>> from bloomberg world headquarters in new york, i am mark crumpton. this is "bottom line," the intersection of business and economics with a main street perspective. president obama and nations leaders meet in the hague. russia excluded from the g-8. and looking at the religious rights of corporations. >> to our viewers in the united states and those of us -- those of you joining us around the world, welcome.

is that the u.s. supreme court where justices question the affordable care law contraceptive coverage. the g7ilcote is where meeting, minus russia concludes. yang yang has details of that meeting. >> president obama calls an ofrgency sideline meeting the g7, ousting russia from the ranks of the exclusive group of eight. the crimean situation overshadowed the situation. at the conclusion of the summit, obama took to the world toge and said putin needs understand there is a choice to be made here. >> it is now up to russia to act responsibly and show itself once

again willing to abide by international rules and international norms. if it chooses to do so, i think there could be a better outcome. if it fails to do so, there will be additional costs, and those will have disruptive effect to the global economy, but they will have the greatest impact on russia. costs willditional come in the form of more sanctions. it will be limited to officials circle and alone russian bank. a wider response could cover the russian energy and finance industries and even weapons procurement. the president says what they are doing now is examining the impact of those proposed thetions, because with interconnectedness of the european economy, sanctions against russia will undoubtedly have ripple effects. the president says they all recognize they have to stand up for core principles here and

know that some countries will have to take one for the team. that team is one member smaller now. they will meet in brussels in june, not in sochi as previously planned. >> yang yang. thank you. let's look at vladimir putin's response to his country's exclusion from the g-8. withchilcote joins me those details. good evening. >> if he was disappointed about being kicked out of the g-8, he certainly was not showing it. he presided over an award ceremony for actors and artists. yesterday he presided over an awards ceremony for those involved with the olympics in sochi. it would have been good if he were able to host those world leaders in sochi. but if they do not want to come, he said, he can't force them, so oh, well. does russia gives to

a body like the g7? >> for russia the g-8 has been an exclusive club, it's an opportunity for president putin to show that russia is important. but for a long while, i think russia has felt, not unlike the g7t that the g8 is more like plus one and russia is the odd they havet the g-20, more traction, because they have more of those allies, those bric allies like china and brazil. while they may not agree with what resident putin has done in crimea, they are not as critical as some of the western countries. that is what they seem to be happy to go forward with. keep it with the g-20. if the g8 goes to the sidelines, oh, well. >> eu leaders gather again on wednesday. can we expect another round of

sanctions for moscow? is an interesting one. we just heard that the next step would be a position of broader economic sanctions, but what is very clear there is not the appetite even among the obama administration, but certainly among those european leaders to go for the full monty unless movedent putin were to russian troops into the ukrainian mainland. places like eastern ukraine. what i would look for would be an expansion of the list of officials from putin's inner circle. the u.s. list is more aggressive. they have gone for bigger fish within president obama's inner circle. pressure ono put european officials to go up the food chain as well. >> ryan chilcote, thank you. for more on the g7 meeting, i am joined by james collins. he was the ambassador to the

russian federation from 1997 until 2001. he is now the diplomat in residence at the carnegie endowment for international peace. mr. ambassador, welcome to "bottom line." thank you for your time today. >> good to be with you. >> sir, what did the meeting accomplished? g7?he meeting of the >> yes, sir. >> they came out with a strong statement, i think a practical statement. i was least to see they were unified. to see theyased were unified. they agreed on basic principles of international law. they called specifically on ukraine to find an explosive political settlement that will give them stability and the prospect for economic veltman. >> ambassador collins, the international community is taking steps to cast russia as a pariah nation. russia has been cut out of the

g-8. but the foreign minister, sergei lavrov called the g-8 an informal club and continued "it has no membership tickets and cannot purge anyone by definition." does the g-8, now g7 have? >> i think it is one of a number of such institutions. it is, after all, by historic the leading economies, and therefore on economic issues, it is fairly significant. of course today it does not have china and that is a big issue. i would say, however, excluding russia from the g-8 is not be a dispositive action. what it does do is show that russia is not in a position at the moment to conduct normal business with the countries of europe.

>> sir, russia's annexation of crimea is beginning to take hold. what is the economic consequences for russia, particularly because its own growth year-over-year is at 1.2%? >> i think it remains to be seen these new moves by moscow and the whole ukraine crisis are going to affect the investment climate in russia. will capital flow to moscow or not? capital. they need technological know-how and so forth to modernize their economy. i think the market has not spoken yet, frankly. it has spoken somewhat in russia there it is, but down. i think the actual effect of these actions have not been market, partlye because they are waiting to see

what the real outcomes are going to be. >> i am speaking with james collins, the former u.s. ambassador to the russian federation. sir, isolating russia and ostracizing president vladimir putin, will that be enough to make him reversed course in crimea? of all, we may speak of the isolation of president putin not seemfact it does to be quite the case. he is still on good terms with china. we have not heard very much from much of the rest of the bric community about russia's actions. what we're really talking about is isolating him from the european world or europe and north america. on him?t have an effect yes, i think it does. on the other hand, he has been very defiant. if you read his speech a week ago and the one he gave recently to the chamber of commerce, chamber of entrepreneurs and

is atry, what you see statement that he intends to make russia less and less dependent on the west. sir, the tensions between russia and the west, they are increasing, especially given the russian troop buildups near ukraine. is this a show, or is military confrontation likely? >> i do not think anyone is going to win from a military confrontation, but it certainly is true the military activities on behalf of of the russian side and what is going on in ukraine as well, where they are working on mobilizing forces and so on, simply brings tensions to a higher and higher level. there is always the danger that something is going to happen and you will lose control of the situation. .> right >> right now, i do not think we are seeing that happen. it does seem a bit quieter in the east. we have observers from the

organization, from security and cooperation in europe suddenly, finally showing up in this region. all of these rings may calm the situation -- all of these things somewhat,e situation but we must do something or the situation will become more grave. >> i have about 30 seconds. sir, this has been called the worst relationship since the cold war in the media. are we exaggerating or are we on target, particularly given the economic stakes involved? >> i think this is the worst, because it is drawing into west posthe post-cold war and world war ii borders. seems dangerous. if you want the worst case, you look at yugoslavia when they did not have such a set of terms of reference.

writes. ambassador james collins, the u.s. ambassador to the russian federation in 1997 until 2001, joining us from washington. mr. ambassador, it has been a pleasure to have us on -- to have you on the broadcast. >> thank you very much for the chance. >> coming up, we will tell you why two family-owned companies are seeking exemptions from the affordable care act. ♪

>> welcome back. we have breaking news. the internal revenue service in its first substantive ruling on the issue says the u.s. asernment will treat bitcoin property for tax purposes, applying rules it uses to -- to governocks stocks and bartered transactions. it will provide certainty to your investors along with the implied tax liability.

-- two cups of coffee with one dollar of bitcoin would -- to classifye bitcoin as property. we will follow that story and bring you more details as we get them. in the meantime, more breaking news. firefighters are battling a apartmentaze in an complex that appears to be under construction in houston, texas. the fire broke out around 12:30 p.m. local time. no information was available about possible injuries or the cause of the fire. in washington, the u.s. supreme court heard a challenge to the that requiresare companies to provide contraceptive coverage to their employees. it focuses on two companies, hobby lobby and conestoga would.

religiousoth owned by conservatives. what is the issue the court has to decide? , these companies want a religious exemption from that law. it is a constitutional case and a statutory case. the court focused most on the statutory argument. there was a law passed in 1993 that provides for protecting religious freedoms. apply underions can the statutes. --thevernment says a corporations do not qualify and not shownwners have that their religious freedoms are burdened by these requirements. and the employees need to be taken account of. case to the big health care case two years ago at the court. seems veryways it

similar. it is a big ideological argument. the same lawyers. you have don verrilli for the administration every -- administration. you have the same guy who argued against the health care law arguing for the company. the big difference is this is not a case that will take down the whole statute to waive the last case might have. this is a fairly narrow point. the administration says it is important, contraceptive coverage, but it is not threatening the entire affordable care act. >> what are the companies arguing for and what would be the impact if they won? something hotly debated in the courtroom. the company wants to be able to claim religious exemptions from otherwise generally applicable laws, and the question is, what else could they object to? some of the more liberal justices, could they say we do coverage forrovide

vaccinations or blood transfusions? could they try to obtain religious exemptions from other laws? child labor laws? the slippery slope argument is very much in place. >> what impact might this have on publicly traded companies? >> probably not any impact. possibility of not knowing where this would lead. all of the challenges to the contraceptive requirements are family owned companies. the lawyer for the companies today said, i don't even know the moree justices on liberal side of the court are clearly worried about the implications if the court says the companies can claim religious rights. >> not too far from where you're at in an appeals court there was another challenge to a case that could have even bigger implications. tell us about that.

>> writes, and this is a case and this is a case that really affects the core of the law. and that is subsidies that the government provides on exchanges . whether someone who buys a subsidy on a federal exchange qualifies for those subsidies or only the state exchanges. since most of the states have not said up there on exchanges, we're talking two thirds, three quarters of the states where low income people would not get subsidies for buying open sure is. if the court were to agree with that argument, it could have a really big impact on enrollment under obamacare. , just to sum up -- no sense of where this might go at this point, right? >> it is hard to call. justice kennedy asked questions opposed sides in the case. look at this not

in terms of the sleeping rolling. who wins and who loses, not really clear right now. r, thank u so much. hackers are getting more sophisticated. details on a new report. ♪

>> welcome back to "bottom line" on bloomberg television and streaming on your phone, your tablet, and bloomberg.com. . the houston coast guard says that the houston ship channel is open for traffic after an oil spill. of south sailing out texas into galveston bay.

this is four days after a barge spilled as much as 175 gallons -- 170 5000 gallons of oil. the channel connects houston with parts of southeast texas including key oil refineries. cleanup is underway around galveston bay. more now on that story we told you about moments ago, firefighters fighting that massive blaze at what appears to be an apartment building under construction just west of downtown houston, texas. that fire broke out about 12:30 p.m. local time at the 2500 block of west allis near montrose. so far, we have not received any word of possible injuries or firemay have started that happening in houston, texas. it is 26 minutes past the hour. that means bloomberg television is.

here is senior markets correspondent julie hyman on a day the markets are trending higher. >> trending a little higher. there was a mix of economic data this morning between new-home sales and consumer confidence. take a look. investors are indeed buying. we are just off the highs of the day. we did have some of the best performers of the last year or so and even beyond that. now it looks like we are seeing a comeback. energy stocks leading the gains. walt disney may save up $1 billion from makers studios that creates you to videos. it gives them -- youtube videos. they meet their performance targets, disney will shell out an extra $4.6 million for the company. also keeping an ion carbon -- carnival. they are forecasting higher costs and lower ticket prices will cause rob is to be lower -- profits to be

lower than analysts were estimating. we will have more on the markets in 30 minutes. more "bottom line" coming your way right now. ♪

>> welcome back to the second half-hour of "bottom line." i'm mark crumpton in new york. thanks for staying with us. thes get a quick check of commodity close at the end of this tuesday. futures were down a 10th of a percent, but not gas futures were up. they are now at four dollars $.40. a rise of over three percent. -- natgas. gold is settling at 1312.

treats. government will bitcoin as property for tax purposes. rules thatusing cover stocks and barter transactions. the irs says it will provide stability for investors. for more on what this may mean, matt miller joins us. break this down for us. >> it is a very interesting ruling and one that people using it going have been waiting for for over a year now. given the popularity of bitcoin -- and 2013 it went from 700 213,000 per our hour and transaction. the market of all bitcoins out there went from about $1 billion in july 2013 to 12 billion dollars in december 2013. a little bit of a drop in butoin this december 2013,

still important for people to know how to treat this asset for tax purposes. what the irs is saying is you will be able to claim -- in the case that you bought it for much less than it is worth now, which is pretty much the case for anyone who bought it about six months ago, you will be able to treat it with capital gains tax rules. that means if you hold it for over a year, the highest rate that will be taxed will be about 24%. if you hold it for less than a year, your tax rate will be about 44%. you will also be able to take capital losses on that, which is key for people who bought bitcoin near the end of 2013 when it ramps up to a peak of about $1200. it is currently trading for less than $600, depending on where you look to do a bitcoin transaction now. it is very interesting stuff and it lays out the rules, which i

have always wondered about, for bitcoin miners. they have to pay the tax at the moment they mine it as regular income and any growth in those assets will be taxed to capital gains. >> but not currency, but property? currency,erty, not which is very interesting for people trading in bitcoin. they will be able to use the lower capital gains tax rate rather than if they had it as regular income. this does not mean bitcoin is not a currency or is a currency. i spoke with the undersecretary of financial intelligence for the u.s. treasury last week, and he said, we do not consider the virtual currency a currency. now -- take from that what you will, using thateople are

going to buy milk and bacon, they consider it an asset. >> thanks very much, matt miller. we have a detailed look at the underground hacking market. megan hughes joins me with more. what did you learn about the business of hacking? >> probably no surprise -- it is booming. criminals cannot figure out the technical details of something they want to do. they can certainly find someone online who can't. this was a report at the rand corporation sponsored by juniper networks. fees couldthat the go from three bucks to 15,000 dollars, depending on how sophisticated we are talking. they used currency like bitcoin for the anonymity. and oftentimes they are referring to more and more digital storefronts connecting sellers with buyers so the sellers can stay anonymous. it used to be chat. some of the highest tiers, dark

net, people are masking identity, communications in scripted -- encrypted. they are highly vetted. some of these organizations have reached between 70000 and 80,000 people. what are people paying the most to do? >> first of all, hacking is actually more profitable than the illegal drug trade according to this report. if you think about it, you have no shipping. it is usually e-mail or downloads. there is a direct link to the end-user. there are not as many middlemen involved. the biggest ticket item -- malware that attacks lesser-known software vulnerability. these are made to order attacks. sometimes governments are the buyers. that was an interesting part of this report. there was one that targeted

system.ios operating that one was interesting. and not just paying for the attacks, but people are being big bucks for the target attacks that we have talked so much about. those credit card numbers went for a big amount. it initially went from anywhere 100 $35.to with these large-scale data thefts, they only happen once every three years. that is a supply and demand issue. as the market became flooded by credit card numbers, the price of that data went down. pretty interesting stuff. >> bloomberg's washington correspondent, megan hughes joining us. megan, thanks. coming up, our roundtable discussion on the u.s. economy, the federal reserve, and a lot more when "bottom line" continues. ♪

>> we turn our focus now to the u.s. economy. consumer confidence in march line to its size level in six years. could this be a signal for stronger economic growth ahead? join me to answer that question, the chief investment officer at .umberland advisors, and bob joiningn, thank you for me. your reactions when matt miller was doing that bitcoin story were just too precious. for those of you who were not with us when that news broke. the irs saying that bitcoin as property, not currency in the u.s. tax system. what is wrong with that? >> it seems to me that it is hard to tax something when it is synonymous. i do not know how they will find whether those capital gains are realized or not. >> what does this mean for the bitcoin discussion? >> it is interesting. it is it a capital gains

transaction if you buy and sell a bitcoin. if you do not report it, you are now subject to tax evasion criminal charges by the united states government. they may have a shot at some of these so-called anonymous folks. >> all right, to be continued. let's talk about the economic richer. it is still mixed today. we did get the consumer finance rising more than forecast. a home sales dropping. yesterday on monday, data showing a slowdown in american manufacturing. how should investors read through this? how can they sift through all of this noise? recovery, a lot of volatility. in the housing issue, there is a debate about the weather, what did the weather do? we do not know where we are with january-february numbers. the fact is, things are getting better slowly. isas far as housing

concerned, people are trying to decide whether to wait because interest rates may go lower or they may go higher. it is not clear when the optimum time is to buy. keep in mind of the consumer is the real driver of the economy. if the consumer is going well, likely, itmore than will fuel the recovery. >> bob, is it enough to give the u.s. economy momentum at this point? along,economy is coming about consistent with a 2.5, three percent real gdp growth. just part ofis that gradual recovery we are seeing. it is holding on. >> is it enough at this point, david, to say it has regained its position as one of the legs of this economy? >> it is better to gain 150,000 jobs a month them lose them.

we have been in gradual gains. you have a lot of impediments all over the credit system -- fedcoin instead of bitcoin. [laughter] but it ising slowly, still healing. you still have 20 million american households whose incomes are either underemployment or -- >> until we see a pickup in investment and we are not going to see the accelerated effects for job growth, and i think that investment is still being riven by uncertainty as policy is concerned. >> david mentioned that there is job growth and income growth. if income growth does not rise, does that cancel out the job gains? >> there are people earning income that were not generating it before, so that is a positive, at least as far as the general public is concerned.

>> all right. let's take a quick break. we will be back with bob eisenbeis and david kotok. we will have more about the fed and we will look at russia and the ukraine and the crisis it is having on the global economy. we will be back in two minutes. ♪

>> welcome back. we continue our conversation with "bottom line -- david kotok and bob eisenbeis. gentlemen, thank you for staying. assetd continuing its purchases. that was not unexpected. is this going to be the way things go between now and the end of this year? >> steady as she goes. i think you will be looking at 10 billion announced in advance after every meeting and the termination in november or their

mouths when the whole process can be done. it's just going to happen. event.kets have priced >> david, at the end of the year, how will the markets react? are on theets expectation of the fed. the fed could disappoint markets. if they do not change the policy, they are into this gradual recovery and it is not exciting. everybody wants excitement, especially after the last year in the market. the boom in the stock market. they are not going to get that. they are going to get the slow adjustment. and the fed wants that. it wants gradualism. it does not want to shop the market like it did when it pulled the plug on the other two times it had qe. >> fed chairman janet yellen said the fed might raise short-term interest rates "in around six months." what happened to the fed not

relying on any single economic indicator or timeframe? >> i think they got trapped by the fact that the unemployment rate improved faster than they thought it would. at they had to reconsider what they were going to do. do not think-- i she really meant six months. if you look at the charts they put out, that is more consistent probablyte change, october, november, when the meeting is scheduled. do theye charts help or just confuse people? >> i do not think they confuse people thing -- confuse people. i think people just did not understand fully what were docs and what were people. [laughter] >> you wrote about the composition of the fomc. >> yellow dots. >> the ones at the bottom were the governors. the ones who control the actual

vote right now. >> the international investors are waiting this data against the backdrop of what is going on in russia, ukraine, crimea. how would you describe the economic politics. -- politics? is a contained area and contained event. we don't like it. but it doesn't have major implications if it remains contained. if you see tanks and helicopters and troops, it is a different game. russia does not want to go to war. europe does not want to go to war. the united states does not want to go to war. we have a geopolitical game. we have a visa war where someone says, we won't let you in and someone else says we won't let you in, but that is it. aret seems like the markets ignoring the threat of russian expansionism at this point. >> it seems that way, but i

think they are more confident it will not explode in the next couple of days. david summarized it. say it did notst happen. it is a foregone destiny. putin has the power, the ability. he proved an crimea he does not care what we think. that is his structure. does he invade central europe? no, i don't think so. biggest effect is what it will do to the european energy strategy. >> is it about energy? >> i think it is a lever. that is where their power comes from. at this point europe has to say, do we want to run that risk, and i think they will sing yet. i want that energy available. >> if you look at georgia, chechnya, were they caught asleep at the wheel? >> it looks like, because it is a pattern. he is following the same pattern is georgia.

which means there might be a move on a couple provinces in eastern ukraine. that is possible. >> bob, before we go, we have about a minute left. i have to ask you about the worldwide consequences. is it about russian crude and nat gas? >> i think it is. that is the main source of revenue, the main source of support for your economy. if that gets choked off a little bit, that will affect the price. we have seen already, they are shifting a lot of supply to china. i think that is where you will see the link there. there wasck thing -- a flap about the new york fed and the balance with the new york fed and you were familiar with that. the fast word on the russian balances at the new york fed or what they did or did not do. we haveight, gentlemen, to leave it there. unfortunately we are out of time. this has been great. thanks. .ob eisenbeis and david kotok

gentlemen, it's always a pleasure. another check on the market movers on the other side of the break. ♪

>> at the latest headlines at the top of the hour on bloomberg radio and streaming on your tablet and bloomberg.com. that does it for this edition of "bottom line" on bloomberg television. i'm mark crumpton new york. thanks for joining us. on the markets is next. >> we are coming up on 56th of

the hour. i am julie hyman. let's get you caught up on where stocks are trading. we are off the highs. the nasdaq just barely -- we did have mixed economic data this morning contributing to that. in terms of individual stocks, we're watching nio marin. the pharmaceutical company has been cut, it's rating was cut -- its rating was cut. however goldman did keep its 84 dollar price target, which is above where the stock is trading now. that level happens to be the average price target by analysts survived by bloomberg. also abby. this rug maker being sued by gilead. -- drug maker being sued by gilead. broadly is thee focus of the sector report today. i object is teetering on correction.

off thisarly 14% year's five. i am joined i michael reagan. this is a group that had done incredibly well. all of a sudden, people seem to be debating a bubble. was there some sort of catalyst? what changed? >> the started at the end of february, beginning of march. that is where the stock started to weaken, not just tesla,eutical, but netflix, google. the etf was down six percent from the end of february through last thursday. then lawmakers and house democrat in washington added fuel to the fire by questioning gilead about its hepatitis c costs $84,000 and sending them a letter and saying, why does this cost them much? spooked out the biotech investors. little changed today, but really a sharp correction.

>> and gilead is a relatively large company. for some of the small companies that make expensive drugs like that, you are seeing even more of an outsized reaction. >> oh, multiple stocks down 20%, 30%, 40% since that letter came out on ready. it is very complicated space to invest in. even if you look at the analyst who cover these stocks. we are used to seeing cfa after an analyst name. for the stocks, you see him d, phd. from were massive inflows the beginning of march. the most since 2000 eight. a lot of analysts say the general money -- the most since 2008. a lot of analysts a the generalist money -- the generalist money sees the weakening in these momentum stocks. they see the scrutiny from

washington. >> very, very quickly, what is the verdict? bubble or no double from what you're hearing? >> a lot of people think it is a bubble. josh grinnell had a piece earlier in the week saying without a doubt it is a bubble. a lot of industry experts are saying not so fast. there are a lot of drugs in the pipeline. much. thanks so interesting. we will continue to track the stocks and see what the market's verdict is, i guess. thanks so much, michael. we will be on the markets in 30 minutes. "street smart" starts next. ♪ . . .

>> consumers are confident and markets are as well. consumer confidence hits a six-year high. street smart starts now. welcome to the most important hour of the session. 15 minutes to go until the closing bell. coming up, the data collection deal for the nsa. mike rogers from