with creditors. the federal reserve discount america's economic rebound. with noolt scores inflation inside. the secret formula does not matter. a sugar-freefronts america. good morning, this is bloomberg "surveillance." live from new york. the final day of july, 20 14. i am tom keene. joining me is scarlet fu and adam johnson. our morning brief. >> european inflation slows overnight to its lowest since 2009. you want a little inflation, that is part of the problem. portugal's banco espirito santo, day two. halted, posting a huge loss and told to raise capital. abouts down, concerns europe. in the u.s., initial jobless chicago pmi as well as the bloomberg consumer comfort index at 9:45. colgate and cargo at 7:00,

followed by exxon and visa. don't mean to interrupt, exxon is going to be interesting because of the russian sanctions. i wonder if they will comment on their investment with russ smit -- with rosneft. >> beginning a new project in the kara sea. >> they might have problems getting the equipment. >> european sanctions for the european companies from sending it. >> i think the first "x-files" series was shot there. >> after the bell, lincoln, tesla, gopro. john kerry in india. >> this is showing the flag and repairing the relationship with mr. modi. an important trip away from all the other major challenges.

is that the morning brief? day.en at fed day and jobs stocks, bonds, currencies, commodities -- futures -13. -98.utures euro under 1.34, and a lot of people have been hoping for a weaker euro. american crude oil under $100 a barrel. , will ithe angst, vix open near 14? yen, 102.82. we scoured the papers, here is a scarlet with the front page. time running out, it ran out, for argentina. standard & poor's says the country is in selective default, missing a deadline yesterday to pay 500 $39 million in interest. the question is whether holders will9 billion in bonds

demand repayment. this is a small group of bondholders who refused restructuring 13 years ago. >> led by elliott management. >> and paul singer. they went to be paid $1.5 billion they say they were owed. >> the supreme court says they were owe to that, but argentina does not think so. >> argentina calls them vultures. we will speak with villem marx. >> every time i look at this, my eyes glaze over. later on "surveillance." simple answers. the new york times this morning, argentina does not need to default. they have money. >> $29 billion in foreign currency reserves. he could write a check for $1.3 billion. would make sense

of it. fed policymakers, yesterday was a big fomc decision. continuing to trim the asset purchase program by $10 billion, now $25 billion. upgraded inflation. price increases are closer to the 2% target. more dovish on the job market. >> alan greenspan yesterday speaking to bloomberg, talks about the dynamics of how you taper and then get to rate increases. gradualism. >> i just tweeted the comment from stephen englander of citigroup. "no change in policy but prepp ing for a shift in dollar." >> yesterday's gdp report shows the economy rebounded nicely. house ofstory, representatives vote to sue the president for over seven his powers.

it has to do with the president changing the way the affordable care act was in force. 5 republicans voting against it. republicans accusing the president of breaking the law. >> may i quote the congresswoman from new york, i used to deliver her newspaper. louise slaughter. legendary. she's a democrat. "a sorry spectacle of legislative malpractice. $12.42 from the newspaper. >> from the new york times, obama'spublicans -- vision to move forward has been intended to delay the law.

suing the president because he is not fast enough in implementing the affordable care act. it is weird. >> the president calls the lawsuit a political stunt. those are our front page stories. straight to buenos aires. dated and pours says argentina defaulted for the second time in 13 years. we check in with villem in the plaza de mayo. you've been speaking with people before the announcement, after the announcement, give-and-go has been -- give us the announcement on the ground. have been saying there have been a few political stunts. the range of opinion and windows are his is interesting. i have local newspapers. one consistent here is that all the funds in new york are referred to as "vulture funds." argentina versus these funds. people are happy with the way the government has treated the situation. >> do you sense frustration

given that argentina has default it several times? 7 times, since, excuse me, since the clearing independence from spain. default is not exactly unfamiliar ground. wepeople have been saying kind of expect this. this is happening regularly enough that this is affecting our businesses. they are fed up with the situation. frustration is not a strong enough word. people on the street are saying i don't know if this is going to affect my everyday life but it is quite annoying. plaza,ook at you on the when his arteries waking up. as you go to get your coffee, is anything really different on the streets? >> not really, apart from the headlines, not a lot going on. people have just started to come into work. within argentina, what is the

next step? goes back to buenos aires, what does he go back to? >> the ministry of economy' as doors are still locked. not sure the next up is going to be. the understanding and local options the of dealing with private banks here, then buying out the bondholders in the u.s., is the scenario they think will happen. it does seem like the easiest solution in terms of saving face for the government. >> perhaps a savior role. villem marx from windows areas. -- buenos aires. >> we are joined by vincent reinhart and sanjay khosla. vince, argentina. to our viewers why this is more than just a few "vulture

billion.ing after $1.3 >> argentina is the classic case of a serial defaulter, to use a phrase of camera golf -- ken rogoff. plug!band shameless seamlessly. a lot of history. because of the serial defaults, argentina has marginalized itself in terms of international finance. if you're looking for ramifications to domestic or around the world, there are not a lot. commenting trouble on this, a u.s. focus. we are comforted by stanley 1998 ons experience in international sovereign -- >> he was there for the last

default. >> what do you think he will be advising to the chair of the federal reserve? >> it is a domestic institution with a domestic mandate. the federal reserve's responsibility is pretty limited to the fallout to domestic -- callesident obama will upon advice chairman stanley fischer. how should he advise the president? as wall street forces a default, and i rude to say that? >> that is the mechanism. if you do not pay all the people you owe, some of those who book force changes in payments -- some of those who own can force changes in payments. in terms of the u.s. economy, not much of an effect. the advice will be to keep a low profile, let it play out. necessary, cleanup in terms of domestic institutions, of which will be pretty small.

, you have done business in argentina as head of kraft 's international business. what distinguishes international markets versus here? >> thank you for having me. i am very lush about emerging llishts generally -- bu about emerging markets generally. and russia has volatility, much more than emerging markets. if you have a balanced portfolio, you have got to find space to manage some of these uncertainties. i am bullish for the long-term. >> were you still running the business at kraft, would it be business as normal in argentina? >> not business as normal. something you have to manage. normally successful companies have local management adapt at things.g these whole in the medium long-term it looks

well. there will be ups and downs in emerging markets. there will be volatility. overall, the growth agenda, i am very bullish. >> sanjay khosla on international markets. we are thrilled to bring you vince reinhart. even harris in the next hour. our twitter question of the day. does a default for argentina ?atter it is a selective default. >> only by s&p as well. t usreatise -- twee @bsurveillance. no charge. panasonic saying it will build the batteries tesla needs for electric cars. companies are planning a factory to make lithium-ion cells. wants better batteries to lower the price of vehicles. planning to spend $5 billion $5

billion by 2020. bank of america negotiating with the justice department, the bank boosted its $13 billion offer. the government is seeking $17 billion. ina acquired countrywide 2008. the biggest bank in france suffers its worst quarter ever. bnp paribas with a loss of five point $8 billion. the defector was a $9 billion fine for doing business with countries blacklisted by the u.s.. that is this morning company news. to make ala trying major turnaround and soda sales. we will tell you what is is doing to try to fix the problem and get you to drink more coke. this is bloomberg "surveillance" streaming on your tablet, phone, and bloomberg.com stop ♪

>> good morning, bloomberg "surveillance." coming up, kevin plank. place baltimore orioles. under armour founder and ceo on the bottom line, 2:00 p.m. kevin plank with his huge .uccess with under armour scarlet, interesting story. confronting its fat problem. this week's bloomberg efforts tok, coke's relaunch as soft drink and repair its reputation. coca-cola is right now on the wrong side of just about every consumer lifestyle brand. the cola is sugary and contributes to what people think of weight and. it is not seen as healthy.

,ou read annual reports coca-cola regularly cites obesity and ingredient concerns as a big risk. >> it is front and center. am i correct that pepsi has outperformed coke? >> pepsi has a frito-lay snack business. >> if you look at the revenue breakdown of pepsi, the snack business is bigger than the beverage business. this together.t as of last week, coca-cola stock trading at a three-year discount to pepsico. a significant reversal from coca-cola's 8% premium. >> is a frito-lay differential? >> coca-cola is more vulnerable to a stronger dollar. fewer, bigger, bolder. we have sanjay khosla. i'm honored to speak to you. international in your

book, "the wisdom of less," what is the "less" coca-cola has to do? >> the book's basic idea is to do a few things really well. >> is coke doing that? >> some of the things, they are doing too much and too little. therefore, one of the things would be to focus on a few things where they can relate win. bigger and bolder. is, whileews carbonated soft drinks are declining, it is a slow decline. >> you can work with it? >> you can manage it. unlike video rentals going out of business. have been some doomsday predictions. pepsico,yi, the ceo of

commented last year that we actually believe that if you let this go on for too long, another three to five years, the consumer will walk away from carbonated soft drinks. hope: relies on soda for three quarters of its business worldwide. that is a massive part of its business. it cannot fix it through smaller bottles or customized bottles. >> there is a two-pronged strategy. one, a lot of success would come from smaller package sizes. particularly in developing markets. run. there is a long making sure other parts of the portfolio. other part of the portfolio, to make that bigger and bolder. a few things and making them pay, rather than lots of little things. >> as a brand manager, someone

who has run companies, how do you do you manage the fact that products are not good for us, sugar or nicotine or anything ye? >> give consumers a choice. one things pepsi and coke have gotten an issue, it fits in with the lifestyle. vincent reinhart, at the federal reserve, do they drink coke or pepsi? >> since it is not chairman larry summers, he was a diet coke guy. >> chair yellen? >> i don't know. >> my guess is water. burned --is badly coca-cola was badly burned in the 1980's. week's issue this of bloomberg businessweek, available on newsstands. >> great cover.

.> look at that pregnant belly >> pregnant? >> i like mexican coke, made with real cane sugar. ♪

>> good morning, bloomberg "surveillance." jobs day tomorrow. i am tom keene. me, scarlet fu and adam johnson. the labor economy. ashkari,neil koc wants to be the next governor of california as a republican. he spent a week as a homeless person looking for work. he went from l.a. to fresno on a

bus. he said he is 41 years old, healthy, able, educated, could not find a job. >> did he take the rolex off what he was doing this? >> nobody knew -- this is actually neel kashkari, they thought he was a random guy. >> he won to find out whether the california comeback is happening. you have silicon valley the rest of california, two speed state. a jobprobably won't have after november, either. there is a skills mismatch in the u.s. part of it is globalization. is itf it is technology,

a compliment to your job or a substitute? if it is a substitute, you are going to have a hard time finding work. that is related to the big things going on. income and wealth inequality. from the labor force. the unemployment rate will probably be 6% tomorrow. because, in part, people are out of the labor market. >> there is the participation rate we keep talking about. of thentina might be out global markets. we take you to buenos aires. ♪

>> yesterday at the fed meeting, charles plosser dissented. ssent to the idea of a perfect summer. a fabulous, more than cool

summer in new york city. july a gorgeous as we and in new york city. this is bloomberg "surveillance," i am tom keene. with me, scarlet fu and adam johnson. adam has our top headlines. ukraine blocking investigators trying to reach the malaysian air wreck. pro-russian rebels are planting mines. ukraine is party to an anti- mine treaty, russia is not. decidedan investigators not to go because of the risk. a vote expected in the hous e because of the immigration crisis. bill wouldllion speed up return of migrants to their home countries. dependence on college loans is using. sallie mae says the typical u.s.

family borrowed 22% of college costs last year, that is down numeral five percentage points. more students are getting grants or choosing a two year school. tuition is frightening. if you look at what cost to go to an ivy league school. >> everything. >> if you can get in. >> for a huge body of america that is not worried about ivy lee, out-of-state or even in-state, some of these schools are a huge burden. is yournt loans -- what take on that and the impact on the economy? related to what we talked about earlier. the skills mismatch. if you are a young person, you have to get skills. you stay in school longer. that means you are not participating in the formal labor market as early. you are also therefore delay when you start looking for a house. all of those things are a drag on the u.s. economy. >> a quick data check.

futures -12, some real way to the market. yields were higher. .ow futures -86 euro nyse under 1.34. barrel.r $100 a yellen,gh for janet slack in thes over economy. the president of the philadelphia fed's dissents. from the men'se reinhart of morgan stanley. is forward guidance dead? is it over? part of whatalways a central bank does. you always fretted over what the fo one statement would be. before that, what about the tilt in the directive of the fomc

will be. the overnight rate does not matter a lot for anything. >> because it is too low? >> because it is so short. it is how is it transmitted to the rest of the yield curve. a central bank instrument is not just the overnight rate. it is where he was going to put the overnight >> rate over time. >> with your decades of work at the fed, working with chairman greenspan. where are the yield curve should i look to monitor what janet yellen to do? the two-year note? >> is the front end. the back end, the 10 or 30, it , it mattershousing internationally. that is a main comparison for investors. but it is influenced by our views of the longer-term economic prospects. in terms of policy, it is the 2. data get closer to the first tightening, that rate is rising because people understand

the fed will no longer have its foot on zero. >> where's the tipping point on the two year yield? that is the question of the next five and six quarters. 1%? >> it keeps going up because we are heading to a federal reserve that would be moving off the zero lower bound. >> i believe he did not give me an answer. >> 25 years at a central bank, i am practiced at doing that. [laughter] yield on the two-year on 59 basis points, highest since may 2011. on friday.ort the fed said in a statement, significant slack in a labor market. how does the fed defined slack and how does the market interpret it? >> there is a compromise, you have to accept that the committee is closer to its goals. inflation has gone up, the unemployment rate has gone down.

so they recognize they are closer to their goals. oh, by the way, the unemployment rate does not matter as much. you have to think about a bigger concept of labor market utilization. >> there is usually one dissent. heaven forbid two or three. the bank of england does it differently. how many people actually agree with charles plosser? how many dissents should there have been? >> the most important thing isut the fomc meeting, it very scripted. they come in with prepared remarks. probably plosser already wrote out his remarks. the big mystery of yesterday is why president stanley fischer did not dissent. he had written an op-ed saying it is time to raise rates. time is near. you have to be in an environment dissent we do not

often. you have to be diplomatic and plan on when you are going to dissent. you do not want to be a serial dissenter. he went to position yourself when the time comes. president stanley fischer probably decided there was another time to do it. president plosser, who was all about considerable. >> the four of us could go on for an hour. how does this translate into running a business at the boardroom level? >> the macroeconomic situation clearly affects the assumptions you make for your business. thingsend of the day, like the news yesterday and stuff, that is not much of a surprise. these are baked in. when you start running international businesses, the world is now connected. happens in the

u.s. affects india. people watch this, they never used to. quantitative easing is certainly something that affects many economies. the concept of everything is connected, that has implications. having said that, many of these emerging markets are pretty independent on their own as well. >> we will talk more about that in the next segment. we want to give you a heads up, we will show you our single best chart on snapchat and evaluations of tech startups. the valuation is drawing lots of eyeballs. we will be right back. ♪

>> good morning, bloomberg "surveillance." futures -11. futures -83. this is bloomberg "surveillance." scarlet fu has our single best chart. >> tech startups, bloomberg reported that snapchat is in talks to raise money from china's alibaba, giving it a valuation of $10 billion. >> the "ft" dismissed it.

wherewanted to see snapchat ranks versus other tech startups. we checked in with a financial data provider on privately held company. billion.ops $17 xiaomi, airbnb, snapchat. three non-us companies in the f 10, including india's amazon like startup. of financingnds have come in the last 10 months, looking like frothy valuations. kirkpatrick walks through this in "the facebook effect" brilliantly. i have trouble with this extrapolation.

vc funds are competing, you have asian companies like alibaba and then a red-hot market. >> in sanjay's world, how velveeta you have to sell, for these guys it is just oh, snapchat. >> are you making fun of me? >> have you ever put velveeta over doritos? >> you described my father's weekend. it.on't have a coke with >> photos? >> in japan, preparing to take a picture using a camera platform designed to take celsius.

these platforms are installed in a number of places. >> is a platform at the site? >> you get a better view. >> this is so asian, by the way. i can say that because i am asian. >> if i said that, it would be an hr violation. the shorelinee, near rio. an iconic bay, where they intend to hold the sailing championships. >> those are argentinian world cup jerseys? >> there should be more brazil jerseys in there, given their disastrous performance. one, it is actually a video. it is pretty awesome.

, a professional stuntman jumping off a roof. >> where? >> somewhere in chicago, the windy city. are you kidding me? ready? wait! >> tom, how did you do this? >> this was cropped. come on. oh, come on. >> this is gopro. >> this is out of control. >> should we all wear gopros one day? >> gopro reports after the bell. gopros at ther american economic association. 50,000 economists. someone with social skills. gopros.sian >> how about the yellen cam.

what does the world look like? >> tom is so excited. >> gopro earnings after the bell, the first report as a public company. >> t-mobile. will be joining "market makers" at 10:00 a.m. eastern time. tune in. "surveillance" on bloomberg television, streaming on your tablet, smartphone, and bloomberg.com. ♪

>> this is bloomberg "surveillance," i am scarlet fu with tom keene adam johnson. the biggest bank in france suffering its worst quarter ever. bnp paribas posted a loss of 5.8 billion dollars. a big factor is a $9 billion fine for doing business with countries blacklisted by the u.s. dr. who meets zombies. sayle familiar with talks amc plans to buy almost half of bbc america. amc's hits include "the walking dead" and" mad men." ofposted a quarterly drop 49%. pepsico executive cornell will

be the new chief executive of target. he succeeds george sine havel -- he succeeds george steinhoff el. >> this is "the wall street journal" reporting the decision by the pepsi executive to go to target. target has not announced it. brianget has named cornell as ceo of the company. they had an interim ceo during the period while they look for someone. target is going outside minneapolis. outside of its usual group of people. >> it had to go outside the box. speaking of which, the man who made oreos a household name in china. now he advises best buy endemol to foods -- and del monte foods. bigger,ok "fewer,

bolder." , target's decision to go outside, what do you make of that? >> it was expected. i just heard about brian cornell , i did a little-pepsi deal with him. deal.ipton-pepsi he has some retail background. it is a great choice. >> any downside to going outside target? they have always promoted people from the inside. >> given where they are in their journey, this is the right thing to do. >> you talk about rebuilding broken brands and a less is more approach. how does target do that given competition from amazon and the stain that has been left with consumers because of the data breach? >> target has to do two things. go back to its core and

build on that. with the new ceo coming from the outside, it is getting the customer experience at a different level. to compete with the amazon of the world. out ofcornell comes ucla, he has a lot of experience. how do you translate sam's club howfrito-lay-like products, do you bring that over to the consumers of target? >> at the end of the day -- >> a box is a box. >> it is not so much about getting the customer experience right, his credibility. how does he get competitive advantage question mark it is spot on. towhat is the best practice delegate authority. he had to hire hundreds of people and then give them marching orders, mr. cornell. how does he reinvigorate target? --biddy i refer to a case

maybe i refer to a case, oreo. oreo is a 100-year-old brand. for 95 years, it was unsuccessful outside the u.s.. of trying. lack by delegating, to your point on the delegating and getting them k check, focusing on countries that were connected virtually. it went to $200 million to $1 billion in five years. >> when you put green tea in oreos, that is an outrage. who decided to do that? was it a mckinsey-ite. somebody in china? >> it was a local decision. the fact was how to get the balance right between mindlessly global and hopelessly local. decision to gohe

to a green tea oreo or whatever else, some of them work, some of them do not. it has been successful. >> there are some instances where sticking with the one-size-fits-all approach does work. coca-cola works because that is the drink that everyone drinks, you cannot make it different for china or india. >> that is the important part. -- is not tot coke go always hopelessly local. it is a balance between global and local. go with a competitive advantage. in oreo, we went to green tea oreos and other products. ,rocurement, r&d technology that is a competitive advantage. it is not one-size-fits-all. the important part is to be clear, where's the competitive advantage, and get that balance right between global and local. >> in the book you have a whole section devoted to the notion of a blank check. you say "a blank check is a metaphor for giving people support to accomplish and out of

scale task." secretary of state john kerry arrived in india this morning. what is on the top of the agenda for him to accomplish, the out of skill task of bringing u.s. and india closer together? blank checke the concept. and then the india thing. i'm a blank check, it is a metaphor. it was declining and outside the u.s. at about $.5 billion. to your point, delegating authority, to go to a bunch of people who are closer to the market and the consumer and fast.g them to scale it went from $.5 billion to $1 billion in five years. what happened in that case is not just results that always work, you learn from failures. it is you send a feeling of ownership. very often, the retired blank

check is much better than average. coming back to your other question. opportunity for the u.s. and india to cement relations. they are too large democracies. very important business for the future. i was in india last week. , it isd is energetic really a lot of energy. -- mandate of the government the expectations are high. and now it is delivery time. you have been getting all of us to focus on the election and that seachange. >> india is profound. sanjay, secretary kerry will travel to india. recently under criticism. what should john kerry's message to the new government of india the? >> the main thing is to build the relationship, for the short, medium, and long term. at the end of it, both countries

are really interested in making sure their economies work. which is the growth message, what the modi government has been single-minded about. a win-win for both countries. >> are you optimistic that mr. modi can project his success north of bombay across all of india? >> i believe so. talking to a lot of people on the ground last week when i was there, just the energy and the optimism. i think everyone is wanting things to get done. young -- halfht, of the country is under the age of 25. many of the people did not even know what happened 25 years before. they want to make this, it is a can-do attitude that is positive. they believe it can happen. i am hugely optimistic. very excited about the indian opportunity. >> thank you so much, sanjay khosla. since reinhart, thank you very much.

a forex report. churn to the market, equity future co--11. euro well under 1.34, 1.3385. >> does a default for argentina matter? tweet us. ♪

but this is bloomberg

surveillance. >> argentina misses a deadline, confronts default with no further discussions with creditors. america'scounts economic rebound with no inflation insight. winter is coming. will it be a frozen euros? it is the final day of july, 2014. i'm tom keene, join me scarlet fu, adam johnson, and our guest host for the hour, ethan harris from bank of america. we are thrilled to have him here. here's adam -- adam johnson. >> overnight, european inflation gets to its lowest since 2009. regulators tell the spirit iritoanto to go down -- esp

to go down today. that is part of why we are lower. a lot of earnings coming out. conoco just break? consensus matches the , a net worth of $2.1 billion. is as expected as third quarter and fourth-quarter. >> no one does earnings like scarlet. >> i will go a step further. no one does earnings and revenue and their dynamics better than scarlet fu. earningsst heads up, for exxon at the top of the next hour. >> also, i believe, mastercard. we have go pro first earnings report is a public company. and secretary of state john

kerry is traveling to india today for talks. that is a big deal. >> let's get you company headlines, starting with panasonic. it will build the batteries that tesla needs. no word yet on location. we know that tesla wants better batteries to lower the price of the vehicle. about $5ny will spend billion on this project through 2020. with talk sayar bank of america boosted its offer to the government from $13 billion, while the government is still seeking $70 billion. this is on top of the mortgage settlement bfa already -- bank of america already paid having to do with countrywide. posting a five billion dollar profit loss for bnp paribas.

>> sources say argentina defaulted on its debt for the second time in 13 years as the -- and as the country averts a crisis, we will go to willow --willem mark. what are people telling you as they get their morning coffee? >> they are picking up their they ares here and ,elling me that the vultures that is, the government, have no agreement. opinionsa range of here, depending on whether they are business owners or not. the business owners are describing this possible default as a catastrophe. it will make it difficult to attract foreign direct investment.

newspapers are kind of shrugging .t off it has happened before and is nothing new. >> is it against wall street, against hedge funds, or against the greater united states of america? >> the way the government has shaped the media landscape is very strong against these u.s. hedge funds. this is the language they use with "vultures" as i just mentioned. >> one of the peculiarities of the situation is the effect of the two markets for foreign exchange. can you explain how that works? is very complicated. everyone here seems to think in dollars, they tell me. the official rate is eight pesos to the dollar. that is the government rate. and on the street, you can pick -- 13 pesosdollars to the dollar.

, someis a lot you can buy real estate, some luxury cars. as that gap it comes more difficult as it is more difficult for people to gauge the future and plan ahead. >> we talk about vladimir putin being alone. is the leadership of argentina alone? is there advice -- a cross-section of advice in given to their leaders? a pouring in of advice from people. it is among the is this community here that they are very unpopular. every business owner that we spoken to in the past two days has said that this government doesn't know what they are doing. cry fire, but are also the arsonists. marx in boy knows aires.s -- buenos

>> stanley fischer, who is the vice chair of the federal reserve system in the year 1998, in the words of stanley fischer, can this be a contagion? >> i think this is very bad news for argentina, and another in a long string of very bad policies. i think this is very little contagion risk simply because argentina is a special case. -- even though latin american economies can live with the problems with argentina. i'm not that cautious about it. >> have you become more optimistic echo >> i think the thing that is making people feel better is, clearly, china has

experienced a soft landing. china is now showing signs of picking up. we think it's legitimate. they will continue to grow at eight a.d. soon -- at a pace. -- at a decent pace. >> let's close with the twitter question post-up does the default in argentina matter? -- let's close with the twitter question. does the default in argentina matter? correct and if it does, who does it matter most to? we want to hear from you. another story we broke for me confirms ryanget cornell as its new ceo. or more on the challengers he will be facing, we bring in the senior analyst for bloomberg intelligence. what will be mr. cornell's biggest challenge? be tohink it will

overcome the breach last december. that will be the biggest challenge as we go forward in the next six months. >> and who is the most important constituent? the managers, the employees, the shareholders >> i think it will be the customers, first and foremost. makingis also about target -- bringing it back to what it was. bringing target back to the customer with a lot of excitement. that is key to making target a cleat -- a key player in the landscape. thisu have watched

merchandising of target versus other competitors. what is the immediate thing they can do in merchandising? about bringing new brands and new merchandise. walmart is all about price. units.is all about as long as they continue to bring units into their stores, their customers will come. >> and right now there forecast this year.about 2% what would bring people in? >> new products. they have this huge rochus on household. -- this huge focus on household. they are bringing a lot of organic. those trips that will bring people for more than once a quarter. on grocery,focusing they are also focusing on household and other areas.

priority is fixing the canadian business so it can expand overseas other places? before expanding anywhere else, canada needs to be fixed. it is a priority. the u.s. is definitely a bigger priority, because of the amount of business. has instituted a new leader there. they have canadian leadership managing it now. it will be a challenge only because the canadian customer fancier.get for being >> we will talk about geopolitical after the break. ♪

>> this is bloomberg surveillance. good morning, everyone. i'm tom keene. our guest host, ethan harris, is the author of "ben bernanke aid." -- "ben bernanke's fed." quickly.th us janet yellen is an academic. she is a math person, isn't she

echo -- isn't she? >> yes, the idea that she is not going to deal with the goals of the fed and inflation, all of that is silliness. she will deal rightly with the fed. phd's in economics and people that talk a lot and, no disrespect, do less math. she has prodigious phc skills, doesn't she? >> yes, she was a very good economist prior to her public service life. what is going on right now is that i think people don't realize that when the fed thinks about the condition of the labor market, you are looking for real health, and that means more than a drop in unemployment rate. it also means wage growth. wage growth and general compensation growth is only 2%

of half of the normal label. -- level. when the fed says there is still a lot of room for recovery, i hear "wages." >> it used to be years ago that of there there was worries costly thing to ever higher inflation. but no, i don't agree. -- >> no, i don't agree. costs, the primary wage 2%, pancake. if you dig around in the weeds, you could say there's a bit of a pick up here or there, but i don't think we should be data mining. we should look at the major data like the employment cost index that is running at less than 2%. average hourly earnings at about 2%. maybe there is a bit of a creeping up of wages, but that is a healthy sign. we are a long way from serious

wage or cost pressure. >> do you have to wait your gdp estimates because of this? help me. i have to make some headlines. >> at a want to burst the bubble , so i can talk to you. no, the gdp data was very good news. >> coming up, house republicans go after the president. this is bloomberg surveillance. ♪

>> good morning, everyone. i'm tom keene and with me, scarlet fu and adam johnson. don't forget, jobs report tomorrow. targeting perspective from ethan harris at bank of america -merrill lynch. scarlet, we have more to talk about, don't we? >> we have some breaking news. colony capital owns neverland ranch, which is michael jackson's home. they are now getting ready to

sell it. like this breaking news? >> it is 130 miles northwest of l.a.. .ou know me >> in certain circles. >> scarlet fu is our celebrity lodestone. >> it is about 130 miles northwest of los angeles. and it's called neverland. it is named after the island in the story of peter pan, of course. what is interesting is, the property is zoned for agriculture. it could be subdivided or turn into a tourist attraction like wasteland. it's got to be a crazy michael jackson fan who wants it. , who boughtll tom this. he said it was a real estate play. people thought he was crazy. in the high-end valley has returned to peak levels.

>> a curious bit of news. let's make a shift and talk about oil. u.s. oil companies are drilling, drilling continues in europe. never mind the fact that europe gets one third of its natural gas from russia and cold weather is around the corner. tom reed are joins us from london. what happens when the world wakes up and realizes it needs russia's oil? >> i don't think the sanctions are short-term. these are long-term impacts. and we are likely to see a slowdown in growth rates .otentially russia has high technology costs companies to continue giving it technology to make

sure that oil production doesn't start declining. it is also investing a lot of money in shale. and again, foreign technology will be crucial. but it does not take away anything from the short-term oil supplies and russia has continued to pump at 10 billion barrels -- 10 million barrels a day. said that, bear in mind that western technology companies are probably going to be a problem in the longer run. let's not forget a lot of chinese companies and asian companies are probably going to be willing to step up and fill that gap. it is not necessarily that dire a situation when it comes to oil supplies just yet. >> and yet, russia, the u.s., and saudi arabia all live for the top three spots. between the three of them, that is about one third of the world supply. would it not be a problem to lose russia? other countries could make up for that? in the short term, you will not see russian supply decline

steeply. but it will be crucial to say whether the asian companies can actually step in. of that,be skeptical but if you see a significant drop in russian production in the long run, then that will affect oil prices. saudi arabia is really the main holder of spare capacity at around 2.5 million barrels a day. and essentially in the current context of the market with libya, syria, and iran. >> you talk about problems spots around the world, and then on our side of the world, yet the report thatgdp pushes growth. shouldn't oil be higher when it's been flat for the past few days? >> absolutely. ..s. numbers are looking better

even the chinese numbers are looking better. what we have is a prompt oversupply of crude. it started coming back a little bit. iran has managed to export a bit more than what it meant to in the interim deal. that has been a bit of an oversupply that needs to be worked through. >> give us a clue on the state of opec. you mentioned saudi arabia's -- saudi arabia as a marginal player and with less wiggle room than before. how much wiggle room does opec have, given the news from russia? talking, you're really about opec as being equivalent to saudi arabia. if you look at the other countries, being nigeria, libya, iraq, iran, none of them have spare capacity in the way the market defined it. it would be easy to ramp up reduction. there is a huge -- there are

huge problems in libya, as in a rock. iraq. a it would have to be saudi arabia or even kuwait to ramp up production in the future. harris, on the chart i price quest again you. . how important are floral carbons to the economy? >> nobody gets that excited about the economic impacts of violence and war unless they create disruptions to energy in the middle east. it's just not that big a story. we have talked about how russia, their ability to develop oil in the future might be impacted. but in the short term, europe needs oil and natural gas. russia needs it for their

economy. they will not cut it off because it is economic structure. >> we will continue. >> argentina -- s&p says argentina defaulted on its debt. the twitter question for the day, does the default in argentina matter? tweet us. ♪

>> this is bloomberg surveillance. i'm scarlet fu with tom keene and adam johnson. let's get to company news. samsung marked its weakest quarter big -- since becoming

the biggest cell phone producer two years ago. will build its biggest dreamliner's in south carolina. that is away from its traditional base of the seattle area. the charleston area is not unionized. dr. who meets the zombies. people familiar with the talks say the networks -- amc networks plan to buy almost half of bbc america. that is this morning's latest company news. wise one of tv landscapes, is this a big deal? >> i have not watched bbc america that much. the only type of drama and -- drama i would watch is downton abbey, and that is on pbs. >> it seems like an odd move. >> i don't know. >> i'm not in a position, not

being the tv wise one that scarlet is, not in a position to comment. >> alina was that everybody dies in game of thrones. >> everybody dies in all of these shows these days. >> you are right. everybody dies. >> the next one is to detective. this is a good one? a very goodctive is one. woody harrelson knocks it out of the park. speaking of game of thrones, going to washington. house republicans voting to sue president obama. joining us now is chief washington correspondent peter cook. the democrats are saying this is a political stunt. some conservatives are calling the lawsuit foolish. is this just politics as usual? >> for all of the game of thrones fans, it was like the red wedding last night on the house floor. >> go. -- oh.

>> we have the five-week recess and he gives republican something to talk about when they are back home in their districts. democrats have somebody talk about as well. they have been using it as a tool. the argument in the words of john boehner is that it is about the constitution. take a listen to what he said on the house floor when he talked about the check in executive power he is trying to pursue. >> are you willing to let any laws tot decide what execute and what laws change echo are you willing to let any president tear up our our founders have built? think that'll me the specific both you took, but think about how you took it, as one body standing together. >> this is again, about the separation of powers in the words of john boehner. but the reality is, this is all about politics and it sets the tone for what is happening in washington. this is what the two sides are bickering about as they head for

the exit. and i guess the bible was invoked, the revolutionary war info, -- >> they were five conservative republicans that voted against it because they did not think it went far enough. >> ok, great perspective there, peter. but me ask you a question. -- let me ask a question. how will this affect republicans as well as independent voters in america? >> this is red meat for the base. to an extent the base will be disappointed, because it isn't impeachment, which is what some people are talking about. at least, among some core conservative republicans. but again, go back to the district. it gives republicans some political cover that they are taking on this president anyway they can. for the democrats, at the same time, they are defending this president, and they are using this aggressively as a

fundraising tool. i cannot stress enough how this is being used to raise money. $7.6 million for house democrats wasn'this lawsuit active. they got $1 million in one day the other day. >> are you going to take a five-week vacation, to? >> i'm not going to take a five-week vacation, tom. it is not on bloomberg's agenda at this particular moment. >> make sense of this for me, peter, if i've got the numbers right. republicans effectively try to vote down obamacare 40 times and now they are suing obama to speed up its implementation. our democrats -- are democrats licking their chops? this is the biggest flip-flop we have ever seen? >> they are trying to implement the portion of the law they did not like. they think the president failed to abide by a law they did not want to see in effect in the first place. this will go well beyond the

president's term, and maybe even speaker banners as well. >> peter cook -- and maybe even speaker boehner's as well. >> peter cook in washington. futures are not doing a lot. down 11 percent ahead of the jobless claims ahead of the jobs report at 8:30 a.m. >> good morning, everyone. look for our digital media, our interviews, and particularly our manning interviews on argentina. ethan harris is with us from bank of america merrill lynch. and yes, we will get to the labor economy in a minute. here is a fact. argentina is not out of money. in fact, argentina is not in default. the nation is in selective default, that according to standard & poor's. the entire surveillance team has begged to lose the minutia of

everything going on. give us perspective. it is a crazy political history, isn't it? >> it really is. the observation you have away from the minutiae? what gets your attention on this day of selective default? >> that argentina seems to be in a crisis every decade or so. with cristina kirchner, if she does not resolve this by the end of the term, she will leave and her husband will essentially come in to clean up. >> her husband is a marxist economy -- economist down there. is there a threat to the government? >> it's not the same as 2001. messconomy was a complete in 2001. there was a tremendous recession .or many years

of aefault was a result financial crisis, currency crisis, and other things. this one was not related really to the economy. to katya.uestions she is an expert. >> my sentence is that latin american markets can handle this. argentina is a special case. do you agree? >> all information tends to agree with that. when argentina devalued, if you're a member, it happened on a day when a couple of other countries do the same. as a result, there was a complete drop in the market and a global widespread drop that they and everyone kind of argentina.t to

it was odd, because argentina was such a specific evaluation. you don't know if someone will end up attributing something to this. >> which is why s&p said "selective default" as opposed to "total default." my question is timeline. it has been a debate in management over these specific. what is the timeline that might be the ripple effect? >> in terms of government involvement, the government has still said they are open to other ideas, still open to talking. but there are local reports saying that private parties may be trying to resolve this themselves. is true, maybe a resolution would be imminent. dates there any crucial that have to be resolved, or certain things that have to occur over the next week? >> over the next week, no. cds is its own world.

we will have to figure out exactly when a default may happen, when it may be triggered. however, the government timeline basically said nothing can be resolved before the end of the year, because at the end of the year, a clause in the bond contract expires. the government says it prohibits the government from operating a better deal for the holdouts. >> what kind of role do argentinian banks play here? we keep hearing how they may be saviors. what is the incentive for them to jump in? >> there was this report -- and that a reported it, representative had come up here to try to buy the debt off of elliott, essentially. they have incentive because they own argentine bonds themselves. they are some of the biggest bondholders in the country. they have incentive as well. however, we heard that plan fell apart last night. but it could still be ongoing in some capacity. >> thank you so much.

try to get some sleep. you have been doing this for a four/seven. -- 24/seven. , selective default default in argentina actually matter? tweet us at surveillance. ♪

>> good morning, everyone. i'm tom keene with scarlet fu and adam johnson. futures are in doubt this morning. a little challenge to the markets. who do you have on your show today? >> we have some great guests. roger altman, the chairman of ever course, will -- of ever and he will talk about everything, from and then his to his -- from m&a to passion, how to bring the callsy back up to what he more than living wages. this is an area that he has been writing excessively on. and that leads me to wall to rob -- walter robb, the co-ceo of whole foods. they are struggling selling products to consumers.

they will start a new national ad campaign. >> betty liu "in the loop" begins at 8:00 a.m. mover,oods is our first because the stock is moving right now. this after the company cut its sales forecast. betty liu talked about the company having a tough go at it. competition is increasing from new rivals. down 3.6% in the premarket. rise are forecast only to 10% as much as a gain of 11%. still, i might point out, pretty good. >> but the margins have had to come down because they have had to attract more customers. the newsrands is in once again. they had cited concerns over quality of meat they were getting from supplier osi and they were going to get -- to sever that relationship, which begs the question of supply in all their stores.

two thirds of their business comes from china. if you've got a problem of sourcing your chicken in china, you got a problem. you have a related story. >> yes, related. antibiotic in -- and erratic resistant infections kill 23 million americans -- 23,000 americans each year and make 2,000,006. -- and make 2 million americans sick. you know, you are what you eat. antibioticthese enriched meat, you never develop resistance yourself. fromgain, this is separate the announcement at yum! brands, but related. >> it is all interlinked. what we willll you

wrap up surveillance with. because jobs day is tomorrow. tom is all excited. >> jobs day with a 4% economy. >> 4% in the second quarter. 231 -- 231,000s jobs added in july. after 238,000 added in june. >> why are we so miserable at 231,000? >> right, that is real job growth. but is it quality? >> we will discuss it with ethan harris of bank of america merrill lynch will we come back. ♪

>> good morning, everyone. bloomberg surveillance on radio and television. tomorrow, jobs report. report,man before the alan krueger in the 7:00 hour. alan krueger of princeton. look for that on bloomberg surveillance. i'm tom keene. with the are scarlet fu and adam johnson. >> and our guest host, ethan harris from bank of america merrill lynch. we will join him shortly. but first, headlines. snapchat could bring alibaba of $10 million.

-- $10 billion. snapchat turned down a $3 billion takeover offer from facebook a year ago. a japanese company gives sony a lift. its annualto avoid losses in the past year by shifting to content and mobile devices. and microsoft takes the wrapping off it first operating system. the update will be available next week, making it more android friendly. >> and watching the markets this morning, futures -13. some of theabout tensions that are out there. we will prepare for tomorrow's jobs report. our guest host, ethan harris, he is with bank of america merrill lynch. these are great and challenging times. dr. harris, is this to america?

is there an america that is benefiting from 4% gdp and another that is being left behind? of thethe first years recovery, that was definitely the case. we are definitely ending -- heading into a second phase of the recovery where we are getting real job growth. inis not a big drop unemployment growth because people are abandoning the labor market. we are getting significant payroll growth. and i do think we will start to see some acceleration of wages. the trickle down to joe sixpack, i think it has started. it hasuntil now, definitely been a two-tiered recovery. >> rubber right, former -- robert reisch, former labor secretary, really emphasizes part-time versus full-time. economists saying that is not true and it is overemphasized. which way is it? >> we have had a mediocre

recovery with too many part-time jobs and too many people giving up and -- giving up on looking for work. this is why the fed has been so patient, frankly. they want to drawback those workers in the labor force and have a strong enough labor market to create quality jobs. that will then tell us we have had a full healing of the labor market, but that has not happened yet. bethe jobs report will coming out literally in about 24 hours. what is the data point that yes, there are too many people working part-time, or, no, these are legitimate jobs? >> they divide the data into those who want part-time and those who are doing it because they cannot get full-time. they will look to see if those numbers are moving toward -- isx -- >> in other words, it part-time versus full-time

versus given up. that to dropok for about another percentage point or so. that will be a sign to have had a broadening out of the economic recovery. to the jobs get in report tomorrow on fed policy. how can you tell when they are thinking aloud versus the signaling aear -- clear policy change? >> i think they're looking for a broad base sign of improvement. on the growth side, that is, let's get a few quarters of gdp growth because that first quarter really scared us. let's get a pew quarters in a row. and on the labor market sigh, it will be on payrolls. what00 a month, which is we are expecting on friday, we are there in terms of job growth. what we need is wage work. those are the -- wage growth. those are the two signs the fed is looking for.

>> i want to talk about the competition within market economics. you have taken a more cautious, measured view. peter hooper over at deutsche bank has been very optimistic. most asry harris, a optimistic as that. what do the optimist get wrong? story of this economic recovery has been tomorrow we going to have a real cycle of recovery -- >> with investment. >> with investment, and housing booming, or do we have these headwinds from the banking problems or real estate problems, all of the balance sheet damage? we have been more cautious because we think those balance sheet issues and a headwinds coming out of the recession have been very important. i think there is a growing consensus at we are getting past the headwinds. there is kind of more of a leastcing around eight end up -- at least nok -- at least nok amount of growth.

he's looking for headlines this morning. >> is inflation an issue for us? >> no, i think first of all, it's not the end of the world if we go a little above 2%. is that really an awful thing? is inching upon extremely slowly. it is still below the fed target. this is what makes it possible for the fed to put much more focus on growth. eventually, that will change. i think a year or two from now, you will hear from a different janet yellen, who is now taking a more balanced approach, talking -- who will be talking about a more balanced approach, talking about inflation now. that is not now. that is two years ahead. >> wow i'm a two years ahead. >> let's get to the agenda, the stories that will shape the day. >> maybe it is a little quieter in ukraine, and tragically, still not quite in israel and gaza. here is my morning must reads, which really addresses across democrats and republicans.

our form policy as we look at these incredible images. this is george will in the "washington post" -- whatever your politics, read george will. i thought this really lead describes the conundrum and challenges to secretary kerry, and that other space. >> i think of the story in which someone accuse the president of having a very european foreign policy. >> exactly, yes. >> tom, you've got to head off to the radio. a.j. and i will continue with our agenda. what are you looking at? >> it is really what we just talked about with ethan, that is, the pivot that seems to be happening. at citigroup, stephen englander, the foreign-exchange strategist, said no change in form policy

from the fed yet, but preparing for a shift by the dollar. it is up 2% is month alone. you look at the yield on the two-year treasury, that has gone to the highest now, 57 basis points higher in 30 -- 39 months. and stocks are higher. it makes me wonder whether there is a pivot. >> i think the pivot is that the markets are starting to believe in the economic recovery. that gdp number is very important in that respect. by revisions of the data and the it willecond quarter, he underscored -- it really underscored the fact that the first quarter was a fluke and we can look past it. maybe growth is here now. >> and it is not just qe driven gains. on my agenda, exxon mobil. he will overcome put ash the oil company will be report -- the oil company will be reporting earnings in just minutes. >> thankfully, by the way, oil

is back down below $100. with all of the geopolitical concerns, oil is under 100 dollars. >> i know. let's get to the twitter question of the day. we asked everyone -- does the default for argentina matter? here are the answers. like you had a great stat. what is it, seven? from 1870's.ult here's another one. no, don't cry for me argentina. did madonna tweet that in? matter?this >> again, we know that argentina is the serial defaulter and this

event has been going on for a long time, so everyone has had time to prepare for it. argentina is just a very troubled economy. >> and remains so, because of selective default. even harris, thank you very much. surveillance continues on the radio. "in the loop" on television is next. ♪

>> good morning. it's thursday, july 31. we are live from bloomberg world headquarters. you are "in the loop" and i'm betty liu. we have a great show for you.

republican senator tom coburn it at his take on how -- how to keep companies from taking cross-border advantages. he says we need a broad advancing of the tax code. roger altman is my guest hosts and he will weigh in on an mende and the economy, plus the upcoming election. hit in premarket trade today after cutting whole foods annual sales forecast because of increasing competition in the space. seo at target.w finally, the struggling discount retailer has a new chief executive, brian cornell. previously, he was a top executive at walmart. team upc is going to with tesla motors to build the anticipated lithium battery factory.