yellen and draghi support separate economies. thecable tv wins big at emmys. this is "bloomberg surveillance." we're live from new york. it is tuesday, august 26. i am time -- tom keene. adam johnson is off. let's get right to the tuesday morning brief. >> new zealand exports fell to an 11 month low. doinguy and dsw are earnings before the bell. u.s., wedata in the get the durable goods orders. at 9:00 we will look at the price home index. at 10:00, the richmond fed manufacturing. indexsumer confidence will be interesting. look at the data.

commodities, and currencies, this is a poll but from the last three days of celebration haired futures are down one point. we look at this turning. the fix is 11. yearerman tenure is -- can -- tenure. this will be part of a we do today. is back 15 data years. this is the nirvana that we remember. >> i bought at the bottom. >> right there. >> is where i bought. >> down we go. there is the ab from a year ago. this is what we are seeing from data that is two or three months older. the chief economists were

view oning this 2015 housing. we will see that through the morning. look at bloomer television for more housing economics through the morning. what an interesting set of newspapers and websites. >> we need to go overseas first for a first front forced -- page story. this could pave the way for u.s. airstrikes against a islamic state forces in syria. the white house makes clear that obama has not up route military action inside syria. he is resisted taking action and getting bogged down there. >> he is not asking permission from assad. that is very important. >> does anybody have an idea in syria where the intelligences? >> that is classified. >> is it in the middle of nowhere 18 miles in from iraq? is it in the damascus suburbs?

about the where of syria. are doing we intelligence therefore long time. we don't know what to do. that is the bottom line. >> this is a double barrel in the story. >> egypt and the united arab emirates attacked them in tripoli. the rebels a been fighting for control of tripoli. >> when you fly to dubai for the first time, it is almost to india. they are the ones with oil. dubai has no oil. has the oil.dhabi it is way -- far east. it they wereot do supposed to do. the pentagon was displeased that no one asked permission. >> i think it is interesting

that you have some states in the middle east that are taking real ownership over what happens in their region. it is not just america's problem. >> we will go to peter cook in washington about this. were they using u.s. jets? >> egypt was using what ever we funded. >> it was reverse engineered. our second story is warren buffett. theas a starring role in burger king story. finance the takeover of tim hortons. investre hathaway would $3 million. you know the history with them. heinz lastred to buy year. >> this is a brazilian private equity firm. >> the question would be if they have improved product enough or

doing financials. be primechatzker may minister of canada. he make a run for it after his comments in defense of tim hortons. the guy from hockey night in america called them up and told them good job. >> game on for amazon. they are buying the video maker twitch. google had been dying it as well. amazon is getting and to produce -- prevent google. they have 55 million active users that can play games. it gives amazon and engaged audience. m&a, agame theory of portion of this is action in defense of other people. >> this is one more point of bubble. that this is a if you're just doing it defensively and there is no

business case, that is a problem. >> they can sell advertising and steer players to shop online. >> this makes me feel old. i am two years too old to have ever gotten into video games. watching some the else play a videogame mystifies me. >> amazon has content because of the fire smartphone. >> i got an amazon box at home yesterday with what senate the tape around the box was selling fire. is all >> part of the multimedia strategy. it is very smart. this is a good front page. guest height is from the -- is from a height of economics. he joins us this morning as we look to the linkage of record equity rices to the central bank policy. is this a janet yellen stock market? >> not entirely.

if the central banks were not supportive, you would not be getting these outcomes. in a structural change environment that we have been experiencing for the last decade, business is the best adjuster. gdp as a 50 year high. share of labor as it very low levels. that is good for the capital side of the economy. >> what is the burning question now linking economics into investment? when will the volatility that is implicit in a change in central bank policy manifest itself? >> when we see it right now? >> part of the answer is the central banks are so reluctant to act in a vigorous way. i think the reasons are obvious. it is hard to believe in the

credibility of their assertion that in a years time we are going to tighten. if i understood correctly, the european economy is not bad enough to fix or good enough to get better. the circumstance is related to something janet yellen brought up at jackson hole last week. had he distinguished between cyclical developments and structural developments? if you think some kind of structural changes happened to the global economy and important pieces of it in the last 10 years, things are going to be different cyclically as well. >> you have banks collapsing all over europe. the same problems. how do you do stimulus? are you confident that they can get this done? >> i think by and large all the governments are allergic to using their budgets. that it's an excess of rusher on the central bank.

we go to the meetings in october. you wonder how they are going to adjust the global gdp view. it isn't very pretty right now. >> as he look at the business cycle overall, the u.s. companies and their profits and balance sheets look so healthy compared to the rest of the world. what business cycle are we in? is the federal reserve keeping us in the third inning? >> we are in the sixth year. that is unusual itself. the fed will finally start to a knowledge that in some sense by tightening policy. a year from now would be the seventh year. that is without resident and modern time. >> we are going to talk about refinancing. ago as ween years

begin the eighth year of the financial crisis. can the united states protect itself from a more challenged european economy? you can pay us in euros or dollars as you choose. this is our twitter question of the day. it's get the company news with scarlet. >> they are cutting 15% of the workforce. they're closing asian plants as they shift manufacturing. this is one of the oldest companies with 9000 employees. 100 applications have been filed with general motors for compensation over deaths with faulty ignition switches. the settlement fund has received 184 injury claims. ae problems lingered for decade before gm ordered a recall back in february. time warner will offer buyouts in the turner broadcasting division. 600 workers will receive offers this week.

this is a large restructuring plan. those are the company news stories. they meet in belarus. this is not a summit but they will be in the same room together. >> maybe they will shake hands. maybe they will bump each other .s they walked last -- past we are a streaming on your tablet and bloomberg.com ♪. ♪

>> good morning good "bloomberg surveillance." zurich will be here. he will talk about the challenges of europe and how it

relates to america. look for that on "in the loop." good morning. morning.sday i am tom keene. joining me a scarlet fu. mr. johnson is off. you should've told me my bow tie wasn't straightened out. >> do i look like the kind of person who knows how to tie a tie? >> johnson would've told me that. that's better. that looks better. there is not a total bow tie in minsk. russian forces are crossing into ukraine. these allegations come hours before vladimir putin and petro poroshenko will meet for peace talks. hans nichols is standing by in minsk. will arrivein minutes from now. are they actually going to meet and talk to one another?

are they just going to be in the same room? >> they will have a class photo together. it will be a working lunch. he don't know the answer to that question and we don't know if there will be any progress out of the summit. we know there will be clarity. if they cannot find the time to peacethen all of these talks and cease-fires are just not worth anything. we're back at square one it which is escalating record -- rhetoric and fighting on the ground. that is bad news for the german and european economies. >> our newspapers full of syria and abu dhabi. our american viewers that dynamic in the ukraine right now. what is the escalation that we need to focus on? the most important escalation happened just a couple of hours ago. russia acknowledged that their were inside ukraine.

russia added a caveat. this is a semi-official news agency. toit -- amounts acknowledgment. russia says they are there by accident. that is laughable. the line has been that russia has been supplying and supporting and sending convoys of aid and weapons and arms and intelligence. that is why the fighting continues to go on. that is why the ukrainian forces have not been able to route the rebels and a couple of holdout cities in eastern ukraine. >> is there any agreement shy of piece that we can hope for? and europeoming needs gas. is there any way they could reach an agreement on gas transmission rights? >> let me take that into parts. agreement, this is

something ukrainians don't want. they don't want a cease-fire if the other side arms the rebels. they would have a cease-fire without any preconditions. the eu energyks, minister is here. there is some hope that there would be a solution for payment. it there is nothing right now. the weather has turned here a little bit. it is basically still summer. the gas talks will become more important in three or four months when western europe starts to get cold. there is a scathing piece in foreign affairs magazine. it is highly critical of washington and berlin. what is the russian view as they travel to belarus? the russian view is that they

have an obligation to protect not just russian speaking citizens but citizens in eastern ukraine that they feel are being attacked by forces that they call fascist. the images coming out of ukraine are remarkable. pro-rebel strongholds of captured ukrainian troops and they are parading them about. this is in violation of geneva conventions. it is remarkable the anger and the animosity that you have in eastern ukraine toward the central government in kiev. >> haunts brings it right over to the economics. you have written about how this meeting is the best opportunity for some sort of revolution -- resolution to this conflict. is that still the case? >> this is the best opportunity. this is not good for western

europe's economic prospects. we are getting all of the other issues. this is not good for them. it would be very convenient if things settle down. >> you are in europe. calculated how much this will make the european economy decline? >> i don't think you can. >> we want to thank hans nichols who is on the ground in belarus. he is waiting for vladimir putin to arrive on the scene. we will be joined by a guest host. we will discuss global economics and the rally in european bonds. that brings us to the twitter question. can the united states protect itself from the european economy? you can tweet us. we want to hear from you.

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>> good morning. i am tom keene. with me is brendan greeley and a scarlet fu. we are showing the moment for finance here in august. let's get to the top headlines. >> stopping the ebola crisis could cost half $1 billion. that is the forecast today from the well -- world health organization. the death toll may exceed those of all previous ebola outbreaks combined. it a pair of gaza high-rises were damaged after an israeli airstrike today. two dozen people were hurt.

or destroyeded five towers and shopping complexes in the last four days. the eye director is hospitalized with injuries after a one car crash. the --driven by luis free hit a tree. -- topf the toplines headlines this morning. this is the morning must-read. rendon greeley gets us started. business week. i think this is the smartest thing written about ferguson. a lot of things are been written about ferguson. he points out that st. louis county is not exactly a cosmic -- microcosm of america. the map of the county looks like a shattered pot look -- broken into 90 municipalities. ferguson is a problem of city planning. you have tiny municipalities as

small as 12 people that try to steal tracks -- tax revenue from each other. >> isn't a divided 19th-century st. louis with north and south around the civil war? >> it is an artifact of the city itself. try tonty itself incorporate on its own. it left it up to smaller municipalities to take up on their own. fromave tax revenue taken each other. that is the problem. if we're looking about improving relationships between gleason residents, we are missing the problem. >> we are dealing with wealth inequality. can we actually help change that? >> it has been developing for quite some time. it is developing significantly because the economy generated it. it doesn't mean we have to accept it as an attractive way

to organize a society. if the policies in place that offset that. >> tax policies? tax policies. some kind of spending policies as well. you can make sure the kids get the kind of education that opens those opportunities for them down the road. >> that is an important article. it is great. >> global bankers led by janet yellen say labor markets still need to heal. we will discuss coming up. ♪

>> some of the good things off bloomberg.com. good morning, everyone. markets are turning. but get to the data check. there's not much to talk about grade 132 on the euro. that is a weaker euro over the last number of days. it is so late. we go into the, eighth year this year. i first heard the phrase. toone point we wanted re-fence the bank disaster. now we just want to re-fence europe. now whyo state right

should americans be so attuned and afraid of this continued european debacle? >> it is a very large chunk of the world economy. it is very large. it developed early and is rich. that is significant. we have a lot of businesses in the u.s.. ashave tax aversion issues the centerpiece of this moment. we have a lot of multinational companies and they have a very big stake in europe. there cap here is part of their vision of a global environment. talked about re-fence, we were talking about this every two hours. bill gross is concerned about a set of events that could lead to a liquidity event. you see that with negative interest rates in germany and slowdowns in gdp and the fall of the french government yesterday and its reorganization.

is there a trust factor within the banking system? >> what is the imf going to do with though -- their global forecasts? there is a g 20 summit coming up in the autumn. go up byis to have gdp 5% more than it otherwise would over the next five years. >> they are not near that. >> the one thing you cannot have is the next recession prematurely. prevent the how to cyclical downturn that some people are beginning to fear in the feelingyou have there is a structural issue you want to boost to begin with. >> how much would a weaker euro assault? >> it wouldn't hurt. it seems like everybody wants a weaker currency. everybody wants the federal reserve to tighten policies of the dollar goes up. >> the germans don't want a

weaker currency. they were taking a household survey last month and germans are huge outliers in terms of home ownership. they are not tolerant of inflation not because of history but because of where they have their assets. is there any hope that this become weaker through action by the ecb? >> i think draghi has given a certain set of signals. >> what would be the catalyst to begin full-blown qualitative easing? >> the hard part is what does it do to give government bond yields than they are? >> italian bonds are at record lows now. >> what you want is to get the private sector credit more liberal than it otherwise would be. that is hard to do in europe because they don't have as well a developed securities market.

they have to get that going. >> is paul krugman correct? he is associated with banks arriving down to the zero interest rate level and that only gets you so far. has he been right for seven years? >> the one bit of evidence -- >> i need some hate mail to come in. in europe, you can't talk about the great recession. you have to make that world. , is it comingty over here? you look at the evidence about the infrastructure in this country, it is clear that we could use a fair amount of government spending. you asked about any quality. government spending programs would help in that regard and our infrastructure oriented. i have interviewed the

resident of estonia. he is from new jersey. he went to columbia. >> nice shameless plug. dork trivia.ont of >> i have interviewed him as well. >> i have not. draghi seemed desperate in jackson hole. he seemed to want people to do anything to have any confidence in any country to fix their own problems. >> the concern is everybody is allergic to physical effort. dash, the biggest thing they have done is raise taxes on consumers. everyone is a bit allergic. you have to have a certain sympathy for that because in the next couple of decades, the budgets are going to be strained

because of demographics. there are a lot of old people coming. they don't have private resources and they will have to be supported by the government. that lookinancials greek or japanese or fix the budget now. that is one set of arguments. the other set which is more in the krugman line of thinking is if you use physical effort now, you will have a bigger gdp and it will be easier to carry those burdens later. the evidence is that the body politics everywhere has chosen a degree of austerity. >> i just wrote down my message for the morning. is fix the have budget now so we can trash it later. >> i wanted to bring in my morning must-read. a couple of the takeaways from

the trading activity is the markets move nicely together and were boosted by faith in the central banks. at other times equities decoupled. this marcheve in higher inequities? >> i think the issue is that if this is a structural change relative to most of the postwar. , then you should expect businesses to expect better than governments and households. profits are the share of income in the gdp that you will observe outperforming. equities and bonds should reflect that. ed is exactly what we are seeing. >> we saw that yesterday. let's go to the twitter question right now. your responses and your growing responses to our

question. we had some really smart answers. can the united states protect itself from the european economy? that is a loaded question. >> you can tweet us with your thoughts. netflix did not win big last night at the emmys. it is a big winner when it comes to revenue from prescriptions. they are topping hbo. we will discuss coming up. it ♪

>> good morning. good morning from our world headquarters in york city. i am tom keene with scarlet fu. rendon greely is in this week for adam johnson. here is scarlet. >> the number of americans lagging on credit card bills is at a seven-year low. arelatest figures show 1.1% overdue by 90 days. average card that is lowering. a pair of big bets by bill ackman. the billionaire behind pershing square capital management picked burger king to rise and herbalife to fall. he was right on both counts. they gained $200 million yesterday. cost half ala could billion dollars.

that is the forecast from the world health organization. died.eople have the death toll may exceed all a outbreaks combined. those are the top headlines. >> that really bears continued watching. >> it could spread the congo. >> this is a new strain. a the problem there is it is public health crisis. they don't have the resources. an important issue. the emmys last night, i knew no one. no one. help me here. >> hbo did not win is big. any of -- did not win the big categories. >> the dragon did not take the best i can. >> you can't claim that you don't know breaking bad. do not adjust your bow tie in front of me and tell me that you

have never heard of breaking bad. >> i have heard of it. our best chart is on hbo versus netflix. even before the winners were announced, hbo was the big winner in term of -- arms of nominations. they have fallen behind netflix as of the second quarter of this year in terms of subscription revenue. in terms of subscription numbers , that happened a couple of quarters ago. reed hastings acknowledge that hbo is more profitable the next looks -- netflix. hbo makes about $550 million. >> that is a huge difference. >> there is other cross coming that netflix will have to deal with. you have to go over the cable wires. hbo has a transmission path. they have agreements with cable companies.

netflix may have to pay more just to get into your home in the future. they don't have the transmission path lockdown. >> they have done that with comcast in terms of pain annexed her fee. >> what portion of america has this? >> not as many as hbo wants. they want to get the younger many else that don't like these $200 cable packages. they are offering a cheaper options. for instance, you don't have hbo. >> that would be correct. comcastould sign up for which get you broadband and hbo for $40 a month. at&t universe has an internet plus for $39 a month. i am just pointing out that hbo is looking at different options to make it possible for people to sign up for hbo without signing onto a big $200 cable deal. >> do you have the stuff at

home? >> not all of it. i am the same camp with you in respect to breaking bad. i have heard of it. >> when do i read foreign affairs magazine when i am watching all of this? >> you can tweet at the same time. >> my commute is three buildings away. it is green lights, it's five minutes. >> i have seen you walk to work and you are reading on the way to work. >> a lot of this is generational. own family.h my bad, -- breaking bad, were you surprised that they won? >> that is a big part of it. it was the last year. >> is downton abbey so -- >> the last season wasn't very good. the networks did fairly well.

it was kind of deja vu. >> how do you know this stuff? >> lady mary. >> i never got over civil. sybil died. lady sybil to you. networks?the >> some of them did fairly well. it julianna margulies won best actress in a drama for the good wife. modern family one big as well. i just read up on it. i didn't watch it. >> they do still exist. >> it is free. it is there. that is part of it. >> it is free. you can get it broadcast over the internet. you can buy a television and pay nothing and get broadcast over the air. >> are we up to a $200 cable bill yet? introduce tomg to keene to walter mitty. bring in $2 million a day.

actualussed this government. this is "bloomberg surveillance haircut we are on your smart phone and tablet. ♪

>> i am scarlet fu here with adam keen and brendan greeley. we are going to get you with some files from bloomberg west. cracking down on the click and eight articles. those headlines in use by news sites to generate clicks. facebook says the move is in her spots to user demand. it is now offering a digital that a recorder from people who don't subscribe to cable or satellite television. it works through an antenna. tivo calls it simple and brilliant and legal. i think i agree absolutely. i've been waiting for this to happen. get one.g to i think broadcast is a huge missed opportunity. it is a very efficient way to get stuff to people that people want to watch. we're clogging up the internet

with video when we can get video to everyone over the air. >> it is all legal. >> and it's legal. isstaying with media, amazon buying a web service lets people watch video games as they are played. a the deal for twitch is worth $1.1 billion. that is today's company news from bloomberg west. >> and tell its officials are calling the islamic state the wealthiest terror group ever. the size of land the united kingdom. peter cook joins us from washington to explain where they are getting all that cash. help me understand this. does they have -- do they have an irs? >> not necessarily. there certainly is a functioning financial system within the islamic state. it starts effectively with oil.

the first major terrorist organization in quite some time to have a steady revenue stream. they control oil fields in iraq and in syria. they control two refineries as well. they're using that to fund their efforts. and they are smuggling oil out and selling at below market value. they are using that cash to fund their offensive operations and to try and form a government and provide services to some of the in the territory they are taking over. this is one of the big threats and curveballs for the united states and the international community. they have a local funding stream and that is causing even more of a problem. of a threathem more than other terrorist organizations we have seen the past. >> this has to go across the border. is there any hope of closing

these borders to keep them from selling it? >> there has been a big focus on that. somebody has to play middleman in all of this. that is the big focus of the u.s. intelligence officials as well as people from the global stage. a lot of this is moving to kurdistan. it is heading to places like turkey and syria. that is one potential squeeze point going forward. there has not been much of an effect going on. they are using the cash. they may be making $2 million a day in terms of oil revenue. they are using extortion and kidnapping. cash, you been watching washington for years. have you ever seen anything like abu dhabi flying west to take on islamic jihad in tripoli? this is new. this is a first. >> this is very new at a

surprise to u.s. officials. the egyptians were involved. it suggests a balance of power in the persian gulf and middle east is really up for grabs right now. these countries feel this threat is so intense that they would launch an airstrike in libya and not notify the united states in some form or fashion. those are u.s. planes that are being flown by the emirates. those are weaponry handed over by the united states. it is highly unusual. >> how will saudi arabia reacted to this. that was my first thought. how do they respond to dubai and abu dhabi flying from new york to l.a. to attack part of the islamic separatists? was the big boy on the block for a long time in that region. it suggests that there are tensions between regional partners and regional allies

right now that we have not seen in the past. i think saudi arabia's next move is a? right now. tensionthere is some that is going to play out. that is one of the mysteries of this moment. how do they feel about the emirates making this move and the egyptians as well? >> you were talking about how the islamic state brings in $2 million a day. what services do they provide? >> it is intimidation first of all. about in some instances you have seen medical help for people in some of those communities. that is not being provided to everyone. this is an occupation in many of these areas. this is not a government that is up and functioning in any form that we have seen previously.

from what weiffer saw with the taliban in afghanistan. they control communities by providing some-- services. they are fulfilling a government role. they are better organized and better funded than a lot of people thought. they are better trained and equipped. all of these locations they have taken over have u.s. equipment. they are driving humvees right now. the islamic state is able to provide services is one of the most terrifying things i've heard this morning. thank you. turn in do that as we the markets. we have a weaker euro the last few days. that is really something to watch. we talk about a reversal from enthusiasm of 170.

thank you so much. thank you for your perspective. hostming up on our guest will join us to discuss the global markets and economics. this is "bloomberg surveillance ." ♪ . .

>> this is "bloomberg surveillance."

begins ofted states surveillance flights over syria in search of the islamic state. this is egypt, the united emirates attacked tripoli. stocks surge higher. janet yellen and mario draghi must support subpar economies. w good morning, everyone. this is "bloomberg surveillance." we are live from our world headquarters in new york. it is tuesday, august 26. i am tom keene. joining me, scarlet fu and brendan greeley in for adam johnson. our guest host, timothy bitsberger with bnp paribas. in theomic data here u.s. at 8:30 a.m., durable goods order. consumera.m., confidence and the richmond fed manufacturing index. >> we see case-shiller,

year-over-year, we come off that 10%, 11% -- >> i am thinking about the case-shiller and when i bought. >> top of the market greeley. >> if the numbers are correct, it looks like a big need for best buy. of $.34.us a consensus lighter than anticipated and 2.7%, ale sales down bigger drop than what analysts had been looking for. >> i would say decidedly mixed. >> what is going on with the bottom line? 23.1%.argin 2 >> a stock is higher now lower. it is doing the same contusion you had with the headline. churning is how i would put the stock. it is mixed retail season. have moved and

shifted toward researching and buying online, resulting in fewer people coming through the door. >> best buy needs more events, needs a spectacular reason to be in the store. >> beyoncé is not doing that. >> we call her bey on this show. bell, bob evans. >> very good, my kind of blue-chip company. let's get to company news, scarlet. >> fairchild semiconductors and says it is cutting up to 15% of its workforce, closing aging plants as it shifts production to outside manufacturers. their child is one of the chip industry's oldest companies with about 9000 employees. 100 applications are now on file with general motors for compensation over deaths claimed on faulty ignition switches. kenneth feinberg hired by the automaker to oversee the victims' settlement fund. the problem lingered for more than a decade before gm ordered a recall in february.

and time warner plans to offer buyouts in its turner broadcasting cable-television division. people familiar say up to 600 workers will receive offers this week. this move is part of a larger restructuring plan. that is today's company news. >> very good. make a 4% down on best buy with morning.p 2 this it is a summer of married discontent. germane to pay the government to take your two-year money, stocks surge every higher. timothy bitsberger is that bnp paribas and works at a critical nexis of debt solvency and liquidity. as though gross of pimco has mentioned, should we be vigilant markets?iquid debt can you extrapolate debt markets in germany and to worry over the fixed income markets? >> what is going on as you have a lot of weak data coming in from europe, you have russian

sanctions about to hit, the ecb tlo's, which don't december.t until a lot of that has put a downward pressure on interest rates. interconnectedness within the bnp paribas system, it is august. is some of the gyrations we are seeing because nobody is at the desk? all of france takes the entire month of august off? >> i get a lot of e-mails from people at bmp para bought in paris, so there are a lot of people in paris. ibas in paris, so there are a lot of people in the office. >> i think he still had some pretty significant themes introduced by mario draghi last week that have caused some pretty good yields by compression.

>> how do we make sense of these dominoes? france and austria have to call new government. both of them have problems with implementing some kind of stimulus. what is next? who is next with restructuring the new government? >> i am not sure who is next, but you can see the pressure on politicians to do restructuring, and i think it has been very frustrating for market participants to see that lack of restructuring, hence the pressure on the ecb to do more. >> i feel like we have been here before because mario draghi says whatever it takes a couple of years ago and it bought the region sometime. now he talked about qe and he is buying the region sometime. what is going to get done that will push us over the edge? of qe,as to be some sort but there is some reticence within the ecb to adopt qe. was never just a qe one, there was always a qe2, qe3, and ongoing. i do not know if the political will is in europe.

>> do they even have the political will for qe one? forcing them is into it right now. what you see on a peripheral -- >> i don't into interrupt, but let's go to this chart, i want you to continue and scarlet, this goes right to what you were talking about. this is the german two-year, and i have never seen that, mr. bitsberger. within those on the radio audience, it is simply a spike 2-year yield.e have we seen this before? >> i think we got to a point where it was negative repo, but i do not recall it happening in germany. mr. bitsberger is expert at these short-term markets having worked at treasury, worked at freddie mac, and now working for bnp paribas. --negative short-term yields does that force it to spend more or to retreat more into

austerity? ?hat does it do next yo >> i think it is a signal to the marketplace that they are worried about growth, they are worried about inflation, and i think it puts a lot of pressure on germany to inactivate some al stimulus. there is worry about russian sanctions and how that will hit germany. in the data we have seen come out of europe has been a stored in a really -- x disappointing. not being a german expert, i would think so. the germans have just been very reluctant to adopt rotter measures to help out europe, as we all know, so you would think fiscaley would prefer stimulus. do you bring this over to the common person in america

whose head is spinning over brendan talking about german macro economics. means nothing to our viewers and listeners. how would a you bring this over to the basic american? >> that interest rate will be low for quite sometime. >> do you agree with bill gross that financial repression can continue for 10 years? >> yeah. i think the new normal could just be a much lower said funds rate down the road. 4% does not make any sense to me. >> can we bring up that chart again? on radioose of you again, this is a one-year yield chart that shows yields ever lower than 1%. >> we use the same phrase, which and thetly quality, thing i am worried about is this is not bad, this is the way things are headed. this is not a flight, this is a long-term trend. we hear about central banks buying sovereign debt, em

ies are under pressure, they're forced to do things to their currencies, and those proceeds may be forced into sovereign debt processes. the mostust, interesting coming into the g-20 and the imf meetings, our twitter question goes to this cross atlantic, transatlantic question -- can the u.s. protect itself from the european economy? we have already gotten some very good answers on this @bsurveillance, this idea of protecting ourselves from 1% gdp and those unemployment rates. let me do a data check right now. stocks, bonds, currencies, commodities, s&p 2000.s over

you look for foreign exchange on a stronger dollar to solve a lot of problems. opinionsidedly mixed on a. nymex crude really confounding the geopolitics of syria and the rate we saw from all blue. and egypt over triple he. from abu dhabi and egypt over tripoli. the bears have been absolutely silence. ," coming up on "surveillance how to stop taxing versions. the topic of the hour in washington. we will discuss next. ♪

>> good morning, everyone. "bloomberg surveillance." . am tom keene with me scarlet fu and brendan greeley, adam johnson is off. allegations coming just hours before president putin and planne's petro poroshenko to meet. our international correspondent was nickel is standing by. hans nichols is

standing by. i believe putin is about to arrive. what are the chances they will shake cans and have a conversation? >> there has been one meeting that has taken place, that would be a poroshenko and catherine aston. ukrainian say this is a good time for peace or peace talks. that is a positive aspect. at the same time in ukraine, ukraine officials have released a tape of what they say are russian commandos, russian paratroopers that were caught that willaine, and only exacerbate the situation. if you can square those two facts, yes, they are talking about peace here in minsk, but at the same time they are escalating their rhetoric and the propaganda war in ukraine. then he may have a better sense of how close they are to come into a real resolution. >> hans, the irony of this meeting as it is taking place at a made for a customs union that does not really exist, that fail because ukraine decided not to

join it, so is anything actually happening at this meeting, or is it just a summit that is not happening for a trade union that does not exist? >> the dozens if not hundreds of would suggest's that the trade union has worked at least for belarus and russia. this is part of the core of what putin's argument is an, and that is what it is good for the economy to stay together, and hedgekraine decided to their bet an also have an association agreement with the eu, that is when this started to crumble, it is the core of putin's argument. yes, there is a cultural one, a pen russian one, but also an economic argument. they want to bring ukraine closer to them so they can traded to commerce with them. >> to what extent are people managing down expectations of what might result from this meeting? >> angela merkel was very clear that she did not think there

would be much too, out of this. look, the schedule will tell us how quickly to manage down our expectations. if there is no one-on-one meeting, you can manage expectations down. if there is, it is a little sign for optimism. >> on cycles joining us live from minsk, belarus. >> very good. theding lead decoupling in euro of record low rates. what are debts doing to survive? that is next on "bloomberg surveillance." ♪

>> good morning, everyone. we did this twitter thing. where like yeah, no one is interested. we are humbled by your response. thank you so much for your response @bsurveillance. can the u.s. protect itself from the european economy? that is our question of the day. i promise our twitter question tomorrow will be on "breaking bad," or "game of thrones," or

"downton abbey." good morning, everyone. from our world headquarters in newark, this is "bloomberg surveillance." -- in new york, this is "bloomberg surveillance." adam johnson on vacation. >> i think he went to the western states to fly new planes. i will get you your top headlines right now. let's do you and update on u.s. planes flying surveillance missions over syria. it quickly started after president obama gave the go-ahead. the flights could set the stage for airstrikes against sites held by islamic states. stopping the ebola outbreak could cost almost half $1 billion. that is the forecast from the .n.'s world- u health organization. exceed alloll can previous ebola outbreaks combined.

and gaza is heavily damaged after an israeli airstrike earlier today. palestinian health officials say more than two dozen people were hurt. have toppled or destroyed five towers and shopping complexes in the last four days. those are your latest headlines. moment.is a surgical this is different missiles from both sides. >> with clear warning from israel. >> it shifted after that cease-fire that lasted a couple of days. i thought maybe we got over a hump -- >> also make sure all the news cameras get there in time to capture it. we have got this great footage, and i wonder if that is not part of the plan. >> i don't disagree with that. i will just identify there is something different this time, like stage three of israel, gaza, and hamas. >> let's talk about some company news here. news that really got everyone worked up yesterday because burger king is eyeing canada's king horton to move its

headquarters. it is the latest example of an american company looking to relocate to a lower tax company. he white house of course scrimmage to become -- to come up with a plan to prevent this. samuel thompson has some ideas and he also has treasury's year. he joins us from state college pennsylvania. involves plan the treasury to make changes to the tax code, without getting into the my new show of section 385, treasury could pick up the slack because congress cannot do much here. >> of that is right. i believe that the treasury has the authority under section 385 to deal specifically with these and version transactions. in my judgments, debt is being issued in these transactions. that is really sort of false debt, and i believe the treasury has the authority to deal surgically with this type of issued in andeing

version transactions and similar transactions. >> what kind of response have you gotten from treasury on this plan? not gotten any response from treasury. i wrote a letter to the treasury secretary about a week ago, but i have not gotten any response, and i would just like to correct something you said. you said i have the ear of the treasury. i do not have the ear of the treasury. i have communicated my views to the treasury and i have written extensively on this and i suspect that they are familiar with my writings on it. letteressor, i read your to the treasury. i tried to read it like a tax lawyer, and i have got language that reads -- if the corporation is managed or controlled or has significant business operations there -- and then as a tax lawyer i get excited because they can be interpreted different ways. if treasuries could have solved this on their own, does this come down to interpretation and enforcement?

>> well, what you just referred to is not within the realm of the treasury. it is in the realm of the congress. thatury has proposed companies like the transaction and burger king, that the foreign holding company would be treated as a u.s. company is the more thanholders own 50% of the company, but that would be a legislative action and not an administrative action. >> sam, i want to bring in our guest host, tim bitsberger. he has a question as well. >> i ask this as a board member -- a net capital have the right to move freely to enrich shareholder value? i feel like some of these actions being proposed are kind of knit taking and don't really

encompass what is best for shareholders. >> you are absolutely right. capital should move to the place have the mostto profits for shareholders, but the government has the , andation to set up rules when you have rules that allow inverters to undermine u.s. tax system, in my judgment, the government is not doing its job in less it tries to address it. >> thank you so much. x so yes, companies have the right to do that. >> and treasuries now scrambling for ways to see what he can do to reverse this tide of tax inversions. samuel thompson of penn state law, thank you so much for joining us. this is "bloomberg surveillance." when we come back, we will discuss how to make money in a bond market right now. it is a big mystery given that

interest rates stay fairly low and the federal reserve has signaled it will keep rates lower for longer. >> it is really front and center. we are focused on record stocks, but it is about bonds. >> we will also discuss the brazilian presidential elections coming up. ♪

>> this is "bloomberg surveillance." i am scarlet fu here with tom keene and bring the brendan gre. facebook is cracking down on click and beat articles. posts like headlines -- you will not believe what happens next -- will vanish from your newsfeeds. facebook seven made the change and respond to user demand. known for its firefox web browser, is going for the smartphone market. it is launching a smartphone and india. the index cloud fx will have memory of up to four gigabytes. sport-utility vehicle is the new plan for china. that is the latest company news.

matters now to our guest hosted tim bitsberger of bnp paribas. he holds a unique perspective having served at freddie mac and that is cripple to our economy. in post crisis, debt has changed. this is the huge story. let's try to put it in english. if there is a crisis, can we handle the crisis now given that there are fewer players to handle our debt market? >> yes. of coarse we can. i do not think the fed is going can. of course we i do not think the fed is going to do that on the intermediate term. when they raise rates, how are they going to do it? i think all signs point to it being gradual. i just do not see the fed doing anything to sock the financial markets into major disruption. >> but doesn't that reticence to

make decisions lead us down the road to bigger shocks? that has always been the argument, that at some point you need to take the way of the punch bowl, but as we were discussing earlier, i do think that a normalized fed funds rate could we lower than what we have seen in the past. >> within that and the greasy oil within the engine, the bond market and the short form commercial paper market, for that matter, is it slowing "normally" now? >> yes, it is. to that point, that is what you see the federal reserve, the f sock and others want to take a real look at money market reform to make sure those pools of capital liquidity cannot dry up and a moments notice. >> is dodd-frank your enemy, your friend, your frenemy, your worst nightmare?

>> that is a loaded question. i would say all of the above. where dodd-frank has gone too far is given the relative -- regulatory agencies the leeway to do whatever they want. >> if you had a cup of coffee with the treasury secretary jack lew, with your public service and your interesting mix of working on wall street as well, what is your number one to do list for the secretary to help the american people? itfor all people, i will say is global coordination in regulation, it is u.s. quarter nation on regulation, just making sure that all regulators, whether it is with the cftc, the sec, the fed, and their counterparts overseas are all approaching things -- macro -- veryf quickly, macro prudential, are we anywhere near that? >> i'm not sure what they mean by that. -- iey fischer, others

mean, i think that is going to be how the fed will manage the economy going forward, and that is what it is currently debating. >> tim bitsberger with bnp paribas. overet, we need to wonder to you for a data check. >> before we get to the data check, just an update on the news we had run you earlier -- burger king and tim hortons to merge. this is a headline. they are in a packed with 3g, the brazilian private equity company, will own 51% of this new company. they will keep two iconic and independent brands. this is according to a company statement. burger king has commitments for $12.5 billion of financing. we had heard earlier that warren buffett would be involved through berkshire hathaway. the new announcement here is that this new global company billion in aut $23 system sales, over 18,000 restaurants in 100 countries, so quite a large footprint. the news here is that burger

king and tim horton are combining. they are launching a new company in which 3g, the presen brazilin private equity come a, will take a 51% stake. u.s. futures are moving to the best levels of the day. futures are higher right now as we begin tuesday. this is "bloomberg surveillance." on bloomberg television, streaming on your tablet, your smartphone, and bloomberg.com. i am scarlet fu here with tom keene and brendan greeley. adam johnson is off this week. our guest host or the hour -- timothy bitsberger of bnp paribas. let's get to top headlines. former u.s. service personnel couldve the a mortgages get extra help under a plan president obama is announcing today. the president will talk about several steps to help veterans in a speech to the american legion convention in north carolina. he signed a reform law earlier this month in response to the va hospital scandal. a former fbi director hospitalized after a serious

injury and a one car crash. police say the suv driven by louis freeh the rough through 12 and hit a tree. he was alone in the the a call. and a pair of big bets by bill ackman boosted his funds by 30% this year. the billionaire behind pershing square capital market picked herbalife to fail and burger to go up. those are your top headlines. probably getting a little the better for bill ackman given that tim hortons and burger king have announced they will combine in a new company. these are the latest headlines from burger king. tom, i know you are looking through the headlines and seeing what else is happening right now. ask the subhead is very important. this goes to the emotion that our erik schatzker brilliantly described yesterday. i do not think it is a small idea that within $94.05 for canada's tim hortons and the 51% ownership by the buffet

consortium -- there is a commitment to canada. there is more going on than finance. there are some delicacies going on. >> there is a commitment to breakfast as well. [laughter] i am serious. part is how to sell breakfast, how to beat mcdonald's. you can do it with tim hortons donuts, may be. that is part of their plan. >> burger king has obtained 12.5 billion dollars of financing, and 3g capital, the brazilian private equity firm, will own about 51% of this new company. they will be the majority owner. burger king and tim hortons will remain independent brands. >> the key system here is berkshire will have no operating or management duties. it is a preferred equity financing with jp morgan wells fargo providing services. obviously within any buffet transaction you want to know what that preferred path is. -- i think off matt levine with bloomberg view, on this.o the math

i need to know what that coupon is for mr. buffett. tax evasion's are better than others. he is a big fan of raising his own personal income taxes, but he is doing tax arbitrage right now with this deal. of bnpbitsberger with us paribas. this is the spirit of transnational corporations. blue chipt likes companies. from where you said, will we see more of the heinz or more of the burger king transactions? >> capital moving efficiently and enhancing shareholder value -- i think that these transactions will continue. money is cheap, and if there is opportunities, whether it is through tax inversions or other m&a type stuff to capitalize. >> away from all-time at a with heinz with the brazilian team iting in, and mr. buffett, is a new globalization, isn't

it, which bnp paribas, i think of your work and china being an example. >> without a doubt. again, capital is going to flow to the place where there is less regulation, where it can earn the most return, and that is what you are seeing. >> is there a simple fix for this? talk have a minute to about it, but could you change the u.s. attack system to a territorial tax system and solve this problem completely? taxing on earnings overseas has always been a hot topic, but if we are talking about pipedreams, -- [laughter] certainly corporate tax reform would be something we would all like to see. like how it is a pipe dream. >> in the time we've got here, scarlet, which is lena mr. -- we shoulde explain that mr. buffett's mode is to get a cash flow along the way to pay for it.

>> i am sure he get some kind of reward out of it. burger king shares are moving higher in the premarket on the news. we will be right back with more on "bloomberg surveillance," we will continue to discuss the european markets and the rallying u.s. stocks. ♪

>> good morning, everyone. we are live, "bloomberg surveillance." iamb tom keene. with me scarlet fu and rendon greenlee, and we look at another acquisition overnight. i have never heard of it. twitch. and i saidwitching, matt miller will know what twitch is. it is video games. i have no clue. we need to get smarter on this, " will course "in the loop do this in the 8:00 a.m. hour. i am guessing you knew what twitch was. >> i did because number one google had been looking at it and google had been planning to buy it for about $1 billion. the total deal will be over $1 billion with amazon now because they pledged to retain certain employees. also i know about it because i play a lot of video games. i play call of duty, need for need, halo, and what i tips, sometimes i go online and

watch people who are better than i am. >> the value is the world can go in and see what the pros are doing in video games. >> people who have developed celebrity status because their go to certain video games, and they have live feeds on twitch where they will sit there and play video games for 6, 8, 10 hours a day and they develop a fan base of people who watch them and play with them or against them. does this at his desk at bloomberg four hours. >> i am so sorry to sound so old with this question, but is this going to become a sport? are we going to see video games like the nfl? fan of the nflr than i am of watching other people play video games, but that is changing. i mean, video games are becoming more and more like movies and video games are becoming -- yeah, more and more like live sports. you're starting to really see a lot of people log in and watch. 55 million people a month

actively use this website, and when you actively use twitch, you do not log on once and then forget about it. you use it a lot. >> do you see as come is the revenue advertising? >> you do see ads. you see people hawking their wares on their live channels. look, i am so good at call of duty because i drink this monster soda constantly or red bull soda gives you wings, so you see a lot of that going on. ask matt miller, "in the loop" on amazon and twitch and also discussing burger king. these headlines are coming out fast and furious. >> they are. just a more in-depth look to what is happening here. we talked about how they are combining burger king. burying is acquiring tim hortons a shares at a 30% premium. is it a merger or an acquisition? >> it is not a merger. >> if you are looking at how the shares structure is done, then it would be an acquisition. ask matchpoint in the delicacies

within the press release about canada. they want to be a merger is what you are suggesting versus this is an acquisition. >> you can call it a merger if it makes you feel better, but burger king is buying tim hortons. >> are they paying the premium to get it done quickly, easily, and officially? >> i don't know, i will talk with a roundtable of experts to find it why they are paying this premium to get mediocre coffee and not very good doughnuts. >> whoa! ♪

>> good morning, everyone. "bloomberg surveillance." markets,on the equity on the m&a activity, but surging equity price a, if you are not in the market, you should be with liz ann sonders of charles schwab tomorrow on "bloomberg surveillance or co a lot going on. --"bloomberg surveillance." thedam johnson is all for week. our guest host is timothy bitsberger of the np paribas. china says microsoft is operating. theprobe centers on

software maker's media player and browser. amazon buying a web service that lets viewers watch video games as they are being played. the deal for twitch is worth $1.1 billion. 35 million monthly users. tivo looking to capitalize on 's shut down. it is offering a digital recorder for those who do not subscribe to cable or satellite. that is the latest company news from the files of "bloomberg west," and of course the headlines we are monitoring -- burger king, tim hortons merging. burger king is going to acquire tim hortons for $11.5 billion in cash and stocks. >> this is a massage press release. thanks to bloomberg news, giving us clarity between what is one part press release and one part pr statement for this transaction.

let's look at the tax ramifications. matt levine did a phenomenal job last night of providing clarity, tax and version and the benefits canada.or moving to the purpose of a tax inversions ooh, canada has a 15% tax rate and the u.s. have a already for -- 35% tax rate, so we can save 20 points of taxes on all of our income by moving. this is a must read if you are on wall street. .im bitsberger with us fo there is a nice tax plug here. i am sure warren buffett and berkshire hathaway are getting paid to do this deal, and i am sure this makes sense for the shareholders of burger king to do this transaction. >> it is not a pharmaceutical transaction because this is making burgers, making doughnuts, making coffee. it is not the intellectual capital of a pharmaceutical transaction in bermuda or the

cayman islands, but never the less to say taxes are part of this deal where yo-- >> he would not know it from reading the press release where thatpointedly avoid discussion. we do not know the coupon, we do not know how much warren buffett is getting paid. they make clear that berkshire hathaway is a financing source and will not have participation in operation or the management side of the business at all. it is the guide that provides the money. questionegulatory about this seems to be the undercurrent all morning long as we talk about it. does patriotism matter, or is this a question of patriotism? should you be required for love of country to keep your tax revenue here? do you see this as an issue of patriotism, tim bitsberger? >> not at all. one of the sad things about this is it is not a call for a cross state i'll tax reform. people are kind of hungering down beyond their political parties. it is creating the divisiveness,

and it is causing a problem where it should be causing a solution. yell. bitsberger, economics, work in the treasury, worked with freddie mac, that this could be a catalyst deal to galvanize paul ryan or a democratic senator from out west? burger king is about america. this is not some esoteric drug. this is about a bacon cheeseburger. >> i would hope so, but it is august. we have midterm elections coming up in six weeks. congress is only in session a few more days. over there,amera erik schatzker is in mourning, he has got his maple leafs jersey on, screaming about tim hortons -- this is o unamerican. plan, ally good reform solid way to figure out the best way to get corporate tax reform done, everyone dropped it like a hot rock. all ryan, barack obama, nobody

wants to touch it. >> that is right, and that is the political reality. it is unfortunate and embarrassing, but we refuse to move forward on that issue. >> we had on earlier samuel thompson from penn state where he was talking about how treasury had room to maneuver, it can make some changes. do you agree with that idea that treasury should move unilaterally because congress certainly cannot get anything done? >> i would hope the treasury would not do that. to me, to tax and spend is the role of congress, rights, and i would hope that congress would show the leadership -- i fear that treasury is going to use that for its own political end. >> i want to emphasize here, the great job of our headline team worldwide, i want to push back against the spin from not only mr. buffett, from others. we are literally translating across bloomberg -- i love this headline "world's third-largest quick service restaurant," it sounds like a pr

statement. >> they do not call themselves a fast food restaurant. fast food is bad for you. >> service what you want. transactions a greased by tax avoidance, and i with whatith respect we do in america, but i want to make clear the matt levine bloomberg view article clearly shows that they are just sense versesmon radically outdated u.s. policy. am i right? are 100 percent right. >> seriously, scarlet, you do this better than anybody i know in business media. i have not seen brendan gleeson -- brendan greeley, a spun set of headlines that i see now. >> like ejection or hieroglyphics. >> this is like if spielberg emerged with katzenberg. >> devin leonard at

ek" asked is it all financial engineering or are they improving product -- i think we have our answer. >> we need to get to our agenda. we are keeping and i on this burger king-tim hortons story as the headlines continue to pull out, but tom, you are focused on the equity markets. >> thanks to matt miller for telling us the difference between acquisition and merger. equity move higher. money is dirt cheap. that is the answer. we have got pros on "surveillance" to tell you about it, but i will tell you scarlet, s&p 2000 yesterday, with no end in sight to what yellen will do, the bears have been completely silent, including doug cast, a "surveillance total class at a few days ago on "surveillance." -- a total class act on "surveillance" a couple of days ago. >> tom, you have to move on to

the radio. brendan and i will take it from here. i am looking at case-shiller. the numbers come out in a clock a.m. isy are june numbers, but it on the heels of disappointing home sales numbers that came out yesterday. this is a part of the economy that the fed has highlighted as a concern. jackson draghi and his hole speech looked at the collapse of the construction industry in various countries in europe. it looks like spain has nothing now, so are we going to have a construction industry here? i am looking at the $33 smartphone at one on sale in india. i am wondering when apple and google are going to start to freak out because it is a mozilla smartphone, really good for the carriers, bad for the traditional device manufacturers. >> disruption in the hardware space once again. let's get to our twitter question of the day. we asked everyone -- can the u.s. protect itself from the european economy? tim bitsberger, i want you to weigh in here. first answer -- no, any firm will suffer when one of its biggest customers is in trouble. is such aa, the eu

customer. agreed? u.s.'s largeste trading partner. the eu's gdp is comparable to that of the u.s. u.s. growth has been solid. things are moving forward, but certainly the data in the eu has been disappointing, and i cannot b be beneficial to the u.s. >> the best way is to update and -- the best with the u.s. can protect itself is a stopping and versions by updating its tax code. >> would it be so easy. should be able to protect itself, shunted it? rhetorical question. >> in order to continue this growth, we need our partners around the world to also grow. yeah. >> we are waiting to see what mario draghi actually does when it comes to that stimulus. tried before.n

timothy bitsberger, thank you so much for joining us. tim bitsberger of bnp paribas. "bloomberg surveillance" on radio continues. "in the loop" is next on bloomberg television with matt miller this morning. have a great rest of the day. ♪

>> good morning. it is tuesday, august 6. we are alive and bloomberg headquarters here in downtown that -- downtown manhattan.

i am matt miller. of largest ever acquisition a restaurant chain. warren buffett is jumping in as well. the s&p at the top 2000 yesterday for a brief moment. could this momentum continue? an investor is not so sure, marc faber. and jay-z is teaming up with kevin durant to outbid out against nike. the sponsorship war is heating up. here is a look at our top headlines. a done deal. burger king you read to by tim horton's for $35 million. it will move to canada and take advantage of lower canadian tax rates. the u.s. has begun surveillance flights over syria. that can lead to airstrikes over islamic state militants.