brings prodigious derivatives and executive skills to aig. and the oil rich northwest iraq falls to a breakaway al qaeda group good morning, this is "bloomberg surveillance." 11 and wednesday, june joining me to scarlet fu and adam johnson. it's a busy day. we had mixed a data overnight. u.k. had the lowest unemployment and the world bank cut its global growth forecast among weaker outlooks for the u.s., russia, and china. >> it has been a real jumble. we get retail sales tomorrow in the u.s. 7:00 we get the weekly mortgage applicable -- applications. at 2:00, the monthly budget report. with all the news coming out of washington, all eyes on

washington. earnings after the bell, restoration hardware and h&r block. how did your taxes work out this year? >> it's like a phone book, it gets thicker every year. lawyers and accountants always make out. president obama delivered the worcester, massachusetts high school commencement at 4:00 today. it's a very cool area. clark university is there. it's a great history of mechanical engineering. >> and the basketball hall of fame is right there. >> that's springfield, down the road. >> it is along 91. treasury secretary jack lew

is speeding at the new york economics club later today. the la kings just got off the bus and nobody smiled, they were all business. >> scarlet saw the rangers drinking under a bar. it's do or die tonight. futures were negative seven yesterday, the 10 year yield was higher earlier and the euro is driving friendly. i am watching oil, it is elevated. crude 104.67. vxx is very complacent. there is the dow. . you can see the brent crude/nymex spread. i am looking for brent crude to

111. is nerdy years of iraq oil. this is the peak, this is the war, and this is the come back with a lot of courage off of that kirkuk pipeline from northern iraq north to western turkey. they were really not doing bad until this disruption. >> people don't realize how much oil comes out of iraq come over 3 million barrels. like number three or four in opec. seven percent -- 17% of the oil comes from this region. >> we did not have to look very far, this is one of the biggest upsets in modern congressional history, the number two republican in the house, eric cantor, losing to a tea party

backed candidate in a virginia primary print the winner is david bratt. portrayed cantor as a member of the washington establishment. the fundraising was so lopsided. through may, he had raised $5.5 million and only $206,000 for brat. >> he did not take the votes. >> it was a huge turnout. >> the polling guy for eric cantor said that maybe democrats showed up and voted for david brat. there is a massive rethink in the republican party. >> and there is a lot of talk about immigration. effectively campaigning that mr. cantor was too soft on immigration. >> this has never happened before. . since theyfirst time

inded for a house republican 1899, is the first on a house republican leader has been voted out. >> a change at the very top of aig -- they got the big government bailout in september 2008. peter hancock will replace bob ben moshe. aig needed 182 alien dollars in 2008. bob benmosche came in and did the job and cut jobs and sold units and repaid that big government bailout. >> this will be applauded by anybody on wall street. hancock is truly one of the revered characters and wall street. we will have much more on this. quantitative finance executive. >> he created the derivatives

business. >> he was part of it either way. >> certainly, risk management is front and center. this was beautifully managed by aig. the transfer of leadership is one of the hardest things to do. incorrectly -- when it's done correctly people don't notice it. iraq city hasgest fallen with tribal gunmen close to capturing a town that has the largest oil refinery. this underscores how the prime minister is losing his grip on the country. >> there was a play up to this over the last number of months but no one was prepared. stunnedot say they were but no one was prepared for the rapidity of this from june 6 to where we are this morning. >> things have deteriorated quickly.

>> ian bremmer will join us in moments. day for american foreign policy. >> all of the lives lost defending that city and for what. that upsets me. there is real worry about the oil infrastructure. >> the implication will last. those are the front page stories. >> it is busy and now there is air and no way to capture the beltway response. washington considers the defeat of eric cantor in a republican primary, no one expected this but turnout was high as he lost to an unknown economic professor. peter cook is with us. houston were you last night? >> i was at a gathering here

last night and somebody wrote the news. we covered this in the morning and reported that they've added brad had run an aggressive campaign. i was stunned when i first heard this news. the word spread like a ripple effect at the event i was out last night. they were members of congress there and one tea party conservative i spoke to briefly and there was some feeling of celebration in his mind because this means the message had been sent to the leadership. nobody thought this would happen. eric cantor was on capitol hill yesterday. he was in votes as late as 2:30 p.m. he did not see this coming and his team did not see this coming. it's a shock wave through washington. >> to indict remember carlos gutierrez and ted kennedy losing and immigration voted number of years ago. did washington lose the immigration debate last night? >> the first take on this is

that, yes, absolutely, one of the big things dave brat campaigned on is that cantor was too soft on immigration and had opened the door to the possibility of younger legal immigrants, children being able to get some sort of permanent status in the united states, perhaps legal status. you have to be careful, it will not happen on the short-term term it look what happened to lindsay ray m woosnam name was on the senate bill that cleared -- look what happened to lindsay graham. you cannot draw such a conclusion so quickly. you can say in the short term there is no chance for an immigration bill coming out of the house of representatives anytime sent. john banner will have to watch his back and every member of the house leadership will have to watch their back after this. >> the criticism was that mr. cantor was too soft on immigration. that's on the one hand but on the other, it's a victory for

the tea party. mr. cantor was anti-gay marriage and antiabortion. why is this necessarily a vote in favor of the tea party? in the sense that it was a grassroots movement and this district in particular that helped dave brat. he did not get support from large tea party groups. this was a word-of-mouth thing. there was a moment a few weeks ago when eric cantor spoke in front of local republicans down and richmond. and cantor started to criticize dave brat in public and got booed. that was the first warning sign that something was up. he started spending more money on ads and things like that and he mounted a real campaign in the final weeks because he saw trouble out there. he did not see this kind of trouble. this was a tea party victory for sure versus the establishment

and it's a victory against big business interests. it's hard to tell you how many ceos were backing cantor in this local race in virginia. this is a defeat for them. they backed eric cantor and they lost big. >> thank you. hourr guest host for the haveon trenner and we also guest. you have been fielding e-mails dan clifton.g from what kind of implications does this have for the economy and the markets? >> dan wrote me and you know him. , he doesim red bull not sleep. he would do the stuff for free but three things he came up with -- the first is that immigration reform is basically dead.

the second thing is there may be some instance in which reauthorization for the import/x port banks will be at risk and behnerrd is that speaker will have to look over his shoulder. there is some discussion of jeb hensarling being someone else out there. paul ryan is another candidate. walid is with us as well. we will talk about the drama we saw yesterday, 225 miles northwest of baghdad. >> our twitter question of the day -- ♪

>> good morning, everyone, and incredibly busy morning. on "market makers," stephen miller, the nonexecutive chairman of aig. new at aig ands steve miller will be on "market makers." this is "bloomberg surveillance." incredibly busy news day. let's move to iraq. 225 miles northwest of baghdad, less than 100 miles from the had troopser, mosul fully. ian bremmer joins us from atlanta.

how should baghdad adapt and adjust to the taking of these territories? important thing they should do is try to work thether with the sunnis and kurds to fight them. the kurds are calling them because it's fair territory in the north. nouri al-maliki has been reluctant to do so. the reason he was reelected was because of the divisions. secretary and fighting is growing quite a bit in this country. >> within those divisions between baghdad and the north and the kurds, the idea of the united states assisting -- i saw the perfunctory state department what last evening -- should the white house and the state department and for that matter the pentagon do? obama is fortunate

that when he gave his speech at west point a couple of weeks ago, he talked about the importance of the war on terror. there is no question that killing osama bin laden was a signature accomplishment of obama and his presidency but the fact that al qaeda has gotten stronger but their strength is not focused on the united states. we have seen attacks on pakistan mosul nothing to do with in iraq. the fact that the united states would be reluctant to provide military support. a lot of it has been taken now in mosul and the most important accomplishment is the u.s. getting out of iraq. we could have intelligence support but will we see any call for boots back on the ground? i think it's unlikely. >> 30% of the american lives

lost in iraq were lost defending osul and we are pulling out of afghanistan, what is the implication for u.s. policy? rebels who have been calling for military aid from the united states for three years now are about to get it. unfortunately, the wrong rebels and they are not getting the american aid directly, you will see more american arms against assad in the fight in syria going forward. this is precisely the out tom the americans wanted to stay out of. >> let's go back in history to a -this is myemer- morning must be read.

what happened to the united states strategy? >> no relation between me and another bremer, i'm happy to say. the united states had an extraordinary military victory in iraq. the political strategy was absolutely nowhere. i think everyone understands that now and that includes the systematic disintegration of the right down tons the officer level trying to build an army from scratch, rebuild morale, rebuild a properly trained core, something eartunited states h

was never in. of are seeing the reaction all of these trained troops deserting, not just a deserting their posts but deserting their uniforms as well. >> thank you so much. there was a photograph last night of uniforms strewn along a desert road. the soldiers literally took their uniforms off. >> there was not much fight in this seizure and we will continue to tally the implications for u.s. foreign policy. hour, ap in the next fashion designer will join us to dreams how the american inspired her. that is coming up in the next hour of " on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire. bloomberg surveillance," ♪

>> good morning, everyone. read --a morning must it's a morning must listen. >> it comes from lloyd blankfein, the ceo of goldman sachs. >> i'm sure i am paranoid. >> paranoid about what? >> i have to worry about stuff. when the phone rings to late at night or too early in the morning i'm like what happens? i have to answer if it stops ringing, i call everybody i know to find out what i missed. >> it's a side of lloyd blankfein you don't usually get to see. paranoia is something that

people in silicon valley know full and well. part of the advantage of paranoia is it creates opportunities. if you are not seizing them, someone else is and that is the paranoia that lives well in silicon valley. this is the new goldman sachs, way more visible. >> he's looking very soft. is this a new message for wall street? >> only the paranoid survive. this is a brutally competitive economy. it's not surprising. andow exactly the feeling ironic tiny company and he runs a huge publicly traded company. whenever you get those phone calls, you are worried. you know if you are getting them at the wrong time, it's usually not good news. how often do you and your partner sit down wonder what you are doing?

>> all the time, this is a man who is running one of the largest banks in the world. it's not surprising and it's nice to see in a way a softer side. >> part of that is that there is for traditional grounds for talent are going to technology. there is a repositioning of the analysts. >> we will be right back. ♪ we will talk about the changing of the guard at aig. ♪

good morning, everyone, and incredibly busy day, let's do a data check. the euro is $1.35 which is weaker. i am watching oil which is

elevated over the last two days. brent crude in europe has not moved very it it is below $110 of somew on reports substantial unrest around the oil infrastructure near mosul. >> let's get to company news because aig are mounted heater can as ceo succeeding bob benmosche i. . he catch of two symbols by the insurer and repay the government dell outs that were $182 billion. this move is very constructive. it means that the company is on the right track and we are joined by josh by phone. let's start with the idea of shareholders wanting peter thatck to stay the course was set or does he need to put his own stamp on the company? morning, absolutely, i

think people look at this as a constructive sign. this is an important milestone for the company. accomplished a lot, the right man at the right moment and was able to reset the town in 2009 when it was the most hated company in america and pushed back on congress and the treasury and reset the conversation around getting as much value as they needed to repay by fundamentally managing a fire sale but also by fixing the company. they recognized eventually that they had to create value in order to repay the u.s. treasury. under that vision, rather than dissolving the firm, one of the biggest moves he made was to hire peter hancock. he is an unusual candidate to run a global insurance company.

he is a risk management executive and built the business at jpmorgan and was the cfo later but worked with the fed helping them fix itself during the financial crisis and when he was brought in to help with derivatives at aig at the fed's suggestion, bowed ben moshe realize this was a senior executive who can help them execute his vision for renewing the firm. i sparred withe the government over different limitations, fanning public backlash. andock is more conciliatory has embraced regulatory supervision so what kind of concrete effect is that have on how aig is run in the coming years? world is currently involved in what the company needs. the fed is very much constructive -- is involved in constructive engagement. this is a company that is with thetioned to work

fed but ultimately, you have to be careful about how you manage that relationship. 1 reverseid a20 to split. you nailed that in your report. is aig too big to ignore? they are the biggest insurance company in the world. what will be either hank cox first to do? >> the most important thing for the next couple of years -- imagine if he is successful, he will have a long-term run. the first couple of years clearly are all about driving margins in the business. this is a company that runs at half the level of profitability and it trades at half the multiple. we see a big opportunity. get to something like 12 or 13% roe.

doing and the reason we look at this as a strategic decision by the board is they have looked to create a renaissance or renewal at aig. they are focusing on margins over volume. its value over volume which is driving profitability as opposed to growing topline growth. on deck is long overdue simplification, bringing order from chaos at this company , streamlining its systems and consolidating businesses come a lot of logical low hanging fruit. perhaps the thing that -- i give peter credit compared to anything else -- he has made a big investment to reshape the firm and focus it on what they call science. i would call it data analytics.

insurancein big and over the past 20 years or so have always been driven by being smarter than their peers. this is a company that did not have a lot of that. >> thanks so much. we've got breaking news? >> this is the headline the just crossed -- siemens of germany's is in talks with mitsubishi of japan. ge had made this vid for alsom and now siemens is in discussion. >> the timing is perfect. we have jason trennert with us. i will say six years ago in i habi andbby -- abu d you talk about transnational corporations and here we are with mitsubishi teaming with a german company to buy a french

icon. >> we will see how the employees feel about a german -- japanese approach to buying the company. they were not happy about ge buying it. there are other issues involved. completely gett the politics out of this. >> is at a french company that has a site or the french government? >> i think that's one of the problems and one of the reasons why you are seeing real changes within europe now. their approach is not necessarily working. those quietne of basic reasons why equities move higher. we are all looking around with curiosity. you would suggest in your writings that the day today does not affect things as much is this. this is the jake from state

farm market. it's the idea that everyone thinks some sort of homewrecker on the other end of the phone and it's just a guy in khakis. he is earnings. earnings are at all-time highs. activitya lot of m&a which is keeping a bit in stocks. many times, people want to be territorial and are scarred by the financial crisis but there are basic reasons why the market is doing better. >> we can all understand earnings growth. >> i think people are so scarred and continued to be by the global financial crisis that people are afraid to take economic risk. they're more willing to take financial risk but economic risk is a bridge too far. greatmissed call is the use of cash. it continues -- money still just a ploy at two projects and capex

and buybacks and dividends. will that continue? >> absolutely, one of the biggest themes out there to me is the activist investment community. that used to be seen as a sidelight or almost entertainment. the amount of money that activist investors are raising now -- >> is almost equivalent to uber. >> it makes it a persistent force in forcing companies and the many of whom were over capitalized, to use the cash and give it back to shareholders. >> it's a new religion. peopleeep, you figure you -- you figure out how to help people play these things. a share buyback motive that is yield weighted and we are seeing growth in that area. that is a trend that is emerging and we look at areas around cash called ance sheets,

bulletproof balance sheet. these are company sitting on a lot of cash and there is a lot of m&a and a lot of the growth is from buybacks. the skepticism is how long can you keep doing this? where is the operating earnings? how do we see that growth and that's where the the skepticism is coming from. pay capital to expenditures with companies investing in themselves, how do i do that? >> it's on the cash rich balance sheets we see and that's an index that is trending up about 20 points. catch of theok at last three years and the return on investment to the uses of cash, one thing that is disturbing is that the companies that is spent the most on cap ex are getting the least bank for the buck. the companies getting the biggest bang are the ones that are doing things that are immediately returned money to shareholders.

ande repurchases are far away the best -- i'm not claiming it's a good thing -- but it is what it is. show me the money. >> it reduces the amount of supply in the market. outstanding stock after the client. >> not only do we have fewer publicly traded companies, we've lost hundreds over the last 17 years, there are fewer shares outstanding. thank you both to our guests hosts this hour. we will continue our series with charts on internet robert gates and how china is riding high. this is "bloomberg surveillance." ♪

>> good morning, worldwide on "hamburg surveillance." we have an incredibly busy news day. "bloomberg surveillance." >> in iraq, government forces have been driven out of the country's second-largest city. fighters from al qaeda he and splinter groups have taken over mosul. there is concerns that the iraqi prime minister is losing his grip on the country. president obama's popularity has hit an all-time low.

only 44% of those surveyed have positive feelings about the president. he got low marks for the way he handled to recent controversies -- the deal that freed the american prisoner in afghanistan and management of veterans affairs. in the nba finals, the san antonio spurs pounded the miami heat 111-92. series 2-1.ad the i was two for 20 on lay-ups in high school so i appreciate this. >> there is a hockey game tonight as well with the rangers. >> i think it is a team from l.a. playing them. >> let's get to a smart single best chart. >> we are featuring charts this week from mary meeker, the internet profit, the foreman morgan stanley -- today's chart shows the top 10 internet

properties by unique visitors. american companies to make up the majority what it's a slim majority and its fading great chinese companies make up four of the top 10. companies, in usa they get more than 80% of their users from outside the u.s.. usa users are making up a smaller amount. >> i did not know yahoo! would be that high. >> i am stunned by this chart. of connectionsot with apple on mobile apps. >> hardeep walia is with us. mary maker is focused on apps and everybody is going to and apps solution. do you agree with her/ what's in there

is the push to mobile. 86% of china's internet population access it from mobile devices and their well ahead of many parts of the world and that has given easy access to the scale. equals ebay plus amazon, bigger than both of them combined and it's the engagement factor. one out of every four minutes these days is spent on a social site. most of them are being accessed through an app so this notion of the web -- it is becoming social and social is becoming weicized so it is a recurrent theme. are they leading the way in innovating when it comes to mobile commerce given that the chinese internet user is based so much on mobile? >> there is no doubt about that. they are ahead on mobile. a lot of innovation happens here but the advantage they have a scale. they have a mobile world. the world is going mobile. nightre was a joke last

that said webpages are dead but we will do one anyway. will we have webpages in five years? >> i think there will always be webpages but it's how you access them. i think they will get more personalized i think the definition will change. the device of your choosing and be more personalized. those devices will be everywhere like your living room so this notion of an app page will be personal. that shift is already happening. >> microsoft is already doing that in effect. >> absolutely, the discussion about the living room and how you access pages in the accordance of xbox, this is the broader theme of how you get these devices? a webpage is a simple version of content construction. it will get richer and more personal and they will know so much more about you. i can shut out the la kings

for my homepage. i will block them completely. hour, the former new hampshire senator johnson and it will give us his outlook for the republican party. with john -- with eric cantor defeated in the primary, who should be the voice of the republican party? ♪

>> good morning, everyone oh quote bloomberg surveillance." jon will be in los angeles at the annual e-3 gathering and do an interview with the oculus ceo. and others. realitythe virtual company. . >> it makes me dizzy. >> euro-yen in four dimensions. >> let's get the company news --

we start with microsoft which is going to court over the government demand for customers e-mails stored overseas. a federal judge granted a search warrant last year in a federal case and microsoft objected. microsoft is now asking another federal judge to reverse the court order. on one of the biggest federal information technology contracts ever. anwill team up to go after $11 billion project to manage electronic health records of u.s. troops. northrop grumman may also bid on this contract. google is building software and hardware to manage power lines and other infrastructure. the goal is to help utilities manage electricity more efficiently. >> should google just take over iraq? maybe eric schmidt can go to northwest iraq. >> the gop could use the help of google, too. to wake up andng

find that the second-largest city in a rock has been taken over. vcs 1995 all over again, companies writing billion dollar checks. walia is living it every day. you know the story very well. back in 2000, it was fine until the nasdaq fell 74%. what will happen this time? >> i would frame this time as rational exuberance versus irrational so it's different. recently, id around think there is a justification for a lot of these things. tech companies are driven by three things -- growth, cash flows, and sustainable competitive advantage. if you can justify two of those engines come you do well. is the company set

expectations of growth-they cannot deliver, they get pummeled like twitter or box and a lot of companies and that puts stress. in anies like uber are different field where they are profitable and delivering growth and the expectations are high. when you look at younger companies, you have seen $65 million checks written for companies less than one year old. that's were you start to worry about there is a lot of competition but people are not betting on these. >> does the optimism spread to other sectors? >> i think some of the claims are overblown. the over valuations are more in the private markets and some of the relatively new public companies but the large-cap companies and technology, it could not be any different. 1999, microsoft was the largest company in the s&p 500, $500 billion, and it was trading times -- 60x forward companies.

the largest company now is apple. it's trading at 14x forward earnings and it has a yield. some of these other stocks are very expensive. i would agree that it's rational exuberance and a relatively small part of the market. shiller,quote robert can you stay in this market not loaded up with $65 million startups? i think among the high-quality large-cap stocks, there is still a lot of value there if inflation and interest rates stay low which i think they are likely to do. i don't know if i would go pioneering on some of the smaller cap stocks right now that the shock is

reducing. >> we talked about skyhigh valuations. what does that mean for alibaba? which was ad.com successful ipo but sets a great environment. the cash flows are positive, they are delivering huge growth numbers. i'm pretty optimistic. >> what about the cloud, where is it in five years? >> it's been around a long. you are seeing more marketing of it but it will be the sophistication of technology. a lot of the startups doing well are cloud-based. the new microsoft ceo, everyone is talking about the cloud. it's just a change of delivery system. >> thank you so much, gentlemen, for being with us. forex report.ick

and the next hour, fashion designer nenette lapore is here to discuss how the american dream inspired her to create american decimate an american fashion line. ♪

>> eric cantor and all of

american politics are stunned as he is defeated in a primary. peter hancock brings prodigious derivatives and skills to aig. falls to araq breakaway al qaeda group. this is "bloomberg surveillance." we are live from new york. it is wednesday, june 11. i am tom keene. joining me, scarlet fu and adam johnson. >> a lot to talk about. overnight, we are going to start in the u.k. unemployment fell to the lowest level. weaker outlooks for u.s., russia and china. is playingank catch-up. mortgageing at weekly applications up 10%.

last week they were down 3%. we have the budget statement urgings -- earnings. several items of note. president obama's going to be delivering a commencement speech to the high school students. that will be at 4:00. he will not be talking about graduation. it will be a policy speech. jack lew is speaking at the new york economic club in about an hour. game four of the stanley cup. that is a little bit concerning. it could end tonight. >> they just have to win one game so it is not embarrassing and we can move on. collins -- they could win four in a row. let's get to some company news headlines. there will be a new ceo at aig.

been running has the unit since september. the company shrank by cutting assets and cutting back jobs. learn whether it has to pay 1.4 billion dollars fine for unfairly squeezing out rivals. the eu imposed the fine five years ago. the company appealed the ruling and the court is expected to rule on a challenge tomorrow. the eu is concerned about generous tax arrangements that companies have arranged in ireland, luxembourg, and the netherlands. >> the dome did not fall in washington i be -- at the capito l.

washington considers the defeat .f eric cantor no one expected this to turn out. he lost to an unknown economics professor from randolph macon college. peter, who is the biggest loser last night, besides the congressman? >> the establishment, the house republican leadership and a lot of big is this groups who , theybute to eric cantor were losers last night as well. at the top of the list, in addition to cancer, john boehner. he has to be looking over his back, worried about a challenge to his own leadership position. heard you talk about an establishment effort to bring the republicans away from the tea party. can they continue that?

>> they have supported other candidates and have more success in this camping season. -- campaign season. aboutses questions established republicans or house republicans who want to see themselves associate with big business with corporate cronyism. that is the risk for a lot of republicans. they will be running away from the chamber of commerce. keep describing the defeat as stunning. t's victory was unexpected. what other upsets should we be factoring in? >> the first is to watch what happens in mississippi with the runoff. challenger was already going to make it an uphill fight. this will give new energy to the tea party organs iris -- organizers in the mississippi.

jeb hensarling, out of texas, is he the guy people are looking at as a successor? >> i was getting e-mails and phone calls from people saying watch jeb hensarling. he is a fiscal conservative, known for his chairmanship of the house financial services committee. he has been talked about as someone who could fight or seize the leadership table. if he does it, does he go for cantor's job or does he mount a challenge to john boehner? that is where all eyes will be. this will start right away. we will not wait for next year for that to happen. >> continued a breaking news from bloomberg news. >> cbs is going to divest its stake in the outdoor america. the split off of cbs outdoor.

get $170. holder may 53 per share. 81% stakedivest its in the business. >> peter hancock. you may not know that name. it is an important name. , he will take up the reins at aig. he greatly assisted in the development of derivative instruments and works with robert merton. a bloomberg contributor knows him. i was thrilled when i heard this news. >> he was always regarded as a star. he was the cfo before the merger with chase. he everyone spoke well. this, he isve about

british u.s.. golf.not a guy who plays he is in the trenches of the business. >> he understands risk. that is an important thing for someone running a company like aig. you respond to the people who said he did derivatives, they are evil and bad, aig should not do that. >> that is ridiculous. ofeone who is the creators derivatives understands the risk. not mean they're going to go wild like they did with aigfp leading up to the financial crisis. this is the perfect guide. a brilliant choice. >> he has his work cut out for him. net income profits only 40% of

what they were in 2007. they sold off the crown jewels, the asian businesses. where do the profits come from. >> they are an insurer. they have been creative and aggressive. i assume they will continue to do that. they will continue to build. this is a smart guy leading this company at an interesting moment. if you think about it, this is one of the great turnarounds in american history. wereu thought in 2008 we going to get $182 billion back from aig -- >> the government actually got its money back. >> ins fades. this is one of the few bailouts the government got its pound of flesh in a smart way. stresss the way to financing should be done. it paid off brilliantly. riskwant to focus on the

management. he was in charge of the property-casualty unit. he said the unit was fed ready back in 2011. does that mean he says will give him a longer leash to operate? >> who knows what the feds will do. i would say aig has earned its way out of the penalty box. all of these financial institutions have figure -- federal regulators crawling all over them. does that mean they're going to get more leash and they had been getting? i think they deserve to. >> jeffrey rosenberg is our guest host. is the great moderation open? low yields, itto has not ended. >> it has not. i think we will transition into a new theme. markets can focus on one thing

at one time. we focused on the european moderation and the spread to the global i think we will talk about the new theme later this month. there is a meeting on june 18. we will talk about policy normalization. >> it is supposed to be a dull summer. first down day in ages for the s&p. -8. we go weaker euro. that is what mr. drawdy wants draghi wants.. up, a world-renowned fashion designer joins us. ♪

>> good morning, everyone. i am tom keene. suggests allbaum is quiet on the market. you have to love the bond. what do you mean by that? from dr. a scene strangelove. everyone was fearful of rising interest rates. fixed incomethe

markets is treasury rates in the back end of the yield curve when we were at 3% and 4% in the 30 year. it was a shift in focus that the steeping of the curve that we saw in 2013, a broad value back to where a lot of people have been seeing longer duration areas of fixed income market. now, you have to pull back a little bit. we had a big move down. we went from tree percent to 2.45. >> we had an ugly august a couple of august ago. vices were down and yields were up. quick thinking we are worried about is not so much the back end of the yield curve rated as the front end. the two-year treasury goes to -- >> something a lot higher. that is the normalization.

that could be very destabilizing to broader financial markets. there is a lot of complacency in the market. there is no volatility. for a shiftcushion in the u.s. monetary policy expectation. >> does your challenge with the yield, canning going to the equity market? >> a can. it is about the lack of any risk premium in the finance market. it is just more about whether or not there is a dislocation risk goes up overall. this time, it is in the front end of the yield curve. with you have confidence the old dudley and others, they can smooth the transition?

history of study the fed transitions. it is not pretty. we want to believe it is going to be smooth. you study the history and the odds are against them. >> jeff rosenberg with us. uber, coming up. ♪

>> good morning, everyone. adam johnson is with us. jeffrey rosenberg is our guest host. >> government forces have been driven out of the second-biggest city. the townconcern

holding the biggest oil refinery could be the next to fall. losingnt obama may be grip of his own. popularity falls to an all-time low. only 44% of those surveyed have a positive feeling about him. in the nba finals, the san antonio spurs pounded the miami heat. 111-92. they lead the best-of-seven series. san antonio shot a record 76% in the first half. >> made in usa. it rings true in the new york garment district.

one designer that is based here and still makes 13,000 to 16,000 garments a month in its warehouse in manhattan is nanette lepore. i want to start with this idea that you started the brand 21 years ago in new york city. moving the bulk of your manufacturing overseas. what is the competitive advantage of manufacturing locally? >> i have great quality control. i have control over inventory. things backd put into stores within two to three weeks. i have a lot more flexibility. it is how i learned to be in fashion. it has always been good to me. >> you are from youngstown ohio.

you started your business with a $5,000 loan from your father. do you think a designer could get their start the same way today? having the garment center in the factories and the ability to do small run manufacturing really allows people to do a startup business with a small amount of money. if you work out of your apartment or you take little things to flea markets or find a place to get around and do things in a creative way, it can be done. you can do it with 20,000. inhere is nanette lepore "the huffington post. andout the small factories personal relationships, new york designers will not be able to survive if the bottom line dries of of the characters out

nyc, there will be no character left. they have the seamstresses in the store. what is the number one thing you need from the mayor and new york state? >> what took us a while was to get people to understand you did not just need designers, but the designers needed the tools to manufacture clothing. of the fashionry industry was what we needed to support and to preserve. there has been an awareness and an awakening to that. they have started an initiative that gives money to factories to improve, to buy materials they need. there is suddenly this understanding. >> jeffrey rosenberg of blackrock.

>> i wanted to ask, the big question financial markets are dealing with, what is going on with the labor market? how hard is it for you to find good, qualified people to work in your manufacturing right now? >> it has always been a gateway for new immigrants. a lot of people come with a sewing skill. factorieseople in my are chinese sewers, but we work with my cutters in my cutting room are mostly hispanic men -- hispanic males. people come with a skill. as far as finding the more technical people like the pattern makers, that sense of understanding how to work in a trade, we are losing it a little. i would love to see more education and more trade schools back up and running so that people can earn a living using

their hands and building something. isis very rewarding and it well made. most of the -- it is well paid. it is not low wages. we need to respect our skilled manufacturers and laborers. >> what is your stance on minimum wage? >> it needs to be raised. it is only for the economy to make more money. i start people off around that anyway. other companies that have more volume can do it. >> would you rather pay people more at the expense of profits rather than having stuff made in china? thathave always had attitude about my business.

i work from a more personal level. >> nanette lepore, thank you for joining us. we will be right back with more on eric cantor's shocking defeats. ♪

>> good morning. down, -69. don't miss john erlichman here -- john erlichman. oculus be interviewing

co. look for that on bloomberg west. >> bloomberg television got a sneak peek of an interview with the ceo and chairman of chairman sacks. lloyd blankfein sat down with charlie rose about manic thing -- about managing risk. predict.hard to it is hard to get out of context and see what is happening. about the future, but we would not be a good risk manager if you let what you think was going to happen have too great an influence on what you plan for and protected against. what we do is contingency plan. what might happen, what could happen. >> and was saying how he is paranoid. >> he framed beautifully the forward expert patients --

expectations. he nails -- you have to set up a framework of what this. what is your what if right now within the bond market and within this historically complacent time? inthe biggest that we have front of us is what if we hear a different message out of the head next week, that it is not actuallyonger, but is the labor market getting better and we need to change the message. he markets are not ready for this. >> it seems like it has tightened a little in the last few days. >> it has tightened up a lot. volatility across all of those markets is at historical levels. you have a lot of complacency going on. times, how may times have you had to change your outlook in your forecast? not been a great secord for bond strategist

forecasting. we got the relative value right hummable with our rates are going to go higher and they went lower. been a lot of reacting. >> are you better off not listening to the fed? >> you have to listen to the fed. they control a lot of what goes on in the bond market. >> i want to mention a programming notice. you can tune in tonight on bloomberg television for the few -- full interview with lloyd blankfein. >> as you may or may not have known, cap drivers protesting massiveuber, creating traffic jams. atvia is in the thick of it trafalgar square. what are you expecting to see

today. the protests begin within an hour or two. >> they are promising chaos. they are saying up to 10,000 taxi drivers will descend upon for fall per square and parliament square to central landmarks in the heart of london, so if that many do show up, it promises to be gridlocked. in london, they are protesting against uber, saying it operates as a licensed taxi meter does. the specifics of the issue are different. this is a response to a successful start up innovative technology. we have about 30 seconds. i understand why taxi drivers are upset, but what about londoners and people on the street? quick everybody will say that consumers should have more choice.

this will be decided in the high court. what is happening today is symbolic. if i take uber going from here to notting hill, it is going to cost me about 30 pounds. it will cost me about 20 pounds in an uber. if you take a black cap, you get in the special lane. be safe, have fun, and come back to new york when you're done. used uber.ever have uber. -- you have pricing to watch that. they are better at notifying you about it.

let's get a data check. not a whole lot of economic date on the calendar. there is a monthly budget statement at 2:00 p.m. this afternoon. futures are down. the 10 year yield is also lower. surveillance is on our digital media, any numbers of ways to see us area try bloombergtv plus. you can find out on your ipad. i am tom keene. our guest host, jeffrey rosenberg. is theof our top stories republican party has been turned on its head because in a hasking defeat, david brat yesterday'sntor in virginia primary.

>> this is a loss that will have a lasting impact on immigration reform and on the future of the gop. a bloomberg contributor joins us now. john, make sense of this. there's a lot of contradiction. what is the message being sent? >> there are mixed messages. you do not want to read too much into this. if you ask eric cantor's colleagues, they are not that surprised in this sense. he did not take the election as seriously as he might have. he wavered on the immigration issue. that is always a problem in a tough campaign, to look like you're going back and forth. it does not turn the party upside down, it turns the leadership races in the house upside down. a big opening for younger members to move up.

it is likely that john boehner banner will be leaving in a couple of years. it will have fresh leadership from top to bottom. >> you know new hampshire is a nexus for republicans. in a few years, how will this change the debate as people migrate to new hampshire over the coming quarters? >> i do not think it changes the election debate. the campaign is going to focus economy and and the recent wounds like bowe bergdahl and the v.a. scandal. this is going to be an off year election. it is intensity driven. republicans look like they have that advantage now. mr. cantor is antiabortion and anti-gay marriage. bearing onave any

what might happen with the gop platform? >> not really. was a conservative candidate. the others that are in trouble , these lost this year are very conservative members of congress. this is not about less right. it is more about establishment. -- i think that is what caught up eric cantor. what discussion have you heard about the tea party splintering off from the republican party? >> none. you are the first person i have heard say that. to the candidates themselves, rand paul or ted cruz, who are tea party

figureheads, to ease in recent, they are going to say that we are republicans. they want to get the republican party focused on particular issues and move them away from some of the inside and baseball establishment stuff. it happens on both sides of the aisle. about someoneg who ran in the primary and beat him. who should we watch in the next three or four months? raises -- races or the national landscape? >> thank you. it is time to ask our twitter question of the day. >> with cantor out, who should be the voice of the republican party? >> does john boehner keep his voice as strong?

tweet us. we will talk about the frenzy for european sovereign debt with jeffrey rosenberg of blackrock. .his is surveillance bha ♪

>> good morning. i am doing my bracket. argentina, brazil. >> pick brazil to go all the way. >> i did not pick the usa scarlet, who have you picked? >> i am picking the rangers to win tonight. i am focused on the short-term. aig, a change at the top of the company. this is the company got the government bailout back in 2008. peter hancock will become the ceo in september. betty, you know the top guys at aig pretty well. you spoke with ben gaucher. ben gaucher, this larger-than-life character.

greenberg nownk -- and nowtion a ben. -- now he is stepping down earlier. that seems to be the biggest surprise. he said to me, i said i would set a date in february to make the transition, but i also said in order to make the changes at aig, it would be important to have a new ceo to run the company. the transition was taken to long. board five names of possible successors. there was too much conversation around the board about each meeting about who should replace him. he finally said, let's just make a decision and announcement now. decision notard's

necessarily is. hehe hinted peter hancock, favored him, he wanted him. it was a horse race between peter hancock and j win truck -- ipo pressure on the board to name a new ceo. there was too much conversation around a. jay, does he leave? >bob said that is a conversation that peter and jay have to have together. >> what about the weaknesses of peter hancock? is he a good fit? >> some say no. --e insurance investment investors say no.

an insurance guy. that may not be what you need for the next phase. the company is a lot smaller than it was five years ago before the bailout. >> thank you so much, betty liu excerptsus experts -- from our conversation with bob benmosche. we will be back. ♪

>> tomorrow, one of our most popular guests will joining us. he wants patients in the market as he buys value. we will talk to mario gabelli. we will talk about dow 17000. our guest host is jeffrey rosenberg of blackrock. let's get you company news. microsoft is going to court over a government demand for customer's e-mails stored overseas. microsoft objected saying because the e-mails were stored in ireland, they are beyond the

reach of the search warrant. microsoft is asking another judge to report -- to reverse that court order. big blue will team up with ethics systems to go after an $11 million project to manage health records. google wants to be a bigger player in the energy business. software andding hardware to manage power lines and other infrastructures. utilities deliver energy more efficiently. that is today's company news. >> to be a fly on the wall. .erkel will meet with draghi of blackrock,erg there is a frenzy for fixed income instruments. let's start with why. bonds are up, yields are down.

ofre will be a shortage bonds. it is here, isn't it? >> there is a shortage of bonds. there is a bid to that story. you have a decrease in private sector borrowing. munis have gotten better. government related death has not been the story. large at historically levels of deficit from the united states. what is really going on, we have not been talking about the supply story of bonds, but the supply of money. mario draghi is providing a tremendous amount of money creation. that is what is driving lower yields. he is directing it at specific areas. >> the spanish yield -- >> it is a hockey stick move. to our listeners and viewers who are not rock stars like you in

fixed income, this is financial repression. when does it end? it is an unfamiliar idea. the idea is basically that change banks actions can what you get out of financial markets. the price you are seeing in europe are not real prices in that they reflect private marke t actors, but the big bank having huge support by providing low financing to do that. the idea of when does this end? five years? europe, it is a long time. they are getting further into financial repression. in the u.s., we could be exiting financial repression and getting towards normalization and interest rates. that will bring interest rates away from the zero.

that is going to be the new story going forward. normalization and the fed. >> this is what we like to see. blackrock does not agree with pimco. i have seen this continue for decades. to address a financial crisis and you don't get yourself out of the sources , youe financial crisis rely on financial repression and you have a 20 year period of low interest rates. what the u.s. did was fundamentally different. we talk a lot about aig. the problem, you fix it, you recapitalize it, sell off pieces and move on. we did that to our banking system. we are recovering. to a higherer interest rate. how quickly and to what eventual level?

>> there has been coordination for the past three or four years between all of the central banks. if the u.s. decouples, that will rock the boat. >> you have a disconnect. the u.s., but the boe versus the ecb. currency volatility, we talked about common the market and low volatility. currency volatility can expect to go higher. >> the dollar should go higher. >> it should, but it has not. the second half of the year, a for we get better economic data, you will start to see some of the currency volatility. >> what will you be focusing on peer -- focusing on? headline that everybody is focused on. it has basically been averaging the crisis.0 since

you have to pay more attention. it shows a huge collapse in slack in the market. they think there is a lot of slack. there is a disconnect in the markets right now. >> i have to ask you this question. how slow is wall street? we cannot get a handle on it. spirit that is out there. >> wall street is an intermediary. youolatility is happening, have a reason to change your portfolio. all at historic

low levels. that is the challenge to wall street. without volatility there is not a lot of trading. it is the trading side that is hurts. that is a cyclical factor. we will not be at a historical low levels across all markets at all levels. >> capital markets need volatility. let's get to our agenda right now, where we focus on the stories shaping the day. new york rangers have to get it done tonight to avoid being swept by the la kings. >> it was a privilege to speak about the nhl. i would kill for the rangers to win tonight. you say about the goal and 82? it was a judgment call.

>> my agenda is far more serious. we will get to that in a moment. , to get out the map and see the square footage that they have taken. now, working north. the key thing would be the buttressing of baghdad. can they get their act together to push against this serious incursion? in30% of the american losses and now the mosul city is lost. was it worth at all? thanks to ian bremmer for ripping up his schedule for us. >> are we going to hear from eric cantor? how is he going to respond? margin.by a large he is gone. what does it mean for the republican party? >> it is so mixed because the

fact is -- my take away, and i itnk john sununu said perfectly. -- with his own constituents. >> let's get to our twitter question of the day. with eric cantor out, who should be the voice of the republican party? the first one was rand paul. how about this 1 -- jon huntsman. tohink he is to reasonable be elected. another tweet, milton friedman, too obvious. ok, reagan. >> reagan, would he be a moderate today? >> almost on the left, it feels like. >> so much of the platform has

become -- >> we need to say thank you to our team for the last 24 hours of work. >> jeff rosenberg joining us from blackrock. "bloomberg surveillance" continues on radio. in the loop is up next. ♪

>> good morning. it is wednesday, june 11. we are live from bloomberg world headquarters. you are "in the loop." i am betty liu. the loop,rg is in

-- weighing in on pay. what does he think of salaries now on wall street? also, neel kashkari, who worked feinberg with the treasury department. for governorning in california. after the stunning defeat of eric cantor, what is neel kashkari have to say about his own party, the republicans? the insurance company rescued by the government is getting a new ceo. toer hancock promoted replace rubber band goucher. -- bob benmosche. i spoke exclusively with him last night. we will bring you thoughts on that change. two pa