>> i am mark crumpton. this is "bottom line," the intersection of business and economics with a main street respective. distributors filed complaints against herbalife. the u.s. military grounds its entire fleet of f-35 fighter jets. and the world's largest private collection of tanks goes on auction. ♪ ♪ to our viewers here in the united states, and to those of you from around the world, welcome. we have full coverage of the stocks and stories making headlines. fed chairkee examines

janet yellen's math on the economy. why the u.s. military grounded its affect and 35's. and why a plan to sue president obama is paying dividends for democrats. we have heard time and time again claims from bill ackman that herbalife is a pyramid scheme. the company and carl icahn say those claims are without merit. in march, the u.s. federal trade commission opened an investigation, and the illinois state attorney general has been looking into complaints filed by 16 latinos outside of chicago. a claimed they were duped out of their life savings and herbalife is to blame. duane stanford-- has been looking into those claims. >> we are headed to a community lulac,un by lou lack -- a major latino advocacy group in

the united states. they have come out strongly against herbalife. they believe the company has been taking advantage of latinos. lulac has pulled together victims. document $25,000 he has lost. he is a good example of the kind of person bill ackman says is being taken advantage of. how are you? i am with bloomberg. >> come in. >> how did you first learn about herbalife? >> [speaking spanish] what was the total amount you ended up investing? >> [speaking spanish] >> the more we talked to these victims, the more it became clear they did not read the contracts they signed.

in fact, they did not have a strong understanding of the mechanism by which they would earn the money. i thought if you invested you would double your money. one of the names that kept coming up was caesar kabul arrow -- caballero. he was their sponsor. we wanted to talk to him and try to get his side of the story. where caesar had one of his nutrition stores. there is an herbalife playing in the window. -- sticker in the window. he met with us at one of his nutrition clubs. [speaking spanish] >> a man said he paid $25,000 and could not sell the product. >> [speaking spanish]

>> would there ever be a time you would buy a large portion of product up front and sell it in a store or nutrition club? wasecame clear that what i seeing in the trenches mirrored closely what we were seeing at the top, with this battle between the hedge fund managers. the company is clearly a fraud, says one side.e, the other side says it is a legitimate business. after i left chicago, i wanted to delve deeper into the attorney general complaints. he's lost.said the documents were heavily redacted and i do not have subpoena power. lawyer, a former ftc said it would be a challenge to prove it is a pyramid. >> proving an operation is a

pyramid can be complex. the ftc will look at all the evidence to determine whether the operation is primarily designed to sell distributorships. or is it really designed to sell products to multiple consumers? that can be a difficult line to draw. all of this will likely take a long time. i would suspect it would be at least a year. it could be even longer. questions like, is it too good to be true? is herbalife a pyramid scheme? >> no. [speaking spanish] no. >> we are joined by a partner in a litigation department, a former senior counsel in the kernel division at the u.s. department of justice. he joins us at our washington bureau. thank you for your time today. >> thanks for having me. >> what is the narrative?

how tough will it be for federal investigators to make a criminal case against herbalife? a good day for herbalife. no company wants to find themselves on a news program like this, and to find a number of complaints filed against them. i think from their perspective the biggest concern is that there is a suggestion that there is a pattern there. you have a lot of people, apparently part of the same ethnic class of people, who apparently have been victimized. that said, this is going to be a tough case for the government to make for a few reasons. first of all, what the government is going to want to look for is evidence that lying to either distributors or knew about lies distributors were making to potential salespeople like the ones featured in the piece just now. that is tough to find. we will have to look at the

documents themselves to see whether there were false representations, in the contracts, to determine whether or not there is a fraud. >> the written contracts with the salespeople -- they could be critical. are they the linchpin of a case against herbalife? significanta very piece of evidence. assuming they were signed, those contracts ought to set out everybody's understanding about the arrangement. and exactly what these salespeople agreed to do. those are going to be critical documents. is in thoset, what documents, those contracts, if not true, or does not fully explain what these salespeople were buying into, that is going to be a very important piece of evidence for the government, the justice department, the fbi, whoever is looking into this. >> are there different guidelines for a direct selling

business, as opposed to any other type of business? is it your word against a seller, or that of the distributor? >> almost. differentot a standard of proof depending on whether it is a sales business or a manufacturing business. comethis case is going to down to for the government is whether or not there were lies, whether or not herbalife new there were lies being told, whether or not distributors were lying to salespeople, and whether or not all the parties knew what they were getting into. according to the report, there are some questions about that. the individual who was just interviewed -- he may not have been told the whole story. that is what the government is going to look into. >> is this a question of what did the company know and when did they know it? >> there is an old phrase -- what did you know and when did you know it? that is what the case is all

about when it comes to herbalife. -- does thatller position have an added benefit in shining a light on possible company?within a we have bill ackman shorting herbalife back in 2007. david einhorn shorted lehman brothers, and his pet turned out to be the correct one. >> that is one of the debates in the market right now. when personal opinion -- if i am in the government, i want evidence wherever i can get it. to the extent there is a market incentive to bring crime or alleged crime or alleged wrongdoing to the attention of the government, that is a good thing. that said, there is a risk, when you have people who have such a strong, strong economic interest in just the start of an investigation, not even necessarily the outcome -- the start of an investigation time drive the value of a security down. that is a risk. i think there is a real

cost-benefit analysis that needs to be done. government, ie care about knowing about potential wrongdoing. >> i want to circle back to something that was mentioned in the piece. ofare talking about a group latino litigants, about 16 of them in chicago. does the fact they were all from the same ethnic group raise a red flag? >> they have something apparently in common. the possible existence of a policy, either by the company, or perhaps just this one distributor. that is the key question. a policy of targeting a certain group of people who may be -- you never know. they may have more difficulty understanding exactly what they are getting into. question,ing to be a

whether they sought to take advantage and where there was something wrong with it. >> thank you for your time. appreciate it. >> take care. said, it enforces in-house rules governing distributors, investigates all claims a seriously, and welcomes the opportunity to help the people mentioned in this story. road to fulle employment. we will take a look at why wage growth is key to the federal reserve outlook on the u.s. labor market. that story and more when "bottom line" continues. ♪

>> the experts are beginning to agree the federal reserve will raise interest rates so that -- further than investors are

expecting. exactly when will depend on how fast the economy is growing. that is a tougher consolation than you might think. how tough is it? >> we have a technical explanation. there is something weird going on. the economy contracted by about three percent. that is a recession in itself. if we were in recession, we should be losing jobs, which tells me those who are predicting another imminent reception are off base, as with all the other data that would ease signaling contraction. business spending is picking up. car sales are the highest since 2006. there has been a lot of debate about the winter's impact. theeally took a toll on economy, one we have not necessarily figured out yet completely.

that is part of janet yellen's problem -- when to raise interest rates. >> how strong is the u.s. economy right now? we do not know, because of -- because after a weird contraction, you should expect a snap back, which does appear to be happening. have.of data we do not that is not a great sign for where we are right now, even though it is nowhere near recession. not seen thee benefits from all this additional hiring, the tightening labor market. we should be seeing people make more money, because there is fewer people available to work. average hourly earnings fell back in june, even though the economy is picking up. we do not feel it yet. we are willing to make big purchases like cars, but we are otherying houses and stuff. confidence is up, so maybe it is a matter of time, or maybe there is something different in the

economy. janet yellen has to figure out what it is. am joined by danny blanchflower, economics professor at dartmouth college and former member of the bank of england monetary policy committee. good to see you again. everyone thatold she would keep an eye on wages, not nonfarm payrolls. why are wages stagnant, and why aren't the markets listening to dr. yellen? >> there has been some kind of evolution in yellen and the fed's thinking, partly for the reason -- >> it seems we have lost our connection with danny blanchflower at dartmouth college. we will be right back. ♪

>> house speaker john boehner's land to sue president obama is already paying dividends for democrats. they are using the legal challenge as a fundraising tool. peter cook is following that story. is the legal move backfiring? >> democrats certainly think so. since he first announced this lawsuit was moving forward on june 25, democrats say they have been effectively raking in the money. house democrats claim they raised more than $2.5 million in just the first six days after john boehner announced this lawsuit. $588,000 came in the first 24 hours. on june 30, they raised more $800,000, the single best day this entire election cycle for house democrats, all since

the speaker claimed the president has exceeded his objective authorities in a range of areas. democrats say this has been good for their fundraising. republicans say this is rallying their own base. speaker boehner saying the president has exceeded his authority is. the only option they had left was to sue the president. >> what is the focus of this lawsuit? thehe speaker has said president has exceeded his executive authority on everything from the health care law to energy regulations. he has talked as well about foreign policy and several other areas. but we have not heard specifically what he is going to be suing over. i know there are legal discussions happening behind the scenes. what issues specifically they are going to try to claim in court the president has exceeded his authority -- as is the speaker saying they do not have any other option, and the

president has not faithfully executed the laws of the land as required by the constitution. the president says this is a political snob, an effort by republicans to drum up support in this midterm election year, rally the republican faithful. fundraising is rallying both sides of the political equation. >> at this time, what are forker boehner's chances success? >> we need to see the fine print of the lawsuit for anyone can see what he is shooting for. the legal experts suggest this is going to be difficult. there is not a great track record for suing the president of the united states, either by individual members of congress or the institution itself, which is what boehner is talking about. he has to prove there were not any other avenues open to them. many would suggest there are plenty of avenues in washington. lawyers in the white house are not talking often about these issues.

>> when apple introduced the iphone seven years ago, it brought the touchscreen to the masses for the first time. an israeli startup has gone one better, enabling you to turn your sofa into a smartphone, or your table into a tablet. this exclusive report. in the futuristic film "minority report," tom cruise uses a trio of psychics to track down criminals before they commit a crime. his ambitions are more modest. he wants to unchain us from our devices and turn the world around us into a more interactive one. his first target -- overhead projectors. >> with a one minute installation, you can take any of 50 million projectors installed worldwide, and transform them from a regular projector into an interactive room, just like that. >> the

bird, which fits on your index finger, is just half of the technology. agent? google earth, the table. image onso project the any device, onto any surface, allowing you to interact with it as if you were there. agent, iphone to the sofa. the agent is still in the development stage. they would prefer we do not show the working prototype. but its impact could be just as impressive as corning's vision of the future, except they are betting on everything being coated in touch sensitive glass. >> voice, gesture, movement, and touch are all parts of this. of touchthink specifically, maybe you have seen a toddler interact with a tablet or a smartphone.

it is very natural. that intuitive nature is why we think touch stays around for a long time. >> covering everything in glass is quite expensive. whichever vision comes out on top, science fiction technology looks to be heading to a screen or a surface near you very soon. bloomberg, israel. the hour.6 past bloomberg is on the markets. matt miller has the details. >> stocks have calmed down a bit throughout the morning session, but rebounding slightly. the s&p 500 down about 0.4%. the dow jones, which is probably the most interesting to look at because of the record we hit last week, still above 17,000. the nasdaq falling the hardest, almost 0.75%. archer daniels midland hit a six-year high

after the company said it will buy wild flavors for $3 billion. among the products is capri sun juice drinks. more on the markets in 30 minutes. ♪

>> welcome back to the second half-hour of "btottom line." i am mark crumpton. thank you for staying with us. we have dealt with technical satellite problems. part -- professor at dartmouth. rudelywe were so interrupted i was asking janet yellen, she told everyone she would keep an ion wages come and not non-foreign payrolls. why are wages still stagnant?

that the markets aren't listening to her, i suspect they're not following the data. that is what we will concentrate on here. the labor markets complicated by how the economy is complicated, not least because all these people left the labor market. the question is, will they come back cap out how should we interpret the fall and the unemployment rate? the answer is it is pretty complicated. if the economy was getting back to full employment, we would expect to see wages rising. thursday great non-foreign payrolls. with all wage growth remaining flat. has not moved for quite some time. it is about two percent. janet yellen has said once again goods in the realm of 3-4, then it is time to tighten monetary policy. by the markets aren't listening, i don't know. she said looks at wages, look at

wages. i have hardly heard any commentary on that since last thursday. >> let's talk about the vix at lowe's that have not been seen in about seven years. where is the fear on the street? are things to calm because the world central banks have stepped in to repair the financial breach? concerned bank is about where we will go from here . in some sense the intervention. iran member when we set up the bank of england and i voted for interest rates cut and qe, in some sense to try to normalize things and allow people to take more risks. the worry is that at some point with the very low rates for very people taketime, too much risk. at the moment it seems to be like your child who has training wheels on the bicycle.

the economy still needs the training wheels on into dangerous to take it off. the worry is there are all kinds of other things happening like the housing market. this is complicated but still an economy on training wheels. >> euro area finance ministers suggesting they may be willing to get countries extra time to meet debt and deficit targets. they have to take measures to make economies more competitive first. is more leeway on that and deficit reduction the answer? mike that allow for greater investment and what that translate to growth? the euro area they have to do something. they have been inspecting -- expecting inflation to go back very quickly. they have expected the unemployment rates would come down. that has not happened. also a bit of shock the german industrial production numbers. the answer is that they will probably have to do something.

look aside from debts and the complications and start to read boost their economy. that is what he started to talk about but very slowly as other. acts very slowly. >> do you see any headwinds that could throw the u.s. economy into reverse? might it be washington gridlock or political tensions or bubbles? anything of concern to you? >> there is obviously still concerned about what happens in the euro area, the geopolitical concerns. it certainly does look like the headwinds in the congress where we had worries about what would happen to government sunday have been pushed aside. i think the fundamental thing still is, what has happened to the economy, look back at terrible first quarter, if the economy really bouncing back? barely there are these kinds of headwinds.

what we should remember it cycles come in about eight years between one cycle and the next. the worry is central banks do not have any weapons. the worry is the business cycle is that next great big worry. >> danny blanchflower, economics professor at dartmouth joining us today. always good to talk to you. thank you for your time. let us switch to energy. coal power continue to fade. finance and investments and renewal energy could amount to as much as 1.3 trillion over the next three years. for more details, i am joined by the head of analysis in the americas. good to see you again. >> coal is being displaced. this is in an ongoing story. we are now in the midst of a five-year time where sure of electricity has dropped from 80% to below 80% -- below 40%.

the u.s. more in than 100 gigawatts being retired. 1000is a fleet of a gigawatts. >> what does this mean for consumers? the backt changes on end. you will see changes from one type of fuel to another. ultimately will manifest itself in different areas of fuel providing electricity. at some point you may see electricity prices have to rise in some states as we make the switch. ultimately we see the shift being played out as the economics of the key driver. you could see cost in some of the regions falling, driven by renewables. >> love the new federal environmental regulations released. they will limit carbon dioxide emissions from existing carbon plans. texas andates, cap --

california -- what will this mean for them? >> and varies across the spectrum. it really is every state can pick its own flavor. in a state like texas, the point going to see pretty significant reduction -- emission reductions. >> -42%. in some states the epa has recognized the fact that there is very little they can do. you are starting to hint about electricity generation capacity. renewables and how they might raise the share of the capacity in the americas through 2030, what will that look like? >> renewables at this point represents a relatively small slice of overall u.s. electricity capacity. large hydro is a source of renewables. other than that, pretty small portion. the course of the next 15 years, absolutely going to change. something like small-scale solar solar is-- small-scale

about 1000 gigawatts, a very small portion. more than 150 gigawatts. about 15%. it appeared 15 years. it is not altogether that much time in the sector. >> let's look specifically at latin america. next week is starting to get a lot of interest. what is in store for that sector's energy sector? >> mexico undergoing one of the biggest reforms it has seen in the country. a fascinating time for the sector. that is due to the fact there has been a decline in oil and gas production and the country has been saddled with relatively high prices, which is a shame because the country has very good natural resources. i think the countries in the midst of these natural energy reforms will break that monopoly in natural gas and electricity and we see significant implementations -- implications.

mexico for all its resources will not be able to produce enough gas for demand. the cost of solar continuing to drop. it has never looked better. >> is this something that was in the movement stages before they took office. i do not think that is the case. there was concern about the viability of countries. about what the resource production would look like. >> head of analysis in the americas. joining us here in studios. great to see you. still ahead, the latin america report for the first time in over a decade mexico poised to

as the top latin american automobile producer. matt miller will join us to tell you why when we continue in just a moment. ♪

>> time for today's latin america report. holders of argentine bonds from 2001 will discuss forming a creditor group with attorneys today. according to a letter obtained by one bird. a conference call at this hour in new york for investors who did not secure in andr restriction in 2005 2010. this comes as government officials are in the hour to meet with the mediator. talking about settling what the group of holdouts who want a court order. . new.s. district judge york think of melon -- bank of new york mellon.

meantime, and the world of car production, mexico taking the lead, edging out brazil for top latin american automobile producer for the first time in over a decade. the mexico car boom built on the backs of exports so will overseas demand keep up the pace here go matt miller joins me now with more. is it going to keep up? >> right now looking at a pace of auto sales in the u.s. flee have not seen in eight years. that is only good news for mexico. every 10 cars they build, eight exported. most of them are coming here. they become the main exporter for north american car production in the world. they have become the seventh largest in the world and have edged out brazil in the first five months of the year. so in those five months they produce more cars than produced in brazil. contrary to what analysts expected. in the list. brazil would keep up pace and keep ahead of

mexico. until a least 2016. one of the reasons they have numberle to do this is one, we are biking a lot more cars. brazilians are buying a lot fewer. getting more expensive to produce them in brazil. wages are growing, regulations are costly. for example, the biggest trading andner is argentina shipping 20% fewer this year than last year. >> what this means for mexico's economy? >> in a way, good news. obviously good news in the sense that there will be more jobs. it cost a lot less to build the car in mexico than it does in the u.s.. in fact, five times more to produce a car here than in mexico as far as labor rates are concerned. many of theyou see major players going there. i'm mark teaming up with

infinity or nissan to produce cars there. $1.4 billion.d nissan has a joint venture with honda that is a $4 billion venture. bmw putting a new facts or -- factory in mexico. so that is great. domestically the demand for cars has not increased so much. they have their own economic issues and only by about one million new cars per year compared to in the u.s., 16 million. >> i assume mexico welcoming this with open arms but is this about the cheap labor? >> not just about the cheap labor. about being in the right place. if you are a german carmaker him and you want to be building cars for u.s. sale as close to the u.s. as possible. add in the labor issue. cost much more to build them and not much farther and that makes it a no-brainer.

>> matt miller joining us. your latin america report for this monday. up next, major turbulence for the s-35 rider jet. the pentagon has grounded the entire fleet. details when we continue in just a moment. ♪

>> well you had your eyes to the sky enjoying the fourth of july fireworks over the weekend, the u.s. military took lockheed martin fighter jets out of the sky, grounding the entire fleet. we are in washington with more on this story. this is not the 1st avenue-35 grounding. what happened this time? >> a fire. not a feature that is supposed to come with the next generation stealth fighter. it broke out in the rear of the on june 23 when they were forced to abort the takeoff. the pentagon grounded the entire

fleet as a safety precaution late thursday and announced the root cause of the incident remains under investigation. additional inspections of engines have been ordered and return to flight will be determined based on inspection results and analysis of engineering data. so was it an isolated incident or does it signal a broader at-35 fleet.the lockheed martin says it is working closely with the joint program office and industry partners in supporting the investigation. any further questions should be directed to the joint program office. as you know, quite a few questions. the fleet has been plagued by a costly redesign. weight, delays and software. this is not the first such grounding. earlier last month and on oil leak was detected during one fight. the fleet was grounded for three

days. the latest grounding already longer. >> how big of a blow is this to lockheed martin? >> considerably big. not good news. the pentagon in this program with lofty. the pentagon's most expensive weapons program. the price tag 71% higher than the originally anticipated cost that when the contract was first signed back in 2001. despite the problems, the outlook generally bright. many other countries have requested planes of their own, but with the latest grounding the outlook is being tested. toginally 35 were supposed participate in british air shows later this week. unclear now whether that will happen. many view those as instrumental to the future success of the program because of this is -- defense department and lockheed relying on the sales to cover the cost of the jet. not good news and we will find out about a decision in the next few days.

>> thank you. another check of the market movers next. ♪

lex get the latest headlines at the top of the hour and on the tablet and at bloomberg.com. that does it for this edition of " bottom line." on the markets with matt miller is next. it is 56 past that were. that means bloomberg television is on the markets. matt miller. i want to get you caught up on where stocks are coming -- stocks are trading. the s&p 500 still 1976. the dow jones still holding over 17,000 him even after losing a third of a percent.

nasdaq, the biggest losses down three quarters of a percent at 4300 -- 4452. keeping an ion treasuries seeing yields moving up today as the price moves down. 10 year down a little bit of an about-face as the yield comes down. not a lot of movement there. the lending rates are being carefully watched by pimco's bill gross as well. spending 200 million dollars of his own money. i am joinedhis bed, by mary childs. million people, 200 dollars is a lot of cash. i am guessing for bill gross, not so much. >> it is still real money. he is worth about two billion dollars and not reading -- betting the whole farm. >> how much risk is there? how much is he putting on the line? >> 200 million as of that. these investments are what he is

buying. they tend to be very levered. that is why he make such a good bet. he says i have seen an opportunity where they trade at a death count. a great bet for a billionaire but maybe not you and me. know about my finances but you're are right. >> i noticed jan hockey is pulled his increase forecast forward to the first quarter 2000 14, still pretty far out there. adam johnson said he is part of the new neutral. how does this fit in? >> it works in a new neutral kind of environment. he said as interest rates stay low, you are going to have that reach for yields. the value will not continue to decline like last year. will normalize. >> how big of a market is this? >> you talk about the closed end funds, did he have a lot to choose from?

>> 600 total. overall 230 billion they hold overall. that is compared to 15 trillion for traditional funds. >> so he can make his bets at his own company. that is good. he gets the fees and that, too. very smart. catch all of her stories online. ♪ >> hard to find any drain on the streets today. trish regan and street smart starts right now. -- any drain on the streets today. welcome, everyone, to the most important hour of the session. 60 minutes to go coming up

today. the thing known as operation penny pinch or, at the eye agents set up a fake hedge fund for a year-long takedown of penny stock hustlers and american apparel troubles could open the door for the ceos return. we will see more on the retailer. sterlingh donald trying to move to court, is the $2 billion sale of the still -- clippers to steve ballmer in trouble you: getting to the big three, the stocks we watch as we head to the close. going to matt miller to keep an i on them. >> keeping my eye on tesla. in theas had issues past. a couple of well-documented fires with the lithium ion batteries over the fourth of july weekend. a police car chase where tesla, doing in excess of 100 miles per hour and allegedly was stolen and slamd