increasee? stocks surge ever higher. an excess of 200 died at the berlin wall. years torn down to revive ago today. good morning, everyone. it is "bloomberg surveillance." we're live from our world headquarters in new york city. it is friday, november 7. i tom keene. joining me scarlet fu and rendon greatly. labor market on par for its best performance in 15 years. we will see if it kept pace last month. the october jobs report is due out at 8:30 a.m. eastern time. workerss added 235,000 and the unemployment rate at 5.9%,o hold steady which would match a six-year low. congressional leaders meeting with president obama and already the speaker of the house have a warning for him. john boehner says the president

will have big trouble if he changes immigration policy without congress are >> i would make clear to the president that if he acts unilaterally on his own outside of his authority, he will poison the well, and there will be no chance for immigration reform. it is as simple as that. >> president obama said he will halt deportation for some undocumented immigrants if congress does not do something about rewriting the law. >> president obama has iran's help.retly ask for that stresseder the two nations common interest in fighting the militant group. if iran did help in the fight come it would not give the iranians any leverage in those talks on restricting its nuclear programs. revelations about the shrapnel airbag and a japanese company that made them, takata,

learned that they were defective a yea decade ago. they ordered engineers to delete test results from computers. more than 14 million cars have been recalled because of airbag problems. four deaths have been linked to the defect. atnot funny, the data breach home depot worse than reported. hackers stole 53 million e-mail a dresses during the attacks between april and september. that is in addition to stealing about 56 million payment cards that we already knew about. but the math together and i believe that is over 100 million. they used thed username and password to get into the network. those are our top headlines this friday morning. let's do a boring data check. currency is crushed, equities nowhere, euro with a $1.23 handle, nymex turns, and the

vix showing the joy that is out there, well under $14, stunned at $13.67. real breaks through at a new weakness, and the ruble was a $48 handle when i walked in the door this morning. let's look at the ruble on the bloomberg terminal because we can do it. here is the putin collapse when we go up, up and away. show standard deviations the gyration and the pressure is being seen in currencies. >> the interest rate increase to not do much, it halted the decline for a little bit -- >> just for a stutter step. as always, we have to point out vladimir putin has no pain point. this does not affect policy like it would in a normal country. >> it has got to affect their markets and their banking system. let's get back to jobs day and

of course the math, distortion of central banks, desperate for growth. jobs in the spirit -- they would love a little bit of inflation. we begin our coverage -- sir martin sorrell joins us and with chiefdy kate moore, sh investment strategist at j.p. morgan. >> promoted lady kate. >> wonderful to have you here this morning. the market gyrations we are seeing as a company, as a bank of america, jp morgan, goldman sachs and others, you begin to see seismic changes in thought or analysis because of these relentless moves? >> no. we look at the opportunity when the market was selling off in early october to add to our acquisitions not in the u.s. but also in asia. the fundamentals are still in place, the macro data looks strong. this is a technical move and we cap our conventions. -- our convictions.

>> what do currency markets like this mean? >> what we are trying to figure out now as we are going through third quarter earnings transcripts is what impact he's ingrency moves are havn on companies. even exposed companies have done well in the third quarter season but first quarter -- and fourth quarter will really move the dial on how companies are thinking about the effects. >> how about building in the seleka commodities, like oil, like old? do we presume that that is coming out of the credit markets? >> we do not have a gigantic allocation in our portfolio. commodities are a smaller bit of it to begin with. i think we are watching for how low oil can go and whether there will actually be opportunistic moments for us to take advantage. the backdrop of this, sir

martin, is christine lagarde. i am watching markets on the move. your stock has done better than good. it is a moonshot. wewe report in sterling, so see a currency headwinds, having a significant impact on our reported results. that makes life difficult. just to point this mediocrity, the top line, worldwide gdp growth is only about 4.5%, 5%, next year the forecast is nominal. companies are faced with lower topline growth and the possibility of a topline growth, so they are focused on cost. i have said this before, the thing that i really worry about is clients are totally focused on cost because in order to get to their numbers, they are going the cnbc 25th anniversary -- >> who? us.hat does not concern >> they said it is amazing what

companies have done -- hold on -- it is amazing what companies have done to reduce and lower costs in america. that in my view is a short-term approach. what has to be done is investing in capacity and brands. >> do you have it all in interest? >> i have no interest whatsoever. i am totally agnostic. >> we should congratulate them on 25 years of good work. he and i would work out. >> he is still very irascible. >> he runs, like, 24 miles a day. >> i think worked out your a rough ability together. -- your irascibility together. are we worried about companies that actually cut costs? it seems like we want companies to cut costs.

we have actually been incredibly impressed by the fact that companies have been able to maintain their margins throughout the cycle. for the last year and a half or two years before every earnings season, the media and journalists and analysts will say perhaps this is a quarter where margins are going to look ugly. that is not what we are seeing at all. we are seeing sales grow. put in aggregate, margins have been improving. >> of the screw is tightening, and what we see is more pressure on the top line. in order to deliver, the rise in procurement and finance is out balancing marketing. until you get to 100% market share, you can do anything everything on the top line. very interesting data, unemployment yesterday. the low skilled workers, high unemployment. why? because companies are not taking on labor, they are not taking on incremental cost in incremental

risk. i understand this philosophy. it is to short-term. it has to be long term. larry fink at blackrock has made much more eloquently than i could ever do, has made the case of long-term focus. valiant in models, allegan, what we see with investments like 3g, very focused on short-term profitability, not long-term branding. >> we know the companies that start in a recession, even consumer facing companies do better over the long term. they are likely to serve longer than 10 years because they know how to keep costs low. how do you take the market and tell them no, now it's time to spend on marketing? >> we build the case. when the average life of a ceo is five years and a cfo is three years and a chief marketing officer is two years, it is difficult to believe -- >> you are talking about their working life, not their mortal life.

>> scarlet, the moon shots, you were talking about that earlier. talk to youryou clients when they see a moonshot like wpp stock? moonshot,rs is not a -- for 28 years is not a moonshot, come on. >> after a tremendous run in a woody's in 2013, should we still be invested? they were concerned that earnings will not be sustainable. we said look, we would not be adding to your equity risk in less we feel confident that the fundamentals are continuing to improve. throughout this year quarter after quarter, we have had earnings improvement, we do not feel that we are at a very extended place in the 20 market, and we say as long as the economy grows and companies are smart and are managing the balance sheets, we can feel comfortable having overweight in equity. >> driven by cheap money, kate. last year, 5.6 percent, we could do the same at 5.1% now.

we went in the euro at 12-year at 2.25% and the dollar 10-year at 3.25%. for an advertising business to go to a 30-year bond market has that sort of rates on a tells you it is driven by fundamentally long-term, but low-cost, money. >> cheap money is not going away. >> that is why the temper tantrum is easy. >> in his job stay. are you -- it is jobs day. are you hiring in america? >> we are a human capital intensive business. in the u.k., we have added 35% heard in america, we are adding because revenues are up 4%, 3%, and we are adding at least in to 3%, soth that 2% we have 178,000 people around the world. about 1.5% on average this year worldwide.

>> sir martin sorrell, our guest host for the hour, and kate moore, jpmorgan's private chief investment strategist. this weekend marks the 25th anniversary of the fall of the berlin wall. what does it say about germany's future? we will discuss right here on "bloomberg surveillance." ♪

>> good morning, everyone. "bloomberg surveillance" from new york city. tom keene, scarlet fu and brendan greeley with us this morning. checkpoint, scarlet. to muzzle inuzzle 1961 to the collapse of the berlin wall, checkpoint charlie is what captured the imagination. boys were murdered there. our hans nichols is in berlin

this summer november friday as we await. what will happen in berlin in two days? a wall of white balloons, some 8000 of these balloons. they have traced about a 15-kilometer stretch of the old line, and sometime after sundown they will be released in the sky and that is where the big moment here -- i hope we will have video of it, it will be remarkable. >> the brandenburg gate is behind you. what portion of the berlin wall still stands? >> less than 400 meters. it depends what you classify the wall, was it just a part that divided east berlin from west berlin or the part that itself, thein backside of west berlin from the municipality of the state of brandenburg? very little. it is just for tourists.

>> i lived there several times and reported from there. cultural big of a force now to five years is what they call the nostalgia for the former east -- cultural force now 25 years later is what they call the nostalgia for the former east? >> now it is not an ol east,-west divide, it is a north-south divide. their work ethic is decided to be a little bit more industrious. berlin is a party city and has always been a party city. >> it is a party city, but i want to bring up a photo that i remember seared into my childhood memory, and this is when the dialogue changed, folks. that is peter fechter's body. he was a teenager. that is a grim photo of the grim august 1962, and that photograph

change the debate on communism here to sir martin sorrell of w peavy, you went through checkpoints. actually, 1965. >> could you feel the tension at that time? >> absolutely. we went to prague and it took us 12 hours. the train journey was normally six hours. zech at not speak any c all or even read it. checkpoint charlie in east berlin was extremely grim at that particular point in time. it is an amazing change from where we were. >> it is. >> 1 hard to remember is how much confusion there was at the time. you know, it is almost an accident that the wall was open. i had a friend who ran through that night and he said he was not sure if he was supposed to be allowed through or not and he got his nose broken by a guard on the way through and he said i

had better keep running, we do not know how long the wall is supposed to be >> henry kissinger and ramirez of this with leading academics of the is supposeding -- to be. >> henry kissinger and remember it's of this with leading academics of the world, angela merkel grew up in east germany, didn't she? >> you know what she did? she went to the sauna. after the sauna, she had a beer. she did not quite know that it was real, and it was not until the next day -- she had classes, her physics lab to tend to. the next day she cross shoppingt to the center, saw the excess. one other thing about this is merkel, and this gets back to the tech debate, merkel was in

the former east, which means that the shot of the was a real presence. today as shere thinks and makes decisions on tech and national security issues. >> i liked what you bring up the emotion of merkel who grew up in east germany. this is the 25th anniversary. you have an entire generation of kids who were not there when the berlin wall came down. what is the emotion of the millennials? fromlot of the millennials the east do not really understand the significance of it. for the generation in the 40's and 50's, those on the east may have been left behind just a little bit. number of board members from the west and the east, it really does not compare. i mean, board members that grew up in the ease, men and women in their 50's and 60's, just a handful on germany's top companies. even if you look at the big companies to route europe, a handful are in the old east. most of those are utilities.

you do have some big auto plants, but there is a huge economic difference still. >> hans nichols, thank you so much from berlin. sir martin, aspiration wins. what you do in your business is the desire for products pure that is the first thing angela merkel did. there was a confusion of the event was east orle, buying in west made sense, and there was the bump, what have we got to do, the strongest force. it is the strong man of europe. i know u.k. may be growing faster at the moment, but if you look at the longer term, somebody said to me you could double your business in germany today, i would do it. >> we are discussing the 25th

anniversary of the fall of the berlin wall. our guest host in the next hour, princeton university's alan krueger. and we have a related twitter question on his job say. tom, this has to do with your morning must repair and what should be the tipping center for morning must read. what should be the tipping standard for the service industry? ♪

>> this is "bloomberg surveillance." i am scarlet fu with tom keene and brendan greeley. we have a morning must listen to you this morning from les moonves, ceo of cvs about the ceo of cbs about the future of digital media. >> i have learned and a learn

time in this business, you never count rupert murdoch out of anything. he is clearly one of the smartest men in our business, and god knows what he will do next. atwe are constantly looking what rupert murdoch is going to do next. forconstant hunger acquisitions and the other is spinning off different assets, trying to survive on their own. which do you think is the more enduring trend? >> i would say if you had assess at the beginning of this year what kind of investment we would see from companies, we thought we would see more companies invest back in their businesses and engage in more capex, but we see a lot more deal flow across many different sectors. our view is that companies feel the evaluations are not that high and that these deals are very compelling at these levels. as a result, we are actually seeing companies not spend on themselves and actually look to acquire or to spin off

acquisitions they think are undervalued. >> if nobody's are buying low, then you are buying low. -- is companies are buying low, then you are buying low. >> we are buying low. -- >> i think the m&a boom if you runcall it that, they have out of opportunities, acquire a company come and see if you can reduce some more cost. rupert's intent on time warner was to be an increasingly digital world, hbo, sports franchises. ♪

top story onnt german production, a very busy morning. on thisrg surveillance" job's day. right now let's get to top headlines. here is scarlet fu. >> the u.s. labor market on course for its best performance in years. the october's jobs report is due out at 8:30 a.m. eastern time and according to economists surveyed by bloomberg, employers added 235 thousand workers. the jobless rate is expected to hold steady at 5.9%, which would match a six-year low. walt disney reported earnings that narrowly missed analysts' estimates.

the quarter was highlighted by the release of guardians of the galaxy. the picture became the top grossing movie in the u.s. this year. cut ties with adrian peterson after the minnesota noings running back pleaded contest to a misdemeanor assault charge for whipping his child with a tree branch. those are your top headlines this morning. >> the data check -- i'm going to avoid it with futures -2, delow -2 as well. tanksrom kiev -- 32 cross-border in the ukraine. that gets your attention. we have not talked about this much, but -- >> my lord. >> that is worth watching as we go into friday and into the weekend.

digitalok back at the age and forward. after the hopeless 2011, the digital strategic vision of 2013, well, there is a 2015 of digital. will it simply gain traction? can digital actually gain money to replace the collapse of advertising and media? sir martin sorrell is on the vanguard of this. he sees a certain desperation. >> we survived. everybody said a few years ago we would go out of business. we are still here. our biggest media customer is google. >> there you are you are in the news today on this afterthought of google systems wet wet our jilted -- google systems -- >> our jilted lover friend. if you google jilted lover, what

do you get? >> which martin sorrell? >> we must extort a merry thing is i got up this morning, turned on my apple iphone -- the most extraordinary thing is i got this point, turned on my apple iphone and saw that the growth rate has shrunk. an 80% premium on a company whose top line growth rates and margins have declined. it is that you would make that acquisition three days or four days before they announce -- mating? dinosaurs >> i believe that maurice was very hurt by the blowup, nine months, he obviously wanted to make it work. john ran for whatever reason decided he was not going for it and i think they call maurice on the rebound. i think he has made a decision

to go into sapient intake 19 times against his own -- >> will this transaction go through? >> it is done and dusted i think. or twoubject to one other closing conditions, but it goes through. interesting thing, they acquired was a of their agencies hispanic agency. >> it done and dusted describes my love life. >> really awkward. we are just going to -- >> got help us. >> let's talk about hard numbers. martin, we all know the fourth number we are raging against is the computer out the rhythms that place ads on social networks. they place ads on google. this is where the money is going, but that is not what we want to do. >> no, no. we spent in america 45% of our

time online, media time online on mobile or internet. aboutindustry, we spent 23%, 24%. 36% of wpp's revenues are now coming from digital. we thought we were over index against the market, but we are still under indexed against where we are spending our time. copy we can plug into algorithms and we are done. out ofave created xaxis our acquisition in 2007, the largest online buying media platform in the world. it is a very successful use of the technology, which we have give us the to independent platform between google and double-click on one side and facebook on the other

purity the answer to your question is we can purchase that targeted premium imagery that you need to avoid those open exchanges where there is fraud. >> you are welcome in your new digital overlords. >> i have no choice. >> that is the future. hugh have said before that google and facebook are not tech companies but media companies. kate moore, these are having tech valuations. >> these are still growing, we like tech and new media and we will group them together in classification systems. tech has been our highest conviction sector seems ene throughoutscn 2014 and we have seen a strong momentum for both new media and existing tech companies that are expanding into new media as we kind of go into the next year. >> is alibaba a tech company or a media company?

>> it is a little bit of both. the interesting thing about the chinese markets, 240 billion, bigger than amazon and facebook, not as big as google, but it is going to get there. it is really a bit of both because the chinese model an all embracing model. it is not just like amazon or facebook or twitter -- >> we are living this. >> you are living this. you have got a device in each hand. tom. is the devices, >> i took a photograph of lady and i translated it over to my cell phone -- >> wirelessly. >> what i love is that you are amazed every morning that this is still possible. >> with a done and dusted love life. >> let's stay in china. china for digital is a little flowers in a

greenhouse. do you think they can survive outside of china's environment? billion,t is $140 baidu is $40 billion, jeremy is is $50 billion. xiaomi is announcing another google in india. >> how do you respond to those valuations some duck to $1 trillion of frothy nests? these $1ions, some of trillion of frothiness. emerging world and emerging asia in particular, the opportunity to gain market share and to really get a bigger share of people's wallets i think is enormous. can these companies grow outside of their home co

untreis -- their home countries? we think yes. >> kate moore joining us as guest host of the hour along sorrell ofartin wpp. our single best chart is next to her and we are on "bloomberg surveillance," on bloomberg television, streaming on your tablet, your smartphone, and bloomberg.com. tom is still amazed that he has got a phone and a camera. [laughter] ♪

>> good one in, everyone. alan krueger with us in the next hour. >> significance of streaming to the music industry from the recording industry association of america. musicported answer to services make more than 1/5 of music revenue. in 2007.p from 3% physical music sales still make up a majority of revenue, but that we know is falling. the big winners of course our spotify, pandora, and other streaming sites. speaking of which come it has

been a record-breaking week forcing her taylor swift. do you remember what she did? she decided to drop her albums from spotify and to celebrate, she posted this video on instagram and she has joined us in studio. taylor swift, welcome to "surveillance." >> thank you so much. i love that ensemble, scarlet. you look great. >> it is a love fest because i love you, too. you decided to make a old move by dropping your albums from spotify. not was one in 1989, i was born yesterday, so globally physical sales still count for 51% of music revenue. weird so talking about -- excuse me, who is the guy over there with the hella bad hair? >> did you know your career had made it when you and the boys from sheffield, england, def leppard, when you came out on stage with def leppard? sir martin sorrell with us on

this miracle of the resurrection of -- >> i am sorry, wait a minute, hold on, i had to say something -- >> shake it off, taylor. and.3 million album sales one week. you know who the last person to do that was? eminem in 2002. x number of years ago with scott borja and how she developed, is this the resurrection of traditional copyright in value or is this a one off? >> this is a fight between the old model that you referred to in the relation to ourselves, the later model and the new model. this is the example of an artist who has the power to try to leverage her position in order to get a better -- >> will other artists do this? >> they will try. if you look at the music business, where is the biggest growth area? that is where the money is. >> beyoncé has done pretty well.

she dropped her album, no forewarning was over on itunes, and a zoom to the top. >> if you know who you are, you know what you can dupe your dime a look like a simple girl from pennsylvania, but i have to tell you if you know what your value is, you can get -- i am sorry, who is that guy at the end of the table? that guy is a sweetheart. we can develop advertising and subscription revenues for you, taylor. >> i think we need to talk about more sales. ideal in money, not revenue. >> does everyone know that i was not briefed on this? [laughter] >> he is defending his silence as a result. >> the you have an orange badge? >> are you kidding? i know the mayor -- the mayor exported me in here this morning.

>> we see so much change within music and creative arts. can we keep the value of copyright forward? >> it is very tough. going back to our conversation in china, you have the mayor of shanghai's meeting last weekend in shanghai and what is interesting is that we are starting to see movement on intellectual property in china to protect it. as the chinese developed the technology themselves, companies are becoming very powerful. they will seek to protect their ipo's. grande.nde, ariana she is happening today. could the beatles happened today? copyright, you have got to get a paycheck. >> it will be more live events. i stepped out for a second. did i miss anything? >> no, you are good.

>> it is job stay after all, tom. our twitter question link that altogether. what should be the tipping standard for the service industry? tweet us @bsurveillance. we want to hear from you. >> christine, can you get me janet yellen mask? ♪

>> it is job stay at "bloomberg surveillance" i in new york. krueger on the nation's inequality. alan krueger on the results that we saw on tuesday. good morning, everyone. this is "bloomberg surveillance." i am tom keene. with me scarlet fu and taylor swift. let's get to our top headlines this morning. >> we began with bank of america. earningshird-quarter by $400 million. the charge comes as the big races for the end of investigations into its foreign exchange dealings feared the lender posted a loss of $242 million. it is one of several banks underscore to me by both u.s. and u.k. regulator spared carlyle group is going to invest in china's online literature

program with tencent literature to create a valuation of about $2 billion. and america's cord cutting picks up pace. the "wall street journal" says it contracted at a faster pace than it did a year earlier, the industry lost 179,000 customers compared to 83,000 a year ago. defecting at all the cable companies including time warner cable and directv. we are looking ahead to the big jobs report due out at 8:30 a.m. the latest economic data we know points to a stronger labor market. the fed pursues monetary tightening or at least on a path towards normalized interest rates, we ask willie markets continue their ascent upwards? kate moore is chief investment

strategist at j.p. morgan private bank. she is our guest host for the hour. momentum stocks have underperformed the last week are small caps on internet names, bio techs. should we because is even as we have seen this incredible v-shape recovery? >> there has been choppiness in the market in 2014. onhave seen hedge funds take copper located positions in a couple of the sectors and then back away. a couple of pullbacks greater than 5%, which by the way is normal for a year. people have forgotten that because we have got into a where we have very few pullbacks and very few moments of volatility in the market and everybody had gotten comfortable with a straight ascent. now we think we will see additional choppiness, we will see some of these momentum stocks back off. we will see higher fliers particularly on the valuation side get sold off when people get fearful, but our view is up still.

>> we have been anticipating it for so long where monetary policy is no longer the biggest driver of equity. >> that is right. it is no longer the biggest driver of u.s. equity. we see a very divergent set of monetary policies around the world and that will govern how we think about investing in allocating in assets. while the fed will be normalizing policy, we .xpect the ecb to add more against that backdrop, i think you have to be a lot more creative about how you are allocating your assets and have a lower expected return assumption, especially for equity. >> that new mediocre you are referring to -- >> this martin sorrell does not agree with. >> you are not a new media will ocrist? >> a dribbling along. >> when we talk about a v-shape recovery, what happened in 2009,

we had the slump come in and we recovered sharply in 2010, than it is almost like a square root sign with a generally up, up, up line. 2011 was a record for us, 2012 with a record for us, 2013 was a record for us, what a 14 but for sterling probably would be a it is a gentle slope up. the real world is only expanding, coming back to the cheap money argument, the stock world is obviously different. >> the money question is -- do you and your strategy for 2015 adjust to kate moore's world? midness?ave a tip i >> with a strange balance pair ,ou have u.s. tightening, bofj more liquidity, the answer to your question as we will continue to because it's as we go into 2015, reflecting our client activity, which is to be cautious, not expansive.

atkate moore, your clients j.p. morgan chase and all thinking of median incomes because they are not dealing with median incomes but part of the new mediocre is a stagnating income overtime that is not going anywhere. is that a problem for the stock market going forward? will that eventually catch up with us, this lack of consumption? >> i think a lack of consumption is more of an issue for gdp data than it is for corporate earnings. corporate earnings is much more business investment. companies need if you like they have more clarity and a greater visibility into the future before they continue to invest. we mentioned it a little bit when we were talking about deal flow and whether or not we would see companies reinvest in themselves. what we really want to see as i was saying before is the. we want to see companies invest back in themselves and say we have this confidence in the future. that in and of itself will be a propeller for earnings and we expect them to be the next leg for hiring.

>> what are your clients as in terms of policy differential? >> it is a little bit confusing for everyone but everyone feels confident that the u.s. recovery is on track. we are saying we are not in a recovery but in fact an expansionary phase of the u.s. economic cycle. that is not the case for europe and japan. we are more neutral on european equities to have optimistic acquisitions in japanese equities. u.s. especially as our highest conviction call. investmentre, chief strategist at j.p. morgan private bank. answer martin sorrell, ceo of wpp group. >> i want a taylor swift mask. >> what more do you want? >> let me do a forex report, brazilian is doing better, talking earlier in london, a very stub $110

euro. stay with us on this jobs day. >> we have alan krueger, princeton university professor, in the next hour of "bloomberg surveillance." we will be right back. ♪

>> this is "bloomberg surveillance."

day. is jobs a cell in an sour america speaks on tuesday. exactly when will they see checks increase? the dollar surges, stocks drive ever higher. andwas at $98 or $132 -- was it 98 or 132 or 200 who died at the berlin wall. good morning, everyone. this is "bloomberg surveillance." we are live from our world headquarters in new york. i am tom keene. joining me scarlet fu and brendan greeley. >> we begin with the economy because we have not seen the u.s. economy create this many jobs since 1999. one hour and a half from now we will see if the labor market kept pace in october. the monthly jobless report is due out at 8:30 a.m. eastern time and according to economists, employers added 235 thousand workers. the on implement rate is expected to hold steady at 5.9%. that would bet a six-year low.

house speaker john weiner making it clear working with president obama will only be -- house speaker john boehner making it clear working with the president will only go so far. the republicans have their first majority in the senate in eight years. boehner says the house will take aim at the president was the signature achievement -- >> obamacare is hurting our economy, it is hurting middle-class family, and it is hurting the ability for employers to create more jobs. so the house i am sure at some point next year will move to repeal obama care. >> meanwhile, boehner also says the president will have big problems with congress if he makes changes in immigration policy without congressional approval. help.ma is seeking iran's the letter stressed the two nation's common interest in fighting the militant group in iraq and syria appeared officials say the letter made another point -- if iran did help any fight, it would not get any leverage in talks on

restricting its nuclear program. >> very good. report also says the japanese company covered up the risk of exploding airbags a decade ago. takata learned of the defective airbags in 2004 and conducted tests your it according to the orderedk times," takata engineers to delete the results and did not order safety records. they have been linked to four deaths. >> i see a congressional hearing coming on this. >> it was one of the biggest hack attacks on any american retailer -- home depot, well, it was worse than what he thought. looking at it all when you add up, it is 53 million e-mail addresses during the attack, add in 56 million payment cards that we already knew about. the hackers used a third-party vendor name and password to get into their internal supersecret,

no one could ever break it network, and that is our top headlines this morning. a quick data check -- not much moving as you would expect on a job stay. exception -- the currency market. you're a low under -- euro under a $1.3992. crudehe weekend, nymex $78.12 as well. it is jobs day. after a presidential shellacking, we speak to president obama's former chairman of the council and economic advisers, alan krueger. we also be joined by william mcnabb of then guard group. professor krueger, boy did they speak on tuesday? were you surprised by the strength of the republican victory? >> it took me by surprise. it is not unusual that the president's party does poorly in the midterm election. this was a bit worse than i expected. the democrats held a bad hand.

by thes a bit surprised change, but i will also say this time -- typically the economy does not factor that much into the midterm election. it matters much more in the general election. >> the math is very reread come a little bit of blue on the fringes that shows this polarization. with your expertise on inequality, the inequality across the nation, what will you look for in today's and next month's and the month after's jobs report to quell the sourness that is out there? >> i think what we are going to see in the months ahead is what we saw in the 1990's. as the economy continues to improve, we will see upward pressure on wages. i excited will see signs sooner -- i expect that we will see signs sooner that nonproductive supervisory wages are rising a bit faster. i think that will help. i do not think it will be sufficient given that we have had three decades of rising inequality and we have had

problems to overcome but we saw in the late 1990's that wages became more compressed. that less skilled workers did better and we will see that again as the unemployment rate continues to drift down. >> democrats lost, but minimum wage laws won. is that debate over? >> i think we will continue to see this debate. the american people spoke clearly -- their representatives have not followed through and there was a remarkable this connect, is safe like arkansas minimum wage past two to one, yet there and elected -- yet their elected officials oppose it. >> here is the single best chart, for those of you on radio, i will put this out on bloomberg radio plus. the structural unemployment that alan krueger has spoken so much about -- it is cyclical. something changed, something broke five years ago. professor krueger, what broke five or six years ago?

>> it was clear we had the worst financial crisis since th e great depression. the problem was that growth was so slow afterwards that we had a large number of people who were unemployed for a long period of time. the longer they're unemployed, the harder it is for them to get back to work. employers do not give them a close look. clients, their skills tend to erode, and we have a long-term unemployment now. about one third have been out of work for half a year or longer and i think increasingly we will see them throughout the labor force. >> william mcnabb, to bring you in with vanguard, philadelphia has been a test tube for the challenges we have in inequality. is philadelphia doing better, the focus of the mid-atlantic states doing better? >> it is sort of a tale of two cities and it is how you want to look at it. on the downside, philadelphia has one of the highest unemployment rates, and you see

ethnicity andby so forth. you see real divide. a lot of that i think we goes back to the education system has been broken. there is a ton of work going on there. the other side is the energy renaissance, if you will, is actually really impacting the mid-atlantic region very positively, and we are seeing a lot of activity in terms of new companies, manufacturing, high-tech manufacturers moving to the region. there are a lot of reasons to be more optimistic around about. comparison is not philadelphia and the rest of the country but silicon valley and the rest of the country. that is where you see the divide. >> jean muster last night on bloomberg radio said flat out silicon valley will not create those jobs of a given company with 150,000 employees are >> is the rise of these silicon valley companies with the increasing market cast but not so robust hiring a good thing for the equity market? >> there is a real disconnect between the fundamental economy

and the markets. i think as you know a lot of what happens in the market race on valuation and expected earnings of the company. if a company in silicon valley has really great prospects and you look forward to the earnings and you think that they are really positive, you are going to see appreciation in the represents,t they and that can be very disconnected to what is happening on the economic front. all you have to do is look at the last five years. from the gse, from the bottom, the drop in the equity markets, we have seen a tremendous rise in stock prices, even though we have had a very tepid economic recovery for >> allison trader week" wrote a really good piece, people pull out of the many downturn, which is a terrible idea for a long-term investment. how do you get people to stop thinking about cash flow when they really needed and continue to think about long-term employment?

>> i think the article pointed out some very appointed point spirit i will say though that when you look at the actual total amount of money drawn from the 401(k) system, it was actually pretty minimal. you certainly see it on the margin and it is something that everybody worries about. i think the key thing on the 401(k) side is to get people to actually tune out the noise. we are having this conversation -- >> we are going to address that later. very quickly, i want to go back to doug on the north and the cbo, -- to doug elmendorf and the cbo. willie continue to improve? >> most likely. >> why can't democrats get a victory lap on this? it is extraordinary. >> the decline in the deficit is the fastest since world war ii. >> it is going to go up again, isn't it? >> i don't buy it.

>> their constituents probably do not care as much as others. number one. number two we brought it down in the wrong way. we brought it down by cutting our investments, we did not address entitlements sufficiently, so we still have problems left to address. >> we could go for three hours with the two of you this morning heard alan krueger and william mcnabb with us. >> on this just a, we want to bring in our twitter question of the day. brendan, you mentioned minimum wage. this is certainly front and center for those earning minimum wage or less if you work any restaurant industry. what should be the tipping standard for the service industry? the answers will vary depending on where you live. tweet us. how much do you tip? >> i tip way over 20%. but i worked in service. you either did or you did not. ♪

>> can one in, everyone. "bloomberg surveillance." scarlet fu and brendan greeley with me. how about the wage, how about jobs, how about the tip? this is my morning must-read, absolutely brilliant out of the "washington post." must-read federal law allows employers to claim credit for tips their employees receive and to pay for workers far less than a standard minimum wage as

a result. you, dear customer, are expected to make up the difference. on the a fabulous piece microeconomics of the wage. alan krueger with us from princeton of course. he owns this. it is a scam, as catherine mentions, and this goes back decades and decades. people in service industries are treated different than everybody else. >> it shows the power of the restaurant lobby. that is what it comes down to her >> proactively, forgetting about politics, when does this change so that a large body of people are not making four dollars and five dollars an hour? >> i don't know p or do i think it is past time to change. >> of the change in the other direction, which is where you see more and more places put out a tip jar, at starbucks, at the ice cream shop. it gives employers a reason to cut the pay and say you can make it up in tips and we are not accustomed to necessarily tipping everywhere. >> alan krueger, happy politics

caught up with the reality that people making minimum wage are working service jobs are no longer teenagers just entering the workforce, they are people supporting a family? >> that is certainly the reality, but there's a whole lobby group which is vested in misrepresentation. they set up think tanks, they can feel where the money comes from, and they misrepresent to the minimum wage workers are >> du have a statistic on what that wages for a restaurant worker? .25 or on up to7 eight dollars, nine dollars, do you have a number on what that tipped person makes? >> it varies a lot across the states. some states do raise the minimum wage for restaurant workers. it varies tremendously across the types of restaurants. also, it leaves a lot to the discretion of the customers. we were talking during the break -- in miami since they have so many foreign visitors, they put the tip right there on the

check, which to me makes a great deal of sense, but people can go beyond that. >> greeley goes beyond that. >> i go beyond that. alan krueger, are you a big tip or? >> i am. i i worked in a restaurant or wi-fi go way over 20%. >> amen. >> our twitter question of the day, you heard our answers -- what should be the tipping standard for the service industry? tweet us @bsurveillance. 20%, 18%? >> when you worked in the industry, higher. ♪

>> good morning across television and radio. we will go beneath the headline data at 8:30 and do the best we can to tell you about the american labor economy. right now we will give you the best we can and top headlines. >> we start with the finance industry. bank of america cutting third-quarter earnings by $400 million and whites out the surprise profit that it reported last month we are the charge comes as the bank braces for the end of investigations into its

mortgage exchange dealings feared the lender posting a loss million. it is one of several banks under scrutiny by u.s. and u.k. regulators and walt disney narrowly missed estimates. rising costs at espn. the quarter with highlighted by the release of "guardians of the galaxy." "frozen"of disney, gives disney world a holiday makeover. earlier this week, the popular orlando destination began a lighting of the cinderella castle with a new production featuring characters from the popular 2013 computer animated feature film, the favorite film of tom keene and brendan greeley. i was 20 to withhold this fax from them, and it is over. i evidently flying to orlando

tomorrow. >> this is such a cash cow. >> it is amazing. important point -- taylor swift is only the second best album this year. the best-selling album -- >> let me guess? >> the "frozen" soundtrack. are you in there can you play down in the halls? ♪ >> go away, thomas. >> they wrote "let it go" in d flat. onto monetary policy. >> central bankers are rock stars. the broncos are playing in paris today. mark carney -- of the rolling stones are playing in paris today. mark carney will be on stage but no mario draghi p or he is pursuing other projects. you are as close to iraq's or as a presidential

advisor can get her are we ending the post crisis period in central banking? we have a better idea of what for and guidance can't do. are we moving on to a new idea? >> in the u.s., we will hopefully normalize monetary policy. the ecb is moving in the upstate direction given the prob lems they are facing in their economy. >> in terms of understanding what you can do, what are the lessons we can draw from the last five years? >> just go back and look what ben bernanke did in two dozen 8, 2009, and the alphabet soup of new lending programs that help support the economy. alan, one of my most in portland moments was you three basements down giving a lecture on economic education p or you want to go microeconomics or let's go macro to the big picture of this meeting in paris. this is a chart that needs

explanation. the white line is japan, the orange line is europe, and for those of you on radio, all you need to know is if you compare japan to europe, japan is totally in original territory or 70%etting up to 60% of their economy sitting on the balance sheet of their bank. alan, there is no way the you can tell me this is pretty. >> it is not clear to me how it ends, and i think it will threat we face in the world economy. japan has thrown everything at their deflationary problem, the slow growth problem, and if it does not work, i do not know what they have left in their toolkit. what areir toolkit, the tools that the american bank we avoidat instabilities like we saw in october in the market? markets haveat our handled tapering reasonably well. there have been ups and downs, but if you look at the end result, the fed managed to end

their purchases, the markets are still pretty strong, and the emerging markets weathered it pretty well. there was a lot of fear a year ago that there would be problems in india and i think they are in a much stronger position today. >> mario draghi made a comment yesterday, saying that the ecb has tasked committees with a timely preparation of further measures to be implanted if need appeared we know that if needed means of different things in rome than it does and frank for it. in frankfurt.s you are talking at a whole different set of worms. >> it is hard to figure out exactly what is going to go on, and our perspective on it is that we like to talk to our investors, most of whom are little investors, actually to tune out a lot of this noise. >> it is noise. >> it is. issues outre are big there, but the markets will be up and down. what you have got to do is have a very diversified portfolio.

>> you are just sitting there, white knuckling it while other people make decisions. are you hoping for anything out of here? lot ofink europe has a long-term structural problems. alan can probably talk through this better than i can, and they are running out of tools. the biggest challenge europe has is the demographics are really negative. when you look at that, it is hard to project europe having really higher growth in the foreseeable future. >> what are you see in the animal spirit of money coming into your machine? money comes into vanguard every day, you are in the basement opening envelopes. are people putting money into the markets? >> actually this year we will take in a record amount -- >> how much? >> right through the last week or so probably $180 billion of net new investment -- >> and, what, five days? >> for the year. >> you can send a christmas card to bill gross, it is ok. >> some element of that. [laughter]

what we are seeing is very diversified investing by our investors. >> all right, william mcnabb, our guest host for the hour along with alan krueger. we will be back as we celebrate this weekend come up when he five years of the collapse of the berlin walter and we go to berlin next on "surveillance ♪."

>> this is "bloomberg surveillance." i am scarlet fu. let's get to our top headlines this morning. we begin with nike cutting ties with adrian peterson after the minnesota vikings running back pleaded no contest to a misdemeanor assault charge for whipping his four-year-old son -- with a tree branch. the u.s. labor market on course for the best performance in 15 years per we will soon find out if they cap pace last month. the monthly jobs report is due out at 8:30 a.m. eastern time. employers added 200 35,000 new workers. the unemployment rate expected to hold steady at 5.9 percent, matching a six-year low. home depot said 53 million e-mail a dress is were taken in a data breach earlier this year. the company had previously disclosed that 56 million payment cards were compromise.

it expects to pay about six to $2 million to recover from this incursion. those are your top headlines this morning, tom. >> this matters now to our guest host. william mcnabb's chief executive officer of then gard p are he and lost some battles. they had decidedly won the mutual fund etf for. america is buying index funds as they fall farther and farther behind in their planning for retirement. you need equity exposure. you may need to put many more thousands away. what a screwed up system. it is amazing how we have blown retirement lending since 1974. >> i would take the other side. i would say the system is evolving. if you look at the best defined contribution plans, they are terrific vehicles for people to say forward herman. the big issue is coverage and that there are still many workers that do not have appropriate access.

>> boston college is leading the research on this. underfunded, and short of putting money aside, is the answer to be in more risky equities? >> diversification should always be the watchword. investors, but am in a strong tilt toward equities. we think one of the best developments in the markets is a target date fund. does this automatically for you. if you are a 25-year-old, you have exposure to global equities. >> how many basis points are you charging for the target gimmick? than 20, all the way down to 10 based on the size of investment. are you capturing investment from those that are doing less than 20? >> we are the largest manager target date fund starting with essentially no market share. what is happening is the market

is responding to high-value. cost is an important part of the equation. you have advisors that add value in that. how do you respond to people's fears, i left the boat. it is way out in the ocean and i can get on it. you have to begin saving in a disciplined manner and you have to do it with diversified portfolios. theou are going to "time" equity market, i think that would be a mistake. pricesand i have seen lower, yield higher. how close are we to that ugly event in the bond market? i think the rise in rates is potentially going to be very slow and drawn out, so we may not see the kind of bond army

getting that many are predicting. if the also tell you, time that you have to invest is longer than the bond fund, you want rates to rise. >> what is the number one thing that people need to know working every day with the great john bogle. >> good ethics is good business. course, we talk to everyone in the industry, and we will continue that into 2015. >> we have a nonfarm payrolls number coming out. ahead of that, we have a data check. the 10 year yield at 3.9%. of thewants to get ahead jobs report. futures are little changed as well. the consensus is for an increase of 245,000 for the month of october. gdp numbers that we got in recent weeks have indicated that

the economy is doing just fine. so the feds next move is -- hold onto the low interest-rate policy because the labor market still has some slack there. >> this is bloomberg "surveillance." , east germans streamed west in search of luxuries. us a professor at humboldt university in berlin, the world's leading expert in a germany to americans. if you would indulge, i will start with an anecdote. withars ago i was working a german and an intern got into a fight with the boss. he said, i see in your resume, you were born.

-- in a certain city. does that still play a role in politics? >> i don't think so. be.r people may some of those people are in political influence but that is way behind german now. you still have some differences across regions but they are looking at other challenges they have to deal with, including southern europe and the euro. >> there is still a divide between east and west, but it is all about money. germany spent so much time rebuilding and now we have infrastructure problems in the west, of all places. it is interesting. for the first 10 years, money was poured down the gullets of east germans. they build highways, factories, lots of infrastructure, at the cost of western german investment. lopsided situation

some rebalancing. a lot of german money is flowing to eastern europe and other places. it is a general problem, lots of pressure on the german government to increase spending across the board. as you know, there rebalancing. is an imbalance in europe right now and germany is seen to have a role in that. it seems so obvious, this lack of investment. is such an obvious economic move not being made, what is the resistance? >> the politics are very complicated. the germans have been lecturing southern europe for about 10 years about getting their fiscal house in order. it looks a little inconsistent to start borrowing moneys to fix

up the highways, although it makes economic sense. it is an investment. wonderful to have you on. talking aboutere bringing the german experiment over to korea. >> some people look at that as a model for cold war legacy. what part of the german it,riment, as tom calls would be most and trucked it reunited korea? >> it is a different story. it is a different -- i don't know that much about korea, but the population numbers are different. given the sheer poverty of north korea right now, it is enormous. that is why the south koreans are rightfully very cautious. this would be a real problem. much worse than what we have. on the other hand -- to put it

the mental orientation of the north koreans is much different than the differences between east and west germany. it is a very complicated problem. >> is there a point in your head for euro-dollar where things change for angela merkel? is weakness a tipping point? forward to the u.s. recovery. i have predicting that they would come back for years. now it is coming and i like to see interest rates rise. that will put downward pressure on the euro and that is what europe needs. andttle bit of inflation, that will help things enormously here. it will help the spanish economy, other southern europeans pick up on competitiveness. right now europe is struggling under this overvaluation of the euro. >> this is now a cottage industry for journalists,

reading angela merkel's mind. thank you so much. >> we are less than one hour away from jobs. how the markets are pricing in the pickup. ♪

>> this is bloomberg

"surveillance." it is jobs today. and 8:30r comes out a.m. betty liu will be breaking the numbers with us. alan krueger, our guest host, will be there with you. we should be having a conversation now. >> i will be focusing on minimum four states that voted on tuesday that they wanted to see a minimum wage hike. $10.10 level,eral but it is close. you can look at it two ways. the democratic bush for the minimum wage hike is, in fact, taking hold among americans. more than three quarters of americans believe we should see a hike in the minimum wage. you can also look at it in another way. in some of these red states

perhaps republicans are taking this on as well and it will be less of a flashpoint. a case where people are voting it in themselves. the free market was not helping them out, so we are going to vote it in. >> i know there was a debate over marginal cost and whether that would drive up cost -- voters said, thanks, i want a raise. number that we focus on, not just the top line? what data is most important to you? forcek hours, labor participation, the composition of the unemployed, hourly earnings. i'm concerned about what is going on in the bottom half of the labor market. would also say i look at the numbers in the context of everything else and this has been an extremely strong month from the perspective of on the employment claims, isn. i would not put too much weight

on today's number given what we know about how the economy is performing. >> said lazear, who will also be joining us, argues that the job market is not as good as it was before. the reason we have so many part-time workers is because of obamacare, this 30 hour workweek . republicans want to raise that again. >> that is the republican point of view. i will save alan krueger here. >> you can see him grinning. the lowest we have unemployment in six years, john job growth since 1999? >> you need to hit the stump with bill clinton. >> you have bruce ratner coming on. is reason i bring him of america's most expensive home is

for sale, something he can afford. 100 $95 million in beverly hills. i have to be honest, i count only two pools. square feet, 12 bedrooms, and 23 bathrooms. >> it should become a hotel. is coming up.p" ♪

up on monday, steve miller, aig chairman. he also knows about the expense side of corporate restructuring. that is going on across the nation as people adjust for 2015. a perfect time to catch up. on monday.e it is jobs today. scarlet fu and brendan greeley. top headlines. investing in ap chinese online literature platform. they plan to combine their website with $.10 literature. tencent literature.

"the wall street journal" says the pay-tv industry contracted last year. customer defections came at all the top cable and satellite tv providers. >> they have a right to give it a try. i do not enjoy sitting here and listen to people live. you have part of my attention. mark zuckerberg took the stage at the company's headquarters yesterday for his first ever public question-and-answer session, saying he hoped to learn from what people asked. this is what he said when he was asked about what he thought about the movie. way to went out of their get some interesting details correct, like the design of the

office, but on the overarching plot, as to why we are building facebook, to help connect the it, they how we did just kind of made up a bunch of stuff that i found kind of hurtful. the reason we wanted to do this was because we really believe it is a better experience and we think messaging is becoming increasingly important. can focus onch app doing one thing well. that was a complicated way to say that his feelings were hurt. is a littlet disingenuous of him, regardless of what the movie says thomas to say that we are building facebook to connect a world. i have always found this rhetoric a little intolerable. into thehed the movie theaters with my kids. they said, it is great. i had steam coming out of my ears.

exactly the same as zuckerberg. it completely miss portrayed brilliant kids. what i thought they got totally wrong in the movie is that nobody worked in the movie. bar,one went from bar to date to date, asian chick to a asian chick. it is a fiction. guys like you at top schools work their butts off. that was not in the movie. moms -- almost no one look good in the movie. it is hard to imagine their competitors would've been successful. you have to give them an enormous amount of credit. >> we talked about this. it is just ludicrous how hardwood ms. portrays how -- >> breaking news, hollywood ms. portrays things. i think there is some creative license there.

here is another piece of breaking news. tom only hosting "surveillance" for two decades while the rest of us work here. william mcnabb is with vanguard. alan krueger, princeton economics professor. both say we need to be smarter about saving money. 401k's.axing out our i think people need to develop better financial habits. rules of to learn thumb, start saving earlier. they need to borrow only one they are confident they can repay. people need to make better financial decisions. we need to do a better job

keeping -- teaching financial literacy in schools. part of the reason we went to the financial crisis is because people put themselves in positions where they were vulnerable. the target fund that william talked about earlier is a good thing, having their portfolio adjusted. people do not understand the fine points of financial investing, but they need to develop habits so that they do the right thing. problem for financial professionals and economists. they think about the long-term, what happens 40 years from now. people think about cash flow, what is coming in, what i am paying out. how do you get people not to think about what is in front of their noses? >> there was a fascinating study that was done at stanford where they took people's photos and then they showed him -- them what they would've like in their

60's. if people can identify with their future selves, then they actually think more about the future. forink the best we can hope is to change the defaults so that people, by default, are doing the right thing. >> do we need to go back to some blend between the traditional mother corporation, defined benefit plan, and what we have now with the free spirit 401k system? >> i actually think defined benefit plans were not successful. the only covered a small percentage of workers. it has become almost mythology that they were successful in the corporate world. what i think you have to do -- the real issue here is if you look at large companies and how they are running their defined contribution plans, they are doing it well. most employees are saving at the right rates. alan mentioned the defaults. enrollment,vings,

-- of the best features i think it is a powerful thing. where we see it, people do the right thing. the real issue is coverage. it is getting coverage to small companies where people do not have access to retirement. >> full disclosure, my first mutual fund was a vanguard fund. what do you find is the biggest challenge in terms of educating ordinary people about their investments in their retirement fund? >> today's show is a perfect example. all of this interest in the economic numbers, the jobs numbers. here we are, sitting on the edge of our seats. >> so we should not watch bloomberg? >> i think people should be watching. we need people who are more financially and economically literate. but as an investor, you have to tune out the noise.

onwe want to get you focused what we are looking out for the rest of the trading day. tom, the russian ruble? ukraine, buton i'll have to look at the ruble. it is out of control. you have to head off to radio. the jobs number is coming out at 8:30 a.m. we will take a look at our -- agenda items. you are talking about the president. if he moves to immigration, some say that he will poison the well. i say that water is already poison. i don't know if it will be uncomfortable. they know each other well. i hope there is some opportunity for progress on maybe the trade agenda, on the device tax, parts of the aca that can be approved. the biggest thing they could

achieve is corporate tax reform, but that would be a stretch. >> on my agenda item, the jobs report. our twitter question of the day ties in. we wanted to wrap in minimum wage. we asked everyone, what should be the tipping standard for the service industry? here are the answers. minimum. >> have you no heart? just get a service job and then give me your answer. >> all the fast food workers $115 an hour. that is their threshold. >> because of our big tippers today -- you are both 25%? >> yes, and including tax. here is the final answer.

>> who are these people? maybe 25% should be folded into the bill. thank you, everybody. "in the loop" is coming up next. ♪

>> good morning, it is jobs day friday. you are "in the loop." what a show we have for you this morning.

the first jobs report after tuesday's midterm elections. former bloomberg columnist mohamed el-erian is with us, along with jason furman. lazear and alan krueger will weigh in on many aspects of the job market, including the minimum wage debate. moment, bruce ratner on the real economy. first coming here is a look at our top stories. we are less than 30 minutes away from the october jobs data. it is expected to show the labor market is on its pays for its best performance since 1999. employers probably added 239,000 jobs last month. the unemployment rate is expected to stay at 5.9%. three days after the election changed the political