should you fear the stock market? cool foraraleley is too school. adam johnson is sculpted and powerful. good morning everyone. we're live from our bloomberg headquarters in new york. i am in tom keene. me, scarlet fu and adam johnson. morning freezes about players. with the ceo.fun survey concludes that japan will need a new stimulus again of $50 billion to offset a shrinking economy. how is your bowtie? >> i was with christy turlington yesterday at cantor fitzgerald. she said it is not straight.

>> i hope you invited her to fix it. >> she will be a guest. 2020. >> there's always hope. japan and china agreed to meet with south korea. they will try to figure out these territorial disputes, including the china sea, drilling rights. in the u.s., we have retail sales that 8:30. >> that is important. 56% of u.s. gdp is due to consumer spending. add in health care and you get close to 70. darden restaurants will also have earnings at 7:00. one item of note -- this is big. we all need new iphones because the new phones are going on sale.

you can preorder. i am not sure when you can pick it up. >> a couple weeks from now. ear was an indication, it could be a couple months. >> we heard the site was down this morning. it is up now. i talked to josh. he made clear the big one. big battery. it is all about the battery. that is the extent of my knowledge. >> it is bigger so i can play spider solitaire. >> i want to play destiny. minecraft? let's do a data check. it is a big nothing screen. there is a lot more going on, besides the euro. go to the next screen. vix is showing some of the

pressure from the week. the two year yield is a .57, rounded up. we have higher two-year yields. when will the fed acts begin? nicely situated. ruvell is front and center. russian central bank kept their rate at 8%. u.s. is zero bound. paper, witness -- litmus 37.25. here is the asian crisis. --s is yen versus the streets ofn south korea selling their bracelets. so, asian financial crisis. here is korean strength. japanese strength -- this is the tension now. how about jon ferro in london? these interdependencies of currency markets show that they

are in now. >> especially with exporters fighting off. >> is that a good friday turn? front page. >> russia is threatening to retaliate following sanctions. added companies to the list of those affected. --t are trans the u.s. will deepen and broaden its sanctions against the defense industries. >> neft. in the case of some of these oil companies, their subsidiaries. in some cases. you wonder if there is some wiggle room. >> i was surprised by this. i thought bloomberg captured this, how finely the eeo got out in front of putin's dialogue.

maybe what we are just now staying -- seeing. government officials, five killed in the cease-fire. some 800. >> 800 injured. >> thank you, tanya. 873 in ukraine. >> there is a cease-fire. by the way, we saw the same thing when the cease-fire was announced in the west bank. officially, there is a cease-fire, yet shots are being fired. arab nations are signing on to join the u.s. to fight against islamic state history ms. =-- extremists. their shareee to do and contribute to the military campaign as appropriate. no one is saying what that means. >> it is hard to quantify. >> lack of specifics.

>> paul brummer will join us. talk about a controversial figure. he will join us at the top of the next hour for an extended conversation on this phrase, boots on the ground. what john boehner said yesterday -- we will go to phil mattingly on this. he says there cannot be an f-16 war. >> even if it were, you still need boots on the ground too. withpaints the targets lasers so the bombs can go where they need to go. >> it is day 2. >> it will be a lot longer. paul is joining us in the next hour to discuss this further. our third front-page story -- the government threatened the yahoo! with a fine. >> i'm glad you bring the separate >> this comes from documents that yahoo! released yesterday. on for theve permissi release. they're partially redacted rid

yahoo! eventually gave in and the data was used in the nsa program. >> i don't see marissa mayer's name here. >> this was pre-2000 and eight. it was something all the big tech companies were dealing with. >> why are we surprised? >> we are also priced at the extent to which the government was pushing the tech companies to give up data. it is all coming out now, especially as we try to figure out how much cyber workers are taking place. >> very good. the associated press reported earlier this morning -- on these new sanctions. they're enforced against russia's previous penalties. what value have they been? we go to hans nichols to link in the sanctions with the president's news in ukraine. what is different this time? first., the eu went

this is really them going ahead of the u.s.. the sanctions prevent subsidiaries from raising funds. they promote longer maturity than 30 days in europe. something similar to obama later today. >> can russia retaliate? >> yes, and that is what everyone is waiting for here. an, these sanctions have been talked about for the better part of two weeks. they were finally published in a brussels register. does russia retaliate beyond cars? they are talking used cars and clothing. do they control airspace? do they know u.s. originated flights that fly over russian airspace? be a significant escalation. >> you reported extensively on

the relationship between angela merkel and russia. she is curiously absent in these most recent talks. >> i would not goal so far to say as absent. when this asummit, gelled together -- there was a big dispute on whether or not to implement them, because there's a cease-fire. the cease-fire is not exactly durable. it is not a cease-fire in the literal sense. use all over the last couple of days, cameron and merkel made sure that the sanctions were published in the official eu speech. now, do you have an off ramp from the sanctions? at the end of september, that will be reviewed. >> would we expect to hear from putin on this friday or into the weekend? >> i suspect we will hear from putin. he is in the eastern part of his

country today and he is traveling back. he is not someone with a great deal of authority. >> hans nichols from the news bureau in berlin, thank you so much. let's turn to the u.s. market. they have been higher. they go from the lower left to the upper right. it will always be good and better in their dna. earnings growth has continued. it is absolutely an uncorrected, perfect bull market. golub is a genius until september. we make fun of it, but it has been an extra ordinary run. >> there are a couple of things. the economy is showing signs of improvement. expectations are that we will have gdp jump from 2% over the last couple years. we think we will have $119 this year. $130 next year. percentage this year will go up

8%. next year, about 9%. >> this is critical. really important is thinking earnings over revenue growth. what is your revenue growth estimate? >> revenue growth has been about 4%. 6% over the next year. >> that is just critical. that is the heart of the matter. >> given all of that -- where are you most worried? we talked about investors climbing because there is uncertainty. what are you worried about? >> probably the biggest worry on investor's minds -- we don't know what the fed will look like. if inflation picks up, the fed will be forced to move faster. in my worried, probably not. >> is that priced in? >> it is probably priced in that inflation is tame. some people will love it. >> on the top line of revenue

growth -- a piece must be a bout of inflation. >> you just heard jonathan say that earnings in 2015 or $130. in 2010, there were $80. >> are you doing math on a friday? >> i'm doing that. you are a ceo at a fortune 500 company. why are we hearing more companies doing victory laps? or is that the wrong tone right now? >> i think the mood is up. it is up across the board. you used to say that zero is the new 3 or 4. overall, i think people are wary enthusiastic. there is still always worry. we got ahead of ourselves a little bit. then, snapped back. i think people are trying to be very reserved. >> ok, jeffrey hayzlett is with

us. scarlet fu, help me here. it is a first-person shooter video? >> we're talking about the game of the moment. we will talk about the profitable industry, minecraft. we will discuss what is going on here. this is "bloomberg surveillance." here is adam. >> i wish. ♪

>> good morning everyone. presidential envoy in 2003. we will talk to paul bremmer about what they would be doing. maybe that is john kerry in 2014. an important conversation with the always controversial paul bremmer. look for that at the top of the

7:00 hour. this is "bloomberg surveillance." we say good morning to you. i am tom keene, with me scarlet fu in adam johnson. news, we'reny looking at the bank ability of video games. the destiny game is on track to become the most profitable game ever, succeeding halo. the first to share raked in $500 million on its first day on the market. our guest, jeffrey hayzlett, no summer. he voices one of the sol diers in "destiny." >> it is like, i am running out of ammunition, more, more, more. >> everyone talks about the imminent death of gaming consoles, right? everything is going mobile. zynga has been one of the big sellers. why are they so resilient? you to play this

at home. i know these gamers. i see them and they play all my long. they play across the internet with many people. you cannot do that as much -- >> are they scarlet fu's kids and jonathan golomb's kids? >> these are people 18-40. >> this is the market that all the people are chasing. >> huge. so, it is more than just a gaming platform. it is part of your living room. >> big tech is taking video games for a seriously. microsoft is in talks to buy the maker of minecraft. amazon bought twitch. facebook bought oculus. why is big tech seeing gaming as part of their strategy? >> they have to have the games for their platform.

they went and did this game with destiny. they used to do the halo game. they bought that and destiny was able to produce there for a while. we're talking about big investment across the board. they have been beating microsoft for the last 10 months on those consuls. >> john, it to me it is about margin. retail, two cents on the dollar. apple brings it down to a $.25. apple is an amateur compared to the margins these guys make. >> that is why people of the software business in general. whether it is internet companies -- >> $.60 on the dollar? >> it has to be higher. $500 million to make it market destiny. doesn't it generate $500 million in revenue? >> units across the thing is $60

per piece. >> by point of contrast, the top grossing is dirty and the galaxy, raining and almost $300 million. this is a hits generated business. >> what i thought was interesting is the way they market this game. they kept this locked down. it was secret. i did the voiceover and i could not talk about it. >> is that a shameless plug? what to do when you do a voiceover for a game? >> they go into a little recording studio, next door. paul mccartney was recording the sound. --paul mccartney? >> they say pretend you have been shot, pretend you haven't stamped. >> give us -- 3, 2 -- >> you have been invited to come on surveillance, your response? >> same thing. >> is there a steven spielberg

of this racket? >> there are tons of these folks who are worshiped by these guys. >> what are we doing? we have great jobs. >> we are stiffs in suits. when do gamers make the transition to movies? >> you have seen some of those with "tomb raider" and others that have come out. you will see more and more. interactivity is the key. these are cults. they are into it, they are doing it. that is waht that they do. >> peter king kludge -- dinkl age? >> jeffrey hayzlett is one of our guest hosts. kodak.ceo of eastman >> twitter question of the day -- who was the most effective this week? president obama, tim cook, or

jack ma? >> tweet us. we will be right back. ♪

>> it is a friday in the nations capital. here is a gorgeous sunrise. they are moving forward from the president's speech. we will go to bloomberg politics for their perspective over the last 48 hours on the president's important comments. good morning everyone. the media to a morning must-read -- right now, out of washington. appear because of the post-american world. i think it is a terrific effort,

little bit dated. here we go again. and then later on, in this essay, the u.s. has declared war on another terrorist group. the military intervention in the region will work only if there is an equivalent, more intense, political intervention. this sets us up for paul brummer -- bremer in the next hour. >> there are some in the questions. the white house had indicated that this conflict -- probably not. >> the idea of a short war -- this is a generational struggle. >> it is becoming a multigenerational struggle. we were in iraq for what? 10 years? we could not fix it then. i don't know why we think we can fix it now. did they even want us? we are americans. we are different. their regional

barrier, we will talk to paul about the great controversy. >> and of course, he will be our guest in the next hour. that is coming up at 7:00. that does bring us to the twitter question of the day. ddress,he president's a who was the most effective? ma?a tim cook, or jack >> i think it was jeff paisley. >> tweet us.

>> good morning everyone. we are at our world headquarters in new york city. foreign exchange -- ever weaker russian ruble.

decidedly on the move this point. this is "bloomberg surveillance." we will be driving a motorcycle later in this hour. right now, top headlines with adam johnson. has beenpistorius found guilty of culpable homicide and the shooting death of his girlfriend. culpable homicide? that is equivalent to manslaughter in the u.s. the judge had already ruled that he was not guilty of murder. he could actually gets 15 years for culpable homicide. and arab nations are promising to do their part for islamic state extremists. leaders met with john kerry in saudi arabia. they called for a coordinated military campaign. it is not certain what they will do. and, in pro football, the baltimore ravens criticized the ray rice controversy last night. they beat the pittsburgh steelers handily. the win came three days after

rice's contract was terminated for punching a woman who was his wife. >> single best chart, 17,049 - >> this is on the market super cylc.e our question goes to john golub. chart tracks the dow jones industrial average back to 1904. history shows that it is typical for the stock market to experience prolonged periods of flat returns. >> i remember that in 1925. >> followed by 10-20 year periods of powerful returns. was shortecent period compared to the 60's and early 80's. does that mean that this return rate that we are in it will be short as well? >> it is hard to know. what it does tell you is that -- if we had 200% return in five and a half years, it is not

unreasonable to say that we could have years of well above average returns and i think that is the key take away. >> there's a disconnect. the economy is growing at 2-3%? investors have got to be scratching their heads here. >> if you look at that chart, the key driver is valuation. if you look at the 1980's and 1990's, we started with a pe of 6. so, it is earnings, and then you add the valuation. why did we have a flat period? it negated all of the earnings. it is really this long run on valuations that matters. >> valuation matters -- speak to this. productivity. what we are seeing now is unlike what we have seen in the past, would you agree? >> yes and no. if you look at productivity, my grandmother told me that the

greatest gainer in her lifetime was power production that could be brought to an outlet in her home. you would not have a refrigerator or a telephone or television without it. but, is it different? i am not sure. --the guadalcanal rally we had a war to get ourselves out of. say we are inhey search of another area to get us going again. do you observe in american corporations that they can sustain that economic growth? >> the biggest issue now is that there is a lack of confidence in the long-term trajectory of growth. you were talking about 2% gdp. companies need to be confident that this thing is turning up. we are seeing some signs to reinvest. business confidence surveys are taking up. we're seeing a pickup in m&a. >> but the immovable force is

where hayslip lives. you don't know that he was down in chelsea or granite -- you are out in the dakotas. >> that is where a lot of growth is happening. that is where people will be safe and have growth. we have seen that in south dakota and north dakota with the oil business. >> they are not necessarily investing in the stock market. everyone talks about this being an unloved bull market. there is not a lot of volume. what does that say for a selloff? >> it is all about fundamentals. if you look at the value of stock versus bonds, stock is very inexpensive. if the economy does what is expected, that is really big, relevant change, that should fuel another like him market. >> are investors buying into this? >> they are --

a lot of them have not participated. long only guys -- they are in. they don't have a choice. they have to. and, hedge funds are playing as well. >> hedge funds are completely missed out. you look your returns on the hedge fund indices. single digit returns for three years in a row. what are they missing? >> it is really hard if you are along-short. you are fighting for the difference between these ideas. as opposed to the market, which has been providing the big returns. in a flat market, hedge funds look brilliant. it is harder for them. >> do they deserve their fees of 2%? >> those that are able to deliver the numbers, yes. those that don't -- that.rehearsed >> one things we have not

mentioned is the federal reserve. if you look at junk-bond interest in the market, they are all kind of rushing to raise some cash. they are levering up before the window of opportunity closes. to see that same rush to leverage up in the equity market at all? >> you are seeing large u.s. corporations. they are issuing debts and then the cash balances are going up. so, when they raise money to do an acquisition, they may be raising a little bit more. this financing is really cheap now. and credit0 year spreads modest. it is possible that this will be a slow process. >> the back story to this is what jeffrey hayzlett -- i am from a codec family, back when development stopped. you are from a kodak that blew up, trying to keep up with creative destruction. that is what keeps jon golub's

role going? a you are also dealing with company that was scared about what their legacy was going to be and try to hang on to that too long. two or three decades to on. creative see the destruction out there that leads to the margin of economic growth? >> i think there will always be creative out there in terms of creating new things. is, we don't see the investment in the r&d side. >> do they see investment? >> if you look at the business, we invest in our business. but, it is spotty. we were just talking to clients about the auto sector -- how it is down, flatlining. why? it is an amazon effect. there's disruptive technology that forces everyone -- who would think there's potential volume in the honest or are? >> adam will to volume in a few

minutes. they're investing $140 million prayed very company that is small, investing -- that is more than most big companies. to be a topicng for us to discuss, coming up. we will also take a look at secretary kerry. he is leaving saudi arabia and heading to turkey. he is now in turkey, we will discuss which allies. next. ♪

>> good morning everyone. it is september 12 print thanks to all of new york city, including the mayor yesterday, for the remembrance of those of september 11. a special thanks to everyone, meeting with stephanie ruhle yesterday. i was thrilled to join a cantor fitzgerald charity, as they who werethe 600-plus killed in that tragedy from cantor fitzgerald. let's go to the question of the day. who is the most effective this week? the president, mr. cook, or mr. ma? we need your responses here to us.

we say good morning worldwide. there was a solid paragraph in the middle of the president's speech on america's coalition. the secretary of state is in turkey this morning. he is leading the search of the legitimate coalition. phil mattingly is with us from washington. this,ght john nailed really putting this question of coalition front and center. how is this search for a coalition different from the search in 2003? >> i think there is an understanding. there's a grasp within the administration that for them to be successful in this push -- in this broad strategy outlined on wednesday, the regional coalition has to be the backbone of it. states to have reached the point where they are terrified of with the islamic state represents and they are willing to take action on a public front. that is what you have seen the

president worked behind the scenes when he was in wales, working with allies to push them. to send the chuck hagel, the defense secretary. john kerry has been all over the place. he had a huge meeting yesterday in saudi arabia. really, it is central to what they want to do. it is extraordinary complex. it really undercuts everything they're trying to do. have a sunni coalition to the west of baghdad, cross-ice area and over to saudi arabia. do we need an equivalent coalition to the southeast, down to iran and shiite islam? >> the administration is kind of wary when it comes to talking about iran. they say there is no military coordination by on their. behind the scenes, when you talk to officials, there is an excel is meant that iran has a role to play. advisors are pretty much --

just a couple blocks away from our u.s. advisers are. they are doing airstrikes as well. they have intelligence as well. the islamic state is not as much of a threat as it is to u.s. and other regional interests. wary is the best way to put it. how they interact with iran is kind of, we will work as we can, but we will not do anything public. when it comes to syria, there is nothing that the u.s. is willing to do. it is interesting. there was some communication put out by the foreign ministers. from saudi arabia yesterday. behind the scenes, they have been somewhat tepid in their support. one of the governments that is d'sboard is al asas government. it highlights the difficulties they face. >> john boehner really changed his tune after the president spoke. he was critical.

then he said that congress needs to offer their support. what changed? >> i think there is a recognition that the republican party's politics are a little complex. but, republicans a support a robust international presence. beenepublicans have pushing the president and this administration to arm and equip moderate syrian rebels for years. they may not like how long it has taken and they may not like the foreign policy in general. but on this issue -- they will support him in the end. >> thank you so much. "surveillance" exclusive. sam roe, on twitter -- he has just stolen a scarlet fu's chart. who did you steal this from? >> this is a golub original. >> it has been stolen and it is now on twitter. fu, it is blind

"surveillance" theft. >> at least we got the data out there. the we come back, polaris, second best performing stock since 2009. let's take a ride on their new motorcycle. the indian scout. we will take you for a ride. this is "bloomberg surveillance." you are watching bloomberg tv. we are streaming live on your phone, tablet, and bloomberg.com. ♪

>> this is "bloomberg surveillance." let's gaze and company news from the files of "bloomberg west." lawmakers in nevada approved $100 billion in tax breaks for tesla's new battery factory. nevada how bid for other states for the facility. this will be the world largest lithium-ion battery plant. and ebay is getting back into mobile advertising. they will have ads back on their smartphone applications. them after deciding the user experience was not good

enough. and, americans a snapped of the videogame consoles like crazy last month. sales of new consoles more than doubled. meanwhile, sales of videogames fell 20%. do you have any videogames? >> i don't. i am the worst at videogames. >> you just play your spider solitaire. >> literally for hours. i played it for 4.5 hours last saturday. >> you need to get a life. >> my mother says the same thing. she actually says you need to get a wife. chief marketing officer, jeffrey hayzlett -- minnesota-based polaris industries is the largest manufacture of motor vehicles. enough american workers because they are overseas buyers that want made in america. >> growth outside of the u.s. will be extremely important.

we want 15% of sales to be 30% of sales. we believe we have a good opportunity to that. clearly, part of the reason we have been rewarded by the market is because we have what i call a high ratio. we put a plan in place and we put objectives out there. we have an incredibly talented team that works diligently to execute plans and create credibility. atjeff, you are a former cmo a fortune 500 company. how important is that moniker? >> it is a very important one. especially for the kind of people who buy these products. a lot of them go on farms. a lot of them go to more rural america. made in america is still important, but we are seeing the brand names. people want that nostalgia. they want that kind of brand, that americanism. much more american -- >> indian actually goes back to

1901, the oldest motorcycle manufacturing brand in the united states. >> how do they respond to the obvious competition? >> that is exactly what this whole thing is all about. harley has 50% of the market share. he says you have to go after it. that is why they called this the scout. they costs $10,000. >> they're doing on price? >> also just on the mystique. what is also amazing -- this is a guy who in 2009 was this keyword by the press for laying off 500 people. he has since been named ceo of the year because he hired them all back and has been building it. >> he is going to move this thing and double the revenue. that is the projection. he talks about goals. he will double their revenue. that is only 3% versus the 52% of harley davidson.

they will go from a 3% market share to 6%. it is still a long way to go. but, they have been doing. growth.% a year >> i applaud you for doing the nuts and bolts thing. golub, let me ask a basic investing question. we know apple makes $.30 on the dollar, where indian or polaris, rather, makes $.13 on the dollar. why would anyone ever by a low-margin company? >> the idea of operating leverage -- when you're a high-stakes cost business and you increase sales -- >> it all goes to the bottom line. >> the percentage increases bottom line for a small change in revenue, and it is massive. >> what you just heard there is why people want the cla level warnings.

this is why not everyone buys apple, but they by walmart or polaris. think the economy will accelerate, which is the general view, you want to be in big, heavy industries with large overhead. >> to put it in simple terms, i already have the machines. it does not cost me a whole lot to run them. >> 100%. what you don't want to be in -- is a company with high profit margins. win ifg company does not you have an excel or any economy. they went on new ideas. those co-pays attract a lot of competitors and other companies that want to do the same things. >> those high-cost businesses -- >> these guys don't have the high margins. they have a very high sgna. there really off the chart. >> you live in the real world. you don't live in these one-bedroom, three-bedroom

shacks in new york. hominy car garage do you have? >> between the two houses, i have six. >> and how many do you have in those doors? >> i have a few. i also just bought a big huge mower. >> this is a sioux falls, south dakota? >> do you have a john deere zamboni? >> i don't. >> this is the slingshot. this is the new product that costs $20,000. when first proposed, he said it was the craziest thing he ever heard. i drove it -- wild. >> i saw you driving one on the west side highway. thank you so much, jon golub. we need a forex report now. it is exciting. really picked up in the last two weeks. well over 107.

russian ruble, decidedly weaker. >> there is the stronger dollar. formerup, paul bremer, convoy to iraq, will be joining us at 7:00. ♪

the tension in ukraine mounts

as europe surprises vladimir putin with harsh new sanctions. his air attacks against the islamic state a delusion? a conversation with paul bremer. america considers the end of normal. in search of economic growth. good morning, everyone. this is "bloomberg surveillance ." it is friday, september 12. i'm tom keene. joining me, as always, scarlet fu and adam johnson. "the end of normal." let's get to our morning brief. >> a new survey concludes japan will lead a new stimulus package to offset the shrinking economy. here in the u.s., we will get a read on our consumers. retail sales come out at 8:30.

darden restaurants announcing earnings right now. it it looks like it's coming in right on the money. two items of note. apple begins taking orders for the iphone 6 today. we have learned that egypt, jordan, turkey and saudi arabia are all joining the us-led effort against islamic state. >> an eventful week. no question about that. particularly in america's geopolitics. he served under a president and his most identified with the immediate days, the weeks in the months after our 2003 invasion of iraq when new boots were on the ground. paul bremer became a lightning rod for support and short criticism. good morning to you.

you have made a sharp note of boots on the ground. do we need to put combat troops into syria? >> i think the president deserves credit for making a tough decision on getting back in the war in iraq. i have some questions about how sincerely he believes in this programming outline. in any war tot tell the enemy what you're not going to do. you are tying your own hands. i don't think saying no combat forces in iraq was a wise thing to do. you can never tell. wars are unpredictable. we may eventually need to put combat forces and we certainly have people who are wearing combat boots there. if they are shot at, they will fight back. almost 2000 of them. we are getting a diluted

description of what it means to have combat forces. >> let's go back to june 15. the comment you made in the wall street journal. americans are reluctant to reengage in iraq. -- what is different about president obama's education of americans versus what president bush faced? jobnyway, president bush's was simpler because we were all in a state of shock after 9/11. president obama's problem is that, since he got elected on the platform of getting us out of these wars and since he has talked about getting out of iraq , repeated again that he will pull them all out of afghanistan, he has a fundamental credibility problem with the american people. particularly in the region.

we have been reporting over the last hour on the rather ambivalent messages that secretary kerry has received. they wonder if the president really needs to carry out this program. >> let's go right to the coalition. -- first order conditions what can the secretary of state promise or use as a tool to generate a stronger coalition? appeal to the interests of those countries themselves. this is a group of primitive muslim extremists. enemy are other muslims. by far, the majority of people killed by al qaeda over the last 25 years, 95% are muslims. these people do not support the government.

they would overthrow the governments of saudi arabia and syria. we have to appeal to their self interests. why it is in their interest that isis be defeated. >> you make a point that the president should be more forceful with the idea of boots on the ground. i want to get to the importance of a plan be here. made in the mistakes we iraq with you leading the way and the lessons we learn from that, what should our plan b this time around? >> i'm not saying that the president should be more aggressive about boots on the ground. i'm saying he should be more quiet about the subject. he should leave open the question. he may need to put them there in the end. what has to happen now is we have to do three things. we have to help arm the kurds, reconstitute the iraqi army because it was severely damaged iki and we have to expand

the air attacks to include syria. those elements are effectively present in the president's strategy. the strategy is there. the question now is, did he come up with a new strategy because of the opinion polls in united states which showed the bottom had gone out of support for his foreign-policy or because he believes we have to defeat isis? ted is the key question. given the problem of his credibility -- it was one year -- he said heaid would bomb the syrians over their use of chemical weapons and that did not happen. you famously wore army boots in your suit as he tried to rebuild the civilian structure of iraq. what do we need to do beyond the military support for iraq to create a stable structure? things. are two

a broader, more inclusive iraqi government. we appear to be moving in that direction. this is the fourth successive peaceful transfer of power in iraq since 2004. there is no other arab country that can make that claim. if they are doing it all in conformity with a constitution written and approved by the iraqi people. if they had to get more sunnis ain. the effort that secretary kerry has undertaken is critical. we have to get the important regional countries. turkey, jordan, saudi arabia and the gulf states. saudi arabia and the gulf states have substantial military capability, particularly air forces.

where are they? it's in their interest to be there. 2003, the lessons you learned in terms of institutional iraq, there were immense challenges there, including some would say your harshest critics of blowing up and thelitary structure human institutional character of the iraq people. from the lessons you learned, what can the president do forward to make for a more institutionally sound iraq? the army.alk about the iraqi army, which we built from the bottom up, is the army that defeated al qaeda in iraq. as the president said himself after he became president, iraq had become peaceful and we had defeated al qaeda. a the lesson is, it was

mistake to pull the troops out in 2011. all of these difficulties now are basically linked to the pulling out of troops in 2011. we have witnessed that army, those trained iraq you forces, islamicrate against the state. what confidence can the american people have that there will be a better trained force the next time around? >> the reason those well-trained wases collapsed in mosul because the prime minister had purged the officer corps of its officers trained by americans right down to the brigade level and put in his cronies. fights because it's officers and ncos are trusted. they collapsed because of the problems in the office. that army and putting those trained officers

back in place is a high priority and it is happening. it will take time. >> thank you so much. paul bremer joining us from our news bureau in washington. >> the idea that the president cannot just take away the idea that there will be boots on the ground. >> the president drew another redline, right? a defensive redline by saying no boots on the ground. >> how do you do this with just aircraft? i don't see it. >> time for our put a question of the day. given the president's announcement earlier this week, who was most effective this week? -- time for our twitter question of the day. ♪

>> good morning, everyone. "bloomberg surveillance." i'm tom keene. normal is done in a dark new book. a history and a view forward of america's politics. the book by the collapse of the soviet union and our own self generated financial crisis. it starts and ends with an affluent society ever wider and apart from the rest of america.

it comes with all the geopolitics we just heard from paul bremer. you have been an outspoken critic of the projection of our military into the middle east. when you listened to paul bremer , what was your thought? as you pointed out, the iraqi army did collapse. isis equipment came from the american equipment that it captured from the iraqi army. we do have the capacity to degrade that equipment. what we don't have the capacity to do is take over and control the territory. >> do you see any capacity of congress to appropriate funds? army onve trained that one occasion and it hasn't shown its worth fighting in territory -- where does not have support of the population. let's continue on to the

controversy within the end of normal. to dedicate your book somebody from the other side. you are a noted liberal. why do you dedicate your book to a republican? >> we were counterparts. staff directors at the joint economic committee. we clashed rather furiously at the time. we became friends and i came to admire him for intellectual -- >> he's come over to the dark side? >> not that. he broke conservative grounds. he took a big hit for that and paid a heavy price and lost his job. from "theear a quote end of normal." clinton inherited and apparently made to order world.

-- we don't have that now, do we? correct. the peak came at the end of the clinton administration in 2000. the bush administration faced a difficult situation of trying to reproduce the spirit. >> the last time we had a budget surplus. will talk about the nfl season. cheerleaders are sitting up. ♪

>> good morning, everyone. "bloomberg surveillance." we need a twitter question for our friday. who was the most effective this week?

that's a smart question. a lot going on this week. who was the most effective this week? there is no charge. >> i wish we had charged before. like 99th and. itunes or something. cents. james galbraith is the professor at the university of texas. the stator top headlines. -- let's get to our top headlines. >> we never charge for anything on "bloomberg surveillance." pistoriusfrica, oscar has been found guilty of culpable homicide in the shooting death of his girlfriend appeared somewhat equivalent to manslaughter here in the u.s. he could now get 15 years in

prison. nations promising to do their part to help the u.s. destroy islamic state extremists. 10 arab nations met with secretary john kerry in saudi arabia. it's not certain exactly what the arab countries will contribute. the baltimore ravens put aside the ray rice controversy last night, beating the pittsburgh steelers. joe flacco through a pair of -- threw a pair of touchdown passes. >> new sanctions enforced against russia. previous penalties have not exactly lessened russian support of the rebels. what exactly is different this time? ryan chilcote spoke with the president of ukraine. one is withber drawl of the foreign troops.

withdrawn. 70% >> it is paused. numberdemanding -- point two is closing the border for the ammunition and troops. this is extremely important. number three, we need --ediate relief >> three points from the president. say.eard what he had to can you tell us what is different this time with this new round of sanctions? it's going to prevent some of these gas and oil companies from tapping european capital markets.

have beense sanctions incremental. nothing has been really revolutionary. they want to increase pressure. if there is a solution on the ground, that you very clearly eu saidegraph -- the they want to reduce the pressure. >> dialing up sanctions against just asoil companies the weather is going to dial down and get colder. is there some sort of contingency plan for how they're going to heat their homes? >> there is no contingency plan right now. 30% of natural gas comes from russia. most of these sanctions targeting extractions. that wereies sanctioned -- it involved in transporting national gas.

transport lines are not affected by these sanctions. >> james galbraith with us today as well. you are eminently qualified for this question. do sanctions work? >> rarely. >> it's a game theory that does not work. we put a lot of pressure on south africa. against russia, you have a large country with a major role in this partner economy and it's not going to go away. >> it's 17 or more disparate nations. >> correct. >> by the way, think about this -- exxon began drilling in russian territory three weeks ago. >> no more. >> exxon is still drilling. >> i want to bring in my morning must read. russia and europe are at a race to the bottom. russia may prove the more

putinent if only because 's authoritarian regime. -- project with that pain might look like for russian politicians . >> the discomfort of running into some shortage down the road. you do have fractional governments in europe. you have a rather pragmatic attitude in germany. ,hey want this problem resolved but they are open to multiple solutions. the vice chancellor suggested a federation solution in ukraine would work to diffuse the crisis. >> we want to thank you as well. joining us from berlin. i want to point out,

bloomberg businessweek is now available on newsstands. you can check out the cover story about how blackstone is the most profitable deal in history. this is "bloomberg surveillance ." ♪

>> we have some breaking news. alibaba's ipo is set to be covered at all price points. set to plan closing its books early after its ipo has been covered. >> the food was finally good yesterday. muchreflection of how

demand there is to get in on china's biggest e-commerce company. sells more stuff than amazon and ebay combined. >> let's walk through the ipo process here. they put out a red herring the days before digital and they put a price grab -- a price bracket. there is a raging debate between and the bankers and five or six major institutional holders. over where the price should come. by no means am i speculating. i would suggest with this -- we gom, we don't go up to a 72ish and it opens. 18 times, which is 10 times

-- serving filet mignon today. >> covered at all price points. twitter question is relevant right now. who is the most effective this week? president obama, tim cook or jack marke? this may affect your responses. >> tipped the balance to mr. ma. it is friday. everybody is getting ready for the big nfl games this weekend. >> i would like to see the giants finally win. >> when the buffalo bills laid

their home opener, they will be without their cheerleading squad . the squad has been suspended because they are suing claiming wage theft. that's when the buffalo bills lay their home opener. opener.their home the teams say they are not liable because they outsource cheerleading to a third-party. nothat's why buffalo does have cheerleaders this season because they have a longtime practice going back to the 1980's of outsourcing their true leaders. -- their cheerleaders. they don't have the money to pay them a minimum wage. we are being sued, we can do this and they suspended the team. they were not paid for games or their practice time. they were not paid for a lot of on-field performances.

maybe $1000.ke sometimes they only made $100. >> why is this not a legal? -- illegal? >> one argument is that they are independent contracts. they are seasonal workers. >> these are like migrant workers out in california in the 1930's? >> the federal government took a look at oakland and said these are seasonal workers. >> $87 billion of revenue every year -- why are they letting this happen? >> they are saying not every team has to leaders. it's not up to us. we let them run it as they please. that'sverything happening now with ray rice and things happening with women, that's a bad idea. >> why hasn't roger goodell said

we screwed up on ray rice, we finally got it right -- we will do the right thing and pay these women? >> if you want to have cheerleaders, you have to pay an hourly minimum wage. that's that. it will be the right thing to do. >> you are going to stay with us. we will continue this discussion on the nfl. .ll the latest controversies betty liu will be giving us details about her exclusive interview with dolphins owner. to not so great treatment correct the nfl has a real problem. let's look at the optics of this market right now. you can see s&p futures are flat. the real story is what's happening on the 10 year. signs of growth. the euro is flat.

crude up $.36. i spent $4.27 per gallon last week. >> we've got retail sales coming up at 8:30. ♪ >> this is "bloomberg surveillance." streaming on your tablet, your smartphone and bloomberg.com. our guest host this hour, james galbraith. let's get you some company news headlines. we start with ali baba. its books early after its ipo has been covered. reports earlier this week that the company received enough orders for the ipo within two days. they said in their filing that they see pricing their ipo at $66 per share. -- hertzing a bill

reaching a deal with carl icahn. carl icahn has said he has a zack of confidence in hert management. alcoa siding its biggest deal ever with boeing. they will be supplying parts for boeing's 787. that deal valued at more than $1 billion. host, jamesest galbraith from the university of texas at austin. we had a financial crisis. it has given us a test tube experiment of economics. successs been little and much failure in our religion of austerity. here to punch holes in it, james galbraith.

we have learned a lot about this word austerity. is it in the text books? >> it is at this point, yes. what is the test of the austerity strategy? the fact that the european economy is flat and the american economy is doing a little bit better. >> do advocate that even at this point we need stimulus to make for a less inequality? >> the point of my book is that we ought to be aware that we face a much more difficult situation going forward than we have in the past. while there is a demand component to this question, simply adding demand is not going to be enough. i'm not sure that we can achieve a return to the previous path. we face a different energy environment and a different world. the technology problem is really different from the past. the need push against to boost demand, do you agree ath bill gross that there is

new normal of a more some dude future for american growth -- so subdued future for american growth? >> i prefer the term and of normal as opposed to new normal. we can have a decent life going forward. the difference between me and paul is quite simple. he sees the problem as the car does not have fuel. i see the problem is the transmission melted down. you have to ask if you can repair the vehicle. >> you are the only democrat in texas. what have you learned about the boom in that state? >> natural gas. >> not less government? >> no.

it's very important for the state of government to be sitting on a large pile of shale. that has helped a lot. there are a number of other things. texas avoided the banking debacle because it had cover banking regulation than florida and california. we did not have the boom or the bust. important product of reforms that occurred in the 1980's. more government rather than less, ironically. >> what would you like to see from congress right now? i would like to see congress the basict two years safety net preserved and not eroded. >> we will come back on this. the end of normal with james galbraith. you look at the iphone 6.

the head of bloomberg digital said get the big one because the battery is enormous. pre-orders start today. stay with us. ♪

>> a quiet morning.

very busy this friday morning. good morning. it's "bloomberg surveillance." adam johnson and scarlet fu are with us. we are discussing football. >> the ravens easily beat the steelers. ray rice cast a big shadow over the nfl. the league is in damage control mode now. betty liu spoke with the owner of the miami dolphins. what did you learn? >> he's the chairman of the related companies building the hudson yards project in manhattan. he's the owner of the miami dolphins and i spoke to him last team and i asked, what are owners thinking about the situation? he said roger is not a liar. he firmly believes what roger goodell told the press the other day. that he did not see this

videotape of ray rice before. the nfl did not have access to it. he said roger has been a great ambassador and protector of the brand and he believes what roger has said. he has not talked to other team owners. we know that bob kraft of the new england patriots has backed roger goodell because he has been good to the team owners eared he has increased the franchise of the nfl. they make $9.7 billion in revenue. the franchises are worth billions of dollars. >> are they just defending their golden goose? >> they're certainly supporting him. you have a story in this week's issue about the buffalo bill's cheerleading squad. no longer cheering for the team because they're not getting paid. this is a bigger problem for the nfl.

their whole image problem with women. >> unit woody. -- the inequity. >> ray rice is a huge story. they have been trying to reach women. they have been doing things like advertorials and targeted tv advertising campaigns. they put pop-up boutiques inside of stadiums. the best thing they could do is not alienate women by mishandling domestic abuse cases and failing to pay cheerleaders. >> you noted that one of the raiders cheerleaders got $1.25 million in back wages. >> that was the first suit. in one that came january. it was $1.25 million for four seasons of work. that was basically the signal

that these suits are going to be winners for the fans. get two dollars an hour and the league makes a quic the -- >> thank you so much for joining us this morning. >> we will be rejoined by james galbraith. ♪

>> this is "bloomberg surveillance." our guest host is james galbraith. professor at the university of texas at austin. let's give you some company news. in nevada are approving $1.3 billion in tax breaks for tesla's new factory. a law requires new sales to be sold through dealers. they will open the largest lithium-ion battery plant. ebay is getting back into mobile advertising. the online marketplace will begin putting ads back on the smartphone application. they dropped them after deciding

the user experience was not good enough. up videogametched consoles like crazy last month. sales more than doubled. that is today's company news. >> i want to bring in my more must-read. talking about president obama, ."e "reluctant leader pier -- the sternest challenge yet to his leadership skills. , you define the end of normal. what is the legacy? what is the new normal in iraq? >> i think the experience in iraq proved the limitations of

our military power and military power in general. so long as our objectives presently remain relatively limited, we can achieve them. if we think we are going to stabilize the whole territory without having a government that is supported by the people who live there, we are going to be making the same mistakes. >> you are a liberal that conservatives listen to. your book is exceptionally on the cacophony we've been through and where we are going. talk about where we are going. you tear apart a body of economics that was gospel 30 years ago. starting with lucas of chicago and others. the idea that our american experiment will self right is baloney. and what isy wrong the new economics if we are not going to use the old economics? >> what the chicago school was attempting to do was reinstate the 18th-century vision that was

based upon a cyst isn't -- a agricultural economy. the world is deeply independent. dependent. depending on a whole system of assurance and protection. we cannot go back to the -- >> even your largest critics would claim that there are does america's now. we have this massive inequality. -- there are two americas now. will we harm our spirit if we redistribute too much income to the have-nots? >> i don't think so. of the haves depends on the value of the assets that they own. if we support the rest of the economy, the value of the assets will hold up just fine. >> what is the to-do do list for the president to diminish inequality? >> a very substantial increase

in the minimum wage. i would apply that. >> including cheerleaders? [laughter] weyour book talks about how won't get back to a pre-2000 economy. when you look at what has happened since the crisis, we are not as bad off as some western european countries. we have our entitlement programs. tell me about how medicare and medicaid has allowed us to continue spending. >> if you look at what happened in 2010, there was no enormous increase in the payments on their those programs. -- under those programs. push that worked because the institutions were in place. if you look at countries in either --urope, they they lost the systems they had. pensions and greece have been cut.

-- pensions in greece have been cut. they don't have that cushion. there is a sense of despair there that you don't have here. >> that has allowed us to maintain our social sovereigns. spending ofain the the economy as a whole. it's a major source of continued demand for all kinds of products. pharmaceuticals and food and everything else. >> thank you for mentioning those programs. --e 186 now that those programs did their job, is there a rolling door -- revolving door where we have to fix those? >> we have to sustain and support them. we can't count on the strong increase in economic growth to

make them unnecessary at this point. we are much more reliant on those programs. the other thing that helped us was natural gas. >> the first economic book i read was from your father. i love his quote. nothing is so admirable and politics as a short memory. what have we forgotten from the past that we have to relive to to 2020? >> it would be nice to go back and look at the great crash of 1929. we did not have this uncertainty of economic growth. we build all of our assumptions on that. not good. >> congratulations on "the end of normal." a must read for conservatives. a book for republicans

written from the liberal perspective. storiesll look at the shipping the day. -- shaping the day. >> sanctions from europe. the first big surprise against putin. russian ruble weakening through the weekend. >> retail sales come out at 8:30. a gain of 6/10 of 1%. >> that's a big number. >> after no increase the previous month. >> you noticed the number 6. as in apple six. i will get the big one. it has a bigger battery, which means it won't run out within funny four hours. pre-orders begin today. -- within 24 hours. play spider solitaire on

the big screen. i can't wait. >> who was most effective this week? president obama, tim cook or jack ma? tim cook wins in my opinion. what else do you want? >> fan boy. i want to play spider solitaire on a bigger screen. that's it. >> i think obama's message was most impactful. it all boils down to strategy and execution. >> very thoughtful. .> jack ma now that alibaba has made it official, they will be closing the books early. the ipo is covered at all price points. >> matt levine has written a series of stories on this.

it made me smarter. pricing and all that. >> also available on bloomberg.com. it is free. >> he is the king of footnotes. >> great articles. they do enlighten all of us. pricing at $66 per share. we want to thank james galbraith . a book that speaks to what we are experiencing right now. normal."nd of ziel.ohnny mans it's a big debate between james galbraith and bill gross. i like how the professor takes a set of outcomes.

>> thanks again. "bloomberg surveillance" on bloomberg radio continues. in the loop is up next. ♪

>> good morning. it is friday, september 12. we are live from bloomberg world headquarters. you are "in the loop." i am betty liu.

we have exclusive comments from miami dolphins team owner over the firestorm about what commissioner roger goodell knew about the ray rice tape and when he knew it. needs real estate. they are teaming up with a real estate company to build a google-like campus in san francisco. a big bet on the line lasting -- the long-lasting future of the car service company. russian president vladimir putin andretaliate after the eu u.s. imposed more sanctions over ukraine. includingned imports, clothing and used cars. was threatened with millions of dollars of fines. the court has released that has allowed yahoo -- the court has allowed yahoo! to release documents from that case six years ago.