bloomberg world headquarters in new york, i am mark crumpton. ."is is "number bottom line today, john kerry meets with iraqi leaders in baghdad reedit and then a look at puerto rico's tax benefits and how it draws in investors. and a woman who took contact lenses to the moon. ♪ to our viewers here in the united states and those of you joining us from around the world, welcome, we have full coverage of the stories making headlines today.

we track the developing bond situation in argentina. we have the preview of a congressnal hearing on lost irs e-mails. we begin with phil mattingly at the white house and the latest on the crisis in iraq. good afternoon. john kerry touched down in baghdad this morning for a series of meetings with top iraqi leaders, including nori al-maliki and the top sunni leader, the speaker of the parliament. one key point the secretary had to make? the time is now. take a listen. >> the future of iraq depends on choices that will be made in the next days and weeks. the future of a rack depends primarily on the ability of iraqi leaders to come together and take a stand united against week, not next month, but now.

>> what? yeah, i've got it. see,arket, as you can secretary kerry underscoring the urgency we are hearing right now and the key point from u.s. officials is that action will negotiation's are going on with other groups as they tried to figure out a way to form some kind of national government that will remove some of his power and give him a more unified approach as they start the process of pushing back against the militants who have made such major gains. >> u.s. officials are raising concerns about gains that the militants have made the that them within striking distance of jordan and saudi arabia. how is the obama administration dealing with regional allies right now? >> it is a very complex situation. you mentioned the gains among those, a seizure along the

border town of jordan that really gave them the striking ability into jordan and saudi arabia. the administration in their balancing act is dealing with sunni allies like saudi arabia and jordan while trying to figure out if there is some kind of way to deal with shiite led iran. one key point you're being told, right now, is that officials are very cognizant of the fact that sunni countries have no desire to work with iran whatsoever. how john kerry and other officials balance that in the days ahead might be crucial to any kind of fast-forward on the backside. lot of peoplen have been asking over the past couple of days, how close is a rack to reaching the level of sectarian strike visited upon the country in 2006? >> u.s. officials are very concerned, market, but at this point feel ok that we are not quite there yet. obviously if you saw any of the pictures coming out of sadr city this weekend, somewhat terrifying photographs of a big

march, many of the militia were disbanded after 2008 or 2009, so that was a big push if for no other reason than to make the point that baghdad will not be easy to move in on. something to keep an eye on, the key of samarra, there is a shiite religious mosque there that is extremely important. it was bombed in 2006 and served as a trigger to some of the worst sectarian strife. they are picking up intelligence that it may be targeted again. i think that that is a major off majorat could set repercussions. at this point they feel they have a decent grip on things and both sides remain at their corners with no major push towards the 2006, 2007 violence levels yet. >> phil mattingly joining us this afternoon. thank you so much. more than one year after the irs scandal first surfaced, the targeting controversy has reared its ugly head yet again, this

time over missing e-mails that may contain fact over irs scrutiny of tea party groups. we are in washington right now with more on the controversy within the controversy. good afternoon. >> good afternoon. irs, targeting controversy, far from resolved. the latest obstacle is a crashed hard drive and years worth of missing e-mails to and from lois lerner, part of the organization at the center of the scandal. the person feeling lawmaker questions has been the iris commissioner who in a hearing before the house ways and means committee last friday angered republican lawmakers when he would not say the three words that they wanted to hear. thatat i did not hear in was an apology to the committee. isi don't think an apology owed. not a single e-mail has been lost since the start of this investigation. every e-mail that we have has been served.

on whychairman pressed the irs did not notify congress about the missing e-mails sooner , adding to the republican accusations of irs deceit. >> you can blame it on a technical glitch, it is not a technical glitch to mislead the american people. you say that you have lost the e-mails, but what you have lost is all credibility. >> the chairman later added that a special prosecutor should probe the loss of e-mails to the department of justice, who have not responded to that request. congressman darrell issa of the house oversight committee is answering with two days of hearings on the matter. the first hearing is scheduled for 7 p.m. this evening with a follow-up from 9:30 tomorrow morning. he offered a preview of what is to come when he sent a letter to him on saturday asking him to answer more than 15 technological questions related to the missing records, like to

please provide the name and location of the clean room or similar facility used to attempt to recover data from the hard drive on her computer. other questions, like please explain the architecture and structure of the irs e-mail system and exchange servers and -- please provide the barcode for irs computers issued to lois lerner. giving him no later than 5 p.m. this evening to respond, darrell issa says that he expects a long night of questioning the irs commissioner. back to you. >> thank you. coming up next, we will take a look at the primary research arm of the republican party, a focus on opposition research and the ,ark art of political campaigns when "bottom-line" continues on this monday afternoon. ♪

>> elite a $10 million operation. democrats had the more lethal operation last cycle. was aerica rising pack ploy does a fix. >> our candidates got really hurt. most famously in the presidential election they saw the bain capital issue. that really hurt that romney. >> are they already having an impact? one example, they caught on tape the well-liked dean of the delegation being made fun of. miller runs the super pac side

of the operation, focused on hedgeresponse, backed by fund millionaire donors. clients,n has paying ranging from candidates to outside groups that have dropped as much as seven figures on research books and updates. as a for profit the company is free to coordinate directly with any campaign. >> the presidential campaign should be here. >> over 20 trackers are deployed across the country, stocking democratic candidates. >> when you go into a house or noate race, there is equivalent of bloomberg in these states. we have to create it. we have to constantly get the video from the field. ofcataloging every move every major candidate, keeping a close eye on the big target, hillary clinton. but they are not stopping there. they are launching a new operation to top top -- to track top democratic donors.

the group hopes to become the permanent centralized research database for the party, with an archive of gaffes that can be used in cycle after cycle. >> i will stop at nothing but to try to get a check from you. >> democrats have taken notice and business is good. >> one year ago we were in an apartment with about six people. right now we have over 60 people across the country. >> phil mattingly joins me again from the white house. you mentioned that some of their clients spent up to seven figures on the material. who are these groups? >> they want to be kind of permanent part of the infrastructure of the republican party. republican establishment is all in with them. we mentioned american crossroads in the piece. they have spent over $850,000. this is a group that plans on being there for a while.

while they don't report their clients, if you go through election committee filings you see big-time candidates and campaign groups with establishment super pac's all in for this. mattingly, thank you so much. let's turn to the markets. sent&p 500 is up eight are . u.s. stocks have been hitting all-time highs. for the outlook on stocks, and harris at tiaa-cref joins me now . they have nearly $570 billion in assets under management. welcome back, good to see you. the global rally and neck woody's last week came after the federal reserve released the policy statement. janet yellen said that accommodative policy, rising policy and equity prices with the improving economy should lead to above trend growth. how sustainable is this rally? >> quite sustainable. ,ou have accelerated gdp growth

good earnings growth for the future, low inflation -- a key when you think about valuations. kind ofmention any internal risk to the market right now. >> is the strength based on earnings or fed policy? >> a bit of both. ultimately it has to be based on earnings, that is the only thing that is sustainable. inre is a bit of complacency terms of how long it will stay this low, but it will be sustained even if rates go up sooner than people expect. >> is there anything keeping the hitting 2000? >> it is always a question of when. there are surprising things that we worry about in terms of slowdowns out of china or a big spike in prices. there was always that possibility, but it does seem like a nice trajectory. >> you talked about complacency a moment ago, concern has been expressed about the lack of

volatility we are seeing in the markets. have investors been complacent? or are they waiting for a selloff? is this environment good for equities? >> we think it is a good of both, perhaps assuming too much in terms of interest rates, but given that the environment is actually quite good? if it is complacency it is justified. >> they seem to be liking what they see, complacency or not. >> exactly. >> let's go overseas for a minute. mark carney of the bank of england spoke last week and said that interest rates in the u.k. could rise sooner than expected and that a lack of forward guidance did not seem to hurt the markets at all. why not? does he evolving guidance help or hurt investors? wax that is exactly the point where people put too much faith in what they hear from the fed. ultimately it will be a function of economic growth and inflation

expectations. if those change, like they did in england, policy will change. we need to pay more attention to what is happening with inflation. >> how would you gauge european versus u.s. debt right now? how would a spillover from europe affect treasuries? >> part of what you're seeing right now in terms of lower interest rates in the u.s. is the fact that you have increasing sovereign debt with asset quality review taking place for european banks leaving a balance sheets with high quality assets. perhaps there are not enough to go around, so they come to the u.s.. oil a fewtioned moments ago. the violence we are seeing in iraq, oil prices are on the rise. how much of a threat does the violence pose to iraqi oil supplies? a spike in prices, is that possibly could cause the fed to rethink its tapering policy? >> it is unlikely.

the threat does not seem to be too significant. even if you get these events where we have unexpected spikes in oil prices, the equity market certainly reacts but it tends to be short lived. evil who want to time that should write it through and be short-term. joining us in the studio. good to see you again. special reports ahead on the economic situation in puerto rico. up next, the redevelopment of the former u.s. naval base has puerto rico looking to go. you had to. we will be right ♪

>> welcome back. for over 60 years the u.s. navy southern command was located at an air base in puerto rico. in 2004 the navy moved out, costing the island thousands of

jobs and millions in revenue. now as stephanie ruhle tells us, -- redevelopment seems pose poised to get off the ground. >> highways, hangers, houses, it is easy to see the potential. >> right now there is not a place in all the hemisphere with the infrastructure on this 8000 acre property. >> on the ground it is a ghost town. 300 million dollars per year vanished from the .sland economy the surrounding community has been devastated. >> after we lost the base we lost many people who paid taxes. the mistake is not awarding the

municipality enough money to rehabilitate. >> after one decade of decay, the quarter -- puerto rican government feels they have the formula for revival. >> we want a world class developer to do something. >> a new master plan for the hotels,tures zones for entertainment, commerce, ecotourism. this month they begin taking proposals from developers to fill out the blank canvas. rodrigo and his partner have their proposal ready to go. the vision is a compound with entertainment. >> there will be total redevelopment around the airport and the ports. then we will try to get some manufacturing, universities, and little by little we will start breathing life into it. >> the infrastructure and location make it a convenient hub for aviation destinations near and far.

and the possibility for commercial space travel has drawn interest from recent -- from richard branson. the government is not shy about touting the site to other world-class investors. in the is the only place world that they can have their cruise ships, an airport that carries a b-52 and at the same theme park. >> acres of potential with intriguing goals, but the challenges have been there for a decade. plans, attracting capital, moving the project from opportunity to reality. >> are you ready to make this happen? >> yes. and it will not take four years to make it happen. >> coming up later we will get a report from stephanie focusing on puerto rico's economic challenges. the island is offering significant tax benefits on and individual

investment income. is that enough to draw interest from high-profile investors? we will look at that question, later here on "bottom line." we are coming up on 26 minutes past the hour, meaning that bloomberg is on the markets. >> good afternoon. let's get you caught up with where stocks are trading right now. down for most of the day, the 500 down 1/10 of one percent, the nasdaq coming into positive territory. will have to be more patient, we are still short of that landmark. factoring in a surprise on the seven-month high, u.s. manufacturing better than expected, pausing of the record high on friday. quick check on the bond market, treasuries versus bond yields, did you see the spread between them? the highest in 15 years. an expression of divergent policy, may be.

apples toparing apples here. when you look at real yields, this might give you an idea of what is going on in that are get. about 30 back in minutes. mark crumpton will be your host for the next couple of minutes. ♪

>> welcome back to the second half-hour of "online." thank you for staying with us. a check on the top stories we are following for you, purchases of previously owned u.s. homes rose more than projected in may, a sign that the industry is stabilizing after a depressed order. the national association of realtors said the sales climbed 4.9% 204.8 9 million annualized since october. a big takeover in the utility wisconsin energy has

agreed to pay $5.7 billion for a 17% premium on the entergy energy, almost doubling wisconsin energy's customer base. in next game for team usa the world cup is thursday. yesterday portugal took the lead in the early minutes of the match and the u.s. dominated for the rest of the game, but in the final 30 seconds of stoppage, portugal scored to tie. those are your top stories at this hour. the new soccer ball this year features a six panel structure with rough micro texture. how will this high-tech design affect the ball's performance? we spoke to a nasa aerodynamics expert to find out. >> aerodynamics is basically the study of fluid flow around objects.

ofa is not in the business designing or testing balls. what we do is use sports balls, especially in the lab for occasional purposes. we found it is easy to get young kids interested in our field by showing them something that they can relate to. this is a wind tunnel, basically a chamber through which air flows. comes to a soccer ball, what we are looking at is the flight of the ball through the air. the layer forms near the surface of the ball. the behavior of that layer is called the boundary, critical to the performance of the ball. that is why the aerodynamics are the structure of the outside of the material. the roughness. that is what determines the aerodynamics.

knuckling is when the ball flies a radically through the air or changes direction as it flies through the air. what we have done here is by using these panels with the fingers on it, it increases compared to the ball in 2010. what we are looking at with a smoke pattern is where the smoke leaves the ball. at what point along the surface? and when does the position of that change suddenly? that is the speed at which the ball will knuckle the most. i think that the basic message for the players is that you will see less of this knuckling. they will find it behaves more like a traditional ball. i believe they will be happier. >> some fascinating stuff. time for the commodities report. su keenan joins us with the details. >> good afternoon, mark. oil falling on the latest

geopolitical news, but get ready for the next biggest concern, baghdad and corn, taking a tumble. let's start with the crops story. over the weekend, nebraska and iowa got as much as eight inches of rain, boosting the outlook for the corn crop, raising it to a rating of very high. check the close, corn reverses ethier gains with week following suit, following suit down 16% in the last three months. check out the year to date drop in coffee futures, up-to-date, starbucks raising the price of its bag coffee. the oil story, meanwhile, futures following the news of the iraqi army has gained control of its border towns. this is said to be an iraqi government video showing patrols over refineries. hedge funds are raising bullish bets on oil to a record.

one veteran said that the findings are almost certainly going to escalate. john says that iraq continues to drive trading and the looming battle in baghdad, he says, is a focus that could jump to 110. there is debate over how bad things could get, from citigroup to bank of america, they are saying that the impact on oil to be pretty big if there is more violence. >> pretty big, but traders are calling this a fluid situation? >> absolutely. to pardon the pun, major companies started moving workers out of projects in iraq last. while the fighting has mostly involved cities north of baghdad , the bulk of assets are in the south and east. markets have not panicked because those rich regions have not been hit yet. >> su keenan, thank you very much. opec recently wrapping up trading. we will have details on that story in a moment.

with massive debt and high unemployment plaguing puerto rico, the government is creating tax incentives to attract outside capital. when "bottom line" returns, we and 22 int 20 attending to bring individual businesses to the island. stay with us. ♪

>> now, back to our focus on puerto rico. tourism is an important driver of the economy erie of the puerto rican government is also trying to entice businesses and investors to stay permanently. to tax incentive programs and acted in 2010 have already received hundreds of applications. stephanie ruhle tells us that they brought the island some high net worth transplants with high levels of enthusiasm. >> i think that san juan represents one of the great investment opportunities of my generation.

>> nick is betting on the promise of puerto rico. not only making significant investments on the island, he has moved his office and family there. spentt year i think i about 10 or 15 days outside puerto rico. we are not going home on the weekends. >> to attract investors, the puerto rican government created acts 20 and 22, offering tax exemption to businesses in outside markets for individuals who relocate to the island. forecast twot hundred 50 individual investors will apply in 2014. >> my phone rings and at this point, you know, three or four times per week with people wanting to know more. >> local businesses are welcoming interest and investment. >> are you seeing a shift with countries moving here? >> i am seeing it in aerospace and in other areas.

>> i have seen more people coming in the last two years then and a longtime. >> one of the biggest incentives is not so much the wealthy people coming down, but it is putting puerto rico back on the map. >> the new visibility of the area is attracting a wide range of investors. at the high-end there is a billionaire who have us purchased and rebuilt a historic resort. >> he has a vision and is willing to put his money where his vision is. >> by all indications, order regions do not resent the capital that outsiders bring with them. >> the truth of the matter is that if we did not have them, they would not the year. it only brings an incremental benefit. >> what are the options? having the real estate development high and go away and crumbled?

>> it is working. it is really working. >> we are receiving a lot of entrepreneurs who partner with our people to create jobs. we are really happy with the jobs. is time for today's latin america report. argentinian bonds are rallying, sending yields to a three-year low. at bloomberg news we have more details. what is driving this rally? ever are closer than before at getting a resolution to the holdout problems. the president has consistently said now that she is willing to sit down and have negotiations under fair circumstances with know,ldouts who, as we have been suing this country for many years to try to get full repayment on the. by who?re as determined >> a good question.

plan,ill be presenting a so to speak, two judges in the u.s.. we don't know what it will say. we don't know if it will be the same plan as always, $.30 on the dollar, but people are really feeling like it will be something substantive. >> what is with the president's change of rhetoric? he recently called them vultures, but now they have softened their tone. >> there was so much back-and-forth last week, one day saying that they would settle, the next saying they had no interest in doing so. in the beginning it had to do more with political posturing and with having to bring some leverage to the table saying that we don't like you and we will default on everyone without settling, but now i think they need to send a signal that they are serious, responsible, and deal with the problem. >> what can we expect this week? >> we know that they will lease -- they will be presenting

something to the judges in the form of a letter and hopefully they will be having meetings with the holdouts this week. hopefully we will have some news by the end of the week that puts this behind us. >> one of the things the president expressed concerned ofut was that this, for lack a better phrase, would break the bank. >> it depends. , they areg right now responsible for paying $1.5 billion, which they could write a check for if they needed to. the question is if they are going to be dealing with and tackling all of their holdouts, which they estimate at $15 billion, they have 28 ilion dollars in reserves over what they had in cash. they could potentially be, if they settle with everyone, issuing bonds or something of the like it may be more suitable for their situation. >> is there a ripple effect that could happen here if argentina

has to pay this money back? what about other sovereigns in similar situations? >> this is a unique case. argentina is in a unique situation. >> this has been going on since 2001. >> they are the staunchest opponents to paying their holdouts. no other government has fallen into this audacity. all the court rulings have called this unique argentina. that is really -- it is not so much precedent-setting, perhaps. >> all right, to be continued. probably see you again in a couple of days as we update this story. thank you. that is it for your latin america report this monday. coming up, a hollywood artist taking a living painting special effect contact lenses. you will not believe your eyes. stay with us. ♪

>> special effects in movies usually involve more than meets the eye, but for one los angeles-based artist it is entirely what meets the eye. christina patterson paints on a teeny tiny canvas, a contact lens. she has handled the ocular looks movies and0 television shows. we got a behind-the-scenes look.

>> there is a long line of artists in my family. i started drawing when i was a little kid. i could pick up a pencil and a brush and i started dueling. as i got older i just kept with it. when i meet random people who ask what i do for a living and i tell them that i paint contact lenses for film and television they say -- someone does that? i say, yes, someone has to. it was a complete fluke. i was working with a makeup artist that would occasionally go to bed and put in contact lenses. it was called contact lens technician. i was hooked. this is a very small canvas. i have to use very fine, fine brushes. a few hairs, basically.

this is a process that can take a few hours or a few days to complete, depending on the design. the corneal star covers your pupil and your iris. the ones that cover the white of the eye? sclera contact lenses. the reason we use sclera contact lenses, where the whole i is yellow? the other reason is it is much shot, hammering a lens where someone has been put -- been hit in the face. i worked on a few giant -- johnny depp films. i have worked with angelina shows,or a couple of her including maleficent. her makeup artist showed me a these flecksall of of different colors in there. blues, greens, pinks. i basically try to incorporate

those colors into the lens. there is competition. there are only a few of us, a handful. less than 10, i think. there are so many things i love about this job. i get to paying for living. i am an artist. to see them finish their makeup and put in the contact lenses, everything just comes together and it is that finishing touch, the cherry on top. >> fascinating stuff. stay with us. we will have another check on the other side of the break on this monday. markets are trending lower, bottom line continues in a moment. we wanted to let you know that bloomberg is the only business ons service being offered amazon fire tv. if you missed any interviews, you can watch them now on apple tv, featuring live streaming and on-demand videos. ♪

>> get the latest headlines on the top of the hour on bloomberg.com and streaming. that is the best that is it for "bloombergn of bottom line." "on the markets" is next. i will see you. ♪ let'sis about that time, check out the markets for you. are lowery morning we across the board and on the s&p 500, 1/10 the lower on the dow jones. looking at the 17,000 out there, we are just short of that, taking a breather.

the impulsive, reactive side of me says -- why? high in the u.s. manufacturing data as well, the other side of me says that we are just off record highs a little bit. now on where the markets are headed, i am joined by the managing director of equity flow. welcome to the show. >> we appreciate the inning here. >> volatility is all that anyone talks about. when they look at vix is lowy that the and that this is a sign of complacency. is that wrong? >> the vix itself is not as complacent as you would think. it tells you that nothing has happened until now, but when you dig into it it tells you nothing, just that things have been quiet. we have a much better indicator, the fear barometer. it effectively asks the market to put their money where their mouth is. the market is saying that the upside in the market is sold.

we don't think the market is going up there. that means that there is skepticism. where there is skepticism there are people fighting the bull market. you know what you need to get the market to go higher? shorts. continue fromtor here? >> that's what the data tells us, right? tactically on the other side of the market you bet on the market going up and this market has been heated for so long and has given such effectively good odds on the upside relative to what it cost to protect your portfolio, that is what the credit fierce which barometer is telling you, the market says that we dare you to bet on the upside. if there is a bet that is too cheap, that is probably where it will go. >> everyone will be screening -- screaming at their screens right now about an -- about a mature bull market. how long can this go on for? >> a great question. i am sure there is a great quote

from a great u.s. supreme court justice, you will know it when you see it. we don't know where the top is. we just know it is in that direction and that that is where the market that against. again, as long as you have skeptics you have the ability to see these people out. >> ridley, these are record low borrowing costs, not just for record rates for high yield as well. does that not impact the margins of some of these companies? >> exactly. definitely fundamentally that is the same as the market research, but it is somewhat related to the volatility that we touched on at the beginning of the show. where is the low volatility coming from? it is an tension of fixed income. how do you get yield? you can get yield out of buying these tight credit products or you can do it by selling volatility. much like a life insurance policy collects premiums and hopes that people do not die. you sell volatility and hope the

market is quiet. >> what is the tag on the s&p? >> 2020. >> corrections at that point? >> we don't know. tactically it feels the market is not vetting on that. >> at bentley or else they would not and. -- and badly or they would not end. things do not end when the market is skeptical, they and when people are too euphoric. >> they call it the most unloved bull market for a reason. we are just off record highs right now. thank you very much. "street smart" is up next. we have stocks one