scarlet fu never throughout a college textbook and now they are worth a small fortune. "bloombergg, this is surveillance," wednesday, may 7. scarlet fu and adam johnson are joining me. >> i sold my textbook. what am i going to do with textbooks? >> let's get to our brief. >> overnight, german factory orders fell 2.8% which was more than expected. in the u.s., it 8:30 a.m. labor costs and labor productivity. worked and the hourly pay is not going up so you want to see productivity. consumer credit is at 3:00 in earnings before the bell, two companies of note -- allergan an d sotheby's. after the bell we have caesar's entered 10 meant and green

mountain coffee. janet yellen will be speaking at 10:00. she is addressing...? the joint economic committee and it's a big deal. everybody will hang on every word. nobody is really paying attention to this. that's usually when a bombshell gets dropped. it bears scrutiny this morning. it's been a steady range on the 10-year note. obama will travel to little rock and survey the storm damage in arkansas. he then moves on to los angeles where he has a fundraiser. >> let's do a data check. -1, the euro is above $1.39. the vxx is showing 13.80.

this is the 30 year bond. we will feature jeffrey dunlo gundlach and we will talk about low yields. beginning of the financial crisis and you can see the great moderation in the 10 year yield, down we go, we come up here and then the world is going to and end jim grant is happy and we are just rolling over again. do we go back down to two percent? >> it does look like a rollover. you have seen a real rollover in the spread between the two year and the 10 year. >> can we go over this in the 6:00 our? we will do spreads in the 6:00 our. aree will do spreads that

pluses and minus but not ratios, that is the compromise. >> let's save ourselves with the front page. we picked alibaba as our first front-page story and the filing could go public. it is the chinese e-commerce company set to be the amalgamation of amazon as well as google and ebay. it could have the biggest ipo ever in the u.s.. it may raise as much as $20 billion. some say $25 billion. >> they are only ipoing a portion? >> it would be the most viable internet company after value -- after google. alibaba has not said whether it will list on the new york stock exchange or the nasdaq or when. a lot of it will depend on market conditions. >> i'm fascinated by the overnight coverage on this. when is this going to go? will this be july 4? >> we don't know and it depends on market conditions.

twitter tumbled 18% yesterday because of the lockup period has expired and we have seen momentum stocks lose over the last couple of days. the story has to do with the grand cayman islands. it's a big debate. theill discuss this through hour. they areher words, domiciled in the grand cayman islands and domiciled in new york. -- but listed in new york. b.it's not a classic class >the next-door he has to do with their twitter question of the day. are you buying alibaba? you can tweet us. >> how can i buy it? wasn't that from the movie "aladdin?"" >> let's move onto her second front-page story -- fiat coming

out with a five-year plan to boost sales after merging with chrysler. first-quarter numbers were weaker than expected. fiat/chrysler met with reporters near detroit and talked about boosting deliveries and for chrysler to go public in the u.s.. hope that weincere achieve our goal by october 1. my chief financial officer to my right reminds me of all the concerns he has of making that deadline. i am incredibly respectful of the function and i listen to him and i say we are still going to try. he does not like that as an answer. the listing process involves clearance with the sec and once we clear those hurdles am a shareholders meeting for fiat and go ahead with the merger. >> it will depend on market conditions as well. -- third front-page story

disney is red hot with "frozen" sales. first-quarter profit is up 27% of and by "frozen" dvd and merchandise sales. 200 and $39 for the dress? >> i thought it was like $1500 for that dress. >> it's a major source of debate. "frozen" will now be a broadway show and part of the theme park. >> can you imagine the first meeting they had on this moving? >> those are our front-page stories. >> we have so much to cover. days and counting to what will be an election in ukraine. secretary john kerry has moved the laggards from pro-russian to russian elements. amoroso suggests bond

investing in 2014 requires a global view and redrawing of the bond map. we have a lot to talk about the let's talk about ukraine. are you brave enough to buy taper in the ukraine after the imf coming in? >> i think that would have been the right move. that is something we have been talking about to investors. if you are brave enough and you take all longer time horizon, at the mostlook risky and most miserable places. >> how does one of our viewers who does not have the access to jpmorgan acquire paper in ukraine, in venezuela and other problems spots? cinco de mayo is still with me, i cannot talk. >> i think it has to be done with different structures. there are so many different ways

to access market bonds. it is global currency and dollar denominated. >> this goes to what you read from jim grant? more of a bond investor and his legendary and says you have to i gas. it is trading at 2.5 earnings which is as cheap as anything. they still make a lot of money. >> it's incredibly tempting. russian stocksh there is that opportunity. of sanctions makes it difficult to pull that off. i want to say to investors not to give up on russia just yet. in to thoseou step cheap ideas? >> i think you step in when you start to see progress on the ground. you are not going to see that from listening to the policymakers. see that -- you only

listening to "bloomberg surveillance." >> exactly. >> we also have a member of the google team. he is currently the ceo at index. you are bringing us the silicon valley perspective. vladimir putin recently signed bloggers to register with russia. >> we are seeing an ever-increasing amount of governments realizing what the internet can do. i think in the near term there will be increasing restrictions. i believe over time, technology will win and people will find ways to communicate using the internet. >> did turkey open up twitter again? >> i don't know the answer. know prime minister erdogan did not want to do that two weeks ago. what is your take? i think people are seeing

what's possible with the internet but i believe people will be able to use encryption and other technology on individual basis to circumvent whatever governments may do. >> technology wins again over autocrats. continue our discussion on technology as well. we will do a lot on alibaba. yesterday, jeffrey gundelach spoke to me. he applies prodigious art with mass skills -- math skills into equities. whatis centered around central banks will do. is oneong as there dollar a bond buying through quantitative easing, one dollar, they will not raise short-term interest rates. it is a sequencing thing. interest rates have gone all the way down to its likely floor of zero c will not do that.

still thatinly true we are months, quarters, perhaps a couple of years away from the potential for short in term interest rates to drive -- to rise. >> it was a stunning 25 minutes with jeff gundlach. we talked about everything. we got into you tony and calculus. >> calculus. he is the investor of the year. >> i did not know that. >> more comments from him coming up. up, alibaba is pricing its pe -- filing for its ipo in the u.s.. we will discuss this throughout the next two hours. ♪

>> good morning, everyone. it is finally becoming may. >> and what a view off of the top of the bloomberg world headquarters. it's going to be 70 degrees today. >> i was going to run in the park yesterday and it was a little chilly. >> it's a beautiful wednesday jimcoming up later, armstrong, ceo and has taken some shots on aol and will be with betty liu at 9 a.m. good morning everyone. >> it is alibaba day because yesterday they filed to go public. it is the chinese e-commerce company that controls about 80% of the market in china. this could be the biggest ipo ever not based on the filing but

people familiar with the matter said the company could raise 15-20 $5 billion. bloomberg estimates that alibaba could have a market via of 150 ilion dollars making it the most valuable internet company. will other words, they only float a fraction of the company and the rest it will hold off. softbanking yahoo! and who are shareholders. let's get to leslie packer. picker.r -- most of the stuff we know about alibaba is based on reporting like the $20 billion offering. there is a 168 dollar market value. what did we learn from the filing about their operation? >> one thing that was interesting about the operation as we learned a lot about the risk factors and things they are focused on in terms of what could be materially adverse to their business. we learned about china's

influence on the company. we learned how big of a hand they have in their operations and what that means as a u.s. investor if you are investing in them, how the chinese government can impact those investments. registration?the chinaany does business in which is registered in the cayman islands and this listing in new york but hong kong would not list them because there were too many confusing parts and the dual share structure. why are u.s. regulators allowing this? >> a lot of people call this regulatory arbitrage in terms of filing in different places. they filed in the u.s. primarily because of their partnership structure which was important to them. as dual quite as severe class in terms of shareholder friendliness. awever, it does a court

substantial amount of power to a small group of individuals. in order to list in the u.s., if you are a chinese company in certain industries of which alibaba is one which includes internet companies, you need to interest variable structure. variable interest entity structure is critical. primeras a real nice written on this last night, the idea of the cayman islands. why is this different than most class a/ class b structures and why did hong kong say no to this deal? >> as an investor, you are not investing directly into alibaba. there is a middle entity in -- alibaba could lose its license to operate this variable interest entity.

as a u.s. investor, the money you have put into this company becomes essentially void. you have no recourse and getting it back. that is detailed in the risk factors in the prospectus and something an investor should be careful about. >> there is 27,000 words of risk factors. adequate independent oversight -- where is the oversight? you are the only one who has read this -- where is the oversight of what 12 people are doing with alibaba in china? >> in terms of the partnership? >> where is the oversight of their financials? i cannot find it. >> that's what's interesting. secou are familiar with the ban on accounting firms, they are audited by a hong kong auditor. they have a lot of business with

an affiliate in china which does their due diligence on their chinese operations. because that auditor has been make itit could difficult for them to get those audits in. in the filing, they did not include first-quarter numbers. ended arter would have little over a month ago. we do not see first-quarter auditing in the prospectus. >> thank you very much. mark finnigan is with us as well. you worked at google but this is not like the google share structure? i think it's similar in that we have a founder with some people surrounding him who has maintained a lot of control even after they go public. >> where is the audit capability on alibaba? >> the story is exciting because of what they have already accomplished.

before they represent about 80% of e-commerce in china which is incredible. and theynt to yale should put jonathan spence on the board. this is can i be like entertainment to the fall. >> this will dominate our conversation this morning. next hour, we will continue the conversation on alibaba with david kirkpatrick, echonomy.er of t our twitter question of the day is will you by alibaba? >> are you buying into this whole concept or will you get swept away? ♪

>> good morning, everyone "bloomberg surveillance." for a morning let's listen. >> we are twisting the morning must-read idea. this is from david einhorn who sat down with "market makers" yesterday and said some stuff about where his fund sits when it comes to technology. >> we thought there was another tech bubble but we think it's an echo bubble. it means it's a smaller bubble. it's not contained with all technology. we are massively long on technology and their biggest position is apple and micron but we think there is a subsegment of tech which is high momentum stocks that have gotten completely out of control in terms of their valuation. we think those stock did reach a

bubble proportion. >> a small bubble like a bubblet. these minor momentum stocks. >> that is a constructive response. yqada,ople also say yada. differentre a lot of types of technology like old technology, ibm and microsoft and oracle and the new stuff like twitter and facebook and in the middle is google which straddles both. abouto you tell customers tech? >> i think you need to know what you are buying these stocks for. they are almost not the growth story anymore. they will continue to provide the tech infrastructure. there is highflying tech companies and i think you're is a place for that in the portfolio. when you think about what kind

of stock should deliver in this economy, it should be the growth you need. if you want something to offset the rising interest rate costs, you have to deliver topline growth. >> that is what everyone is looking for. we will have more with anastasia amoroso in this hour. coming up, investors who that against housing, eric talk with return.gundlach when we this is "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire. . ♪

morning, everyone "bloomberg surveillance." good morning. adamme is scarlet fu and johnson. let's do a data check on bonds.

everybody has been wrong on this. ball are surprised by low interest rates. here is an exclusive -- housing is toast according to jeffrey lach. of america youth will not buy but why is a bond guy word about housing? >> it's because of the disconnect between what seems to be the consensus optimism about the housing market and a different picture one gets if you look at the statistics. the housing market is far from fully healed. the activity in the housing market is extremely unusual by any standard. thatercentage of purchases are cash only is over 50%. it's higher than that in some of the hotter areas.

that comes from investment pools but that's not exactly an end-user. that is not a real purchase. that someone holding it for a time and renting it out for a while and then selling. it's just a way station for the ultimate end-user. but you have foreign money if you look at the hard facts of new home sales which are flat on their back, they are no better than they were in 2009 and they are trending lower. have said that housing is linked to wage growth. away from that is the idea that it has to heal. do you perceive a normal housing market anywhere in the next decade? >> if you mean normal is 2005, no. >> like we grew up in western new york together. >> the demographics are what people are missing on this. think about the household formation collapse we have seen. the young people today are unemployed at a high rate them a they are renting on the cost of rent is going up while the median income of printers is

going down. that means these renters have very little wherewithal to save for a down payment. there also saddled with student loans. scarred byhave been the housing collapse of 2008. some people say putting down 20% to buy a house in putting it on leverage is not a guaranteed moneymaker. it might be a high probability loser of all my capital. we have preferences have changed. theoted a survey by mcarthur foundation and the said the enthusiasm for renting versus owning his up by 30 percentage points in the last several years. this is because people are scarred. the baby boomers will have operative for sale. on average, they are half $1 million short of retirement savings and 74% of them social security will be what they rely on and these people will sell homes. we have a market that is demographically different and when you think about the boomers

funding their retirement, all this suggests the housing market -- there is a new normal in the housing market versus what we do about an grew up with in the 90's. >> we will have much more with him during "bloomberg surveillance." amoroso is with us from jpmorgan. there is an optimism among economists. i don't hear that with jeff gundlach. do you believe in a buoyant economy that can drive all assets higher? >> i think the economy is picking up but there is not a whole lot of optimism from that survey on the housing market. investors and homebuyers have been scarred financially and emotionally. i think it will take some time for us to return back to the homeowner nation we were. >> how do you position assets within a retirement plan with what you just said?

you cannot do 60/40 anymore? i think that's the first step, to identify the strategic allocation. what has changed is we have to be more regular in our approach to equities and fixed income. >> it's a matter of owning which bonds. ownershipay the home trend rate is declining but what about the multifamily construction and what about the apartment reits that can benefit from the extra rental demand? when it comes to bonds, what do you own globally? i wrote a piece that said redrawing the boards is something we have to do. the vast majority of opportunities or outside the u.s. >> i think the key thing you said is we are scarred. oll brothers ceo told us the multifamily is the single

biggest growth area. it's not houses. back to the idea of single-family homes being a tired idea in investing. gundlach says history proves him right. closingcks the etf prices from mid april 2 mid july the last few years and they show the etf falling at least 10%. incomplete and that's how the etf has performed this year. if history is any indication -- it will start falling and there's a seasonality. this.goes beyond it is just one great big distortion. all of this is a fiction of low

interest rates. that includes alibaba. what jumped out at me is half the home sales are for cash. that's not healthy. that's not an end-user. >> this is not in the text books. >> no, but you always had a portion of home sales that were accounting for -- accounted for with investors. moneyre are suitcases of walking around outside our world headquarters. factw do you reconcile the against the wealth disparity thing where you have a fraction of the population spending $50 million for condos in new york but the vastuston majority of people are left out? >> that has been a very difficult thing about this process. janet yellen admits that in all

the testimony and research. it takes a long, long time to get every last person, the broad-based american consumer, to where the high net worth consumers are. we ares a long time but encouraged about the economy because it's starting to happen. if you look at the breadth of hiring, is starting to improve. five years, six years into it, to move to ang better quality of life. it takes years in this case. >> longer in this cycle than it has in the past. we will continue this conversation. coming up we will speak to the ceo of sidewalk, a company that has paved the way for online textbook rentals. what was your heaviest textbook? >> economics for sure. >> mine was bio 101. >> i had a differential equation textbook. >> i remember that.

>> what a racket, textbooks. >> we will be right back. ♪

>> a very busy morning, 10:00 of therning janet yellen

federal reserve goes before the joint economic committee. good morning, everyone, scarlet fu and adam johnson are with me. >> president obama is pledging to help find more than 200 schoolgirls kidnapped in nigeria. the girls were kidnapped three weeks ago and the u.s. will send a team from the military and law enforcement to help in the search. this is ha'aretz that. -- horrific. ukraine, they will go ahead with the presidential election may 25. the president said that she go ahead with the election. last number of ways, we have brought you the best coverage we can on ukraine and crimea and russia. we are honored to ring you amoroso, the global market strategist for jpmorgan

but you have a perspective we have not had. you grew up in the urals and summered in crimea. state the cultural attachment between the people of eastern ukraine and crimea with russia. your personal experience of how that geography is attached to russia. >> the trouble with eastern ukraine and crimea and having that association with russia is that, for the longest time, crimea was a part of russia. even more importantly, the perception under the soviet union was that there was no distinction. that is really no borders are hard and fast. when we used to travel to crimea, it was as easy as going to russia and it was considered in my family's mind to be a part of russia. >> how do you respond when we hear propaganda, for lack of a better word, that the culture and tensions of the moment back to world war ii.

you grew up with the umbrella of grandparents who experienced the horror of the battles of world war ii. how did that fold into the cultural dialogue now? >> i think it is such a difficult situation. the biggest parallel i see is we have to shift away from this cold war dialogue. there is a great divide. there is a great distinction between what the u.s. wants to accomplish and what rush is trying to accomplish and the divide needs to be bridged. the way to do that is by acknowledging both countries national interests. one of the interests for russia like it is for the united states is to make sure there is not an encroachment of russia onto the rest of eastern ukraine or the rest of eastern europe. there's also the desire of russia to ensure that there's no encroachment of nato onto the territory and ukraine serves as

an important buffer. i think that's a critical dialogue. >> thank you for that direct perspective on russia and crimea. >> i want to get her perspective on something written by william galveston this morning. this is my morning must read -- anastasia, you grew up in russia and you are now an american working here in new york. two,o you resolve those the past, the present and give us a path forward for washington. >> that's a great question. i ask myself that quite a bit because i have to wear a couple of different hats. the perspectives are so different in the truth is somewhere in between. it's not just the pro-russian

insurgent efforts. they are fighting against the government in kiev. , there is somee legitimacy to the protests. what the people are revolting against his corruption and poverty that has dominated western ukraine but more in eastern ukraine. kiev needs to speak to the protesters without signs of intimidation and without signs of threats. >> that is wonderful to have you here. as we go to the may 25 election. >> let's move on to college textbooks. i remember spending $300 purse or master paying for those heavy textbook for it our producer spent about $650, she says which is insane. of sidewalk,eo company that started off as a textbook rental service and has expanded to in clued a tech platform to help college bookstore stay afloat. welcome, i wonder if your expansion and the original

business which was to rent because ofoved wider a pushback against the barnes & noble's and amazon taking on some of the market share? is that the system was very inefficient and broken and was expense or students in the belief was if we could get into stores and get at the local level, we could move faster than we ever could sitting on the outside. there is a machine functioning on campus that could deliver content to students but very inefficiently. we wanted to make that more inefficient and bring the cost down. we launched sidewalk. evenople would ask why we use printed textbooks. point i thought we would have moved on. why are they so resilient? >> they use them because they work. a student has paid $5,000 to attend school that semester and the outcome of that $5,000

depends on how well they can learn and study. the physical book works and it brings results. >> i totally agree with that. there is no substitute for a good textbook. macrothis over here -- economics -- everybody has to buy it and way over here, it's $188 in change. -- and change. there is a lot of royalties in the business. >> why are textbooks so expensive? lots's a big ecosystem and of people will get money in the process and there are a lot of royalties going back 30 years. there are concepts in text books could go back 40 years. >> how much of $188 is royalties? could go half of that to content generation royalties. the cost of printing the book might be five dollars.

it's very low. >> as an example, if this is $188, what would it be for you? >> you can rent that book for $32.98. we partner with amazon. >> that might be your price. can i highlight the book if i rented? >> you should. >> when i read it after you, i just read the headline. let studentsways highlight write in the margins. have traded in vacations to pay for your racket. >> it's not his racket. >> is there a situation where everybody can make some bacon but $180 for textbook? >> over the last seven years between different companies, venture capital is coming into this space. given the right amount of attention and resource, this market could explode.

this is a source of anxiety. then again, you deal with tech innovators all day long. high education seems to be moving hot slower than other industries. why is that? >> i have to believe it will move faster. i have to look at something like netflix that started with renting physical disks and moved to a digital model. i would be excited to get their. i would love to be able to rent my textbook and read it on my kindle. >> it's different than a novel. textbook is a different adoption curve. >> i read textbooks at home for fun. >> that is tom keene right there. michael spence, help me out. the search for modern china,

it's $38. that is a textbook that everybody uses. >> coming up on that's a regular book. >> i don't know. >> your work is crucial. you're the most important person we have interviewed this year. >> anyone facing college tuitions. >> did you ever pay over $200 for a textbook? >> i haven't. >> a lot of books require well over $200. >> thank you so much. >> this is a number for you -- 35% is how much the amazon revenue is generated by product recommendations. we will talk about how personalizing the shopping experience could change the fate of retailers. this is "bloomberg surveillance, go on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire. ♪

hump day -- this is "bloomberg surveillance." amazon says product recommendations account for 1/3 of everything it sells.

our guest host who has a startup called index wants to link up everything with your e-mail address that enables retailers to customize promotions based on your buying history. it seems logical. it has taken so long to get started. what is the biggest success story you have had so far? >> we are helping retailers think about managing their businesses around customers instead of just dollars. theirers are reporting earnings and they say same-store sales increased x percent and you ask them how they do it. know if it comes from returning customers are new customers. they have transaction data. but transactions don't have an understanding of customers. they literally cannot tell you where their revenue is coming from. i think the model of online measurement and personal relations is what has to come into the equation. >> you need e-mail addresses to do this.

how receptive our people to give data? >> we can reuse existing credit cards to get that customer level information. it is reporting for the retailer to understand the heartbeat of our customer base. in terms of getting e-mail addresses, e-mail receipts are so common. ashave seen sign-up rates far as 50% with their retail partners. it establishes a way to communicate in a personalized way. >> it sounds like this is leveling the playing field with amazon. would they have more information you cannot get for the brick-and-mortar? >> amazon has perfect data. they are able to use that data to create a better experience for you. when you think about physical stores, they are less personalized and more expensive to run cia have to wonder about the future brick-and-mortar retail.

and terms of retail space per capita, the u.s. has four times more retail space per capita than china. we going to build out that retail space in china or were we going to leapfrog? you have to wonder about the future of retail in the u.s. but it has to become more personal. there has to be a real differentiation. >> my experience in retail is they don't have what i want. >> this could help that like google shopping. it's more personalized. >> absolutely, google is helping to create that one click checkout experience and same-day delivery with shopping express. things are shifting to amazon in terms of it being is he. search, click, buy and you are done. there is a centralized destination and google makes its money from that. >> thanks for joining us.

what a pleasure having you both. report, dollar-yen. we that much more, stay with us. ♪

>> ukraine attempts to quiet russian elements. you will own shares in the very grand cayman islands. your phone company wants to mate with your cable company. it is the 2014 freak show. this is "bloomberg surveillance." we are live. our guest host for the hour, david kirkpatrick. "the offer -- author of alibaba effect." overnight, german factory orders fell. u.s., we have labor costs as well as labor productivity. consumer credit comes at 3:00. we are watching a well. that could be happening any minute. stay tuned.

we do not have those numbers yet. tesla, we should also note that janet yellen speaks at 10:00 and president obama is traveling to little rock arkansas. , but not have mondolez they will get about $5 billion and 49% equity in jacobs. we have the results. 39th -- $.39 a share per quarter. mondelez?hat is >> why did they call it mondelez. >> the name tells you nothing.

>> let's get to a company news -- a company name we can understand very groupon is having a tough time making the change from daily deals to e-commerce. jetblue has mitch -- missed out in the rally on airline stocks. the ceo was part of the founding leadership team. shares of jetblue are down 21%. whole foods has a problem. it is not the only game in town. they missed analyst estimates. they face competition from traditional supermarkets.

>> alibaba is going to corner the tail market. >> they filed officially for an ipo. they control about 80% of china's e-commerce. a lot of people describe it as a combination of amazon, google, ebay. raise $1ooking to billion. they're expecting alibaba to raise about $20 million. this! is looking at happily, because they own about 23% of alibaba. they will be selling part of their stake in the sale. david, all of my radar is up on this deal. is this the biggest thing since

sliced bread? >> i would say caution. >> it is to good to be true. what are you looking at when you look at this red herring? a red herring first? any number is coming out of china, they automatically have to be looked at carefully. that is just a general reality. mostba is one of the impressive tech companies that has ever existed. whatever they might be doing with their numbers or china's government, i do not know. this is a global company that will have a long life as one of the top five internet companies on the planet for the foreseeable future. going public is a major deal for it, the chinese economy, for

awareness of the reality of the scale of the chinese internet. it is a very big deal. >> what about amazon? it could be the new amazon. >> it could be a threat to amazon. that is not the way i look at it. plans are china, its a little unclear. what it has done outside of china has mostly been served as the intermediary between chinese manufacturers and foreign buyers. that is the business that got it started. consumer businesses are more recent. they are thriving, but only in china. >> reasons to be concerned from a financial perspective -- what are you worried about? for alibaba, the ipo, what it means. >> pricing is always a question in a case like this. it seems awfully pricey, the kinds of numbers being thrown a wound. twice the value of facebook, for

example. journal street published statistics showing profit, growth rate, it is astonishing they have higher growth rate dan amazon or ebay. they have more profit. their revenue is small. >> are they dependent on their founder? >> more so. he is more central to their success than steve jobs. he is often called the steve jobs of china. he is not a charismatic person on first glance, but he is revered by his partners, these billions of sellers in china. >> are you going to buy shares of cayman islands entity?

ive -- do you trust of the auditing of this thing? >> the reality of this company is very impressive. how the numbers have been dash.ucted is beyond my that is where i would show the most caution. inould not be cautious saying this is a major global internet company. it has potential outside of china in a lot of ways, including consumer businesses. i see them having a lot of potential. u.s. internet companies are fundamentally challenged by the snowden revelations. american internet companies outside the united states are suspect. we might think chinese companies should be suspect as well, in reality, the playing field has been leveled the u.s. government 's disrespect for our flagship companies.

duly --unds that effect it sounds like that effectively -- that that will trump any valuation concern. >> probably. is -- if he goes away, they are in trouble. he is incredibly brilliant. , to the leftroup is cayman islands, to the right is an irs number that has not been signed. they have jake claimed tens -- jay clayton's name. we do not have the ability, but -- who isng that auditing this? i cannot get a straight answer. >> we need to know that.

it is a very good point. >> would investors feel better if they had interaction with alibaba? >> that is a good point. i think they will. they need the money. they have already drawn down in a billion-dollar credit facility. i thought this was a marketing ipo. it is, however. once you see them in the markets and to talk about them every day feele show, people will more comfortable buying from ali baba. my wife was trying to buy aluminum panels, saw there, would not buy it there. >> are you buying alibaba? are you buying into the concept? tweet us.-- at $600 a share, caution on the appleshare. a little above

600. the question on apple has to be longer-term. ,re they going to be innovative doing things with your hoard of cash is not investing for the future. there is open question as to what the future looks like. it is supportive of the share price. >> more of that interview with jeffrey gundlach coming up. your tablet,ing on smartphone, bloomberg.com, apple tv, the list goes on. we will be right back. ♪

>> good morning, everyone. this matters to our guest, david cook accurate. -- david kirkpatrick. we talk about edward snowden, putin, and your internet. they did not exist for the facebook effect. if you were to write this note in effect right now, what would you do? >> that is an interesting title for a book. globalure role of the

internet is in question since it came along. my concern, my big issue of the day is whether the internet is going to get a vulcanized. this continuously connected network that we have come to rely on that has been a growth engine, it could be jeopardized. you look at a lot of things happening like turkey turning off twitter and youtube. the european union is thinking about imposing privacy regulations that would restrict the way that global internet companies can operate. u.n. is a movement and the to take control of the internet itself away from u.s. dominated, mostly volunteer entities that have been the government's entities up until now. -- governance

entities up until now. see in 2014?we about --isappointed president obama has not been more clear about what the government's intentions have been with its oversight of the internet. he has refused to say what they were doing or to confirm or deny anything in any detail. considering the u.s. has been this moral guardian of internet openness, the moral guardian of freedom on the planet, we have been the stakeholder for freedom. and openness, and honesty. here, we have relinquished their role. >> are the europeans with us? >> they are as close as anybody. they have such an obsession with privacy that they use the snowden thing as a justification for their own push back.

in terms of openness and freedom, they are pretty good. , iernment leaders in europe don't think they typically understand as well as americans do, the economic importance of the internet. in europe, the problem is a connection. >> david kirkpatrick on an issue that is not going to go away. coming up, speaking of snowden, we are frozen. we look at disney. sing with me, david. ♪

>> good morning. i am tom keene. david, really is helping us out this morning with terrific perspective on alibaba. headlines. >> here's why the u.s. is urging ukraine to go ahead with the presidential election on may 25th.

is waging an offensive against pro-russian militants in eastern and southern parts of the country. president obama is pledging to help find more than 200 schoolgirls kidnapped in nigeria. the u.s. will send a team from the military, law enforcement, and other agencies to help in the search. these at young girls have been kidnapped. sold 280rk, christie's $69 worth of art. the buyer was a collector from china. >> of course they were.

>> he spent a year or two in the united states. that is partly how he got a flavor for what is happening on the internet. i would not say he is typical in any way. >> just dumb block, the bonking? ndlach, the bond king? opened our interview yesterday talking about mr. loeb and sotheby's. how and what will happen with bond yields when they rise. he would suggest not a new normal, but we will see a no normal. bottomed inlike we july 2012.

i use a metaphor from hemingway. hemingway had one of his characters ask the question -- how does one go bankrupt? the character answers first slowly, then quickly. that is the way bond yields tend to bottom. bond yields may be sauce ring saucering out. i have a hard time believing they will accelerate higher. when you deal with some of the financing needs we will have, then i think you could be making a legitimate case for the high interest rates. >> a new normal and an old normal. do you work within any kind of lach paradigm? >> i call it the no normal.

it basically means there is no paradigm that we had, so predictably in place for years, which is a debt paradigm. >> a fascinating conversation. fed, janet yellen speaking on housing this morning. expect the 10 year yield to and at 3.38%. >> i thought that was a total class act. from credit squeeze saying he was wrong. .> here we are that dovetails right into what we are saying. selling debt because it is going to return some cash to shareholders and because it can. this low rate environment is doing all kinds of things, enabling technology companies to do all kinds of things they would not be able to or want to.

>> facebook buying oculus and whatsapp. companies that have the ability to sell at equity do not often get such debt. it is facilitating a lot of flexibility. our jost rocked over those two jaws-- deals -- our dropped over those two deals. thehusiastic about -- enthusiastic about the alibaba deal. >> when you say squishy, like we kool-aid?inking mthe companies, like twitter and groupon were overvalued and they are being properly readjusted. other companies, like google, facebook, ali baba is in the

middle. they are giant colossi that will continue making money. it is not one uniform landscape. >> what about amazon? the more it sells, the lower the margins go. amazon's growth strategy is andorget about profit to dominate. they are doing well with it. at some point, they have to make profit. talked to a security analyst she asked me -- do we need another amazon? >> everybody needs competition. amazon has caused walmart to get better. we need competition. alibaba will wring more competition. that is a good thing.

>> speaking of e-commerce and they way you get stuff done, the media landgrab continues. what does a ramp-up in mergers mean for your cable bill? we will discuss, coming up. ♪

>> coming up, janet yellen will be tested by -- will be testifying on monetary outlook. that will begin at 10:00 a.m. eastern time. this is "bloomberg surveillance."

i am scarlet fu. >> she is a very real person. i want to share something that, at tension. with einhorn sat down stephanie ruhle and erik schatzker yesterday. he had with janet yellen's predecessor, ben bernanke. you have to listen to his comments. >> i watched him in front of congress and speaking and watched him on tv and 60 minutes. what was your opinion? >> i have been critical for a very long time. the dinner for me was cathartic. i got to ask him all of these questions that have been on my

mind for a very long period of time. on the other side, it was frightening. the answers were not any better than i thought they might be. >> frightening, tom. he thought the answers would be more insightful. i cannot begin to convey how any central bank has a voice changes. they have an official guard. greenspan, when you talk to him after 20 minutes or so, you hear >>ments of the 50's or 60's. they are a real person. >> chairman bernanke was protective and then he talks in that quick, academic cadence. >> what they were objecting to his bernanke said there would be no hyperinflation and that it generally occurs after a war. einhorn was like -- 100% certainty?

that does not ring true. an unprecedented amount of liquidity that has been thrown -- , he isy like bernanke allowed to say that because within that academic construct, if you say 100% certain, you're out rear for standard deviations -- three or four standard deviations. >> don't listen to the actual words. >> i thought the eye want comments were brilliant. back-and-forth was interesting. >> it gets to one of your favorite words -- the zeitgeist. >> you look at the markets,

currencies, we are not doing a data check. >> speaking of the zeitgeist, you heard about the teenager that's total way -- that stowed away in the wheel well of the airplane. it shows him emerging from the plane and stumbling from the tarmac. survivedy landed, he five hours on the plane. low levels of oxygen. he is out of the plane, stumbling around. >> here's the other thing -- the wheel wells are not russia rise. how did he survive? -- are not pressurized. how did he survive? >> i think he passed out. he is in the custody of child protective services. that is incredible. >> that is a long flight. we tend to think california to hawaii, it is still five hours.

>> i thought an economy seat was uncomfortable. on the tarmac?et how do you get through a chain-link fence, how do you not get seen. ofthat goes to the question why a security so bad at our airports and doesn't matter. -- and it does it matter? >> how about the mystery of delta's share buyback? are airline fares out of control? to pay less,efer if that is the way to answer. you're making a decision not to travel. >> up 67% in 18 months. priced two business tickets from new york to paris. outrageous. >> it was like a donation to a children's hospital. >> i am waiting for the price of

energy to affect the price of airline tickets and it hasn't. >> let's get a data check. futures are higher right now. up by four points. the 10 year yield is up 2.593% right now. >> good morning, everyone. this is "bloomberg surveillance." we are on digital media. look for us on apple tv. we are right next to "frozen." the semen telecom is march or die. theme in telecom is march or die. joining us now is craig moffett of moffett nathanson. the comcast time warner cable is pending regulation

review. starting gun for people talking about it. whether or not it happens in other western. everybody that was questioning should we do something solve the comcast moves and said it may be now or never. we have to think about the regulatory environment. here is what i wonder about -- there are not a lot of players. it feels incestuous after a wild. directv is in talks with at&t. networkalks with dish before. there's not a lot of premium done and people do not have a lot of negotiating leverage. >> you are right. there are not that many different players. more importantly, the sec and the department of justice have are not going, we

to do a lot of these deals. companies feel compelled to move forward anyway. the most interesting is sprint-t-mobile. they have been told that they're going to be rejected. softbank seems to think if we can get in front of the sec, we can explain to them how the wireless industry works and then they will -- >> will that combination come together? >> i do not think so. i am an outlier in suggesting i think they will even try because the board at deutsche telekom will say this is too risky. adam johnson, the other day in our microeconomics segment brought up an index. there is a mathematics about utilities from the 1930's, the idea of combination. are we going to a utility media distribution industry? index is a measure of --

it is mathematically simple. it is the square of the market share. add up the square of the market shares and you can get a sense of how -- sinne of those sigma gnals. >> it is one of the reasons comcast time warner cable has had an easier time. it does not raise the hh i. all of the other mergers do. realis going to be a very barrier to getting any of them across the finish line. >> with the exception of and at&t and directv. they're different businesses, but they might it together nicely. >> not entirely. at&t has been getting into the television business for a long time. they have a television product, universe, the covers 25% of the united states. >> it does not have 25% market share.

>> true enough. the market, you're taking one competitor out of the market. awould not suggest that is showstopper for the deal, but it will get scrutiny. >> what about the chance that some other technology could come along that could throw all of this into a new light. putting high broadband networks into more than 30 cities, the possibility that some new wireless technology could come along, what about that? all of these mergers in washington depend on market definition. shift the market definition and say the definition needs to be expanded to include new wireless options or the definition of the product is the bundle, the product set, that changes the game. >> the challenge is the doj has to take a very short timeframe

and these things are not changing the landscape yet. >> these are pending issues. we will continue this conversation. question of the day -- are you buying into alibaba? will you buy shares? tweet us. ♪

>> this is "bloomberg surveillance." we talk about disney. i am tom keene. a very important guest. >> eddie lewis here to tell us what is coming up on in the loop. is here to tell us what is coming up on "in the loop." >> how can we go for a day without talking about this? >> a there is a "bloomberg surveillance" up session with "frozen." tim armstrong, when he love a hit like "frozen." he is going to be on with us. you know how big they have been pushing into original programming. they're trying to compete with yahoo! and google and everybody else out there. that going to talk about and how much that is driving up -- >> may need to hit.

>> everybody needs a hit. >> we need a hit. >> tim armstrong on "in the loop." betty will be on starting at 8:00 a.m. >> we are keeping an eye on disney. they reported results yesterday. 27%. quarter profit up the stock is up by 9/10 of one percent. bob iger doing well. muchcan thank "frozen" for of the beat there. it has been a blockbuster in every which way. it will be a broadway show, merchandise, a theme park attraction as well. tom, "let it go? " >> talk about content is king. your share of -- your cherub

could have an else address. -- elsa dress. $1199.99. content has always been keen. i have a grog -- daughter graduating from college. she would go see the movie and she would secretly want an elsa dress. >> i don't know about $1200. >> author of the facebook effect , there is a disney effects, but we do not talk about it. etc. wn espn, abc, >> some businesses are network effect businesses and others are not. making hits. keep facebook does not. the network itself builds on itself. that is what google and the

other companies have, the companies like -- that companies like disney lack. the results were terrific. >> we will be right back on serenity bank." . to -- we will be right back on "bloomberg surveillance." ♪

>>: all miter. -- pull an all miter. -- all nighter. mo koyfman . it would be nice to catch up with him. good morning, everyone. our guest host, david kirkpatrick. he is giving us great perspective on alibaba. to continue that conversation. let's get to company news. shares of twitter began trading today at the lowest since the opened.

even with the decline, twitter sells at a level that makes it more expensive than face the or linkedin. nintendo beats estimate. they are counting on new videogames to revive interest in its console. they have introduced a cheaper, portable machine. to 8 kart 8 -- they are up already? ea beat analyst estimates. er ofwant to be a top writ games sold online rather than in stores. that is today's company news. >> it is important to interrupt the show. renaissance macro -- the first quarter of united states gp is ugly" and i think that is --

>> you showed me yesterday on your computer there was someone that sent you a note about second are being negative. >> no, first quarter. there is a debate about this. yellen at 10:00 a.m. this morning. look for that on bloomberg television. a negative statistic on gdp and all of a sudden what the chair says is extra important. alibaba.op story, david kirkpatrick with us. he has given us terrific perspective. >> i have aged about four years. it has been a lot of fun. cover ali baba,

yahoo!, but here's the spread. is it a frenzy like it was in the early bernstein years? >> on one hand, i like businesses with structural advantage and alibaba has structural advantages. i struggle with these kinds of valuations. alibaba than i do in yahoo!, but i do not follow either one. >> how critical is the auditor of an initial public offering? do you care about the accounting for any chinese entity? >> of course you do. everything from -- there has been some hard examples of when you overlook it. alibaba has a genuine business. they have a real business. it is not a joke. whathallenge is -- valuation methodology do you

apply to a business like that? the market is going to be struggling with that for years. accountingtioning of -- it has been said frequently that even chinese gdp might be skewed and a positive direction for political reasons. we cannot know. -- thenese economy leaders want to integrate with the rest of the world. the chinese economy is trying to enter into global commerce and a full and complete way. you will see a conflict between systems. public on theen hong kong exchange. they are in the middle ground already. alibaba is a chinese entity, trying to operate in a global context. wouldg kong regulators

not accept the new structure of alibaba. ofe, you have an example things being tougher. areong kong regulators different than chinese regulators. it is a british influenced system. -- is splitth between hong showing hong kong. this company needs to raise money. it is not just a marketing ipo. when will it list? they do not tell us. out. is quite a ways bese auditing questions may part of the causes of delay. >> ask david about the ali baba -- >> what does it mean for ipos in general? quick have the look of the kirkpatrick world?

with the fly from these more fanciful valuations -- >> like twitter -- >> like twitter, netflix, a lot of these companies. valuation a different in china then you are in u.s.. valuations are superhigh across the board. who am i to question that. i do not think china deserves a higher valuation. the chinese internet market is the highest market in the world. they have over 600 million people in the internet. americans have not focused in on. this idea would cause them to look at -- the chinese economy as more and more like u.s. economy. they are more wired than we are. there's a giant opportunity. it is not have as much to spend. that is the negative. clicks i want to bring in our twitter question of the day.

will you buy shares? >> yes, yes, yes. revenue in china is enough. in the u.s., there is a new competitor for amazon. this one? i bought ali baba, but had a bad experience with product delivery. there is not much support from ali baba. oali-who? this will steer clear from percolating tech bubble grew. >> you jack markell. lous -- you see jack, and there's a wonderful constructive -- and all this. craig moffett with us, as well as the agenda.

>> one question i have about poles- how deep are the of investors that are investing in companies like netflix. what is this amount of new equity coming to the market going to do to the rest of the valuations? >> that would not worry. there is unlimited appetite for good companies. tech is changing the world. there is money there. >> let's get to the agenda. tom, what have you got? we are back to the ukraine. >> it is a little more quiet today. europe gets a third of its oil from russia. all of that oil flows through ukraine.

>> christine lagarde writes a check, right? we are only writing one billion to the imf and they giving something like 27 million. >> signs of potentially a wage price spiral. atwill get unit labor costs 8:30. productivity expected to go down labor costs going up 2.8. you have squeezed productivity, not have to pay people more. that is potentially a sign of inflation. metastasize -- testifies today. showing live coverage of her testimony. >> we want to thank craig

moffett and david kirkpatrick. you guys have expanded into a magazine. >> we just published our first economy magazine. this is the end of "bloomberg surveillance." ♪

>> good morning. you are "in the loop." i am betty liu. here are the top headlines this morning.

it is here. alibaba has filed for what may be the biggest ipo in the u.s. ever. the e-commerce company might raise up to $20 billion, surpassing facebook. will this be a twitter hit or a facebook flop? aol beat estimates. they are turning themselves into a digital media firm and focused on original programming and advertising. we will hear from the ceo, tim armstrong. janet yellen is on capitol hill today. she will testify before the joint economic committee. you can watch her speak at 10:00 a.m., new york time. we start with. coverage of alibaba, which could be the largest u.s. ipo ever.