path. time warner is in play as the great media consolidation continues. forget about plastics. you want a job that is rewarding. good morning, everyone. this is "bloomberg surveillance." world live from our headquarters in new york. it is thursday, july 17. i am tom keene. joining me scarlet fu in adam johnson. we a right to it. international brief, here is adam. >> we're starting with the u.k. where for a second day in the row we have a rising economic data. wage growth .7%. but mark is only .7%, carney has telegraphed that rates are likely to rise in there sooner than later. maybe the first of the major countries to do so. we should also point out result -- kind of a different story. their keeping borrowing rates at 11%. >> that is inflation with no growth. >> stagflation.

economic data in the u.s. -- here is what we have got. initial jobless claims and building permits. 9:45, the hits keep coming, bloomberg comfort index, the 10:00, the philadelphia fed business outlook. earnings, danaher, morgan stanley -- >> 7:15. >> and blackstone, a big one before the bell. after the bell, ibm and google. say --know what ibm will >> they changed the conversation. the conference call will be about looking forward and what kind of appreciation to come out of the deal. >> items to note -- the senate transportation subcommittee hearing on gm. >> are they going to recall a corvette? >> they are recalling jimmy ramadi -- >> wake up. on the brain. mary barra has been before congress four or five times.

present obama will be speaking at the port of wellington on infrastructure at 2:10, and angela merkel turning 60 today. the british open also begins. >> doesn't be president make his way to new york this evening as well? be a mess.t will do not go anywhere tonight in new york city. just stay in your apartment and hunker down. >> and on a thursday, this is a huge eel for the vast elite that watch "bloomberg surveillance." >> airspace is close from 3:00 p.m. until 11:00 p.m. >> i try to get the "surveillance" sikorsky and they just said no. >> we are not going to the hamptons. >> literally they shut down the airspace, didn't they? >> i was going to see the red sox, but you cannot do it. >> and what a shame because it will be a beautiful evening. you could have flown without any clouds. that is the morning brief. >> data check, we look at equities, bonds, currencies, commodities. s&p 500 down seven big points there, worth watching.

10-year yield at to $2.49, a lot different than two dollar$2.50. oil elevated. this is the first day we have seen oil pickup. our next screen, the vix a solid 11.00. there is the dow, nicely above 17,000, the yen 101.50. it has been stronger versus euro in the recent days as well. the front pages, boy, did they change starting yesterday with time warner and fox. we look at today's front pages. here is scarlet fu. >> we will go big and broad. the united states and eu have hit russia with more sanctions over ukraine. among the company that the u.s. is targeting is russia's biggest oil company, rosneft, also the third-biggest bank, gazprombank, certainlso blacklisted

companies but they were less specific than the united states. some with a less stringent as well. >> obviously they go after the capital markets and their axes away from shortterm commercial paper. how do you respond with a global american business? who can you talk to, who can you not talk to? who am i going to get into trouble with about the business trip? >> it will be interesting to see how this plays out when companies report their earnings and talk about how operations are affected by the slowdown we are already seeing in russia and less encouragement to do business. >> by the way, you can understand why the europeans would be less stringent -- they depend upon russia for energy. europe gets about a third of its natural gas effectively from russia through pipelines. you have got to kind of play nice and make it work. >> what is the next page? >> dow jones industrial average setting a record. yesterday 17,138.

a number of reasons -- janet yellen was speaking again for a second day. >> fed sugar. >> asset is not out of line with his oracle norms, she mentioned. you mentioned time warner fox. 20 century fox willing to pay. >> [tom humming] >> that is from the "new york times" business section. rice by the way, i just ordered watching "game of thrones," and i am loving it. it only took me four years, but -- >> i will give you a hint. i am messing it up for you. everyone dies. just so you know. >> twice. >> twice. third front page. >> we go back to banks. we mentioned how morgan stanley will be returning -- reporting earnings. they go america said prosecutors

-- bank of america -- we have learned they are at odds over the settlement. they have over $13 billion, but the government wants a $17 billion, so the fact that they cannot reach an agreement means that maybe prosecutors will sue. increases the likelihood of that happening. >> what happens if the bank just says no to these -- >> lawsuit. >> they go to court? >> presumably. >> has anybody just said no? >> people have said no as part of the negotiations. jpmorgan agreed to settle last november with $13 billion, and of course citigroup reached a settlement of $7 billion. >> remember what happened to gm bondholders when they said no. they got the cram down and the administration said you will take this deal whether you like it or not, so i'm not sure you can necessarily go up against this administration. >> for better or worse. >> the administration is eager for this to blow over. forbfa has been an issue

years now. in any case, there is our front page story. >> very good. international relations -- america confronts a broad set of international sanctions. last evening, the president directed his attention to punishment for russia as vladimir putin is in eastern ukraine. the europe and u.s. continue to punish. ian bremmer is with the razor group. -- with the eurasia group. ian, what is different this time, this moment for israel? for israel, there is a lot of pressure domestically to actually engage in ground strikes. that is kind of surprising. netanyahu is the one that usually has been the hawkish and out there in front with the more military stance. actually a lot of popular rhythm. he does not see a benefit as strongly in taking ground steps, but there is no question that

the other big thing that has changed for israel is that the consequence of hitting hamas -- hamas hasly been completely cut off resident cc because in egypt is very different from , has cutm brotherhood off all of their economic lifetime and considers them a terrorist organization. it is very hard for them to do anything to respond to israeli military strikes. >> had he studied the effectiveness of israeli ground troops as they go into gaza if that was to happen? >> look, the thing about gaza is they note every inch of that territory, their ability to engage in close knit, very densely populated urban fighting in some of the highest and most effective in the world, but the

point is it is going to be costly both from a u.n. perspective as well as financially. this is not something they can do in a few days. ground troops would require at least a few days. and the international program in response to that would not be insignificant. >> ian, quickly on russia as we look at these new sanctions, do sanctions work? know, after the 12 round of sanctions, you have to start to think that they are not getting the behavior from the russians that the americans had wanted. ,he two things to focus on here first, the mounting of frustration from the u.s. every time we say there are consequences, the russian response has been to proceed that they have i had every intent to engage in ukraine. secondly, we are having a harder and harder time even maintaining

the europeans being in lockstep with us on these sanctions against russia, which of course thean enormous part of initial policy when we started implementing those sanctions several months ago. >> ian, you mentioned the fiction of thinking that the eu d u.s. are in lockstep. there are tennant company's on a list that are sanctioned, the u.s. much less stringent. what is the possibility of the rest to lose business, that europe will slip in and go where they cannot? companies are already losing new business and opportunities to european companies and others around the world. the biggest american firms are important to the russian economy. people look at exxon mobil, which putin names directly in his commentary yesterday in response to those sanctions. it is certainly possible that putin will decide that he wants to do something important and symbolic to hit one or more of

america's key companies. also, american brands. nationalism in russia is at a fever pitch, and certainly you can imagine public demonstrations against visible american brands in russia. if you are an american ceo operating there, you have to take steps to respond to that. >> dr. ian bremmer, thank you very much, of the eurasia group. >> we are also pleased to welcome our guest host of the hour, howard london, and also brian white of cantor fitzgerald. gentlemen, i want to start with our front page story. you have megamergers between time warner and fox. is this the top of the market? timed of cannot help of warner and aol. >> it is 2014 and it feels like 1994 if you look at the all-time high list of stocks. i have never owned this at the same time i owned apple,

microsoft, google. i do not own ibm, but while. intel i should own. they are all of 8% yesterday, microsoft and intel. with of this has to do money flow. a lot of this has to do with microsoft, the new ceo. the way they monetize their software products, but it is really not a top. i have never seen anything like this, so i do not know how to call a stop on something. >> brian? >> what we are seeing in the tech world is a rotation into these mega cap tech stocks. i think that will be the case going forward. >> we will talk about this later in the hour on "bloomberg surveillance." are we going to have a silly season with time warner? you not only get the shift what you get the market with the emotion, do you get the pendulum so far out that we become silly and our evaluations?

>> it generally speaking in my area, valuations for a lot of these emerging high-growth companies peaked in february. my mega cap stocks are very cheap, and a discount in the s&p 500, ibm -- how under value they are. >> which is exactly how words point, how can you have a market top when some of these companies are very cheap. just look at apple. our twitter question of the day -- if content is king, what is the crown jewel? >> it is the millenials. they have tools that we do not have. go pro, youtube, netflix and amazon. if i were going to go create a business channel, i would go create 80 americana shows that my kids could watch for 100 years. it is not about creating 24-hour television. no offense, you guys are right. it is about craving content --

>> ah. >> tweet us -- if content is king, what is the crown jewel? @bsurveillance. what are we looking to hear from a jenny ramadi in her new deal with apple? ♪

>> you do not know this. good morning, everyone. "bloomberg surveillance." joe torre. you think he is a manager of the yankees. forget about it, he is a nine time all-star. he will be on "in the loop lows quote with betty liu. -- he will be on "in the loop" with betty liu. home of the dreaded new york yankees. >> dreaded, dreaded?

>> this is "bloomberg surveillance." i am tom keene. with me, scarlet fu. adam johnson also with us. get us started, scarlet. ibm, the former pc maker and now software and services company, will report earnings after the bell. the interesting thing about ibm is how it transformed itself. it was a pc maker data became a club company. now with a partnership with apple, it is trying to make a dent in mobile enterprise. we will check with brian way of -- brian whiteld of can't surface cantor fitzgerald. going through a transition, and it was a first time in ibm ceo ever mated to the mobile world congress, and she gave a keynote. really they opened up to

developers to develop mobile apps, and that is part of what she was talking about. their --reas of focus big data, cloud, they acquired software, social, and also mobility. big areas of focus. >> are they under investing -- she has so much pressure to keep shareholders happy, she is building free cash flow, but she is not investing. think they are investing in areas that make sense. the problem is the stock is only up 3% to 4% since the end of 2011 when she took over in january 2012. s&p is up 56%. this is an issue with investors. something has to happen or there will be a shakeout. i think they are at an inflection point. theiry are getting rid of semiconductor making unit, they pceady got urid of their section. did they exit these two early

october -- did they exit these two early? >> no. that isthey do exactly in the semiconductor business? hardware made $1.6 billion and then lost -- >> pc's are not dead. it is priced into microsoft and i intel. >> it is ugly. tot is your device ginni rometty? >> oh. shiningeet is really brightly on google ventures, on the venture on some of these companies. i think ibm is going to have to step up to the plate and really show their vision with some acquisitions and spend some money, sprinkle down from big

cap tech onto what is new and cool in till they can integrate some of these companies. i think marissa is being punished at yahoo! because she is maybe making the wrong type of investment. >> all right, brian white, we want to thank you for joining us as morning on ibm and apple, especially with ibm's results later today, and of course will be with us for the next hour. nardelli, robert o will be joining us as the guest host. this is "bloomberg surveillance ." we are on bloomberg television, streaming on your tablet, your smartphone, and bloomberg.com. ♪

>> good morning, everyone. "bloomberg surveillance." time for a morning must-read. here is scarlet fu. >> it is actually a morning must listen. goober whothe ceo of was speaking in hong kong. the companies valued at nearly $17 billion and he was talking to bloomberg about the possibility of going public or not. >> the other thing that happens when he raised 1.2 billion dollars in private markets is you do not have to go public, so until it becomes a strategic imperative for us to go public, we are just not. >> he does not have to go public. howard lindzon, cofounder and chairman of stocktwits, you say he owes you five dollars, but you do invest in uber through a small fund. couldthe way, anybody have gone in. the deal was on angel list, and other investment of mine, so the original investment was at a $4 million valuation on angel list,

so yes, that was open to a lot of accredited investors. at this point, this is probably going to become one of the best returns of all time, especially since it was available to all people. but they are going public. and at $17 billion compared to amazon going public at six under million dollars in 1998, 19 99, they are public. >> but why a dispatch company -- which is basically what uber is, they don't even own cars -- why is a dispatch company worth $17 billion. and cannotho is 14 speaking was would have a better answer. >> but he can program, right -- guy would pull up and do magic, this is magic in the rural life everyday. i push a button, the car shows up, tax is included, the driver is registered. it is a phenomenon. so magic is being created, and it is also productivity being created. a 50-year-old driver can rent a

car, does not pay for the car, huber pays for the car for them, and he pays nine dollars a day to run a business. it is entrepreneurship. it is an entrepreneurial combustion engine. nobody predicted this, and that is how you get to $17 billion. >> i love that -- you cannot put a price tag on magic. >> full disclosure, i just became an uber vip. >> coming up on "surveillance," we will discuss how investors are reacting to the time warner cable-fox proposal. that brings us to our reporter question of the day -- if content is king, what is the crown jewel? ♪

>> good thursday morning. gorgeousness of a cool

new york. i'm talking about the temperature. wasn't there a polar vortex earlier this week? we are redefining polar vortex. >> it feels like san diego. >> 57 degrees this morning. just beautiful. what a shock. citigroup there in front on the stateide of the empire building. >> love it. >> good morning, everyone. this is "bloomberg surveillance." i am tom keene. let me get to a data check. ortho is moving, and some of afghanistan. oil $102.12. .9% thisted a solid morning and equities come up a little bit. i do not want to make too much about it, but there is a little bit in the market right now, adam. says no toe warner fox as investors say please. they push the shares up 90% yesterday. howard lindzon witnessed the reaction firsthand, the founder

of stocktwits. his website lit up. sift through all of the excitement and buzz. we have had a lot of deals happening in the media. from this one potentially two direct to become a at&t, comcast, time warner cable, what is happening right now? >> i take you back a year and a half ago to richard branson's island where i bought some netflix at $80 a share after the felt soeal, and i smart, and i'm sitting around branson and a bunch of very some people, and aren't as smart in their bathing suits, no matter what past the age of 50. everybody thought i was an idiot for buying netflix, so i came home from my trip, i sold mine a i sold my $84 -- netflix at $84, so i would say nobody knows anything about media in 2015. time warner knows nothing, too, so let's take that away. i think you have the bank saying we can make up trading profits

by doing deal profits here. i think there are all kinds of undercurrents going on. get paid.w bankers this is easy money. the numbers are made to see whatever they want. listen, this is a golden areera of content. >> i just wanted to piggyback on what you were saying. if no one knows anything, the thing everyone seems convinced of is getting bigger is the key. >> sure, banks are behind that. >> the scale seems to give everyone leverage. rich greenfield pushes back against that. he told the ft that our gust is that well-positioned media companies should resist the urge to merge simply to increase scale. when is gail bad in media? scale that in media? >> i think it is bad now. netflix, amazon, super vision, bloomberg with their loan shows on apple tv, magnificent stuff. that is the future that is timeless so kids can learn and

everyone can share together and atch and discover throughout remote control that finally works. we still live in an era with a poor remote control and we are all aggravated to get on netflix. i think like facebook splitting up with apps, media should be splitting up and really going tactical around content. >> we are at a moment where we literally copyright matters. to me it was the cbs-viacom split off, realizing what "i worth.cy" is these are balance sheets constructed on content and on copyright. will google want to that? >> that is a question we are talking about. you know, you hope they don't. to make a case where it makes sense for google to go around content, i want a world where i have $180 going to time warner and i feel it should be zero. that is the world i am thinking of in my head.

i do not want to sort these things because i do not know if it will happen in 20 years or whatever, but my son lives in that world where if i saw that bill, i would cancel tomorrow, but i am in a world where i cannot. i am in a high margin that i get nothing for in my opinion. >> but you know there is a tension here, and that is with all of this consolidation, effectively rising power gets concentrated, and your concern comes even stronger. so then what? >> those are the things we worry about. nobody is up there thinking about the stuff, how it plays out. he is egotistical, and his ninth decade, he is not thinking about you or eyes. ask is this deal -- >> he is not thinking about you or i. >> is this deal thinking about regulation? >> of the bankers somehow have worked their way in here and make the numbers work for rupert murdoch, and rupert murdoch says -- what are we waiting for? he would be waiting for something is he knew the deals

would not happen because they have a chance of getting shut down, so i don't know. i am always a skeptic. congratulations to the time warner shareholders because they are laughing. >> many of them therare shareholders of fox as well. >> these are real games in a surreal environment, and games are games. power hasbalance of been tilting down for distribution, because they have done a lot more deals? >> i always think it comes down to distribution. when i started my show that we sold to cbs, it was all about syndication. you are starting with nothing. you have got to build a brand. today obviously netflix, itunes has a screen that the kids look for the top 10 movies, select a distribution has become hard again because how do you break through google play or the itunes store, how do you use the search on that funds will enough to find what you want? >> do you agree with mario corelli -- do you agree with mario covelli that th -- mario

gabelli ? >> i think so, i think eagles win and do bankers get paid. >> i like that -- he goes win. >> our twitter question of the day -- if content is king, what is the crown jewel? please, tweet us @bsurveillance. way, shameless plug, do not forget to download the latest issue of "bloomberg businessweek" on your ipad today and also available on newsstands tomorrow. ♪

>> futures negative eight, dow futures -29. good morning, everyone. "bloomberg surveillance." i am tom keene. morgan stanley earnings at 7:15 this morning, scarlet. write to our top headlines with adam johnson. >> security forces in afghanistan. a rocket attack. the military says four attackers were killed. the governor says beat attackers were taliban insurgents. and the death toll is now 38 after a typhoon hit the northern philippines. the capital, manila, was spared the full force of the powerful storm, but high winds and

flooding left more than happy province without power. more than happy people have been inaccurate. and cbs will let its own announcers to decide what to call the washington football team commonly known as the redskins. several high-profile nfl wruiters have stopped using the team's name. those are the top headlines. don't want toal call it redskins right now? >> washington football team? >> d.c.? >> helmet, is it frank keating of former governor oklahoma, he said call them the tomahawks. >> i think that would hinder some controversy as well. >> it probably would. i had no problem with this until i thought wait a minute, what about if it were the black skins or the yellow skins -- >> or the white skins!

>> change the name. >> the deficits. >> of the deficit, i like that. very good. domain.l get a equal partners. >> we have got to talk about the housing market for a little bit because we have not seen foreclosures this low since the housing bubble burst if you can believe it. fell last month to an eight-year low, and this year they are projected to be 70% lower than they were at their peak in 2009. meanwhile, sales of distressed properties make up a smaller deal. florida had the top foreclosure rate in the first half of the year. you see this anin california? >> coronado, my little corner of hell zone is a during the summer because the neighbors have gone away. my neighbors go away, they overprice their home because people from phoenix will pay anything, and those people who anything will

bring 60 people to the house, so because a giant month of celebration near howard lindzon tom, so i become the angry person. we don't even know the repercussions of the sharing economy yet. i am starting to see it this summer -- i hate my neighbors. killer math. the middle-class cannot live with howard' lindzon. the pacificmatter, coast without wi-fi live in this magical time where i am able to do this from the business i am in, but i see that firsthand, too. forced topeople are rent and scrimp and save. but it is a hard one. this is a hard dilemma. >> i know your son's golf course commutes from phoenix. >> on the "surveillance" jet. number three photo of the day. israelie taken from the

-gaza border showing smoke billowing up from the gaza strip following an israeli airstrike. fighting continued up until the last minute before that five-hour cease-fire. >> you sometimes see photos that you think will change the debate in the dialogue. the "new york times" this morning -- scarlet, bring us up people in aur family all killed. >> you wonder that photo is like the photo from vietnam. >> you wonder if that is the game changing photo. tyler hicks. >> tyler hicks of the "new york times." they did give her a temporary cease-fire at least. >> and so that humanitarian aid could go in. >> it is a halt. >> it is a halt for five hours to bring in humanitarian aid. estimate the clock ticks, five

hours, bam, it happens again. number two, the 140 third british open taking off today at royal liverpool. applauded. tiger woods gets a slow start. a very polite one. curious because he is actually among the favorites to win. >> he did not even show up at the masters, and because he was not there, the rating was the lowest since 1957. golf depends on tiger to show up. >> do you agree with that? absolutely, 100%, but not at the british open. it is a different type of global event. but i agree, it is hurting the u.s., but the world moves on. there are some great golfers. >> does phil mickelson still have a game? >> no. he is not going to have the game to win eight times a year, but he can win once or twice a year. these kids right now are unbelievable. >> like that little girl from california. with aon just played

chinese kid, 14 years old who played with the masters. my son looked at me and said dad, his ball makes a different sound. what the hell does that mean. if he putting vaseline on his clubs? he said no, dad, it just makes a different sound. we are living in a global world and golf is a different game. >> you play? >> when the market is not open, i played four rounds a day. when the market is open, i played five rounds. >> number one photo of the day -- a madame tussaud wax figure of german chancellor angela merkel. >> she looks totally real. >> this is a picture of her in front of the vanderburgh gate with the birthday cake. she turns 60 this week. happy birthday, chancellor merkel. of you, adam,re was phenomenal. >> oh, thank you. >> does she have an opinion on biotech stocks?

that as well, that and the social media stocks. expanding today. >> on happy birthday, angela merkel, we will discuss that as well in the next hour, the challenges she faces, the pushback. coming up, the summation of our weeklong series on millenials. milleniallk to one who is part of the growing entrepreneurship. we will get more on why they are going their own way right here on "surveillance." ♪

>> this is "bloomberg surveillance." with tomlet fu here keene and adam johnson. let's get you company news now from the files of "bloomberg west." apple agrees to pay $450 million to settle rice fixing charges according to a court filing. the company was headed for trial in the antitrust case. prosecutors say apple conspired with prosecutors to raise e-book prices. the money will go back to customers. a major security breach may be hurting ebay. the company's third quarter outlook fell short of analysts' estimates. the company also says it lost traffic because of a change in search software. and airbnb is rebranding itself with a new logo to go with it,

but the image has sparked internet buzz. new logo ishe sexually suggestive. companythis morning's notably files of "bloomberg west." >> here is the surge in american oil, west texas intermediate, this is the taliban attack i'm presuming in afghanistan, you can see we are making out now to two highs here. i do not want to ascribe us all to afghanistan, but let's be aware. futures negative 7, we were -12 moments ago. now to our single best chart. >> all this week we have been focusing on the millenial market. today's a single best chart shows where these late teens, twentysomethings, maybe early 30's want to work. this is from brookings. they surveyed 10,000 millenials. the usual silicon valley

destructors show up -- google, apple, facebook, amazon as you would expect. what is interesting here is outside of those tech firms, government agencies occupy the most number of spots. cd state department there -- number four. the fbi, cia. >> that is fascinating. ande is faith in government there is faith in tech that is changing the world. >> what is the google magic? >> i think the google magic -- >> you get stock options. >> you get the food, you get the that facebook came in on everybody left and google's stock kept going up, so the next great thing that comes along, people will stay longer. --se that left and -- sorry now realize they could have stayed. i think that is the big issue with google. >> i would say importantly, scarlet, within that chart, that elite resume to get any of those jobs, including the state

department and the fbi. we are talking about a razor small part of the millennium world. >> the best of the best. if the millenials do not get their job, what happens next? that is caseybout gerald, a millennial entrepreneur himself. i want to get your company, in s across america, but first, set the scene on how you shifted gears to forming your own company full subunits lead to a traditional route. you had a summer internship at a law firm, then a summer internship on wall street. what happened? >> in the chart that you all were just talking about, it is really interesting from the standpoint of what people are doing. i think the larger point here is that my generation is the 9/11, thatthat saul saw as summer interns the fall of the economic system. i was an internet lehman brothers. >> that worked out.

ofwe saw the criticism government, and we have seen the criticism of everything we've taken for granted. in some way or another, we change, so i think striking out on our own is not just about not getting the job that we wanted. i think it is really about living a life of meaning. i think it is about being sure that wherever we work, whether it is google or the state department, that we are dedicating our talents and our time to a cause greater than ourselves. >> if that is the case in the goal is to effect social change, you went to harvard business school. why that's cool over a state law school? >> it is funny to my eye always thought i would be a lawyer. i went and spent time at a law firm and disagreed with that notion. i went over to yell law school a guye law school, and was talking at that in the 20th century she wanted to change the welcome you had to go to law school, but in the 21st-century if you want to change the world, go to business school.

i took that for granted at the time, but once i got to harvard business school, i saw that most of the biggest challenges we face in our generation are going to have to involve business leadership, are going to have to find ways to create new jobs and new solutions. so that is why. >> if we assume that you are correct that the change happens at the business level, is it the entrepreneurial level that howard invests in or the big corporate level, the time warners, the foxes, etc.? >> small business creates two out of three new jobs, employee over half of the workforce. we have to put the wind at their back. that is not mean they are lost corporations. >> it took mcdonald's maybe 40 years to learn china. can be magicalr globally, that is how to pulchie can have such a high pe. that is the world we live in. this execution that we are seeing by certain companies for

getting banks, whatever, an uber, airbnb, chipotle, under armour is magical, and they are fueled by millenials. >> is this transferable away from the elites millenials? because to me, there are different millenials. i do not buy the idea of harvard businessschool or yale cool transfers to over 98% of millenials. >> we work with a guy from flint , michigan, 26 years old. he came in entrepreneur because his mother face mental on this, and being an entrepreneur with the only way he could provide for himself and his family. he has created a business in detroit that is not just grading jobs, but he is revitalizing some of the troy's most vital neighborhoods. this is not just about privileged folks having more time on their hands. it is about a whole generation

of people across a broad spectrum considering a new way. >> and your company, mba's across america, tries to place these not in silicon valley or wall street, but all over the country. >> absolutely. tour,case went on this the rise of the west, and he made 98% of his funds from his investment fund outside of new york and silicon valley. effect of the matter is we are talking about the playbook for growth and change in america today, and it has got to include entrepreneurship and it has got to be in place is not just on the coast. that is what we are trying to invest in. >> all right, casey gerald, founder of nba's across -- mba' america, harvard school graduate, and our millenial for the morning. thank you. 102.33, up a solid $1.13. the euro-yet is a big story, the last couple in the

of days, and there is a rubel off the sanctions. howard lindzon, thank you so much, with stocktwits. >> do not be a stranger, howard. coming up next on "bloomberg surveillance," robert nardelli was one is on guest host on television and radio. ♪

>> president obama announces .arsh sanctions in this hour, morgan stanley announces trading is not so grim. good morning, everyone. this is "bloomberg surveillance," live from bloomberg world headquarters. i'm tom keene. joining me is scarlet fu and adam johnson. and our guest host this hour, robert not delhi. and stephen how is with us as well. let's get right to our morning brief. >> overnight, wages rose 7/10 of a percent. of ahile in brazil, a bit

different story. two little growth and too much inflation. the central bank keeps rates steady at 11%. a lot of inflation in brazil. coming out. housing starts, building permits, and we please -- and the weekly jobless claims. and at 10:00, the philadelphia .ed out look we will see what mr. plosser has to say about the outlook in the mid-atlantic. and then we've got man that -- morgan stanley in 15 minutes. >> that is right. >> after the bell, ibm and google. in the senate transportation subcommittee on g.m. recalled that 10:00 today. i believe that is the fifth time the ceo mary barra is before congress. president obama in support of infrastructure in wilmington at 2:10 p.m. what do you have?

between bank talks of america are going nowhere. anddoj wants $17 billion bank of america will not budge from its $13 billion offer. it makes it more likely that executors will sue the bank. and according to the "new york could see theft largest playoff in history. microsoft has 125,000 employees. chrysler said it can fix a dangerous flaw in suv's at of a government recall. in gas tanks can rupture rear end collisions, sparking fires. nearly 3 million vehicles are effective. the remedy is to install a trailer hitch to protect the tank. we need to go to washington.

there are sanctions that signal and there are sanctions that hurt. president obama has announced taccone and limits to how russia corporations can access -- has announced jerk tony and limits -- draconian limits on how russian corporations can access u.s. markets. peter cook is in washington. eut is the support from the of the president actions? >> they did not match united states actions. that should tell you something. there is a divide. there is agreement on the general probe -- the general goal, to force russia to finally help de-escalate the tensions in the ukraine. there is a divide in terms of what the u.s. has been willing on the general message they are on the same page. >> what is the next later or

event of sanctions? it was pretty clear in a briefing with reporters, senior administration officials pointing out this was targeted. the sectoral, the broad sanctions he's been threatening all along. and even the sanctions against these individual companies, and these are big-time companies in bank, ross neff, no vo-tech. it is not the day-to-day operations, but the long-term debt they might try to finance over time. the next step for these companies could be even more immediate steps in their day to day basis. >> in the first round of sanctions, senators like john mccain were very vocal. they are curiously quiet this time. why? >> because there are so many other things going on right now, to be honest.

there is the sense on capitol hill that there is support for what the president is doing here. but there are some, particularly among the republicans, that think the president should go even further. the sanctions, even those announced yesterday, are still not tough enough. marco rubio and others are calling for sending a stronger message to the russians. so far, by and large, most people on capitol hill, republicans and democrats, support what the president has done. tension between the germ -- between germany and the u.s. over the surveillance and spying affecting the coordination between the u.s. and europe on the issue? >> the white house says it is not, but ok much a be on that phone call between the president and angela merkel on tuesday -- but so, to be on that phone call between the president and angela

merkel on tuesday. this is very delicate diplomacy. and the fact that there is a gap between the u.s. and europe on some of these sanctions tells you that not everything is perfect. >> peter cook, thank you so much. our chief washington correspondent as the story continues to unfold. is with us.lli i thought it was a good idea to have him on a few days ago. it is even and -- it is an even better idea after the news of the last 24 hours. e, a managingow partner at his firm for over 30 years. know where to begin. how busy is your practice right now? is it a strategic frenzy going on? cuts it is a busy time, really. and across all of our -- >> it

is a busy time, really. and across all of our service lines. the world is moving fast and we are busy helping. >> we have talked about this before. is the new five-year strategic plan really three years? >> it is. -- aty early days on general electric, we stood up focusing on a three years horizon. i started in 1971, way back in the prehistoric days. we used to sit around and say, well, we are pretty well protected. who was going to ship air in these bigger boxes, right? fast backrd and we're harkening to the three circles. you're either in the circle or out of the circle. right now, it appears that appliances are out of the

circle. >> it is surveillance's then diagram. for scalee is looking and synergy. they are looking for tax -- tax in version, but what is the main distinction? >> companies are looking for topline and bottom-line. they cannot get it all organically. we are going to see multiple deals. >> not just media. >> not just media. in the last six months it is across sectors. businesses are transforming themselves. scale is important. about visor trying to transform itself into a different company and it didn't work. how much manipulation are you seeing from companies were they say, let's go way out-of-the-box? the starting point is never the inversion. it is a large-scale, but -- it

is the business issue. but taxes have been another way that these companies can get value. tax system prevents them from doing that. you see a $100 billion synergy -- that is aware that you and i both hate, synergy. >> they would get rid of all of the overlap, the hr department, all of that. comparison to in the overall size of the deal and the value created. >> no question about it. it is a piece. companies have done a great job extracting efficiency since the downturn, but they are pretty much -- have pretty much bottomed that out. now we will see scales, efficiency, and cost reduction. and stephen howe

are with us to make you smarter. let me do a data check. about an hour and a half ago, futures were down and they are down further. >> coming up on surveillance, 21st century foxx's rupert bid for times warner is already north of $75 billion. that brings us to the question of the day -- if content is king, what is the crown jewel? >> bloomberg, that is the crown jewel. it's smart. >> we will be right back. ♪

>> good morning, everyone. i'm tom keene. this matters to our guest host, robert nardelli. combined present 200,000 number of about and it needs a friend. ibm has found that friend in apple. in doing ane signal agreement with apple? >> they see an opportunity to

recover. quarters ofseveral declining revenue. i think we are in a high-tech frenzy right now. the association of ibm to apple makes a lot of sense. ibm flatd i remember on their back. best practices to turn around a big, sprawling company echo >> -- sprawling company? >> first of all, he did a fabulous job. a lot of leadership and inspiration. and the government at the time was forcing the big four or five to divest. ibm came in and got rid of the portable computer business. partner withty to apple makes a lot of sense to me. >> how do you think strategically and not lose sight of the tactical at any different level in the company?

>> you have to think strategically and act operationally everyday. you cannot just focus on today without thinking about tomorrow. >> do consultants work echo -- do consultants work? >> consultants do work. they bring outside perspective. they are not caught up in the legacy of the business. i think it is a fresh approach. you bring them in, focus on the opportunity, and it is a variable workforce that does not add to your fixed costs. in to consult at ibm right now, what would be your number one recommendation? ibm needs to regenerate itself and find new ways to expand its revenue opportunities. it cannot be old and stodgy. she has to bring new concepts to the playing field. >> does she have to take larry ellison, 101? is that what this is, being more

oracle-like? >> what is happening in media and content today, you have to make this thing up. jeff is doing it at ge right now. he saw the appliance business on the block this morning. >> bob nardelli on ge appliances. angela merkel turns 60 today. this after eight and a half years as german chancellor. what has your leadership meant to germany? ♪

>> the morning, everyone. breaking news, the banks continue to report. morgan stanley. >> it is a just a couple of one-time items we are looking at. on the revenue line, $8.61 eight $.61revenue -- billion in revenue. and you were looking at trading

numbers. higher than what analysts were looking for, but certainly down from the first quarter and also down from a year ago. equity revenue, $1.8 billion. >> an interesting twist -- we are just looking at these numbers right now. the value of trading and gaining -- of gaining and trading your own trading desk. i don't see that at morgan stanley. net losses of $241 million compared to losses of $54 million. maybe a little week. >> they be part of the reason is that james gorman, the ceo, has made a distinct move away from trading into wealth management. margins are 21%. >> that is significant, because organ 70 had been part -- had byn targeting 20% to 22% april of 2015. >> and they are wealth managers. the average representative revenue, $900,000. that is getting to be a big number.

-- did that in a month, will in a month once, right? >> i tried to do that in a month. percentrcent to four seems to be the sweet spot for the increase in book value this quarter. >> having said all of that, james gorman said a muted operating environment. nude is the key word. and they rip -- muted is the key word. and they continue to be disciplined on expenses. >> we will dive into that a bunch more for you. right now, a busy day. here is adam johnson with our top headlines. >> we got some breaking news coming out of ukraine. on the battlefront, the government say that rebels shot down a transport plane last week, but today the ministry is blaming russia for downing a fighter jet. the pilot bailed out when his plane was hit by a missile from a russian jet. moscow denies it is helping separatists. says fiveitary

attackers at a kabul airport were killed. and bank robbers have turned a california city into a war zone. two suspects were killed yesterday in stockton. they fired ak-47s at police during a 45 minute chase. two hostages were tossed from a speeding car. cars and houses were riddled with bullets. strange story. >> [indiscernible] foxx's warner turns down $85 billion takeover bid. deal at this this point, given that just because has set effectively twice he's not interested yet come -- given

that jeff bucher this has said he's not interested? >> it certainly makes a lot of sense. in addition to the cost synergies they talked about, there are some soft synergies. they've got better gold will -- better global scale in terms of istribution content, which one of the fastest-growing parts of the market does -- these days. we think it is a great deal. concernsthe regulatory can be taken care of. >> he saying no for now, but if push tom price, he would get there. whoe is not a shareholder doesn't want this necessarily. >> that is likely right. if you put the bid out there at 85 and let that sit out there for a month or two, get some

archives into the stock and raise the bid to $90, $95 -- and by the way, $95 still make sense for both foxx and time warner. we think it will get done. he made it clear that the pendulum could swing much higher in valuation. he turns to you for the specifics. dow incomeh the -- ebitda.either. deals anywhere from 10 to 12. >> i want a stock price. paying95, they will be probably 12.5 times posted synergies, which again, given that the $1 billion energy is conservative, that is still a good deal for foxx. bow,am, back to the

$100.60. >> where did you come up with that number? >> i did it with a 15 times extrapolation, plus growth, plus copyright value. >> i would add that with long-term debt with -- where it is, foxx would be funding this from new cash. >> it is not out of line. on a multiple basis with what is going on in the market today. the adjustment for mr. harris is cash is free. >> cash is free. >> a tremendous opportunity. it will fuel more deals. and the companies have been cash available ands the competition is fierce. >> we cited earlier on other shows. the availability of cash, look at these major corporations with offshore cash. it is a wonderful way to invest.

we will not see any repatriation of the taxes. >> that is a good point. >> i wanted to bring up some headlines. cs controlling shareholder denies reports of a merger with vw. ♪

>> this is bloomberg surveillance. i'm scarlet fu here with tom keene and adam johnson. let's get you top mean -- company headlines. maker put 46. -- $46 billion on the books yesterday.

cutter airways made a major deal -- guitar airways made a major deal. bmw adding to the wave of recalls on faulty airbags. million models must be fixed. they could break apart and injure passengers when deployed. and slumping demand for pizza hurt yum! brands in the second quarter. profits did fall short of some forecast. owns taco bello and kfc. >> this is a huge deal with boeing come a huge deal. emirates tour airbus apart yesterday. -- tour airbus apart yesterday. emirates did not mince any words with airbus. this is something we will cover on surveillance. there is something going on

between boeing and airbus. i don't know what it is. >> they all want the wide-body volume. that is where the growth is. >> and has changed from narrowbody to wide-body. the seo of boeing about month ago. i think he's got it going. >> -- spoke to the ceo of boeing about a month ago. he's got it going. >> angela merkel has been chancellor of europe's economy for eight years. she turns 60 this weekend has a 71% approval rating. you might ask, is this as good as it gets? especially when you consider the fact that germany actually has an infrastructure problem. that is the latest article in blimp -- bloomberg businessweek. put it into perspective. how much worse is germany's infrastructure than ours? >> shockingly bad. they have one of the lowest investment grade, both public and private, in the oecd. among the industrialized economy.

shockingly, germany's roads are bad. the autobahn is ok, but it's all the secondary highways that are in bad shape. i've seen various estimates, but they all run between $7 billion to 10 billion -- 7 billion euros to 10 billion euros per year on infrastructure alone. on one of locks broke the shipping areas. it is an investment problem they have. >> with her popularity, why can she use that as a mandate? and they've got the money. >> they don't necessarily have the money. i spoke to somebody who represents germany's famed family-owned small businesses. he said there is a german proverb that says the wise man does in good times what the stupid time -- what the stupid man is forced to do in bad times. they are doing so well right now

they have balanced the budget. by next year, they will have a balanced budget. and they absolutely refuse to take on any new debt. there is not that much money in their balanced budget to pay for the infrastructure investment. and even though they could get money at close to nothing right now, they are refusing to do that, because they see themselves in a leadership role for the rest of europe. they don't want to be telling the rest of europe to tighten its belt without doing it. >> why is infrastructure -- i mean, it's so obvious. but why is it such a difficult program to get everyone on? >> couple of reasons right now. we could take some lessons from germany has best practices in balancing our budget. if we look at how we are overreaching and putting more and more weight on the taxpayers, it is a big concern. >> i wonder if merkel has so much political capital to spare because she's got this high approval rating, what is she spending the capital on?

>> she spending it on maintaining a stronger relationship with the united states. i cannot fault her for that. she is under tremendous pressure at home because of the various spying can't -- spying scandals and the nsa to interrupt the progress of the transatlantic harder ship, for example. that is something she's pushing for. other than that, she's not had a lot of domestic work to do during her chancellorship. it has been her job to fix europe. and that is why she is so popular. she is seen by germans as having given as little as she had to while avoiding catastrophe. and she gets high marks for that. >> your article comes out this week. actually, last night he came out. >> yes. >> tell us about this headline. [speaking german] gerhards the ghost of schroder.

up, building starts, jobless claims. ahead of that, stocks will open lower at the market at 930 right now. >> good morning, everyone. good morning on bloomberg radio. i'm tom keene. with me are scarlet fu and adam johnson. also, bob nardelli as well as stephen howe from ernst & young. nasdaqyou know that the was hacked about four years ago? you may not remember. the exchange traded down a two paragraph issue on it. it is the cover story of this

week businessweek. of analytics.e co all they know for sure is that a nationstate gain access to the nasdaq and we don't know what their final objective was. how can this be prevented in the future? the attitude of prevention, you pretty much already lost the battle in my opinion. i will give you an example. surgein iraq during the as an intelligence officer. when my unit to the ground, we took an attitude of prevention to prevent the attacks happening to our base. when we did, it actually cause the attacks to increase. will he took an approach on intelligence and risk man -- when we took an approach on intelligence and risk management where we dealt with bad things

that were happening, we reduced the risk to a manageable level. it is the same thing for ciber and the same thing for nasdaq was up once you understand where they're going to attack, you can use your resources. that is the approach they have to take going down the road. >> and different approaches require different government agencies. the fbi, the nsa, the white house, the secret service, they are all informed or involved. does that help or hurt the process? >> one of the problems we have in our federal agencies is that we have a lot of capability in ,yber intelligence in the dod specifically the nsa, but the nsa does not have the authority to leverage that capability to the private sector. that is in the purview of the fbi or law enforcement agencies, or perhaps dhs. kind of has this

counterintuitive situation going on where we have all of the capability in one spot, but not the ability to leverage it. , managing howe partner for ernst & young in the costcas, how do you manage at the boardroom level for all of this, the surveillance and security echo -- security? >> i think the comment about it not being about prevention anymore is spot on. cyberattacks are prevalent. to iscompany have talked focused at the board level. you need to know what your data is and what could be subject to attack and not only get out preventing it, but protect it once it happens. this is budgeted. it is that strategic. >> you have been awarded the bronze star and a number of other important rankings for your service to the nation of iraq through the nsa. if you were to comment about the

nsa through the media uproar, what would you say to them? ofi would say the mission the nsa is to protect the american people. they have that on their hearts on an individual level. i wasn't a high-level executive there. i was an operational level person. and people have in their heart the desire to protect the american people. that is what they do everyday. >> is it a permanently damaged organization? >> i think it has been hurt a little bit from the recent events, from edward snowden. it will recover. saucier -- bob stasio, thank you so much. >> fabulous to have him on. instead of all of the punditry and experts to add value here everyday day, to have somebody in the trenches. nsa, they are the

actually trying to help us. >> i knew that would impress you. we will talk about megadeals will we come back, which brings us to our twitter question of the day. if content is king, what is the crown jewel? tweet us. ♪

>> good morning. dow futures at -47. the 10 year yield is that a little bit of a risk off field as we go to the opening be you -- opening bell. >> and as we go to the opening bell, we will check in with betty liu. joe corey, the legendary new york yankees manager is going to be inducted into the hall of fame this week kent -- this weekend. propertylking new york coming from an, family deeply involved not just with property in new york, but saving new york city during its recession. he is part of a big dynasty in new york. topic of u.s.ig and sake -- u.s. sanctions imposed on russian companies.

peter cook will join a little bit later in our program. >> looking forward to betty liu and "in the loop" at 8:00 a.m. i like the joe torre one. >> i know you do. my morning mover is morgan stanley. the shares are rising after the bank reported results. earnings per share, when you exclude couple of things, $.60 as opposed to $.51. want to point our attention to wealth management. that is where james gorman has really shifted the bank for this -- the bank's focus. margins are higher than what deutsche bank was looking for. they were looking for 20.5% for that timeframe. >> and you don't have as much capital as you would on the trading desk. >> yes, your balance sheet is stronger -- smaller. you have that with other

major wealth companies to emphasize the importance of it. >> microsoft down slightly today in the premarket. after yesterday's 4.5% move. earlier this week, the company announced possible job cuts will stop they would be the highest, in theory, since 2009. that year it was 5800. and if you figure the company employs roughly 130,000 teeth -- 130,000 people, that is roughly four percent. >> the actual announcement could come this week. >> or next week. the earnings edge is also on my radar. we have a lot of earnings coming out. after the bell, ibm, google, and amd. in tomorrow, ge, citigroup, and disney. >> it will be amazing to see what disney says about foxx-time warner. >> they may not touch it as a

hot potato. >> bob iger has been selected ceo of the year. >> see if you can work on that. but ask him if he would by cnn. that is the scuttlebutt. that disney could by cnn. >> bob will play the tough interviewer role tonight. megamergers. we will discuss with bob nardelli and steve howe next. ♪

>> good morning, everyone. tomorrow on the program, so much going on. it is a good time to catch up with robert ellison of sandler o'neill. he does fabulous research. really, synthesizing all that is going on in economics, finance, investment, and politics. robert albertson tomorrow morning on bloomberg television. it is always great to see him, but tomorrow will be particularly important given what we have seen from making this week. >> recently especially with morgan stanley. the hour,host of robert nardelli and stephen howe

. some company news from the files of bloomberg west. apple recently paid $450 million to settle price-fixing charges. the company was headed for trial. prosecutors say apple conspired with publishers to fix prices. the money would go back to customers. a major security breach could be hurting ebay. the third-quarter outlook missed analyst estimates. they asked users to change passwords two months ago after the company broke into its system. up to 12,000 microsoft workers could get pink slips today. that is, according to the "new york times" in the largest lay off for microsoft in its history. microsoft at last count had 120 5000 employees. that is your company news from the files of bloomberg west. -- 125,000 employees.

that is your company news from the files of bloomberg west. microsoft, 12,000? is -- the and that record that we saw from a few years ago was 5800. this is a big deal. it is because of that merger with nokia. i think he's putting his thumb print on this company now. adding lean, taking advantage -- getting lean, taking advantage of the synergies with consolidation. i applaud him for it. none of us like to see people move -- lose their jobs, but i think he's making the right move for investors. point, and you hate to say it, because we are talking about people losing their jobs, but if you can take that kind of costs out of the system --

>> and he's been criticized for being stodgy and slow. he's changing the momentum. >> it is all part of that where everyone needs hardware to go along with the software. we will see if that plays out. satya nadella, making some big changes. changes in the banking sector, commendations nations, transactions, mergers, even agreement. has lifted this at ge, at home depot. is with ernst & young. wordvises that dreaded synergy. how was it seen before the financial crisis? >> competition is so fierce right now. microsoft laying off people and companies seeking bigger deals because it is not so easy to squeeze more efficiency out. scale will prevent more opportunities. they need to grow the top and

the bottom. >> just to bring it down to the transactional level, the big argument is stock and cash for takewarner should they foxx stock. how do you judge the future value of the acquirer? >> there is a big transformation going on as well. it is anybody's guess. if you look at tech companies and media companies, right now, it is to use the cash you have available and keep building the pot. you buyardelli, would rupert murdoch stock? >> let me say that i think jeff is very cautious. he's been through this before with aol. i think the sweeter the deal on cash, the more interested he becomes and not putting his investors at risk with somebody else's stock. >> it is not only the price, but the mix. >> absolutely. and it begs the question with everyone talking and working -- worrying about when rates will

eventually rise. cfo's not effectively loading up on deck with low rates? >> confidence is building, but it's not all the way back since the crisis. i think companies feel extractive efficiency. they have cash. the economy looks better here. europe is beginning to creep back a little bit. i think they're coming in and investing, but still with caution. >> you done such a great job with earnings. remember $1.3were trillion in deposits for bank of america? >> i know. i wonder how much of this megadeal merger is being brought activism.eholder how much a factor is that? >> it is a big factor. it is a big lever that forces companies to be competitive.

if you are not on top of extracting value in every sense, the activist is company -- is coming. >> is jeff bewkes and internal activist? >> i think jeff has a very clear strategy with what he wants to do with time warner. yes but off the magazine portion. he's been very focused and his strategy seems to be paying off for investors. >> a really amazing share count at time warner with what he's done there. >> fewer shares, which is engineered earnings growth. >> with a buyback. >> yes. is one of the cautions here that conglomerates don't work echo -- don't work? in the 1980's, you build things, and now we are seeing corporate divorce and things get but off to create value. >> i have a selfish point of view. the analysts that say too big and too complicated is because they cannot get their head

around it. proponent of two big in conglomerates. i think they add tremendous value. look at what ge jested. you know, bring in -- ge just did. you know, bring in heavy of theial and let go lesser earning assets. >> focus on the core is what you're saying. >> yes. >> let's focus on our core. tom, you're on the market. >> i don't care whether it is mega zillions of cash. it's also about currency and stock. we go up to the dow, 18,000, 19,000, or 20,000, and then we have a pullback like we are in now. and the big difference is not just the twitter-facebook valuation. look at the valuation of time warner, of apple. and for that more -- for that

matter, dan her reporting this morning. these are relatively cheap companies. >> yes, and if you analyze the amount of them in a activity -- are at thevity, we highest ever, $2.2 trillion. and that is just u.s. companies. >> and that is the dollar value, not the number. >> and since the downturn, the activity has been very low. >> we will have two data points at 8:30 a.m. housing starts and building permits are somewhere -- expected to be up somewhere between two percent to three percent. on my agenda, earnings. it is the busiest reporting day of the earnings season so far. google and ibm will be reporting. >> i wonder what the search percentage for google is. >> and whether there will be a buyer in this for them as well. -- i >> let'sget

get to the twitter question of the day. we asked everyone -- if content is king, what is the crown jewel? oes that mean twitter? >> arguably, yes. 140 characters. >> but look at game of thrones. episode 10 tonight. >> who died? >> the guy. iger, you'reb going to ask him some questions tonight. >> what is your question for him? done a fabulous job. what is your next acquisition? >> and the last answer for our twitter question of the day, substance. substance is the crown jewel of content is king. that means bloomberg

surveillance, clearly. much.nk you so >> bloomberg surveillance on radio continues. "in the loop" on bloomberg television is coming up. ♪

>> good morning, it is thursday, july 14. we are alive. we have a much -- must watch show for you.

will be talking to us. so much to talk to him about, including derek jeter. mary bauer heads to the hill again today, the ranking republican on the fed committee will be drilling her. at our topook headlines this morning. turning up the heat on russia. they expand the sanction on the conflict in the ukraine. russia'st round targets -- microsoft prepares one of the biggest rounds in job cut history. there are reports the cuts are bigger than five years ago. stanley, the bank had a smaller drop in