the fed, they meet. are they behind the proverbial eightball? adam johnson needs a new belt. that is an exclusive. this is "bloomberg surveillance." world live from our headquarters in new york this wednesday, june 18, i am tom keene with scarlet fu and adam johnson as well. >> what is wrong with my black belt? classic kind of guy. >> it matches my shoes. >> you need a mickey mantle read. overnight, the bank of england expressing concern, surprise perhaps in the minutes by the markets low perception of a potential rate rise in 2014. they're saying, market, wake up, we might raise rates sooner.

that is a big deal for the bank of england to say that. >> it is in the mix today. >> central banks in both norway and thailand expected to keep their rates steady this year. in the u.s., 7:00 we have the weekly mortgage applications data. a: 30, the current account balance. the big one at 2:00, the fomc rate decision. everyone is talking about this one. make sure you tune in to bloomberg television at 2:00 for our special coverage of the fomc rate decision and janet yellen's news conference which will be at 2:30. this is special coverage today. >> i will be there. it see what they will do or not do. >> and the dot pot forecast. >> i am bored by that.

>> you are bored? >> we had fun with it yesterday. >> like this dot chart? this, thert like rest of them are down here. they move around. >> where is janet yellen? >> you don't know which dot is which and you don't know when they move. earnings, believe it or not, federal express is today at 7:30. after the bell, red hat. mary barra facing lawmakers yet again in washington at 10:00. go --g that just seems to 20 million recall so far. >> i've lost count. let's do a pre-fed meeting good as jack. you have to be aware of where the dow is.

10 year yield is elevated. we will talk about the two-year in the second. oil slightly elevated. events in iraq, obviously. the vix shows how it is resilient. the two year yield in a bit. that.look at a shorter-term yield. here is normal. down we go. you can see once again we spiked up, mirroring the new core inflation number and breaking out of this would be a huge deal. months?ighest in nine >> back to june 2013.june 2013. that is the tension. 2:00 p.m., mark crumpton leading our coverage at the fed.

scarlet fu has the front page. >> with iraq, the white house signaled airstrikes on iraq are not imminent. president obama bracing congressional leaders and the option trying to keep iraq from falling apart and becoming a civil war from a full on civil war. he emphasized he favors political steps before taking any kind of military action. both the nfc in the pentagon said last of the president has not made up his mind on military action. the forces continue to converge toward baghdad. jumble ins more of a the news. there is not a theme. post" isington different than "the new york times" is different than ."loomberg news >> you had the sunni militants were marching on baghdad and the

government of baghdad is primarily shiite and yet you have other partnerships with other sunnis. you almost have sunnis against sunnis. i mean, it is very -- north.ish forces in the >> yes. >> one thing that has coalesced in the last 24 to 48 hours as the leadership in baghdad is really trying to get a grip on authority within the shiite community. that is been a major change. >> it is a story we will continue to monitor. tensions are easing in russia and ukraine because russia's president spoke with ukraine's new leader about a possible cease-fire. vladimir putin had a phone call a day after gas supplies were cut over unpaid bills covering not just the cease-fire in ukraine where there has been fighting, poroshenko once the insurgents to leave and was a buffer zone along the border with russia. sounds like progress. >> for so long it had been falling apart.

anastasia was telling us yesterday as long as there's discussion going back and forth, that is a sign. >> i want to say, it is amazing how firms can put a muzzle on people. i give jpmorgan major credit for allowing heard is the about her childhood in russia, summering in crimea. most major firms would say, you can talk about that. >> she is russian and also u.s. stock strategist. a company story we have been following, general electric sweeping a bit as it tries to win the battle for energy assets. according to people from a with the situation, ge will plan vestments and nuclear technology. the journal has a bit that says they mail/-- mazel train as well. >> i'm confused. >> g differentiated its bid from

what seem is put forward. >> you're much better than i am. do we know he wants to acquire whatever hog -- >> they want job guarantees. isseems the economy minister leaning more toward something that would create two european super companies. >> unbelievable. was that our front page? >> that was our front page. you have on your ranger's blue? >> i am kind of in mourning. >> on the federal reserve, thomas porcelli, rbc capital markets joining us as we moved to 2:00 him this afternoon. also with us on consumption in the spirit of retail, the chief executive officer of marvin trop associates. two different worlds linking.

i look at the raging battle in my conversation with lagarde in what is this subdued potential gdp or actual gdp and there is a set of optimism that pushes against us. where are you? >> over what time frame? over the short term, i think it will make an argument for trend growth of about 2% in the united states. once again be on the next 3, 4, 5 years, trend growth will shift down materially in the u.s. got closer to 1.5% because of the demographic dynamics. >> is there any expense of any central bank or the federal reserve able to gain that shift? >> the reality for any central bank is, central banks don't really respond to structural issues. they respond to cyclical issues. even in an environment where i can easily build out a scenario where shifts to 1.5% in u.s., even with that growth, you could

still have some inflationary impulses and that is also what the fed will respond to. your idea of consumption, you're knee-deep in it. to review, winter and spring did not happen. >> winter, for various reasons, was incredible because everybody blame the weather. in general, the consumers are feeling pretty good. the housing situation is good. we have to keep an eye on oil. ultimately, things are looking pretty promising. >> average illustrate its customers to wait until things are 40% off, 50% off before pulling the trigger? >> the particular cadence of markdowns continues to be the case. the training of it, but ultimately, there is a science to it which has been perfected. >> you said something that really kind of stopped me in my tracks for moment. >> should i feel honored by that? does it take a lot or little?

>> this is a lot. you said we're slowing down long-term to 1.5%. as i listened to morning talk about consumers, where do you come up with that? >> is straightforward. it basically mask -- math. the working age population in the u.s., the population growth rates for that is down materially. probably speaking, if you look at the growth rates for the population of the united states, we were running north of 1% for decades. now we are going to be downshifting to have percent growth. that is sort of a dynamic. speaking, that is what basically causes this issue. >> morty singer and thomas porcelli with us. getting you ready not only for trading this morning but the fed meeting at 2:00 in mary barramotors plans to tell congress you want except business as usual. she is questioned today about why jim did not act sooner to

fix a faulty ignition switch that was linked to at least 13 deaths. shoe aisle on the steps she has taken to work quickly address safety defects. united parcel service has joined fedex and changing the way charges for practices -- packages shipped by ground. they stone size and weight. -- based on size and weight. discouraging online retailers to ship small, lightweight items within large boxes. the world's number two fashion retailer reported quarterly profit revenue that beat estimates. h&m said earnings were up 25%. they plan to open 375 stores around the world this year and will also add up to 10 new online markets. and that is today's company news. h&m seems to been behind the ball on the online part of this business. why is that? >> any of the vertical retailers are trying to shift people to their stores and now realize on

the channel business is five times more valuable than -- so that customer who shops everywhere in something hugely profitable. >> when was the last time you stepped foot in h&m? >> help me out. is a little too loud, right? >> they have djs in the window. it is like disposable clothing. one season. >> but globally, they have permits all of the world, go direct themselves. we get a call a week from somewhere saying, get as h&m into our territory. >> how quickly does a place like h&m get it in the showrooms? is it weeks? >> we touched on it last time, but ultimately, everything happening in any given fashion week ends up in h&m stores two weeks after. >> and there's no copyright? is a copyright infringement? >> it is inspiration.

>> it is fabric and thread. >> coming up, a big day for amazon in seattle. jeff bezos is hosting an event. will he unveil a new smart phone ? that is the scuttlebutt. our twitter question of the day -- it?hat time is i need to buy a book. >> this is "bloomberg surveillance." we will be right back. ♪

>> and morning, "bloomberg surveillance." we try to bring you the best.

we continue our discussion on meeting at 11:00. look for that on "market makers." good morning to you worldwide, i'm tom keene with scarlet fu and adam johnson. scarlet, you're in the business of a new watch. >> smartphone. i still have my iphone 5. it is been seven years since apple released a smartphone and transformed industry. jeff bezos is expected to unveil apple's first mobile phone at an event in seattle later today. >> why do we need another phone? >> amazon wants to build on its own platform. it has a couple of other things that differentiates it like this prime membership they can draw from and really maximize revenue on it. the devices drive digital

content sales and drive subscriptions, and that is ultimately what amazon wants to leverage. >> good luck. amazon -- apple and samsung, between the two of them, they control about 3/4 of the smartphone market in the u.s. and about 2/3 of them are -- >> nice chart. >> it is a crowded marketplace. >> good like raking into that thing. you think about how many different phones have failed trying to do so. the most notable was the blackberry 10? >> put that chart back up. i don't like high charts, but this one rocks, green and red is the dominance of the market. >> people like victor anthony say there's a wide-open opportunity to grow the smartphone market in china, and the emerging markets. in the u.s., it is pretty saturated. but if you go abroad, that is where perhaps amazon to make a difference. we've seen lots of phil years and lots of failed attempts to

do just that -- failures and lots of failed attempts to do just that. her number the facebook phone? the htc had the phone, facebook had the phone, google -- was very popular. >> that were practically giving those away. >> amazon could potentially give away something like free delivery of purchases. and you wonder whether survival -- and then there is price. >> they're saying it is going to be $250 to three under dollars. -- $300. if they get 1% -- actually one billion smart phones sold annually around the world, if get 1%. on retailer, first mover status and the wobbly status. is there any room in retail category, certainly something as

depreciated as smartphone, for a third, fourth player? >> what is interesting, given operating system and you have a hardware. in this case it is amazon's operating system effectively because their hardware which is separate from that. i think the way they're going to actually do this is convince people it is worth buying this phone so they can get access to the tv shows, music, the books and all the other content it provides. >> and a discounted price. >> you're going to have to buy into the 100 dollar prime subscription. the question is, how many of the new customers will buy prime as well? >> i wonder if it is the secondary phones for people. >> give me an amazon prime app on my phone and i will respond. >> we will check in with cory johnson later who will be covering the event live when it happens this afternoon. this brings us to our twitter question of the day --

quicksilver but a 20% discount on everything at amazon? >> good luck with that. >> tweet us. >> can you imagine walking down the street with a 3-d camera? you would make yourself dizzy. >> coming up, david winters. his take on coca-cola and what he sees next for the ceo pay their. ♪

>> good morning, "bloomberg surveillance." let's get to the top headlines. leader inpected benghazi will not be sent to the

guantánamo bay prison. the suspect was captured by u.s. special operation forces in the via but instead will be taken to the u.s. for trial. the attack on the mac and facility in benghazi killed the messenger and three others. the obama administration is signaling airstrikes in iraq are not imminent. president obama reads congressional leaders on u.s. options in the latest fighting. sunni muslim rebels are about 34 miles from baghdad. talk about rising postal costs, last night in new york city, a world record price for postage stamp. are you sitting down? a stamp from 1850 614 $9.5 million. >> bill gross, i bet he was bidding. >> probably the deepest pocketed stamp collector of all time. it was sold by the estate of the late multimillionaire dupont.

those are the top headlines. >> let's get to the morning must-read. >> it is from bloomberg businessweek's upcoming cover story i'm a an inside look at the clampdown on aegean whistleblower who got the ball rolling or thought he would want to figure out there were problems with the ignition switch. cortland kelly was the safety inspector at gm and raised concerns and try to go to the company, did not get very far. there was a deposition held with gm's outside lawyer. here's an excerpt from that article -- he sued the company and did not get very far. he was pushed around, moved to different parts of the company, tried to basically he brushed aside. >> this is an article that does something on the headlines.

>> it digs into the story and gets to the people involved who tried to make a difference and could not get anywhere because of the culture. they even called today gm not. everyone is in a meeting and decide something needs to happen, but no one does anything. this is the upcoming story of business week. check out the latest edition available on your tablet tomorrow. because online tomorrow. on the be back with more federal reserve because the fomc into its two-day meeting with the rate decision at 2:00. >> coming up, i will do the "surveillance" not. ♪

>> good morning. i am tom keene. how about a fed day data check? there's nothing going on because we're waiting for 2:00 a.m. -- 2:00 p.m.

bitx crude is a little elevated. abovecrude, i need to be 115 to get my attention. we're not there yet. janet yellen and the committee will try to not move markets this afternoon. i will join mark crumpton in the 2:00 hour. the immediate backdrop is rising inflation. nevertheless, plosser philadelphia richmond, feldstein from harvard, they're losing sleep. , are you losing sleep? a i'm losing sleep because of 12 week old at home. >> congratulations. --but other than that >> the only child in america not

singing "let it go." >> he can even talk yet. >> but he can scream really loud. >> the vector has changed on inflation? >> we think it will continue to drift higher. clear -- by the way, there are a lot of great little nuggets in anchorage and went to read it. one thing he was clear, they're basically willing to let inflation drift tire and remain north of 2% for some period of time. world imf during the three years ago or so with 4% inflation. what is high inflation for yellen and her colleagues for those opposing such as charles plosser? >> we can create drama -- >> but what is the number? >> it is not necessarily getting to a number. i think it is how long you stay at that number or north of that number.

i think that is the real question. at this point, is a great example of how they're not going to drift in terms of their thinking. we expect 2.5% on headline inflation. for the better part of the year. that will not sway their thinking with regard to policy. you're talking about a solid five point period. >> are you into 2016 for any kind of rate increase? >> we are. >> you have the chart of the day. >> thomas porcelli gave it to us. you brought this chart to show us how investors struggle with getting the actual path of interest rates correct. >> this is a chart of my eyebrows. what are those lines coming up? let's explain this. >> i'm going to start calling this the eyebrow chart. let's make this simple. this basically shows the actual path of fed funds, the dark

line, and the dotted lines are expectations for the direction of fed funds at the specific times. what you can basically see is the market almost always get it wrong. we have this chart back decades and it is always true. >> i see this across wall street, folks, a single point of the chart in time, say christmas of 2012, the dotted line is, what is the guess at that time where janet yellen or ben bernanke is going. the headline is, they have been wrong. >> absolutely. is universally wrong. it is interesting we put so much emphasis on these dots from the ,ed and we try to understand there are 13 members that think there will be a rate increase in 2015. let me ask you, if you look back at 2012 when the fed started to make this public, does anyone want to guess the number of fed officials that actually thought you would have an increase before 2015?

11. 11 fed officials thought you would have a writ increase before 2015. now we're going to coalesce in the 2015. that is the point of the chart, too. it.ou your self address i weighed to clarify this. ultimately if during q&a today, this janet yellen is pushed, we think she will of knowledge the reasonableness of a midyear liftoff. she believes in the dotted lines two, in other words. >> i think they all do. they want their key policy pool -- it is one of their key policy tools. referencing that dudley speech a moment ago, he basically said, it seems reasonable we will have lift off sometime in the middle of the year because basically, most fed officials think that and the market -- >> the way -- >> that chart -- >> this year, 2015. next year, thomas porcelli is out even further. >> we expect the first hike will come in 2015 and start to get into the ramp up period in 2016.

books i wanted to find lift off. is it market expectations or actual rate rise or the economy turning as well? has would argue the economy already turned. not to the degree google one, nevertheless, -- not to the people want, but nevertheless, if you think about the average recovery is about seven years, in theory, your two years away from the next recession. but we would argue given the fact there is this lack of and balances in the system right now, you'll have a much longer than average economic -- >> morty singer. to see any indication on economic slowdown? brands?, the cheaper >> for the time being, it will still be about luxury. the midmarket will still be squeezed. luxury is on fire globally. the luxury consumer is just rolling. fox they're not really dependent

on what the fed says or does. beyond janet yellen, there are a lot of officials who say things about the market and somewhat the fed should do. some of them vote and some don't. ,losser, dudley, fisher fischer. for those who don't follow every single move and everything they say, who carries the most weight? >> there is a core member of the federal reserve, yellen is part of that, but dudley is absolutely part of that as well. the new fisher. -- fischer, we presume he will also become part of that core. there are a few members you want to pay attention to. that dudley speech, for the third time, a really resonated because a lot of the agency was suggestsome new, to us janet yellen is also in that camp. >> bring this back to mere mortals. the idea of all of this discussion is the continued

financial repression. when do rates go up? when do retirees get a break? >> one of the things we're been expecting is the 10 year yield will start to rise before the end of the year. a 288,000 initial print on jobs two months ago. you had to under 12,000 jobs last month. yet yields have done the exact opposite of what you would expect on those days. as a result, we've had to scale back expectations for where we expect a 10 year yield to finish. the fed, part of the bigger conversation we're having today, the fed left off in the middle of next year. we think they do, but once they start that liftoff process, it suddenly so as to keep rates generally speaking across the curve low. >> the headline from bill gross, he is modeling a decade. >> one of the big headlines last week was mark carney of the bank of england changing is line which a bit too signal interest rates will rise sooner than people expect.

did he change the way they communicate to investors? >> there is this fishing expedition to some extent by the central bankers for transparency. transparency.ive in theory, transparency is a good idea but in practice, you can get tricky. you have a lot of voices out there. i think that can add to the confusion of this process. it is important is to focus on a few key members. i think that is generally worry we'll get the path of policy, the direction. >> thomas porcelli with us from rbc and morty singer. 2:00 pm, i'm thrilled to join mark crumpton will have our coverage, our special coverage of the federal open market committee rate decision and chairman yellen has a news conference along at 2:30. that will always make headlines. particularly with the imf has done on a very cautious outlook. it will be interesting to see where the chair, the president, and the governors lineup at the

fed. >> what will she say about inflation yesterday we showed we had inflation and if you've been traveling by plane, you're feeling it. our single best chart on this is next on "bloomberg surveillance." ♪

>> everyone in this shot has a

hangover. they were parting in the west village last night. it president visiting new york city yesterday afternoon. it is a gorgeous, hot, humid day. >> it is going to be 88 degrees. >> you said you're wearing seersucker under your blue blazer. >> this is "bloomberg surveillance." i am tom keene with scarlet fu and adam johnson. >> we're going to start in russia were president vladimir putin is talking cease-fire in ukraine. he discussed a possible and to a still lose with the new ukrainian president. ukraine says there are about 20,000 pro-russian militants in the southeastern part of the

country. poroshenko once those militants to withdraw. california will not become the first date requiring warning labels on soda and other sugary drinks. the state senate effectively killed the proposal. they doubted it would change consumer behavior. record viewing audience for the u.s. win over ghana at the world cup. espn's has 11 million people watched the match, making the most viewed men's soccer match ever on the network will stop was also the highest rated telecast for espn. >> they needed to include univision ratings as well. >> people are glued to it. >> there into it. >> mexico and brazil today. that is a huge deal. if you're in the european restaurant -- >> on the upper east side. i was the only american in the place. people were going nuts. the comments, morty, you can

speak of international flavor here. >> thank you. >> this was huge, that mexico actually tied brazil. that is gigantic because mexico is opposed to lose significantly. >> absolutely. the other thing about the fever regarding america, i think america will win it within the next room and maybe not this time, than but i think could be next time. >> really? >> i'm calling it. i think americans are going to get behind it. it about the 13-year-olds now getting behind this. >> i was at a french hotel before madame lagarde and there were three games in a row. by the second game, everyone is totally smashed. butt is an excuse to party, it is a fun party. it was a good time yesterday afternoon, trust me. >> we the single best chart. $840 dollars to lax.

>> did you buy the tickets? >> no, it is outrageous. scary picture for frequent flyers, the cost of living u.s. is picking up pace. are rising prices. airfare jumping a must 6% in may from april. just look at the far right corner from the section of the chart. see the one-month increase, the steepest in 15 years. from year ago, rose 4.7%. demand is outstripping supply because of consolidation. .ewer seats available adam, you just flew back from denver. every single flight is packed. >> every single seat. and not just frontier. southwest, delta, i mean, they were just jammed. >> assumption is, someone starts phrase, people express, ken. can they get the gates? heathrow, thet

queens terminal over there, they need a third runway to make it work. they don't have it. >> tickets are outrageous. >> and affairs are unlikely to come does fuel costs are rising with attention in iraq and russia and ukraine. >> as i've noted several times over the past several months, the ceo of united told me for the first time ever the airlines are being run as businesses and not as public services. >> thomas porcelli with us. rents, how are they doing? are they airline-like? >> they are. it is not a new story, but we expect that will continue. it is one of the reasons why we expect you'll actually have this higher headline inflation over the course of the next several months. a few factors, food prices are rising from energy prices, rent prices, medical care costs.

these components in particular will conspire to put pressure on inflation first --for sure. >> thomas porcelli, thank you. >> buckling down because of former wall street worker is picking on belts becoming the next big men's fashion. ♪

>> this is "bloomberg surveillance." let's get you some company news from the files of bloomberg west. close to an agreement to buy micros systems for more than $5 million according to people familiar with the matter. it would let oracle ceo offset slowing growth by adding software for hotels and restaurants. youtube will start blocking music videos from labels that haven't signed up with its subscription service. that involves about 5% of the labels it works with. it will allow servers -- to listen to music or watch and they're not connected to the internet. yahoo! has its first diversity report. of the workforce is female. 77% are men. 90% is white or asian.

companies news. >> he is the doctor with a harvard mba who then went back to design school and launched the company that makes only one thing -- belts. he is andrew heffernan and joins us now. with your education, you could do anything and you chose belts. why? >> i've been a part of menswear since 2009. i was a consultant before that. i've been watching the market for quite a while. menswear is growing faster than womenswear. the fastest-growing part is accessories. if you dig into the numbers, most success groups are growing at double digits. stocks, tie bars, bracelets. the one category with an accessory set a zero growth is the belt. you ask yourself, why a group of

accessories with multiple or with double-digit growth, why is the belt at zero growth? we believe there has been zero innovation in a depressed market. >> i'm only one of the table that remembers the miracle that was coach belts, out of nowhere. they made a leather skinny belt. i'm going to say 30 years ago if not more. for four or five years, that is not what anyone wanted. how do you get that junk condition were having a better in "theyou need to get new york times" or womenswear daily? what is the step? >> we believe this is a product story. there are two aspects. we do particular belt. it is a stretch woven belt with no holes. it stretches up to 25%. >> thank you. >> this much marketable belt, much more adjustable belt that fits you with your traveling or exercising or not exercising from a much more comfortable fit. the second part, it is a much better build lenses help to

better design. inbelieve a belt should be expressive accessory. if you think about what men are doing to express themselves treat excess risk, whether it is a colorful bowtie or lapel pins. >> i will say, i was a doubter. that is a cool belts. and it stretches. can i literally just walk into a store that is only belts? ofthat a profitable use store space? >> take a look at socks. they sell in 70 countries. they have 14 standalone stores. they will do about $170 million. for years.round a tie only company, they started a few years ago by couple out of chicago. they sold private equity for very large number.

this and itook at says tommy hilfiger. which brings to have to associate with and what cultural group jump starts this business? >> i don't think it is cultural at all. it is loyalty. the men's market is about going to back to something they trust. classification specification, which is about being an expert at one classification, him in particular. -- men in particular. the men's brain is trying to pick something that does incredibly well. then there's the charity angle. cancerthe pen down charity. something they can rally around. branding within my classification businesses. >> is this moving and nantucket

or the vineyard or the hamptons? >> we see ourselves different from those companies that do occasional morsi seasonable belts. we believe ours is sort of for every occasion, every mindset, every stop. we have 80 variety online right now. >> scarlet, "game of thrones" belt? >> you need a wolf on there. you need the lion. as tom mentioned, tommy hilfiger, it these brands try to expand to become a lifestyle brands and offer all kinds of things, not just apparel but also accessories. won't you be tented at any point to expand to something else, whether it is bracelets or others? >> we believe there is enough growth in the belt category -- >> $3.2 billion? >> in the u.s. and 80% is probably men's. it has seen zero growth since 2007. our western is, can we kickstart growth?

it is not about market share -- >> growing the pie. >> can we make sure guys have much more belts in their closets. , $3500 per square foot, just eyeglasses. is this the future worry to specialize in one thing and do it really well? >> that is absolutely right. even in the big retailers, j.crew, we talked a lot about j.crew, they're talking about using classification teams within their stores. barber or anyike of these guys to build the key classifications. >> are you going to go to women's belts? >> we've already seen 30% of our sales go to women. >> i could wear this. >> you are all over it. >> but it is -- >> who were you wearing yesterday? andrew heffernan, thank you.

it is the belt and suspenders report. brazilian rial weaker overnight. >> coming up, value activist will be our guest. ♪

>> the shiite leader of iraq and

baghdad coalesces power. the executions of sunni prisoners single new divide. president obama considers selective airstrikes. the fed meets amid rising inflation. is the fed behind the eight ball? searching for value in the bluest of blue chips. could coca-cola go private? good morning, everyone. it is wednesday, june 18. i'm tom keene. joining me, scarlet fu and adam johnson. our guest host, david winters, founder of the wintergreen advisers. overnight, the bank of england expresses surprise in its minutes. the markets low perception of a potential rate rise in 2014. norway andks in thailand are expected to keep rates steady this year. economic data in the west just out. -- nba mortgage applications

>> down almost 10%. after being up 10% in prior weeks. >> very volatile number. at 2:00, the fomc rate decision. in.want to be sure to tune you will have the rate decision and janet yellen's news conference which begins at 2:30. tom will be joining mark crumpton today, talking about what the fed has to say. we have some earnings at 7:30 coming from fedex. after the bell, red hat. gm's ceo is back in front of lawmakers again today. scarlet, there you have it. inwe have general electric talks with france about its ge will refine guarantees on jobs, investments and access to technology.

they made a competing offer. train signaling system as well. shares of adobe systems up close to 10% in premarket trade. it added online subscribers to the faster than projected rate in the second quarter. adobe has been pushing its cloud services. amazon unveiling its first smartphone later today. at&t will be the phones exclusive carrier. at&t was also the sole carrier for the iphone for four years. which brings us to our put a question of the day -- twitter question of the day. features would make you switch to an amazon smartphone? the 3-d camera? >> it would make me dizzy. price.is all about >> it's an important question.

they continue to advance. with iphonecome out six and android will come out with whatever. more and more, i see this on sidewalks. the look down at your phone while you are walking around. >> now you can shop, too, apparently. >> we are in a bull market. holdouts.a few they are in cash, getting crushed. how can there be value after 180% move? the fed wants you to buy stocks. you did, i did. big tech is cheap. david winters is controversial. we will talk about coca-cola and all of that hearing a bit. he making comments on coca-cola. let's talk about valley right now. growth versus valley. was winning? >> you can win both ways.

people are so skeptical. they don't believe the world is coming back and their earnings are getting better and they are more -- there are more deals. are underfunded in our retirement plans. maybe equivalent to 60%. ,his is a national failure national disgrace. it used to be with franklin templeton and all that. if i'm going to go in with an advisor or not with an advisor, how do i get ahead? headway leapfrog play better position? how do i leapfrog to a better position? >> you are right. underweight in equities. they are the only way to create wealth over time. people need to start taking money out of cash, leaving the fear behind and finding an

investment manager they have confidence in or the dreaded index. >> did you see that number yesterday? 40% in cash? unbelievable. >> that's called disbelief. i look at the data myself. if total return index him you were to reinvest dividends, that would account for 51% of total return. dividends. why don't we talk about dividend stocks? this is one of the best shows on television, anywhere. you talk about what's important. dividends matter. versusbird in the hand -- we love dividends. >> is apple a dividend? >> i guess. the challenge with something like apple is they have to keep

coming up every six months with a new play. that is harder than investing in companies that make dependable, boring product. tech companieske very much. you are skeptical of them. as it trieslue-chip to transform itself into a services company? what do you have to say about those big, old tech names like ibm and oracle and apple? >> it is tough. we own some google because everybody uses google. when they're walking down the street, they are probably on google. they have replaced the newspapers. we will by tech, but so many of these companies get blown away. >> can they buy their way back to growth? oracle is looking at a deal for $5 billion. it is hard to buy your way to

growth. some have done it, but it is easy to lose your way. >> one thing you have been known for his broad, secular views. one of them is mining. iron prices doing so poorly in china. in hydrocarbons in iraq, is there value there? exxon is fine. it might not be extremely stimulating, but you get data weight and it grows a bit over time. we own a company called canadian natural resources. alberta, safe in place to do business. they have 50 years of reserves. it's an oilsands business. andrades at a big discount you can go to sleep at night knowing your oil -- >> someday down the road, you will get a payday. >> we already have. oilsands -- oil has to be $95

in order to be profitable, right? >> go to their website. they make money at lower prices. they are very smart and shareholder focused. >> i want to talk about the coca-cola idea. have you been surprised by the uproar over your comments on coca-cola? whole issue the with this excessive compensation plan. the company has never justified for why they needed -- i think it's been universal that people have said, this is bad. -- there have been comments in the last six weeks from the largest shareholder that he wanted to buy the rest of -- >> what's his name? >> warren buffett. >> to have been comments in the brazilian press. in today's wild world, you could have an lbo. you don't know, but you do know

that it's and under managed business with a lot of assets that has not performed. to me, it's the idea of cash generation. >> coke has done better than its rival, pepsi. you own 2 million shares of coca-cola. small when you compare to warren buffett. do you plan to buy more coca-cola shares? >> we like the company. i just got back from asia. every country you visit, coke is there. the potential for coke to grow is enormous. it's a cash machine. now live in a we world where prices are beginning to go up. >> is their beef with the compensation or the way it's run? >> it's partially comp. the company could be a lot better run. they have been completely silent.

there has been speculation about a takeover. >> are you a shareholder activist? >> no. when something happens at the company that we don't agree with, we do something. >> like carl icahn. david winters will be here throughout the hour. we will get to coca-cola in a moment. data check at 2:00 p.m. this afternoon. oil is elevated. that bears watching through the morning. we can to me that conversation on what david winters has to say about the executives at coca-cola. ♪

>> good morning, everyone. host, david winters. he manages the wintergreen fund. on cash.sed rising dividends are past their due date. lord corporations continue to shift cash back to shareholders. a great non-call for the first quarter. it still continues. you go to work everyday assuming the party continues? >> if you own the right

businesses with the right management at the right price, we call it the trifecta. life gets better. >> and i write that a properly grown company, you essentially asrt with a 7% yield you see what they do with their cash? >> absolutely. they should generate cash and the cash is the shareholder's money. if they are smart about it, hopefully they grew that coupon. >> it goes back to total return. you do you live in a single-digit world? 2-3% yields. if you are lucky, you will make 3%. we have not seen that. what kind of world is it? >> returns are going to go up. inflation will go up. if you own the right businesses

that have the ability to print a coupon, yourwing returns can be very favorable. what did you learn from john templeton? >> he was an amazing guy who said you have to look all over the world. you can't just sit in one country and select from those securities. world -- i dynamic just got back from asia. there is so much going on. use u.s. multinationals as a proxy for emerging market investment? .> it's a fine way to go if you are trying to get your confidence up. there are fabulous companies that are domicile. we love denting overseas. overseas. it is a first-class company. we find that we can dig around and find these great businesses

that trade cheaply. bloomberg surveillance exclusive. betting on horse races. with us through the hour. we will get to coca-cola in a bit. amazon is expected to unveil their smartphone. we have cory johnson. --t features would you like would make you switch to the amazon smartphone? ♪

>> good morning, everyone. it is fed that. scarlet fu and adam johnson with me. david winters, founder of wintergreen advisers. a lot going on today. -- it is fed day. let's get to our top headlines right now. here is adam johnson. the leader of the attack on the u.s. diplomats in benghazi

will not be sent to guantánamo bay. the suspect was captured by u.s. special operations forces in libya. he will be taken to the west for trial. the attack on the american facility in benghazi killed the weston master and three others. the obama administration is signaling that airstrikes are not imminent. obama briefed congressional leaders on u.s. options. sunni rebels have captured towns in iraq and are 34 miles from baghdad. sold ay's, stamp for $9.5 million. those are your top headlines. >> did you ever collect stamps? >> no, i never did. i'm not sure why people do. >> my father is a big time elector. -- collector. bill gross is one

of the biggest smart people on this. andives people a collection sells it to charity. >> it is a snapshot of history. the upside down dirigible. of inequality, concern over excessive ceo pay topped the agenda at annual shareholder meetings. owns 2 million shares in coca-cola. we're going to bring in allen mccall who studied the math behind the numbers at coke. he is an expert at compensation and a research at stanford's graduate school of business. numbersed into the coke and your conclusion is that the is package at coke

expensive, but not necessarily out of whack. can you explain why? >> when you look at the numbers behind the compensation program that they put forward, what you see is something that is more or less in line with what every other company is doing. from the perspective of, is it unusual relative to other companies, is the cost really high relative to other public companies, the answer is, not really. that is your benchmark, certainly things don't look that out of whack. the context ofin coke and what make sense for them, it may not be the right amount of stock to be using an compensation. includes stock units . options that allow the executive to buy shares at a discount later on as well. is there an agreed-upon way to value these options? >> the value of options is pretty much a nonissue these

days. you plug in some assumptions and -- binomial evaluation model. is option granted today probably worth around $10 per option. those expected values of what that option would be is pretty much accepted at this point. >> i want to put some numbers on this. correctly, itthis looks like coca-cola managers affectively own about 13% of the stock. assuming those numbers are correct, how does that compare with other s&p 500 companies? >> in terms of total ownership? that will be slightly on the high side. i think coke has been -- coke's management team is one that is

long tenured and has a history of holding onto the equity that is granted to them. the function of not bringing in stockers and holding onto more than others, they tend to have higher equity ownership than other big companies. >> david winters is with us as well. i look at the bloomberg data and it shows that there are fewer shares outstanding of coca-cola -- wheressentially nine. l is the malfeasance on the part of executives? >> if you read the proxy, which is convoluted at best, and you do the calculations that are shareholder friendly, the delusion which coca-cola stated was 16 point -- 16.5%. bonusou have a varied

shares that can be issued without any criteria. up,problem is that you end as an owner, sharing more and more of the economics of the business. in coca-cola's case, it is a business -- >> others would say this is simply normal business. it to otherompared big corporations, it is much higher. part of the problem with the coca-cola for lan is it has the potential of infecting the whole s&p 500. if everybody says, i want that shiny toy -- unlike our last segment where you start with a 7% coupon, if you are giving a 3% coupon to management, that's a problem. >> we want to thank alan mccall for joining us. of course, david winters is our

guest host for the hour. coming up, explosions in baghdad strike militants. the deteriorating situation in iraq. ♪

>> this is "bloomberg surveillance." let's get you some company news headlines now. we start with general motors. the ceo lance to tell congress she will not accept business as usual. the house subcommittee will be questioning her about why she

didn't act sooner to fix the faulty ignition switch. she will outline the steps jim has taken. -- gm has taken. ups will start charging based on size and weight. a move that will cut costs and boost revenue. the world's number two fashion retailer reported quarterly profit and revenue that beat analyst estimates. earnings were up 5%. -- were up 25%. will add 10 new online markets. that is this morning's company news. tory will bring it you live from the west coast. jeff bezos is expected to unveil the companies first foray into

the mobile phone market. this is happening in seattle. cory johnson is there. we have been talking about this all morning. camera andve a 3-d will probably have some sort of app that helps you go to amazon prime. what is the excitement here? amazon doing something in the new market. amazon is a dominant retailer in the u.s. it grew up on the desktop. it it has increasingly moved towards mobile. there is a threat there. the opportunity for somebody else to come into the computing people make where purchases and decisions and do more on mobile. amazon is trying to get in front of that with a phone like this. dark here.of >> they got you up very early.

if you look at the market share, it is so concentrated. android is 80%. app andjust create an put an amazon prime app across all of those other phones? they have certainly done that. amazon has really tried to put themselves between other retailers. they have an app where you can a retail location and scan a barcode and see if you can get a lower price. that has had limited success. thisll find out more about -- their notion is not just to drive sales of the phone. amazon is willing to accept -- it's the only business willing to accept lower margins than the cell phone makers. amazon might have the opportunity to have a device that works in a retail location to make the shopping happen on

amazon and b with the consumer at all times. device to bet this different from other phones we have seen. the project within -- they arearters developing the kindle and the amazon fire hd. they will try something new and if it does not work, they will move on. >> as you talk to silicon valley theutives, you make up bloomberg west team, are they excited about this amazon device? curious is probably the right word. it is a monster in retailing. it occupies its own space here in silicon valley. we have entered an age where technology and companies are part of the broader economy. it is more important to what is

walmart than apple. it is a dominant retailer. a the things they do to give the things they are --ng to get shopping there >> we will be watching for the unveil, coming up. thanks, cory. news have some breaking right now. fedex has just reported its results -- earnings line, it is a b. fedex shares up right now by 1.2%. huge deal.a this is a solid beat revenue earnings. the percent change move is a nominal gdp plus plus move. fedex also making some

comments on the broader economy. it sees continued modest improvement in 2015. for the full-year outlook, it is pretty much in line with what analyst had been anticipating. >> good morning, everyone. on digitalinterviews media. the new mobile app. i'm quite taken by the new release this week. with me, scarlet fu and adam johnson. david winters with us. he has created some controversy on coca-cola. we will get to that. let's continue on fedex. this idea -- it's a solid beat. >> a solid beat on bottom line and the top one for fedex. -- sharesto percent up 2%. beating analyst estimates for the quarter that just ended.

before your outlook remains in line -- the full year outlook remains in line. their growing optimism come away from the gloom squeeze all earlier this week. saw earliergloom we this week. >> they are going the right direction, but it is modest yard we are moving forward, but not celebrating. >> fedex ground daily volume grew. >> let's get to the news this morning. a tragedy in iraq. a discussion of permanent long-term shift in national --ders and policy

reports of brutal executions across the sectarian divide. of foreign policy at the bipartisan policy institute joins us now along with his detailed notes on iraq. what do i need to know right now? what do i need to focus on? >> would you need to focus on is that this is not a stalemate. he saw a rapid advances by the terrorist group. we were catching a breath. now, it's not. happening in the cities that sunnis and shiites take revenge against each other. it has devolved into a civil war. >> would you suggest that secretary kerry or president somebody better to talk to?

>> i don't think so. we are dealing with prime minister maliki. you have the political factions within that group. that does not make him any better a partner right now. what the united states needs to sunnis.ach out to the the narrative has to be that this is not a sectarian war. thatis an extremist group is pursuing radical goals. those of us in the west, it is easy to understand that sony on one hand and shiite on the other. there's something more subtle. sunnin --inst sunni against sunni. >> you have seen a proxy battle

for dominance within this sunni block. they have all been jockeying for position. if they have been supporting various groups in syria and around the region. they have been sending money and arms, too. you have seen battles within those groups as well. >> i like how you link in the other countries there. this conflict spill into next? >> i think jordan is a big concern right now. iraq shares a border with jordan. they are overburdened with syrian refugees. the terrorists used their gains in iraq to get into jordan, that would be a major problem for jordan. israel as well. >> thank you so much.

scarlett? >> a great conversation with a look ahead towards jordan. we will discuss our agenda and the twitter question of the day. ♪

>> good morning.

bloomberg surveillance. it is fed day. futures are flat, as they are supposed to be. >> joining us right now is betty liu. it is fed day. i'm sure you are covering that, front and center. >> yes, we are. if anybody was surprised by this bond rally amid this tapering and recovering economy, gary is not surprised. he called it quite early and said, don't ever expect bonds to move. he has all the reasons why he made that call months ago. i know we are all healthy eating. i have not juiced. i hear it's really good. the ceo of sprouts farmers market -- they have 170 supermarkets around the country. they compete with whole foods, trader joe's.

they are on the healthy food craze. the biggest question on my mind healthy foodstand is more expensive and you can make more money selling that. you still make more money selling hot and bad food. >> it is easier to add value. you process it and you can charge more for it. >> why are we seeing so many of these supermarkets spring up? good question. people buy their groceries. do they eat it? >> it makes you feel good. very good. it is front and center -- the fed. they will try to not move markets this morning. we will have our 2:00 p.m. shows . ng ourrumpton leadi

coverage. the set of issues, the statement, the minutes, the press conference. i would suggest the press conference, after what we have seen -- >> it will be interesting. absolutely. mark carney had indicated that interest rates would rise faster. >> the bank of england was surprised that the market as a whole did not appreciate. that is a big deal. >> you have the vice chairman, stanley fischer, wonderful. it is a little confusing. stanley fischer out of rhodesia working with the imf. the 1998 crisis. highly esteemed. writer of the classic test book -- textbook. you have richard fisher who is just as well esteemed out of dallas. >> yes.

was the governor of the bank of israel. he has come to be the vice chairman of the fed. >> richard fisher was the governor of the bank of free-trade. >> fresh recalls at general motors. is the auto giant a good investment? ♪

>> good morning, everyone. it is fed day. tomorrow, arguably the most important economist in the nation. alan greenspan's research expert. the debris out of the 2:00 hour this afternoon. the view forward from a .articularly o it tomorrow at 7:00 a.m. on bloomberg surveillance. our guest host for the hour, david winters, founder and ceo of wintergreen advisers. that's get you some company news. we start with oracle.

close to an agreement to buy microsystems for more than $5 billion. offsetl would let oracle slowing growth by adding software. will start blocking music videos from labels that have not signed up yet with their subscription service. adding 5% of the labels. yahoo! has come out with its first diverse the report. 37% of yahoo! workforce is female. are men.s leaders 90% of its total workforce is white or asian. yahoos ceo's marissa mayer. >> why are we doing this? >> there was pressure on google to open its books. >> why not general motors? >> silicon valley is the growing industry.

that is where the job hiring will happen. that is where people want to see progress. >> what is your beef? >> it is the most sanctimonious bs i've ever heard. this?dak or gm do or gm do this if you are going to build your self as change, you have to -- >> there you go. nicely done. of general motors, their ceo is too distracted to worry about diversity. she will be on capitol hill today. over 3 million more vehicles are recalled. he the auto giant a good investment -- is the auto giant a good investment? >> we go inside the story and --d out how whistleblower

how a whistleblower tried to get the story through and tried to tell management about what happened. >> the bloomberg businessweek cover story is just a transcript. >> you can see it on your app. >> david winters, do you manage gm shares? >> no gm shares. the auto business is a lousy business. haveconomics over time been terrible. you want to be in businesses where the odds are in your favor, tom. >> to those of us who have enjoyed losing money in a market, if you look at the airlines and the autos, are we too dumb to guess the bottom and get out at the top? >> yuan securities were the odds are overwhelmingly in your favor. autos and airlines are really tough. you show up and you have a

negative coupon. banks are linked right in with autos because you need the loans to make the gm move. >> we like finance companies that do not borrow money. we owned some franklin resources and mastercard. the idea of making loans come the history of companies that make loans are not good. we like companies that generate lots of cash. >> the value proposition is certainly there. especially if you look at how many of them are trading below the premium. isn't there an argument to be made for the fact that commercial industrial loans are picking up again and there is a second look given how cheaply they are trading? >> absolutely. you want to find the best deals. if it's in a company that can generate higher rates of return with no leverage and is

improving economics as opposed to a company that has a lot of leverage and is -- >> financials have more than they used to. capital ratios around 9%. that is 10 to one. >> it used to be 30 to one. company --a >> i want to work on your notoriety right now. are you suggesting there are other coca-cola's out there of management that are service managing share ownership to take over a company? >> we look at this very carefully. coca-cola, we were surprised with. >> who is the company that is managing share count for shareholders? >> i can't tell you who is running the business line management pockets.

we were shocked with the behavior of coke. >> intel was iconic. on a track to retire a third of its shares over a decade. >> help me understand what is or operatorsners owning 13% of the shares. they are very aligned with shareholders. >> how much is too much? how much do you get paid for generating a big coupon? you should not have a bigger and bigger slice of the pie. >> fair enough. >> in the case of iconic people saying things should be run for shareholders and it's not run for shareholders -- >> if they deserve it, reward them. if they don't -- >> would you suggest that mr. is just talking his book off at that time percent preferred dividend -- 9%

preferred dividend? guy. is a good he has said no excessive pay. he participated in an lbo last year. he left people behind. >> let's get to the agenda right now. we have to focus on the stories coming up that will make news throughout the day. tom, you are looking at 2:00. >> mark crumpton will have our fed coverage for you. i think it's more new wants than people think. -- nuanced than people think. mr. mckie will be at the news conference -- michael mckee will be at the news conference. interested -- maybe as big as mak mexico and brazil in the world cup. here -- a firm and

ferment here. yellenion between ms. and the market. that was the conclusion of the bloomberg poll. , mitsubishi,deal hitachi and siemens ng on the other. on one hand and ge on the other. will they do it or not? expected too unveil the first foray into the mobile phone market. 1:30 p.m. cory johnson will have live coverage of that. what is the price point? will you be able to make

purchases more easily? >> i don't get the why. i have yet to hear a white this afternoon. >> put the amazon prime app on my iphone. i don't need hardware. >> why? what features would make you switch to an amazon smartphone? a 20% discount on everything on amazon. third i knowing amazon is the new evil empire and all, but everything i do involving them works. i will give the phone a look. nothing would cause me to shed my iphone. did you tweet that? >> i did not. your secondary twitter handle. what about you, david winters? than it's better everything else. otherwise, i will stick with what i've got. >> are you using a blackberry

from 140 years ago? >> yes. >> thank you so much for your thoughts on coca-cola. with betty liu is up next. we will see you tomorrow morning. ♪

>> today, at&t will be the exclusive carrier, just like it was for the apple iphone. gm general motors ceo will tell the house committee it is no longer is this as usual at the company. they will be questioning why it took so long to do with a all the switch. staying with general motors, bloomberg has discovered an exclusive story about a whistleblower who tried to alert gm over a decade ago about defective cars. armor head of gm cost is nationwide program raising inrms over safety concerns 2003 but it fell on deaf ears. tim,ng me now with more, who uncovered the incredible story. a