the losing side of a new price war. record profits. olivia: left, it's been years since a truly devastating hurricane on the coast. when will the luck run out? erik: and the business of leather, as in, shoelaces. we will introduce you to a 150-year-old company selling tens of millions of shoelaces to some of the biggest shoe manufacturers in the world. ♪ olivia: good morning, i'm olivia sterns. mm: and i'm pimm fox. a little bit of a rally.

the dow jones industrial average up a little more than half a percent. the nasdaq also right in the sense of a percent. tao is gaining for a fourth straight day, the longest winning streak this quarter. this is a strong burst of economic data that appears to be renewing signals that a fed hike will come this year. the dollar hitting an eight year high, or almost an eight year high. pimm: is also getting ready for the high against the euro because i know you are traveling this summer. let's get to the top stories this hour. u.s. prosecutors colonnade to a decade old can -- a two decade old conspiracy. they are talking that the game of soccer. 14 soccer officials and marketing executives have been accused of corruption. seven were arrested in zurich switzerland will send the fbi

director said the game was hijacked by those seeking to enrich themselves. olivia: and the bailout talks with greens are said to be going nowhere. bloomberg news is reporting that greece will probably miss this week's deadline deal with creditors. for international officials told bloomberg that greece is not close to an agreement with the imf and the european commission. greece needs more bailout funds so he can repay an imf loan next month. fromcdonald's is in a sale . you know that, but this morning is a proposed solution. the world's biggest restaurant chain will no longer release monthly sales information following the june same-store sales report. mcdonald's u.s. sales have declined for six straight quarters. michael kors shares are pledging this morning. the stock has been down more than 20% of our to date. the luxury retailer forecasting earnings that fell short of analyst estimates. but it's a different story at the luxury jeweler tiffany this

morning. tiffany shares are up more than 11% right now. first-quarter earnings beat new -- beat estimates. the new products helping. goldman sachs is number one in london, at least when it comes to bonuses. oldman paid -- new figures showed goldman paid london thanrs about $40,000 more second place morgan stanley. bonuses have been squeezed in the past couple of years. the eu has cap variable pay out to time salary. those are your top stories. pimm: coming up in the next hour, one airline index is indicating that airlines have entered a bear market yesterday. we will pick a look at the recent plunge and airline stocks and why it is happening. thathe youth tournament often makes us feel downright down.

we will take a look at the scripps national spelling bee. it begins today. -- the national office of oceanic atmospheric administration. they issued an outlook for the hurricane season. we will take a look at catastrophe bonds. a billion dollars worth expected to be issued this year -- $8 billion worth expected to be issued this year. olivia: and high-end retailers roll out first-quarter earnings. tiffany is soaring higher and michael kors is plummeting more than 20%. johnson,ng in craig president of customer growth partners, a retail research firm. good morning. interesting contest -- contrast here with tiffany and michael kors. both stocks were down about 20% year to date. daughter.

i feel like he might be in the market for a t bracelet. are actuallys shrinking and michael cores are growing, howbeit at a slower -- kors are growing, albeit at a slower pace. it has been a busted brain for a while. olivia: why? craig: the product is not bad, but it has gone from being a tomorrow brand to being a yesterday bread. core customers have moved on to the newer, hotter names. whether it is tory burch for case fate. has over expanded the brand and diluted the luxury value of it. the essence of luxury is the exclusivity. but if you find it in 3500 or

4000 doors worldwide, that is not exclusive. pimm: so what is the deal? it is that confrontation you have between higher margins -- you want a higher-margin business, but if you are going for a growth start, you have to to justifye stores the valuation of the stock. would michael kors the example of such a thing? craig: unfortunately, that appears to be the case. tiffany, you have high-end margins there. craig: that remains a sterling brand. there is not at all a brand issue. anniversary a your ago in japan -- they had an anniversary in japan. people can see through all of that. they know that. there is no underlying brand problem is that the quality is fine and they are doing much better on the fashion product's. olivia: let's just stick to kors for a second.

europe was a strong note. still has a lot of brand equity in europe. a brandhen i say it is issue, it is primarily in north america and the u.s. in europe, it's a much newer brand and it still has a lot of re.. the it is quite strong, but even there it is quite different. where the tourists go and where storeaffic is, the kors there does great. i block anne hathaway on broad street where -- a block and a half away on brought -- on bond street where the true luxury is, the kors store does not do well. put forth this idea that there are stocks and there are businesses. right now, the stock of coach is mirroring the business? or is that a stock you want to

buy? will they get this together? craig: we don't do stock advice. we just look at the fundamentals of the company. the difference with coach, it had its time of overexposure. it was too ubiquitous. if you are ubiquitous, you are not theirs. luxury is the value of scarcity. meanwhile, the products got boring. coach, we believe, is just beginning to turn at this stage of the game. but you are not seeing any kind of results. pimm: it could be in anticipation of what you may think will happen. craig: again, we don't do stock advice. but coach may have an inflection of boards. they have shrunk their store base and they continue to shrink it. they are a mirror image of where kors is right now. olivia: how about watches?

that was a strong potential growth area for tiffany in particular. craig: for tiffany, yes. olivia: i never think of tiffany and think watches. craig: the watch category is great because it had a great run in the past year or two, but it is a bit softer now. but with tiffany, we think it may have some potential there. overall, the watch category is a little immature versus where should be. pimm: what is the most exciting luxury brand for libya to pay attention to in the next few weeks? craig: we think tory burch remains a great -- olivia: i don't think tory birches luxury. craig: it is accessible luxury. pimm: what about kate spade question mark -- kate spade? craig: it is accessible. product and gucci are very strong right now. and my personal favorite is from as h --ermes.

ermes.e ha craig: it is accessible. olivia: i'm going to go out on a limb and say state law. laurent. thank you very much for being here. record.rline profits at how is this possible? ♪

olivia: welcome back. pimm: let's go straight to julie hyman with a look in the markets. julie: i want to get to the movers in today's session. i want to start a couple of climbers on speculation of a potential deal. they are juniper and sienna. juniper in particular up 5%. they're one of the best performance in the s&p 500. its competitors and alcatel lucent arkham mining -- are combining. it forms speculation about who might be a target. they could help erickson --ericcson avoid being

marginalized. also wanted to make -- take a look at tivo. the shares moving higher by more than 3%. the company added 285,000 subscribers. yourself be asking like i did, are people still buying tivo question mark apparently, they are. it differs from the generic -- still buying tivo? apparently, they are. it differs from the generic offerings from cable and satellite. applegate farms is a closely of luncheon meats. -- applegate farms is by carmel, a closely held maker of luncheon meats. a lot of the traditional process food companies are trying to get into the natural foods is this through acquisition -- foods business through acquisition.

olivia: julie, your dress match the carmel chile so nicely. mel chili so nicely. julie: i plan that. olivia: we appreciate the attention to detail. shut downhouston have transportation. there is a 40% mess that they will get even more rain. 12 have been killed and 12 others are still missing. an ebay has a new strategy to attract advertisers. merchants will pay for as only if they actually lead to sales. imagine that. ebay will be able to specify what percentage of a product price they will pay to run the ad. and planet fitness is going public. they are planning an ipo, though we don't know much more than that. the filing is a great -- is secret.

steps -- gymm ever memberships as little as $10 per month. pimm: but you still have to go. those are the top stories. a turbulent year for the airline industry. the bloomberg index has full by 20% from its high. has record industry profits this year. what is driving down airline stock? us fromyst joins princeton. airline report record profits and stock falls. make any sense question mark george: -- make any sense? i think it does. you had a really good q1 earnings season. in thewant to stay

investment right now i'm run the risk of oil prices rising, capacity constraint breaking down, which has really been the driver of profits? i think a lot of them have thought, how good does this get question mark -- does this get? let's talk about the supply side of things, additional capacity. which i think is a fabulous thing, because it means hopefully the seat next to me will be empty. how badly is the additional capacity hurting the airlines? george: not a lot yet. southwest has changed coming into the new year. they are adding 6% 7%. and that is concerning, as they are one of the largest airlines in north america. delta has inched up their capacity growth. they are growing 3% to 4% above gdp. that is is concerned.

30% in oneines grew quarter. we are seeing weakness on their fair front. we are seeing their yields -- on their fare front. we are seeing their yields come down. how much will this have to fall for people to take market share? worthwhat stocks are buying right now question mark what our lines -- buying right now? what airlines are worth buying right now? hard to movell be around and if one takes market share. delta, one of the biggest full-service guys adding 3% to 4%. george,ah, but southwest's mania domestic carrier. delta has lots of international routes with different competitors. what about alaska air? george: alaska air is fighting

it out with delta for a seattle have right now. that is really challenging their yields. when the big guys move like this, i think it's hard. you get in a market share war and the fair start going down. start -- the fares going down. olivia: will there be amended this year? george: i don't know if there will be anything big. the small stuff could still happen. the small players, jetblue, and others could definitely take over candidates. olivia: george ferguson, thank you for joining us. my favorite thing about alaska airlines, the most punctual airline in america does right the weather. the next time you cannot land at laguardia because of the rain, it is [indiscernible] next up, foreign policy. we all run and spend as much

money and time and security and get rid of liberties or whatever we want to do to respond. fif♪

pimm: what will define america's foreign-policy strategy in the 21st century? both obama ands the bush administrations lacked a coherent foreign policy and that this commission has led to overreaction to major world events in the past decade. bremmer is the author of a new book "superpower" which defines three choices for america's global affairs. bloomberg about the choices. the lastu think about 20 years and where eric and have gotten themselves in trouble, it has been overreaction to the inc. in the absence -- two things in the absence of strategy. whether it is ebola or isis or 9/11, if there is no strategy

coming in, something hit the headlines and we all spend as much money and time and security and get rid of liberties or whatever we want to do to respond. increasingly "the world on fire" as many of the gop candidates have talked about, what is the new american leader going to do? >> you can see a lack of strategy, but i watch people talk in the foreign policy establishment were they are still operating in a world where america has unlimited ability to shape the world and that has been severely constrained in the past decade. constrained in part by americans themselves. i think there is a question about what we want to do and what we want to stand for. you say there is a conscious pulling back and not just a limit of the >> power. i think it's both. -- not just a limit of power. >> i think it is both. the market and

the attractiveness and things we talk about everyday and it's hard not to argue that america drivingable of decisions. it is true that our allies are less interested in supporting us, but there is the question of -- do we want to destroy isis question mark and what are we prepared to do about it? do we really want to make the russians pay for their invasion? tom: we will talk about superpower later and focus on islamic state later in the hour. abouts a statement washington right now. truman, like the elder president bush, new way to stop. douglas emmett karcher, like the younger president bush, did not. -- douglas and mccarthy, like the younger president bush, did not. we are playing tennis in foreign-policy. we are trying to hit the ball back. that works against an eight-year-old, but it doesn't work if you are playing a decent

player. that is the problem. we've seen that in the decision of whether or not we were going to remove assad or punish him. we see that today with isis. how far are we willing to go? we are prepared to tell the that they have to take care of this for us. if we do not see quick wins, we do not have a strategy. tom: can the imf help america, or are they in the way in developing foreign-policy? they are trying to help america. if you look at the imf talking , the imf is actually saying they want to inject reality into these conversations. you, the united states, are not the only player in town. whether it is christine lagarde or the world bank players, they are concerned that the only world bank president without a

global strategy is china. and they are building institutions the infrastructure bank and bricks bank that are challenging global institutions like the imf and making them weaker over time. the imf once to bring the chinese in. that is hard to do. creanian bremmer with tom -- tom keene and brendan greeley. olivia: interesting point he was trying to make is that this book is not about the decline of american power. it's about the financial system, the role of energy, the attractiveness in the market. it's about a lack of strategy. pimm: i think you could write that book. olivia: thank you for having me. i will see you tomorrow. pimm: still ahead, more on the soccer scandal. ♪

pimm: welcome back. i'm pimm fox. let's a look at the top stories

this hour. going after corruption in the world's most popular sport. swiss police have arrested seven officials from fifa, the governing body from soccer. they are accused in taking part in a conspiracy involving $150 million in bribes. u.s. attorney general loretta lynch says more arrests are on the way. all of theseral: defendants abuse the u.s. financial system and violated u.s. law and we intend to hold them accountable. pimm: the u.s. says the bribes were meant to influence the the world cup in 2010. janus capital group gross admits grossjanus capital's bill admits he did a poor job of

shortselling bonds. 2.5%.obal bond fund lost they were trading in an error range instead of betting on out against the debt. and more cuts may be on the way at bank of america's trading unit. and the chief executive at bank saiderica brian moynihan more cost cuts are possible. brian: if the environment stays flat, less volatility, we will keep it down. we worked it down to one level and will have to work it down in the next couple of years. pimm: brian moynihan spoke at the conference here in new york. also in new york city, there's a problem with the subway system. someone or some people have been

stealing power cables. at least 500 feet of cables were swiped, and that has caused delays for thousands of commuters traveling through the borough and queens. authorities said they will probably sell the power cables for scrap. those are the top stories of the morning. markets are closing in europe. for the latest, let's go to ryan chilcote in london. let me give you the lay of the land here in the equity markets. it is a sea of green, or we should say landmass of green. in greece in particular, on fire, a 3.5% today. but not alone. the ftse off over 2% as well. greed tends to be very volatile -- greece tends to be very volatile. nearly as interesting as that is what we are watching in the corporate area, and in particular the airline injury -- industry. permissionticular

from the government of ireland giving permission to buy that airline. both companies are up as a result. and the french telecom company that wanted to buy time warner cable, but the founder of the company today said they simply were not prepared to do that. was down, but a pullback from the very broad equities market rally. and finally, i want to show you the currencies. this is a dollar strength story. the pound going down with that. almost the same story for the euro. rally little bit of a because there is some optimism to do that maybe the greeks will be able to pull off a deal with their creditors after all. back to you. bloombergs ryan chilcote

in london. thank you very much. coming up on the bloomberg market day, on a day where the national hurricane center issues its hurricane season outlook, we will look at catastrophe bonds, $8 billion worth expected to be issued this year. plus, more americans are going meatless, and is threatening the leather going history. is it time to have a cow? we will find out. and at 90 years old, former aig executive hank greenberg will not give up. on the bloomberg market a. now returning to the top story of the day, 14 people charged in connection with the corruption scandal at fifa. several of them were arrested in zurich. surveillanceme, coming to brendan greeley from new york. what you should say actually went down for those who were not paying attention. brendan: they were two

investigations going in parallel. one of them is the investigation being conducted by the fbi that was looking at things that happened on u.s. soil and he got permission to extradite from the swiss government. went into alice hotel in zurich. the other investigation is happening in switzerland. the swiss government is looking at fifa itself. there are many layers of fifa. it is also composed of -- southtions american, central american, european. the u.s. is investigating what happened on american soil with the south american confederation and the central american confederation. the question we are still trying to figure out is how far up his goes. -- this goes. will they get to the top of that stepladder? what has been the reaction in switzerland? hugo: how far up his goes, in

answer to bring in question, i think a lot of people have been lattertoday where is set -- asking today where seth bladder is today. where is the man that should be held accountable as the man who ran fifa for the past two decades? pimm: a little more on the implications and the power that on fifa.ter has hugo: here is the man who has been running the show since 1998. friday's election was supposed to be clear that he for and he has widely secured the support africans, the south americans, the asians. -- it means with even

small country support he can shore up the election. afa weighing in, the european federation, and they are saying we think perhaps this vote on friday should be crisp owned -- should be postponed. this is the confederation in france, germany, holland, and england, real heavyweights. if they put their foot down, who knows what will happen on friday? there are two investigations going on in parallel. we just learned -- brendan: there are two investigations going on in parallel. we just learned a little more about the one from the fbi from the press conference loretta lynch gave a half an hour ago. what do we know about the swiss investigation question mark what are they going after and what do they have? to identify trying the people they are talking about. because as you said, the american investigation is

looking at past allegations of corruption involving the world cup in 2010. the swiss investigation is looking forward. what we are trying to establish that they people are have not named, but just cited and are looking into. and what roles do they play at fifa up to the level just below where sepp blatter sits? because he has not been called in for questioning and fifa has been using that as an expiration or justification to say why sepp blatter is clear and clean. pimm: thank you very much, hugo miller, reporting in zurich. and also thanks to brendan greeley. still ahead on the bloomberg market day, catastrophe bonds. tomorrow, the national hurricane

center will issue its 2015 atlantic hurricane report. we will find out if the industry is ready. ♪

back to thee bloomberg market day. i'm pimm fox. i want to begin with some of the top stories crossing the terminal right now. mcdonald's will with reporting monthly sales. they will report for june, but that's it. most other restaurant chains and retailers do not give out their monthly sales numbers and mcdonald's u.s. sales have fallen for six consecutive orders. rick santorum is running for president, again. an and a location for++

you in terms of the expected loss. -- there is analysis for you in terms of the expected loss. you would expect a loss everyone in 20 years, you should be getting paid a much higher spread versus something that pays out every 200 years. pimm: the national hurricane center will be releasing today, supposedly about 15 minutes ago. they will be releasing their forecast. does that mean the insurance companies will try to figure out details, or do they already know everything? judith: i would say they don't really trade on the seasonal

forecast. as i said, there's a risk analysis provided to investors and those are based on long-term models, long-term trends. investors not focus on the seasonal forecast. when there's a hurricane coming up the coast, that is where we call it a live cap event. investors will trade around with their portfolios. you certainly see trading during live event, but no, investors are not trading around the seasonal forecasts. pimm: what is the minimum buy-in? judith: in our experience, we only sell to institutional investors. at least need to have $100 million in assets, and $250,000 is the minimum buy-in. pimm: thank you so much. are --head, prices cattle prices are climbing, but the leather good prices are unchanged. ♪

pimm: americans have consumed 22% less beef over the past few decades, but the hunger for leather has increased, which is causing problems for leather suppliers. there is a push and pull between demand. where does all of this leather come from and where does it go? i want to do from the feedlot to the feet in the chain. cowhide is only a small percentage of the value of an actual cap. .- an actual cow as a result, leather prices are tied directly to how much meat americans are eating, and americans are eating less meat. pimm: i'm glad you said the word particularuse one company in your story makes leather boot and shoelaces.

about what its report demonstrated to you. james: not many people know about auburn leather in auburn kentucky. and yet they make 50 million laces per year. if you have shoes from l.l. bean, shoes from ugg and they have laces, it's a very good chance they were made by this company in kentucky. pimm: and you mentioned that the hide is the beginning product. the company has not really been able to pass along the price increases. what is going on? james: if you spend $70 on a of highe and the price double, you will not want to pay -- the price of the hides devil, you will not want to pay double for that shoe. these companies are hitting the

hit. they cannot really pass on the price of leather to consumers, because they do not want people a luxuryof leather as good, but it turns out it is moving in that direction. pimm: describe what it was like to see the laces being made. james: it is pretty fascinating. they come into a receiving warehouse as something called blues," so the hides come in kind of moist and blue. this woman who owns a warehouse that transforms leather, she will put them into huge drums that dry them and then she stretches them and feed them through machines that slice them into the shoelaces we have. pimm: you say it is almost like a bread slicing machine. james: yes, these plays are moving very quickly. she has 110 workers that are

feeding these things through and binding them. pimm: and taking a look at the business of leather, the average steer weight, 1300 pounds. the average wholesale fear press, $2350 -- wholesale t. rowe price, $2350, and high sells for $100. optionsjulie hyman with details. let'scoleman -- julie: take a look at action on the street at this hour. we have stopped bouncing back from yesterday's a decline across the board year -- here. let's focus on options in particular. joining me is jim strube, avery lives -- a derivatives strategist at mk am holding. we had a big spike in the vicks yesterday that was the biggest of the year. yesterday that was

the biggest of the year. but it was not that big a spike. jim: it was down yesterday, and up strongly today. what we're focusing clients on xs the phenomenon in the vi futures curve. we are focusing on the spread between the three-month future and the spot vix. in this low volatility environment in the last couple of months, but the prior low volatility timeframe was three and a half months. it is increasing instability in our view and the potential for a pullback. julie: to be clear, the three-month futures on the vi x are now predicting higher marks than the current spot. walk me through that. futures curve is

upward sloping going out over time. what happens when you have these volatility spikes is that shorter data volatility spikes higher. the rest of the curve moves up, but not as much. that is the inversion that i make reference to. saying we have not had an inversion is equivalent effectively to saying that we have not had a meaningful spike in volatility similar to what we saw in late january, it in december, and in october of last year. julie: what do we take away from that? you say it's concerning. jim: it is concerning because there is increasing instability. in an environment where headlines on greece are flying around, and we don't have an fomc meeting until mid-june, so it's not easy to find a potential trigger out there. optiont evaluating markets and volatility does suggest an environment of increasing instability.

and throw on top of that the fact that we in the first half of the year still have been there was strange for the dow jones industrial average since 1896. professional investors have not had. the only inkling of fear out there is the open interest of the vix, which means people are expecting some higher volatility . but with this says is to do a scrub down of portfolios and get the new options. julie: value etf's, walk me through the trade. we looked at the largest, most actively traded index and sector etf products. we effectively graff them -- graph them against their skew. and there is another -- there is one that stands out, and that is iw and. -- iwm.

you want the correlation in place for your protection, but volatility mayd set a great starting point. one that we are recommending is to go out to july covering the next six weeks or so. they've got about a 30 delta. they cost about $1.30. that would be the first step in adding a little bit of protection to a portfolio, again, in an environment where we see increasing instability. julie: interesting stuff. we appreciate it. don't go anywhere. ♪ we live in a pick and choose world.

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betty: stocks rocked -- soccer rocked by a scandal. 14 people charged on blundering and racketeering. they took millions in bribes before choosing world cup host cities. pimm: greek prime minister alexis tsipras said his country is close to an agreement with creditors. the age of 90, former aig chief executive hank greenberg is waging one of wall street costs longest and most expensive wars for redemption -- wall street's longest and most expensive wars for redemption. we will look at his legacy. pimm: good afternoon. i'm pimm fox. betty: