build an expensive ecosystem. america is giving tax dollars to ireland. can the u.s. find corporate tax reform? good morning everyone. this is "bloomberg surveillance." where did the month go? joining me is adam johnson. and olivia sterns is with us today. scarlet fu is off. but go back to the morning brief. >> german business confidence dropped to the lowest level since october. this is due to escalating tension in ukraine. >> it is fascinating. this is like the first whisper. >> the german economy has been doing well. the u.k. economy is doing well. they grew 31.% year-over-year. -- 3.1% year-over-year. >> that is going to be the story. >> sure is.

we are glad you're here. capital goods and durable goods are at 830. this is an important read on our economy. moving to earnings, we have stanley, black & decker, abbvi. today.fire ships >> that is a phone. you almost have to describe what that is. >> i don't know why they called it the fire. maybe it is hot? what do you think? >> it is revolutionizing the world. it is innovative. >> is it as good as my iphone? >> we will have to see. bidensident obama and joe are meeting with leaders from central american countries today, trying to figure out how to deal with this crisis on the border. >> let's do a data check. what a week it has been.

we turned -3 on futures. can we break through support for a week or euro? hydrocarbons have done nothing but churn all week. you can see with the vix, better than good market. that is important. .50..47 2.50. -- top just a whisper. this will be a theme all day. for inflation,d over 30 years. we're extending out inflation-adjusted beyond where we were in 1999 and 2007 as well. the russian market, which you talked about yesterday, is more like this. just flat. >> what is also intriguing to me

about this chart -- rally down to hear. >> retirees adjust for inflation. let's look at the front page now. here is olivia sterns. >> israel and hamas are concerned a u.s.-backed proposal for a cease-fire -- accelerates.aza over 800 palestinians and 34 israelis have now died since the conflict began. they rejected a truce that was brokered last week. the hangup was the issue of lifting the blockade. hamas did not feel that they had a solid guarantee that it would be lifted. john kerry is doing everything he can. a lot of questions about whether hamas will listen. >> that is the distinction.

hamas is actually in the conversation. adam, when we started the week, they were not. >> no. the military side said they were not even consulted on that first truce proposal. >> sunday is a day -- this will be fascinating. from friday ended saturday, what will secretary kerry do? >> the protests have spilled over into the west bank. >> i do not know where to comment on the u.n. hospital that was struck last night. there are so many reports on that rocket fire. >> terrible. we have ukraine. violence is wrapping -- rampi ng up again. shooting down a three drones in the last 24 hours.

they assert that russia is firing artillery across the border. this is the first time american officials have publicly alleged russia's direct participation. the prime minister resigned yesterday. more and more, this is resembling the ground floor. >> we will have alex from the eurasia group join us in 45 minutes. we will try to figure out why putin would do this while the world is watching. >> i have two observations. e.u. sanctions -- prime minister cameron said that sanctions must target puting cronies. the prime minister is talking about rifles. a lack of rifles. you wonder where is kiev. >> well, that is one of the themes of the morning. >> much more on this in a

moment. >> rupert murdoch, 21st century stocks, agreeing to sell the pay for tv business in germany. this will increase the $85 per share bid for time warner. many say that rupert murdoch is like a shark. moodys has just come out with a downgrade of bskyb. >> they're questioning how much you can spend on time warner. >> how much is it worth? is it $85 billion currently? $85.per-share price of mario cavalli thought we could get up to $100. aboutember how we talked dell going private at $21 million and that was a big deal? >> that is front page news.

>> futures are negative. dow futures -19. laws have not been voted. folders cannot be paid. what options do we have now? that was the jury comments of the israeli prime minister who resigned yesterday. ryan chilcote joins us from the london news bureau. what are their options in kiev for what remains of the government? >> we have two things. one, the ruling coalition collapsed. that may have been orchestrated. the collapse of the ruling coalition clears the way for an early parliamentary election. that is what all of the politicians wanted. the more worrisome thing is the ukrainian prime minister. he made a very emotional speech

and says he is resigning and stepping down. he does not need to do that. typically, he would stay in power until the new parliament comes in. >> you are so good at this. kiev,r. biden flies to this is the guy he wants to speak to. thee have a dialogue with guy who is a follow-on on from the previous corruption? >> we do. everyone was used to dealing with the guy who did the $17 billion deal. this is the guy who has been driving those reforms that the ims has been demanding. he was unable to do that. that is why he is resigning. this could be indicative of a risk that would be worrisome. he would be on the same page and they are fighting a war now. the answer is, yes, there's a little bit of a dialogue now. but everyone is a little more

comfortable with being a technocrat. >> what sort of mandate does mr. henko have on the western side of the country now? >> he has a pretty strong mandate. everybody has backed that revolution and backed the former president's overthrow. they wanted to do parliamentary elections, which they have not gotten. that was promised. is trying to do is consolidate his power by giving the people those elections they were seeking. why? because there are a lot of people who supported the ousted president. many of these people see these people as evil, having given permission to the police. that is what is going on. >> thank you so much. we appreciate your perspective. mr. chilcote will join us in the

7:00 hour as well. our guest host, we have julianna emmanuel julien with us. i love your perspective on europe. why haven't the markets gone down more? they should react to the stuff, but they have not. >> they have not. where in the crossroads people are looking through and looking toward the next couple of years. what you see when you look that far ahead is that the markets are generally in good shape. because the market is doing better in the united days. earnings are picking up. is very evocative of past bull market that had several years to run. >> adam mentioned as a german economic statistics. when you speak to your colleagues, do you separate

buoyancy and optimism on the or. from gloom in europe does europe have a recovery as well? >> europe is a bit of a different animal. russia is at europe's back door. the pressures there are certainly unique. when we look at it, it is the m auation where, fro professional perspective, we think the markets should be discounting more risk than they are. >> julian emanuel, we have lots to talk about. the gloom last week was outrageous. . sell everything, good cash. >> there was a big rally last friday. >> there's a lot of pain around the world. it is amazing. >> i am already in cash. let's go to company news. hisargulies says accusations against his

blackpool trading is unwarranted. barclays says this does not show that clients were harmed. quarterly profits for gmr down from last year. they are paying $1 billion for recalls. the popularity of chevy suburban said other large models are offsetting this somewhat. in ae is buying twitch deal worth $1 billion. twitch makes games for players. >> amazon has a problem. tom keene is not spending as much as he should. they had a disastrous earnings report yesterday. we discussed after the break. ♪

>> good morning. good morning from new york city. a beautiful friday morning here. coming up, you had a wonderful article this week -- russ from blackrock. their chief investment strategist. that is that 9:00 on "in the loop." this is "bloomberg surveillance." olivia sterns is up at this awful our. scarlet fu is off today. it is 11:00 in london. >> we are talking to amazon. they are reporting their biggest quarterly loss since 2012 after the bell yesterday. jeff bezos is spending more and more cash, building more distribution warehouses. he is developing more

smartphones. what is he not doing? the key question is, how long will investors tolerate losses? is this a tipping point? $19 billion in sales for the quarter. yet still coming out with a loss. >> i remember this with comcast. when would they deliver cash flow to shareholders? mr. roberts finally did that and the stocks shot higher. this is a stock that has gone higher. >> you create an interesting parallel. comcast had to lay down new fiber cable. that is what he is doing with all the situations. >> here's a quote from the quarry -- mcquarry. it is clear that this ecosystem war is going to be expensive and affect margins. apple and google are in the lead. >> and for so long, that has

been the strategy. try to buy loyalty. try to buy that market share. look at stock rid it hugely values. it is the second highest-rated 500. in the s&p also interesting to compare it to alibaba, the ipo we are waiting for. it is spinning off profit. speak directly about amazon, but i want to talk about the hopes and prayers -- maybe cloud computing right now. when you talk to your tech specialist, how much has to be poured into cloud computing? seconds really in the inning. it is something that is going to reshape the world. like amazon reshaped

the world in the late 1990's and early part of the 2000. what i would say is, when you look at the share price isctions, what we are seeing disappointment when earnings do not meet expectations. >> not to comment directly on amazon, but we have seen this before. the strategic plan in the markets says enough. they go ok, that is fine. give us some cash flow. >> that is right. you are at the point where the fed chair basically called social media and by attack out -- biotech out. >> was that an appropriate? >> she could have given a more nuanced message. it was not the exuberance. amazing, actually. how interventionist to the fed has become.

be sure to check out the latest issue of bloomberg businessweek. 33 years old is how old the burger king ceo is. daniel schwartz is one of the youngest ceos and we talked all about it. get your copy today. we will be back after a quick rick. ♪

>> good friday morning. we welcome all of you worldwide. adam johnson and olivia sterns are with us today. scarlet fu had to have a three-day weekend. adam johnson insisted on top headlines. >> french troops are heading to

northern mali two guard the wreckage of an air algerie airliner that crashed. boko haram is active in the area. the cause of the crash is not yet known. israeli warplanes attacked three homes in gaza. that happened earlier today. a leader of the islamist group was killed. israeli troops are trying to shut down a network of tunnels that the militants use. and a host of factors are slowing sales of new homes in the u.s.. sales fell 8% last month. think higher rates are hurting the recovery. >> one of the mysteries for august is the housing economy. i do not have a straight answer. >> the gains have been very

strong. it seems to have slowed. what is it, 33%? that is shocking. one third of the homes being got our cash. >> you asked why i moved back from london. i cannot afford a home in london. i think this may raise a few eyebrows here. jim chenos was speaking to charlie rose. he said he had a surprising comment about putin. >> he is a nationalist. said he would he be first among equals. it is fair to say that he is first. more firmg to be much and aggressive and much more muscular. >> what do you make of that? so much saber rattling going on in the u.s. there is a mitt romney fear of

russia researching. maybe it is china. >> you have brought this up a couple times this week. julian emanuel is with us from ubs. i think of the classic work done by jonathan anderson on china. what is the ubs take now? ♪>> china has flagged for severl years now. with the numbers turning around -- >> the market the last two years is up. >> all of a sudden, investors are interested in the china story again. everything looks like it is expensive in the u.s. or getting there. >> what is the catalyst? >> that the government is going to engineer, as it seemingly does, a soft landing. >> how do you judge those that are skeptical of china like mr. chanos.

is it a large audience? >> it is a steady audience. you look at corporate governance and the political system and they're always going to be clas ses. >> he has given a shot to the new york historical society. >> be sure not to miss the full interview on "charlie rose" on bloomberg tv. >> we went to oppose the twitter question of the day. can the u.s. negotiate with putin? tweet us. ♪

>> good morning everyone. olivia sterns is with me today. adam johnson as well. let's do a quick data check. it is friday and a four-day -- no, futures -4.

there's a lot going on. yields are higher. weaker euro, stronger u.s. dollar. 81 on the blended basket of major trading partners stronger dollar for the week. what a week it has been. the gloom crew has been wrong. they are generating ever better profits and cash flows off of modest revenue growth. emanuel is a derivatives strategist at ubs. i love your note on a profit shock. what do you mean? >> basically, the quarter that is shaping up is quite good. it is as good as it has been sent 2011.

we are happy about that. stocks do seem to be discounting them. it is the rest of the year that is a bit more challenging. the expectations are very high. growth is over 10% factored in. we may not get there, but we will stay strong. >> we will talk in a bit with mr. murdoch. synergies. word is is that just cost cutting? are corporations simply tougher on cost? >> that has been the story since 2009. corporations have to find a way to survive. revenue is starting to pick up. the economy is starting to pick up slowly. >> that was my question. to your point, to what extent can this continue to be germ by cost cutting? --driven by cost-cutting? it seems to be a great quarter,

but not on the top line. >> it is good, it is improving. we do not want to get carried away. if we think about where we were in the first quarter, gdp printing down 2.9% -- and we look at where we are now, it is a steadily improving scenario. >> we assume that was all weather related, correct? we should be clear. >> there were issues with spending on health care. the government has inflation. that was a large part of it, no question. >> here's my concern. this is from the technical analysts. only 20% of stocks right now are at 20 day highs. the rally that we are seeing is getting narrower. your target is 1950. you do when you are through your target? >> you stay optimistic.

we have said all along that if things went right, you could go to 2050. our concern in the short term is that the market feels it is discounted, lots of good news. you have geopolitics out there, you have that set up there. >> you talk to 50 people all day. when will you talk to olivia sterns? one,oes not have a for a because she is too busy. if she's going to go into a 401(k), how does she go into a market now? >> you have to think long-term. >> look at her. >> fine. think long-term. basically, one year out, two years out. all of the conditions are in place. it is just the short term where we seem to be not paying enough heed to things that could go wrong. >> what are the sectors i want to be in? >> we continue to favor

technology. i know technology a strong. >> old tech, new tech? >> we like tech with cash. when you look at tech and health care, those are sectors with lots of cash. and cash, we are in the midst of an m&a boom. >> please stay with us. we have the bank of switzerland. ubs, i love to say that. someone else -- rupert murdoch is on a tear. after 21st century fox. he unloaded italy and germany last night with the transaction of $9 billion. guy johnson us to explain from london. how big a deal is this really? i was taken by the number $9 billion. is that a deal or a rounding error? >> i think it is not a rounding

error. it is going to give him a lot of opportunity to change the direction of that time warner bid he is trying to make. he does not want to raise it and risk his credit rating. he has a nice investment grade there. what he does is make the transaction work for him in relation to that. it kind of works as well. it is putting me stock lower -- the stock lower. mr. murdoch is trying to protect his investment. moodys came out and says it anticipates a cut by two notches to bskyb as a result of that transaction. mr. murdoch is ok with his investment grade. sky is getting a downgrade. so, yeah, not a rounding error. >> jump in. >> i am thinking back to 2011.

murdoch and his son were trying to take over bskyb. they lost it because of the phone hacking scandal. is this murdoch exiting europe? >> no. .e has a 30% stake in sbkyb does he come back when the dust settles? i don't think he is thinking about that. he is not exiting europe. he still has a big chunk of change invested in bskyb. >> held me and help americans understand where mr. murdoch focuses. is his focus on london and europe? or is he an american guy focused on u.s.? which is it? >> i think he is an australian on chipper nor. he is a newspaperman born and b red.

he does not care where the asset is. he is thrilled that the wall street journal is giving papers a run for the money. >> do you agree that he is geographic agnostic? >> i agree. he is an australian newspaper guy, isn't he? he sees the deals and the opportunities where they arise. clearly, this transaction is aimed at improving that. he is prepared to shuffle and take a little bit to make it happen. inwith people off the record his organization, he applies to his managers to make money. that is what drives him is money. and understandably so. that is fair. >> guy, i know you will have a view on this. olivia, you spent eight weeks in london? how did you get this assignment? >> you need to be able to watch

the footing. >> dumb question -- how is sky tv different? >> sky tv is paid satellite-tv. it has a lot of options. bbc is basic cable. >> is it like cnn? >> no, more like espn and a package of cable. >> very good. i learned a lot here. guy is almost to his we can. thank you very much for it >> you know what you do allege time in london? you go to a pub. >> that is why he looks a little disheveled. , president obama is calling for swift action to stop tax inversions. we will show you why in our startling single best chart. ♪

>> good morning. i am tom keene. with me, adam johnson and olivia sterns. it is the perfect day here in new york. a fabulous summer. the best summer in five years, six years?

>> i walked out of my building and it was like a september morning. >> gorgeous, like california. let's get to the top headlines. here's adam johnson. >> the white house is thinking of granting refugee status to young honduran immigrants. they will meet with south american representatives. many immigrants are coming from honduras, which has the highest murder rate. fast food workers are staging a campaign for higher pay. more than 1000 workers are expected outside of chicago. the effort started two years ago. they want the right to unionize and a $15 per hour wage. the price for not buying health insurance? perhaps. a family of five that is not covered will have to pay $12,000 . the fee for individuals is just under $2500.

i am stunned that it costs that much to ensure a family. have a democrat from ohio who will sit down in the next hour. let's get to our single best chart. here's olivia sterns. >> we're hearing more and more about concerns about tax evasion every day. president obama attack comp anies i use mergers to avoid taxes. he calls them corporate deserters. why is there so much attention on tax and version now? our single best chart paint a good picture of what is going on. in the white, it is deals that have withdrawn. yellow is pending deals. plete deals. this is why everyone is freaking out. >> when i look back, it is

incredible to see the judicial career, not just as a justice -- he codified this idea. you have a right to work within the law to avoid taxes. >> how can you call it unpatriotic? they have an obligation to shareholders to do everything they can. >> i understand it is all legal. we are all capitalists, trying to maximize profit. what upsets me is that individuals are left holding the bag. >> the solution to tax reform -- we will speak with tom strickland later in the hour. if the government does anything will it be retroactive? >> let's get to julian. i know your team has studied this. who is right? >> everyone is right, ok. clearly, we prefer that businesses stay headquartered in the u.s.. learly, at some point, the

government will address this. the eeo has artie started to look into it. e.u. has already started to look into it. it may be comprehensive tax reform that benefits everyone. >> we have to wait until after the presidential election? >> certainly after the november elections this year. it is washington. means.now what that i have a number for you. $1.6 billion. that is how much mark zuckerberg made yesterday. the founder of facebook saw his fortune rise by $1.6 billion, pretty incredible. that is a result of the strong earnings we were talking about and the shift to mobile. i'm looking at these numbers -- he is now worth $33.3 billion. that makes him worth more than survey brennan -- sergei bezos.even jeff

>> it gives you an idea of what that guy was thinking at snapchat. >> i want everyone to remember that he was a piñata. including from me, full disclosure, of this disastrous ipo. it is something how they screwed that up. i will not blame mr. zuckerberg for that. i do not think he is fancy enough to screw it up. what a turnaround. there is a great chart today calling facebook a blue-chip -- question mark? i don't think it is a big deal. how much did they gain yesterday? >> $1.6 billion. it is incredible. >> he has been generous in his donations. >> yes. and he is trying to deliver the

internet to everyone around the world. , when zuckerberg, keene you want to write out the check. >> which bank? you are a boston guy, right? >> we will work something out. >> what have you got? ok, tell you what. we will talk about the european union stepping up its response with regards to ukraine. that is coming up after the break. ♪

>> will there be a truce? secretary kerry is working on that. hamas is now involved in those discussions. there could be a change in 24 or 48 hours. this is smoke over gaza. continuing warfare in the gaza strip. some 2 million people involved. good morning everyone. this is "bloomberg surveillance." with me, adam johnson and olivia sterns. olivia has company news. >> but start with apple.

they're moving ahead with plans to let customers use iphones as credit cards. they will move into mobile payments. talks are underway with fisa and other credit card companies about partnerships. they would let people pay on the web or with apps in stores. combine with ald real estate website is nearly done. zillow will buy trulia. people with knowledge of the deal expect an announcement next week. comcast will step on the gas pedal for its web servers. they're extending fiber-optic cable to customers' homes in some parts of the country. that would help it compete with google and verizon. comcast is the biggest provider in the u.s. >> very good, adam? firing artillery across the border into ukraine. this development occurred overnight.

alex clement is joining us. he is an expert on russian politics. alex, thank you for joining us. why would putin do this? why fire artillery into the ukraine when the entire world is watching? >> it is not clear when the started happening. the interesting thing about the announcement is that they decided to make a public allegation about this. this is been going on for several weeks. that signals that the u.s. is pressuring russia, but also laying the groundwork for another round of sanctions. the europeans have outlined a framework or expanding sanctions. the trouble is that it is difficult to imagine a level of sanctions that is meaningfully offering geopolitical calculus, script >> nicholas burns was with us yesterday. one of our focuses was on mobile

menace of vladimir putin. there was a wonderful article. they really tried to figure out how to deal with the president. >> well, there is some speculation, right? the loneliness of the lonely cza r. >> does he have that advisers? >> he has a small circle of advisers. he is increasingly isolated from some of the other oligarchs. the economic impact of this is not so great. his calculus is geopolitical and political, not aeconomic. that is the trouble with the sanctions. they will not meaningfully alter the catalyst. for putin, the influence over ukraine trumps economic. therom interfax, they cited press eservice.

the prime minister has put in his resignation to the ukrainian parliament. >> you understand the chess game that has been played for centuries by russian leaders. what is mr. putin playing right now? >> the overriding interest is to maintain russia's influence over ukraine. it is impossible to overstate the extent to which he himself and most of the population believes that ukraine is fundamentally part of the russia's sphere of influence. both politically, economically, historically. he wants to extract concessions from the president. the main concession he wants is a ukraine that is so decentralized that russia can continue to convert influence. >> olivia, you are in london recently. cameron walked sanctions. does london want sanctions? >> london does want sanctions.

you heard from the new foreign minister. russia is nowhat going to be a pariah. he hopes that this is a turning point. a lot of is hoped that this would be a turning point. why hasn't the tragedy of mh17 been something where everyone steps back? >> that is exactly right. pardon to theh positions of all involved. enka, itident poroshoe hardened the position that he has to go after the terrorists in ukraine. there has been no stepping back from the fray. there has been escalation on all sides. i think it gets worse. the politics on all sides makes this get worse. people are saying that people should step back from the brink. >> what is the resolution that would happen? >> putin, what he wants -- i assume you're asking about

putin? what he wants is this idea of a ukraine that is so weak that russian interests can be projected into ukraine via a decentralized. >> is that a stepping stone to the longer-term expansion of the russian border? think the inc. -- kremlin is interested in a occupation and expansion. it is enough to keep them in their sphere of influence directly. >> alex, we should get your thoughts. can that be u.s. negotiate with putin? tweet us your thoughts. >> one of the important efforts of the week. to engage with mr. putin. thank you so much. julian emanuel, we appreciate your optimism. alex, thank you for your perspective. let's go to the forex report. weaker yen.

that is the headline. 101.87. sterling under 170 as well. hour,ing up in the next the former governor of ohio is with us to discuss. ♪

proposes ay kerry

one-week truce to begin sunday as fighting continues in gaza. amazon disappointed the building expensive ecosystem. ve vladimir putin is ry alone. he is watching ice hockey. we're live from our world headquarters in new york. it is friday, july 25. joining me, adam johnson and olivia sterns. our guest host for the hour -- from sky bridge capital. alex kliment joins us early in the hour. let's get to the morning brief. >> german business confidence is dropping to the lowest level since october over tensions in ukraine. the u.k. economy is expanding. 0.08%. we have some very key economic points as well.

capital goods are coming out at 8:30. this is is measurements of what individuals are spending and what businesses provide. we have stanley, black & decker, and xerox. fire ships today. and president obama and vice president biden are meeting with central american presidents from honduras and el salvador, trying to figure out how to deal with the problems on the border. bolivia, what you have? >> amazon's earnings are out. this has some feathers ruffled. they missed for a second straight quarter. they were double what wall street predicted. people thought that they would not make money despite having $20 billion in sales. amazon says they are betting on long-term project. a deal now could be in the works for a dominant search website for house hunters. truliais expected to buy

four $2 billion in cash and stock. the announcement could be made as soon as next week. traffic to90% of all real estate sites last month -- rupert murdoch is reviewing his bid for time warner. he is selling his pay-tv unit for $9 billion. bskyb.er is each one dollar increase per share will cost $1 billion more. i guess he could afford $94 per share. not too quickly, to say the least. we have international relations fatigue. to ukraine -- and to london. soldiers cannot be paid. we see the turmoil in kiev. the prime minister resigned and the president remains.

ryan chilcote is in the london the news bureau. he is an expert on ukraine. mr. biden travels to kiev. the imf wants to give billions, maybe millions to kiev. who are we giving it to come monday? >> we would like to give it to the prime minister. he has been the prime minister. he just submitted his resignation. a resignationt is has just arrived. we will see if they accept it. he is the one that we want to give the money to grade he has been the glue of that $70 million aid program. he is the one who has been driving through the reforms. is the person that everyone would like to meet with. --i think you spell ukraine i am not sure. there is a president. a chocolate guy? >> yes.

poroshenko. >> he is a chocolate guy. is it just further corruption in kiev? >> here's the thing. the president was elected by a group of people in ukraine who are pretty much done. they have had enough corruption. they are watching him. he does not have the kind of mandate create -- so they are watching him. not have the mandate to hang out and steal. they insist that even though they voted these guys in and got rid of the previous president, corrupt,enerally very they will not give these guys a free pass. they will watch him like a fox. everyone knows that. i am wondering if there is a

link between the prime minister resigning and the u.s. reporting that russian military is now shelling across the border into ukraine. is it appropriate to connect those dots or are they unrelated? >> slightly unrelated. that after i interviewed him when he became prime minister, he may have been trying to strengthen his hand. he thought he would be the most hated prime minister. he was cutting a deal with the imf. he said it would be 10 times worse for his country. so what he is doing now is, i think he will give himself a chance to not become the most hated. to get out of the limelight, just as the bitter medicine takes hold. inflation is just kicking in and ukraine. this kind of strength at the same time that the u.s. is looking to strengthen the 's handan government

militarily against the russians with sanctions -- that is what that is all about. the report about the artillery firing into ukraine is to nudge the europeans into action. >> thank you so much. ryan chilcote with terrific's perspective. alex clement is with us as well with eurasia group. your group has been such a value to us. we look for institutions in international relations to get things done. is there a representative in ukraine or is it basically chaos? >> you mean a partner to deal with? >> someone to partner with for anyone? >> i think the president poroshenko is part of that institution. that is why they had meetings on holdings of presidential elections. they gave them a party to deal with. >> we see crimea and have they

shifted the strategic request of the west? >> not really. putin's strategy has been to escalate at every point, such that formally outrageous things look like a compromise everyone can live with. first it was crimea. then he stole a march on eastern ukraine. that shifted the attention. now everyone is talking about what is a copper is that everyone can live with. the west is getting out of that frame of mind. he is still ahead of the curve. >> i have been thunderstruck by the nuances of prime minister cameron. he seems partly towards the u.s. decidedly not for the germans. how do you see that? >> it is an interesting move. the british market is heavily dependent on gas. >> the united kingdom needs russian hydrocarbons? >> s, all of europe does.

britain gets a lot of their fuel and energy supply from gas. that is how they heat their homes. it is not too surprising. alex, to go back to you -- you know the front page story that out of his referencing. proof that they are seeing russia firing into the ukraine, looks like it is becoming more of a ground war. what is the evidence that the russians are directly involved in training the militants? sayt is very difficult to with precision what level of operational support or material support is coming from russia. what is clear is that the separatists are acting in russian interests and with russian support. >> what does that mean? ukrainians are going to russia and being trained? >> it is more that there is a flow of russians from russia to ukraine. >> at the behest of putin? guys areof these mercenaries who have fought a

number of conflicts in the region. in easternists ukraine comprise. groups. some locals, some people from russia. some claim times with the russian intelligence services. it is not a homogenous group. that makes it difficult for prudent to control. there is an idea that the kremlin controls. it is more of an issue of influence. >> angela merkel has been a supporter. she and putin get together and begin russian. >> she is the crucial player on the european front. theu.k. is worried about effect on the city of london of sanctions against the russian financial sector. the germans worry about the industrial sector and industry. each of the european countries has their own specific industries that are affected by russia. none of these economies are

hugely exposed to russia as such. specific industries with lobbying power are worried. >> i was in frankfurt speaking to the ceo of an engineering company and he was very much on the side that we need to make this relationship work. this is a short-term blip. this brings us to the twitter question of the day. can the u.s. negotiate with putin? we want to hear your thoughts. >> thank you so much for your perspective on ukraine. we continue with the market reaction. troy from sky bridge capital is here and a bit. a president obama is taking tough stance on companies that want to relocate to lower their taxes. is that un-american? we will debate right here after the break. ♪

>> this is "bloomberg surveillance. we have the senior portfolio manager from sky bridge capital. not to hedged and fund underperformance after years of subpar returns. we call this a plain vanilla market. what is the future for hedge funds. can they deliver. i thought your review was brilliant on this. there is an eighth place for

hedge funds. why have they underperformed? wo of the largest strategies have been stuck in a secular challenging environment. if you are a macro guy, you are in government. no long short, there is short rebate. it is much more challenging than it used to be. information dissemination is much more widely helps. trying to get a large -- >> the game is that you invest in a hedge fund. i have a long-term timeframe. i know that everybody's timeframe comes in. is that what you are observing? if they have a poor outcome, perhaps they want to allocate elsewhere. continue toassets

grow in the hedge fund industry. it used to be in the 90's that there were plenty of inefficiencies. you did not have to get anything right. now, you have to be much better at figuring out which strategies are timely and which to execute. >> will this start a trend? that is the question now. >> i think -- >> oh, come on. >> consultants, individual institutions, will make their own decisions. is the hedge fund portfolio adding value? are they reducing value? if not, they should go elsewhere. is very 2% annual fee and 2% of the gain over the hurdle? >> that has been friends since the third quarter of 2011. that is when they start to compress. the hedge fund industry is not stupid. they see the writing on the wall. somewhere between 13 and 17.

there is gradual compression. >> troy gayeski -- forget about the fancy guys, how about ohio and the debate over the minimum wage. it is a totally different debate than and manhattan. we will speak with the former governor, ted strickland, on where the minimum wage should be. stay with us ♪

>> good morning everyone. it is "bloomberg surveillance." adam johnson is with me and olivia sterns is with me as well. >> when is your birthday? >> august 1. it will be the last birthday i ever have. >> we will not say which one. >> 1929. >> let's get to the top headlines. here's adam johnson. >> french troops are headed to

northern mali, into records of -- wereckage of the air algerie airliner. boko haram is active in the area. the cause of the crash is not yet known. homesi warplanes attacked in the gaza strip. a leader of the militant group was killed. the battle between gunmen in the northern and central sections of the territory -- they are trying to shut down tunnels that the militants use. the white house is taking refugee status for young honduran immigrants. the president will meet with leaders to discuss waves of young people coming across the border without their parents. many are from honduras. >> futures are at -4. stories --ur top

barack obama throwing himself into this politically charged effort to block u.s. firms from reincorporating overseas for tax reasons. he is calling it wrong and unpatriotic and are urging congress to put legislation in place. they are trying to buy out faster jet --astrazeneca overseas. ted strickland from ohio is now president of the center for american progress. good morning and thank you for joining us. it does feel like we're trying to close the barn door. why are we trying to tackle this one issue of inversion? should we go after the bigger goal of trying to solve u.s. tax reform? >> the good news is that most american companies have not chosen to do this. some have and others are thinking of doing it. i think it is a matter of citizenship and responsibility.

these companies benefit from everything that america provides to them. they have access to the rules of law, the of our military company infrastructure. for them to look for this loophole to try to increase their profits seems to me as an unpatriotic kind of maneuver. that is why we have been talking about economic patriotism in this country. we are a corporation that except for some of the responsibility. most to do, thankfully. some are looking for the easy way out. the loophole should be closed in my judgment. >> an important state, a swing state in ohio -- you speak for a large part of america. you are the first in your family to graduate from college. there are a lot of fancy people in manhattan making big money here. exactly how angry is the american public? >> very angry and frustrated.

increasingly cynical. unfortunately, they tend to paint at the congress and politicians with a broad rush. they do not tend to make distinctions between those who are trying to work in their benefit and those who are not. i think that that is really unfortunate. hasink that is why congress such a low rating approval among the american people. find this fascinating, the political calculus from 2014 to 2016. it is like a tinderbox. whatever anybody's political affiliation. >> it is tough to find the middle ground. maybe you can help us understand. governor as aor democrat, there is a call for republicans from ted strickland. you found middle ground. what does it take to bring people together? >> when i passed my first

budget, both houses of our legislature were controlled by the republicans. that budget passed with one dissenting vote. in both the house and the senate. i can tell you my second year or my second budget -- things had changed somewhat. the same anger and divisiveness that we see here in washington had seeped into the political climate in ohio. that has happened across the country. gridlockeing a kind of fortunatelytion -- in some state capitals things are getting done. future we foreseeable will see more action at the state level. one thing that politicians

like yourself beat the drum about is that manufacturing is returning to the u.s. my morning must-read comes from -- on shoring maybe ms. we hear about apple opening up in texas. lenovo even coming back to the u.s. they say the demand for manufacturers has shown no kind of reversal. off shoring manufacturing has increased 9%. what does the u.s. need to do to bring them back? to recommit ourselves to being a country where manufacturing takes place. and, there are ways to do that. but, i don't want to beat a dead horse here. i do think that over the years we have been snookered in trade deals we have made which have placed our domestic companies at a distinct disadvantage.

and, so people go to look for cheap labor. and that is what happens. >> stay with us please. >> we will take a quick break and come back with governor. ♪

>> good morning everybody. we are live from gaza. that was a substantial plume five minutes ago. it has disbursed a little bit. that is 2:00 an afternoon. the on a friday afternoon.

the war continues. good morning everyone. i am with adam johnson and olivia sterns. scarlet fu threatened that you join us next week. let's start with the data check. it is a mild pullback. nymex crude was at 102. troy has been working hard since may. >> it has been wrong because the economy is starting to improve. qe is still in full swing. risk, start to reduce as you come to the end of qe> >> how lovely is it? >> it is brutal. now you are in a big m and a wave. they get taken out any premium.

and you are fighting the feds. the key is to have strategies that are not correlated. i would suggest that it is easier said than done. we will continue, thank you. >> here's another easier said than done. trying to live on seven dollars per week. that is what ted strickland is doing. governor, you're down in washington. tonow that you're trying bring attention to people who are only making minimum wage. you yourself are trying to e.on $77. how are you feeling? >> i am fine. i am doing this for a few days. i could never walk in the shoes of someone who is trying to support themselves on seven dollars per hour, $15,000 per year. the minimum wage has not been

raised for five years. it is time to do this. the american people support it. employed -d has -import other people to join. congressman. we have a lot of faith leaders and people of faith joining us. we have labor leaders. a lot of people who are just trying to -- not trying to be self-sacrificing or goody two shoes. -- calling to call it attention to the fact that some people have a tough way to live on seven dollars and $.25 per hour. >> ohio is miles from this debate. does the immigration debate hold up on the border?

how does that resonate in ohio? >> i hope the people in ohio feel as i do. our obligation is to care for these children. lebanon and jordan and other countries, as a result of the syrian war, are dealing with millions of rescue bee gees -- refugees. they're coming from three countries were law nor has broken down. they are fleeing for their safety. this country has responsibility to respond in a positive manner. your president migrate those children back to honduras? is that a proper approach or should we give them citizenship in america? >> we should give them due process. we should look at these children individually. look at their individual countries and situations and make the determination thoughtfully and carefully.

i do not think we should in a wholesale manner send these children back. we have an obligation to deal with this and a humanistic way that looks after the needs of these children. i hope our country will respond in that way. >> lebron james is coming back to your ohio. are you welcoming him back? >> we love lebron. cleveland is on a roll. the international gay games are taking place in cleveland. the republican convention is coming to cleveland. lebron has come back to cleveland. we feel good about what is happening in cleveland. uatedemocrats will ieval columbus, ohio for the democratic convention. wouldn't it be great? >> he is insufferable. >> dreary on lake erie. >> how about those columbus blue jackets? stanley cup contenders.

>> things are going well for efforts in ohio. it is deals amid swing state. it is the heart of america. >> thank you for joining us. quick data check. markets are flat. >> good morning everyone. i am tom keene. we are on bloomberg television. we welcome all of you worldwide. don't forget our digital media. it is ever going. look for many interviews on radio and television across bloomberg digital. olivia sterns is with me this morning. of guest host is troy gyeski guy bridge capital. among other things, he loves ice hockey. ben is the author of "fragile empire." he has written the must-read of 2014. it is a fabulous window into the

daily life of vladimir putin. this was written up in newsweek this week. has done this to protect the myriad of sources who have contributed insight into the mysterious nature of vladimir putin. wonderful to have you with us today. what has been the response of the kremlin to your article in newsweek and to your book? >> the response to the article i wrote was, in the russian media, we knew this all before. it has already been seen. what is so exceptional? the response to my book am i do not think they were happy with it. what i try to bring across in my writing is that putin rules russia as a vulnerable, isolated, haunted man.

they want to protect the image of him as a strongman, in control, frightening to the west. of the is a snippet snippet we see from ben judah's newsweek article. he is obsessed with information. pressigence reports are clippings. you say the president loves ice hockey. any public this is figure that has been visible for 15 years? we do not have u.s. presidents going 15 years, do we? >> no, we do not. what is remarkable about the daily life of vladimir putin as it is not that he likes the swimming or cottage cheese. it is that his daily routine goes by with no committee meetings. no cabinet meetings. no deliver to decision making process.

he very much rules alone and in isolation. >> does anybody in his inner circle -- anyone around him, any advisors, does anyone contradict him? peoplee are very few that can stop putin or interrupt him or that he is close to. lavrov is not someone he is close to. he is very much on the outside. a bureaucrat. he is very rarely present, if ever, at these hockey matches, where a lot of the discussions take place. he is a very important person. putin's old right-hand man is very important in the decision-making. is the person who is key deputy prime minister.

many people say that he is the real prime minister. he is doing the running of the government. putin is swimming in reading and taking time off to learn english. >> forgive me for interrupting, we'll may have 30 seconds. you talk about what he does not like. is there an achilles heel or something he is passionate about? heel that he is vulnerable about? he is motivated by fear. he is frightened that if you would ever step down, he would go to jail because of corruption or human rights abuses. he is terrified that now, especially after mh17, he would never be able to go into safe exile abroad. >> interesting. i want to congratulate you

and your book and your newsweek article. i cannot convey how important this is. thank you so much. >> our twitter question of the day, can the u.s. negotiate? tweet us. ♪

>> good morning everyone.

alix steel is known for betty liu coming up on "in the loop." russ will join. we are really looking forward to. he had a smart article earlier this week. that is live at 9:00. we welcome all of you. sterns with me today. fu is off. we have an earnings and and an earnings season which once again surprised everyone. >> yes. i want to point out that there have been some earnings this morning. xerox surpassed the estimates, haas did moody's. we're still waiting on abbvie. >> who are they? >> they are spun out from abbott labs about a year ago. everyone is up in arms about the

tax and version. obama says it is unpatriotic. it will still be based in illinois. >> an illinois company. sounds like it is from -- >> the issue is they have one drug that is bringing in billions every year for arthritis. >> why did she look at me when she says that? >> that is unfair. so, that is the stuff for today. food, theson peterbilt trucks, and eastman. >> you have a morning must-read? >> this comes from jordan of the wall street -- the university of wisconsin. writing in the wall street journal. baseball is a game and math is a game too. good coaches know this. they tell you what you need to get better.

difficult, but they're also addictive. >> i agree. are you making it a game at home? >> we are trying to create my wife does most of that. i must confess. try to make it challenging, try to make it fun. the youngest is trying to learn subtraction. >> when you look at it, what i find fascinating is coins. we do not have any coins at the house. we are a cashless society now. they get a nickel and dime and quarter. >> my kids love to play with them. >> is it all sort of interactive and immersive? >> it seems like it is rules-based. you have to memorize things. you have to learn the basics. they have not moved to the softer -- >> what i am concerned about is

that if all learning is a game, the thing i got it to be really bored and keep going. lewis c.k. i am in his camp. there's not enough room in schools. >> tom wants to bring that back. the ruler slap. >> we will be right back. ♪

>> good morning everyone read coming up on monday, the perfect time to speak with christopher from gabelli asset funds. particularly in media and technology. they have been doing a bang up job of finding failures. this is "bloomberg surveillance. we're getting it ready for the weekend. adam johnson and olivia sterns are with us. amazon was down, not 10%? >> ish. >> they have already been down 10% year to date.

they're still the second highest valued stock in the s&p 500. 573 times earning. amazon is reporting its biggest quarterly loss in 2012 -- since 2012. how much money do you need to be bringing in on the top line before you can actually pull in a profit on the bottom line? it looks like for jeff bezos that the cloud computing business is falling. involved.he capex warehouses,on these they are shipping out those new phones today. he is getting into devices and he has drones. >> let me walk down the income statement. they bring in one dollar. they bring in less than one penny for the operating income l aw. by the time they get down to net income, i believe they get 2/10

of a penny. >> is shocking. hsn, mindy grossman, told me -- the margin, troy help me understand. the more they sell, the less they make. >> some of these highflying stocks have never had a stolid operating business model. if you look at health care, the companies have real earnings, real revenue. >> do you feel that way about amazon? he thinks it is a value play. >> it is hard to say what bill miller is thinking on any given day. if you own something like that, you better hope they figure it out. >> troy is with us from sky bridge partners. let me run through the capex from the last few years. $1 billion, $1.8 billion. $3.8 billion --

now we are up to $4.3 billion. that is what this is. they're taking all that money that is minus the shareholder and putting in futures. >> they continue to invest in future growth, that has not yet translated into earnings. what gives you faith that it will? >> you think that this is a tipping point? >> it is hard to say. swing, as qe is in full it is not. at some point, when there's correction. >> enough on amazon. 14 holds on amazon. >> understandable. >> look at that. they are always overweight and bullish. still bullish. >> the stock declined 8-9% yesterday. it is down 18% on the year? >> absolutely. troy is with us from sky bridge

capital. troy, you speak to so many people in the equity world. i was thunderstruck last weekend by the gloom that was out there in the land of the pundits. it is a breathtaking wall or walls of worry that we have to climb every weekend. >> geopolitical risk is one of most recenters' thing to focus on. it is unlikely to have a correction. it is when qe is over and there is a confluence of events -- geopolitical is not enough. in a disappointing earnings. you need a bad quarter of growth. then, maybe a geopolitical issue or potential issue. >> the statistic of the week is jobless claims. >> two hundred 84,000, the lowest we've seen since january

27, 2006. >> the averages 203,000. that is three zero. >> it looks like a lot less slack in the labor market. we had a strike. we had a threat of a strike. when was the last time we had a threat of a strike? >> look at the other things people are freaking out about. inflation is coming back. >> look at the cpi number this week. >> people were concerned about inflation coming back. now that inflation is coming back to healthy levels, that is the reason the fed should hike six weeks from now. now?ike six from that will not happen. >> we are not saying it should. that is another thing people were articulating is a concern. inflation is over 6%. indicating the world will end. the world typically does not

end. the bull market will continue. >> the message this week is earnings are really good. i think of john golub. where is the recession? how do i frame gloominess in this environment? >> it is hard. which is not a bad thing. there is not gloom to frame in the earnings today. that is a good thing. >> many would argue that the first order was never a shin. we are not transitioning into a 3% economy. we are stuck in this 2.5%, which is better than nothing. it will also be a slow and steady recovery. the key is to find as much low hanging fruit as possible, which we think is in the m&a area. >> you need to go to radio to continue "surveillance." >> my agenda is the cease-fire.

there is nothing else that matters now. we saw the images. a substantial smoke plume above gaza within the hours. disbursing. war continues. and everyonery trying to get to a sunday cease-fire. what has changed is it seems that hamas is more involved in these discussions than what we knew on thursday. >> that is for sure. radio continues. we will see you later. what do you have? >> durable goods. handbags, jewelry -- >> the stuff that you love. >> refrigerators. 8;:30 a.m. -- expected to increase 1/2 of 1%. >> i am focused on the white house. we have president obama meeting with the leaders of honduras and

nicaragua and central american countries. what is the solution? what people do not realize -- troy, feel free to weigh in. fewer than 3% of the people who go in front of a judge to hear their cases heard for asylum get deported. a lot of them walk out and disappear. >> that is a big problem, obviously. people argue we need comprehensive immigration reform. we need political change in d.c. before anything can occur. most people think it would help if we had more right-leaning senate. as long as obama is in the white house, you will not get major reform passed. >> no major immigration reform. no major tax reform. >> precisely. >> do-nothing congress. >> the twitter question of the day -- can the u.s. negotiate with food and?

u.s. negotiations are irrelevant unless putin can negotiate with hardliners. that is interesting. it is not what we heard from alex kliment. he said that putin calls the shots. second answer, he will not negotiate unless he faces any potential loss. especially if the u.s. is handing over a deal. >> that is the face-saving issue, which richard haas has talked about. he cannot be seen losing face. --finally, one respondent how can you negotiate with john? >> i would not have thought to call him jaws. what an interesting insight from the writer of the newsweek article, who paints him as a fun, happy person. >> a lot of the things you hear about him being isolated.

very interesting to hear his point of view that putin is worried about losing his grip on power and being arrested. >> troy, thank you for joining us today. get back to your office and trade 'em. we will be back. ♪

>> good morning. we are live from bloomberg world headquarters. i am alix steel in for betty liu. we have a fantastic show lined

up for you. the markets are quiet, too quiet. why this political geo turmoil geopolitical turmoil is barely bothering investors. flying high after the earnings report. we will discuss ongoing consolidation. here's a look at our top headlines. ukraine troops say they faced artillery fire from the russian side of the border. meanwhile, russia's central bank squeezed by sanctions and a currency crunch to raise interest rates for the third time this year. rupert murdoch collects some sugar. getting 9 billion dollars for two european paid tv units. that cash could help murdoch -- raise0 billion bid his $80 billion bid. amazon reporting second-quarter sales 23%