after the portugal bank shot. and germany, argentina, and the world prepare for sunday's climactic match. good morning, everyone. this is "bloomberg surveillance." we're live from our world headquarters in new york. it is friday, july 11. i'm tom keene. during me scarlet fu in adam johnson. we get right to our friday morning reads. europe rebound over the 2% plunge. it does have enough capital to survive the stress and requirements. that news yesterday is what took us down. secretary of state john kerry meanwhile arrives in kabul. ?hat else we have go ecodata. oh -- this will tell us where we are spending the money we don't have. >> our chief economic correspondent michael mckee

theht an 18 inch fish in river. >> where they are meeting in jackson hole. >> charles evans will be with mr. mckie later on. >> yeah, we will have those details. at 7:00, and 8:00 wells fargo. that is the big one. it percolates into next week. several items of note -- ready for this? number one, free slurping today from 7:00 to 11:00 at 711 because today is 71/11. come on, that is an annual thing on july 11. >> i have never had a slurping. >> you would like them. maybe today is your day. >> how did you enjoy your day off yesterday? >> it was good. the bike thing was really good. i did the city bike, i went to

staten island. what wacky cap doing road all the way to staten island on a city bike? doing it --we kept >> you wrote all the way to staten island on a city bike? on ais it like being 6'5" city bike. >> one diastole -- why do you have a bowtie on? >> that is a good question. the roots first major-league game was 100 years ago. >> very cool. >> we put that in there for you. >> let's get a data check. we are looking at equities, bonds, currencies, commodities. nights,f 4, rebounding and yields have come in. that is the story for the last few days. the euro does nothing. oil has done nothing. he then led israel, gaza, iraq, ukraine -- amazing oil, $

102.60. the vix elevated but still very complacent. the two-year yield was a .52, %, now .42%. stronger yen against weaker euro. we will go to john farrell a little bit here in london. lisbon, we have a problem, up we go, down we go again. this just put some scale to blip of yesterday, really nothing compared to the tension in portugal during the true european -- stocks in europe done yesterday over tubing percent, down about 160 points on the dow, so it was there, but it seems to be less there. >> we will put it in perspective as we try to do internationally here on "bloomberg surveillance ." at the really looked webpages this morning. here is scarlet so with our front page. >> we did not have to look very

far. stocks in europe are rebounding this morning after a jet crisis involving portugal's second-biggest bank. the european banks and stocks at the mention, adam, tumbled yesterday after the bank missed the debt payment. the bank has exposure to companies of the company called grupo espirito santo. >> i want to provide clarity here that when we say missed a payment, there is a set of and there isnies, a real up and roar about who is missing what payments, not the bank per se -- >> but a parent of the bank. >> a parent minority holding company. >> but the fact you have to point out like that show there are big issues about transparency or lack thereof. >> how interrelated it all is. >> yes. it is there, it is a wake-up. old-school people have said watch out for this, again the

druggie recovery if you will. >> and people in the u.s. are wondering if this will be the catalyst to take money off the table given that validation is maybe a little stretched in the short term. more perspective for the meantime, company news story because we are on the verge of a big takeover in the tobacco industry, reynolds american, which makes camel, is closing on the purchase of a company that makes newport. they have a value of almost $23 billion. >> is this the fact that the world is leaning against big tobacco and big tobacco is consolidating like everything airlines toable to telecom, you name it? >> totally agree, and this was the theme, a backstory at davos. every industry squeezes in. we talk about aereo and media

and cable, as you mentioned, adam. everybody is pulling it. >> but the distinction here for tobacco is here in the u.s., yes, the market is slowing, but not necessarily in emerging markets. that is where they are watching. the consolidation may be a way for them to get scale overseas. in the united aids, they have been dealing with slowing growth for a while now. ask imagine actually working at a tobacco company and going into a meeting and going -- how do we get more people to smoke? i feel bad for you. >> imagine being the ad man who has to pitch that. more signs that israel is preparing a ground attack against palestinian militants in gaza. the 3000 reservists. israel has a ploy three infantry brigades. israel was certainly wounded, the first israel casualty. >> what is the distinction this morning? >> people are talking about whether this is insulating

extremists on both sides, but as we have noted before, this is the conversation we could have been having five years ago, 10 years ago, 15 years ago -- >> over and over again. and recall that israel pulled out of the gaza strip several years ago, and now with all of these reservists being called up, it begs the question -- are they going back and? topresent obama spoke benjamin netanyahu by phone. we wondered if the u.s. was going to jump in with some kind commentary. >> we will go to our tel aviv news euro within the hour. >> and those are front-page stories is friday morning. >> very good. we are thrilled to bring you the senior fellow at the asia society, and i guess it could be , the germany forms spy scandal, this, that, and the other thing. how does asia respond to what we are seeing in europe, whether it is a financial crisis or the geopolitics of the moment?

does asia feel removed from these other stories? i am inure whenever asia, and you talked about europe, europe seems very far away. america is central. the civic relationships are very important, but europe because it does not pull its weight in international affairs, because it's economies are so divided and whatever europe tries to do collectively, individual leaders will go to china do their individual deals, so europe's influence in asia is relatively low compared to their economic power. >> take us inside the body language of merkel traveling to china versus president obama traveling to china -- how are they greeted differently i y? >> certainly will present obama goes it is a bigger deal, but there is more attention because the china-u.s. relationship is so much more consequential, but if you look at how angela merkel , andd her visit to china

now as you mentioned, this "spy while she was up in china. german businesses are basically cyber espionage and theft coming out of china. she has not mentioned chinese espionage, china as responsible for cyber as the notch by name, so again -- >> raped? that is a strong word, jamie. >> it is unbelievable when we talk about the cyber issues and the hacking. the amount of theft that is coming from china is a huge transfer of wealth, of intellectual property going from the developed world to china. it is a major, major issue and we in the united states certainly in europe but not sufficiently woken up to it in my view. >> the white house, president obama, secretary of state john kerry have a lot on their hands, a lot on their plate trying to figure out what the priority is here. you tweeted out a story questioning whether president

obama's foreign-policy is to european. why did that strike a nerve? a european from perspective, everything is about negotiation, it is about soft power. in a way, not to sound like a nationalistic american, but the united states in some ways has given europe a vacation from history because we have provided since the end of the war, so they have come to believe that negotiation and just declarations can do things in the world, and what we are seeing particularly with the rise of china and russia becoming more assertive in the world, the hard power really matters. with an american president being a little more european, it is getting more wiggle room. >> i want to address this later on with jamie metzl. we will talk what the new study that japan is doing over military power as well for the right now, we need to get one extremely sensitive company

news. here is scarlet fu. >> america's best-selling export car is an import. the cell cande in reline a heart beating the traditional big three in overseas sales. it was 23 years ago today that bmw started building cars in spartanburg and the german automaker says it will expand that plan. they could eventually reach 450,000 vehicles a year. chinese plant that makes him products are still using child labor. despite efforts to stop the practice, a human rights organization says they have spotted 14 year old and 15 euro girls. -- 14-year-old and 15-year-old girls. regular say amazon is unfairly billing customers for millions of dollars. the federal trade commission blames amazon's app store. according to the lawsuit, kids are downloading games without getting their parents' permissi on. the charges go automatically, leaving surprise mom and dad with the bill. the government says it has

gotten thousands of complaints. >> you may get a few more complaints on this one. keep your eyes posted on the skysails up amazon pushing forward with a plan to deliver packages by drones. i am serious. amazon has asked the faa to expand testing of drums outside its research laboratory. the company wants to deliver packages weighing less than five pounds with unmanned aircraft. regulators have banned most commercial drone operations so far. the faa trying to come to grips -- i don't know, is this rural america? >> i feel like this is the comedies catch on comedy central. i think the "washington post" did a great series of articles. there will be accident. you will be in westchester and some kid will be hit by a drunk falling out of the sky. >> jamie, you are delivering by sim cards. >> exactly. >> do drums come up in discussion? think right now they

do, but for sure in our future drones will be involved in domestic whether it is delivery of goods or travel. basically airplane still need pilots, fighter jets do not need pilots -- >> i will get pizza delivered by drones in new york city. >> sure, why not? >> not necessarily new york city. >> drones spying on citizens. >> although -- >> it always seems creepy. >> jamie, you were an adviser to the senate committee on foreign relations, so you understand the way washington works. can this thing gets her washington? >> eventually it will, but it will take a while. when drones become a regular mode of transportation and delivery, -- 58th streeting down here passed 3rd avenue. i see a drone, scarlet, coming right now. >> that is my breakfast! >> the twins at the "antique roadshow -- " --

>> adam's free slurpee. >> hey, i am liking this drone thing. stocks ineuropean force. rebounding today. is it safe to go back in? there is mario draghi, mr. whatever-it-takes. ♪

>> good morning, everyone. "bloomberg surveillance" all day today on bloomberg television. michael mckee sits down with a set of officials including philadelphia fed president charles plosser. he will do that at 10:00 a.m. today live from jackson hole, wyoming.

this is "bloomberg surveillance." i am tom keene. with me scarlet fu and adam johnson. >> world markets rebounding from yesterday's portuguese plunge. the country's second-largest bank today says it does have aqua -- adequate capital. mario draghi has told us several times he will do what it takes. .ohn farrell joining us >> adam, you have hit the nail on the head. i come in this morning and nobody is asking anymore, we have seen markets fire today with a record low yield. it is very easy to call this an isolated event. markets wobble, we do not care about it. i have got two very big takeaways from yesterday -- one europe -- it is not all that at the moment. there was a phrase called the

feedback loop, when every bank got in trouble. yesterday was a shock and reminds us that that is a line and rally. art equally their rooted problems here in europe. how many others are there out there you there could be many. one more. yesterday also said that there was risk and it actually exists, and that is the big take away. this european investment story is not a one-way bet. >> if there was to be some form of bailout or coverage, who would do that? government, mario draghi, the taxpayers in germany? >> i think that is it the question, tom. we talked about a bail in. within talked about these european sums put together like a firewall to some of these banks. the fact of the matter is i don't really know. it depends on how big we are

talking about. when you look at germany and the german taxpayer, that is why angela merkel is concerned. whenever the government stop the flex ability, she holds on. >> scarlet, i think within the conversation, the whole thing -- how do you even define contagion, and how is it different from the united states? >> contagion then, containment now. jon, do we expect this to be contained? maybe a most italy. i think an isolationist in like an isolated case for now. systemic at the small bank, how much risk of the posts, but i think there's a bigger question a play here. we have been conditioned to think that everything is going to be ok because they have got our backs. druggie will do whatever it takes and everything will be fine. i sat down with a y yesterday. nowotn

he said they are sustainable. why are you going to question risk and some of these countries? guys, risk exists, and at least mark carney in the u k is talking about that. you have janet yellen talking about that next week. she gives backing up any potential for a rate rise. once she finally does capitulate, that message is going to be so strong, and the ifught this morning says they do capitulate, it could get messy. >> last question to you, given the fact that spanish yields are near the lowest we've seen since 1789, it's hard to believe that -- what are investors, no guys who actually hold this paper telling you? >> if you've got a yield below 3%, it is better than a yield of debt on 1.6%, if you have a strong stomach and you can hold maturity, they have a good pickup, adam. you see central banks pushing down yields in the likes of

spain and italy. some people out there, if they can get a pickup of 2.8%, 2.9%, and it is well across a 0.5% of inflation and getting into europe, whatever you say about the fundamentals in italy and spain, not so bad. >> all right, jon ferro joining us with a perspective from london. thank you, jon . >> for now, it looks like everyone just viewed yesterday as a short-term buying opportunity. >> exactly. it is a blip until further notice. >> i watch the highlight. "bloomberg businessweek" is now available online and on newsstands. it is a pretty salacious story. the fall of the sleaze king. you can pick that up. >> we will have it on the coffee table at home. >> this is "bloomberg surveillance." on bloomberg television, streaming on your tablet, your smartphone, and bloomberg.com. ♪

>> good morning, everyone. dow futures up 39, the bigs closing at 12.59. it is "bloomberg surveillance." i am tom keene. scarlet fu and with me with our morning must route, -- morning must-read, and here is adam johnson. >> "the wealthy deriving an important part of their income interest on bonds, and low rate policies have reduced its income. monetary policy is not in their interest. it is bound up in class and ideological conflict." total return price move up. do they get a wealth of vytorin -- do theyffect the

get a wealth of vytorin income effect? ambiguity i would suggest to professor krugman. ambiguity like whether i will e today.urpe >> i hope you would. it is free. >> central bankers and officials cannot agree on economic policy -- improving isconomy not improving. they give us a mix read. >> we will have more from fed officials in the coming hours from bloomberg television. either way, our twitter question of the day -- has tv killed the summer blockbuster movie? tweet us @bsurveillance. ♪

>> good morning, everyone. "bloomberg surveillance." good friday morning. i am tom keene. here is adam johnson. >> tom, israel says hamas aspiring missiles toward its

homeland at a rate of one every 10 minutes. one rocket exploded today at a gas station injuring three people. isaid sirens have sent really scrambling to shelter. no deaths have been reported there. about 1000 hamas targets in at least 95 people have been hurt in gaza including i does and the civilians. secretary of state john kerry trying to settle a bitter dispute right now between afghanistan's top presidential candidates. he says u.s. aid could be cut off if violence erupts. kerry arrived in kabul today. he is meeting with candidates. the second place finishers of the runoff election was fraudulent. and lockheed is trying to lower the price of its new fighter jet. the company is asking to suppliers to cut the cost of grumman, andrthrop they will spend up to $170 million to retool. the jets now cost about $98 million each. he plants have already been

delivered and are grounded right now because of an engine fire that happened earlier this week. >> very good. the complex weekend for secretary kerry. if it is friday, that must mean afghanistan. could you imagine president phone, ms. money penny reporting all of the james bond sent to washington on assignment. unfortunately it is not the movies and it is not funny photo that germany is livid over allegations of u.s. i-8. hans nichols is that our berlin news bureau. hans, do the germans justice and we will throw a german out of washington? do not expect us to go tit-for-tat. the view here, and you started to hear some german politicians say this publicly this morning, is that they should use this as an opportunity to reset relations. what germany really wants of the one a no-spy agreement. yes, the webby spying on them to end, but they want this

agreement. angela merkel that's not have it. she chucked out the top spy here. >> heaven for but i would ask this, but is there any proof of spying? >> is there any proof to spying, or on the actual allegations? >> is there to prove that summary actually did anything wrong, that they drop the roll of film off next to you at some football game? >> welcome to the allegation, the most serious one is a 31-year-old individual who works for the german intelligence service and was also transferring documents to the u.s. intelligence service. there has not been a whole lot of denial on that fact. the fulminating on this is how important it was. were these documents really sensitive? the way this 31-year-old employee -- that is the only thing we know about him is his age in that it is a he, the way transferred the document was thrace fake weather application on his computer.

he used to be drop boxes and top marks. now you do it through an app. we clearly have spying concerns between the u.s. and germany, between the u.s. and china, and ms. merkel has just gotten back from china. any discussions about german-china spying? >> no, let's differentiate between the spying claims. the spying claims on china are industrial level to gain secrets for the sake of chinese companies was up the spying allegations on germany are that the u.s. intelligence services spy on citizens in germany to prevent terrorist threats. they're still spying in both countries, but they are entirely different, and i think the germans appreciate that distinction. >> well, to provide us with that's the station, jamie metzl joins us from the asia society. there is no difference between our relationship with germany and china. are we driving off film canisters the hind benches in beijing?

>> i don't really know, but i hope we are doing as much spying as we possibly can because that is what states do, and i think that yes, if you are a little leader like angela merkel and something like this comes out, you cannot say oh, america is our friends, this is what the countries do. i hope we are spying on china. as a matter fact, when the snowden revon revelations came out -- to washingtonent to berlin. are you a double agent? metom, are you going to out on national tv. >> what is the weather today? check on that out. we should beaid spying. should we be spying on our allies yo? >> some we have a no spy agreement like the u.k., and we should not if we have a kind of

agreement. but there are a lot of cases where the united states needs to go what is going on in the world. i guarantee you the germans are spying on us, the french are spying on us. this is the way of the wall and we need to be careful about the way to manage it. >> when they are not looking at the world cup this weekend, what will be the debate within germany on this important issue? >> well, the way it could escalate is if there is a talk about giving edward snowden of asylum here. there are certain factions within the german left that want to bring snowden to germany out of moscow. the leather big issue is how do you turn the page. do you actually try to have an agreement, and if you get a no-spy agreement, that all can be forgotten in a news station chief can be brought in, but a lot more work needs to be done to stop it is difficult to underestimate how angry and alone merkel is and how frustrated her entire government is. it's very good, hans nichols, get back to your double agent -- maybe he is a triple agent?

>> you never know. quite the sort of looks like sean connery. >> separated at birth. asylum may be giving to edward snowden? >> no way. why would they do that? it is the ultimate hot potato. if you want to offend america, take edward snowden in, right? have got cybere spying, a major source of discussion and disagreement between u.s. and china. it is within an "new york times" article earlier this week, our guest is for the hour is jamie metzl. theas worked extensively in state department information division. i want to get to japan and it's a remailed to relate and in a moment, but given your background, i first need to ask whether all this discussion of cyber spying is going to further damage the u.s.-china relationship and get in the way of their cooperating on other issues that require their attention. badhings have been so

between the united states and china on cyber spying that this will only continue a long series of events that have really aggravated, particularly the united states but also with china and we mentioned snowden a moment ago, so it just gets worse and worse and worse, and from the chinese and five, they are benefiting enormous lee, particularly in industrial spying. they're getting all kinds of andllectual information there is no cause. last month we indicted a secret spying ring in china, but from the chinese perspective, who cares? this will go on. >> there will be a lot of tit-for-tat, loud noise. what will this be like i've years from now? >> i hope we will be doing a lot more to defend ourselves. we will have to be more to more aggressive unfortunately with the chinese. the united states was trying to say that government not spying is ok because that is what we do and we are pretty good at it as the snowden files show, but industrial spying is not ok, and

from the chinese perspective, it is all the government, and they are saying if we are spying on -- if you are spying on us, we are spying on you, and we do not recognize the distinction between government and business. it will get ugly before it gets better. officesal macarthur's above the bank, the end pure gardens in tokyo. -- the imperial gardens in tokyo. some say there is a sea change. can we have a more military protection by japan? >> japan in many ways is becoming an on bloomberg television, streaming on your tablet, your smartphone, and bloomberg.com -- japan in many ways is becoming a normal country. the u.s. drafted in their constitution in many ways, the constitution was not imposed on agreed upon by japan, and japan renounced its right to use military force in international affairs, but now things are normalizing. i think it is normal for japan

to consider its military future along with its political and economic future. >> i will go with that, but as we saw in greece, there can be a small minority wing or party in their society that harkens back to those fears. how big is that society in japan ? >> they are certainly on the right and on the left however you want to define it. there are a group of people who are unrepentant snatcher mentalist -- unrepentant nationalists and they do have a voice and a voice has been heightened by the abe government. there is a group on the left that they would need to be complete pacifist and renounce war and instruments of national policy. japan is in a very difficult position because they are being squeezed by china, they have questions about america's future in the asia-pacific, north korea -- and i was in north korea a couple of months ago -- is going nuclear. they have a lot of threats, and from the japanese perspective, it is normal that they think about how are we, japan, going

to defend ourselves going forward? ,> is japan re-militarizes what does china do in response, what does north korea do in response? thosena is already doing things. in some ways, japan's pressure is a response to chinese aggression because in the old days when the united states was guaranteeing japan's security and they did not have the massive buildup that they are going through now, when china was putting so much pressure on japan -- japan has scrambled jets about 400 times over the last three months in chinese violations of japanese airspace, so japan is feeling really depressed. it is not really fair of china to be pressuring japan to be military role,e and when i talk to japanese friends come i say japan should consider its military future based on four things. one, how it sees the future of

u.s. military alliance and our military support. two, how much china is pressuring japan. three, china's military buildup, state of north korea's military program. >> what are the people of japan want? are the skeleton still there from 1945? has in manyjapan ways prove itself over the last 70 years. it is in my view a very responsible policy. there is a lot of ambiguous feelings about moving in this direction, and if it had not been for china's aggression, i think it would have been very, very difficult for prime push thisbe to dialogue in a way that he has, but because of this chinese aggression, because of this insecurity, it has created an opening, so i think there is a lot of ambiguity. >> jamie, thank you so much. >> by the way, you have your new book coming out, it is about -- >> human genetic enhancement in

the context of a future u.s.-china rivalry. the question is -- what do we do about? do we match them and how. >> it is a thriller. >> isn't leonardo dicaprio in the movie? >> yes, he plays you, tom. >> speaking of movies, speaking box office misses, our single best chart is next. ♪

>> good morning, everyone. "bloomberg surveillance." with mia scarlet fu and adam "slurepee" johnson is with us. means free slurp ee from 7:00 to 11:00. germany has expelled a top officer in berlin. leaders are furious. that is on top of suspicions that the u.s. tapped chancellor angela merkel xfone last year. the tension comes at a bad time. american and german officials are trying to create the world's biggest free-trade. in three of the world's richest men are blaming the border

prices on congress. they come from bill gates, warren buffett, and sheldon adelson. they say the republican-let house has failed to revamp immigration laws and tens of thousands of children are pouring in from mexico. , the odds-on favorite to win the world cup. the one-sided semifinal victory winning overas bettors. germany will face argentina on sunday. the game is happening -- are you going to watch it? we will certainly be watching it. it is argentina's first trip to the final in 23 years. those are the top headlines. >> go argentina. >> you were counting on them. >> yes, all along. 3:00 p.m. i am told sunday afternoon. let's get to our single best world cup chart. >> no, this is not on world cup, this is on summer blockbusters specifically and the lack thereof.

as we head into another summer weekend, we focus on the summer box office, and this is the summer to beat so far. we have had a pretty steep drop-off from the summer of 2013, which featured some pretty big bombs like "lone ranger" by disney. this is according to box office mojo, which shows that summer box office is down 20% so far this summer. we bring in paul sweeney, head of research at bloomberg industries. what is going on? why do we have this big drop-off? is it just a couple of big blockbusters did not deliver? >> it is. last summer was a great summer for hollywood. and so on and so forth, so the comparisons will be tough no matter how you look at it. unfortunately for hollywood, this is a boom or bust business and this has been a weak summer. we have not had any major breakout movies. the best movie so far has been "x-men" with $227 million at the

domestic box office, so we have not had the $300 million box office movie yet. planetn of the of the apes." >> right. they are hoping it will be a big blockbuster and spur the summer on. >> is our behavior from really changed? >> i don't think so. despite all of the digital media, the 60-inch sets in the theater is essentially flat over the last 10 or 15 years, and witty you %5tor in the 3% to growth, people are still going to the movie, but it is the same old truism -- it all depends on what kind of quality content goes into the theaters. >> i tell you why, that is our twitter question of the day, actually. has tv killed the summer blockbuster movie? please tweet us @bsurveillance. >> i think about how there have

been so many great tv shows, but they want a movie at the end of the, "sex in the city," "entourage," they all want a big movie years later. >> $90 or $20 to get the first or $20n my home -- $19 to the first movie in my home and i can sit on my own cap. >> we go to a place like korea, they say how can you make the movie experience different. you have big chairs and cocktail waitresses bringing funky drinks. screens. std gets better, the movie experience has to differentiate. >> i do not go to the movies anymore because i have been to too many where the audience is noisy, loud, rude. it is just no fun. i am not at the movies. >> i would never want to sit behind you in a movie theater. that would be the worst. ee you would have a slurp thrown at you. >> i scrunched down because it is really rude.

>> i'm going to let a secret out about myself. one-time tom and i were seated next to each other, and i had to get a pillow to put it under me because the guy is so damn big. like 18 inchesit taller than i do. >> you need a booster seat. at age 48 was in a booster seat. >> is a sticker shock? that shockstatistic the one they think about the theater business, but the attendance has generally been relatively flat, which is amazing. one of the things that hollywood really banks on is maybe 3-d. but that really hasn't worked. care about iger what we have been talking about? >> oh, yeah. >> disney is the one in hollywood that really banks upon the franchises. you get a franchise like "ironman," that becomes movies, tv shows, the rise -- nobody

does it different than disney. >> ♪ let it go are we done with that yet? >> we are, but you're not. >> tom, let it go. aereo fights back against the supreme court ruling. we discussed what the future of this television service is next. this is "bloomberg surveillance." we will be right back. ♪

>> this is "bloomberg surveillance." tom scarlet fu here with keene and adam johnson. later this morning in about an hour from now, charles peabody, the banking analyst and founding partner of poortales partners will be joining us. wells fargo kicks off the banking season. we will get mr. peabody's outlook. >> it will be important to speak with him about where these two big -- fascinating, it really must watch for anyone a global wall street. ok, on media, i am lost, you are lost, even paul sweeney a bloomberg industries is lost. lost thee clear they recent supreme court battle they would go out of the tv business. guess what? they are back in it. it is very confusing what aereo

is doing right now. with us paul sweeney from bloomberg industries, a wonderful organization following different industries from around the world. as well.zl with us i am bored by this story. why why care that aereo will not go away and i? -- and die? >> for those of us who watch broadcast television, we do care. even barry diller does there really is no plan b if the supreme court strikes down our business model, which the supreme court did in fact to do. however, aereo comes back yesterday and says you know, the supreme court left open a little opening for us, and says if we can become a cable system like a comcast, we then have the opportunity to go out like any other cable system and rebroadcast over the air broadcast signals, so the issue is, which we don't know -- will they have to pay the broadcasters retransmission fees? >> of course they will. what does brian roberts think about aereo?

>> ryan roberts at this stage does not care because the supreme court was very clear that aereo as originally envisioned being a very low cost alternative for consumers to get over the air broadcast signals and perhaps a bypass brian roberts' cable system, that business model does not exist anymore. if aereo wants to come back in a new form, they will have to pay, which makes the economic model difficult for them. >> i think of people in china -- they have the option to buy a box that plugs into their tv and the internet, and they get all the u.s. programming that we get maybe a day later. it is not clear whether it is legal or not, but it brings to mind -- is the u.s. consumer paying too much for content when the rest of the world since beginning of for much cheaper? theirry viewer knows cable bill seems to go up mid-to high single digits every single year. the issue there is the cable companies and hollywood will tell you well, you are getting a

lot more content, so the value proposition is very much there. we will see. >> also any, thank you so much with bloomberg industries, jamie metzl, thank you, particularly your comments on japan as well. >> take a look at dollar-yen at the moment, not much movement after yesterday's big move. ♪ >> america tries to facilitate

in the gaza strip. it will be a difficult bank earning season. wells fargo reports 8:00. germany, argentina, and the world prepare for sunday's climactic match. bloomberg "surveillance." arelet fu and adam johnson joined me. charles peabody is joining us. zero rebounds after yesterday's 2% plunge. portugal's bank says it does have enough capital. john kerry arrives in afghanistan to deal with the disputed afghanistan election. we don't have a lot of economic

data. the federal budget deficit summary is at 2:00. earnings, wells fargo comes out 8:00. scarlet fu is smiling. >> the world's biggest maker of fasteners. >> that is why we care. several items of note. free slurp is it 7-eleven from a 7:00 to 11:00 a.m. >> oh, i get it. >> what is your favorite flavor? >> this -- io. is?his -- io slurp >> we arnie had a big name before he left. let's get to the company news.

traders are rattled after hearing about stood instability at a major bank. payments missing that and accounting irregularities. their reassuring investors by revealing details of that exposure. banking problems spurred europe's crisis. bmw models made in south carolina are beating detroit's big three in overseas sales. it was 20 years ago that they started building cars in spartanburg. production could reach 450,000 vehicles a year. alibaba's ipo proposal is sailing through washington. initial -- approve the plan. it is estimated the stock $20ring could raise billion. that is company news. >> thank you so much, scarlet.

our top story is a violence escalated between hamas and israel. there are 2 million people in the gaza. reservists are called a. has called three infantry were gauge. one israeli was seriously wounded. this is the first serious casualty on the israeli side. alex, what is different this time than the last many times? >> good morning. it is the intensity. right out of the gate is really use a lot more firepower in the first two days than it did in the previous campaign in 2012 altogether. we have seen a number of israeli strikes much higher. the number of rockets fired by hamas are much higher.

159 strikes in the gaza. the death toll has climbed a much higher. the first serious injury on the israeli side. in gaza, the death toll just topped 100. >> is hamas attached to the people of the gaza strip? or are they acting as a separate group of militants? -- theyare very much enjoy a large swath of support here in gaza. i have talked to a number of people who have their homes destroyed in these airstrikes. do they want the violence to ends? people say they want them to keep firing rockets back. there is also a large summer people who say they just want to live in peace and they want this to stop. >> we have heard from the

president of the palestinian authority earlier this week. he made a leave for international help but he has been silent since. have you heard from him in the last 24 hours? >> he is shown his support. he has full throated support for resistance and protection. -- for the right to self-defense in the gaza strip. is called for international condemnation to get israel to stop its progression as they call it on the gaza strip. the palestinians are trying to create a unity government between the factions in the west bank and hamas in the gaza strip. they see israel trying to destroy that. >> president obama spoke to benjamin netanyahu iphone. whatstically speaking, influence does the u.s. have right now? >> they have always wielded

significant influence over the israelis. palestinians, they are saying that obama is giving non-you the green light to continue this operation. they say he is supporting a ground invasion by not putting enough pressure on the israelis. america has little to no influence on hamas. that is what is scary. traditionally egypt has been that the strip rocher. since the overthrow of the muslim brotherhood, hamas doesn't have a relationship with egypt. there is no clear peace broker. there is no talk of a cease-fire. border in israel we see a number of different numbers from 40,000 reservists called up to 20,000. i am sure there is some double counting. do you have a hard number for us? >> it is not that there is

double counting. initially 40,000 were authorized. a lot of that that to me and mobilized. then it was 20,000. -- latest number is 30,000, 30,784. most of them heading to the west bank to relieve regular service soldiers who are going to come down here to the border with gaza to be and what they're going to call defensive positions. that could quickly become an offense of the order is given to launch a ground invasion. >> alex, thank you so much. scarlet, you have important news. >> we mentioned that reynolds american is closing in on a purchase. they have confirmed that they are holding these discussions. no price tag has been mentioned. they are involved in the discussions as well. along with u.k. based imperial

tobacco. these discussions are confirmed to be taking place right now. reynolds american possibly buying lorillard. smoking in the dead states slows down everybody looks overseas to make up for that. >> we go to banking with wells fargo at any talk this morning. portugal's second-largest bank faces new challenges of solvency. charles peabody is with us. the news is in europe and it is better news this morning. do you worry about the contagion of portable bank or any other bank folded into the large banking system? >> i do. whatever there is a mix where theaverage is involved,

funding is not core. you have accounting irregularities such as this and admissions of liabilities. that is a mixture that is volatile and unpredictable. always a crisis between liquidity and solvency. what is the trust and belief in our major banks right now? is it 100% certitude? >> in the u.s. it is. toy are almost back precrisis levels. in europe i'm not so sure. >> is it too early to wonder which u.s. banks might have the greatest exposure to portugal? the last round of european bank crises we were looking at if it was morgan stanley or goldman sachs. are they vulnerable? >> the exposures of changed dramatically. in terms of their loan portfolios they been doing a good job of their investment

securities. that is where the risk is. the risk-taking has been pushed into shadow systems. i think the regulators understand that. they are now including a variable where the loudest -- largest counterparty fails and you have to account for that. lesson to the data check right now. it has a friday field. starlet? workers are fighting for higher pay. our next guest has a solution to the minimum wage debate. we will discuss right here on bloomberg "surveillance." ♪

>> did morning, everyone. bloomberg "surveillance." is focusing on bank management. it they would use their cash. they are bank officers of the when to initiate. are they going to be able to raise dividends? >> i think they will be able to. i think the expectations are excessive. >> there is dividends and

buyback? increases will allow them to pay out in the midteens. the buybacks are going to be a lot more modest. they are expecting three or 4%. i think it is going to be one or 2%. they are going to use their macro tools. we had a worldwide response from jamie diamond announcing that he has cancer. can they manage their way through this slowness so to have the use of cash to use? >> their capital levels a been replenished. there is no revenue growth and there is no earnings growth at the moment. until you get these consumer banks growing, i don't see where the momentum will come from. >> is a nominal gdp? can they manage their way to a better outcome? >> if you think about the

consumer banks there are three major pieces. there are the branches and mortgage bank. you need people to borrow again. only one is showing any momentum. we had a distance, frozen and a terrible first quarter. now people are saying maybe it was it not the weather? >> we are seeing some pick up because loan growth has picked up. the weakness in mortgage banking and in fixed income and trading will persist. >> do you have a single best buy? >> we do have a lot of buys. it tends to be more in the regional banks as opposed to the money center. are one of our top three picks. >> it is totally different than

the others. >> they have the ability to sell the capital to return. they are showing to revenue growth. >> i will tell you this, we never give enough love to wells fargo. we will talk about their earnings at 8:00. coming up, there is a football match. t is a match and not a game. bloomberg "surveillance." ♪

>> good morning. our twitter question for friday. his television killing the summer blockbuster movie? has the world cup killed the summer blockbuster? we have had some great responses on that. my answer is i really don't care. >> boo-hoo.

bah humbug. >> i have seen transformers three times. i am tom keene. along with me as adam johnson scarlet fu. is charlesost peabody. let's get to the top headlines of the moment. >> israel says a hamas is fine missiles toward the homeland at a rate of one every 10 minutes. one rocket exploded at a gas station and injured three people. air raid sirens of sent israelis scrambling to shelters. no deaths are reported. the military says it had about 1000 hamas targets in the gaza strip. at least 95 people have been killed in gaza including one dozen civilians. trying to settle a dispute between afghanistan presidential candidates. he said usaid could be cut off. he is meeting with the

candidates. a runoff election was fraudulent. three of the world's richest man are lemming the border crisis on congress. bill gates, warren buffett, and sheldon adelson wrote new york times piece. the republican-led house has refused to revamp immigration. thousands of children are pouring in. moneyss is balking at the president obama wants to use to tackle the problem. those are your top headlines. >> this is the most contentious topic. that would be the minimum wage. aaron dubay is with the hamilton product. the higherh suggests minimum wage outweighs any costs. good morning. the republicans will push against you. what do the keep them in wage crew get wrong?

>> i think moderate increases in increaseage can earnings going to those at the bottom and reduce poverty while posing limited risks to the labor market. that is what the research suggests. and that is what i propose. >> what level of minimum wage would you want to see? i understand it is state by state and city by city. do you have a golden number that gets things done? >> there is a lot of evidence that a minimum wage that is about half of the median wage in the labor market is a reasonable one. the market can bear that. for the united states that would be close to $10 an hour. for some states that have higher wage and higher cost of living like massachusetts where i am,

that can go a bit higher. >> i want to bring you my morning must-read. -- he says the pitchforks are coming for us plutocrats. the most insidious thing about trickle-down economics is not believing that the poor get richer. he pushes that the rich should support an increase in minimum wage. it would make the middle class be able to afford to buy more things. do you believe that support from the rich guys like the plutocrats which asus debate and make a change in minimum wage feasible? >> my guess is yes. for the following simple reason. 70% of after poll, americans increase -- support increase in wage.

usually about half of say it is because of strong lobbying efforts by narrow special interests. theink having support from political and economic elite would go a long way toward increasing the minimum wage. thank you so much for being here. thank you. charles peabody is with us. you look at the minimum wage, i know it is different on wall street and it is higher. the future of wall street for youngsters? it is a good time to be looking at wall street? guess it depends on what sector you are involved in. the trading environment right now is very poor.

turnover has dropped to nothing. the underwriting environment has been very robust. we might see some positives. big question is what does wall street and compass? is it private equity firms or hedge funds? there is a real battle for talent. >> bloomberg news is them a good job of describing the brain drain on wall street. they are all going to the private sector. >> that was a shameless plug from charles peabody. >> we'll take it. i was mentor to and i was looking after. is that still part of wall street? >> i have young people that i mentor another individual to been very involved in bringing along young people. at the big? ones >> the bigwigs have formal

training programs. >> and you survive that. >> we have a bunch of merrill lynch alums here. federalp, should the reserve fear inflation? we will discuss. ♪

>> this is bloomberg "surveillance." the rubik's cube is now officially middle-aged. it turned a 40 this year. a replica will be floating down

the hudson river. this is courtesy of the liberty science center. it will began around the statue of liberty. it will go upstream to hoboken, new jersey. you can look four-ball you're drinking your flea slurping. have you ever done it? i feel better. i tried but i cannot do it. >> i used to take apart and put it back together. >> the people who win it can do it in seven or eight seconds. >> had a they do that? >> i will bet you matt miller can do it. >> he probably could. i cannot. you have to forget about 2-d or 3-d. i like the stake and the other one where you had to slide around and move the tiles are in . >> i have no idea.

here is something else. i want to know a little but more about germany. buts the size of wisconsin, it has the fourth largest economy in the world. they are one game away from taking the world cup. hans nichols is joined us from berlin. there is some sort of lesson here. you are in the thick of it. what have you learned from the germans during the world cup? >> we have poured through a lot of data. open wanted to do was, with a metric of how many defaults argentina have had. it was too many to count. germany has had a lot of defaults. there is a figure. who has the older team germany or argentina? >> i learned this the other day. i believe argentina does. >> they have the oldest team in the world cup. they are 20's 8.6.

-- 18.6. i discussedon here, this the other day with someone over a beverage of my choice, is this a marriage of what east germany did 30 and 40 and 50 years ago in the olympics? >> no. they have injected capitalism into. i mean shoe contracts and all the wealth that is associated with that. when you come to visit i will take you to the part of east germany. this is where the athletes would get their homes. these are like small little cottages. compare them to what you get if you play for germany. you get a much nicer house. >> what will it be like sunday morning in berlin or hannover or frankfurt?

what is the distinction about the german experience? >> the cities that are broke like berlin will be total messes. they will not pick up garbage for weeks. frankfurt ared good cities. you can't be serious. berlin is broke? that is the one economy in germany that is growing. >> berlin is horribly mismanaged. it is compared to detroit. berlin is a city why they can't finish off the airport. there are massive budget shortfalls. most of the east is well served with infrastructure. the west is run down. they haven't spent money on roads. berlin is a mess. it is a dirty city. >> i just learned something. >> charles peabody is our guest for the hour.

you played soccer? >> i play division iii in college. i've been following the world cup very closely. i am on the side of europe and germany. do they come up the field like nobody they just move the ball? efficientve a very short passing game. argentina will probably pack the box. that is a massive jargon alert. they were like wasps all over brazil. >> the efficiency is what allowed them to get through that defense. >> what a big kick the ball from farther out? >> that is the english style, to kick and run. >> i learn more about the world

cup in 32 seconds unaided from espn. let's pack the box in the next half-hour. futures are recovering from yesterday's selloff. >> good morning. bloomberg "surveillance." we have an extensive digital media. charles peabody is with us. conversationul about banking here in a bit. he is on assignment in jackson hole, wyoming. his gazing up in a sky. michael mckee is our economics editor. he is at rocky mountain economic summit. he is cleaning the future of our federal reserve policy. >> iler the cavities highly now to hear sound a lot like you

when something doesn't work on surveillance. this is not the other conference you're used to. this is growing very rapidly. this is perhaps less academic and more practical. it has a lot of beneficial. they are talking to the public here. residentsree fed bank and research directors attending. we sat down with one of them. we talk to him about what he sees going forward in the economy. he is got a message for the markets. do not expect a rate increase anytime soon. we have made some progress in labor markets. he is focused on inflation and he does not see any. >> i think the underlying fundamentals continue to for 1.5 for a couple of years.

i'd expect to get up to 2% for a few years. i think there continues to be pressures that are going to hold that down. if we get above 2% that will be a sign that things are doing better. it is not a catastrophe to overshoot inflation by some amount. 2% is our target but that does not mean we have to stay below it. we have to average 2%. inflation rate if it's thatcontrolled and kept can work out. he said that is going to take about a year now have to do. next year he is going to be voting. that is when they will vote to raise rates. hole is thejackson first meeting before the kid the

city fed meeting. is he on speaking terms? very goody are on speaking terms. i was at dinner with both of them last night. they are speaking here a little bit later today. we will have them live on "market makers." they are so far apart of what they see as the point at which we see inflation starting to be affected. higher thinks it is much than charlie evans does. he said at this point he thinks it is much lower number than anyone at the fed has been talking about. like thek it is more normal rate that we used to think of before the crisis. something to the 5% unemployment rate. that is what i take to be the sustainable rate. we still have quite a ways. i see a lot of slack.

the low wage growth today is indicative of that as well. i think there are many signs of continued resource slack. >> he doesn't think we're going to see any kind of real inflation until you unemployment down to around 5%. is a wage pushed i he does not see any pushes this point. theow does this frame to july meeting? >> it will be interesting to see how far janet yellen is. she speaks next week. we will see if they give us any indication where they fall. it won't change the debate this year. right now they are focused more on the how than the when. when we get to the end of tapering in october people will start talking about when we raise rates. we will have to pay very close attention. thank you sokee,

much. later today, charles plosser will join us as well. scarlett? >> we want to highlight the twitter question. as tv killed the summer blockbuster? ♪

>> good morning, everyone.

bloomberg "surveillance." it is friday. adam johnson is back. i am betting on argentina. >> you have been betting on argentina from the beginning let's bring in betty liu. he has. he did not just jump on the bandwagon. >> he went way ahead on argentina. he liked the blue uniforms. that is how my mother chooses teams. that is how i choose my cars. i love that keller. >> that is fair. i will grant you that. 100%. >> we are very excited to have him in the studio with us. heard him unveil the gm

compensation plan. is going to be joining us more the thinking behind this. the claims start coming in august 1. there are so methinks to account for. >> there were 13 deaths linked to this. how many claims this he expect? cover 2.6 going to million of the cars recalled. i don't know if there will be that many numbers. obviously they will be looking through each case. it is wide and big. this fund is uncapped. he has a limitless amount of money. >> it might not be that you died which you had some other complications. >> there are all these

questions. gm has recalled almost 30 million vehicles. there are questions about other crashes. there are other callers involved. one of look at those? >> he is uniquely qualified to solve that. loop"s 8:00 on "in the with betty liu. >> number three is for you. babe ruth of the boston red sox. today, he began his major league career. there is a house out in massachusetts that he lived in and it is still there. >> then there is the house that he built. >> a drone catcher in a shot of martha stewart's greenhouse in her bedford, new york compound. that is a beautiful place, as

you would expect from martha stewart. uses a lawnmower -- golf course lawnmower to motor yard. she is kayaking with matt miller. >> manhattan henge. >> big deal. keep the children home. >> this is bloomberg "surveillance." ♪

we willg up on monday, talk about mergers and acquisitions. there is a lot more going on wall street. scarlett? >> i am here with tom keene and adam johnson. guests peabody is our post. let's get you some company news. microsoft employees are trying to read between the lines of a new mission statement from the company's chief. he sent out an essay that was short on specifics. he said microsoft must more --

work more faster and efficient. says sam music service clout is in talks with top music firms. it will give shares of its company if the labels don't sue for copyright violations. it is a german-based startup. it has a quarter of a billion listeners. a battle between technology and tradition will be waged on new york's treats. yft will send that cars. they do not have the city's blessing. the rules should not apply to them. >> these are two great stories you finished with. they just want to play by a different rulebook. rulebook might be antiquated. >> the difference i see a subtle. you raise your hand to hail a

cab or you dilute on your phone. that is the only difference. >> this is like area. they feel like they have a new label. >> i use the subway. >> i take uber. i'm sorry. they want to play a different rulebook. >> you support that playbook. lyft andalking about sound cloud. >> you have litigation with lyft . let's get back to the banks. yft thiswill take l weekend and figured out. wells fargo will report in minutes.

charles peabody is beneath the headline data. he calls for a most difficult. in the banks. wells fargo is different. he just runs a different shop read >> he knows how to generate revenues. >> one of the best practices at wells fargo? least eight at product relationships with each customer. >> may i suggest it is what they have not done? have they been brilliant by avoiding things other banks of done? >> they have avoided a lot of the risks. they have also been in certain sectors of the been in secular decline. bring up the chart on the wells fargo. i think this is extraordinary. it is so much different than the

other banks. it completely looks different. >> it trades at a significant premium. it is probably about 2.7 times higher than a lot of the bank. >> it is not cheap. we are getting long in the tooth of this market and we want to stick with quality. >> it is quality. you will stick with it? >> we will until we get a better sense of how strong this economy is going to be. >> when the earnings come out, people want to know if they beat or missed. they want to look at the efficiency ratio. what does it tell us about the health of the rest of the banking sector since wells is not like the other bank? wells should show some sequential revenue growth. that is the most in thing. everyone is starved for revenues. >> i have to revisit the money question.

do you expect to see rationalization and firings? that.organ has signaled i think they have a good sense of the environment right now. they were expecting a week were staff. >> thousands or 10 thousands? >> i think you'll be thousands at the moment. >> a little bit of a slower pace. what about credit quality? the trend has been improvement in credit quality and reserve releases. does that continue? >> i think we are at an inflection point. net charge is linked and has probably bottomed. release is coming to an end. we have seen the end. we will see more reserve lease of the mortgage business. >> how much of that is priced in right now? >> i think people are still expecting a sweet spot.

i think that is going to happen. that wellsed saying fargo and bank of america were loading people off -- laying people off. is that being made up for? >> on the mortgage business, there was a bleep. i do think that is going to be the case. i think you will see additional pressure as ricin becomes more aggressive. you are seeing a pickup. i don't think it is sustainable. it seems to be financial engineering. we need the capital markets to support that. >> as a way for the banks to report earnings, what do you hope to learn about the rest of corporate america? >> the key is what is driving revenues. everyone is looking at topline is thisrea the >> organic revenue growth?

>> exactly. we could go on for hours. thank you so much. >> let's get to our agenda. the story of the day that you're watching. >> minus civil. it is the future of the fed. there are two fed meetings in jackson hole. meetingss city fed comes up in the end of august. unfortunately, there is a justification for the trip. this is a huge deal. none of this is in the textbooks periods in my living room i have a collection of micro and macro text. some of them i actually read. none of this is in there. >> we are talking about the debate. it is a really real debate. >> this is the first year in a decade where mckee is there and it is justified. >> the others were all

boondoggles. >> michael mckee is looking for the future of the fed with the inflation worrier. mr. lockhart will stop by as well. he will talk about what he sees. >> you have to have to radio. we will continue with our agendas. >> european banks are my agenda. here is why. they are up about 1.2%. this is a rebound after what came out of portugal yesterday. the second-largest bank said it might have problems. i want to see something out of the ecb. the bank has enough capital, what is the ecb doing? we heard from druggie earlier. draghi earlier.

we haven't heard anything since. >> world cup is on my agenda. it finally comes to an end. you have germany against argentina in the finals. you have resulted in the netherlands for the third-place win. that is tomorrow. we asked you has tv killed the summer blockbuster movie? tv meaning netflix or live sport events. i feel completely justified to throw my garbage all over the floor. i would rather pay $20 and get a first run movie in my apartment. about tv people raving shows and not movies. hollywood does not need tv for that. they did it themselves. >> that may be true.

peabody, thank you so much. bloomberg "surveillance." ♪

>> the boring. you are "in the loop" and i am betty liu. ken feinberg joins us.

he is working on the compensation fund for gm victims. it to governors sound off on what it takes to create jobs in their own home states. they will be joining us. watch our exclusive interview with charles evans and why he thinks it will be a long time before interest rates rise. this is very different from what we have heard from fed officials. these are top headlines. portugal second-largest bank says it has enough capital after a debt crisis. they missed payments on commercial paper. israel is stepping up its attacks. they have called up three infantry brigades.