repression ahead. if it's tuesday, it must be belgium -- the usa takes on antwerp. good morning, this is "bloomberg surveillance." it is friday, june 27. i am tom keene and joining me is scarlet fu and adam johnson. gent? you just say >> not jent. >> i haven't heard anybody mention that since social studies. >> we are playing belgium on tuesday. >> we will all know about it by them. >> nothing got done between for0 and 2:00 yesterday >> the u.s. to come in 1-0 is pretty good. that's like mexico and brazil 0-0.

confidence fell on concern over ukraine. in the u.s., we will get our own measure of confidence at 9:55 a.m. courtesy of the university of michigan. oute got kb homes coming and eu leaders are gathering in brussels talking about russian tensions. it's back and forth with the russian sanctions. there have literally been three round trips of discussions. >> there are important discussions going on. >> hans nichols is over there and we will check in with him later. secretary of state john kerry is in saudi arabia. >> that's an important meeting. will get the weekend started. let's get a data check. at-4 and the two year yield is moving lower.

is churning.ar address the geopolitics of oil in iraq in this hour. 11.63. the weaker dollar is confounding the dollar bulls. let's look at the 10 year yield as the litmus for the financial system. this is arbitrary, 2.5%. down,e last year, we come we come down and you wonder in the last couple of days if we finally break through to new lower yields. all of that is hinged on economic data and what the fed will do. is that sitting on resistance? that it's about to sit on support. >> very good, there is some

technical analysis from adam johnson. and -- wehe papers scoured the papers. outhe big banks are pulling of the barclays dark pool trading venue which is the second a guest -- second-biggest. attorneyafter new york general eric schneiderman filed a lawsuit against barclays claiming that barclays lie to clients about high-frequency trading in that dark pool. is pledgingarclays to conduct an urgent investigation. >> i saw a conversation with arthur levitt, the former chairman of the sec. he did not mince words. he said any attorney general in their actions has a political tinge. that was his exact language. he did not take a shot at schneiderman.

he took a shot at the office of attorney general. therein.e goings-on undertonehis other that we were talking about yesterday which is how curious that would keep going after non-us banks. -- paribas, archelaus >> -- barclays. >> the european banks run the bigger dark pools. can barclays do business within the star call if these other banks pull out? >> barclays shares are rising after a five-day decline. our second big front-page story is a big win for the nyse and a loss for the nasdaq. alibaba list on the new york stock exchange. it is likely to be the largest ipo ever with an estimate of value of $168 billion.

it would make it the third-largest tech company on the nyse. >> is this a loss for the nasdaq? >> yes, the nasdaq was where all the tech companies went. problem.had a >> did you get your shares? you got like 10,000 shares. yeah, i got zero shares. a great conversation with robert nardelli, the former ceo of home depot. that the nyseters got this listing. >> it's weird to be on the floor of the stock exchange. the stockrted on exchange, there were many people

down there and now it is much less. --people were so is he people were so busy that you bumped into the inkwell's. >> the president is asking congress for half $1 billion to train and arm moderate rebels in syria to help rein in sunni extremists because the fighting has spilled over from iraq. the president has been criticized for not doing enough. the question is whether any kind of arms or weapons could end up in the wrong hands. we have seen this happen before. >> think about the other side of this that yesterday we read that nouri al-maliki, the primus or of iraq which and there he is an ally of the united states, is welcoming help from the syrian government in the form of airstrikes to fight against the sunni insurgents. all of a sudden, the sunni

government we oppose and might be fighting against -- >> visit shifting alliances or being opportunistic? it is up for debate. those are your front page stories. >> m it is aess. expect the unexpected. we are now two weeks on from the collapse of normalcy in iraq with brent crude at $109 and that is now 114 dollars . the administration reversed years andre-reversed gears and decided to fund moderate level that rebels in syria -- moderate rebels in syria. a clue where iraq will be in five days or 10 days? >> i don't think anybody does. everything changes so quickly. two weeks ago, we sought isis storm out of nowhere and take over major cities and we saw expectations the battle would be brought to baghdad and they stalled out and now we see iran and syria getting in on this.

it is hard to imagine where we will go next. they talk about destroyed borders. of newframe the idea borders drawn across this? >> ever since the syria conflict started, the borders in the middle east have been weakened between the kurds establishing your claim on new states in iraq and the sunnis are trying to do the same. are the saudi's the elephant in the room? they have so much power and force within the sunni-islam that they will call the shots eventually? >>isis is not just a saudi puppet. they will do what they want. the saudi's are afraid of they pull their support now, it will backfire on them. >> let's bring in lisa abramowitz. when you talk to people and the bond market, are they talking about the back-and-forth

tensions in iraq? relegated toly geopolitical risk. don't understand why it isn't in the forefront of their minds. it feels like a disaster. it feels like there is a lot of moving pieces that could potentially broke does blow but embroil the countries in the region. >> the bond market is fixated on what the fed says which means interest rates will stay longer -- lower for longer. >> they are still funneling money into the financial system and that's all people are focused on. pollack has been open for a lot of criticism. what will you listen for on the sunday talk shows? there will be so much anger looking back and accusations. what do you actually listen for among the chattering heads? >> you have to look for concrete steps we will do in the future.

the key is coalitions and alliances and how we will put together a political group that can fight isis and also keep iraq from splintering. what nouri al-maliki doesn't tuesday will be important. -- does on tuesday will it be important. we have an amazing non-consensus bond call for the six months of the year. have you ever seen the bond troops be this wrong? >> everyone is. think about the comments we got out of the credit suisse -- ira jersey said we have all been wrong on bonds. >> all the banks are admitting it. they are lowering their forecast for yields year and then increasing their forecast for returns on investment grade bonds. >> is today june 27/ >> we are almost at the end of the first half. >> children don't get out of

school until july 20. >> yesterday was the last day of school. european leaders are meeting and on their agenda is the turmoil in ukraine. will there be more sanctions on russia? we will go live to brussels for the latest. this is "bloomberg surveillance ," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire. ♪

>> good friday morning. coming up later on bloomberg television, timothy armstrong, the chief executive officer of aol at 8 a.m. this morning with the loop. looked on the future of an up-and-down company. york, this is

"bloomberg surveillance ergo in a europe, eu leaders are meeting in brussels today. there to do list is pretty long but they want to find out who can run the eu as a commissioner. he's the wrong person. he has been at the heart of the project to increase the power brussels and induce the power of nationstates are his entire working life and is not the right person to take this forward. theot the person to take organization forward -- hans nichols joins us from brussels with more. there is a divide between the u.k. and the rest of the eu. it is the u.k. at risk of leaving eu membership? >> it's going to be increasingly difficult for david cameron's government to make the case that the u.k. needs to stay in the eu in part because of these attacks on junger.

you heard the sanitized version and all the british papers this morning have allegations that a probleme junger has with drinking and wants to turn smoking rooms here inside the ou so he can continue smoking. it has shifted her a policy argument to one that is personal and quite nasty. i'm sure you will agree with me on the irony of this. aren't british prime minister supposed to drink? before breakfast isn't that what winston churchill? said emphasis.is confused >> it's positively. adam johnson starts every show with cognac. >> i do start with a double espresso accepted a because i woke up late. >> t >> it's factually incorrect

because i believe adam starts with armagnac not cognac. >> that has been corrected. does the united kingdom or to what extent does it lead or follow the eu agenda? they want to influence it but they are having a difficult time. david cameron is in a predicament at home and being attacked by the right for being too close to europe. he has always said that he can have more implements inside the eu and the u.k. can be better reforming it from within them without area of the problem with that argument is is more difficult to make when privately and publicly you have been very critical of this man, primelaude junger, former minister of luxembourg and he will now be the face of the eu. in my conversation with

christine lagarde 10 days ago, the french seem to be involved in the calculus. who are the alternatives to mr. juncker/ the alternative was a socialist, martin schultz who was the had left of center candidate but he lost -- his party came in second place. this process never got far along so that there could be an alternative candidate. both sides dug in. angela merkel was initially open to a different candidate but she dug in on supporting juncker even though privately they don't have a great rapport. you have this giant proxy fight whot jean-claude juncker was a prime minister for 18 years and left in a scandal not of his doing and is the prime minister of a country with half a million people and that's with the big fight is about. you can see both sides marshaling their forces and

having a fight over someone other than him. now we happen to have all the stories about his drinking and his wine closet and the smoking. there are old phone booths that have been converted into smoking lounges all around here. i will save them for you. >> thank you so much. silly but to europe is it is important. >> it is, if only to guide the conversation. >> we've got more coming up on "surveillance," including the tle willfounder of chipo join us. our twitter question of the day is -- this is "bloomberg surveillance." ♪

>> good morning, everyone. futures are -4 and dow futures are negative five. of ukrainians are fleeing their country hoping to find safety in russia. they are crossing the border and those living say they fear their children are not safe and they will never return, they say. the cease-fire did little to stop the fighting between pro-let -- pro-rebels and the government. president obama hopes to train and equip writers who want to bring down theassad regime. half $1king for billion.

is bringing back its best-selling cars for repairs. 29,000 chevy cruze models are being recalled. the airbags had defects. recalled plenty of cars based on the ignition switch problem. it reportedly caused 13 deaths. >> what has not been recalled? a '66 corvette? >> its way over 20 million. barraf that is mary getting ahead of that and just saying they are going to recall any car that had a problem. >> after that a live set demo down with dan sat gilbert about his one million dollar investment in real estate

-- >> we have over $1 billion invested in real estate that is in technology and existing billions that buildings and new construction. inre is 100% occupancy downtown admit 10 nine young people cannot find a place. >> so far, he has invested more than $1.5 billion in detroit. budget wasannual $1.2 billion in 2013. >> he owned to the cleveland cavaliers. >> he also owns quicken loans. he is a self-made entrepreneur kind of guy. >> there is a curious distinction within detroit. the downtown area around the renaissance center and the hotels is beautiful and clean and it's busy. there are people in detroit that are productive. large parts of the city are not that way but it's not all bad. market ando the bond

you buy detroit or california at the bottom. lisa abramowitz is with us. muni bonds of the story of the year, aren't they? >> that's right, people are looking for yield anywhere. this is where people are nervous about them for a number of years. now they are piling in and seeing value their. they still offer some yields. >> i know you are not on speaking terms with a structured loan people but you do say to the meniscal bond people. >> they are doing amazingly. if you look at corporate bond funds, they are moving into munis. it's a place that seems to have value. >> what you get a jump on puerto rico like cathy burton? >> it's amazing to me that you have 200 traders and hedge fund entrepreneurs moving to puerto rico to avoid taxes.

we heard from the governor no said if we just give them taxes in puerto rico, they can move their. >> then they are raising taxes within puerto rico for the middle class. what's going on? >> we will be right back with more on "bloomberg surveillance." good morning to you on this friday morning. ♪

is the end of june in new york. 80's today from the but a beautiful photograph

downtown of the metlife building and grand central station and the empire state building. we welcome you worldwide, " bloomberg surveillance," thank you for watching us across america and worldwide. i am tom keene. nike is reporting an increase in quarterly profits. results were slightly better than analysts anticipated. they credit strong sales of apparel and footwear in western europe. 777ng is finding out it's airline is hurting sales of its own cargo jet. the passenger plane has a large cargo capacity synthetics another delivery companies are shifting shipments to the hold of the airliners. one broker says he has not sold a wide-body jet in years. philip morris wants to take advantage of the e-cigarette trend.

they are developing a product that heats tobacco instead of burning it. it will debut later this year with plans to add more markets next year. unlike e-cigarettes, heat sticks contain real tobacco. >> let's do a data check. usually friday is a little slow. the 10 year yield is 2.5%. that is a real backdrop. let's look at the geopolitics of iraq and what it means for oil and america's future. , the middle east has always been about oil. isre is the prize that oil regional politics that would make international politics week. the middle east is complicated.

i have to admit that i try to keep my eyes glazed over. if i look at the great divide of sunni and shia in iran, which part of sunni are you most focused on? >> we are focused on their internal competition with different countries backing different extremist sunni groups fighting assad. the saudi's have stepped up and supported isis and will they continue to do that or will the sunnis back off of that and go for regional stability? >> this is a chart from eight or nine years ago. of light.r there is the non-movement in the 50's and 60's and the opec collapsed in 1986 and the persian gulf war and up we go with the grand boom.

we are focused on oil in the grand debate. is the rest of the middle east focused on not? >> i think they are but we have not seen prices go up further because the fighting has stayed away from the southern part of iraq were most of the oil fields are. if this continues further and becomes a regional secretary of war in iran and syria fighting with the shias in iraq, we will see much higher prices i think. >> saudi arabia is the largest producer in the region, the largest in the world. is theren, shiite - any chance that iran and saudi arabia come together for the betterment of the region? >> that is hard to imagine. the u.s. and soviet union. they're locked in a struggle of dominance and that extends to oil. saudi arabia produces more so they want to see stable prices and people hooked on oil.

iran exports less and they want to see higher prices so they can fill their coffers. there is a different energy strategy between those two. >> in other words, what we are seeing withisisl is this is an extremist sunni group that wants to eradicate shiites. can you bridge this 800-year-old gap between them i think you can. they have picked up a disaffection between the iraq sunnis who feel they are not represented. >> what about israel? what kind of role is it playing? >> it is taking a step back and has clear priorities in terms of protecting its homeland. it seems -- if it seems weapons in syria, it will take action but it is watching the two major foes fight it out. >> this initiative by the

president to supply $500 million of weapons that help the syrian the president,f could that draw israel in? >> the bigger question is who will be's rebels be fighting? will they fight assad or isis and is that a priority? >> do we have an informed foreign policy? making adople who are hoc decisions actually listen to people like you at the council of foreign relations or brookings? do they pay attention? >> everyone listens to me. >> seriously, do they pay attention to what pros say? >> i think they do but the problem is so complex and you also have public opinion which is divided. the american people said they don't want to go into iraq and the president's approval ratings are plummeting because iraq is becoming a mess so how do you square that? >> how quickly could the

conflict escalate and move into the south and cause prices of oil to increase? >> i think it would be hard for it to be as quickly as we have seen. south is extremely dominated by the shia and we have seen him ramp up with militias. the majorshia shrines are there. >> its 225 miles. >> right. lisis hin that, does the envisioned southern iraq as part of their agenda? >> they published a powerpoint presentation with their 10 year plan. it extends from morocco through malaysia which is a territory they want. >> did you say malaysia? >> yes. >> as we focus on domestic

politics, who within the u.s. has a good understanding of what is happening and can offer a prescription for it? >> one of the problems is that we have not had a presence on the ground in iraq since we withdrew troops in 2011 and that has limited our perception of what is going on there. we withdrew our ambassador in syria because the fighting got so bad. we have limited knowledge. >> do you have a tipping point on brent crude? is it 100 and two dollars? >> i think it will have to go higher than that. >> very good. and -- and going to - end. >> this has been going on for centuries. shiites think they have a legitimate claim to islam, that's the problem. becoming up, big changes may in store for wall street and our

single best chart shows how the millennial's save their money. this is "bloomberg surveillance." ♪

>> good morning, everyone, our twitter question of the day --

i did not come up with that question. that is a brilliant question. numbered pony up for a to value meal? this is "bloomberg surveillance." sunni insurgents are pressuring government forces in iraq causing thousands to flee and the shiites are pushing for the removal of prime minister nouri al-maliki and say they will form a new government next week. it hasights watch says evidence the insurgents executed at least 160 captives. at least 14 people are dead after a gas pipeline exploded in southern india today. it destroyed homes and caused widespread evacuation. it is state owned and the fire is now out but they say it's too early -- it's still too early to

tell what caused the explosion. he posed a famous question during the watergate hearings. remembering former senator howard baker junior. he died thursday at his home in tennessee. he was known airing his three terms as the great conciliator. he is best known for his role during the nixon white house when he asked what the president knew and when did he know it? the nation.oss for he combined his moderation with the razor-sharp intelligence. every time he opened his mouth, he was smart. fromrning must-read comes someone who knew howard baker, al hunt. i had a hockey injury them and i watched the whole thing.

i was flat on my back all summer with a bad leg injury and i watched everything including the john dean thing and baker stuck out like a sore thumb. there was all these old guys jockeying. he has the dark here next to senator ervin who was front and center. there is mr. inouye who recently passed away. he appeared on the senate floor two years ago emotionally. this is a great moment and baker's leadership here was absolutely unique. i cannot convey enough how smart the sky was. >> i think of how often we use that phrase -- what did someone know and when did they know it? it comes up so often. >> he was smooth with politicians but when he was on camera, he had a razor-sharp moment. he did thatg and if

today, he would be beaten to death. >> he was credited with restoring order and purpose of the white house in helping to mend relations with congress. >> watergate was stunning. he went on to real leadership assisting ronald reagan. >> intellect and compromise art two words that i will look for in future leadership. >> in november? >> good luck. >> intellect and compromise, we need both. >> we also need top photos. >> we will have three starting with the number three photo -- old, allis at 19 years smiles, andrew wiggins selected by the cleveland cavaliers last night in the nba draft. he will play for the gentle man that betty liu is interviewing at 8:00 a.m., dan gilbert? i got it. >> did you guys watch the draft?

>> i haven't. >> we are not big nba draft fans. it is not as big a production as the nfl draft. that is an extravaganza. weekend, dennis the previous weekend was the u.s. open and you have the french open of tennis and we have been watching the world cup not to mention hockey. there's lots to choose from now. the number two photo, remember the sinkhole at the museum in kentucky? this is at the corvette museum. it has become a selling point. -- they are thought pulling that corvette out of the mud. they have decided to leave part of it open because it is kind of hard to fathom. inecurity guard walked in the morning at 6 a.m. and planned to open the museum and there was a whole. he wondered what happened. >> they are now embracing it?

>> everyone wanted to see it. it's amazing. the third photo -- i have not seen this one. our number one photo -- this guy has been suspended by fifa for four months for the bite. >> and nine matches. >> can you imagine biting? lisa abramowitz want to weigh in here? did bob burgess get that yesterday? >> i don't understand why is it that when somebody bites that it's worse and different than hitting? it feels so different. >> it's like fairplay. >> if my two-year-old were to bite, that would be a huge problem. that would be meetings and an issue and this is behavior that's outside of the norm.

it's beyond just hitting. >> it took fifa a while to respond to this. he has a history of biting opponents. he bid to people in the past. >> one of the experts said this will cost him millions of dollars. him posingo was of next to a photo of himself. tyson fightinge evander holyfield. that was the end of his career. mr. holyfield on bloomberg television today. >> coming up, investors are piling into bonds on rising fears of economic weakness and we will discuss what it means for your returns next. ♪

>> this is "bloomberg surveillance." let's get you company news -- alibaba says it will listed shares on the new york stock exchange which is a blow to the nasdaq. the chinese company will trade eada. the symbol

the nsa scandal is causing verizon a major contract as germany says it will end its contract with verizon because they are concerned about security. they were shocked when angela merkel's cell phone was tapped. findings in ag study of american internet use -- the government says that nearly 1/3 of u.s. homes don't have a web connection faster than dial-up. a sharpsays there is digital divide between households that are connected and those that are not. that is this morning's company news. >> i am so glad you did this. this is a big deal. this is a huge deal. we have all those whizbang stuff but a huge amount of americans have technology but it is dated,

like 10 years old. >> they are using dial-up and it is a contrast to the rest of the world. think of south korea where everyone is on 5g or whatever the latest version is. >> you said 1/3 of american households ? written on this month. this is a divided america. >> let's get to the bond market. shows14 pile on into debt things are slowing after a commitment to record low interest rates from the fed. lisa a brummel what's writes about the anxiety behind this. she knows where the risk lies. to thes the biggest risk resilient bond market rally? >> that's what everyone is looking for and they look at yields being lower and prices higher and they say we don't like these yields and we don't like these prices and yet they keep buying because there is not

a clear catalyst for the rally. is very concerning to many people especially when yields are at record lows on junk bonds. people are saying that some of the problems might lie in the fact that much of the money has come to retail mutual funds and exchange traded funds. it could be short-term funding and people could pull that money and the longer-term debt does not trade is frequently. that's one thing people are looking at. >> there is a lot of volume but everyone is worried about the liquidity issue when it comes time to exit. absolutely, the backdrop to this is wall street's biggest banks which have been pulling back their balance sheets that they used to facilitate debt trading so this slowed down trading which makes it harder to really execute in big size quickly now compared to pre-crisis. >> the age-old tradition is the

street knows where they can make money and pick up basis points because of esoteric products. is some of the complexity now is that they can make greater marches -- greater margins with complexity? >> the bigger banks and stopped doing that and more complex trades. a huge volumeing of synthetic collateralized debt obligations. >> i think this is a huge deal. they cannot just run to squares like they used to. >> it's not just low yields. the ratings are down 52 basis points over the last 17 years. yesterday, twost of them said you might get a last leg and then it's done. are you hearing anybody else say something like that? >> people are saying that this

is a bubble and it's at the peak and it always goes further. if you've got central banks around the world to method to keeping the situation going for as long as they can, what will derail it? you got the fed keeping benchmark rates at 25 basis points and mark carney who hinted that he might raise interest rates in england -- ,lus the ecb starting potentially starting a purchase program, this is putting downward pressure on yields. >> our investors positioning themselves? what does it tell us about where they see things headed in six months or one year? >> you've got people going back to just the basic plain vanilla intermediate bond funds that they pulled billions of dollars from last year. they are coming back and they say maybe this is something that could last longer term. >> what will be the collateral damage?

>> i think inflation is one of the biggest concerns people have. >> inflation moves, prices go down and yields go up. >> at a moves away from the control of the central banks. >> where is the consensus right now? we have been wrong but where are they now? >> janet yellen says she is not concerned about inflation. they are shooting for the two percent target. you also have inflation data that came out -- >> consensus moved? >> i don't see it. >> thank you. thank you so much. fourex report is the mela. -- is a vanilla.

next hour,p in the steve ellis, the ceo of chipotle joins us and we will discuss rising food prices and the organic market. . ♪

for continueddes

american economic recovery. the slack is in consumption. chipotle changes the food industry. is tuesday, it must be belgium. america advances. good morning, everyone. this is "bloomberg surveillance." i am tom keene. joining me, scarlet fu and adam johnson. -- guest host is is ellemnn zentner. concerndence fell over over ukraine. we will get our own confidence with university of michigan confidence. gathering ine brussels to discuss russian sanctions. we will check in with hans nichols. note, if item of

may, secretary kerry is in saudi arabia. there you have it. a brief brief on this. >> let's get to company news. nike is reporting an increase in quarterly profit. the sportswear maker credits strong sales of apparel and footwear in western europe. boeing is finding out that a 777 airliner is hurting sales of its cargo jets. it has a large cargo capacity. fedex and others are shifting shipments to the holding capacity of the 777 passenger airliner. morris is developing a marlboro product that heats tobacco instead of burning it. they're called heat-cigs.

unlike e-cigarettes that use nicotine,h again -- heat cigarettes. >> are you going to walk on the street with an e-cigarette? this is different. this is different? full disclosure. try one of these things. >> why? >> just to prove to yourself how absurd the whole thing is. >> a look stupid. i will be honest. i shouldn't be one to talk. i have a cigar every sunday afternoon. it appears it has been a miserable first half of 2014. janet yellen and the fed must recalibrate. they must adjust as july beckons. it was not just a frigid and a frozen first quarter. trapped in making

them of isolation. gdom of isolation. that really captures. everybody got the first six months wrong. that's a for statement, isn't it? >> yes. we will probably have a flat first-half. the data going into the second half of the year is looking well enough for the fed to remain optimistic with the growth outlook. it is starting to get cloudier with wages remaining stagnant. estimates of actual data -- are the fed estimates out of where morgan stanley and goldman sachs and the rest are? >> even with the fed coming into the june meeting and drastically marking down its growth forecast, it still remains too optimistic for the year. they are too optimistic.

whack still. of supposedly, we will be going into a rising interest rate environment. >> supposedly. that worked out. >> i want to go right to your note. by gonzaga gods. it is all backward looking. bygones arefirst -- bygones. it is all backward looking. we knew the first corner was bad. >> beyond q2, what kind of growth rate do we settle in at? president paying attention to the gdp tracking, we need to go to more of the high-frequency data. how are jobs holding up at the 200,000 level? does continue -- consumer confidence continued to move higher? the freight companies tell us things are moving and shaking around the country. it makes it appear that economic

growth is not just fallen flat in the second half of the year. >> i want to stay this route. would we have seen in the last three days in gdp markdowns -- this is a fed that cannot raise rates. tothe fed may not be able raise rates, but inflation data seems to show that there is a pick up in prices. what is the inflation data the the inflation data the fed have not show us? with the fed is looking at his core pce. it may be rising faster than the fed thanks. is just starting to get questions about what does that say to you if wages are not growing, but prices are?

will you raise rates when real wages are negative? >> she said, i don't expect were real wages to remain flat. but that would raise downside risk to the consumer. they don't raise rates when real wages are flat or declining. >> average hourly earnings declined. >> they did. in the may report. year-over-year. that is what triggered the questions over what would the fed do? are known for writing wonderful and detailed notes. are we over thinking where we are right now? do we need to look at the blunt instrument of consumer confidence i see you never see of michigan and yes it is a recovery, but you look at university of michigan, we are "normal."ar back to we're just distant from normal. >> it is important to put it in context.

the consumer confidence measure is rising to a series -- a position of 85. it has taken u.s. households five years for the stability recovery. even the confidence is rising, we are still not getting much response from households. that earnings growth can be 8% this year? >> costs remain so low. wage and salary growth are going nowhere. >> wage and salary growth. >> if you look at janet yellen does, -- >> 1.5% nominal? >> average weekly earnings are 2.5%. >> that perfectly folded into our discussion later with chipotle about 2% wage growth after inflation.

>> i want to talk about the world cup. we clearly haven't talked about it enough. [laughter] specifically, tv ratings. we're not going to get them until later today. espn did report some breaking business on its video streaming app, record-breaking business, i should say. are you ready? the game between u.s. and germany, 1.7 million people were logged on. that is a new record. the most ever on espn. it speaks to the fact that people are watching. ball anduy the soccer have it around the living room, can i get cut and chiseled like these guys? [laughter] >> by the way, you're not eating at chipotle, either. a 1600 calorie burrito does not count. >> a lot of people or not able to log on. >> there may not be the capacity. if you are streaming tv.

watching bloomberg television on lexington avenue, sometimes it cuts out because at&t cannot stream the data. >> i want to bring in my morning must-read. it is from a columnist at "bloomberg view." where is the only sport the u.s. can claim to be an underdog. any idea how much any lost productivity there was because of the u.s. have in germany game? >> i don't want to tell you how many people of morgan stanley were watching the game. [laughter] i think it is a healthy corporate environment if you encourage people to get out there a group for your country. pizza in theot of office yesterday. it was a great environment. >> mr. gorman is not from america. >> australian, right? >> australia is out by the way.

australia is out. they did not move on. >> i think he was probably cheering for the u.s. than. >> it's like march madness. >> at least you have a bracket. >> argentina. argentina. coming up, we have a packed show for you. steve ells, the ceo and cofounder of chipotle. rising food costs and how it is affecting their hiring. hint, it is not chefs that they are hiring. would you pay more for fast food in order to raise the minimum wage? thank you to adam clash at -- adam johnson for that great twitter question. ♪

>> this matters now to our guest host, ellen zentner. too littlexed evidence that consumers want to consume at the margin. they are marginally holding on to the wallet. the savings rate is up. why is this a surprise to economist? account like normal behavior. >> it does sound like normal behavior when the outlooks becomes tenuous or households remain unsure about the

soundness of the financial future. a weak labor market will do that. now what we have got to contend to is that we have been dealing with wage growth not accelerating. but it has been an environment where prices have been falling or also remain stagnant. real wages have been improving. now, the prices are rising. if wages to not pick up, you start to get demand destruction. that is something that janet yellen is watching and is worried about, she has said. >> more than anyone i know who has nailed the weakness of roach has beene out front saying, it ain't there. the you agree with dr. roche?\ >> we don't have consumption across the board, across all income groups. we have been waiting for the so-called trickle-down effect where it starts to affect and

raise the lower income households and it just has not happened. >> help me with this. we are halfway through the year. july 1 is on tuesday when the u.s. plays belgium. our economists wrong because you are aggregating everyone together? -- is our issue here that we have not disaggregated our analysis? >> we drove down into the consumer quite a bit. we drill down and look at consumer spending by income group. typically, in the aggregate, you look at it from a 30,000 foot level. about really want to care where consumers are spending and where the shifts are occurring, you have to drill down to the income level. wealthy spendthe on big-ticket durable items and the categories that are low in

discretionary and just continue to limp along. we have to have stronger wage growth. it is wage and salary growth that affect those incomes. >> are you and i going to chipotle today? >> i don't think so. but i know we could go there in the future. >> we will speak about a kale brito. what a fabulous success chipotle has been. ♪

> good morning, everyone. it "bloomberg surveillance." scarlet fu and adam johnson. tell futures, -25. -- dow futures, -25. >> is fast food sustainable? is raising menu prices as food costs increase. joining me now is steve ells, the founder and co-ceo of

chipotle. steve, chipotle is rolling out higher menu prices. make the change now? what was the specific catalyst? >> it has been three years since we raised prices. we certainly can tolerate the ebbs and flows of the commodity market and we don't adjust prices during those ebbs and flows. but the trend has been upward and we felt that this was the time to take a modest price increase. it is great because our customers understand. they tell us we understand because we have not -- they understand because we have not seen any resistance. we have a very loyal customer base. that is because of our commitment to really great ingredients. and served in this new format where everything is prepared cooking techniques

and served in an interactive format. >> let's break down the ingredients of a burrito. how the cost of ingredients go up. >> beef is the most. avocado prices are doubling. >> they have doubled in like a year. >> their cyclical. every other year, they have a bigger swing. to go back to my point, we can handle the ebbs and flows normally and we have been handling them. we don't really worry about food costs like a traditional fast food -- restaurant. we have higher food costs because we are willing to invest in premium quality ingredients. we know it takes an investment to make sure you are serving the very best food possible. see how packaged food companies deal with inflation. ken chipotle make smaller burritos?

>> steve has to speak for steve, but his focus has always been on quality and value. his consumers have responded to that. >> tom? >> a look at the report and i look at your 56th street location. it is jammed. it is absolutely jammed. since 2006. 185 restaurants. up 18% per year. no one is doing what you are doing. why don't you have competitors? >> our idea was very simple. in the early days. that was to -- i use my background in classic cooking. i learned the basic classic cooking techniques from the chefs and tim ryan and that was

the foundation. the other cia to be clear. the culinary institute of america. nobody thinks about fast food. it is a new approach. we are buying real food. >> they are buying real food. as mcdonald's changed the business plan because of steve ells? >> you would have to ask them. >> i wouldn't know. >> they have to. you guys have fresh stuff. >> it has been a long time since you have been to mcdonald's -- i have been to mcdonald's. >> i'm not sure it is real food. i go into chipotle and it is like nutrition. >> yes, it is. >> talking about mcdonald's. they famously have the mcrib every october. in all seriousness, we correlated port rices which followed -- pork prices at the end of barbecue season which

allowed them to do it. >> this is exactly what we don't do. when i originally designed the menu, it is the same menu. except we have added so freaked and we haveas formalized the bowl option. we visit ranches, we understand how food moves in the country. >> it is part of the mission with food with integrity. when we look at the calorie count for some of the offerings on the menu, walkable he and chips, 770 calories. mole and chips, 770 calories. >> sure. if you are a to pull a customer, customer, you

understand that you are in control of what you eat. someone who wants to eat lighter might have a salad with some grilled meat, some tomato salsa, and maybe a sprinkling of cheese. certainly, in the 300-400 calorie range. athletes who are exercising hard and eat a lot of calories will come and loaded up. isld i think is important that you make sure you are using the very best ingredients, so then you put the customer in charge of what he or she puts on a burrito. >> you run the culinary institute of america. can you teach chefs to be healthy? >> it absolutely is. we have had a mandatory course in nutrition that everyone, including steve ells, went through and have been through. we have many other electives that focus on nutrition.

it will be increasingly important in the future. >> we have steve ells with chipotle and tim ryan with the culinary institute of america. we will discuss americans and retirements coming up. ♪

>> we have some breaking news. ukraine will extend the cease-fire by 72 hours. this is according to a french official. this is an agreement made by president poroshenko during the summit in brussels.

the cease-fire will be extended by 72 hours. >> dollar ruble, euro ruble. this is just wrong to ruble in the last minutes. this is working. it is moving. it matters as we go into the weekend. >> we will continue to keep you updated. this is "bloomberg surveillance." the job recovery since the recession is pretty uneven. one highlight has been the growth in restaurant hiring. it could be good news for the culinary institute of america. is it good news for the economy? tim ryan is here with us, the president of the culinary institute of america. , along with one of their most famous and successful alumni, steve ells, the ceo of chipotle. the prospects are fabulous

for graduates. we have a tremendous track record of successful alumni. including folks like steve ells. recruitment on campus has been at all-time highs. these are companies and restaurants coming to recruit our graduates. >> what is the starting salary? >> about $35,000. $25,000 paying one and -- $125,000. that is a good return? >> that is a good return. to look attake starting salary. we look at lifetime earning. i think that the restaurant industry, the food industry in general, is an industry of tremendous opportunity. tremendous entrepreneurial opportunity.

in any industry, it is true that not everybody is going to be a that doesike steve, not mean they will not do tremendously well. that is true with our graduates and that is true in the food service industry. when you focus on what is happening in the starting salaries, i think it is very shortsighted. >> steve, i know you pay more than federal minimum wage. what are the prospects someone joins chipotle is making eight dollars-nine dollars per hour -- >> we are really proud of the opportunities we give our folks. the vast majority of our restaurant managers come from peru. we have a clear path within the restaurant that encourages our crewmembers -- come from crew. we have a very clear path within them restaurant that encourages our crewmembers to move up.

a fabulous culture needs to be created. they have to created a culture of empowerment were people know they have the opportunity and are encouraged to become the future leaders. i restauranteurs -- their average compensation, total compensation is over $100,000 per your, including stock options. >> are you going to be able to open to pull a in seattle --chipotle in seattle? seattle might have this sort of minimum wage and if that is the case, then our prices will have to reflect those conditions. >> what is your biggest headache with the sell side? sanford bernstein is still all over your stock. it is still a moon shot. how do you deal with wall street?

you are an art history major. >> art history and then i learned classic cooking. >> exactly. at the onew burritos asked the wrong question? >> we have kept a very simple. we focus on really, really great ingredients and we focus on our cooking techniques and we bring that altogether with a team of top performers who are empowered to achieve high standards. this is a completely different model than typical fast food. customers are responding. they come by the droves. you have seen the lines, you know how busy it is. we have a very efficient economic model at the restaurant level. there is so much room for growth. late,k that the entrepôt there is an operative -- beyond chipotle, there is an opportunity. we will continue to create opportunity. that is the secret. >> steve ells, founder and

co-ceo of chipotle. ate 200 consecutive days at chipotle. how do you do that? >> the university of michigan consumer confidence comes out after the market opens. >> good morning, everyone. we are out on your tablet as well. let's get to company news. here is scarlet fu. >> the art of the deal. getting back into the stock market. .ichaels starts trading today a creditor of american apparel is depending full repayment of the loan to the chain. they're calling in the $10 million debt. american apparel ousted its founder. the company was asking for a waiver to use the loan going

into the fall. a device that helps some disabled people walk again is getting the ok. the robotic leg braces work like an x a skeleton. it lets people stand and walk with help from a caretaker. it was developed by argo medical technologies. that is the company news. overe number of americans 85 will double over the next 45 years. -- 25 years. financial touring the country to try to help people plan for the future. the ceo is joining us now. first and foremost, how much did the financial crisis separable back and create this problem? >> it did not have a lot to do with the financial crisis, more demographics. boomerse 10,000 baby turning 65 everyday and that will continue through 2030.

of americans have long-term care insurance. >> amazing. rates or the fact that health care costs are high? >> it is both a big problem. low rates and health care costs are exploding for long-term care. the average cost for a private nursing home room is $87,000. it is growing over 4%. it will double in another 15-16 years. if the average person needs long-term care for three years, most baby boomers have not saved the amount of money. >> what is the fix? >> they need to begin to have a talk with their families to figure out what they're going to do. they need to set aside assets. we think policies make sense. it is an opportunity to take the risk off the table and to feel much more secure about the fact that you can keep whatever necessary you have aside and let the insurance pay for it. >> jen were has been -- jen

has beengenworth courageous and staying in this business. do you need a government regime to jumpstart people toward this insurance coverage when they are in the 40's, 50's, 60's? did they need assistance or a tax advantage to get your business going? >> i think that is all part of what we have to consider. is,main thing we are saying let's start the conversation and have families talk about it. ort americans think medicare the affordable care act now covers long-term care. >> when they see your premium, they don't buy it because it is huge. >> it is huge. but we are launching a product where you can pick the amount of premiums. let's say you can only afford $100 per month, we are going to allow a new product that you pay what you can pay and that will cover you for x amount of

coverage. it will not cover you fully. >> our guest host is a senior economist at morgan stanley. >> i have a question for you. you talked about people in their 50's and 60's having these conversations with the family. or our family, we were forced to have this conversation when we cared for an elderly grandparent. my parents decided to get long-term care insurance. they were very lucky to get it at that time because costs have rocketed since then. thatare locked into a plan assumed costs would only grow at a certain amount. they have been told, you are very lucky. if you had to get it now, it would be exorbitantly priced. >> there is no question the policies issued 10 years ago are much cheaper than they are today. interest rates are must lower -- much lower. >> very quickly, paulson hedge fund manager says split the two.

>> we have done a lot to do you ,ead >> the ceo of genworth thank you so much for joining us. we will be right back to discuss wages. ♪

"the wall street journal"

reporting that bnp paribas will cut the dividend. we will have much more on this through the morning. we will look through that. 9 billion reasons to cut the dividend. >> and so multibillion euro bonds as well. >> friday afternoon in paris. what do you think that has something to do with it? >> all the money they were make this year, plus the first quarter next year, gone. >> it is still being debated whether it is 9 billion, 10 billion, or 11 billion. [laughter] >> we noticed. joining us is betty liu. you have a pretty action-packed show this morning. founder ofa former aol on with us and the current ceo of aol. [laughter] that will be an interesting match.

this mission over the last five days to draw attention to cities saying that startups are not just in silicon valley, they are all over the country. we were in detroit. cincinnati, now in nashville, today. it has been a bus tour. he has been on this little campaign. there we are in detroit. we will be interviewing steve case live to find out what he found out. is it possible to find the next big facebook in detroit? >> he stopped in detroit. tech firms,tor for that seems kind of curious, given the problems they face. >> one problem -- person who believes strongly in this is dan gilbert, the billionaire founder of quicken loans. he is also focused on the cavaliers. we interviewed him. he has put in more than $1

billion into downtown detroit. orare not just about cars bankruptcy, we are about attracting people to the city. >> we have over $1 billion in investment in the city. real estate, technology, existing buildings, new construction. 100% residential. the young people cannot find a place. >> you would have to make it really bad investment right now not to make money on property in detroit. >> for a house in new jersey, you could buy an entire building in detroit. >> the comparisons are pretty stark. detroit applied for bankruptcy, people thought another city would follow. that has not happened. problem has been particular areas. up and talklow it

about it like it is a national issue. it really is city by city, state by said they, where there are budget issues. >> betty liu, in the loop. "in the loop" begins at 8:00. big banks cutting ties to barclays following a lawsuit by new york state. we will discuss the fallout. bnp shares are rising. we will be right back. ♪

>> that is coming up tonight. coming up tonight, a very special episode with stephanie ruhle, speaking with kanye west and other notables. p.m.is a 9:00 -- 9:30

and here with tom keene adam johnson. let's get you company news. a tech giant goes traditional. list shares it will on the new york stock exchange, a blow to the nasdaq. they will trade under the ticker symbol baba. they are expected to go public later this summer or early fall. perhaps august 8. the nsa find scandal is causing verizon. german leaders were shocked when they found out the nsa tapped personal cell phones. some surprising findings in a study of american internet use. most one third of u.s. homes do not have a web connection that is faster than dial-up. the number of u.s. homes with

internet has now released -- reached 85 million. there is a sharp digital divide between households connected and those that are not. that is the company news. >> that is a huge deal. i cannot convey how all of a sudden this has become the haves reaching ever forward with their perfect toys. look again at the american economy. we are 180 days gone in 2014. the first half has been a six months of decided slack. that was certainly the word of janet yellen and economists. income growth is that the absolute heart of any back to normal recovery. it appears it is simply not happening yet. zentner is an expert on this. is with morgan stanley. how bad is it? have we ever seen income growth

this multi-for this long? >> i like the way you put that. you are always so colorful. before onen mold wages. in 2003, with the jobless recovery, it took a long time for wage growth to start picking up. it has taken longer this time. that should not surprise anyone. wage growth will pick up, but the lag time between economic growth and wages is just extremely long. >> the behavior on this is fascinating. i look at my parents as depression babies and this literally goes to your single best chart which i will call the great distortion babies. >> they are the new depression babies. the savings habits of millennial's. it is from the brookings institution. leastadults are the trusting of any generation. they do not trust banks, wall street, they graduated into the financial crisis. they keep most of their money in cash.

they put 52% of their savings in cash. all other ages put 23% in cash. millenials are a big group. >> their enormous. if the baby boomers were our then theeneration, millennial star the largest. they will affect the economy and consumer behavior for their lifetime. they are bound to be more risk averse for their lifetime. this is not some sort of temporary trend. this is a group they grope solely connected to the internet. the first group to grow up 100% connected to the internet throughout their youth and more aware of the financial crisis. >> in that, the microeconomics of labor, the supply, the demand of labor, how does this technology fit in? am i right? i think of a research note you did years ago on this. this idea of the computers substituting my labor at my

potential wage gain? >> yes, so at the turn-of-the-century the industrial revolution was having machines replace people that needed to be run with people. the machines still had to be run with people. now we are replacing people with machines that need to be run by machines. callechnology, what we productivity, continues to rise means the labor productivity continues to fall. the type of technology that we are thinking existing technology is being made better. >> i go back to the foreign affairs article of the month. digital disruption is not just about to little toys at google or apple. it is about completely changing the weight structure of the country. >> and it takes jobs. you look at the unemployment rate for 18-20 five-year-olds.

significant double digits. have you done work to quantify how that translates into lack of gdp growth? slowedntial gdp has since the financial crisis. some of those labour distortions go into those calculations, not just the demographic trend. the demographic divide of the percentage of population move into the older demographics. that is a big drag on potential gdp. there are other distortions in the labor market like the high unemployment among teens and young adults. >> what is your potential unemployment rate if you are so cautious on potential growth? >> we think that there is more structural problem with the labor market than the fed does. think the natural or long-run rate of unemployment is 5.5%, we think it is around 6%. out withl lynch coming the same call as morgan stanley.

they are elevated in unemployment rate. >> pimco's new neutral. >> i'm not sure america is ready for 6% unemployment. >> that is not what people had in mind. let's get to our agenda. tom, get us started. you are going big. your political. >> price of oil. we had a pretty good week. there it is. percolating this morning. the news on syria. he gets on iraq and the basic idea of these elevated oil prices -- our dependence on oil and the idea of where does this crisis go into july? >> you say these higher oil prices could slow down gdp. could it take a big bite out of it? >> absolutely. the world has got more efficient with its use of oil. impacts of lesson. it still has a noticeable difference in the growth of the

u.s. economy. if oil prices rise i $10 and sustained,ses are you can see gdp harmed by 0.3% four quarters out. it makes a big difference when you go up to $50 per barrel increase. >> here is what is on my agenda. the first half of the year ends on monday. next week, we will get all sorts of commentary on how do you make money in the back half of the year? utilities were the best performing sector in the s&p 500 , up about 15%. i will be looking about how to make money in the second half. >> barclays is on my agenda with all of the fallout following the new york state lawsuit with dark pools. jenkins. >> where does this go? >> it is a good question. i wonder if the attorney general is looking at other banks.

>> it is hard to believe it would be limited to just one bank. >> i do agree with that. >> let's get to the twitter question of the day. would you pay more for fast food to raise the minimum wage? >> i would say that is a minority opinion. that leads to the whole idea that a lot of the stores -- >> minimum wage, $7.75. is $15,500. the poverty line is $11,700. people making minimum wage are barely above the poverty line. is it will getn solved at the state level. zentner thank you very

much. bill demong tuesday. belgium. >> have a great weekend, everyone. ♪

>> good morning. it is friday. we are live. i am betty liu. we have a great program for you. we have the former and current

ceo of aol. we will talk to tim armstrong. we will get his reaction to aereo's defeat. seek --eo and founder, tove case is on a mission create silicon valley in the middle america, starting with detroit. he kick that off on monday. rick snyder and cleveland cavaliers owner will join me to talk about bringing investment and jobs back to detroit. a big pack. the year came president has signed an agreement for closer ties with the eu. ukrainemove that sent spiraling into crisis. a closer look at president obama's request to arm syrian rebels. the president has asked for half $1 billion.