst estimates. the global wealth unit was at 19%. we will keep an eye on all the earnings next week, including johnson and johnson. las vegas high rollers know a thing or two about the good life because they get tons of perks from the casinos. the nightclub in the bellagio has a -- in the bellagio earns $250,000 per night. them inside mgm's collage a casino, at the exclusive high nightclub, is one of the most expensive tables in the world. >> i like this table. >> absolutely gorgeous. >> part of its value is the

view. 1200 water spring robots, 400 -- 460 feet. about $40 million. inside the club, the fountains are made of champagne. club the most profitable per square foot. the average table cost $8,000 per night. this one costs $250,000. what makes it different? this red button. the cost to set off these fountains, $10,000. >> so only two people technically reserved that table for 250,000. it is reserved for these whales.

coupleare spending a million dollars at the casino, they want to give you everything they can. >> i love that button. >> macau has an incredibly well and has surpassed vegas. at the challenges that we face here for the gaming and history over the course of the last several years. it is through the eyes of that -- he managedyer to win $15 million playing blackjack within the span of a few months. he did because the casinos were formidable. -- were vulnerable. >> that was the guy and the katy perry video? iwatch katy perry videos, what

can i say? >> you learn all about it -- you whatearn all about it and is going on by watching "the player: secrets of a vegas whale." at 9 p.m..g onit is airing at 9 p.m. tuesday, january 21. we will be back. ♪\

bloomberg surveillance. let's be some company news from the files of bloomberg west. ibm is beefing up its cloudy units. the company will invest $2 $1.2on to -- will invest billion and the cloud. for one and playstation push to spending on videogame consuls to a three-year high in december. $3dware sales jumped to billion. it was the best monthly showing since december 2010.

and the t-mobile at&t feud rolls on. the t-mobile chief is firing back. the renegade ceo says t-mobile will sponsor its own concert with macklemore. he said his appreciation for macklemore is the worst kept in the social hemisphere. that is from the files of bloomberg west. he will be there with pink shirt and all. >> he is different. can break how you your contract with at&t and t- mobile will pay for it. >> yes. >> china claims progress in its .fforts to ease the cash crunch we know the government has had to refuse massive amounts of cash and stimulus efforts in the u.s., europe, or japan. -- ising down is the fact this really reform?

, it is the most important interview this morning. -- our nextsts guest does not put much stock in chinese government data. they gather economic data on the ground and they do it in an independent fashion. a lot of other people besides dr. roche are china bulls. you are not. state the case. china bowl.t not a we are looking at a slow economy. in a way, seeing a slower slowdown in china is bullish. the ground right now? the latest anecdotal evidence? , we saw a week q3 compared to what official data was claiming. in q3, q4.mp we saw a deceleration in all most every single sector.

>> you don't by seven percent gdp? , it is impossible to nail the number. we want to see slower growth. it is apparent when you look at the regions, apparently look at sectors. gdp is an artificial construct. >> what would you be doing differently? , the first thing i would do is put in deposit insurance. is i would be pushing this tightening but i would not let up. there are a lot of people fearing there is too much pressure. chineseast seven providences are setting lower growth form. given the pollution and the headlines that people cannot walk outside without coughing -- >> people are taking very seriously the environmental impact in china from the saddle kidded capital -- from misallocated capital.

this is something china knows it cannot push off any longer. >> the state enterprises think otherwise. they are not going to back off. >> it is a question of how much they can push back on invested interest. of credits, people trying to rein in the shadow banking system was withholding money from the system and pushed market rates up. and yet credit growth has not slowed according to the latest data. this seems to be a loss of control by the chinese government over the economy creation. >> it is much worse than that. andave seen the m2 numbers they are still high and problematic. what we measure is the way credit seeps into the economy. one -- when we look at the aggregates levels, we are

looking not at the volume. we are seeing firms with extraordinary providences get access to that credit. >> secretary clinton was front and center on her concept of fair trade. let me ask you the basic questions, are we losing jobs to china? >> no we are not. ae extent that we are having more open trade, we are going to be empowering american consumers. >> the textile jobs are gone and there's not another weight behind it? >> a lot of people said we lost manufacturing altogether to china a few years ago. you're seeing those jobs come back home. the idea is not that we or china should control manufacturing, it should be about where it should be to -- it should be produced to lower costs. , -- >> we have a special look at the agenda. mike mckee has a great agenda for us. disappointed tom is

going to dallas. -- to dallas. davos. all the games on sunday. it goes beyond that. it becomes a battle of personalities. it is tom brady versus peyton manning. of they have met 14 -- they have met 14 times in the past. tom brady has a record against manning. every time they have met in the three years they have been in the playoffs, the team that won won the super bowl. there is a lot at stake here. we will see how they do. will be anropose it offense of game or will it be neutralized? it will probably be an offense of game depending on the weather.

at this point to have two great quarterbacks. in the volume and sane? >> it is really loud. seattle is the loudest stadium -- volume really insane. .> it is louder seattle is the loudest stadium. >> who makes more money? >> that is a great question. taken manning makes more. the contracts are weird because of the bonuses. on an average basis, peyton manning has made more. brady has made $13 million per , $16 peyton manning million. >> celebrity lodestone -- >> mrs. brady makes a fortune. >> she is only a supermodel. >> there is their combined earnings.

them all unit -- >> all you need to know. demo -- >> we have our twitter question. these guys, which quarterback is going to have the best weekend? the one that throws to the tight end of most. that is interesting. aaron rodgers will have the best weekend because he will earn $60,000 per day for the next 10 years and watch it from home. scarlett hid on the important point of the weekend. >> the shares are moving higher in the premarket right now. decline,rofits litigation expenses rising. you back out of the one-time items and profits beat analyst estimates.

what are you looking at? -- jobless --ound ound, my guess is it will be a narrow dave ellis -- narrow davos. crimes -- is this crisis over? so. a lot ofink people say it is. >> we had a big down shift in momentum. we are counting on the emerging markets to make it up. right now neither look like they are breaking new grounds. we're still not coming out of >>re we were five years ago -- five years ago. >> thank you. going to say 7.6 but then gloat about how it be the target. looks like ge's earnings.

>> that's right. >> thank you so much for joining us this morning. we do have housing starts coming up in 30 minutes. "bloomberg surveillance" on radio continues. "in the loop" is up next.

>> live from bloomberg world headquarters, this is "in the loop". betty liu will be here the next hour. >> it is good to be with you the

afternoon. >> i feel strangely awake. when have got our once i -- irwin simon here. i understand there is more stuff downstairs and we'll get to later. >> we will have a power breakfast. i feel at the third wheel here. i'm honored to sit with you. they haveere because been an aggregator of healthy food brands. , juicing is the new hot thing. >> it is a cleanse. it is a juice that is a pick me up. a seven-dayoff juicing. for the last seven days, i was juicing. you can see how i look and tell it worked for me. i feel great. >> i think you're looking pretty good. >>