cash is king. $155 billion large. is writing for your holiday purchases. and the conversation with lang lang. this is "bloomberg surveillance ," live from our world headquarters in new york. 21.s tuesday, october i am tom "i hated piano lessons" keene. scarlet fu hated him worse than i did. i printed really -- >> i took piano less. we really look forward to this. difficult, challenging his. turkey and the islamic states anadarko currently has a change >> turkey has a

change of heart and islamic states. k coming to the aid of kobani. u.s. has been pressuring turkey to help aid the kurds in kobani. to south africa, where oscar pistorius has been sentenced to five years in prison for killing his girlfriend. his lawyer says he must serve 10 months in jail and then could be sentenced to house arrest. he was convicted of the equivalent of manslaughter. he killed his model girlfriend, reeva steenkamp, when he fired four shots into a closed bathroom door. >> in russia, one of the heads of the world's largest oil companies has been killed in a plane crash when his plane struck a snow plow on a runway in moscow. investigators say the snowplow driver was drunk. apple is getting ready for

another end of the year shopping spree. the complete forecast for the current quarter beat estimates. ceo tim cook says demand has been staggering. he would say that. the story with the ipad is not quite as good. sales of the tablet missed estimates, down 13% from one year ago. big banks and credit card companies were on board for the debut of apple pay. ceo barrynsumer bank summers. >> our philosophy is simple. we are here to help our customers. our customers, if they want to put their credit card or debit card onto an iphone and use that for payments, then we are going to be there for them. the most important thing for us is to be responsive to our customers. >> you was a terrific battle with cancer. at 80de la renta has died two. he dressed hollywood stars for five decades, and first ladies

including jacqueline onassis. he was the first american to become the top designer at a french fashion house. his last big creation, a dress alamuddin. today on oscar de la renta. let me do a get a check. we look at equities, bonds, currencies, commodities. futures up 6 again. stearns, 127.66. -- 1.2766. a huge move to complacency yesterday in the vix. dollar ruble, 41 exactly.

let me go to the back monitor very quickly. yield. the two-year we go 10-year, 10-year. here is the feel that here is the fear from 8, 9 months ago. we did not get back to where we saw. >> we did not, but we consolidated as a -- at a lower level than what we had been trending toward. >> this is optimistic. >> even if it raised, there was a lot of volatility. >> that is one of the thermometers you could use on the system janet yellen has to look at every day. >> let's take the temperature of what is going on in hong kong. after four weeks of protests, clashes with police and a failed meeting, student leaders and hong kong government officials are sitting down to hold talks. our correspondent joins us from the admiralty district in hong

kong. will there be a back-and-forth dialogue, or is this more a presentation of each side's position? good morning, scarlet. the talks just kicking off in the last couple of minutes. that is what you are hearing now, so i apologize if you cannot hear me. they fired up the projector screens. there are three in total. here is how it is going to work. they just started with the rules of these talks. both sides will have five minutes to have an open remark, then 90 minutes of discussions, and then they will end the number marks with 10 minutes each -- they will end the remarks on both sides. five government negotiators led by hong kong's chief secretary. that is happening as we speak. they are ramping up the language. >> i think we have lost yvonne man.

>> let's be sure that the video that we are seeing there is from admiralty. >> right near the government buildings next to the central business district, and it is not the area that the high court has issued injunctions to clear out. >> it is like the public discussion they held on c-span for the affordable care act four years ago. >> not a lot of political theater? >> yes, there are just two sides airing their grievances. you are hearing sort of standard autocrat language. thin,"ience is wearing "i cannot be responsible for what other people do to the protesters." >> it would be good to speak to someone with an important book out on china to continue the discusses -- with the discussion.

we will get to that and also to ukraine as well. the energy surge. to touch on china. you have such a great book on this. how would you write the book today versus two years ago? >> when we were wrapping up the book two years ago, a friend read it and said this is a great study of the consequences of a rapidly growing china on the global resource change, but you had better write something about what a slow and china would do. that is where we are right now. area, buttrong certainly where we were a couple of years ago. book of themy summer. it was superb. -- one ofelp me here the means necessary for the leadership in beijing? kong,n it comes to hong they are trying to communicate

-- they do not really want to give, but they are trying to calm things down. they know that the audience for what they are doing is not just from hong kong, it is beyond. there was a piece yesterday about taiwan. they are becoming a lot less confident in the idea of two systems. >> is there any room for compromise? we can say we are having talks, but it is either a democratically chosen chief of the island or not. >> i am sure there is room at the margin, but you are right, they are talking about fundamental issues and why china wants to describe itself as democratically chosen, but it does not feel democratic to the people of hong kong. >> i am glad you brought up taiwan. this is a laboratory of what ifld happen if taiwan and -- taiwan is reunited with china. i think given what taiwan has

seen, you will not see that laboratory experiment play out. >> let's get back on script from hong kong and the challenges there. the power surge you see in ukraine -- maybe it is a lack of -- winter was coming. it is here. friday, look for snow and 33 degrees in kiev. 33 degrees and snow in kiev coming up. has an important -- michael levi has an important book out. winter is coming. is it really going to happen? does russia cut off the gas? >> i am skeptical, but you have to prepare for the possibility. one of the big challenges is that within europe there is in norm is disagreement over whether or not russia would use that leverage. people are pretty skeptical. they are also less probable.

eastern europe, they are much more concerned. >> which country -- is it rumania in eastern europe? >> it is romania and bulgaria. southeastern europe. there may be loans from europe to help pay russia what they say they are owed. it has had gas subsidies for so long, it is not very energy efficient and does not know how to use gas. >> that's right, so you have all of these inefficient industries in ukraine support a lot of jobs. it would not work if gas was just sold from the market. toy russia is willing provide it. you need to get to a point where they function as an economy without they subsidized gas. getting from here to there is extraordinarily difficult. >> what is going to be the tipping point? >> we will have to see a broad resolution, which is not an easy thing.

move arounding to the edges. it will build more resilience. it will try to reassure countries in eastern europe that it will help, but that is going to take time. >> is a $100 barrel gone? are we done with that? >> i think volatility is back. scarlet, better than good. dow futures not affected by ibm today. up 55. for surge last quarter apple on strong iphone 6 sales. we will tell you how analysts are reacting after the break. this is "bloomberg surveillance ." ♪

>> good morning, everyone.

"bloomberg surveillance." the former secretary of the treasury, president of harvard .niversity, larry summers 11:00 a.m. this morning on "market makers." at thertant conversation robin hood conference, of course. scarlet fu and brendan greeley joining me this morning. dow futures up 66. brendan, i guess that is because of -- >> all about apple. apple is a job c and in october -- apple pay,t launched and we are not talking about the watch yet. here is the question. on the earnings call, tim cook says it is unclear what iphone supply -- when iphone supply will catch up with demand. how does that smell to you? >> i thought it was fine.

you mentioned inventory dynamics. i am inventory skeptic. they never make enough phones so we are always lined up out the door. >> our guest host today, michael levi. look at this -- it is broken. in chelsea, this would be an art -- this is why they are doing so well. >> i like how you roll, no protector on the iphone. out and get one right now, but you want to replace it. >> this is the ecosystem where he can fold in all of his cfr calendar and all of that. does the sell side say? >> the sell side highlights the fact that the apple watch will not be broken out in unit sales. it will look -- it will be lumped in with others.

also that the iphone really is the cash cow. the iphone makes up 70% of profit. arend you skeptic, what you missing is the international plans of apple stores, discontinued international projection as well. if you watch. passion, the cupertino zero hedge, a great analysis of how to get $155 million large in cash within share in iraq. does not want like ibm, focused on financial lovers versus the important stuff you are talking about regarding ok'd fitzgerald said apple is in the middle of what -- cantor fitzgerald said apple is in the middle of -- i am always wrong about apple. complaintrealized my

about them has been they do not have a strategy for the next billion. they do not need one because porsche also does not have a strategy. retire five years out with $1 trillion. i do not know the extrapolation, but they are not a billion dollar company, they are a trillion dollar company. >> what does it do for the fan boys if the new products they come out with are just slightly bigger. >> are you looking me -- are you looking at me as a fan boy? it is in new york city, and international store. but this international expansion is stunning. what do you observe in china, the middle class? what do you have, a 3? iphone 4? >> i think it might be a 2. -- but a big he

effort in china is to shift from exports more toward consumption, building up the middle class. you go to large chinese cities, and plenty of people want iphones. even if the average remains low, you have a large set of consumers. of china to buy an iphone to make a huge difference. >> true. the scale is unbelievable. the dow futures are up 85. someone to talk to, 5:00 p.m. today, iconic investor carl icahn. at theephanie ruhle robin hood investor conference. let's talk about cash. ruhle.ahn, stephanie stay with us. it is "bloomberg surveillance" from new york city.

good morning. ♪

>> good morning, everyone. "bloomberg surveillance." tom keene, scarlet fu, and brendan greeley. his arts education as important as math and science? thank you for that. we need to hear from you. as importanttion as math and science? i was thinking about this last night when i was playing piece in d minor. lang on the future of classical music, on piano

lessons in his country of china. >> i have a morning must-listen. brazil'st of presidential elections on stock. >> every time the poll numbers go up, petrobras stock goes down. time -- the problem is, it is tied to dilma. there are number of estimate -- of scandals surrounding the company. we are just not sure even if neves win he will be feeling warm and fuzzy. that, thed all economics are so poor at petrobras, we really call it a scheme, not a stock. >> michael levi, this is something you understand a lot about, oil and politics. the associate has always been,

watching the numbers on roussefas, that dilma has shackled the company with the requirement to buy local. is that fair? >> it is fair when you talk about a supply chain that does not always exist. now you lay that falling oil prices that put pressure on the cost rate. you can see how the share price would become even more sensitive to the politics. >> is there hope that with these offshore -- there has been concern earlier last year that these amazing offshore explorations that petrobras, the strikes they have made, that there was not the money to explore them anymore. is there a hope now that there might be the cash to pull that through? >> it is certainly going to be possible if the price stays high enough. if the bottom line works right, they will find a way to bring in the cash development to attract too large a prospect or the big

question that will loom over it is going to be the economics, particularly with this weighing on them. >> you are doing more geopolitics with the larger picture on oil, but you look at the major oil companies. how does brazilian oil's major player compare to russia's? gazprom? how are they in terms of business operations? >> it is much better. in the grand scheme of state owned enterprises, oil companies, petrobras is relatively good. it is not a gas prom -- a gas prom, for example. zprom.is not a gas prices brazil have an oil that they can no longer hit these prices off the coast? >> one of the things that have been going around, people are

talking about what is the stress point for u.s. shale? some that i am talking to are saying that you ought to be looking at the stress point for offshore, whether that is the gulf of mexico or brazil or west africa. those are tricky because once you put the money and, you have to be making it back over decades. >> i wonder also if that number keeps rising, as it does with the breakeven numbers for saudi arabia. >> an election in brazil as well. there is an election coming up in the united states. up tonight, "with all due respect" with your governors. ♪

with someft challenges, apple front and center in the news. good morning, everyone. "bloomberg surveillance." futures up 12. we are getting back there with the vix well under the 20-year average, 18.57. $83.19 a barrel. nymex crude down. top headlines with scarlet. >> warren buffett taking a $900 million hit. the is how much value billionaire's men in ibm has lost since it abandoned its 2015 earnings forecast.

toe customers are moving cloud computing. shares fell more than 7%, to their lowest level since 2011. a comedy pulled its support for a 52 billion other deal amid opposed changes. the drugmaker has since announced a $5 billion share buyback and boosted its quarterly dividend. will pay a it breakup fee. russian authorities say the driver who crashed ceo, was drunk. >> this is a bit of swashbuckling. we are a fortune -- we are fortunate to have michael levi with us today. the council on foreign relations

of energy, you were quite taken by the tragedy of this total, tragedy of this reference. it is extraordinarily saturday. he was a wonderful guy, engaging, and anything up. my he was so impressive and successful resources for the company. is it a name guy. >> the need guy was that u.s. oil companies to an extent are more reserved, more measured, more academic, where he is on a jet trying to find the next barrels. >> it is a, located one in russia because of the geopolitical situation. he was former -- he was forward leaning on a lot of things. he was outspoken on climate change, trying to build up on oil but also talking about how we had to tackle refinement. it even possible?

i always wondered about this, watching bp's advertising on climate change. companyssible to run a that extract natural resources and also figures out investments on climate change? >> i think it is. they will not lead the charge on climate change, they can help us understand how to transition from coal to gas. they can make it clear that it is compatible to cut consumption even as western companies invest more in production. >> as the price of oil rose, it made wind and solar comparably more attractive. is that a problem now as the price is dropping? there is less of a cost advantage or less of a possible beef competition. where you look more broadly around the world, it does matter. gas prices are setting off oil prices. oil prices go down, gas prices go down. economy -- what is wrong in our stereotype, our

myths of oil a renaissance? >> i think we are pretty much on the mark when we talk about how much it is growing and how much it is revolutionizing the oil industry, but i think we go too far when we talk about the broader consequences. >> you let your must-read essay ideais weekend with the that we forget that we import more than we make. >> we import substantially more than we make, meaning falling prices are good news. people have become too competent in stable oil prices forever. two, almost three years of stable oil prices. thate need a story of why will be around forever. it turns out it is not. volatility is still the name of the game. we had good luck for a couple of years. not anymore. >> while it is good for spending, it will also be bad for jobs in certain states. should we expect a severe revenue downturn for states like

alaska, wyoming, kind of what we saw in 1986? >> it is definitely not 1986. on ant your finger important thing. it is not just the broader economic impact, is the impact on public finances -- north dakota, texas, pennsylvania -- they have become more dependent on oil revenue. >> this is european oil, which is a bigger, deeper market than what we have got with texas intermediate, round-trip, coming back to that mid-80 level from the 100 level we saw from a year or so ago. >> the traditional position in the u.s. has always been low oil prices is good for incumbents. but that may not hold any more because it is different for different states, is what you are saying. >> in the election, there are much bigger forces at work. there are not a lot of places out there where you could imagine falling oil prices tipping the balance, whether

good or bad. i think that is enough on oil. >> we covered a lot of ground. >> the power surges, must-read, michael levi. he has been writing prolifically. photosook at our top right now. >> number three photo. this is a picture of kurdish people watching explosions outside of kobani. turkey is allowing people to cross their border to help fight basis -- to help fight isis. >> so this is north and east of damascus, and this is at the top of syria, essentially. there are two other fronts. >> and it is such another step in a delicate game that turkey has been playing.

iraqi the help of the kurds, but they do not want their own kurds to be involved. i think it changes the scope of the acknowledged battle, that this is spilling over borders for a long time, and it is better to be able to acknowledge what is going on as a government. >> i do not want to catch you unguarded, but in the eastern part of syria, it is oil rich. the islamic state has taken this territory. >> what is interesting is this is important to the islamic state, but not necessarily so important in global oil markets. we tend to fixate on the global oil market. you can take 10,000 barrels off the market, given to me, and i would be very happy. i would be rich and no one would notice. our usesis upset that are going to iraq more than syria. >> the syrian rebels in many cases -- you know what we are

going to do right now? we are going to move from the brutal to the ridiculous. obama in chicago, the only place where he is accepted and wanted as a political figure, casting a ballot in early voting. brutal.re >> he is not campaigning anywhere because he is not wanted. defense, president's he is not the first. >> he is not the first, but this is particularly stark right now. >> he is voting in the midterm elections right now on october 20. to pointk it is also out the importance of early voting. he is not making an accidental political statement. he wants to point out that early voting is important. he said in the video, "i am glad i got a chance to vote." let's go to something we can all agree on. oscar der one photo,

la renta and hillary clinton in 2013. hillary is wearing one of oscar's suits. oscar de la renta died at 82 in connecticut, confirmed by his wife, after a long battle with cancer. >> he had a huge victory lap because he was a designer of amal alamuddin's dress. actor youd that mentioned. amazing to go up madison avenue and see a different character in each store. i will be honest, i have never been in an oscar de la renta store. but like everyone else, he was fancy, fancy, and he had another price store. i think a real price point for $2000 to renta was $3000, entry level. price ofl levi, if the

an oscar de la renta address drops, is that good for brazil? >> absolutely. >> coming up, we will discuss our single best chart. in our singleou best chart, next on "bloomberg surveillance." ♪

>> good morning, everyone. "bloomberg surveillance." tom keene with scarlet fu and brendan greeley. let's get to our single best chart. >> it shows the u.s. share of the global economy, how it has been on a steady march lower. , ouris from david woo guest earlier from bank of merrill lynch. decoupling really a thesis anymore. look at the blue bars, the u.s. we account for 17% of the total, down from 20% a decade ago. bric countries have grown. we are really talking about china as the main driver. was saying even if the u.s. economy is doing better than other countries, it is not

, the extent. how important will it be moving forward for india? he isis a great sign willing to take risks. lower oil prices, creating political openings. but there have been these openings before. >> continuing with this conversation because it reminds me of indonesia as well, where they subsidize their domestic energy market. >> this is a problem, as is the case with ukraine. if you subsidize, you are missing out on all sorts of cost savings. there is no sense of being -- there is -- you lose out on all sorts of chances are it with brazil, it is -- >> they are looking at doing this more nationally. with the chart, we have to be

careful with this. this is a purchasing power parity. healthy -- help me with something that can rogoff rogoff said years ago -- when we move our oil around, how disruptive is it? >> it makes geography matter more. if you look out over the longer-term, 10, 20 years, you do not take any of this for granted. it is about security and the transport of trade, in particular the transport of energy. >> did you take piano lessons? >> i did. >> how long? >> too long. >> did you play the black keys? >> no. >> our twitter question today -- is arts education as important as math and science? @bsurveillance.

coming up, we talk about the importance of an music education , who joins us next on "bloomberg surveillance ." ♪

>> it is new york city, it is gorgeous. it is the home of classical music, but many of us would say that is changing. but it is a perfect october morning. will look at wall street in new york. and at weinstein will join us -- ilana group weinstein will join us from idw group. world-classduces artists, such as lang lang. he has performed across the u.s. and asia. musicalpporting education to children around the world, and he joins us now on "surveillance." i want to start with your

childhood because you began playing piano at the age of two after watching a "tom & jerry" cartoon. there are some 40 million children in china learning to play the piano. are they being inspired on their own, or are they being pushed into it by their parents? >> that would never happen in america. >> during my time, it was more strict. but now i think most of the kids are playing just for fun. correct.r i need to it is 50 million. >> and growing. >> all of them are music lovers, and the piano is loved so bad in china for music future. >> your father was famously hard on you. at one point he drove you to almost kill yourself out of shame. it was a tactic to get you more expired -- to get you more

inspired. obviously you are not taking it to an extreme like that, but how do you approach teaching children music now? arectually, my father and i now best friends. i just want to clarify. -- you werebout known for carnegie hall, for your own foundation. to aus about what you hope compass with the united nations. >> i became a messenger of peace last year. so this year, i do some things unique for the u.n. so on october 24, we are doing a big event, and we are bringing 80 children from all over the and then weding -- are going to play music together, and together we will also have a special guest like sting, alec baldwin. so it is going to be the world

peace concert, and hopefully we will raise more money for education. >> you are an ambassador, and part of that is the importance as soft powerusic -- jazz and rock. korea is good doing it with pop. can you do it with classical music? >> when i perform, i do not think too much. i just want to get a good connection to my audience. but certainly i think piano is a popular instrument around the world, and i think it works. >> right now what we are looking at is you playing with metallica. >> at the grammy awards. powerre is some soft there. >> heavy power. industry,learly an classical music, that you say needs saving. be on every classical stage in 10 or 15 years? what is the state of classical

music across the nation? >> i think in the u.s. the main problem is education in the public school for music. the is why i am doing foundation. we want to bring the programs and music classes into the public schools, which we are now working with four different schools in the u.s. >> not everybody can have a steinway like you in different homes. how can you teach kids in the elementary classroom to love deanna? you have a digital -- to love piano? instill a passion in kids any young age? i want the kids to produce music themselves. >> give us one example. >> for example, first tell them the basic things, and then we it from their head to their heart. i want them to play something by

themselves. then we write it down. >> so do you go see major, no black keys, or do you go to a the dark keys? >> it depends on the kids' level. >> i know i practiced one hour every morning, so i guess talent is part of it. talent, ictice, 10% think. >> what was the course you took as a young kid. you are in china, you are struggling to get physical with that. charity -- theof great-grandson in san francisco, i said to him, your great-grandfather really made us practice. >> i studied music in public school here in the u.s., but it is a problem now with local budgets getting crunched. or is just not the money for it,

so how do you get across to local school boards that this is abs important -- that this is as important as math? half $1 million for a two-your program, so we are actually trying to -- you bring in the arts, elevating china upon the economy abroad? >> china has a lot of good new contemporary artists, and i know some of them are really talented. it is a really good thing for the world to have this part of doingrld coming out in this. >> so many artists like metallica are worried about itunes and spotify. are they your friend within classical music? >> absolutely. i just released an album, and the first day it is on itunes

and spotify. >> and you feel that you and others are being compensated fairly, given the new digital finance, given the old days? >> for me it is fine. when i am also listening to other great musicians, pushing it on the social network and i can hear and you may buy it. you grab on the left hand. can you go c to e? >> with my right hand, i can go c to g. >> wow. >> it does not look that big, but it works. >> thank you so much for joining us today. "the journeyook, of a thousand miles."

the messenger of peace. >> the ruble back at 41, off tensions with the ukraine. 106.90.ar-yen >> we will be on bloomberg radio in the next hour as well. ♪ . .

>> this is "bloomberg surveillance."

as fightingshift intensifies on multiple fronts on iraq and syria. islamic state will attack mountaint sinjar. tim cook is ready for your holiday purses. and ready, set, calculate -- wall street adjusts to their new compensation. good morning, everyone. this is "bloomberg surveillance." we're live from our world headquarters in new york. it is tuesday, october 21. i am tom keene, joining me scarlet fu and brendan greeley. >> turkey has a change of heart in the fight against islamic state. line the turks will allow kurdish forces to come to the aid of kobani. has been pressuring turkey to help and kobani. the turks were looking for a way to do that without supporting kurdish separatist groups that turkey itself considers

terrorists. over to south africa where former big runner oscar pistorius has been sentenced to five years in prison for killing his girlfriend on his lawyer says he mustered 10 months in -- he must serve 10 years in jail and then may serve -- 10 months in jail and then may serve a home sentence. >> the head of one of the world's largest oil companies have been killed in a plane crash. wasceo of france's total killed when his plane struck a runway in moscow. he oversaw the biggest expansion 15oil reserve of total's in years. apple is getting ready for another and of the her shopping sprees that spree. ceo tim cook says the demand has been "staggering." cook has moved apple product

debuts until the end of the year. ipad are downhe 13% from a year ago, meanwhile, big banks and credit companies are on board with apple pay, the new mobile payment system. summers --o barry >> i think apple pay is a big deal. to help our customers and our customers, if they want to put their credit card or debit card onto an iphone and use that for payments, then we're going to be there for them, so the most important thing for us is to be responsive to our customers. >> and a death in the fashion historic, long, and brave battle with cancer, offered a lorentz is dead. a huge loss for new york city fashion. all square de la renta -- oscar renta of course iconic with hillary clinton, and of course michelle obama. renta dressed george

clooney's wife. >> he played a doctor long time ago. everybody has forgotten. >> with grace and elegance, dead this morning at the age of 82. let me do a quick data check after our top stories, equities, bonds, currencies, commodities. not ibm influence today. futures up 15, dow futures up a nice 105. last week as a distant memory as well. well, maybe not. market gyrations are sending some investors into panic. volatility means opportunity. we have rick heitzmann with first mark capital to talk about the state of your wall street. alana, is a boom time on wall street? >> i think it is better than it was in the past because it is activity and commentary means but theding revenue,

reality is all of this volatility can also take a negative turn. the amounts that trading deaths are holding ends up going south, and it could because their position in the same way clients are. >> looking down on wall street from the top of the empire state building, is the shift from big firms to smaller firms? is that true what we read in the media? difficult foris smaller firms. i think that the regulatory requirements make a very onerous in terms of the amount of compliance and the amount of capital they have to hold against activity. i think the barriers to entry for smaller firms is much higher. read the talent is interested in going west into tech. what do you say to get them on wall street? >> my 10-year-old was here today because he is off from school, sitting in the control room, and he is obsessed with apple. >> is that is why the show has been so good? twhank you.

you so much. >> so you are having trouble selling your own son. >> i am having trouble selling my own son. the twos are -- portholes through which we viewed life work investing banking and consulting, and now it is not about innovation come it is not about growth, it is really about fighting lawsuit after lawsuit. >> it will not be as boring as it was in the 1970's. >> rick heitzmann, perfect man to bring in, cofounder and managing director at first mark, do you see ilana's world bleeding into yours? vc jobs really, totally but jobs at startups and whether be bigger tech startups and ready to go public or starting their own company. warden set a record with the wharton set a --

record with the most amount of graduates starting its own businesses. >> that is great. don't we want people creating value? >> we do. change the world, create value, get something. >> they do not all succeed. they know going in there is a huge failure curve, right? >> yes, and especially business schools it is a great time to take risk. smallually do not have risk costs, you are willing to work hard. why not take the risk now? if you fail, you fail. increasingly we live in a world where failure is rewarded. >> with your pitch for a 23-year-old out of a fancy business school, pitching to you their idea? >> i think the best thing is hey, i have some experience here, but the world's changed and this is what will be new. if you look at evans be go with snap -- evan spiegel with

snapchat. if you make a femoral messaging, that is the way the world is going. i i feel terrible because talked to the people who started twitter in 2006 and i decided it was the dumbest idea i have ever heard -- >> you are good at that dot >> and then look what happened. you at someone pitches that age, are you buying the person or the idea? >> generally the person. you look at is this person asked let's, and even if you're 22, 23, there are enough things that draw a straight line, greg, intelligence, and a presence much bigger than 22. front and center, 5:30 this evening at the robin hood conference with our stephanie ruhle, look at that. some ways he has changed the game on wall street. how is activism adjusted to the

world of head-on competition in wall street? >> look, it is one strategy. it is a strategy which this year has had mixed results. strategies at hedge funds. >> are people starting hedge funds right now? >> they are, but you need a lot of cash, you need deep pockets. you need to look pretty institutional right out of the gate, and i think that as a result is harder for younger people who don't have the experience and reputation to start. >> that is why we love ilana, she talks honestly, she is not all happy, happy. >> apple results really emphasize how dependent it is on the iphone. more than 70% of the profits tied to one product. as someone the tech world looking at that, is that a good path for the future? >> it is starting to get a

little scary. a used to be mobile phones, five years, seven years ago had a different mobile phone makers, carriers, operating systems, so nobody really controlled ecosystem, and now there are two huge players. ecosystem bleed come if you look at the ipod numbers -- disappointing. with google controlling on the other side. >> do you think the duopoly will continue into the next billion, or will we look at it being even cheaper? >> you can't get any cheaper than android. it is free. cry oh jan and there are some ryogeneneration mods -- c and there are some next generation mods getting popular in china. >> are you surprised that they are not acquiring more companies in your universe? >> very surprised. >> what are they waiting for? >> it is a good time to do -- i

do not want to say transformative acquisition, but something very interesting. >> you can only build one massive new headquarters at a time. >> that is true, and they are doing it. united technologies of connecticut -- 04, beating the consensus of $1.81. also, $1.5 billion for the year, so that by that continues. b> jack golu publishing this morning, dow futures up 97. we will continue spirited conversations on "surveillance." 11:00 a.m. this market, lawrence summers on bloomberg television. ♪

>> this is "bloomberg surveillance." tom scarlet fu here with keene and brendan greeley. wall street's biggest banks managed through tougher regulation, but a lot of people fear that efforts to rein in risk-taking means blockbuster trading performance is a thing of the past. ilana weinstein is president and ceo of idw group. now that some of the regulatory changes have settled in, people are getting more accustomed to this new environment, we are seeing unintended consequences. >> it is interesting --

regulation was to take risk out of the system, right, anything that is the most capital intensive and has the most systemic risk are the fixed so one of the, unintended consequences is you are left with a smaller number of banks, intermediaries in fixed income, which concentrates the power and the risk in the very asset classes they were the most concerned about, in another piece of that is -- and you see it now with the volatility that has gone on a market, that because there are fewer intermediaries, it is more difficult to process the amount of volume, so there is a liquidity crunch. i think that is another unttended consequences -- intended consequence. isanother thing i've noticed that everyone shies away, they want to run away from that systemically important tag that regulators are so desperate to put on them.

what does that mean for your world in terms of recruiting people to work in the big banks when they do have other options? there's not a lot going on in the big banks. our business is so focused on the buy side and i've said this before, i started the firm 13 years ago. bywas 50% sell side, 50% side. almost all of the activity is really for the larger had friends and -- hedge funds and asset messengers. >> rick heitzmann, you're nodding your head, is a simple regulation, capital requirements and done? >> when you try to regular too much, you see in exposure and in the private market to fixed income with things like lending club and prosper and others, so the harder you squeeze, the more that gets out. we see the similar thing in the private equity market with gompanies waiting to

public. >> if you are waiting for a squeeze, you have to give more to regulators. >> or you have to relax regulation and have simpler requirements so people are not spending a tremendous amount of time trying to avoid regulation. >> so you are for higher capital requirements -- done. >> i would not say that >> even the things like the eu curtailing the amount of compensation this year is going to drive banks i think out of -- their ability to have operations. >> we will continue here on "bloomberg surveillance." futures up 16. ♪

>> good morning, everyone. frommberg surveillance" new york city. i am tom keene, with us scarlet fu and brendan greeley. dow futures snapping 105. brendan? >> several well-known venture capitalists including marc andreessen and jim breyer are warning that the good times may not last for startups. the venture capital dollar

raising has dropped. rick heitzmann knows the vc business well. r the good times over? >> not yet i don't think. used to look at a zero interest rate. people believe there is a bull market for some time to come and i think what you're going to see is a little bit of a shakeout of premium companies versus non- premium companies. >> where do you look when you are looking at a startup? what is your rubric for figuring out whether they are spending cash wisely or whether it is all going to the foos ball table? not clear,ten especially with early entrepreneurs who do not have a lot of finance background. you look at the key metrics, are you doing the three things that matter and are those things working? customer acquisition, revenue per customer, and are you seeing those lines began to cross of revenue expenses? >> you say the best time is not over yet, but how much did the volatility of last week shake things up and maybe crack the

foundation at little bit? >> i think people are checking the foundation, but i do not know if anybody's doing a thing differently yet. you are in the long haul in the startup world, so you are worried about when a cycle will end, and this has been a great cycle. i think the company's continuing the the path and most of finances are continuing down the path. >> old meetings -- no canceled meetings? >> no canceled meetings. >> silicon valley, silicon alley, los angeles had a great run in 2014 as well. which to if he has your greatest interest right now? >> new york by far. it is the fastest-growing, the second-biggest younger free, and we are seeing a lot of people move from silicon valley where quite they are moving from out west to heare? >> interesting move -- from europe to new york. >> the baseball team out there

was so good they had to move somewhere where baseball sucks? >> unfortunately. we have to have something here. >> new york city is great, and i was an entrepreneur in los angeles and knew the system well there. i think that is early probably three years, five years behind new york and terms of growth. >> internationally everywhere you travel somebody is trying to create a silicon -- cambridge wants to create the silicon fence. when you look at berlin, london, which of those do you find most enticing? >> estonia, latvia, all of those places have their own silicon something. london is pretty good and london has established venture ecosystem, which is different than maybe the rest of europe. berlin is probably the most interesting emergent market. >> where the clients go and hedge funds? these guys are smart and have massive math skills, but

rick's worlds need them as well. >> it is like anything else -- you have winners and losers. it is mixed results. i think the quantitative trading is maybe a more natural place for them than in your world. >> probably be more lucrative place for them, but big data and data science is very big. >> you have great pedigrees online which is the course you took to an nba program? what is the course when you are out in the trenches and you are like damn, i needed to take that course! >> i spent a lot of money. especially right now, can indication skills. >> thank you! i got a d in that. >> to be able to convey your ideas crisply, clearly. >> he went to hbs, so we did not learn any math. maybe if i would have gone to a

different school for that. >> the difference between sloan, carnegie mellon, and the others were just touchy, feely case study stuff, i love that you have communication skills. when they are pitching to you, they are doing like their social network, we are cool, that is out. >> they like presentation schools. >> what are you doing, why is that important, and why should i listen begun 15 seconds in anything you do you go >> so the hoodie and flip up era is no longer enough to cut it? a singularly. >> where do you want to see the hedge fund type? >> i think being able to be six and and get to the bottom line very quickly. what are the fundamentals, why do you like this idea, and how would your thesis differentiate it from everybody else? you do not want to see heard mentality obviously. when things don't go well, it

gets worse because everybody is in the same thing. >> mine is what do i don't do, i want to know what they are lousy at. if they tell me they are not lousy at anything, gone. >> mike weakness is that i care too much! back either of you look and think i did not need to go to a business school at all? >> no! >> great experience, met great friends, it's on like a social club, right? depends whatut it you want to do. for the hedge fund world, i will tell you we have clients who see it as a negative. i am not exaggerating. >> we will come back to talk about this. our twitter question of the day, we're thrilled to have a weinstein with us, is arts education, scarlet's p&i

ano lesson -- >> why would you assume that fu took piano and really didn't? >> we will be right back on "surveillance." ♪

>> this is "bloomberg surveillance." i'm scarlet fu here with tom keene and brendan greeley. time for company news, we start with warren buffett taking a $9 billion hit, how much ibm has licensed the company abandoned its earnings forecast romney -- ginny romini has struggled his supportulled for the agreement with shire because of proposed changes to u.s. rules governing these types of transaction. the government -- the company has revealed a share buyback. and an executive jet crash claims the life of total's ceo.

died becauserie the snowplow driver was drunk and three crewmembers were also killed that is the latest company news. >> this matters now to our guest host, ilana weinstein. founder and chief executive idw group, and of course we look at compensation, the challenges, the sell side, andide, maybe making less, it is a bundle, a soup here, what is the new new of compensation? >> i think the sell side will not feel like the ugly stepchild this year as they have the previous years for the buy side. the buy side is having a tougher year. it has had mixed results in hedge fund land but far and away performance is not as good as it was, so it is a pay for

performance method of compensating people. no performance, no big bonuses. i think the sell side just won't be necessarily that differentiated. >> i hear so much conversation over the deferral of bonuses. americans do not like that. we want the money now. >> that is not going to change. three years, the amount just keeps getting bigger. he getst at which deferred gets smaller, so last year you had after $100,000 bonus, 50% got deferred in cash and 50% got deferred in stock and you're right, $100,000 after-tax is not that much to pay tuition and make your mortgage payment. that is not getting better. >> we're going to continue with deferral, but then after three years of paying it sort of clicks in and becomes an annuity. are we there yet? where it is an annuity after

regulation of dodd-frank? of thes not an annuity absolute numbers are not that big, and they are not dot i think juxtaposing that to the buy side, we see more hedge funds deferring compensation on the buy side. differences a gets reinvested in the fund. your net worth is not a bank stocks, it is invested in the fund that you work in. >> ilana, both carl icahn, 5:30 tonight with stephanie ruhle, all of the focus is on bill andan, and carl icahn einhorn and all the rest of them -- the average hedge fund person -- what do they make? >> does not make -- >> $150,000? >> average of the top 25 or average across -- think there is a

massive delusion that anybody out there is making bill ackman money. i do not buy it. >> if you were at a fund that has outside performance, you will get paid. >> what does the average guy make? >> there is no average because they're different performance -- ap ha hedge funds come great performance, paid seven figures. fund without great performance is based salary. there is nothing to pay people. and they should be ok with that because in great years they will get the big bucks and if they don't have good performance, they should not get paid. >> bring it over to the sell side. guys at the top of every major firm in trading or making all the money. different all that it was, as you know, pre-crisis. and the sell side does pay with an advantage of each other, so you do not have as much variability. >> is the dynamic i

don't want to live in connecticut i want to live in wall street? >> i want to live in new york city. [laughter] >> ok, ilana weinstein with us as we look at compensation. scarlet? for shares of target to rise. this is "bloomberg surveillance." i'm scarlet fu here with tom keene and brendan greeley. -- breakinget loves paypal,vices, ebay's rick heitzmann, you are a phillies fan, we will not hold that against you. what we want to know is the wall line on wall street is this is good for shareholder value, but i'm curious about corporate culture. are we learning that one company cannot do two things? >> companies are to state any paypal culture was missing from even a culture for a lot of years.

hade who built pay paul entrepreneurial -- those who built paypal had entrepreneurial culture, and not so much at ebay, so the hope is that dan shulman and ebay will be able to take off without having to worry about everything that comes along with ebay. >> i am wondering -- is it possible to merge cultures? are there goodies able to this having been done well? acquiring instagram, same with amazon and zappos . >> and it worked. you have your own culture, together we will be better. >> how do you get value out of something without messing up the culture? >> don't do anything to fast. let the company which iis succeeding continue to succeed them how they can achieve their goals. >> we have already had the

renaissance a venture capital and the spirit, is the more of the same or is there a new new vision and 2015? >> alternative lending will be a big theme. you talk about the regulations, taking money out of the money center banks and people looking for yield in the zero interest rate environment, lending club one.big they will go public and people will see the growth and kind of alternative peer-to-peer lending and alternative lending. instinct will be behind them and going public. it is an opportunity for me to lend to you or find other ways to drive yields. >> if alternative lending is the new theme, the old theme seems to be social networks. my morning must-read -- our tweets that send money the new lamborghini? you wanted to show your status, you bought a lamborghini or wrote a check in return for getting your name on a building. soon, you mail me have to tweet to reap the rewards of

conspicuous consumption. a merging there between social networks and alternative lending? >> look at how good i am come a look at how generous i just contributed to scarlet's kickstarter campaign for this -- >> we are working on it. more donations, please. >> what is the standard bad pitch you get right now? i have this new idea for a social network and it is going to do -- >> it will be twitter with 142 characters. >> you get that pitched? , they do the math, you take something popular and change a buy something that does not matter. >> we have breaking news here -- this is stunning, it is like ibm yesterday. it is another iconic american blue-chip just not getting it done.

global unit 1% growth. >> that is not encouraging. the headline that we are paying attention to -- coca-cola restructuring is north american manufacturing operations. it is basically re-franchising company owned north american bottling by the end of 2017. >> people do not want sugar in their drinks. it is hard to get around. >> i totally agree with that. ilana, jump in here. control a cherub in the room. you are not doing a 16 ounce big old, are you? >> i hope he is not. >> soda ages you faster than smoking. >> you think so? >> and it doesn't cause cancer, right? >> we will see. >> look at what the camel non-filters did to me. it is so different, but the same is ibm -- >> coca-cola right now is very

much geared toward its offerings in a stock is currently down 3.4%. also talking about macroeconomic challenges through the end of toy 15. we are keeping an eye on coca-cola as well as the markets right here for you right here on "bloomberg surveillance." ♪

>> this is "bloomberg surveillance." i am scarlet fu here with tom keene and brendan greeley. breaking news from coca-cola, streamlining operations. it will miss its long-term 2014 earnings per share growth target. it is also restructuring its global supply chain as well. specifically its north american bottling operation. >> i will redux this in 20 minutes. revenue growth as part of their incentive plan. the stock down a little bit here. right now. >> it is just amazing the similarities here to the confidence of the structure plan like international business machines yesterday. brendan, i thought you had great perspective here. great perspective here on sugar. >> coca-cola knows this. claire stood off of "blaze "businessweek."

they know they have a problem. >> they know they have a problem, pepsico, by the way, also knows that have a problem, and the company has been under pressure by nelson tells, the activist investor, who says they need to restructure, they need to split up, and they need to cut costs. both of these soda giants are facing -- >> you are dead on, betty, in the idea that it is fancy people making fancy composition. rick, jump in here, nobody is talking about what they have to do, which is cut costs. ibm, i heard almost nothing about rationalizations for right size. >> idea made a lot of money of integrating very complex premise software. everything has moved to the cloud and you do not have to integrate on premise and they have not adjusted to the new reality. >> what have they set about cutting costs? >> you have not heard about cutting costs? >> total denial. >> i do not hear that from the c suite at all.

they have been cutting costs, and a are on a five-year plan, cutting $5 billion in costs out of pepsico, but that is not enough for some shareholders. 131,000et, coca-cola, employees, you wonder when i goes under 100,000. going back to brendan's idea that it is about sugar in the drinks. >> they have to figure out what it is they possess and how that differs from their current business model. coca-cola is doing one interesting day -- in south africa, they're putting wi-fi and coke machines because they have got it everywhere, so what do you do if you have presents all over the world? >> the coca-cola machines are very cool, by the way. >> what you do with all of this news on your show today? >> someone not exactly cutting costs but plowing money is elon musk. >> are you going back to tesla? do you own a tesla? >> i just like them to play that

video of me in those cool model s's. he is facing another battle this time in michigan to sell his cars directly. michigan being of course the home to the big automakers. >> did you wear your seatbelt? >> oh, you bet i did. >> we look forward to that conversation. you will be speaking to the vice president of business development of tesla motors today. betty liu with "in the loop" begin to eight :00 a.m. today. we will be back with more "bloomberg surveillance" right here on bloomberg television, streaming on your tablet, your smartphone, and bloomberg.com. ♪

>> good morning, everyone. "bloomberg surveillance." i have been looking forward to this, isaacson tomorrow will join us on innovation. he has a smart book on the post world war ii through the 1950's and 1960's, innovation. also walter isaacson with his terrific "time" magazine review of henry kissinger's new effort as well tomorrow at 7:00 a.m. top headlines from a busy morning. >> the largest donor to those super pac say turns out is not tom stier. he pledged to spend $50 million of his own fortune to defeat republican candidates that he is now over that.

in second place, sheldon out adelson. sheldon in brazil, the president has slightly five days to go before the runoff election. . has an advantage previous polls have shown rousseff trailing. >> brazilian stocks have basically been ping-pong balls. moving every which way based on what people think the electorate -- where people think the presidential election will follow. it is such a unique animal globally that it defies that type of simple analysis. says hect, chainos calls it a scheme and not a stock. a warning from new york fed president saying that banks must fix a culture that encourages back behavior or run the risk of being broken up.

douglas spoke to senior bankers at a closed-door workshop. those are your top headlines this morning. we talk about these tech companies that are spinning off businesses. is anyone pressuring jamie dimon to do that? >> you see an evolution here with dodd-frank, do you say 30%? >> if that, and what is implemented -- that will never end. there is litigation over what has already been implemented. >> we were talking but is earlier with rick heitzmann -- this is a problem of complexity. >> with that is increased volatility, most certainly within wall street and the hedge funds. volatility abounding best week, a little bit, this week. rick heitzmann joining us this morning, also ilana weinstein with us as she searched for the next marginal job on wall street. let's open to the new new that is out there on volatility.

we have gone through a crisis and come out of it. the plutocrats have benefited. mark zuckerberg has benefited and people like him. what is the volatility for you next year in venture capital and entrepreneurial space? >> i think that people are still uncertain about how long of a market -- we have interest rates will rise, andey therefore stopping the ipo's. >> i agree, but the distinction is we are grown-ups now. this is what i witnessed in 2000. we do not have the dumbness, the silliness that i recall 14 years ago. >> the best businesses today have real business models that are doing something important as opposed to 14 years ago where it was a terrible thing. i still think that some of the valuations, the air will come out of that. >> of the air came out of the banks and i noticed the cost compliance, legal, dodd-frank.

what was the liner bill for jpmorgan? >> billions. >> that overlays indirectly affect your work, doesn't that? >> it certainly affects banks' ability to pay people because of that $5 billion settlement of pay to the justice department in august, and you're right, it is not stop. bill was up 40% year-over-year. >> and that was for the mortgage fraud. there are other issues that we have not even gotten to. >> nonstop issues, and i think they thought it was going to taper off. what is that game with those moles? >> whack a mole. >> that is what it is. >> we were talking to someone five years ago who said people did not know how to deal with the crisis because there had never been one in anybody's institutional memory. that is not true anymore, and the youngest people you are recruiting know what a crisis

looks like -- >> all they know is crisis. >> what is the value of hiring someone who grew up with crisis? >> for starters, there is not a sense of entitlement. when all you have enjoyed is riches and an up market, you have young people who sort of think that they just deserve to be paid x. i think that culture does not exist in the past five years at the investment banks and different at the hedge funds. >> speaking of the hedge funds, what is the follow from last week, the volatility that we saw? a lot of people have commented there may be some forced unwinding. could we see some victims from last week does the turbulence? >> yes, and some funds are formed poorly, but the reality is the last two years have been an unusual environment. anything you did other than go long what have her you and was not a good thing to do. if that was going to continue for the last five years, doing vanilla longs with the way to go

and you do not necessarily need hedge funds as much, but now with this volatility, we are seeing more complexity and a regime that may make it more advantageous to hedge, as in hedge fund, and having a sophisticated understanding of downside protection and relative value i think is really important right now. >> may be if you are one-sided trades like we have been seeing. let's get to the agenda where we need to focus on the story shaping the day, and tom, you had won a broken the last half hour. >> it is october 21, and major corporations are looking to 2015 and 2019. coca-cola, we knew this was coming, but there it is down 3% share price this morning. the bombshell is a major restructuring out to 20193 . when i noticed, brendan, they're going to set an incentive compensation based on revenue growth. that is a complete capitulation of the income statement to the heart of the matter, which is

you have got to grow sales. that is the new new. operating incomes, all of the other jargon garbage, we have got to go out and sell and grow. >> they have the same problem mcdonald's does, which is that you cannot measure on the margins of your product. people no longer want your product, the thing you have made money off of for 20 years. >> you wonder who the next big company is going to be this week to get ready for 2015. >> i wonder when coke gets more money from dasani than coke zero. >> it has distribution. >> that is really important. safe feeling amateurs talk and prose talked distribution, and coke is got it everywhere. reorganizing all of the distribution channels. yahoo! earnings are due out of the well, marissa mayer facing pressure from investors.

it going to do with all of the money from the alibaba ipo? >> rumor is they are buying -- >> online video advertising company, which -- >> who is going to buy twitter? itif anyone buys them will be apple because of the ever structure and the identity of your twitter id can be really important. >> i was told something last week at a bloomberg link event, this idea that twitter was so successful they have not had to change. it was so good out of the gate they have not had to change like facebook. >> that is true, and i think you are seeing how you are going to drive revenue to support very, very high multiples, and i think if there is any kind of cracks in that, it can open. >> if apple buys twitter, that i could be wrong about both of them. iswhat i'm looking at today

we are going to have an interview at 11:00 this morning with larry summers at the robin hood conference, sore lawrence -- sir lawrence of stagnation. rick, are you a stagnatio nist? >> no, i still believe doug you ask larry about lending club where he serves on the board -- >> you are so bullish on lending club. >> i am. >> to you have money in this? >> none. zero. i just think it is an interesting trend. >> you sold me, we will get off the air and i will write a story about lending club. >> do a lot of people on wall street talk about lending club. >> no! they will get a loan to buy the hinckley picnic boat. >> ui so much, ilana weinstein for joining us, and of course rick heitzmann of firstmark

capital. >> carl icahn, laurence fink will be with stephanie ruhle, smart conversations. stay with us on radio and television, worldwide, good morning, it is "bloomberg surveillance." ♪

>> good morning. it is tuesday, october 20 first. we are live from bloomberg headquarters. i am betty liu. you are in the loop.

of theirman and ceo cable corporation will talk politics and ports, don peebles. and tesla motors, will be electric carmaker be able to automakerin the capital of the world? discuss buffetl processes strategy. what about his miss step? newsing of, the breaking at mcdonald's. more on the breakdown. sales numbers. mcdonald's.ok at scooting all eps items, coming in at her dollar 51 per share. the estimate from those 21 analyst suite server -- we