fed will act -- well, at some point. pandora, they are in court. digital radio is different than regular old radio. good morning, everyone. this is "bloomberg surveillance." it is tuesday, february 10. we need some top headlines. >> president obama said the u.s. may send deadly weapons to ukraine despite operation -- opposition from german chancellor angela merkel. merkel was there at the white house to press a diplomatic solution. four way talks will be held in minsk tomorrow. >> we are in absolute agreement that the 21st century cannot stand idle have a stand idle

and allow the borders of europe to be redraw and. -- redrawn. >> a slow rise for chinese consumer prices in january. it is the slowest pace in more than five years. falling food and tumbling oil and metal prices are pushing inflation lower, raising real interest rates. >> i trust regulators and china have reached a decision on qualcomm. regulators in china said the company used its dominant position to force unfair conditions on customers. the measles outbreak is spreading. the cdc says there is now 121

cases of the measles across 17 states. until recently in the u.s., it was on -- unusual to see more than 100 measles cases in the u.s. in an entire year. >> boston smashing records for snowfall. 69 inches of snow in the last 30 days. truckloads of snow have been removed and dumped on fenway park. that is not where they are putting the snow. i am kidding. boston is just getting hammered. we are not. >> we keep forecasting this blizzard that is yet to materialize. boston has seven feet of snow on the ground. >> i have been chasing down an

economist from harvard and she could not leave her house. [laughter] >> are you buying spring yet? >> not yet. >> it is in the windows. it is like "spring is in the windows." >> i am buying for fall. >> fall fashions start coming out in the early spring. >> ok. i'm lost on that. let's do a data check. we have some time to talk about the markets without the hurly-burly. the euro-dollar, a weaker euro. on to the next screen. the dow is near 18000. it is churning. the german two-year bond is a negative.

that is a stunning to statistic -- a stunning statistic. alix steel is doing a great job on this yesterday. oil is down to 20. maybe green is good news for some people and bad news for others. back here is when we were lasted 20. -- last at 20. >> i feel it when you watch this kind of volatility right now, if you say you have a call on oil you are lying to me or to yourself. everyone has been wrong about this. >> it is a directional call. it is not like a single point forecast. it is a tough thing to do. oil at $20 barrel.

how about the markets? there is a quiet on the markets this morning. equities are flat for the year. up 13% in the past 12 months. the dangers of too much recalibration, too much overthinking. i think it is a great theme for the show. we are always like ok, worry, worry, worry, worry, worry. >> the courage has to be looking through a couple of the biggest worries for investors right now. it has to be deflation, slower growth outside the u.s., the impact of energy on earnings. the courage chester come from being a longer-term investor. -- has to come from being a long-term investor. >> look on the left side of the

chart how much real yield there was years ago like two decades ago. it is not there now. how distorted is your world from what the fed is doing and what the bond market is doing? >> fixed income has very strong returns for the last 30 years. we have a hard time seeing value anywhere in the asset class. >> we heard steve schwarzman a saying he is spending as much money as he can in energy. >> we are not quite comfortable with energy. it is one of these things word is difficult to predict where we are going to bottom out.

there is a lot of technical pressure. >> to your point, brendan, does jpmorgan have a single hall on oil? >> we don't have a single point call. we are letting it be a moving target and recognizing that the supply-demand fundamentals and the price do not match for us. >> people don't want to get caught on the wrong side of an oil call. you are pretty bullish on europe. >> i would say we are neutral. [laughter] >> what is a bigger deal in your world right now? is it the qe announcement by the ecb or is it what is happening with greece? >> i think greece is a far bigger deal. qe came too little, too late. the bigger question i have is, will this political overhang in

greece and these negotiations holdback business investment? i am worried that investment has closed down. >> jim paulsen was optimistic and he has shifted to greater caution and over to europe over to multinationals. >> i have seen plenty of reports that suggests that credit demand is not even there. >> that's right. you can create supply but you cannot require people to take out credit. i'm talking about high quality companies. if you don't get that, you don't get the growth you need to take up something north of 1%. >> what will you be watching to see if your suspicion is true? we have not seen a lot of

movement in bond spreads outside of greece. >> i will be watching a lot of language from the policymakers. the eurogroup meeting. the discussions over the next couple days. i will be watching how perceived to be confident the other anti-eurozone parties around the different countries are. >> here is mohamed el-erian this morning. investors face difficult calls. microsoft goes 7 billion large in debt. are they using it to raise dividends? >> maybe. the bigger print is that u.s. companies should be continuing to use this open window of incredibly low rates and available financing to buy back stock. [laughter] loc in capital to allow them to expand in the next wave of the u.s. recovery.

>> when and how is that going to happen? they should be using this opportunity to spend this cash on something other than buybacks. >> on something other than buybacks. we want them to engage in more expansionary activity. we want to see more m and a and capital expenditure. we are starting to see cuts in capex in many parts of the energy sector. what we need to see now is, does this decline in energy kill a little bit of confidence or do people feel buoyed by a? -- by it? >> what are you seeing among your clients? what is the appetite for risk? >> the appetite is fairly muted. people are concerned after five

years of a bullish market. they are looking for negative headlines. they are already risk-averse. >> do you see a as a sign of confidence? >> i think we can take it both ways. a couple of years ago we thought, why not companies taking advantage of this? are they so concerned about the future that even at relatively cheap valuations they are not going to buy assets? now asset prices are little bit higher. the fact that they are doing these deals people are speaking out of both sides of their mouths. if you are putting cash to work, it means you are no longer fearful. >> are you seeing a lot of cash being put to work? >> not on the individual side

but on the corporate side, there is a lot of willingness to take it out. >> kate moore of jpmorgan with us for the hour. coming up, got milk? coca-cola brings a new modified milk. will it work? the twitter question of the day is what is the future of coca-cola? tweet us. this is "bloomberg surveillance." tom is mooing like a cow. [laughter] good morning. ♪

>> good morning, everyone. "bloomberg surveillance." later this morning, mortimer zuckerman of boston properties looking forward to that on "in the loop." this is "bloomberg surveillance." good morning. we need to get to some top headlines. >> a third-quarter profit mesko -- ms. for softbank -- miss for softbank. the company maintained its full-year target. in egypt, the cabinet has suspended the national soccer league indefinitely following a deadly confrontation between fans and security forces outside the cairo stadium over the weekend. more than 20 people died after a stampede. egypt's public prosecutor has

ordered an investigation. a major setback for indian prime minister narendra modi. modi's party demolished the competition in national elections in may. those are your latest top headlines. >> this is a big deal. >> she had seemed unstoppable. the bigger deal and the -- he had seemed unstoppable. >> this is like a new india. >> remember 1993? brendan was heading off to college, i was learning to ride a bike. there was one commercial that year that none of us can forget. ♪ >> and that was the vienna would

dancing be one of my all-time favorites. that's make a random call. who shot alexander hamilton? >> [indiscernible] >> i'm sorry. >> got milk? >> despite the success of the campaign, fewer and fewer americans have been drinking the white stuff. the demand for value added milk is increasing. the president of coke america thinks fairlife could rain money. the dairy market in the u.s. is very fragmented. people don't buy storebrand milk.

people are not brand sensitive. >> they are putting stuff in milk. >> talk about what fair life is. it is a brand name. it creates a revolt in. -- revoltulsion. it has extra stuff in it? it is like super awesome. >> extra protein, extra calcium. the dairy industry is fragmented and in decline. coke is hoping that its marketing prowess can turn that around. >> coke as distribution all over the world. nobody wants the liquid it is used to selling. >> bubbly is gone.

>> there is no growth in carbonated beverages. they are trying to add value and up the price. >> a gallon of fair life is $3.69. >> would you buy this stuff? >> i'm a little bit more of an organic shopper then an additive to my drink type gal. i like to go in little bit more on the purest side. >> the allman milk is booming. >> the plant-based milks are growing. u.s. milk alternative sales on the rise. it is a $2 billion industry in the u.s. >> it goes to a point that

olivia made earlier in the story today. coke is trying to jump onto this trend of healthier milk and completely missing what is going on which is that people want more natural things. >> we don't do three glasses per day. >> we still have an 18-month-old who is drinking a lot of milk. >> that is where the growth is. infant formula. another place were coke is branching out. [laughter] what is the future of coca-cola? diet coke? coke zero? fair life milk? ♪

>> good morning, everyone. "bloomberg surveillance." the euro bears a modest watching this morning. we have an outstanding morning must-read. >> fed governor jay powell sat down for an interview. it was a wide-ranging interview. what stuck out to me was jay powell's comments about the audit the fed movement. >> it is a huge movement. >> rand paul give a speech. >> this is about getting congress into the meeting by meeting making of monetary policy. over time, we have learned that when that happens, elected politicians want more accommodative policy that results in bad economic outcomes. we have had lower inflation and

it is under control. why we would change that now is a mystery to me. >> the issue here is how much control should congress have over the fed. his argument is that the less control congress has, the better the fed does. >> yes. >> this goes back to 1951. >> the push in congress for an audit is an violent conflict with the fed. >> i will leave other people to debate this, but it is important to bring this up. >> his father, the congressman paul, dr. paul he has made this a staple of his campaign. this is a huge part of appealing to the right if you are going to run for president. >> yes. >> it is a basic distrust of those ugly capitalists up in new

york city from the 19th century. [laughter] it is no different than william jennings bryan. >> perhaps it is just politicians trying to score some points. great interview with governor powell and peter cook. go to bloomberg.com and check it out. powell still sees plenty of slack left in the economy. the number this morning is 83. that is our number of the day. that is how many rigs u.s. oil producers closed last week due to the weak rebound of oil prices. our next guest says to not worry about oil prices. ♪

>> good morning, everyone. a tuesday "bloomberg surveillance." >> microsoft is selling $10.8

billion of debt and its biggest bond sale on record. the world's largest software maker is taking advantage of investor demand for corporate rated securities. it sold more than $2 billion of forty-year obligations. california is now home to the largest solar power plant. the 550 megawatt plant generate enough electricity to power 160,000 average california homes. governor jerry brown called for an increase in renewable energy. >> there is nothing out there. i lived out there when i was a kid. >> heinz will include the popular sriracha in their catch

up -- ketchup. >> i did not know microsoft did forty-year paper. this is the greatest chart in equities. yesterday, they tried to get their costs back up to where it used to be. cheap, cheap, cheap, cheap, cheap. this is the conundrum of every company in america. kate moore this is why stocks were not good. they have lots of wiggle room. >> they have lots and lots of wiggle room. we have good underlying growth. >> this is like college financing. >> wait a minute. but then what do you do with that money? >> you give it back to shareholders. i'm sorry. >> everyone would welcome more dividends with open arms. as i was saying before, we want

to see them put their money to work with real investment. >> do your clients of interest in a 4% for your coupon? -- four-year coupon? >> everyone wants to have a little pocket of yields. >> we're going to talk oil right now and demand for oil. elasticity. we want to dive into it. you have great research on this, skip. what we are going to do with cheap oil. are we going to buy more? >> we are starting to see that. we saw a surge of gasoline demand in the fourth quarter. we think that u.s. oil demand growth will be up 3000 barrels per day this year. >> are you going to push against that? do you buy the idea that we get to $20 per barrel? >> it is hard for us to see getting down to $20 per barrel.

that would be a world where we are destroying demand not growing demand. we think the manner is going to grow 800,000 barrels per day globally this year. >> i'm getting a church van. the rising demand you are predicting, argued talking more church or bigger cars? >> we have started to see rotation to heavier vehicles. people are not trading in vehicles -- priuses for escalates, but people are going to crossovers. we are starting to see more driving. one of the interesting numbers on the friday jobs report was when you look back at the fourth quarter, we added 400,000 jobs. we have created jobs out there and that explains a big part of that fourth quarter pop.

we are a global energy and metals researching consulting firm. we have 1000 employees and 24 offices around the world. >> but you are mostly in texas, right? >> are second-largest office is in houston. we have over 100 analysts. >> how ugly is it out there? how ugly is it for oil? >> you mean, houston? [laughter] i thought you are making a disparaging comment about houston. [laughter] >> not the baseball team. [laughter] >> so far, things are ok. people are walking on not quite a shells. -- egg shells. things are getting a little bit tight. >> are they furious? >> i think they are shocked. nobody ever thought that the

saudi's would not be the saudi's. >> the conventional wisdom is that they are trying to write out the drop of the price of oil to push oil producers out of business. does that work? >> don't apply conventional wisdom to an unconventional problem is what we are saying. >> what did you think of this prediction from opec yesterday that non-opec production is going to drop? >> they wish. >> we can't square to those numbers. if you think about all of the momentum just in north america. it is hard to get that number to go negative. >> you were talking about natural gas. >> what is the implication? what is the correlation? >> we don't see there being much of a relationship at this point. you hear talk about the associated gas.

we don't think it is a mover on the market. what we could see is a bit of pressure on gas prices through coal-fired generation. >> what is fueling the increase in demand for gas that we are showing on the screen? >> what drives that is a couple of things. it is the power generation rotation away from coal to natural gas as a cleaner burning fuel, a cheap fuel with gas prices where they are. the other sources the industrial demand. >> give me an update on ethanol please. where did this debate go? >> disappeared. it got punted to 2015. the refining industry is in a holding pattern waiting what the 2014 mandate -- >> can you breathe ethanol?

>> you are probably not supposed to. >> what you make with the rest of the stuff when you are done making whiskey. [laughter] we have been seeing oil service companies competing on price. the breakeven points in the american west, are these not as firm as we thought? >> breakeven's have already come down. just as a rule of thumb, we think if you're looking at a $70 breakeven he year ago, you are probably looking at something at $60 today because of the cost compression that is happening. we don't think that is over yet. we think that continues into 2015. >> have you buy yourself a hummer? >> know, we already have an aircraft carrier in the driveway. [laughter] >> skip york, thank you so much. i have a minivan and the driveway and my children cannot

move out fast enough. maybe they will sooner than i think. mom and dad may be getting their basement back. the millenials may be moving out. ♪

>> good morning, everyone. "bloomberg surveillance." here is our twitter question of the day. what is the future of the coca-cola company? this is an important question when you look at the challenges at mcdonald's, as well. what is the future of the coca-cola company? let's get to our single best chart. >> it was supposed to be the generation that could not be bothered to leave home. it was cyclical. our single best chart thanks to deutsche bank shows that the millennials are moving out. new household formation was down and that is no longer true. it has picked up. kids were staying at home. that is the yellow line. that was on the rise for a good decade and that has dropped, too . we have kate moore. we were talking about this over the break. what i am wondering is new

household formation, is that a leading indicator or a lagging indicator that we already know about? >> i think it is going to be a leading indicator because it has been so stubbornly low relative to precrisis trends. there are three reasons why it has been very low. there has been broad-based risk aversion. people lost faith in housing. younger generations are not so sure they want to park their money there. millenials have a different view of credit and the banking system. we are talking about how many of them actually have credit cards or actually use credit area mortgage rates have made it very difficult for first-time buyers. >> how old are the average millenial's? >> born after 1980. 20-34. you probably have a couple of millenials. it is not talking about who is buying a home, it is talking

about who is moving out of the house. there are plenty of reasons to think that millenials will not buy rates -- houses at the same rate as past generations because they are scarred by the housing prices -- crisis. >> millenials have never been given the chance of a growing economy. they have never seen it. >> i came out of school at a time during a massive bust. there was never a time where we did not see mass layoffs in one generation of college graduates. it is nice to blame the financial crisis on this risk-averse behavior, but there could be something else. >> there is something else and we have a staff report from the federal reserve bank of new york. we are talking cyclical stuff.

people go out and get jobs. they leave home. the real problem according to the new york fed is the debt overhang, the student debt millenialds have. >> this also affects a flexible they can be in where they live. millenials want the flexibility to move from job opportunity to job opportunity, whatever is going to help make more money to pay off debt or build up their own coffers. >> what you are not seeing is that at intervals throughout this conversation, each of us looks to olivia. >> i am officially a millenial. i rent an apartment, i don't want to spend a lot for a cable bundle and there is a big correlation. >> i go back to the world of the

republican convention three or four cycles ago. the gdp average since you were in school was 1.7%. >> i was on the front end of the curve. in 2008, everybody did not have a prayer. >> these people don't know in normal economy. they have never seen it. >> if you came out of school in 2006 and you lived over a difficult period, you will definitely say it is difficult to find jobs, it is difficult to pay rent, it is difficult to do anything but cushion your personal balance sheet. i can totally get that. but we are further enough into the cycle at this point. most people's parents who took a hit on the asset side have recovered. balance sheets have recovered.

that should be trickling down, i would think. >> this is what a rational economist would say, but a behavioral economist, they are show lowly -- slowly showing us that how the economy was when you left school is how you feel about the economy your whole life. >> i came out of school and the heart of 1973-1974 recession. we 100% believed that that would end. every single person was certain it would end. that is not true now. you grow up in a 1.7% -- >> people are delaying decisions. we like to call it single broken lazy -- broke, and lazy. [laughter] single, broke, and lazy. >> sdternterns: single, broke, and

lazy. >> that is olivia's new series she is developing. [laughter] >> i pitched to my parents after i graduated that i was a startup. [laughter] >> ultimately, that strategy would not have worked. i put together a full business plan and mama and pop moore would have said, no chance, you are out. >> i told my parents i was going to be a playwright and they said, good luck to you. >> can pandora avoid a major core battle? they need to fight off a royalty suit. this is "bloomberg surveillance." streaming on your tablet your phone, and bloomberg.com. good morning. ♪

>> good morning, everyone. "bloomberg surveillance." this is an important interview. this is with mckinsey global institute and they have done fabulous research on their wonderful pathbreaking study on obesity. we need to get to some top headlines from around the world this morning.

here is brendan greeley. >> a few light rays of economic light this morning in greece. bonds moved higher for the first time in five days after speculation that greece's creditors are close to a deal with the country to make sure the company is not left without funds. there is a meeting tomorrow with 18 euro area counterparts. auto sales and china climbed 10% last month driven by the demand for suvs and minivans. consumers favor more spacious riots. retail sales in passenger vehicles surged. suv sales surged. minivans surged by 20 2%. ubs beat estimates in the fourth quarter. stronger earnings and the tax game boosted earnings and doubled its dividend. net income was up. analysts surveyed by bloomberg expected 853 million dollars.

those are latest top headlines from around the world. >> pandora is heading to court yet again. they are being sued by bmi a rights management company. they are being sued over royalties being paid to songwriters and publishers. the company won a suit against the american society of composers and held onto its 1.85% royalty rate. with us now is paul sweeney. pandora won their case last time. how is the case looking this time? >> it is probably looking pretty good. this whole digital streaming of music and content in general there is a whole new set of law about who gets paid, how much do they get paid? everybody needs to get paid in the music business. recording studios, music labels, publishers writers. >> this is a question of whether

or not, pandora, a new online streaming music service, should pay the royalties is a terrestrial radio station? an fm radio that i could turn on for my local radio if i could still own one. [laughter] >> you are a millenial, i forgot. [laughter] >> or your car, if you still owned one. [laughter] >> everyone in the music has to be paid. -- music business has to be paid. is it 1.5%? 3%? pandora is already paying 50% of the revenue to music labels. this is a relatively small cost for the music publishers. if you are pandora, it is all margin. >> what is the logic of the argument in the suit? what is their argument laying out why it is that pandora streaming is different from playing to the radio? >> they are saying it is radio

and that like any other rebroadcast or of content, we need to get paid for the music publishers and songwriters need to get paid. >> they want a bigger cut. what is the logic there? >> they are saying it is a different service, it is an online service and is not covered by the flat, blanket fee. >> this goes back to your court by allah cart. -- a la crarte. >> spotify allows you a lot more control and they pay 70% of its revenues and royalties. is the argument that the more control you have over what you get does that service than have to pay more back to the artist? >> i think that is what a lot of these are saying.

this is different than traditional radio. traditional radio pays a blanket fee. this is an individual service. this is also big in the video business as well. when you see dish and sling tv. dish negotiated aggressively to get digital rights to espn. this is not just music this is video, this is print, this is all content. as these services take more content direct to consumers online, the question for all the content owners is, do i get paid? >> pandora has been having a rough time of it. the stock was down 17% recently. can pandora afford to pay a higher rate? >> on the margin, they can. their costs are so high on a fixed basis for the royalty rate, that is why they are fighting so hard about 1.7% versus 2.5%.

they are really at the risk on the revenue line of if they do not continue to grow the revenue line and subscriber base, it goes right to the margin. >> is any streaming service going to come out of this alive? there have been concerns that spotify cannot make money. >> can you make it simply as an advertising driven model? that is a traditional subscription model. is that enough? the answer is, probably not. there needs to be a subscription component and that goes back to the millenials. starting to pick on you guys but do they want to pay for content? >> paul sweeney, thank you so much. kate moore thank you to you as well. >> let me do a forex report. it is quiet on the markets. what you need to know is that

there is record weakness on the ukrainian wrubel. -- ruble. we have an incredible our next hour. stay with us. good morning. ♪ . .

>> this is "bloomberg surveillance." tom: angela merkel gives quality

time at the white house. meanwhile, she says greece has come up with quality recommendations to appease germany. the fed will act at some point. it considers stock market tantrums to come. obesity is worse and getting more so, and mackenzie -- mckin sey provides a definitive's study. we are live for from our world headquarters in new york. it is tuesday, february 10. i am tom keene. joining me olivia sterns and brendan greeley. olivia: president obama says the u.s. may send deadly arms to ukraine. the two leaders met yesterday at the white house, angela merkel was there, pressing for a diplomatic solution to arrive at a peace deal. former talks with doing pressure -- former talks for peace with russia, ukraine, and

germany -- president obama: we are an absolute agreement at the 21st century cannot have us stand idle and allow the borders of europe to be withdrawn at the barrel of a gun. olivia: foreign ministers have agreed to delay an expansion of sanctions against russia to give peace talks a chance. a slow rise of fuel prices in china. cpi rose .8% from a year ago. that is the slowest pace in years. it is giving the central bank more room to ease monetary policy. tumbling oil metal prices are lowering really interest rates. brendan: antitrust regulars and china are taking action against qualcomm. regulators a qualcomm's license fees were too high and the company used its position to

force unfair conditions on customers. the measles outbreak is spreading. the cdc says there are now 120 cases across 17 states and all but 18 are tied to outbreak that again in disneyland and california late last december. in the u.s., it is unusual to see more than 100 cases of measles and an entire year. tom: it is february. we must need to do an article on snow -- boston hammered recording a whopping 69 inches. two hockey goals high of snow in the last 10 days, 10,000 truckloads have been removed from the city streets, and the city is going to double its annual $18 million snow budget, and it will get worse. more snow is possible on thursday. why do we have to do the obligatory snow story in february? brendan: i don't know, but i have relatives in winchester

and i shudder to think how sick of each other they are right now. tom: it is cool. that looks like austan college right there -- boston college right now. stay tuned to bloomberg 1200 and boston for weather reports on the snow today as well. let's get a data check equities, bonds, currencies, commodities. it is finally quiet with one exception -- euro gives it up, $1.1274. careful watching to see if the euro breaks down as futures are up 4 as well. each and every central bank now is data dependent. the fed reserve, well, they await data. jason trennert, managing partner at strategas research, he says hand-in-hand allowing for upcoming austerity from data dependent listeners and viewers. what does data say right now? jason: i think the data says the

us economy is a little bit stronger than people might have given it credit for. i also very much -- the fed is getting increasingly difficult to justify emergency accommodative -- tom: where are you in the parlor game? jason: our chief economist thinks it is september. tom: farther out. jason: a little farther out, but it will be this year. i know larry summers was in the papers yesterday talking about the fact that it may do more harm than good but it is hard to justify zero. tom: do you presume a taper tantrum, and equity market tantrums when all of this unfold? jason: i've a feeling we are getting it little bit right now. the old song tom was three steps and a stumble, with was not the first fed tightening was not the second, but the third one.

i have a feeling this time around because it is so well televised and people are so worried about what is going on about the economy that we are actually getting a little bit of the taper tantrum now and that once we actually get into the tightening, it is not want to be as big a deal as it might appear in the first place. brendan: jason, what about the rest of the world? will it continue to be a drag on corporate earnings in the u.s.? jason: the dollar will be, but at the start of the year -- i run a run a country and talk to ambassadors, the general feeling is that the rest of the world would drag the u.s. down. i'm getting the idea that frankly the rest of the world may be better than people think and it is not only because you have had a change in the facts which is to say the ecb is getting really involved in the bank of japan is continuing to do what it is doing -- oil is another one of the stories where there has been a tennessee to look at the glass as half empty, and it hurts relatively small economies and it helps very large economies, not just u.s. you europe, but also china

india, very large economies. olivia: larry summers says the fed needs to wait until it sees the whites of the eyes the mac monitor shows a stunning plunge in inflation. jason: this requires a little bit of cognitive dissonance because janet yellen i feel very strongly, as dovish as advertised, very focus on the labor market on wages, but again i think you can come up with the idea that the fed can tighten a little bit and remain very accommodated for a long period of time. tom: what we hearing from jason is what we heard from jim polson yesterday on radio, which is a shift from domestic focus to what about our international stocks/ brendan: i think it is curious that we are having this commerce version based on two categories -- the united states and rest of world. do we really divide the global economy into two that way?

jason: you do because the u.s. is the dominant player in the world and also because we are in the united states, and i will also say that u.s. is ill 69% consumption, so it is a relatively closed economy. it has an important impact on earnings to put it mildly, but it is also important for u.s. stocks. olivia: u.s. economy, 59% consumption, 50 for 6% of s&p sales are coming from abroad -- 56% of s&p sales are coming from abroad. jason: you are seeing that from the currency transaction affects. if the rest of the world is better, as we suspect in the rest of the week year the dollar will be somewhat mitigated because top line will be a little bit better. that is the way again i am looking at it. the money this business has made with non-consensus ideas was not priced in, and i think the rest of the world doing better is not

particularly well priced in. brendan: this is your stand -- rest of world, glass half full. jason: yes, not just be developed world, but i think the emerging markets are going to do better. not looking at emerging markets as monolithically as they used to. they are saying there are big differences between the borrower and -- tom: let's switch gears. microsoft has 40-year, 4% paper. every cfo is going to go out there, do bonds, extend the duration out. that has got to be good for equities. jason: tom, it is not just when you think about it, right? m.i.t. issued 100-year paper. mexico issued 100-year paper. it makes absolute sense. the only group not issuing

longer-term paper is the u.s. treasury. 50% of our debt matures in the next three years, and this is i call it the charlie sheen affects -- [laughter] you can get away with a lot of bad behavior when you are the reserve currency. olivia: oh, i thought you meant it was by winning. jason: you get away with a lot of bad behavior just because you know, you are the dominant player, so -- brendan: as much as i would love to continue along that metaphor let's fire up the stock picking machine -- you say get out of the consumer staples and get into discretionary. jason: if you look at where 10-year yields are and you look at consumer staples, health care utilities, there is not a lot of room for error. you are spending 18, 19 times earnings for consumer staples. 10-year treasuries to $2.30 which is where he were in

november, you are living a little dangerously. olivia: do you think we are going back to 2.5%? tom: i have heard this for three years. he has gone through cases of cigars. jason: september, they were $2.50. when i go around the country the focus has changed -- four months ago, five months ago, people were saying why are treasury yields $4.50? now it is -- how can they go up ever again? so the consensus has changed a lot. olivia: coke consumer or discretionary stable? jason:coke coming up life, it is our twitter question of the day -- what is the future of coke you go tweet us @bsurveillance. ♪

tom: good morning, everyone. markets moving, futures up 13, get your attention. also a terrific important morning must-read. olivia: it comes from john meer shinar the author of one of my poly cytec's works, "the tragedy of great power politics." he writes in the "new york times"

olivia: i think it is a very interesting point. john mearsheimer writes in contrast to can waltz -- ken waltz. it is a double standard to what we are doing in ukraine. tom: he is almost the anti-zeitgeist. he really pushes against the ingress -- conventional thinking. brendan: it is hard to have this discussion unless you are making the distinction he is making which is you do not need to know who is right or who is wrong. you need to know what is the right thing to do. it is easy to look at this situation say vladimir putin is definitely stoking the conflict, he is sending russian troops and heavy machinery over the border. does that mean we need to do something about? not necessarily. tom: has anyone said ukraine should not be a part of nato? olivia: i don't think so comment

august the you are hearing a lot of countries of course the president of estonia sounded very pro-western europe. that has really concerned vladimir putin. it is classical, realist politics will stop those new nato rapid transit are lined up right along poland and romania. brendan: forget ukraine, he is really flying all of these sorties to sort of see what nato means. he is actively testing to see what this alliance can do. tom: and as you mentioned estonia has been more than vocal about this. brendan: for a long time. olivia: go to the "new york times" and reed johnson mearsheimer -- read john mearsheimer's piece. tom: it has been a very quiet morning, and all the sudden we move with a 2.00 on a 10-year.

we will talk to jason trennert throughout this hour about movements on the market that could cause market upset. the yen a $1.1910 so some real reversals. i will also show ukrainian money showing weakness, the hryvnia. brendan: the hryvnia will have problems for a long time to come. tom: coming up on bloomberg tv, michael coss.pps. it is "bloomberg surveillance." ♪

tom: good morning, everyone. "bloomberg surveillance." our twitter question of the day, a big response what is the future of the coca-cola company? of course earnings out here in about 15 minutes i believe it is on coca-cola. do that out @bsurveillance. we say good morning, and we need to get to our top headlines from around the world.

this'll be with olivia sterns. olivia: softbank failed to make up for widening losses of sprint in the u.s. analysts surveyed by bloomberg expected $641 million. the company maintained its a full-year target. and in egypt, the cabinet has suspended the international soccer league and definitely following a deadly confrontation between fans and security forces outside of cairo stadium over the weekend for some than 20 people died after police fired tear gas into the crowd, setting off a stampede. an investigation has been ordered. in india, a major setback for prime minister new hendry modi -- narendra modi. early trends pointed to an easy win for the common man party.

national elections are in may. those are your top headlines. tom: there he good. we go to saudi arabia. it is a revolution of sorts, not the peaceful transfer of power in saudi arabia from abdullah to solomon. rather it with the next generation. john has studied the extended family of abdullah for a decade. he is the director of ashmore group and his notes are read minutely and carefully worldwide. i need to rip up the script. what would $20 oil do to your saudi arabia? john: first of all, thank you full stop i do not think we will see $20 oil, but of course it will not be good news. it all depends for how long will oil state at 20 if at all, so i

think over the next three to four years, saudi arabia will be fine with oil at 20. again, i do not see a careful stop i see it more in the 60's range rather than 20's. periodtom: john, you are in dubai. there is an interesting relationship between saudi arabia and the united arab emirates. how will that relationship develop not only with king solomon but also with the grandchildren of abdulaziz? john: that is a great question. there is a historic relationship between the two countries, uae and saudi arabia have work to another after the arab spring to help egypt, to help bahrain, to give a lot of assistance to these countries, more than 25 billion dollars has been given to egypt over the net -- last few years, and $10 billion committed to bahrain, so they have important relations, these two countries.

olivia: john, we are trying to understand the saudi decision to not cut production. you feel it was conventional wisdom to put u.s. shale producers out of business or to contain iran/ ? john: i think this is happening as a result of saudi arabia's commitment and belief that they have to go after market share. of course global markets believe that the saudis are doing this to hit on iran. i will remind people during the iran-iraq war, oil went down substantially from $85 to $88 and maybe the agreement was the use of chemical weapons by saddam hussein, so i do not think this is the right strategy, nor do i think that the saudis are doing it to force ukraine or russia comply to make them part of a happier family. brendan: john we have a question for you from jason trennert, here with strategic research in the studio with us.

jason: who is the marginal producer? is it u.s. or saudi arabia? john: i think the marginal producer continues to be saudi arabia because they have the extra capacity. nobody talks about the ability of saudi arabia to have 2.5 million barrels of extra capacity. definitely it is still saudi arabia, but the u.s. is very important, no doubt. i think the floor and oil prices is now at $45. it is not going to be $20. we have seen the 40 five dollars, the marginal producers still being saudi arabia. for saudi, the cost of reduction is in a single dollar digit, so there is a concern saudi arabia can still see oil at much lower prices and still make money. olivia: john, what about what is going on domestically and saudi arabia/ multibillion-dollar cities going up, i've a friend or harvard who is working on one.

if oil stays at $50 a barrel will they be forced to scrap some of these enormous spending projects? what is the process for economic reform? john: i believe will we're seeing come of the announcement, the $32 billion worth of let's say handouts and pensions and extra salaries that the king announced, king salman, is part of this attempt to keep everybody within line and also to show the benevolence of the new itk is important, and saudi arabia have donein in theg past. .remember when kingof dollar became king in 2005, he increased public-sector salaries by 15%, so this is not new, but of course the amount is substantial. brendan: it is an economy away from oil and other sectors, was that just window dressing or is that going to happen? john: you know, this is an ongoing attempt.

saudi arabia needs to continue to diversify. unfortunately, diversification is difficult. saudi arabia still relies on oil. olivia: john, thank you so much, john sfakianakis joining us there from the ashmore group. coming up, we will be joined by mckinsey global institute director james tom: manyika. ♪

olivia: good morning. this is "bloomberg surveillance." i am olivia sterns. we start with microsoft selling $10.8 billion of debt in its biggest bond sale on record. the world's largest software maker is taking advantage of investor demand for the highest

rated corporate security. it is in six parts including more than $2 billion a 40-year obligations with a 4% coupon. and california opens the world's largest solar powered power plants near joshua tree national park in southern california. the megawatt facility and raise enough electricity to power 150,000 average homes. governor jerry brown called for a reduction of electricity use by 2030. and a pittsburgh-based company said they will be including sri racha in its heinz. the new catch-up will hit stores later this month, and tom, those are your top headlines. tom: this matters now to our guest host jason trennert. yes the dollar will strengthen

yes, there will be a modest currency adjustment, but all of that will be outweighed by destination america. there is something about a stronger currency everybody loves. jason: tom, i think that is true. there has been a lot of concern, hang wringing about foreign policy -- foreign-currency on earnings. we've seen results between movements in the dollars and pe's, so there is a tendency for what you lose on earnings that you tend to make up for on the pe. tom: the price divided by the earnings, they could both move around, the answer is about confidence. jason: it is about confidence, so what i find when i go around the world and talk to institutes outside the u.s., they start with the currency then they go to the asset class, then they go to the security. american investors i think by nature, you start with the security and then he might work back to currency later on.

i think this is an important thing in a global market to realize that a lot of investors especially in places where you are little bit nervous about what the future may hold geopolitically, you start with the currency first, any dollars awfully attractive. tom: the "new york times" did a five-part series on new york city real estate. big money flows into big caps? jason: listen, tom, i do not know for certain on the real estate market, but it seems obvious from a circumstantial point of view if you look at what is happening in the real estate market. people are looking at new york city real estate as a bank account. tom: shares of jpmorgan -- buy me jamie dimon. jason: this is a lot harder to steal than my cyprus bank account. i am not going to come in some morning and have a haircut of 10% or 15% on my manhattan condo. tom: i want to flip it here, i

heard this from jim polson at wells capital, and everybody is on board the american blue chip wagon. you say there are international companies, foreign companies i need to be bought. are those blue chips as well? jason: i think they are. europe and japan look attractive to me. the only problem is part of the plan is to weaken the currency in europe and japan. you have to be careful. if you can hedge the currency, i would say on a non-currency-adjusted basis i would argue that european and japanese equities might outperform the u.s.. if you are not worried about the currency, i have a feeling international shares might out form the u.s. tom: jason trennert with us. let's get to olivia sterns. olivia: coca-cola results -- coca-cola caesar u.s. currency headwinds to knock about five points off now revenue. adjusted earnings coming in a little better than estimate that

$.44 per share versus estimate that 42 cents. $10.8 billion. coke saying they will target a share repurchasing of $2 billion to $3 billion in the coming year. global volume growth of just 1% in the quarter, and that brings us to our question of the day -- what is the future of the coca-cola company? how's it going to turn this oil supertanker? tom: the headline -- global sparkling beverage. what is a sparkling beverage? olivia: carbonated? tom: they are afraid to call coke "coke" anymore. a sparkling beverage. olivia: and that is why coke is getting into milk. let's see where u.s. futures are settling pointing to a higher open up by 12.6 are now. the u.s. 10-year above 2.

the euro slightly weaker against the dollar, tom, trading at 1.13. this is as we wait to hear whether yanis varoufakis is playing a trick with mario draghi. nymex crude down by 1% trading at $52.33 per barrel in new york. tom: good morning, everyone. "bloomberg surveillance." i am tom keene. olivia sterns and brendan greeley with us this morning. futures up 13, dow futures up 105 things are improving. olivia: the world is awash in cash although technically it is awash in debt. $57 trillion since 2007, and there is almost no deleveraging insight. james manyika is the director of the mckinsey global institute. thank you for coming this morning. james: i am glad to be here. olivia: how does this end? james: not well if we do not do anything about it. despite what happened in 2008 the world continues to pile on

debt. it has grown by 17%, and most of it is government debt so the $57 trillion you mentioned, something like 25% is government debt. we are not going to grow our way out of this problem, unfortunately, because the growth we would have to have is unbelievable. brendan: do not say what you are seeing in berlin because you will be met with some resistance, that we cannot grow our way out of debt. let me read some of your report -- a broader range of solutions will need to be considered. what does that implore? james: it just means there is no single answer to it. we have to come up with a better twill for dealing with sovereign debt. we will have to come up with more micro-prudential tools to deal with the financial system, for example. brendan: if we can't grow our way out of it, we are talking about restructuring, better ways to restructure, right? james: we need to drive growth, restructuring. tom: jason trennert with us.

i know you have a question for james, but to me, the idea is we need a catharsis, a catalyst to make this structural reform happen. i have not seen it. jason: i am wondering about rogue are for when you deal with this. there are a couple of ways to get out of it. you can default, you can create inflation or -- i do think you can grow out of it. before 1945, you would just find another land to conquer. those are kind of the standard ways you get out of massive government sovereign debt. you are saying you are not going to be able to really grow out of it. james: put it this way, the kind of growth you will have in countries like spain, italy, and greece is like twice what anybody is forecasting. that does not seem like a reasonable solution. you have to work on both growth and restructuring. olivia: you cannot imagine what happened to brendan's eyes. brendan: i just spoke to her

yesterday, but she offers another option, she wrote a paper, the imf published it last week, pointing out that for about 70 years until the end of rights and woods, one thing the government did to get rid of detbt was financed -- debett was financed. this is not beyond the pale. james: it is not. we have a much more globally-connected world. keep in mind also that it is not just government debt. households have actually levered up much more than they were even before the recession. i will give you a good example -- if you look at households specifically, the coal crisis countries -- the u.s. the u.k. spain, and ireland -- have delivered. everywhere else, if you look at debt to income for households are now beyond 150, that is way higher than it was before the recession. jason: i am conservative

politically. i would say the one thing that does not seem to have been tried to me are supply-side solutions to grow our way out of the problem. is that just so far beyond the pale and a place like europe that you would actually have structural reform to create capital formation that would grow, or is that just off the table? james: the challenges are the kind of structural reforms you have to have. the fiscal balance, if you look it interest rates, there is such a big structural reform that it is hard to do those in the political environment we have got in europe. tom: olivia mentioned earlier millennials and how they have never seen a real economy. what is the mckinsey run rate for the u.s. gdp? under 3%, over 3%? james: over 3%. the good news is we still have a huge pipeline of innovation, so if you look at longline growth, the u.s. has environment that is in fact a higher activity of the

economy, you have a pipeline of innovation, technological and managerial so i am quite optimistic. whereas that is not the case for some other countries. olivia: james, thank you so much was of james manyika you are staying with us. "bloomberg surveillance" will be right back. ♪

brendan: welcome back. this is "bloomberg

surveillance." i am brendan greeley with olivia sterns and tom keene. betty liu is with us. betty, you have zuckerberg up with you, and where was he in 1999 when i needed a works? betty: you might have grown your building and the gm building. brendan: it all worked for me. betty: exactly. have you guys heard of this? it is shared workspaces, you can print a cubicle, and you will work together, and you hold hands and it is great and wonderful. olivia: yeah, it is really cool. betty: they raised $350 million. the company valued at $5 billion. jason you are a big numbers guy. let me throw some numbers at you. the company is valued at roughly 100 times their income.

the revenue is right now at about 100 $50 million -- $150 billion. 33 times their market cap. mort's revenue is $2.4 billion, and he is that nine times his market cap. what am i trying to say? this company is valued as a tech company, not a real estate company. being in real estate as more knows very well, is a capital-intensive, sometimes slow growth, and very cyclical business, and the reason why families generally run property developments companies, not so much tech startups. you know what? wework might defy this whole trend. olivia: that is a crazy valuation. brendan: i want to suggest in front of stragtegas, the rise

of shared foxhole workspace, what does that mean for the economy as a whole? jason: ironically it is probably tough for real estate full i would say the entire internet boom will lessen the need for commercial real estate in general. it is also probably going to lessen the need for certain types of support functions that you would normally have. it is a very interesting phenomenon . being a macro guy, i'm listening to betty and saying this has a lot to do with financial repression and low interest rates as people are searching for any sort of field and you are seeing it result in very high route uh and's -- and very high valuations. that is what i am thinking rows listening to betty. betty: my big question on wewo rk is how much they know of the credit quality of their tenants? mort zuckerman and other property developers need to know that they have people with

credit renting their spaces. olivia: i will say i have been down to a wework on lower broadway. tom, they have free beer after 5:00 p.m., and there was a long line for the massage chair. betty: i like how you pointed tom, "free beer!" olivia: joining betty liu on "in the loop" the chairman of wework properties. ♪

tom: good morning, everyone. "bloomberg surveillance." tomorrow robert knightnardelli joins us. always interesting on the state of the investment spirit. you will be with us on television and radio tomorrow. i am tom keene. with me, olivia sterns, brendan greeley. the euro $1.1301. headlines from around the morning -- olivia: government bonds and greece moving higher for the first time in five days. this after speculation that greece and its treasurers are close to a deal that will make sure the company is not left short of funds. finance minister yanis

varoufakis hopes to agree on a short-term funding program with his 18 euro-area counterparts. and the rise driven by demand for sports utility vehicle's and minivans, consumers continue to favor more spacious rides over conventional sedans. passenger vehicles climbed more than 2 million, suv sales surged 52% -- wow --while minivans surged 22%. and ubs, stronger earnings, the bank doubled its dividend after reaching apple targets, net income just over $1 billion, up from $992 million a year ago. analysts expected 853 million dollars. those are your top headlines from around the world. tom: very good. this is important -- simply devastating for a first time in a terse 69 pages, the mckinsey global institute has combined all of the available research and thinking on obesity.

without question, it is one of our true global crises. you know the growth rates you're right, it is terrible -- there is no single bullet. in fact with any mckinsey study there are 74 bullets that would wipe out the cost and the burden of fat. james manyika is the director of mckinsey global institute. this is more profound to me. i want to go right to one of the narrow parts of the study, which is what jason and i talk about all the time, jason trennert with strategsas, which is portion control. [laughter] jason: both alcohol and food. tom: disability-adjusted life years saved from eating less on the plate. let's compare that to the impact of something that we talk about all the time, which is we would only have 49 daly saves, this is

profound -- "eat less." james: eat less makes a difference. if you look at all of the intervention groups and put them all together, in the top five, at the head of portion control you have got reformulation of food products, then you have also got the reduction of high calorie which is the other one. you have got to look -- tom: th 74 bullets. ejames: absolutely. jason: in the paper, you talk about we have to change the way we think about obesity because personal response really is important but is not enough to make this change. we have to change the environment that we live in as well. james: what we found is that when governments and policymakers try to prioritize one intervention, they miss the point. you have to work all of them and more importantly a line the incentives. brendan: in the u.s., the politics of personal choice comes smack bang up with any attempt to fix this. shell obama's initiative, which you would think would be a political --

michelle obama's initiative which you would think would be a little has become very politicized. james: war in some countries -- this is huge. olivia: 2/3 of the adult population in the u.s. is obese if you look at appetite -- tom: we looking at me? olivia: we like to show these stock photos of people's midsection to are overweight, if you are on radio. i was not, tom. i have had a few meals with you. i think you are pretty responsible with your portions. there is no appetite for a policy response, look at what happened in new york city when we suggested capping oversized soda -- taxing oversized soda. james: we need to think about how do we experiment and learn from these experiences and try new solutions? tom: there is a quiet page on

diabetes. brief us on this profound reality of real illness from obesity. james: one of the challenges of obesity is -- i do not know if we are taking this as seriously as we should. you see in the research, and it is linked to some of the effects of obesity, so some point we are going to tap to take a diabetes very seriously and actually look to the research. there is research that points to how we can try to deal with it, and we do not take that seriously enough. brendan: the actors in society the organizations i can help drive change -- i know the pentagon is concerned with obesity because young recruits are overweight. james: pretty much back to the point that there is no silver bullets, we will have to look at our institutions, universities the military companies, in fact when you think about what we put in our cafeterias that is a big part of how we attack.

olivia: this new value-added, more healthy milk from coca-cola -- tom: the bottom line as americans do not want to eat tofu. what is it that subway had, the triple -- james: part of the issue, tom, is we associated healthy eating with tofu. there are so many more healthy choices, by the way. look to examples in developing countries. quite simply a lot of very basic, tasty food does not cost that much, and they do not all have tofu. olivia: a lot of calories come in beverages, which may be one of the reasons -- [laughter] tom: for those of you on radio, i will send it out to you, the executives as well. olivia: a lot of these galleries are coming from beverages, which is probably one reason why coca-cola is shifting its focus to its new value-added milk. it brings us to our twitter question of the day -- what is the future of the coca-cola company?

first answer -- it is cheaper than water. america is supersaturated -- the future overseas. tom: a smart tweets come i've never thought of that, it is prestigious. brendan: a lot about distribution problems with liquids in the developing world. olivia: they said global volume for coke was 1% and sparkling beverages, as they say for stocks i can answer -- it is not about coke or milk, it is about giving experience and value. we need a starbucks effect which means coke has pricing power, they want to use their marketing extra tees to drive sales. brendan: somewhere in portland right now, an art is no soda shop is opening up. i made that up, but it is coming! olivia: good the future of coke be milk, coffee, and energy drinks? tom: i love the idea of the vitamin drinks and all of that stuff. olivia, where are the vegetable drink's going?

jason, you start the morning. olivia: there is a market in the west village that is selling raw nut milk. $8 for about 12 ounces. tom: there we go, really interesting on coca-cola, and look across loomer radio and television for analysis. -- across bloomberg radio and television for analysis. the agenda, olivia sterns gets us started. olivia: the potential launch of spacex, elon musk's rocket is supposed to go at the name of the spacecraft is called falcon 9. the satellite will travel one million miles from earth. again i want scheduled for 6:05 eastern time from cape canaveral, weather pending. brendan: we love rocket launches on "surveillance." my agenda is the european

meeting. i know they happen all the time and most the time they do not mean anything, but this is really important. yanis varoufakis will lay out his plans tomorrow, which is what everybody wants. everybody is going to put their cards on the table, every other european finance minister will be there, and we will have real news tomorrow. tom: my agenda is measles -- it is back. i cannot believe i am saying this. measles is back with some demonstrative numbers. i wrote article out of berkeley california five or six kindergarten or surround berkeley, california, it was stunning where this issue is going. pay attention to this issue of measles. that is not only the agenda for the morning -- brendan: it should be a public health issue, but it is solely becoming a political issue. tom: had we get from measles months, rubella to small pozx? james, are you going to do some

in on vaccines? james: we are thinking of looking at the bad behaviors consumers have. tom: james manyika thank you so much. we say good morning. ♪

>> good morning. it is tuesday, february 10 and we are live from bloomberg headquarters. we are 90 minutes away from the opening bell.

we have some great guests this morning, starting with mort zuckerman. he talks about why he's investing in the so-called uber of the real estate world. he tells us about the big lie in business. it is time to audit the fed again. the new jersey republican sponsoring a bill that would do just that. lawmakers have tried to do this every years in 2009. what is different now? exclusive comments from the city fed governor. it looks like greece is headed towards a clash in the eurozone. angela merkel signaling she is not willing to compromise. eufinance ministers meet tomorrow to decide how much to lend the greek government.