tom: ruth returns west. we consider the return of palo alto. good morning, everyone. this is "bloomberg surveillance." we are live from our world headquarters in new york. i'm tom keene. joining me, olivia sterns and brendan greeley. olivia: a brazilian billionaire who bought heinz is eyeing another american food company. they are in advanced talks to buy kraft foods. 3g would merge kraft with heinz. shares are soaring in the premarket. up about 16%. 3g also owns burger king. in france recovery crews are

returning to the remote site where the german airliner crashed. searchers have find the cockpit voice recorder from the german a320 plane. authorities will want to know why the pilots made no distress call as the plane plunged from 38,000 feet. >> that is going to be the number one item. why wasn't there any call? there were multiple radios on the airplane, multiple ways to communicate. why wasn't there a message? they will be looking at that very closely to find out what was going on in the caulk it or around the cockpit at the time of the event. olivia: the searchers are still looking for the flight data recorder. the crash killed all 150 people on board. president obama is no delaying the withdrawal of troops from afghanistan. the president backed off his plan to slash the number of u.s. troops there this summer.

10,000 troops will stay in afghanistan until the end of this year. the president says the u.s. mission is simple. president obama: we want to make sure we are doing everything we can to help afghan security forces succeed so we don't have to go back. olivia: there is also another advantage to keeping u.s. forces in afghanistan. it will keep -- make it easier for the u.s. and the cia to conduct drone strikes from there. brendan: the republican budgets are identical, except for defense spending. one calls for $94 billion in defense spending. there will be $20 billion in defense spending cuts. apple has bought database software foundation db. according to a person familiar with the matter, the move is

expected to help apple improve the speed of their software devices. a painting by pablo picasso could be yours for $140 million. his "women of algiers" will hit the auction block on may 11 in new york. get your paddles ready. we have breaking news. tom: "the wall street journal" reported overnight on the kraft transaction. this is very simple. it is a merger and a re-merger. mr. buffett is involved in this transaction. olivia: berkshire hathaway is once again teaming up to buy up another big american food company. they are in advanced talks to buy kraft foods. heinz will in fact merge with kraft. tom: heinz will own 51%?

olivia: the heinz ceo will become ceo of kraft. tom: so i can put heinz ketchup on mike -- on my kraft velti to cheese? -- velveeta cheese? brendan: haven't you been doing that for years? tom: yes. we have a perfect guest. this is dinosaurs mating. ugly business. dave driscoll out at citigroup has great stuff on this. minimal revenue growth. all sorts of ceo challenges. when in doubt you just cut cost, don't you? >> that's exactly right. you see the cost cutting mechanism they can put in place.

a lot of these companies are inflation hedges. u.s. inflation is starting to rise. that will be positive for companies such as hines, such as crafts, and the other consumer companies out there. tom: the symbolism here of apple as a dow stock while a brazilian private equity firm makes a tough decision it is amazing. you have two old stodgy businesses that could have been dow components and something like apple now on the dow. a remarkable time, isn't it? >> that is one of many metaphors that we can see for the changing world. brendan: when we talk about cost-cutting, it is important to put this into perspective. this is not just cost-cutting. costs are like fingernails, they must be cut constantly. this is all that they do. olivia: given the fact that we

have equity markets at a record high it is not that frothy of a valuation. the current valuation looks like it will be about $40 billion which would imply a premium of about 8%. the other headline we are getting is that 3g along with berkshire is going to invest $10 billion. i want to bring in at hammond. -- ed hammond. tom: did you sleep last night? >> a little bit. olivia: are they going to cut the fat or build up an american barbecue condiment empire? >> i think a bit of both. pulling together with heinz gets them this empire. will they cut the fat? definitely. they are the best in the business at doing it and they do it from the top down. we saw them do it at burger king.

we have seen them do it at heinz. they cut back any kind of access. -- excess. they will reduce any unnecessary fat around the edges. brendan: if you read the feature from "business week" some examples -- at burger king you have to get permission from your boss to make a color copy. tom: they do that to me every day. brendan: there is no free budweiser at budweiser anymore. tom: i remember the shock in st. louis over what they did to budweiser. dave driscoll is doing great work over at citigroup. kraft is an expensive stock. there is the fragility and the immediacy of kraft.

what is the timeline of 3g? when you look at where they want to go five years out, where do they want to be? >> they go in with an approach of how much can we squeeze from this business? how much can we cut the cost? how efficient can we get it? they do whatever they need to do and then they find companies to merge it with or they take it back out into the market. they are extremely smooth operators. olivia: that is very important to keep in mind. 3g has a much more different buyout style. 3g tends to hold longer. they also do not like to go out to any old fundraising. they get too big, wealthy people like bill ackman and warren buffett who can do these deals with them. brendan: they cut the cost. but they don't sell it for parts. tom: i like that idea.

what is the size of this deal? olivia: 37 billion dollars. i believe it is going to be a valuation of about $40 billion. tom: is this the biggest thing that war and has ever done? -- warren buffett has ever done? >> it signals to things. the market is in great shape. the cost of borrowing is very low. at the moment, we can say -- see that there are really great companies out there in terms of brand names that are not trading over the top under presenting good inflation hedges. tom: let's look at relative valuation. campbell soup is not on here. i'm sorry, folks. i did not do here -- i did not do that. this is mondo lays -- mandalay's , which is part of kraft.

it is 20.6% margin. this is a company doing a little bit better than the other two. brendan: is it possible to put up a basket of american companies that are having long-term habits because habits are changing? people don't eat these things anymore. tom: excuse me? brendan: people. don't eat these things anymore. tom: look at the video. i'm going to start crying. [laughter] >> there is a decline in the businesses, but there was a good case to be made that these are inflation hedges. u.s. inflation is starting to rise. tom: what is the distinctive feature that has not been reported yet? >> we are all trying to figure out what they have done to get here and what else they have looked at.

the thing with 3g is that they run everything. what else did they look at? what did they pass up on? tom: campbell soup. campbell soup has been a dog. i have no gray hair and it was identified as a dog. >> it is an owner that does not want to sell it. they do not want to get rid of it. 3g could have taken it. it is a dog. tom: with the success of mondelez when you add in the new kraft valuation, that is a phenomenal value creator. >> it is a phenomenal value creator. tom: did you say they tripled margins at burger king? olivia: yes. to your point about whether or not this was expected obviously, we knew that warren buffett said he knew he was going to be hunting for elephants and doing a big deal

the ceo of kraft used to work at ripplewood, which is a private equity firm. there was a sense that kraft might be on the table because this was a new ceo that might be more open to dealmaking, versus the person that runs campbells. brendan: when we look around are there any other american consumer companies other than campbells that are waiting for this kind of a takeover? >> catalogs -- kelloggs is another one that has been speculated. i think they might wait a while before doing another one of these. they have deep pockets. they are very ambitious. if you could team up with people like warren buffett, the sky is the limit. tom: we have not been a bloomberg terminal monitor, but i think this is important. they have made a velveeta

kroner. -- cronut. i think this is very important. brendan: we like velveeta cheese. tom: you give your father a stick of velveeta cheese? have you ever had it? olivia: no. brendan: i don't even know what it is. olivia: ed, is kraft heinz moving to canada? >> it would not be unlikely. it would be an extremely aggressive step. it would take financial engineering to do that. olivia: ed thank you for joining us on the news of the make a merger between heinz and kraft. tom: you have never had velveeta ? olivia: maybe.

at camp? [laughter] olivia: can 3g turnaround kraft? what will brazilian billionaire jorge liman do? ♪

tom: good morning, everyone. "bloomberg surveillance." let's get right to top headlines. olivia: heinz and kraft announcing that they will merge and it will create the third-largest food and beverage company in north america. kraft shareholders will own 49% of the combined company with heinz shareholders taking the other 51%. berkshire hathaway and 3g

capital will invest $10 billion in the new company. in france, workers are looking threw the remote site where the german crash occurred. they have found the flight recorder from the germanwings flight that crashed. they are still looking for the flight data recorder. turmoil in yemen. shiite rebels closed in. the tv station controlled by the rebels says they have seized an airbase that had been used by air u.s. -- by u.s. advisors. a senior official is saying intelligence is being sent to government forces in tikrit. it is the first direct involvement in the offensive by u.s. coalition forces. ukrainian president petro poroshenko is firing the

governor of the eastern region. the governor is a billionaire who was fighting to stop the government from seizing one of his businesses. singapore's government is extending viewing hours for those morurning the nation's first prime minister. he died at the age of 91. his body will i and state until his funeral on sunday -- lie in state until his funeral on sunday. we will talk about talent wars between wall street and silicon valley. then, is sotheby's and economic indicator? then we will talk to celebrity fitness entrepreneur tracy anderson. tom: we need to move to france. a very difficult story. hans tackles -- hans nichols has traveled to the south of france. great sadness this morning and

great mystery. what have you learned in the last six hours? hans: i have learned just how difficult a recovery operation here would be. you see behind me these outs -- alps. they think the crash happened at about 1500-1700 meters. the snow starts about 2000 meters. in between me and their the mountain rises and you cannot land a helicopter on a steep slope. that means sending in people by foot. we don't have word on whether they have recovered the second part of the black box. that is the part that records the flight data. we don't know how intact the voice data is. tom: what is the linkage of the three governments working together? i thought the reporting this morning was quite responsible, but how closely linked is this recovery of three nations? hans: everyone is drawing on

expertise of all the countries. eventually, the remnants of the plane will be brought together and assembled in paris. there are officials on the ground from all countries and leaders and heads of state will also be arriving. as you may have noticed, the wind has picked up a little bit. previously, that was not a factor in the recovery. it is darkness that they are fighting against. it does appear to be a coordinated effort. so often, i talked to you about europe fragmenting and what is happening with greece and brussels. it is moments like these that you get a sense of how strong european unity is and how everyone does come together and work together and try to find a solution. it appears that the coordination is that the highest level and working quite smoothly. tom: hans nichols, thank you so much. stay with us. "bloomberg surveillance." ♪

tom: good morning, everyone. the gorgeosity of spring in new york. we are getting a touch of warmth in the air. olivia: my morning must-read comes from greece's finance minister yanis varoufakis. he writes speaking about the first bailout.

his criticism is that the bailout effectively just transferred private losses to taxpayers, to public citizens. i know you know yanis varoufakis. what you make of this? isn't he supposed to be coming up with a laundry list of reforms that he is going to enact? brendan: i think this is classic where a fact this -- yanis varoufakis. before he became finance minister, he was a popular commentator on what was happening in greece. he was very good at framing what happened. sometimes i wonder reading ellis factors whether if it is still not a cultural problem in europe. >> that is absolutely correct. in europe and the u.s., you have

a union, but in the u.s., you have a fiscal union. that is one of the fundamental problems with europe's recovery. brendan: do you think germans understand that their own banks got bailed out because they give money to greece? >> i don't think people have a long enough memory to remember when their own country got bailed out. olivia: yes. you also talked about the toxic blame game. i don't think bringing up war reparations helps. [laughter] we will discuss wall street and silicon valley next. this is "bloomberg surveillance." ♪

tom: good morning, everyone. yields grinding ever lower. let's get to our top headlines. olivia: a big merger in the food

business. heinz is combining with kraft and a deal backed by 3g and berkshire hathaway. the deal is a mixture of stock and cash. kraft has a stable of well-known brands. berkshire hathaway and 3g have agreed to invest another $10 billion in the company. 3g also owns burger king. in france, ground crews are making their way to the flight of that germanwings plane crash. the airbus a320 plunged into a remote area of the french alps. all 150 people on board were killed. investigators are hoping that they may be able to figure out why the plane made a rapid descent from 38,000 feet. president obama says establishing a framework for a palestinian state probably won't happen soon. the reason is the comments by israel he prime minister benjamin netanyahu.

president obama said the u.s. is committed to a palestinian state. president obama: we believe that two states is the best way forward for israel's security for palestinian aspirations, and for regional stability. that is our view and that continues to be our view. prime minister netanyahu has a different approach. olivia: the president described his relationship with netanyahu as "very businesslike." brendan: republican presidential candidate ted cruz took a shot at his wife's employer. heidi cruise is on unpaid leave from goldman sachs. ted cruz said goldman sachs is positive and negative. senator cruz: my criticism of washington is they do favors for wall street. they do crony capitalism.

i have been taking on leaders in both parties. i think if they are building a better mousetrap, great, but it should not be government favoring. brendan: he says that goldman is entitled to practice its business, but without subsidies from the government. mark zuckerberg is going to make his pitch to software developers. he will rollout tools that will help at makers reach the audience. zuckerberg talked about the conference on his facebook page. >> we are still putting the whole place together. we will have about 25 developers here tomorrow. i think about 35,000 developers are watching and joining us online. i'm excited to talk about all of the new things we have been building to serve our community to build great new mobile experiences to help you share.

tune in tomorrow. brendan: one wonders whether sheryl sandberg can find him an audio engineer. [laughter] brendan: in sports, it may be the only thing that jack nicholas had not one before. he came to receive the congressional gold medal. he won a record 18 major championships and he had also been awarded the presidential medal of freedom. tom: very good. go west, young cfo. it is an interesting trend. the siring call of silicon valley beckons many. michael for tech parachuted in this morning. he survived the flight based on his iced mint mode he does -- mojitos.

maybe they need an adult in the room. is her job to be the adult for google and to blue-chip-zize like apple. >> google is definitely on a blue-chip-izing trend. that is a good point. i think that they have a core business that everyone knows about and they are making big, long-term bets. google is not very good at church -- competing in a field that is competitive. they are good at long-term bets. tom: is this a responsibility where she has to be an adult in the room? >> i think she will be the person who helps explain the complicated strategy to wall street. they lost their ir person to alibaba.

this is their move to restore it. i don't think this is a huge move from wall street to silicon valley. it is just a step up from make it cap to make a cap. i do think she has to explain the complexity of google to wall street. brendan: you don't look at where the talent goes, you look at where the money goes. one of the things that is interesting about silicon valley is that you have investment banks going out and trying to get in on second and third rounds of funding. it is where the best returns are. >> we would be managing our client portfolios toward technology exposure. to me this is a fantastic metaphor for what we are seeing from an industry perspective. moving from financial services over to technology. brendan: it is fascinating.

you say this has been going on forever. >> i think the shift would be from goldman to twitter. that is a bet on the future. i don't think leaving from morgan stanley to go to google is a bet on the future. it is an interesting move, but not a bold move. a bold move would be if she had gone to pinterest or one of those. that would have been market moving. olivia: in terms of culture as a female executive, where do you think she will have an easier time operating? >> what a loaded question. [laughter] tom: excuse me. we need to bring the show to a complete halt. >> michael just said gal. tom: are you a programmer? >> no. i am a wall street alpha male. [laughter] brendan:olivia: you are missing the tide. >> i think she will be fine

wherever she is. i give a talk at the economic club in chicago about entrepreneurship in silicon valley. that group asked me is there a role for women in silicon valley? my role is, for sure, but i don't think it is your dollars -- daughters. i think it is the women immigrating. they are going to be running the companies from the future. the way the men from those countries are running the companies there. tom: i assumed maybe she would replace marissa mayer. give us a yahoo! update? >> without saying too much, i think that after this major tax move has run its course you will start to see a shift in some of the executive ranks of yahoo!. i think a huge value creation on locking has been created with the tax move. there is a divestiture that has

to happen. that will take the alibaba investment and move it to another thing tom:. tom:maybe the brazilians will by yahoo!? brendan: perhaps. they are coming. you are going to take a break. we will talk about whether yahoo! is relevant. could 70's serve as an indicator for the stock market -- sotheby's serve as an indicator for the stock market? this is "bloomberg surveillance." ♪

tom: good morning, everyone. "bloomberg surveillance." i'm tom keene. on a most interesting morning. brendan: last week, the camera stopped rolling and we talked about the southern these -- sotheby's indicator. that is today's single best chart. this is just the share price of sotheby's the auction house. we rented it forward to 2011. here is the problem. on this day today when we've got picasso's "women of algiers" it

to go for $140 million come we don't have a clear trend the way we did looking back. olivia: sotheby's has been underperforming. you just said it. that $100 million picasso is at christie's. christie's has been crushing sotheby's in modern and contemporary and they have done a way better job of going out there globally and recruiting all the new moneyed clients tom: . who was the new moneyed clients? olivia: asia, mongolia, parts of eastern europe. they had a team focused on scouring emerging markets and going after perhaps jorge liman. tom: do you have a picasso in the living room? >> my taste runs to more classical art. i stopped at the impressionists. brendan: atul has nothing but

bloomberg monitors. do you see an indicator or an accident? >> i see an accident. there are parts of the market that is overvalued. there are other parts of the market that are deeply undervalued. tom: such as? >> we think technology is undervalued. tom: big tech or small tech? >> we are talking about technology hardware's, which is predominantly big tech. the u.s. consumer with think is going to experience a resurgence and the industrial production related names. this is more about the u.s. economy creating a resurgence. >> do you think that software is also undervalued? >> we are predicating technology

-- productivity on technology growth. >> you are talking about cisco? >> we are talking about technology hardware. that is the biggest opportunity in the world right now. >> that is because all of these companies have corporate balance sheets that have yet to invest in for the next 10 years? brendan: when you say making actual things people can use, i was interested in seeing that apple is investing in a cloud technology company. >> they are a little company. it is an amazing, highly scalable company. tom: what do they do? >> they are a database. they are going to do things very reliably. it is a really scalable database. apple is recognizing that it needs to get cloud.

it absolutely says that apple needs to get cloud right. that is the right conclusion. olivia: retail sales or soggy. there is no wage inflation. >> nominal wage growth is going to increase. it is starting to rise quite dramatically. gasoline prices are falling. tom: let's come back. smart conversation. olivia: still to come, it is one year since shaking up wall street. michael lewis talks about faster trading. >> every new technology bread some faster trader. up until very recently an argument can be made that it was good. that you were making markets more efficient. going from microseconds. it is not clear that this helps anybody. olivia: we have more flashy thoughts from tom's interview.

♪

tom: good morning, everyone. "bloomberg surveillance." i'm tom keene. the 10 year yield. 1.87%.

here is brendan greeley. brendan: a major deal to tell you about. 3g capital has acquired kraft foods and cooperation with berkshire hathaway. they will merge to become -- heinz and kraft to become north america's third-biggest food company. berkshire and 3g will invest $10 billion in the new company. in france, recovery crews are working at the remote crash site for the germanwings flight that crashed yesterday. they are still looking for the flight data recorder. the crash killed all 150 people on board. the connecticut home of a san diego killer is demolished. -- sandy hook home -- killer is demolished. the lot will be left as a wooded area. dan coats of indiana says he will not run again next year.

he first went to the senate to replace dan quayle when dan quayle became the gop's vice presidential nominee. amazon says u.s. regulators are not keeping pace with progress. the faa just give amazon the company the green light to test drones. golden state clenches its first division title and 39 years. sharpshooter steph curry on the nba's highest scoring team. coming up at 7:00 a.m., steve forbes joins us. we look at 2016 presidential candidates. we talk about why a weaker euro being good for germany. olivia come over to you at the news desk. olivia: he has sculpted many more celebrity killer bodies including gwyneth paltrow,

taylor swift, madonna, christie turlington and now tracy anderson is growing her empire into dvds and apparel. she is also streaming her master classes online. her method is keeping pace with the booming $20 billion per year health and fitness industry in the u.s. joining us now is tracy anderson. thank you so much for joining us. >> thank you so much for having me. olivia: this is great news that you will be streaming the master classes. so that they can have a front row seat in your master classes. >> very true. olivia: is the future of fitness online? >> i was very careful for many years. technology moves great and science is great and it moves fast. i stay right at the forefront.

all of that knowledge as we learn, is super valuable to me. however, sometimes we have to slow ourselves down especially me as a focused expert in my lane. where can my expertise in technology and wherever we are really serve the people in the right way. i am all about doing things in the right way. when i say that i can really come into your life and help change your body and help you feel more connected to yourself, i mean it. the fastest avenue is for me to connect with you. to me, it is very exciting that we have the power of the internet to be able to say i have waiting lists for my studios. i have waiting lists with in my studios to get into my master classes. i have a brilliant new ceo who said, pick up a go pro and let everyone in. i struggle so much because i

created this for everyone, not just for people that can only afford access to high-end jim's. it has been thrilling for me. i am obsessed with it. i have a streaming family already. olivia: i have been on many of your waiting lists. i am excited about it. do you think there is a risk you are going to be cannibalizing your own business because instead of paying hundreds of dollars to join the studio, people will just join online? >> i am not concerned about cannibalizing my business because there are different paths to getting results. if you can to me personally and i was able to really take in where you have been, all of us are really very unique. we are completely unique. every person is unique, every pregnancy is unique. we are all unique. if i have access to you personally, in person, i can give you the gold standard of what i am capable of doing. that does not mean that i can't really change and effect someone's life via the web or

the content in some way, as long as it is authentically me delivering it area diameter not worried about it. there are so many people that stand to gain so much in the quality of life from my years and years. almost 20 years of staying focused at this. i would rather them have access to it. olivia: this is the latest up in the growing expansion of your empire. how big is the business opportunity online? >> the word empire. gosh. i am really focused in my lane. i love to go in and serve people's lives and i think we live in a society that is really focused on denaturing people or playing on people's emotions for beauty and quick fixes. i think that my potential is really huge because i think that people go online and they search for all of these things that actually don't really connect to them more to themselves, so when they stumble across being able to have something that can really serve them, i think it is

going to be -- i think it is just going to be huge value added. olivia: i say empire because it is no longer the classes that you started with. it is wellness, it is products. what are the plans for ath -lesiure. >> i have always had a very specific style. people have always been interested. i have cut things from not the exercise world to where i am at in my classes. i feel like i have a team where i am able to focus on what i love. i am a real super nerd. i like the research, the content creation. i love the fashion, but i will not do anything that will take me away from my practice. do you like this, do not like that? people believe in authenticity as much as i do. i believe exercise apparel is

huge because now it is ok for someone to go to an exercise class shower, change, and the lifestyle where is more relaxed. olivia: it is also ok to wear to leggings to brunch. who is the business you admire most? >> i admire gwyneth paltrow because i am married to her in a wonderful sense because we are really for helping people create the run lifestyles and create that balance in their lives. she is a wonderful and amazing partner. i really have a lot of respect for jennifer lopez, who was a client and friend of mine. i think she is one that is doing so many things well. that is not easy. olivia: tracy anderson, thank you so much for joining us. tom and i will be live streaming her next master class. tom: thank you so much. let me do a forex report. a very quiet day.

a stronger yen. churning. in our next hour, mario gabaldon. ♪

tom: the mystery of why

germanwing flight crashed in rugged terrain. and the mating of dinosaurs with food, heinz ketchup and cheese. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. i'm tom keene entering the is olivia sterns and brendan greeley. olivia: catch up and she's putting together -- cheese and catch up, putting together to world-class foods. craft is known for velveeta and philadelphia cream cheese. they are no strangers to this

kind of deal. two years ago, they teamed up to buy heinz. searchers have found the flight recorder for the germanwing a320 five. it is believed to be usable. the recovery process for the bodies will be slow, though. >> it is quite difficult to detect the bodies. that is why the operation will be done by aircraft only. olivia: rescue workers are still looking for the plane's other black box. the crash killed all 150 on board. and president obama is causing the withdrawal of troops from afghanistan after meeting with the new president of

afghanistan. he promised to back off cutting the number of troops there this year. almost 10,000 will stay there through this year. the president says the u.s. mission is simple. president obama: we want to make sure that we are doing everything we can to help afghan security forces succeed, so we don't have to go back. olivia: there is another advantage to keeping forces in afghanistan, making it easier for the cia to conduct drone strikes and operations from there. brendan: congress will consider budget six of them, but only two of the matter. one of them calls for $94 billion in war spending offset by the pentagon. apple is trying to bolster his cloud computing business.

in a data -- in a data varies -- in a database purchase, the move will expand its foundation. and picasso's woman of algiers will get the oshawa block -- the auction block at christie's. the last time the painting was for sale in 1997 they went for a mere $32 million. i'm looking for change in my couch cushions. tom: not much data on the markets. the 10 year yield at 1.87%. we need to give back to the top end story of the quarter. brazilian buyout of 3g agrees to buy kraft foods with mr. buffett.

what is the distinction of the headlines this morning at what is different than six hours ago? >> berkshire hathaway's involvement in this is very important. he's done deals with 3g before. his involvement in these kinds of deals, it gives an extra clout, and next level of legitimacy. but that comes in as the long-term guy. it suggests that this is going to be a company that 3g guys and hold for some time. tom: do you would just assume he will do like he does with every other one and give a preferred coupon? eight: him and 3g are -- ed: him and 3g are, we think they've all this for a long time.

he has some strong brands that go with this obviously behind stuff. -- the heinz stuff. olivia: if it's going to be just like heinz, then there could be some job losses and plants going -- closing down, because that is what 3g is known for doing. are they trying to build a condiment empire here? ed: they are already on their way to doing it. they are the burgers, the ketchup,. olivia: think about the buying power they will have. eight: and now the restaurant. they have a phenomenal empire. they have this great motto at 3g now. we don't know if it is an official company statement or just an official, but it is psd

which stands for poor, smart, and a desire to get rich. tom: steve, it's really prepared to have you here today. this is why america cannot stand the rich guys. the number one think of as olivia sterns just sick of as olivia sterns jessica biel they leave with scott scott -- as olivia sterns just said, they lead with cost cuts. hillary clinton is in iowa reforming or phrase on the middle-class. how do republicans get around the people that will lose their jobs in a 3g-crafkraft transaction? steve: this recovery has been more of a top 10% rather than the 90%. that gets to what the

republicans are advocating. ted cruz came out on monday when he announced for a flat tax. rand paul is going to advocate a flat tax. tom: olivia sterns wasn't born yet and you and i were talking about a flat tax. there has to be a new agenda. steve: the agenda has never come. the flat tax has been enacted in over 30 countries and it has not in the united states. if you don't get a tax code that is progrowth where we spent 6 billion hours a year filling out tax forms, if we don't get a stable dollar, and a health care system -- brandon: wait a minute, there is a difference between a flat tax which is a flat rate, and reforming the tax system. the republican party had eight years to do that and instead focused on tax cuts. when will they actually reform the tax code and make it to blur? steve cohen they go -- make it simpler?

steve: they have. they go together. tom: i want to get off the tax code. i don't disagree, except nothing gets fixed. i want to get to fear about job cuts in america. olivia: 3g did move burger king across the border to canada. what is the republican party going to do it 3g decides to move heinz or craft to canada? -- heinz or kraft foods to canada? steve: he's got to get the macro right. tom: they did not get the macro right? steve: look at europe raising taxes. japan raising taxes. and they wonder why their economies stagnate.

brendan: you say there is no difference between the u.s. economy and that we have a european style economy. every analyst seconds the show fundamentally disagrees with you. there is a fundamental difference between our markets and european markets. steve: the european markets are so low that you could make the case you could do bargain buying there, and the same in asia. why are we satisfied with 2.5 percent growth six years into a recovery? tom: do we have the numbers on what we will see with kraft foods? ed: they are looking at 1.5 billion a year. tom: $1.5 billion is taken out of in a chronic food company and much of that -- of an iconic food company and much of that falls on the voters, doesn't it? steve: if a company needs to slim down, they should slim down.

keeping old dinosaurs alive in the name of job preservation is what leads to stagnation. the key thing is, new startups new big companies. look at the terrible 1970's. what was starting to emerge apple, microsoft amgen, southwest. brendan: i need to get this question in. kraft foods, they'll be there hot -- velti. do you even like a kid, too? steve: i do. olivia: can 3g turn around kraft foods? ♪

tom: good morning, everyone. thanks to our control room for keeping it going this morning. quite in the market, but a lot of news. this is david driscoll a few days ago on kraft foods. this is before the merger where he has a cell. --a sell.

this is a train wreck waiting to happen that mr. buffett and the brazilians bought this morning. if campbell foods next? ed: that is one that has been speculative about for some time. -- speculated about for some time. they may want to do it, but i don't know if candles will want to sell. tom: i want to go to a colleague of yours in christ, john edwards and his presidential campaign a few years ago. are we living in to america's and -- two america's now? steve: in cities like new york, you have a huge inflow of capital, foreign capital. tongue: it's a greater divide isn't it? -- tom: it's a greater divide

isn't it? steve: it is a greater divide. you have fewer real startups and you have an economy where you do not invest in existing things, like this merger, rather than create new things. brendan: a goes back to several republican and democratic presidents. the pending on how you look at the numbers, it goes to 1985, 1975. you could blame a bunch of policies, but this divergence is not a partisan thing. steve: no but when you have a vibrant economy, which we did have an 80's and 90's, people can improve their lot in life. when you have had hideous tax code and all of the power is concentrated in the dead-end activities at how consistent were people don't know what the cost of labor is because there are tens of thousands of rules coming and bank regulars pounding on thanks when they make loans, is amazing we are doing what we are doing.

olivia: perhaps you could say there is inequality in the equity markets where there is already the wealthiest investing. they don't let the retail investors -- the retail investors listen to driscoll and other analysts. they go to investors like buffett enactment to do their deals. tom: a blistering op-ed in forbes this morning. olivia: do you love velveeta cheese as much as tom keene? can 3g turn around kraft foods? ♪

tom: good morning, everyone. good morning, worldwide. one big churn to the markets this morning. let's get to the top headlines. olivia: we begin with a major food deal in the works. 3g is acquiring cap -- kraft foods along with warren buffett. craft -- kraft foods

shareholders will get 49% of the buyout and an additional percentage. crews are working at the remote site for the german airliner crash. they have found the cockpit voice recorder from the germanwing a320 but they are still looking for the flight data recorder. it killed all 150 on board. a cash bounty is being offered for the capture of the countries president in yemen. he fled his palace earlier today. the rebels also arrested his defense minister. they have seized and hair base used by u.s. advisors in yemen's fight against al qaeda. -- an air base used by u.s. advisors in yemen's fight against al qaeda. iraqis are trying to retake a

town that was taken over by islamic state. it is the first direct involvement by coalition forces. opec numbers -- members have been stockpiling. estimated 7 million barrels to as much as 35 million. this crude would be first to be sold above -- abroad if there's a deal on iran's nuclear program. and singapore government is extending viewing hours for them -- for those morning the nation's first prime minister. thousands turned out to honor him. he will lie in state for four days until his funeral on sunday. still to come we had to the scene of the germanwing crash. hans nichols will be there live at 7:30 a.m.

and then can 3g turn around kraft foods? and at 7:50 a.m., michael lewis on high-frequency trading. our guest host for the hour steve forbes, has run for president himself. you think ted cruz is a serious candidate for president? steve: he is serious in his approach. no notes, no teleprompter and he spoke smoothly. the guys formidable. i think he's got real problems in terms of getting ground forces going in iowa and new hampshire. but he will be a real candidate. the amazing thing about the republican party today is that it has a really good, strong bench. you will have a vigorous debate on things like the tax code, foreign policy, and the like.

tom: i look at the registration of republicans in california and it is jaw-dropping, to say the least. how will they get the middle going? forget about disaffected democrats. that comes like the 1980's. how will they find a new -- that sounds like the 1980's. how will they find a new middle ground of immigrants? steve: democrats and a better job of getting their base out. it's all about who's going to get this country moving again. that is what voters want, young and old. olivia: you are close to the first rings of the party. do you think a tea party candidate can raise enough money to win -- to the purse strings of the party. do you think a tea party candidate can get enough money to win? steve: you can raise a lot of money very quickly. obama showed that in 2008. brendan: a writer for politico

has been watching ted cruz at the beginning of his career. she writes this. you've been through this primary process. is that a winning strategy, to say all of this range from disaffected libertarians to the christian right, they can be brought under one tent and it will work for ted? steve cohen he's got to first show he can appeal to a base of the party. -- steve: he's got to first show he can appeal to the base of the party. rand paul will be announcing a couple of weeks and will be going after the libertarians. it is wide open. brendan: if ted cruz targets him, is that a tent? steve: what reagan established

was a coalition. he was always portrayed as a right-wing crackpot, but he put a coalition together and he won two elections. olivia: two tom's question, is it really all about that base? did we learn from obama and mccain that it is about winning the center? steve: both mccain and romney did not bring up the base in the general elections. if you don't start with your base, you have nothing. the way you get a base is having a strong progrowth program, at least in the republican party, which reagan did in the 1980's. centric voters want economic both -- economic growth. so does the base. it will be hard to bring them together. olivia: thank you so much. as we head into the break, our twitter question of the day. can 3g drive around kraft foods? last year, kraft foods had flat revenue while shrinking 62% amid

a structural decline in packaged foods. tweak as. ♪ -- tweet us. ♪

tom: good morning, everyone. we need to go to france where hans nichols is very close to the crash scene -- the crash site seeing.

what is actually going on at the site this afternoon? hans: they have established a footpath to the site and they've got 27 recovery workers on that. they are working on the recovery right now. they are still doing quite a bit of helicopter activity, because of weather turns into -- if the weather turns inclement they want to be able to access the site by foot. there is the ambition and the hope that they could potentially start recovering and returning bodies from the site as early as today. in a few hours, a little closer to the crash site -- we are about nine or 10 kilometers away. it is just over those nouns there. the prime minister of spain will be landing here. madame merkel has left. she will be at a local event in two hours time. we are hoping to be there to get every doubt as well as a press

conference in cologne. it should be starting shortly. -- we are hoping to be there, as well as a press conference in cologne. it should be starting shortly. brendan: give us a sense of the political significance of what has happened, both for germany and france. hans: in germany, there is a great deal of just sorrow. france, mr. hollande said they have to feel sorrow because the tragedy happen on their soil. we do spend a lot of time talking about political differences in europe, but in moments like these it is easy to come together. in moments like the, europe is truly united. there are certain verticals in place and we have that certain protocols in place and we have officials from all the countries and everyone appears to be working together and on the same page. we will see what madame merkel and mr. hoyer have to say.

tom: let's get to the top headlines. olivia: berkshire hathaway and 3g capital have teamed up to buy kraft foods and they will merge it with heinz ketchup maker that they acquired years ago. kraft foods will get a certain amount of cash and stock. sales have slowed in recent years. and president obama says establishing a framework for a palestinian state probably will not happen anytime soon. this comes after the recent comments by prime minister netanyahu in the buildup to a recent reelection. president said they are committed, though, to two states. president obama: we believe that two states are best for the palestinians and for regional

stability. that is our view and continues to be our view. prime minister netanyahu has a different approach. olivia: president obama has described his relationship with benjamin netanyahu as "very businesslike." brendan: strong dollar hurting the u.s. steel industry. unused production is now at the highest level since 2009. tomorrow, steel producers will urge congress to impose tougher limits on imported steel. mark zuckerberg hopes that people will follow -- will buy what he is selling. there are apps to give facebook more real estate for its one million advertisers. he talked about it on his facebook page. mark zuckerberg: we'll have about 2500 developers here

tomorrow and something like 3500 are watching us online. i'm excited to talk about all of the things we've been building within our community. we will build new mobile experiences and help you connect to those you love and care about. brendan: evidently he's standing next to a landing helicopter. the idea is spending eight hours on passion projects outside your normal workday. and we seen this before in sports, jack nicholas winning once again. he came to capitol hill to receive the congressional gold medal, the highest award that congress give civilians. yes also been awarded the presidential medal of freedom. tom: the data checked this morning is a non-dated check. -- non-data checked.

we are not there yet, but i'm watching the vanilla 2-10 spread as really a signal of the higher 10 year yield. maybe the next couple of days. oil, $47.40 per barrel. olivia: good morning. here is brennan. -- brendan. brendan: six budget votes in the house today, one on a bill called price and one is on a bill called price 2. they are both authored by tom price. help me know what is going on. peter: they are putting on the floor not one, not to, but six separate budget plan. three come from the public's entry from democrats. the democrats on the votes to get theirs done.

-- three come from the republicans and three from democrats. the democrats don't have the votes to get theirs done. the big difference between these bills has to do mainly with the fence spending. the battle is between fiscal hawks and defense talks. -- defense hawks. at the end of the day it is likely the defense hawks that will prevail. john boehner spoke about this yesterday. john boehner: i think the way we are considering all of these budgets, both democrat and republican budgets, is frankly, the most democratic ,small d way you can consider this. it will be what goes to final passage. it's a great way to do it. peter: a great way to do it

especially if you can test file of your republicans at the same time -- that despite all of your republicans at the same time. brendan: it appears that he may have figured out how to herd cats. is this him figuring it out? peter: this will give him some political cover, if you will. it will allow fiscal conservatives who favor more offsets on defense spending, but it will also give the defense hawks a vote on a fiscal budget without offsets. it gives everyone a little satisfaction and at the end of the day, john boehner gets a successful vote. brendan: peter cook in d.c., a confusing place. thank you for always helping us figure it out. at the desk we have steve forbes. i'm curious about the republican party grappling with defense

spending. is this a shift that they are willing to take on this article budget, one that they have been low to before -- what do they have been loathe to before? steve: the defense department is under severe pressure and restraint. even our obligations in the world, we got to muscle this thing up and that is what you will start to see happen today. whether the president tries to block it, we will see. brendan: so the answer is we will not see any republican drops in defense spending. steve: no, even those who think we should be more cautious in the world will be loath to cut spending with the fence. you can cut in a lot of areas, but defense you cannot do cheap. tom: you wrote a blistering

editorial about the presence defense policy. let me quote. "the world will not cooperate anymore than it did in the 1930's and the 1970's." forgetting about the world war ii scaremongering, how screwed up is it and what is your republican party going to do about it? steve: you saw what the republicans did in terms of sending a letter out and also inviting the prime minister of israel to address a joint sense -- a joint session. they are extremely worried about what this president will do with iran, having iran run the middle east in effect. that is why you have this strange alliance of the saudi's, the jordanians the egyptians, and israel. tom: should your party co-op foreign policy away from the

executive branch? steve: when the executive branch is doing something that is not right let's have a debate. olivia: we are running out of time. we will come back. our twitter question of the day -- can 3g turnaround kraft foods? ♪

tom: good morning, everyone.

bloomberg surveillance from new york city. michael lewis is out with a paperback. little has changed since lewis when after high-frequency chain -- traders. one thing that has changed is the consensus on the view that the easiest solution is simply to delay by the decimal -- by an infinitesimal second every trait. i asked him about slippage. michael: slippage is giving them a microsecond to get information . what i have done is made it impossible for them to do that. tom: just have everyone in this game delay an infinitesimal amount. a lot of the problems go away right? michael: you are right.

and another thing is to put everyone in the same place. if every market took the responsibility to make itself fair by illuminating the speed advantages than the problems would go away. the problems -- the problem is that these exchanges sell. it's a big source of revenue for these traitors, so it would be a class of their business model to do this. tom: michael lewis was a great review of "flash boys." steve, i grew up with your magazine. how does wall street high-frequency trading get the trust of america back? steve: high-frequency trading just makes it possible to have exchange traded funds. you see a graph -- the discrepancy between what sells

in the marketplace all the time. tom: michael lewis agrees with you there is a value to it. how do you get rid of the harmful parts? steve: that is what the debate should be about, not whether we have hybrid trading. but it -- not whether we have high-frequency trading, but if you have abuses, clear them out. brendan: i'm not a wall street guy. i don't have any experience on the street. i read the book and found it compelling. the bank of england report that will get the footsie over two years found that high-frequency trading tended to create lasting price changes and not temporary. it did not see the harm that michael lewis did in "flash boys." olivia: i think the complaint is that they are paying for two different lanes. also, depending on where you

geographically locate your server will give you a competitive advantage. that does not sound like a level playing field. tom: i agree with you. coming up tomorrow on "bloomberg surveillance," a little push back. bart children -- bart chilton formerly of the cftc, michael goes after burchell -- goes after bart. ♪

tom: good morning, everyone. i'm tom keene and with me olivia sterns and brendan greeley. brendan: we begin with a major food deal, 3g capital acquiring kraft foods in hardship with warren buffett's berkshire hathaway. is that enough names for you? they will form america's third-biggest food and beverage company. kraft foods will get a cash buyout plus a special dividend. berkshire and 3g will invest $10 in the new company. and in france, two americans were on board the flight that crashed yesterday. they found the cockpit recorder

from the flight but are still looking for the flight data recorder. also crossing the bloomberg terminal right now, veteran republican senator calling it quits. dan coats of indiana says he will not run again next year. he first ran in 1988 to replace dan quayle. amanda knox is again awaiting the judgment of an italian court. she spent the last seven years trying to prove your innocence and the notorious 2007 murder case. now today, italy's highest court is referring -- is reviewing earlier testimony. and it is one of the most broadcast songs of the 20th century. the benny king -- the ban he keying song --be e king song,

and by "stand by me" is being honored. olivia: the u.s. housing market is actually on solid ground -- we see if the u.s. housing market is axing on solid ground at 8:10 a.m. tom: mario gabelli joins us now. why are we seeing more of this? why does campbell soup not do this? why are there more people that just say enough, we will cut costs?

mario: nice to be with you. basically, warren gave you the dots. clearly, this is good example of financial engineering. i would have to ask the kellogg trust what he would not take this. tom: this is ultimate merger quality. new split off margulies and use it off kraft foods. where is the next m ondelies-kraft breakup? mario: i think they will sit down and say, look, there is a big play with regard to eat emerging -- with regard to merging snacks and so forth. this is not exactly elephant hunting. probably committing between somewhere between $5 billion to

$7 billion on this deal. he's got a lot left. olivia: a couple of questions about 3g. they have a unique buyout thio. for example, they have aggressive cost-cutting. and we know they typically hold an investment longer than your average american pe firm. what is your take? mario: i think you just outlined it. you look at what they did with burger king and with tim hortons. you can track all of those tight and am it. on the other side, this is now a public company. 6 million shares of kraft foods and that stock will be trading. you're talking about a company that will have a market cap of close to $80 billion. what do they do next?

you are talking about $9 billion of ebitda looking out two or three years. how much debt is reduced to her how much do you grow it? they will grow more. brendan: you look at these brands that are being acquired velveeta, which americans are eating less of, along with others, are they acquiring good acquisition? mario: you are talking about millions of americans and seven billion in the world. i'm not going to comment on whether you go natural cheese or others. buffett as not swallowed any down pills --dumb pills. and neither has the 3g crowd. let's assume they understand how

to create value. tom: i want to bring it over to your expertise in media. this just sounds like pepsi when they break off frito-lay. will we have a food distillation in time warner? give us the potential breakup of time warner. mario: time warner already spun off aol and the cable business. he has been shrinking the cap like a lot of the companies to build injured the value. the next step is obvious. does he by ce -- does he by cbs? all of that is in the process. tom: where's the catalyst to jumpstart mr. mucus -- mr. bucus in that process? mario: i think in general it has

already started. he is clearly aware of what is going on in the global marketplace. tom: thank you so much. we appreciate your comments before the 8:30 a.m. conference call. olivia: time now for the twitter question of the day. can 3g actually turn around kraft foods? here are some answers. steve forbes is still with us on set. what is your take? we know sales at kraft foods are flat and earnings are down. think about the combined purchasing power that kraft foods and heinz might have and it's not all about a flashy call. steve: and they still have a great brand name.

can they come up with new products yet one thing that is very hard for incumbent companies is doing the second act. with the mcdonald's going through it today. they did it you know and they've got to do it again. we see it in our own business. you cannot say -- stay still. tom: is jeb bush a second act? steve: he's a first act. tom cole and explain why he is a second act to his older brother and his father. steve: he is important to immigration reform and also to economic growth. he's his own person and i think that will become clear. bring -- brendan: education is the one topic that jeb bush is really associated with. can you run a national campaign on education? steve: you can run on the idea that you give states the authority. not only with education, but

also with health care and medicaid. he came out saying you can achieve real growth rates. if you can flesh that out he will be a real candidate. olivia: who gets the best boat cruise, --cruz, rubio or bush? steve cohen whoever gets the best platform on immigration. in terms of immigration, it will be piece by piece. i'm talking about henry clay -- we were talking about henry clay during the break. you've got to do it piece by piece. tom: can the republican party become the new whig party? is there a risk of that? steve: no, because you do not have a huge divisive issue like slavery. tom cole and only on bloomberg news can you do -- tom: only on bloomberg news can you do whig

politics with steve forbes. we looked at this interesting transaction between heinz and kraft foods. stay tuned to bloomberg surveillance on the radio and in the loop on bloomberg television's next. ♪

>> good morning. it is wednesday, march 25. i am betty liu. we are 90 minutes away from the

opening bell. also, a big property player. the ceo, of one of the largest homebuilders, ara hovnanian. plus, a woman who specializes in divorce is helping dozens of wealthy women grab their share in settlements. remember the $1 billion check to his ex-wife? and, titans at the table, cruising the highest see, why the cruise industry is looking to avoid any depth. more on hours national airing thursday night right here on bloomberg television. first, a look at our top headlines. a major deal in the food industry. merging.