♪ >> from bloomberg world headquarters in new york, i am mark crumpton. this is "bottom line," the intersection of business and economics with a main street respective. goes to estonia and sends president putin a morning, and a bankruptcy trial gets underway, and a look at some unconventional ways airports are trying to make money. ♪ to our viewers in the united states and for those of you joining us around the world,

welcome. we have full coverage of these stocks and stories making headlines today, and a multibillion-dollar bankruptcy case. we explain why turkey is so important in the war on terror, and let's begin with peter cook him a following reports of another american journalist executed in iraq. afternoon, the associated press reporting there has been a new video that has been posted to the internet showing the execution of the 31-year-old freelancer who work policy"e" and "foreign magazine, last seen in serious in 2013, stephen -- steven sotloff, and there was a fellow beheaded, and was his life was threatened by islamic state militants in that video, and are now, we are getting reports, unconfirmed, that there is a second video now

that has been posted, another message to america. administration officials cannot confirm the authenticity of the video, but they have been asked to comment on it, and here is he state department spokeswoman. >> the intelligence community will work as quickly as possible its authenticity. if the video is authentic, we are sickened by this brutal act taking the life of another american citizen. our hearts go out to the sotloff family, and we will provide more information as it becomes available. lookinggain, the u.s. to confirm whether or not this authentic. about the questions execution of james a foley last they are looking to see,

if this is, indeed, authenticated. lastou will remember month, there was a message given directly to the islamic state from the mother of steven st otloff. >> peter, how will this change the debate over the islamic state? >> there was an intense debate already surrounding president obama's policy towards the islamic state, and this is only going to ratchet it up more in terms of the military option. he has been debating on whether and you can more, be sure that if this video is authenticated, that debate is only going to get louder, and there will be more calls for the u.s. and others to step up their response. >> peter cook, from washington, thank you. for more on the militants, i am by ourfrom washington

reporter. wife they had successfully intoht the mosul dam back and theyf the iraqis, will be hitting the islamic state throughout northern and western iraq, and as the president himself admitted, you cannot attack isis without also attacking them in syria, because they are not only using that as a base and a haven, but they are at that border, pretending as if it does not exist, and we have talked about the american journalists who have been executed, and we believe they were executed on the syrian side of the border, but president obama was really ill or read for it, and he essentially said we do not have a strategy for this

this.was pilloried for you are talking about this being a linchpin in serious and iraq. how is this so? that isis true, and because turkey shares more than 500 miles of a border, across which the last three years of this uprising against bashar al-assad, it has been very easy for foreign fighters as well as any turkish militants to cross right over into serious and join these militant groups, including isis operating in syria and iraq, so now, what the united states has made clear that they want from turkey, they want to shut down that border. the problem is turkey made itself one of the key enemies of bashar al-assad, and so that is also going to be hard. how do they shut down this whole network of safe houses that

exists to get these foreign fighters in? >> do we have any idea whether turkey is going to cooperate? >> they realize that isis is a huge threat to them, but there are diplomats and family members, including a toddler, who are being held hostage by isis right now, so turkey does not want to have something horrible to the hostages, and we do understand they are trying to stop foreign fighters from getting in and getting back out to the u.s. and europe. >> we did learn last night that a group did target affiliated known as al-shabaab. what do we know about them? but we do know that they did do ground strike against al-shabaab. what we have not confirmed is whether the leader of al-shabaab was killed in that strike. that, in d hsu said is fact, that man was in the convoy. ishu said is that,

in fact, that man was in the convoy. the u.s. has put out a $7 million reward for information on the whereabouts of this al-shabaab leader, and we are looking to hear whether, in fact, he was killed in that strike. >> indira, thank you. and president goes to estonia, and he will go also to wales, and brian -- ryan chilcote joins us from london. ryan, what does the president what to say to the leaders of estonia, latvia, and elsewhere? what none of them want to become the next ukraine. the difference between them and ukraine is they are native members, and they feel it push comes to shove, they are not confident that the other nato

will, to their aid as article five calls for, so this is president obama's way of saying, yes, we will defend you if there is something from russia, and it is a way to telegraph that to the russian president, as well. >> what is the difference between the ukrainian troops and the army was quickly retreating, giving up some of the gains it had made, and i think the sense is they are not going to get back some of the territory they are missing. the territory they retreated from, they blew up the runway, as they left, and that is something you do if you do not think you are going to get the airport back, and you want to deny your adversary, the ability to use it. things are heating up.

about focusing on statehood, and that had a lot of people concerned that vladimir putin may want to ette, somethingl between ukraine and russia, , and theyup until now talked about them having me --sed and not autonomy. what heg clear about really wants. his spokesman then came out and said, no, no, the russian president is not pushing for independence and that part of the country, but this is part of what he has been saying that definitely has everyone on edge. >> ryan, we have about a minute left. how is this affecting their economy? >> they just said that ukraine may need as much as $19 billion

if the war continues through 2015, and so far, the imf has already pledged $17 billion, so just to give you a little perspective, ukraine is in dire economic shake. it is already the worst-performing economy in that part of europe. east of the country where the fighting is going on is its industrial heartland. it is 1/6 of the country. and they have to pay for what they were not planning on, you can see how this is becoming a problem, obviously, for the imf. chilcote,rg's ryan and coming up, detroit's penalty trial gets underway. we will have that story. ♪

its customersand may be the latest victim of

hackers, and details are still emerging, and julie hyman is following the story. julie? >> thank you. this was first reported a law, a journalist who specializes in -- this was first reported in a blog by a journalist who specializes in data security. what he calls the cyber crime underground, or per traders in these luminary investigations. be the same russian and ukrainian hackers who also were to blame at targets, of course, that massive data breach that we talked about, sally b as well as sally beautyaid -- chang, and he. said it could affect all of the home depot stores.

and there are nearly 1800 targets, so it is not clear about how many cards this could have affected. >> it is a court hearing, a final hearing in the mass of the municipal bankruptcy underway. michael mckee is following this for us. >> the morning was taken up by motions about what evidence may be admissible. shut offnvolving water the for those who have not paid their bills. he said he would rule today. $18 are not able to meet billion in debt and declared bankruptcy just over a year ago, and they were asking about their plan to fix it be approved.

and they are looking to find another 1.4 billion to invest in police, fire, and city services just to keep detroit alive. and retired city employees will see cuts in their pensions and big reductions in their cost-of-living allowances. the city also wants to cut what it owes financial creditors in some cases by as much as 90%, and that is where it comes from. guarantee, they are on the hook to lose more than $1 billion if the plan is approved, and they are fighting tooth and nail against it. these are two of the biggest questions in this trial, which could last a month, by the way, is it fair or fair enough under bankruptcy law, and is it the grand bargain deal to provide almost $9 million while saving the art collection from possibly

being sold off to pay the debt, and should the city pay its bills by selling its treasures? he is quite fed up, dismissing the latest petition, accusing the company of making defamatory allegations about the local district judge and mediator in the bankruptcy. he is also threatening to sanction the company. is a a tough judge, but he very interesting character, as well. he went to the university of michigan law school and was appointed a bankruptcy judge, but he isn't expert in this, but he is also a rock musician. in the background behind the lead singer there, he really is a motown man. >> michael mckee, thank you so much. and the president and ceo of the detroit regional chamber served as head of an administration

under george w. bush, and .elcome back to bottom line >> litigation aside, can you point to any strides that they have made to get things in order have really turned the blocking and tackling of services really on its head, some of the basics that many of our cities take for granted, police service, picking up the garbage, streetlights. all of those things were, frankie, missing in action in detroit, and now we see those basic services, online. there is a lot of private investment that has occurred over the last five years. opposed toe those this bankruptcy plan that was outlined.

this was in favor of pensioners. the entire process have benefited from transparency? >> well, i think the transparency has been very high. for synial guarantee cora, i am not a fan, but this is certainly the best unit can be reached. don't forget that the grand bargain, as your caller mentioned, is being dropped on the table by philanthropy, state government, and private donors, that does not have to be there, and this is money that this year would not have, and this is because of the detroit institute of art, so if that grand bargain goes away, at almost $1 billion goes off the table. >> there is a story on bloomberg.com today that says, in the last decade, did big

governments in the united states , ase as much on charity detroit did? was he hooked on philanthropy? was the lure of rye that money -- of private money too large? as your bloomberg article mentioned, the first to san francisco, and that is a lot of new tech money. and the second is detroit. so you have two cities very different, san francisco and detroit, that both have a lot of private philanthropy, so whatever you would say about detroit's philanthropy, you would have to say the same about san francisco. moving alongocess too quickly? the california cities of san bernardino and stockton, two much smaller municipalities, a file bankruptcy before detroit, and those plants still have not been finalized. is this a question of wanting to

get things done before the contract of the emergency manager expires by the end of the month? >> everyone here has had a real sense of urgency, the governor, the mayor, and the judge himself has had a sense of urgency. there is no point in having this drag out like a knife. let's use the example of the auto companies, right here in michigan, that went through bankruptcy not too long ago. they did it quickly. they did it efficiently, and they rebounded incredibly well. let's use this as a template for how we handle detroit and other cities he may be in a similar situation in the future. >> sandy, we have about 30 seconds left. the retirees are going to get something out of this, but they were promised something before, vanished.promises are there any guarantees that they will not get hosed this time around? >> this is obviously a federal

bankruptcy proceeding, and that is why this trial that literally started about 10 minutes ago will last about 45 days. that is to assure that everyone in this, if the plan is approved, everyone gets what they are promised to get, and that is why we work in court right now. baruah, always good to get your perspective. thanks for your time. >> thanks for your time. it is the backe, to work, back to school on the markets, when bloomberg's "bottom line returns. ♪

♪ we're coming up on 26 minutes past the hour, and that means we

are on the markets. i am julie hyman, and i want to talk about home depot, the shares falling after the supply store says they are investigating what could be a massive credit card breach created they say it could be from the same group of hackers that were behind the breaches at target, sally beauty, and p.f. said, and what they have in response, at this point, the spokesperson said, i can confirm we are looking at some of the unusual activity, and we are looking at our inking partners, and protecting our customer information is something we take very seriously, and we are aggressively gathering facts and working to protect customers, as it is about how many may be affected. we do not have the confirmation, but they are looking into it.

and the nasdaq is trading a bit s&p and the dow are being dragged down as oil is being dragged down. we will have more on the markets in 30 minutes. " is next.ne ♪

♪ >> welcome back to the second half-hour of "bottom line" on bloomberg television. i am mark crumpton. and time now for our commodities report, and my colleague su keenan joins us. >> good afternoon, mark. we are seeing oil, gas, heating oil all hit hard, rent crude low, ando a 14-month this has a lot to do with speculation about the end of the summer peak driving season here and that demand will be hurt.

report, thert particular post holiday selloff, one man says we're going into the final turn around, as it is of the bullishl exuberance has been exercised out of the market. check it out. you are seeing crude oil down more than 3%, and the whole complex taking a hit, and the difference we are seeing from last week is that ball him is -- is that volume is coming back, off the low, and the 100-day moving average. for oil, it was the first retreat in five days, and going into the fourth quarter, they say energy is generally weaker. we know there is plenty of supply, so on the supply side, the market is going to remain eric. meanwhile, regular gasoline continues to slide. it is down to $3.43 nationwide per gallon, and that is the lowest price since 2010, according to aaa, and we are at

the highest level for this time of year since 1990. silver, they are hitting an 11-week low. >> it certainly came in stronger, and signs of a stronger economy tend to boost demand or save havens, so as was pointed out, political concerns have an effect. palladium futures, meanwhile, dropped the most, down more than -- it is the biggest decline since june 12, and we have been seeing palladium on a bull run as of late march. >> su keenan with our commodities report. su, thank you. and providing significant returns to retirees, pensions, and life insurance companies, and my next guest says that is going to change in the next decade. my guest helped as a managing director at morgan stanley wealth management, and he joins

me now along with my columnist from bloomberg news. thank you so much. john, change in the next decade. how dramatic? >> pretty dramatic. we are using a pretty generic term, and you can use the barclays or one of the indexes and 2013y for that, was the first negative year of return, about 13 points. >> what changed? >> basically, what changed is that yields have been on a downward trend for 30 years, and they hit bottom, and doing whatever it takes, markets breathed a sigh of relief. riskiertart buying assets. >> a false sense of security? >> i think it is people getting over a crisis. -- bonddo you think bob

investors can expect? bei think it is going to significantly low, which is our strategic timeframe for investing. >> that means negative real returns, because that is lower than inflation. so our investors going to sit back and take it and accept it lower returns? >> we certainly hope not. we have been advising a more tactical approach, the old adage about getting your bonds portfolio to do well, you cannot do that anymore, to doing things like picking certain asset classes within bonds, moving in and out of different asset classes as opportunities and risks resent themselves, kind of a changing of the mindset. let me give you one quick example. in 2013, a bad year for bonds. the barclays was down, the high yield up seven. going into high yield, you have to be able to have more flexibility. >> ok, you used the word

tactical. does that mean you are encouraging investors to be more proactive? >> absolutely. the duration, credit quality. broadly speaking, you have to expectation, because they do not have the income or return that you had in the previous cycle. >> is another thing if you start to increase leverage or other types of risk taking behavior. this led up to the 2007, 2008 crash. >> the high yield market generally follows economic cycles, right, so going into 2008, leverage had gotten to ohio. hubris was widespread with managers doing silly things with their talents sheet, broadly speaking. some of them were being good about it. -- silly things with their balance sheet, broadly speaking.

cash balances are really high, so we think we are still a ways away from that next turn in the cycle. happens, probably into a recession, you're probably have another recession. >> ok, so where do they get this? >> what we are suggesting is you just have less of your bond allocation in the formerly perceived a safe haven of bonds, and i still think they can lay a role as a ballast. >> did you just turn a paradigm on its head? fromseems like a shift regular thinking. >> the spanish 10 year bonds, what is a safe haven these days? >> the answer is very little. if you play it right, maybe you get a positive return, but in

all likelihood, you are going to get zero or potentially even a negative return. where it could stay fairly high, things are perceived to be riskier bonds, like corporate bonds, and may be emerging-market bonds, as well. ackay, and my jon m colleague, lisa abramowicz, thank you. about hackingbe the apple icloud service to illegally access new to photographs of jennifer lawrence and other celebrities. photos ofnude jennifer lawrence and other celebrities. >> after nearly 40 hours of investigation, there was no systems breach. in other words, apple's servers

were not breached, for example, and how did this attack happened? they say that they have seen it that certain celebrities were attacked, a hack of security questions, something that has become all too, and on the internet, and nothing the cases that apple has had resulted in any breach of any of the apple systems, including be icloud or the iphone, something earlier howrts had theorized about, exactly this happened, and they say they are continuing to work others, and it also encourages users to use with they say is a strong password and also to enable two-step verification to try to prevent this, so in some case, what the hackers will do is try a series of different passwords until they hit upon the right one, so this might have been one of the tactics that they used in this particular case, but, again, we hear apple saying that their

systems did not fail and were not breached in these cases. >> our senior markets correspondent julie hyman joining us again. julie, thank you. still ahead, our latin american report and some good news for the brazilian economy. "bottom line" continues in a moment. ♪

texas things it has a low-cost answer to military surveillance, a box that can spy from the

stratosphere. ♪

is time now for today's latin american report. production in brazil rose more than forecast in july come the increase coming after the innomy listed into recession the second quarter, and this is the first increase since january, and the president has attempted to revive growth with tax cuts, billions of dollars in credit, and higher social spending. that is your latin america report for this tuesday. next, american airports looking for some unusual ways to find

new revenue streams, but this one might be the most unusual yet. we will have details when we come back. ♪

>> when was the last time you were at a jampacked airport? hard to remember, right? wipedomestic flights were from the skies between 2007 and 2012, leaving airports strapped for cash. bloomberg's alix steel got a look at some conventional ways -- unconventional ways they are trying to make money. >> imagine this. you are taking off for vacation. you settle into your airplane gate,pushed back from the and ca 78 foot ridge? well, get used to it. airports are desperate for cash.

the great recession hit the industry hard, deteriorating has injured traffic, airline bankruptcies, mergers, flight goingks, and see airports to controversial and unconventional ways to make money. one of the biggest losers? pittsburgh international airport. over 14 million people traveled through its doors, but 10 years later, that number was cut in half. but it was devastating. when 9/11 hit, then u.s. airways into bankruptcy, there were 16bably this team thousand, thousand employees from u.s. air who lived in the region who lost their jobs, and we went from 21 million flights per year down to seven or 8 million flights per year. airline almost did not rvive, and a lifeline from pennsylvania gave it some breathing room, but it was only when it turned to fracking when it found its savior. a natural gas producer is paying the airport money to drill on

its land to tap into huge natural gas resources buried in the marsalis shale. >> we are standing on pat number two for our project at the pittsburgh international airport, and what you're looking necessarily where you can optimize the surface disruptions. >> the airport has already andeted money from consol, the rest will come in royalty payments once production starts next year and capital expenditures. it passed by only one vote, making it one of the most controversial, and other airports have had crazy ideas. some cases solar panels or wind turbines, and now, pittsburgh gets 23% of its

revenue from non-aviation sources, like this deal with consol. helps what we need to do at the airport. >> alix steel, bloomberg, pittsburgh. with myet smart" colleague trish regan comes up at the top of the hour, and she joins me now with more on cyber security. >> yes, the head of the nsa is going to be joining me with an exclusive interview, and we will talk about what we have seen as of late, and of course, coming out of home depot, that there may have been a cyber attack at home depot, and jpmorgan as we learned about, and then we are learning about the next big threat to the system which is come fast, a kind of cyber warfare, that officials in government circles are looking at, that it could be a really catastrophic event. there is this argument from the administration and maybe

some of the rules are mandatory, and other saying maybe we volunteered to do this. right, and jpmorgan spent millions trying to fight this, and they still got hacked, so one of my questions for general alexander is what can be done, what should he done, what more needs to be done to prevent this, and i also want to get his reaction, of course, on this report that another american journalist has been murdered by the islamic state. and another guest is coming on with a new technology that is basically going to come in where off, and they think they will be saved from problems with other networks, so we will get his view on that. >> all right, trish regan, at the top of the hour with "street smart," thank you much, and after this break, "bottom line" continues in a moment.

♪ bloombergsday, the sports business summit, with executives and star players discussing issues and trends in a multibillion-dollar industry, and bloomberg tv will be there with special guests throughout the day. join us with exclusive coverage

thursday on bloomberg television. get the latest headlines at the top of the hour on bloomberg radio and streaming on your tablet and on bloomberg.com. that does it for this edition of on bloomberg television, and i am mark crumpton. thank you so much for joining us. i am mark crumpton. i will see you tomorrow. >> it is 56 minutes past the hour, and that means bloomberg television is on the markets, and i am julie hyman. let's take a look at where the markets stand. it is about one hour before the closing bell, and the nasdaq is still holding onto a game, but energy shares have been following with energy prices dragging down the s&p 500, in particular, today. however, the longer-term looks sunny, and headlines grab this the economy being said to be slow but good enough to 3000 byhe s&p 2020, and a senior strategist

reacted to that seemingly bold call. said it was not out of the realm of possibility. something like that could happen. we saw positive growth of 6% per year. let's bring in mike, since you are looking at him, our bloomberg news stocks editor. bloomberg news is known as a bear.-- she is known as a pretty average. >> it is about an 8% advance in the s&p 500 over five years, which, if you look back historically, that is pretty close to the average returns we have had in the last century or so, and it would require earnings growth in the morgan stanley estimation, so it really would not require much expansion in valuations, which is pretty remarkable. a lot of people obviously worried if we get to a high-valuation level, but this could get to 3000 in five years. >> what it does also seem also

is there would not be any disruption that would take us off line of that slow and steady growth. >> yes, the call is made with its chief economist, and it is predicated on the idea the economic expansion will continue through them. onre could be a double take that, because expansion in the u.s. economy has lasted less than five years, and we are already past that, more than five years now, and longer as time has gone on, and they cited the 1991 to 2001 expansion, 10 years, and that is the longest one, and they say this one could be even longer. >> what is interesting, the point a made, and the point that other commentators made this morning, just because it has gone on for a while is not in and up itself a reason. people say the bull market is old and that it has gone on for so long, but something else has to stop it, not just its age, right? what yes, they look at able on

china different economic indicators, and what they are looking at is hubris, when executives get a little too confident, and they boost inventory levels, and they boost capital expenditures, and they take on a lot more debt with this feeling of hubris that things are going to continue, and they say that the u.s. consumer has deleveraged so much that there really is a lot of sort of pent up demand. >> interesting. another said, i am not willing to go out that far, 12 to 24 months, and that is about where i will go. and from bloomberg news, thanks ismuch, and "street smart" next. ♪

>> welcome, everyone, to the most important hour. we have 60 minutes to go until the closing bell. stocks falling to all-time highs. the s&p had its best month since february. i am trish regan and street smart starts right now. today, the islamic state is making good on its threat to washington. the stream missed