ise case for thetech bulls - all about sales growth? ambergs is " surveillance." it is thursday, may 1. -- it is "bloomberg surveillance." we need to get to a brief this morning. brief presented briefly. the world,ta around u.k. manufacturing is stronger than expected. in the u.s., 8:30 a.m. we got the week list jobless claims. they correlate with the s&p 500. at 9:45 a.m., we've got consumer thatrt and u.s. pmi and 10:00, we've got the ism. >> why do you look at vehicle sales? the u.s. proxy on consumer. last month, we saw the most in

seven years. can we keep that up? >> we will talk about this within the hour. you've got earnings to going on? conoco phillips, to mobile and mastercard are before the bell and linked in is coming out after the bell. >> let's do a data check. a strange day. i was surprised by a record high yesterday. it caught me off guard as you just continue to advance and the 10 year yield is higher. there was strange economic information yesterday including the multi-look at the first quarter. vxx shows a lack of volatility in the market. the dow is at 16,000. we have scoured the front pages3 .

here is olivia's are in, back from bali? yes, ukraine lost control of the eastern part of the country. progress and militants occupied more government buildings there and have occupied these buildings and proclaim themselves rulers of the people's republic. this comes as the u.s. and eu continue to accuse russia of fomenting the progress that milt -- the pro-russia military and the country. >> it just won't go away. the concern is that the money is going in the pockets of russia to pay off the ukraine gas bill. 1/3 of theolds about ukrainian debt in the next two years of any imf money you could say is going back to russia. in the same way that the aig bailout went to goldman sachs.

dow begins the day at a new record high, 16,000 500 81 and the s&p 500 within seven points of a record. this happens on a day when the government reports the economy has basically stalled out. gdp grew in the first quarter by as the one percent weather was blamed and they talk about spending more on heating and the cost of obamacare kept gdp from being negative. >> where is the gloom crew. the marketsle think are too complacent and it looks put or aad a greenspan bernanke put. >> i am all in cash and i have levers all my cash. are burning cash. coke is signaling it could

change the stock deal. warren buffett said he does not like the plan but would not vote against it out of loyalty to cope and now coke says the plan offers maximum flexibility for future adjustments. he does not like plans that are connected to stock options. >> we will look at this as betty liu focuses on it today. it's smoke and mirrors to me. i don't get with the beverage companies are doing. the total u.s. soft drink sales since 2008 have fallen 17.8%. >> where is your juice cleanse? i'm doing a juice cleanse. we used to do a coke classic clans. -- clans. and now we are doing blueprint -- >> should i go get my juice? >> no, you can have the rest of

mine. [laughter] >> those of the front page stories. we've got a wonderful guest us withew maddis joins his resilience optimism. julia emanuelwith at ubs investment bank. i was thunderstruck yesterday by what the equity markets did. i did not realize -- is this a surreptitious equity market? why are we creeping up and we are not noticing it? >> it's because everyone is looking at it within the context of 2013. you had this roaring market up almost 30% and what we have seen so far this year is moderate by most standards. it's despite the fact that we

are at new highs but if you look at the challenges, you had this terrible weather in the first quarter holding back gdp as we know, you had emerging markets concerned with the beginnings of the taper, you had russia and the story that won't go away, you have continuing concerns about chinese growth prospects. the markets are really taking it in stride. slope matters. this is the great boom through the 1980's and 1990's and then we break out. that thepredicted markets would predict what would be a good economy. toant you to state right now the worrywarts out there why they don't need to worry about 0 .1% gdp. >> rising rates will stimulate the economy and not weaken the economy. the threat of rising rates is what is helping boost the economy. we have to worry about if the fed decides they are too scared

to move forward and they begin to signal that. all of a setting, all the reasons for people to try to boost growth instead of buybacks and dividends in the equity market goes away. rising rates are what's going to drive that transition. >> that's completely the opposite. risingn understand rates as a reflection of growth in the economy. why rising rates themselves actually help the economy. >> in a short rate environment, everyone tries to get their money back as quickly as possible because they are assuming that tomorrow they will get a better rate on their investment. for stocks, that drives dividends and buybacks. when rates begin to rise, you are in competition so you have fixede a choice between a income yield or growth. growth then gets rewarded. think of buybacks as a form of corporateqe.

as the fed is tapering it's fun purchases, we ask -- its bond purchases, we expect the rising rate purchases where there will be more confidence and we see that hold up, it's a situation where cash will be redeployed into revenue generating ideas like and m&a. >> it's a substitution effect? >> is this microeconomics thursday? >> you are a princeton guy. >> the micro becomes the macro. >> this is a serious point. >> what individual companies are doing and the motivations for doing it are what drives the economy. buybacks have been happening because they get paid a majority you do buybacks because it will boost your stock. >> they are also doing it because they are not seeing any topline growth. the fed said yesterday that

consumer demand was one of the few bright spots in the economy. at what point do we have to get concerned that we are not seeing the topline growth? the sales are not coming in. ofwe go back to this notion the fed being a driver of increased animal spirits. we are seeing it withcapex picking up and m&a. topline is going to come in even after this first corner abomination of gdp at about two point five percent. it's not great but not awful. andid the fed miss opportunity to get out in front of your optimism on the economy? >> no, despite all the talking around it, the fed has never really wavered from a 2015 hike cycle. they have been talking about a particular five years. anybody who expects them to push that back into 2016 will be sorely disappointed. they talked about before they got the 6.5% unemployment and there's nothing on their radar

screen. the fact they did not change the statement of all besides a tepid tells you theyit are on autopilot for the tapering and are probably on autopilot for the rate hike. >> as we go into jobs day tomorrow, let's get company news. >> let's start with sony which has posted a quarterly loss that was 18% larger than the company had forecast. that has been hurt by a slumping computer and consumer electronics market and it's trying to revive its fortunes with job cuts and new game consoles and smartphones. >> that was quick. --i will give you a longer 1 there is a blockbuster deal in the pay tv industry. directv might be bought. no one is commenting and directv is the second-biggest pay-tv operator. abercrombie & fitch as given into an activist investor.

forged a partner and engaged for independent directors to its board. they had four straight quarters of losses. >> i get my haircut on the 11th floor of that building. >> they used to sell pith helmets. you could get outfitted for real safari. abercrombie and kent used to run safaris. i do l.l. bean when i go skeet shooting. >> that's today's company news. >> coming up, another megamerger in the works -- sprint plans a bid for tea mobile and we will discuss this on "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire.

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>> good morning, everyone. if users are up seven. this morning all day, betty liu goes inside pepsi. it starts with her exclusive interview with their chief executive officer. that's today at 8:00 a.m. eastern time. a real look at pepsi. adam johnson has done good work on that as well. this is "bloomberg surveillance." johnson decided to join us this morning after torrential rain in new york. olivia sterns slept here last night. it was amazing rain. it was like biblical. i saw russell crowe go down

central park with an arc. >> russellkrohl? >> he's in the movie. he was going down central park. >> another megamerger could be in the works. sprint which is 80% owned by softbank is planning to move forward with the bid for tea mobile u.s. they would make debt arrangements for that offer. this is a bloomberg exclusive story and they have met with six banks, a formal bid could be announced in june or july. the big question for this deal is the concern that regulators could hold it up. the011, regulators blocked at&t effort to acquire tea mobile. everybody thought that would go through but now it looks like softbank is trying to push this through and piggyback on the conquest -- comcast acquisition of time warner. >> the stock moved.

this is a surprise. tea mobile rose 11%. on this news. >> this is tea mobile u.s. and has nothing to do with deutsche telekom. men -- of 67% of two t mobile overall. >> there are four companies involved. sprint is 80% owned by softbank. t mobile is 67% owned by germany's deutsche telekom. that's why it is so confusing. >> is the government involved? >> absolutely, you have to get this passed the fcc and the department of justice. is the fourth-largest carrier in the u.s. only block the at&t deal with everyone thought would go through. >> $23 billion is the valuation? julian emmanuelle is with us from ubs. the fed has expressed

confidence that we can grow going forward given the fact that we are continuing to taper. now we are seeing corporate executives express the same confidence in m&a. a month ago, we predicted it could grow by 17% this year. now, the numbers look like it's closer to 40%. >> will we see nominal gdp? you guys say the word confidence too much. that's what this is about. >> we were just talking about capex. m&a is just buying someone else's capital stock. you will get rewarded for that in the future. i bring it back to getting off the zero rate environment. i think zero rate of the most corrosive thing that anyone has ever seen and if you want proof

look at japan. >> will the regulators approve this? >> that's out of my purview. deal? you banking the weeds, getting into the there is an index where they look at market share and that problem is that index is really high. there is serious concentration already. >> you are in the microworld today. >> i can't keep up with you. >> micro economics and you've got power equations with adam johnson this morning which means i need more juice. >> the jews is making me smarter. -- the juice is making me smarter. juicing because i don't want to substitute juice for meals. i will have jews in addition to meals. i am not replacing my meals print -- i will have jews in

addition to meals. >> everyone at work is doing that. you are number two and you are not an hour into your day. the viewers can see it but i think you look dewy. >> dewy? >> i think that is creative destruction. >> olivia sterns talking about a dewy eyed tom keene. the newest edition of "bloomberg businessweek" is out today and you can download the app for free on your iphone or android. the silicon valley conspiracy is the cover story. we will speak with the author of that story in the next hour. we will be right back. ♪

>> good morning, everyone. it's our twitter question of the day -- sir martin sorrell will join us in the next hour. >> he would say adverts. >> that's the london way to say. -- she justent spent six weeks in london and she is talking with the british accent. olivia sterns and jon erlichman are with us. -- with adam johnson. >> president obama is blaming blocking theor minimum wage. president accused republicans of pushing down on a top-down

policy that benefits mostly the wealthy. in ukraine, pro-russian militants are stepping up their attacks and have seized more government buildings. russia is being accused of stirring up trouble in ukraine. oprah winfrey has emerged as a potential bidder for the l.a. clippers. teama joint bid for the with the oracle ceo larry ellison and former music executive david geffen. >> the price is going up. >> that's the irony. those are your top headlines. >> we've got a morning must read -- this comes from leon panetta.

he says the world is just as dangerous and maybe more so. >> has the debate going away about getting back to 1938? that was shocking that headline, the idea of bringing the budget back to 1938. >> that's incredible. >> that's the concern. wasard haas yesterday talking about how our policy is completely unfocused and we are sending the wrong messages is because we don't know what the message is we want to send and it weakens the military. >> he was advocating arming the ukraine.

he wants us to send more military assistance and to ukraine. >> as does john mccain. hour, we will hear a briefing about the travels of john kerry. also coming up, u.s. gdp is slowing to its weakest pace in five years and we will discuss why next. "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire. ♪

>> good morning, everyone. adam johnson and olivia sterns are with me. scarlet fu is off today. i think it is the rain. we got biblical rain.

let's do a data check. i'm looking at a ruble that is stronger. this is equities driving higher in the united states and crude oil is under $100 per barrel. we've got gainers and losers as well. with are going to start pepco, the big winner yesterday. up 17.4%. it's the biggest single die on record. exelon is buying pepco as we discussed yesterday. dreamworks fell nine percent, the biggest drop since february. " mr. peabody and sherman" failed to attract kids to the theaters. >> it did not get there. >> david geffen of dreamworks may be buying the clippers so he needs that money. >> didn't they have a song? >> it's a good movie, two.

>> how many times have you seen "frozen." >> coming up on i've got two little girls. addresses?ave the >> i don't. we have a little barbie dolls. >> they are $1600 on ebay. >> i thought you bought one. >> they don't make them in my size. as the dow jones industrial average guys to new highs, the first quarter economy was flat. there is a broad assumption of better times ahead and drew latus and julian emanuek suggest go long the u.s. economy. on domesticnote final sales is critical. what is that? >> domestic final sales is what u.s. producers are selling to u.s. individuals print when you look at that number, it was nowhere near as bad as the headline.

it was largely what we were expecting. the weakness yesterday came from trades and inventories and we know because of the energy revolution in the united states that the trade numbers will get at her throughout the year. inventory to sales ratios are near all-time lows and inventories will not drop forever. we think it was a pricing effect. you take a giant stock of goods and you change the rise and then you look at the delta on that which is the change and it's easy to get big swings. >> was that a hat trick? >> i'm trying to figure it out. he accused me of being lost in microeconomics. dahlou brought up the herfen index. i defy anyone to tell me what that is. i know what it is, unfortunately. >> that is square market share. part of the morning must read -- we took a poll this morning at our meeting.

, 11% oftrue 18-29-year-olds expect to retire before age 55. these people are in for a surprise. within the optimism of ubs, why are we so reticent about equities? don't equities to better over the long haul? >> they do and we look at it as healthy skepticism. this is the wall of worry we are climbing. if you look at the headlines right now, people are saying to sell in may and go away. we don't think that's necessarily the case. >> the data might beg to differ. you the past five years, can take an average of the s&p 500 and it declined 1.8%. >> if you look at the long haul, that tends to be the case.

2014 is shaping up as a different kind of your. january is normally very strong and we had a week january. february 10 to be soft and we had a good february. we think the elements are in place. this is stranger than fiction. nature ofe bizarro it, is because we don't know where it's going? >> i have never seen the consensus so strong for a strong second half of the year. everyone says we have been through this before but everything is going toward a better second half of the year. >> can we get to four percent real gdp? >> i don't think so but i don't think you need to. one of the things we forget and one thing that has helped us -- it is allowing baby boomers to actually choose to retire. baby boomers are saying we are going to stay in the labor market forever but all of a

sudden, the equity market recover and the housing market recovered and may now have the money they thought they had and they are leaving. for the making room 18-29 years old. >> and making money. sectors that tend to do the best, health care consistently is up 3.2% on average for the past 25 years over the summer months. we can debate whether or not -- >> but they rocketed last year. >> correct, do you still ride that? >> we certainly do. it's one of the sectors that we prefer. both earnings momentum and revenue, you getting it and health care. it's the affordable care act that is providing some of the tailwind. >> let's jump forward. we mentioned to sell in may and go away -- don't we have an election coming up?

is this going to get in the way of either of your world? what does this election due to the economy? more about elections overseas. european parliamentary elections is not on anyone's radar and i could be a problem. show thath the polls it's a 50-50 call, no one seems to think that's an important issue. go to our london correspondent, olivia sterns. should they be george go to edinburgh next after new zealand? >> that would be a good idea. >> i can just see baby george out in the backyard. >> think of the conversation. scotland for the first time since 1647 -- >> you learned that from "game of thrones." >> if i got the date wrong, please tweet me. scotland could leave the u.k.?

>> this is unlikely. everybody talks about it in the u.k. all the economic analyses suggest that scotland independent of britain could not survive. >> one more serious question -- we have had equity markets for years in a row, how tired is this bull market. ? >> it is by no means a startled but it is getting out there either in length or person to of gains. we don't think that's an issue. this year is all about the transition away from the fed is being the driver of higher confidence and corporate profitability and the growing economy. >> thank you both so much for being with us. we say good morning in scotland. in and have a discussion with olivia sterns. >> please call in if you are listening.

coming up, checking the apple growth where sales surged and growth since then has tapered off. it turns out another big company is following a similar trajectory. that is next on "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire. ♪

>> good morning, everyone. we have adam johnson olivia sterns. let's look at some top headlines. >> the u.s. is signaling russia that any move against nato countries could be risky. nato jets started flying air patrols in estonia and lot the a and o when it to discourage any thoughts vladimir putin has about extending the russian reach beyond ukraine. at home, new jersey governor chris christie should be wearing a set of wings on his jacket. he is the state-owned helicopter fleet 106 times last year which is more than four times as much as he did in his first year of office. he took office promising to tear up the state credit card. a government study says there is no reason to say who rate for hollywood. california's $100 million per year subsidy for the film and tv industry does not pay for itself

and it warms that adding to the subsidy may not stop job losses to other regions. those are your top headlines. --here is a tweet i usually do the winston churchill breakfast. >> and half a tomato on the broiler. this one is a lot sweeter. i thought you were going to mention the mickey mantle breakfast. that was a vodka. that's a great expression like a naughty little secret. >> vodka and weeds. >> i've got apple and facebook. this chart shows that apple revenue year-over-year growth since the first quarter of 2010, it has surged peaking at 83% in the second quarter of 2011 and

it turns out that facebook's growth since the first quarter of 2013 looks strikingly similar. revenue climbed 72% during the first quarter from 63% three months earlier. that's a fourth increase in a row. can it sustain that? this is revenue growth of the story behind facebook is they are monetizing and driving that mobile advertising. think about subscriber growth. that is petering out. >> we will talk to martin sorrell about this in the next hour. with theody on board conversation of tech, everybody believes the zeitgeist. >> when we go back and look at the other episode of 2000, you really had all of technology incredibly overvalued. when that bubble burst now you are only seeing pockets

of what we call extreme valuation. a lot of technology is more properly and rationally valued. >> your 401(k) is like 42% in the last few weeks. >> the momentum stocks have lost their momentum. >> is apple a value stock? >> i think to some it is of value and to some there is still an element of growth. and growing company requires moving the needle even more. i think you see what you want to see in a stock like that. >> how are you modeling corporate profits? is it up five percent? i hand that ought julian because i am an economist. >> this is how the street work. you have a macro view. are we only doing micro-this hour? if you go to a pro to get a plug-in number, that's what

works for you. team and our team are tightly linked and we get together once a week and hash things out. >> we met yesterday afternoon. >> there is such a thing as a free lunch if the economist is not buying. >> i like that. >> my day of a one-hour juice cleanse and they are talking pizza? >> what did you guys talk about? >> we talked about the fact that you look at the first four months and investors are reasonably frustrated. it completely makes sense when you look at all these things that came in. gdp because of the weather, russia, china, etc but when you look at it, the market is taking it in stride. you have had this rotation that hurts your 401(k) but on the other hand, if you are a utility investor, you love the last four months. >> and the dow was at a record high. our number three photo today

is in pensacola, florida. but truck is stuck in the middle of a flooded neighborhood. it's the same storm system that brought the southern hernandez and more than two feet of water over the florida panhandle. the photo speaks for themselves. >> our number two photo -- ukrainian soldiers guard roadblocks along the highway in eastern ukraine. it is inflaming tensions. things changed in the last 48 hours? >> rapidly, we have the acting president of the ukraine -- of ukraine saying that they have lost control of eastern part of the country. times" headline is that ukraine loses control of the east. do we have another one? >> our number one photo in

a metro airchigan, act he cast their vote for parliament in iraq. >> look at that, absentee voting.

>> the top five percent of content on youtube for 14 different areas. cisco plans to invest another $150 million in so-called disruptive startups. the company's investment unit will use the money for dances and projects like data storage. also in web connected devices like home appliances. the bid today covered t-mobile according to people with knowledge of the situation. sprint met last month with -- to get financing in place. the third largest wireless

carrier and t-mobile is the fourth. there are a lot of regulatory concerns. everybody's piling on. everybody is in the cloud. everybody is in mobile ads. am i right? winners -- who are the winners? it might be amazon. 75%-80% of all small businesses on the cloud are using amazon servers. >> are we on the cloud? >> bloomberg is in the cloud. for now, we are distinctly not on the cloud. we are on the ground talking about pepsico which plans to cut its cost by 5 billion dollars over five years. that's a lot of money. activist investor -- argues profit ability lags coke and snapple.

a team of 140 analyst to provide global research and data on 125 industries and all major sectors. kenneth, thanks for joining us. it's only grown happen as fast. why would they want to own pepsi in the first place? >> what attracts them in the first place is what they see as a great portfolio of brands. 's frustration is it's under leveraging them when it is generating -- >> soft drink sales have fallen 17% since 2008 for the u.s. as a whole. thank you for that data. how is pepsi responding? >> pepsico is really focusing on two things. first, to grow the top line better. it is trying to do that in the face of waning demand for soft rings as you are suggesting here.

it is trying to do that with coming up with better sweeteners. pepsi next is targeting as the next best thing and cola because it has far fewer calories. it uses non-artificial sweeteners. the next is really to get better margins as they assimilate the big bottling operations that they took on a few years ago. it's a combination of those two strategies that will keep the activists at bay. >> what he's really pushing for loss from the beverage business. has said that she refuses to split the company. would that move makes sense? >> it could make sense from a near-term perspective. the business is a gem. it's a great food business. it's growing and has high margins. no doubt it would do very well as a stand-alone. patient investors would say, there really is some merit to

the power of one strategy that pepsico is pursuing shar. if they can come through the cost-cutting numbers they're suggesting -- >> you know the chart, folks. here is pepsi cola. i know it's a glass of water for you and you never have any pepsi. here's a chart. they have had very good shareholder return. why are they slashing expenses? >> these bottling operations are so little margin. and disparate in the way they have done things in the past. pepsi is saying, maybe some central planning of these bottlers is due. coke is basically pursuing the same strategy. take them on, align the better, -- there's a lot of redundant operations going on. that's what is going to be targeted. if they can do that, they have the best of both worlds. a high-margin operation and

a vertical operation. they can concentrate to selling it. >> thank you very much for joining us. lots to talk about. we appreciate all the work that you do for the team at bloomberg industries. thanks, ken. make sure you watch bloomberg television all day. betty liu is going to go inside pepsi. it all starts with exclusive interview with the ceo today at 8:00. drew madison of ubs. thank you for coming by today. 0.1%. have i ever seen that? .1% and the dow was at a new high. >> how exciting is in? let's do our forex report. euro, unched. the ruble moves as it looks that eastern ukraine is some way apart from kiev.

>> coming up in the next hour, the ceo will be our guest host for the 7:00 hour. this is bloomer surveillance on bloomberg tv. ♪

>> the east slips away from kiev

. this is the international monetary fund. it's left of ukraine. the dow surges to record highs as the american economy is flat on its back. and deceptioneit in silicon valley. good morning, everyone. this is bloomberg surveillance peer live from our world headquarters in new york. i'm tom keene. joining me, adam johnson and olivia sterns. scarlet fu is off today. our guest host for the hour, certai sir martin sorrell. you are here representing any number of may days. we have a morning brief this money. adam johnson has a forest. >> summit economic data around the world. u.k. manufacturing stronger. china manufacturing weaker than expected. economic data here in the u.s., we have a lot. bloomberg surveillance comfort index and the market u.s. manufacturing purchasing

managers index. 10:00, construction spending. all day, we are getting vehicle sales. exxon and conoco phillips and t-mobile and mastercard. after the bell, mastercard and linkedin. to push aheadning with the today cover t-mobile. this is according to people with knowledge of the situation. we met with six banks to get financing in place. there is also talk of a blockbuster deal in the pay-tv industry. at&t has approached directv about possibly buying the satellite-tv company. that is according to the wall street journal. nobody's commenting. the second-biggest pay-tv operator. abercrombie and fitch has given into an activist investor. they forged a truce with its investor and for independent

directors to its board. been revamping the company after four straight quarters of falling sales. adam johnson is not buying his hunting year they. but as today's company news. >> criminal is now civil. that is the distinction. zürich and paris confront criminal charges in new york for their credit suisse. this is a serious business. he is a chief financial officer of lehman brothers. what was your reaction to the article as you saw yesterday on the distinction of criminal charges versus civil charges for these two banks? >> don't play with matches. this is a major impact in terms of financial institutions. there is an assumption that we know how things are going to work out here. learned from bank of america's problems that these institutions are very complex and are literally bags of

contracts. we have no idea what those contracts are going to say. you bring criminal charges annual trigger something. >> i know there is a big difference between these two stories. critically, are there other stories like this for the american banks? are they next? >> let's hope not. will there be settlements? that's another issue. >> criminal or civil? >> deferred settlements come if that's the way we go. that is perfectly acceptable. a criminal charge is going to cause the clients to pull away. wildfire --off that let's hope that's the case here. cfo.nk of my days as the finding --ways

collateralize to . these unforeseen events can occur. books, theimed black long and thicker reports on banking. you amend pages in there because of what we have learned yesterday? buy, holdin to shift and sell? >> legal matters remain a great uncertainty in terms of -- which fundamentally allows the answer for any problems the bank is cost itself. those are interesting issues. it appears to us that the settlement cycle for litigation has been pushed way far off. typically, you settle litigation roughly 2.5 years after it

starts. we have not seen -- >> how long out are we? eight years? 10 years? put this ing to a frame of reference i can understand. if a stock drops below five dollars come institutional shareholders have to sell that stock. it in your world come if one of these banks were accused of criminal charges, would large have to stope wpb doing business with those banks? >> in many cases, the contracts would cause them to. if you have a criminal charge, you're not going to be dealing with them. if you have operating business, you will pull your operating business from them. thanks to the creditors -- my creditors again --. >> you advise all sorts of banking franchises with wpp and do privately as well.

a question for brad. what question would you ask the banking expert this morning? >> i come back to this from two points. foreign banks. will this apply to domestic banks? is this negotiation or a new twist? >> is a negotiation? yes, it is. that led to my first comment about the play with matches. constant issue a on a bank by making those statements regarding criminal charges against you. clients begin to pullback and anticipation -- in anticipation of events. what youoes back to and i talked about yesterday. is this about new york? or is it really about washington? this has become a political issue between nations. the card and ask hollande to scale back

from old charges? >> you would get your central-bank because they have to be worried about the unforeseen events here. the justice department can do a bit of drama. central banks are in a different -- >> it tightens the pressure on the commercial banks. restricting their areas of operation, increasing capital requirements. it is intensifying the pressure in terms of the operation. >> you're absolutely right. i was up at harvard business school lecturing and we were talking about the limited constraints that banks operate with. i was describing it as a fenced field. one of the students said, no, it's not a fenced field. it is like dr. who.

you can barely turn around. hsbc was in a similar situation and they skipped the criminal charges. if you actually do get criminal charges, is that a death sentence for the bank? >> we really don't know. that is the uncertainty on something like this. have seen arthur andersen and that should be a lesson here. >> and enron. that?e you involved with >> with arthur andersen? many years ago. before they split. >> remind me, brad. case and theal clients pulled away. once they pulled away, there was nothing. if you think of a commercial bank and a foreign bank that dollars, u.s. they have plenty of euro funding. essentially, you could end up

with -- >> this is key here. slow down and describe what you just said. what do you mean by dollar funding? york.re in new what do you mean by dollar funding? the balanceok at sheets, you will find that a very large portion of their asset base is dollar-denominated. they have euro deposits, but they are relying on wholesale funding for a portion of that balance sheet. the assets they have. they need confidence in the marketplace in order to go out there and borrow. corporate treasurer's are simply not paced to take risk. if we see any signs -- the market is looking at this and saying, this is drama on the part of the justice department. -- i had aon this

partner at sure when sterling who i once asked, what should we do about dealing with a regulator? her comment was perfect. , problem. >> search warrant sorrell will be with us for the entire hour. we will speak about media and adverts. what kind of adverts generate sales? we need to hear from you. >> we will also be discussing ukraine. this is "bloomberg surveillance." ♪

>> good morning, everyone. this matters now. our guest host, certai sir martin sorrell. it powers the companies. they have to turn to people like the messageo get when there is no message or they have to make up the message. you're involved in this this morning. who do you represent? >> we are involved with a number of situations going on. situations, we

are involved in three of them. from a cloud point of view, we are involved in all of them. both.k with >> how do you control message in the day of digital, twitter and all of the other damaging -- >> you treated as you would a crisis or a political campaign. from the time that the curtain rises to melissa in the case of astrazeneca from early monday morning when pfizer was asked to campaignit's a 24/7 until you get that inked on may 27. for astrazeneca. you have to treat it as a 24 7 -- everything else within the company is subsidiary to that situation. ings is thatig than

big companies tend to be ruled by constraints. that makes them very flexible. the biggest demand in these situations is flexibility and ability to respond quickly because being online all the time -- >> you talk about response. the wall street journal put it brilliantly. they have an audience with the french government. you are on the gulfstream. what is your device to the ceo who has to go across the pond and speak to a nation driven with politics? >> when you go across the pond, therein lies the problem. you have to demonstrate that you have the interest of the jurisdiction we're talking about at heart. same thing applies in all the als you're talking about. the target is concerned about employment and longevity of intellectual property. concerned about whether it's the

takeover of a national treasurer and of the government is protecting it. all of these issues are very important of the context of price. always very important. it's a media race. some of these deals go through inversion. you have to modify and moderate the impact. >> coming up, the bloomberg business week. scandal in silicon valley. ♪

>> good morning, everyone. day. betty liu goes inside pepsi. the interview with the chief executive officer. a lot to talk about there. some real challenges for them. this is "bloomberg surveillance." with me, adam johnson and olivia

sterns. our guest host, a perfect time to talk to sir martin sorrell. does he know i'm juicing this morning? iced?ve you ever ju >> i went into the refrigerator this morning and it was gazing at me. >> we're juice cleansing this morning. that will be a one-day affair. president obama is blaming republicans for blocking attempts to raise the minimum wage. supporters only had 54 of the 60 votes they needed. --accused republicans of pro-russian militants are stepping up their attacks. they see more government buildings in the eastern part of the country -- seized more government buildings in the

eastern part of the country. as a winfrey has emerged potential bidder for the los angeles clippers basket velti. she's discussing a potential bid with oracle's ceo. the league will try to force the clippers owner, don't sterling, to sell the team. >> the key word there is try to. i don't have a clear answer where that is right now. >> never before has an owner been banned entirely from the sport. >> or been forced to sell. >> you have people who have been declared not fit and proper. you have had that in formula one. you've had it in soccer in the u.k.. comments was making and had financial issues. >> i'm not sure not fit and proper is a concept that is really translated -- >> it's exactly the same thing.

you get banned from ownership. >> is there any recovery for these people? >> sometimes a finite time limit. in many cases, it's a long amount of time. i can run her one for life. >> sir martin sorrell will join us on manchester united. >> the government does not control the situation says the ukraine president. progression militants have seized buildings and kidnapped at least one election official. you have returned from traveling en thesen kerry. giv developments, what's his next move? >> he has been trying to get some negotiation going. that is why he went to geneva and talk to russia and ukraine at the time. the u.s. has said repeatedly that russia has done absolutely nothing to actually enforce that geneva pact.

the thing we're looking at right now is more sanctions coming from the west. what is the impact of the sanctions? we already saw that we had vladimir putin coming right out and putting it on the table saying i'm ready to retaliate if i need to. --t means >> you are the queen of background. what is the background we need to know right now? there has to be a background between us and germany and russia. there has to be a tipping point. >> nobody wants to say exactly what it is because they don't want to -- >> even off the record. >> background is strictly not even near the record. >> they don't want russia to walk right up to that line and not cross it. they want to play their cards close to their vest. logic tells us that if russia actually crosses the border, all bets are off. we're talking economic warfare. one investment institution sent me a note over the last week in saying 60% probability

of further military action in the next seven days. we are well into that. >> i'm not willing to put odds on it but i will say if i had investments in russia, i would be concerned about those. if i were one of the u.s. companies, i would also be concerned about sanctions coming forward. we know that the white house and the state department are briefing corporate officials and bondholders and institutional investors about the risk. >> you nailed this about the use of u.s. troops. the wall street journal that said that one of the reasons we need to not cut on military spending is because of ukraine. has john kerry been talking leaders?ess the white house and the state department have made extreme a clear to u.s. businesses that if they need to go forward with tougher sanctions, they are going to go

forward. we know businesses have been briefed to that effect. what we are talking about is people bracing for what is not only possible sanctions against banking and energy, but also bracing themselves for what putin might do. >> what about the split between western europe and the u.s.? split withinhe eastern europe. 28 countries within the eu and not all of them agree. some of them one more time for diplomacy and are worried about risked their own industries. >> critically, are u.s. companies like exxon willing to actually stand behind the sanctions and do what they need to do? >> what we have been told is everybody's going to enforce the sanctions. every company has said that they're going to abide by the law. even the european ones. >> french companies? >> i expect they will. they're hoping that there will

be retaliation. >> thank you for joining us today. >> coming up, conspiracies in silicon valley. the cover of this weeks bloomberg businessweek on newsstands and your tablet. ♪

>> good morning. bloomberg surveillance. i'm tom keene get with me, adam johnson and olivia sterns. olivia has company news this morning. >> boeing has cleared a big hurdle over the newest version of its long-range plan. the faa will allow the 777 to be

approved under wools that cover the current model certification. that's according to wall street drill. it is likely to reduce the number of changes boeing will have to make to the plane. tom'soversy over al decision to sell to general electric. the fight is not over yet. the ceo rejects accusations that the proposed sale is an act of national betrayal. warren buffett may win the war. he is coke's largest shareholder. he refrained from voting against the act last week. he criticizes afterwards saying the plan offers maximum flex ability to be changed in the future. thank you so much. good morning to all of you. yesterday, missed it it was a grinding dow jones industrial average. nobody would know it given the

various walls of worry out there. he has crumbled of those walls with his optimism. he is the chief investment strategist at bm oh. wonderful to catch up with you this morning. why should i acquire shares here this morning at a record high? >> we are in a bull market. the more people we talk to, the more we talk about that particular topic of being in a 15-20 bull market. that does not mean that bull markets go up straight every year. thehink we're approaching high here for the year. that being said, that does not mean that you should be averaging and are looking at .ifferent strategies that is where we are right now. we think the s&p 500 will hit a high of 1900 for the year. >> speaking of blind stares in disbelief, let me bring in my colleague, adam johnson. >> as tom and i contemplate what

to do with our cash, which we have been a leveraged cash -- >> your question. >> you mentioned strategies that do well in a fun environment. what should we be doing right now? >> it's interesting, most investors last year, especially the second half of the year, almost entirely left the dividend trade. not just talking appeal trade. we have been talking about this since the calamity of 2008. the dividend growth strategies or a burgeoning asset class. she baby boomer trying to bigger out -- trying to figure out how to get income. if they can get it from companies here in america that are growing the dividend, we also have the fortunate opportunity to do canadian strategies. the canadians have paid

dividends for a long time. they're way ahead of us here. we think there's still a lot of time for american companies to grow. so far, that has worked this year. >> we're seeing a shift from larger share buybacks to dividend growth. it is that an important distinction? >> it is. especially as this economy recovers and matures. you have the next wave of higher -- that hases caught a lot of investors by surprise. the natural progression is paying more dividends. the next big move is that cap x is going to come back and start spending money on companies. that will come once we start to see even stronger economic growth. it won't happen until we start to see more growth. >> the fact that emanates up 70% this year, what does that tell you about where we are?

>> we are not peaking, folks. spread outery through a lot of industries. -- they are very concentrated in growth areas, especially in the health care space. activities is a reflection of low gdp growth. these companies in a situation where to get growth, limit on cost reduction and look for deals to grow. >> thank you so much. the montréal canadiens versus boston bruins. >> we will discuss that overages. >> we're doing the juice cleanse for at least another 30 minutes. i'm having a churchill breakfast. quicken data check.

here we go. everything is flat with the exception of -- s&p futures are flat. >> good morning, everyone. it is "bloomberg sa surveillance." >> amazon fire tv. >> bloomberg radio plus. plus on-- bloomberg tv the ipad. >> we did charts on radio? how? >> it's a michael mckee secret. i'm tom keene. with me, adam johnson and olivia sterns. she has an important story this morning. allegations of collusion in silicon valley's boys club. up most elite employers ran

the white flag in a class-action lawsuit filed on behalf of of more than 64,000 programmers and engineers. the accused of the companies of conspiring not to raise one another's work forces. all in the interest of stifling competition and suppressing wages. paul wrote the story which is the cover for this week's issue of bloomberg businessweek. -- comingations about out of silicon valley. they have people riled up. walk us to the allegations. what is the conspiracy? >> the late steve jobs who was enjoying apple's resurgence was simultaneously very anxious about talent drain. said am i out and will totally throttle you if you try to recruit any of my programmers were engineers. he said this directly to google. they said, ok, we won't. then this bilateral agreement spread throughout silicon valley. you had a whole network of

agreements among the biggest companies in silicon valley, agree not to raid one another's work forces. do they think they can get away with this? extra near you an aspect of the corporate culture in silicon valley. to e-mailontinuing each other back and forth in dealing with these matters. as a matter of ceo policy. the general counsel were not on a lot of these calls. >> i go right to robert crandall. he has been a great friend. he was put in the timeout chair for doing this at american airlines. >> what happened at american airlines is nothing compared to the reach of what happens in silicon valley. >> even little wpp was sanctioned in the context. there was no agreement whatsoever. there was some exaggeration about how far it went. >> wpp was on someone's list. that is not disputed.

i have the memo on my desk where google says -- >> there was no agreement whatsoever. named as anot defendant. that is not a company am talking about this morning. >> this is important. was very important what we heard just there. >> the collusion was more blame to some people. of intel.om the ceo this is from his e-mail. .we have a handshake i would not like this known broadly." >> it shows you how explicit this was and how there was consciousness on the part of the ceos were involved in these agreements. what they were doing was not kosher. extruder a fact that even someone like the ceo of a major tech company would think he is concealing something as he is -- typing out any mail.

people still don't realize they're actually creating a record. >> it's all out there. >> exactly. >> on the cover of the wall street journal. >> you have done terrific work on gun research. now this. what is the price tag on this? 64,000 engineers? >> this is the ironic kicker here. how do they think they will get away with it? they kind of got away with it. in the end, when you take $324 million and divided for ways among these four gigantic companies, and comes out to 0.4% of the revenue just from the last order. >> can there be further litigation? >> i think this one is pretty much wrapped up. we are done for the moment. >> a few thousand dollars each those programmers. be sure to pick up bloomberg

businessweek. what kind of ads generate sales? tweet us. ♪

>> good morning, everyone.

we are in the middle of three days of reports on the american economy. the job economy as well. look for that -- claims this morning on the jobs report. get out to betty liu because we have a special show coming up inside the power of one strategy at pepsico. what are they creating to leverage beverages and snacks? let's get to betty. >> we will have an exclusive interview with the pepsico ceo. boomer television is going inside pepsi. now inside their research and innovation center. just outside of new york city. we are going to be speaking with her about pepsi for a new generation. a new generation of snacks and food and how they leverage the two to drive growth. around me right now is all the products that they have brought from around the world. we will be testing out some of

these products and i will tell you how they taste. we are going to be going inside the test kitchen at frito-lay. i went down to find out how they onto acken and waffles potato chip. it takes a lot more than what you think. we went down to the gatorade science center in florida to see how they are really tailoring gayer. -- tailoring gatorade to the athlete. how they made the formula even better for those who want to get healthier. we will be inside pepsi all day long. bettysure to tune in when goes inside pepsi. the coverage begins with those exclusive interviews at 8:00 a.m. >> morning movers right now. >> i have a mover for you. closed at 4.39.

its drug has enabled people to live 1.9 months longer. that's a very big deal. that is significant in the world of biotech. you can get that kind of result. it is highly technical, but people understand what's going on. >> have sprint planning to move forward with its bid for t-mobile u.s.. this could be another one of our big megamergers. ishares rising the premarket. t-mobile shares were up about 11% yesterday. a big deal here because it's going to get past the regulators. remember back in 2001, regulators blocked at&t's efforts to a choir t-mobile -- a choir t-mobile. the ceo is the leading candidate to run the combined company. >> and earnings edge to give you. we have plenty today.

bell, craft, expedia, opentable and linkedin. a lot of people will be looking at linkedin. tomorrow, we have cbs and berkshire hathaway. archer hathaway is interesting. >> what kind of ads generate sales? tweet us. we are here with sir martin sorrell. one of the biggest admin in the in thes -- ad men business. ♪

>> good morning, everyone. i'm tom keene. a busy morning. let's get right to company news. olivia sterns has it for us. >> google has unveiled new advertising tools for marketers on youtube. the new service is aimed at alleviating concerns that ads are not reaching the right people. the packages offer top five percent of content on youtube for 14 different areas. cisco plans to invest another $150 million in disruptive startups. the company's investment unit will be distributing money for data storage and web connected devices like home appliances. sony has posted a quarterly loss 18% larger than analysts had

forecast. hurt by slumping computer and electronic sales. sony is trying to revive itself with new smartphones and game consoles. >> sir martin sorrell is the chief executive officer of wpp, which barely describes impact. he will be riveted once in the .anel in davos we will talk media. facebook and twitter. we have to go to the most important moment we have seen in this 2014. when in doubt, leave the castle. baby george's trip was a total success. >> known as the republican slayer. >> give us a backstory. there is a wave in new zealand to move away from the commonwealth? >> not any longer. >> i thought it was going the other way. they were extremely welcoming. there has always been this republican feeling in new zealand and australia.

from thence commonwealth and separation. familyrips by the royal -- if you look back over history, the queen, prince charles, diana all went to australia. and had singular success. this has been the most successful so far. >> i just thought it was stunning. >> that's the thing about babies. this a surprise to the people of the united kingdom how successful this trip was? >> i think it was extremely well-managed. i have to say we were not involved. it was meant to be a -- they did an excellent job. it was beautifully handled. >> have you hugged baby george?

>> no. to the media and to twitter. of what we have noticed so much is this idea of everybody on board on facebook and google taking over your business. said -- googleys has gotten increasingly powerful and has five legs to it. desktop search, display, video with youtube, social and mobile. it is very powerful. it is arguably the world's most valuable company. facebook is getting traction. twitter may be less so. amazon in the background and ali baba coming. companies in e-commerce and social and mobile and video are becoming more powerful. the strongest by some

considerable distance is still google. roseugh facebook is making and that t,oo. look to china for a lot of the technological developments. think google is not in china. it is 70% of smartphone platforms on android. google has penetrated china in a very subtle way. germany, 20 million units. alibaba.oes to >> the price range is $185 billion? >> for alibaba. you said there were five components. you did not mention the six, which was consumer products. whether it's nest or driverless

cars. >> that's almost the sideline. poodles strategy is around intelligent search. refining search over the years. -- google's strategy is around intelligent search. and the the cinemas tourist attractions you should go to. that will get refined over the years. it is not a paradox that the interesting thing is every time you use google, it gets more powerful. it gets more intelligent. it is a self-fulfilling prophecy. you can argue there is a whoness school professor has made a big reputation by criticizing the effectiveness of google research. while he might be right today, he is no it is not going to be e case in the coming years. the biggest threat to google is not the size issue.

have never had such a big company with so few employees. the real issue is the regulation. >> let's switch cures here. here.tchgears are they still at the top of the food chain? has content remained king? o decision is going to be very important. >> will justice roberts be right on that>? >> i don't want to go there. that is equivocal decision. i thought you might have had the -- that is a critical decision. to content, online content is becoming more and more important. --erest only, it's interestingly, still a small share. if you look at the up fronts, the networks you referring to,

criticallyl important that. the retransmission fees are significant. >> that's a direct conduit to you. isn't it? the whole retransmission fee goes back to sir martin. >> we get a bit of it. not enough. >> it's time for today's agenda where we look at the stories shaping the day. >> mine is a strange story on the cover-up bloomberg news. not -- it's a strange thing. .ot in the zeitgeist i wonder where it will be by the end of the week. just the imagery of these progress and militants with the facemasks so that we can see their faces. are they actually russian soldiers or not? >> all the economic data coming

up, this thing is front and center. >> here's what's on my agenda. the auto sales throughout the and atm the automakers 9:00, the other component. we just learned there is going to be some sort of press conference held by ford. they will not yet tell us what the topic is. we can suspect perhaps that it's an official announcement about the new ceo. there was talk about it a couple of weeks ago. they have not told us what they will say. we have to wait until 9:00. >> may be ford will run the detroit red wings. >> how about the clippers? i'm looking ahead to jobs they peered we get initial first time on implement claims. we're expecting the number two fall two 320,000. the more important numbers the labor department's farm payrolls. 215,000 is the number we are looking at. ignore the headline number.

it's time now to answer out with the question of the day. we asked, what kinds of ads generate sales? necterts need to con with the zeitgeist at the moment. humor is the trigger." >> emotional. "ones with hidden rewards. but the fingers click on ads and find the reward codes." "civil asked that a direct and ads thatint -- civil are direct and to the point." >> there are many alternatives. some cheaper and some more effective. what we are more concerned about is the return on investment. >> greatly appreciated. sir martin sorrell with us from

wpp. >> make sure you watch bloomberg television all day. betty liu is going into pepsi here it is touch with her exquisite interview with the ceo. moments away. quickly get your cup of coffee and make sure you are watching that interview. we will be back tomorrow. ♪

>> good morning. it is thursday, may 1, and we are shaking things up, coming to you live from pepsico's innovation center in new york.

today i am taking you inside explore one of the biggest consumer brands in the world. how does pepsi combine the power of its beverage and snack products to drive growth, and what goes on behind the scenes? it is a lot more scientific than you think to give you the next great bag of chips for the big game. we will kick himself with -- an exclusive interview with chairman and ceo indra nooyi. and i will show you how gatorade is pushing hard to cater to athletes. we visited the florida research facility to find out what data they used to beef up their sports drink formula. endemol head to texas to find out how scientists and chefs work together to pack big flavors like chicken and waffles, how they pack them into the tiny chips. but first, pepsi by the numbers. pepsico is a global beverage and food powerhouse with 22