tv In the Loop With Betty Liu Bloomberg January 27, 2014 8:00am-10:01am EST
first interview. >> the target class of emerging markets continues to roll out at home with north pacific at home dropping. >> plus chipotle is not only known for its loyalty to locally grown and organic nudes, but also its style of marketing. the fast casual burrito giant is out with its latest comedy series advertisement tactics about exploited cows. the chief operating officer >> thanktheir tactics. you, cristina. i am joined by trish reagan, who brings us a first on bloomberg interview. >> capital earnings crossed just moments ago. fourth quarter earnings being who estimates this morning, authorizing a new $10 billion buyback. we have the chairman and ceo, doug from p aurea, illinois. always good to see you. good news on the buyback, on the
beach. let's talk, for a moment, about the revenue you have seen over 2013. it turned out to be a rather challenging year? >> yes, it was a challenging year. we saw a fairly sizable reduction in our mining business, which frankly surprised us a little bit. in 2013 to do a lot of things in our company. we are very proud of our team. strengthening the balance sheet, the debt equity ratio today is the strongest it has been in 25 years. if you look at the fourth salesr, we actually saw drop 10%. 1.7 billion dollars less in sales. taken from what we had in 2012 compared to operated earnings, we were better. we are very happy about that. the quality of products has never been higher. the safety record in our plants and offices is good. there are things to celebrate. more than just the top line.
>> i know that you did a lot of cross -- cost-cutting in 2013. cut $400 million in spending. as we look ahead into this year, do you anticipate more cost- cutting? constant cost management mode around here. we have been for over a year. i would say the worst is behind us, but we will keep an eye on absolutely every penny that we spend. was,ugh a year as it taking into consideration, we reduced costs one point $2 billion. a company of our size in one year is a lot. where we are today, particularly with our outlook on sales in 2014, it is just to do what we are doing every single day and make sure that we have an eye on costs around the world. >> i have got to ask you about
mining. that big town that you bought. you have already written down the investment from china. do you regret those investments? what is going to happen to cyrus in terms of write-down? >> i do not regret cyrus for one second. that is a long-term investment that this company made. aroundis a key business the world and will be for many years to come. we will look back on this on 5, 10, 20 years as a very good piece of business. remember, we bought cyrus to expand our product line to the minors. the other thing about mining today, which quite frankly is as interesting as it is surprising, production keeps rising. a lot of our machines keep moving. customers cutting back on in 2014, we are seeing that continue, as long as mining production continues, at some
point they will come back to us for parts, new machines. it will turn around. i like that investment. down the road it has looked really good. >> there is so much increased competition in china from the chinese and from ge and mining equipment. what are you doing to stay ahead of the pack? chinese business has been a long-standing business. we were there in the 1970s after the opening. today, 2013, sales in china, we have about 25 dealers there. a finance company there. we operate in china the same way we do everywhere else in the world. our goal is to be a leader in china, just like we are in so many other markets. we are tackling the chinese competition inside china. the good news is the excavator market, a key market for china, we are the industry leader there .
we have had an increase in our market share over the last five years. we are building, slowly. either long-term or over time. it will be a great market. someone else will lead that through the world as long as i am here. >> you guys have picked up market share in the last year. how have you done that? is price counting part of the strategy? >> we have done it kind of the old-fashioned caterpillar way, with superior product and parts through the dealership. 25 dealers inside of china selling every day, servicing customers. our business works when our customers come to us and want the lowest owning and operating costs. in china, contractors are just like they are everywhere else in the world. productivity, typically that is what we do. this is the model we are using in china and, frankly, it is working out very well. down, china market slows
that market has been more accepted. customers, contractors over there, they need productivity and they want it. they are facing competition as well. they need them in top condition. >> absolutely. one of the big concerns for the economy right now is that ceos are just not investing a lot in. we have seen a lot of stock buyback, but people are saying that they have not seen a big enough commitment. it was a scene in 2013. something that you and i have actually talked about. this morning you and i are doing exactly that, $10 billion worth of your own stock. might startthink it to change, for you and for other companies? when will these companies say that they are investing in people, infrastructure, not just stock buyback? >> there are a couple of things to volunteer. one of them is certainly that when the world grows at the pace
it has been growing for so many percent,ss than three less than two percent in some cases, it does not allow for any expansion or employment gains. that is the root cause of this around the world. whether it is in the united states, emerging markets, europe, there is just no growth. it means the companies, businesses of all sizes and shapes to one thing and that is , focusing onoing cost, market share, making sure that every day we are doing the most efficient things we can possibly do. we are lucky, we work hard on restoring our balance sheet. at the end of the year we had about $6 billion in cash. we will buy quarter another $1.7 billion. in about one year we will have bought almost $4 billion in shares back. then there is a new program over the next five years to another
10 years. meanwhile, we are investing. our will be up slightly in 2013. we are pretty well capacity eyes we area good word, but set for capacity. if we see economic growth, we are able to take it on. it really gets down to anemic gdp growth levels, we have to see that change. >> you sound very optimistic. the stock is getting juice this morning. but the stock has yet to perfect to get -- yet to outperform the s&p 500. what are you telling your stockholders? >> it says a lot about how we manage the company in 2013. over 12 waser improved profit per share. getting the efficiency production system inside the factories, the inventory is under control.
slightly better than we expected. we are doing all the things we need to do, operationally, to make up for 2013 on the top line. we should feel quite a bit better about it. certainly with buyback we should see a strong signal. >> we are going to leave it there. doug, thank you so much for joining us here. >> great stuff. we have already seen the stocks move in the premarket. let's get to christina. >> washington, president barack obama is using just about every social media tool to promote a centrally old ritual, the annual state of the union address. phil mattingly joins us with that story. what are they doing in social media right now it is different to what they have done in the past? >> it is everything right now. 33 million people are expected to watch the state of the union address tomorrow, half of what bill clinton averaged in his terms.
the white house knows that they need to reach out. they have been giving staffers the official white house instagram account for the last 10 days to try to show behind and connect to people like that. get a video outreach, explaining what is going on. after the state of the union, something to keep an eye on, they will take a virtual road trip to sell the proposal tomorrow night. you will have cameras coming with him, he will be online as a regular participant, conversing with people as they walk through. basically, social media is huge as they try to address the top -- the drop in viewership, related, as you noted, to the huge speech he is giving tomorrow. >> another trending story thereow, tom perkins, out this weekend, making some pretty racy remarks, basically comparing the debate in income inequality to not see germany, saying that right from the epicenter of progressive
thought, san francisco, he would call attention to the parallels of fascist not see germany. a war on the one percent, mainly and the one percent, mainly the rich. any thoughts on whether or not the president is going to re- examine his message on equality? because of this backlash? everyone thinks that this quote is crazy. a rational person would think that this is crazy, but even still, are their second thoughts about this inequality method? >> white house officials shook their head when they read that. to your point, the white house is aware that the inequality message, the progressive message can be divisive. they want to avoid it. this is a change we have seen in the polls over the last couple of weeks. it is not so much a message
about inequality and the rich having too much and the poor having too little -- too little, it is going to be about action. to your point, christina, they will try to make this a positive message, not i hate the rich message. >> i love getting in the back rooms of those strategy sessions. thank you so much. >> i am watching the global selloff from last week. this morning, futures modestly enhancing on the heels of what is called a 40% cell. they posted their worst week in nearly two years, but the two years have been straight up markets. >> let's set the stage, here. last week we saw the biggest weekly drop for the s&p 500 in two years. overnight from asia we saw more steep declines in equity. asian stocks retreating by the most since june on these growth fears that started last week with weak manufacturing data from china. >> it is all about china, right?
>> yes. we were worried when we showed up for surveillance, but futures steamd higher, picking up throughout the morning, thanks to caterpillar, helping to drive up futures for the dow in particular. but the bigger story is the emerging markets selloff. the rupee in india, for example, sliding. , a big story peso from domino's last week, the valuation now credits negative for the bank. the peso fell 15% last week. interestingly the turkish lira is rallying, turkey said that they would have a surprise central bank meeting tomorrow, which has people feeling bullish around turkey. action from the treasury market last week, money going back into the safety and asset of u.s. treasuries. yields below 2.8%. >> gold selling off a little
market right, emerging- equity volatility rose the most in two years growing with china's economy. but will the contagion continued to spread? our guest this hour, the principal at dallas capital. john, good to see you. welcome to "in the loop." the selloff last week, i could not believe that people were calling for fed action after a minor selloff with three or four years straight up? >> 30% up, three percent down. we have suppressed volatility for four years.
now any volatility scares people . they think this is the big one. >> is this the big one? >> in the analogy of maybe a forest strike, we have not allowed the forest to burn for a long time and there is a lot of dead kindling on the ground. all it takes is inexorable shock to set it off. >> the larger question, is this a sustained pullback or a correction, in your mind? shift,e has been a tidal of sorts. easier money, easier money, easier money. whatever it was, for the last several years. now it is not. all the sudden the u.s. is trying to taper, using your money but less of it. all of a sudden, volatility sparks up again. in china, you are really seeing bankruptcies. we have one trust in the headline that represents $4.5 billion in liabilities to
various banks in china, but we saw 20 trusts go bankrupt last year that went unreported because the news never gets outside the chinese firewall. >> you are short for china. >> no doubt. >> what names can you specifically talk about that you are specifically shorting? >> we look for names where there are a lot of leverage and negative free cash flow. >> burning money? >> burning. it is amazing. >> wait a minute. the government is always there when they come to china, but were they not going to backstop everything? to make sure that it did not unravel? the government is always there, and they have a great balance sheet. >> is not clear what their balance sheet looks like. since china owns the banks, it is somewhere between 200 and 250. not a great balance sheet, all of a sudden. provincial government debt is gigantic, also. then your senior rates go up.
let's take the china development bank proxy for the government. it is a one dollar trillion balance sheet and their interest costs have gone up 200 in the last few months. that eats all of their profit, right? as the rates go up in china, you will see more stress on the equities. >> folders are, at the forensic research group you were a customer of ours. >> we did a lot of that work. >> especially on china. >> that was a while back now. 3, 4 years since i did that. i wonder what kind of names you are looking at in china. i feel like they have all gone away now. >> shockingly. >> maybe it has become the ipo in the u.s.? >> they acquired a lot of reverse mergers to take them public in hong kong, but none of them had become public yet. there has been a fascinating turn of events in the last week. in the chinese-based companies
listed in the u.s., the sec started fighting over longtime financials three years ago, they finally prosecute the case against auditors last week, saying -- you are guilty. we might fan all four of you from practicing in the u.s. for six months, which would prevent every chinese-based company in the u.s.. >> all right, but the flip side of that argument? >> those companies that you listed would not even be able to file quarterly reports. or even trade anymore. >> the thing about that is that this is a highly political situation, right? the administration is now working on a trade pact with china. the chinese government has come out and said that this is ludicrous, you have to let this go through. is politics going to get in the way in the sense that china could come back and say that we do not like american companies?
>> great point. >> they've done that. >> in addition, the sec -- their job is to protect u.s. investors , right? that is their job. they can either punish current investors and protect future investors, or the opposite. they can punish the future investors, they will continue to get robbed. chinese companies stole $22 billion off u.s. capital markets. you think that that is ok? wrote down the company by 86% of their value. the disruption in the accounting came out a couple of months later. >> i am not saying that it is ok, but that there are political considerations that may be larger. >> there are always political sit -- political considerations between the u.s. and china. >> the sec took an important step toward saying not guilty. >> an important thing.
to watching "in the loop," live on bloomberg television. i am carol massar. markets, 20 six minutes after, bloomberg tv is on the matter -- on the markets. equity futures hitting the high of the session in the s&p 500, also higher on the industrial average, certainly getting those caterpillar results with pencil buybacks after a very, very tough last week. we from markets to music, have that covered? >> last night was a big night in music with the 56th annual grammy awards kicking off. daft on swept a couple of the
awards. best pop duo group performance, forget lucky, and our goal of the year, with random-access memories. >> a surprise? >> not really. that song has just exploded. macklemore, ryan lewis, best new artist, and song of the year was royal's. >> did you get to watch the whole thing? >> i did not. here is the thing, everyone criticized them for missing the wave of electronic ants music. the biggest thing to hit music in the last couple of years in terms of profits and the amount of attention it is getting from millenial's. the problem with the grammys has been that they just do not get the genre. they try to do it big in 2002. this02 they put together performance with the foo the industryspin,
magazine, called the performance a complete mess. >> out. >> in 2013, the grammys were so scared of messing it up again, they just steered clear of the genre. this year they issued sort of what was an apology by giving daft punk these big honors, but at the end of the day, daft punk, get lucky? more of a pop song. >> all right. coming up, we are going to talk about the chip only ad campaign and their marketing brainchild chief marketing operating officer.
great fast capital binding and highlighting how its food is repaired, grown, and raised. they have a reputation for unconventional marketing that they have taken to a whole other level, announcing the launch of their own comedy series, called farming dangerous. it can be watched weekly on hulu in february. here is a taste. >> is is the biggest improvement in agriculture since synthetic wheat farmers. it is a game changer. you are feeding cattle petroleum? >> no one wants oil in the food chain. >> sure, they do. >> all right. to go viral. >> joining us is their chief marketing officer. mark, great to have you here. abouteople think
chipotle, they do not think about video series. you talk about this one year ago. why is this a smart way for you to get your message out? why does it bring more people in? for the food that you offer? >> thank you, carol. this is definitely uncharted marketing territory, for sure, but the basic idea here is that we believe the more people know about where their food comes from and how it is prepared, the more curious they will become and more likely they will be to seek out restaurants, like chipotle. it is created to make change with curiosity and people and indirectly drive into the restaurants. this is less about near-term traffic and limited time offers and really more about changing the way that people think about food. >> what is the demographic happening in the u.s. right now that can make this message
resonate? for most of my life people have not cared about what goes into their food. >> particularly young people, you know, we think about the 14 -- 14-34, they are looking more and more at what is in the food that the. this is marketing that is really designed to help them become more curious about those issues. that is the audience we are the most interested in with the show. >> people are becoming more curious about food. why are you not nervous about criticism that you are opening yourself up to potential scrutiny about chipotle's own practices? did that ever crossed your mind, coming up with this advertising campaign? >> sure. well, you know that most of the advertising we do is in this vein. we expect that. chipotle is far from perfect. we never claimed to be perfect
at all. we are actually on our own journey for food with integrity. it is never-ending, really. it may take us forever, but it is about constantly seeking better quality ingredients, ingredients that are prepared with respect for the animal, the environment, the farmers. we are further along in certain aspects over others, but it is a journey we are on. we never claimed to be perfect and we are just trying to change a system we are part of. >> i understand that, but how does advertising change the actual system? >> it is not advertising that will change the system. what is going to change is a demand for better quality or sustainably raised food. after here. we are as people, as the public becomes more interested in these issues and actually demand higher- quality food, that is where the change comes from. the marketing is simply designed to get them curious about it. we are just one little
restaurant chain. admittedly, we have a lot of restaurants, but we are not going to change the world. what will change the world is demand for better quality ingredients. fromrk, this is john dialectic capital. a question about sustainably raised food -- i salute the goal and i think it is great that you are taking a leadership position in this, but it costs more. how do you think about that with respect to margins as you look forward? at pricing? look can you raise prices? do you want to raise prices? will paper -- will people pay fire -- will people pay higher prices for sustainably raised food? >> we do spend more on our ingredients, by about 34%, then other restaurant change -- chains. we spend considerably less on marketing than other fast food chains. the type ofant for
marketing i'm doing here today, because it has viral potential. we do a lot to offset the cost of the ingredients and we think that we do have pricing power at this point. all of these predictions about what we might do with pricing, you know, i think that people are really willing to pay a little bit more for better ingredients. but the bottom line is that chipotle is not that much more expensive than other places. done about two animated shorts, 20 million views on youtube. you have a video series that you can extend, if you want. it has a storyline. what is next? a movie? how long -- how far do you take this content push? >> we have talked about movies before. i do not think we are ready to go there yet. just getting this television series off the ground was quite an effort. what i would like to see happen
is more seasons of this particular show. this is just season one, but the storyline is written such that it could expand to further seasons itself. that would be great, if we could generate an audience for the show. it really is entertainment and not advertising, so it has a chance to do that. >> mark, thank you so much for your time this morning. >> apple coming out with more on their important quarter. plus, time warner. a preview when "in the loop," continues. ♪
"in theme back to loop." i am carol massar. apple, big earnings. >> one of the biggest market cap companies in the u.s.. this is an important and interesting quarter for them because of the china business. this is a full 13 weeks they , seven hundred 50 million customers, just a big opportunity for the entire world of technology. and in interesting one for apple. we were talking earlier about all of these crummy chinese companies in the u.s.. maybe folks didn't even get a , we will see if they will stick to their guns. i wonder, look at the size of the chinese market, you can
understand why the non-seasoned investor looks at something like capital china mobile and thinks -- china is huge, china is an emerging economy. do you do anything on the long side? >> we certainly play to diversity and apple in china. but apple has been selling their for a long time. now that we have the china mobile offering, i am not sure it is necessarily the step up function that people think it is. we think that apple is an attractive play, but i am on the board of it company called immersion. china is their big growth opportunity. >> i look at things like the xbox. on apple? long >> i am. >> what i do not understand about apple, and corey, you have a great view into this. if we think this is truly an
innovative company, why are we relying on growth in china for an existing product as the only growth area? is there a mental shift going on where it is no longer an innovative company? >> it is undeniable that there has been a recent lack of innovation. the biggest thing this year is their five and a half inch screen phone, which enjoyed has had for a number of years. >> is that a tablet? >> you are looking at a pc market that is shrinking. ipods are not a growth opportunity anymore. smartphones, growth of gold over with bigger screen sizes and china. it is a relatively cheap company. almost 200 billion dollars. corey, you and i talk about this all the time, we nitpick so much with this company, they do huge business and make a lot of money. >> this is one opportunity where i think they will do a couple
million units alone. that should be about 4.5 ilya and dollars in profits for this company. is it not that innovative? it is $4.5 billion out of one client. think think that when we about technology -- my big question the technology, in general, and i want to get your view on this -- the fact that technology can change so quickly, does that mean it does not deserve the growth pe? one of the fundamental tenants of growth comes out of the 1930s and before, growth from when technology might have been an 18 month process. >> that is a great point of a lot of technology product companies. you might be able to draw the line between samsung and apple. they are kind of stuck in the hardware business. it will be a real challenge for them if they lose their share with their current galaxy product. >> and we are seeing that, already? >> we were wedded to apple.
you bought the apps, got the movies. >> i am so frustrated with itunes right now. >> you cannot get out of it. >> what about the fact that you have to constantly update your operating system? why does apple have to do that? does that cause you doubt as an investor? i cannot do things at home until i update my systems and then by the time i update my operating system, i do not have the time to do the thing i set out to do. >> they are kind of following the path of the evil empire. there is this forced obsolescence. i purchased the ipad one for my kid, you cannot update the operating system to a high enough level to run it. you basically throw that one out, you have to go buy a new one. it is a forced cost -- forced obsolescence that drives the top line. it is the corporate objective.
a bigger phone, an opportunity with china mobile. investors looking at other areas where they think there will be a future. the nextn has a loop, person has a hyperloop. printing, then 3-d printing. service. then software as a shortfall, is that where you see opportunity? >> apple is a placeholder in our portfolio. for me the real opportunity today is the year 2000 bubble in march of 2000. trading as a service at 30 times revenues, not earnings -- day? worst
>> they opened a software supply chain company. it was a bubble in 2000 that went away. >> incredibly complex market opportunity. a company that traded at a high months -- high multiple in 2000. they made it a secondary last week where half the stock came from insiders. the stock did not even go down. you had real opportunities for software service. amazon when down 90% after 2000 and you have that kind of return opportunity. talkingis what we were about last night. a fantastic company, going about 90% twice? sit tight, we want to get back to those names after the break. ♪
wealthiest people on the planet and ask them to sell anything. case in point, james dyson tells us his preferred method of firing people. >> it is quite a long time since i have fired someone. but unfortunately i did have to do that. it is terrifying. it took me six months to strike up the courage to fire the first person. it still takes a lot of courage to do it. it is so heartrending. it is shocking and dispiriting to the person you are doing it to. the way that i usually do it is say -- it is not working out, is it? it is the truth, most of the time. >> not you, me. >> with that accent and that sweater?
i don't know. our guest host for the hour, the cofounder of dialectic capital. how do you fire employees? >> we do shareholder activism. we had a number of ward seats on a company that was sold to private equity. when we come into the situations, often what has to be done is a shrinking of the workforce. there was a situation with that company last year for they had hired one third of their -- fired one third of their r&d task force. neveraid that morale had been better. that it had to happen. because the writing was on the wall. of feeling.hat kind >> everyone knows it is going to happen. even though it seems so difficult, there is almost a sense of relief after you do it. it is not like there is not chatter. >> not for the people walking out the door. >> i know what you are saying.
>> but you have got to step up. >> make the company work. >> i have known people who have tried to work with you. you interview people, you interview people, you wait, but we think that is a life raft and it is hard to throw people out. you have got to be careful about who you bring in. we do not even have offices. you sit in one floor. speaking out, we spoke generally about ideas, but what names are you focusing on right now? >> i have talked about 3-d printing before with you guys, but last time we spoke about it stocks were trading at a $20 billion market cap with a $2 billion industry. they are not profitable, if you aggregate the prophet. as of this quarter, two of the three leaders have three announced earnings. next one is gratis.
3-d systems, they basically said don't be surprised if we have to invest extra over the course of 2014. >> why does everyone then say that 3-d printing is the next big thing? i spoke to folks at 3gs about drones, but they said it was 3-d printing. seriously. >> it has been the next big thing for 25 years. the 26th the year will be the big one? >> it is a real industry. it is just a very different from a few years ago. given the margin structure of the growth rate, it should not be 15 times sales. >> people think the prices are going to fall like the computer. but most of the pieces of free deep -- 3-d printers were not -- will not fall. they are made out of solid, big, unchanging things. >> and it is not like hp where you make a ton of money off the toner. the toner is a commodity not
growing at the rate it is supposed to. something is wrong. about does everyone talk it, then? >> because it goes up and trades at a high multiple and captures the imaginations of people on bloomberg, cnbc, other places like that. >> i told you that we could talk , but first, we will 56 minutes after the hour, up a little bit, the dow jones, s&p, nasdaq, picking up a little bit. more when "in the loop," continues. >> in the next hour, the ceo of aol brands, joining betty liu to talk about the transforming media landscape. stay right here. ♪
>> 30 minutes to the opening bell. this is "in the loop" with betty liu. the countdown begins right now. >> welcome that, you are "in the loop." equity futures higher, indicating the s&p is going to rebound following the worst week since june 2012 on friday. apple set to record its first profit gain in more than a year after shoppers shelled out for ipads and iphones during the holidays, apple reports after the close. details about what president barack obama will tackle in his state of the union address tuesday. thees include raising
minimum wage and boosting spending on infrastructure. along withlands -- the u.s.'s military role in afghanistan. the markets, show the blame for stock selloff following on the fed and their plans to taper bond buying. investors worried the world is not ready for this. the last time stocks declined in january, we saw the beginning of the crisis in greece. what has changed here on tapering? >> what we are seeing, warren out,tt's tide going investors look for yield in emerging markets when interest rates were at zero and you could make money -- you could not make money here. as mr. buffett put it, "who is swimming naked. " korea,n brazil, south not exactly an emerging market.
thailand has had problems politically as well. the problems -- the people on wall street who follow the fed said it is not going to affect what they are doing. the fed is a dependent -- the fed is a data dependent fed with u.s. data, that has been coming in better than expected. it is hard to say we will change directions now because the economy is: were they wanted to go. ben bernanke said to expect $10 billion a meeting, that is what people are expecting this week. and other markets might not feel the same way, seeing some pretty they decline -- pretty big declines. the january 2010 decline lead to problems. looking at all the markets around the world, you are not seeing a complete selloff, look at italy, of for the year. the viennese stock market is doing better than anyone expected. even egypt is 7%. fat andabout the
tapering, could we see tapering of the tapering? >> there is a possibility they could dial it back to $5 billion or something. seeould depend on how they the u.s. economy, not overseas. they may be concerned about housing, they have seen mortgage rates rise and a slowdown in housing. housing starts were off, existing home sales were off last month, that my concern them. >> what about tomorrow when the president gives his address? what is in there that could affect investors? >> probably nothing. the president wants to change the subject from obamacare, he might talk about the economy. he might talk about income inequality. nothing is likely to be passive this year by congress, investors know that. do not expect a big market reaction. >> thank you so much, mike mckee. watch our special report on the state of the union, tomorrow at
9:00 p.m. eastern time. now, some other top company news. more company sick on a cruise liner, a royal caribbean cruises ship returning home two days early after 300 people caught a stomach bug. 3000 passengers boarded the ship in new jersey for a 10 day cruise, health officials still looking into the cause of this latest outbreak. google and sam come teaming up -- google and samsung teaming up to cross license patents. the companies say this will allow them to reduce potential for litigation and focus on innovation. billionaire media mogul john malone is making a move in europe, liberty global is buying -- cable company -- buying ziggo,able company liberty global will reach 90% of dutch households. liberty global is also behind charter's bid for time warner
cable. it has been a trend we have been watching closely on the "in the loop." nelsonjust released -- just released figures on the state of a ad market. it is still only a 4.5% market share of total ad spend, television is the dominant force, 58% of total ad spend. joining us now with more is susan lyne, ceo of air will brand group. group,ol brand previously ceo of yell group -- of gilt groupe. >> i have been working a long time. it is going fast in internet advertising. tv ad spending is still where it is. mcdonald's ceo said that, tv is where it's at. >> we see that as an
opportunity, that is where you want to be. when a marketplace is really starting to take off, you want to get in there fast. aol has done a great job of positioning itself as a company to take advantage of that move of ad dollars from tv to online. >> has it changed in any way in the last 12 months that you have noticed? >> sure, we see market is much more interested -- we see marketers much more interested in buying video inventory, we cannot keep up. we have the largest video distribution platform with aol on, it is always -- >> more demand than what you can satiate. last week, you announced the acquisition of gravity. describe what gravity is.
tailoring content for viewers. >> they built a personalization engine based on your interest graph. different interests. most content on the internet is served up to everybody, no matter what you care about. this week, there is a lot of people in denver who care about the super bowl. i do not. no longer the new england patriots. there is a big opportunity, the next frontier is to be able to personalize content so whatever you get is highly relevant to your interest. >> here's my question -- why do i want tailored content? newspaper and the seeing things i do not normally look at. that, there is definitely certain content that everybody should see. but, there are clear indications
of the things that interest you particularly in addition. it might be television shows, it might be certain kinds of sports. it might be that you have got a passion for collecting. so, you should be able to get that kind of content delivered to you automatically. not something you should have to search for all the time. we will be back in a moment, susan lyne, our cohost for this hour. we will be joined by the ceo of hearst, looking at their venture into health care. what is that about? with less than 30 minutes until the opening bell, we will have a tock on where stocks are set open this morning following their worst weekly performance in years. this week, it is all about the fed. stay "in the loop." ♪
>> you are watching lou ann," live on bloomberg television -- you are watching "in the loop." thest corporation announced creation of a new brand unit that includes a venture fund and innovation lab, very different from the magazines you have come to know. usually associated with the company founded by william randolph first over a century ago. is hearst now president and ceo, steve swartz. still with me is a little brand group ceo susan lynes. you are both in the media world. you know each other. your entertainment businesses, health care, those parts of your business are growing revenue and the growing profit. they are so unsexy compared to " when didout "cosmo,
you start becoming a magazine company? >> we are a magazine company, we have a new magazine next week with dr. oz. we have been in the health care information business for more than 30 years. we have ramped it up of the last couple years, we now own five excellent health-care companies. we decided to let the health care industry know that these brand they know very well part of hearstre and that we went to grow these, add to this sportfolio -- >> were they in different areas, you wanted to cement them under one umbrella? >> they are in the health care, information, analytics space, helping for better quality care, more effective care. we hope that will help lower the cost of health care. >> susan, some would say aol is
the reason why steve has to move into other areas, you are creating content taking readers away from his magazines. >> they are creating content, too, in the digital world. you cannot be a media company without having a very strong digital arm. so, yes, we do compete, but we also partner. >> we have worked with them, i think susan's aol has done a fabulous job of investing in new technology companies. we have tried to do the same and learn from what they are doing. >> some of your entertainment properties have been lucrative, espn -- the state and that has been dynamo. there was a great story in "the journal" about how espn is trying to tackle the cord cutters. hey are going into his li -- into this live app.
is it a worry that you will see live sports programming go digital? how would you capture those eyes? >> it made clear that espn is a digitaln television and innovation. we are confident that under the fabulous team that we and the walt disney company, the veryity owner, we're confident that that management team will position them no matter where the business model goes. >> doesn't worry that the fees might to start to come down? wetechnology is changing and are not quite sure where it is all going. i think our answer is just to try to have the best product and best brands and move where the market goes. >> susan, for aol, basketball league decides i want to take my sports -- i will live stream online. is there an opportunity for aol? >> i think there is, but right
go where the games are. the guys are locked up for the most part. what will be interesting to see is what happens as newer sports become more popular, we saw that with soccer in this country. i think there will be a lot more expansion of what is considered really popular sporting events. >> more sports. >> they agree with that at a expand, the x games -- they agree with that at espn, the x games were on. steve swartz, hearst president and ceo. susan lyne staying with me. the old was new again at the grammy awards, the winner for best group performance going to a disk of funk tune. ♪
>> moving and shaking this theing, pop duo daft punk, french musicians took home more awards than anyone else at last night's grammy awards. their album picked up three "gets and their single lucky" was named record of the year. it followed a major trend of the night, recognition of older and more established musicians. legendary band led zeppelin took home the award for best rock album of the year. susan lyne is joining me, a well brand -- aol brand ceo. did you watch the grammys? i am glad old folks got recognition.
i can see you being a led zeppelin fan. >> once upon a time. >> when you see these musicians, do you say there is an opportunity for aol in music? may be partnering with some of them. >> the interesting thing about music, unlike sports where you have a dominant player, espn, music is much more fragmented at this point. which is a good thing for a company like aol. it means we can play, we have conversations all the time about music. >> conversations like what? are musicians who have become brand in and of themselves. there are new devices and platforms emerging that we believe could be interesting partnerships for us. these are mostly partnerships we are talking about. >> what i find interesting, for cable channels, you have got to find a hit show.
on online, you are looking for a hit talent. a personal brand to be the one pallet that is going to aggregate viewers -- to be the one talent that is going to aggregate viewers. >> there is that, i still think what is really different about online is that you have such a long tail. yes, there are dominant personalities. time, there are so many people online at any given moment with very diverse interests. so, there is a lot of opportunity for many come in voices.ces -- for many what becomes more important miss having the platform to be able to -- what becomes more important is having the platform to be able to personalize or deliver that. group ceoyne, brand at aol, a few minutes away from the opening bell.
>> welcome that, you are "in the loop." 26 minutes past the hour, bloomberg is "on the markets." olivia sterns has more right before the bell. >> overnight, the markets in msci down by the most, 2%. the selloff started last week manufacturing. stocks in europe lower as well. u.s. futures are bucking the trend come in futures are pointing to a higher open. it appears that the u.s. is diverging away from that trend coming out from overseas. some new numbers on u.s. home sales at 10:00 a.m. are expected
decelerating,ales still the best year for u.s. home sales since 2008. sterns, thank you. "on the markets" again in 30 minutes. the top 10 trades you need to know about, alix steel joined in. google.0, i u.k. artificial intelligence company deepmind, the acquisition will be used to improve search results and google translate. google has spent $17 billion in the past two years to purchase hardware, software, and advertising technology companies. >> number nine, the homebuilder was downgraded to equal rate at barclays -- equal weight at barclays. their profit will be capped by decelerating price trends. barclays raised its price target by one dollar to $30 per share. >> walmart cutting 2500 jobs. this will be made -- these will
be made at sam's club divisions, intended to streamline management. >> lululemon shares were cut to neutral from buy. the analyst cited a slow recovery from public relations industry -- public relations issues. >> who could forget the see through yoga pants? media, culinary fourth-quarter results beat estimates. they also announced its chairman and ceo will step down immediately. they named former yahoo! executive michael barrett to ceo,. shares falling in the premarket, jpmorgan cutting shares to underwrite from -- underweight from neutral. jpmorgan also cutting its price target on cisco to $17 from $21. >> liberty global agreed to buy
dutch broadband provider ziggo 46 point 7 billion dollars. liberty has been expanding its reach in europe, acquiring the u.k.'s virgin media last year. >> royal caribbean posting a fourth-quarter profit compared to a lost a year ago, billy by bouyeded booking -- by increased booking. this comes as they were forced to bring a ship home early after 300 people got a stomach bug. >> apple will report after that close, first quarter is typically the highest grossing period for apple. caterpillar, the world's largest construction equipment maker forecasting that sales will be about 56 billion dollars, topping estimates. caterpillar proved -- approved a
10 billion dollar buybackplan. call, i trade to the want to bring in tony dwyer, a bullish analyst who is calling for a correction. tony, this is the correction that you have been waiting for based on fundamental change. but fundamental changes happening? what ultimately joins the market, i do not think there is a fundamental change. you have a fundamental change coming from three factors. the currency declines in asia, more specifically, people are not paying attention to north america and central america, currencies are getting smoked. also the fed meeting, will they taper? also, the debt ceiling that treasury secretary lew brought up last week.
if you look at when the markets gets mugged, it was when the highlight came out about what he was saying relative to that -- when the markets get smoked, it was when the highlight came out about what he was saying. >> a lot of bank ceos, including at davos, lloyd blankfein said the selloff at the end of the week looked pretty normal. i was e-mailing with ill miller of legg mason, he said corporate profits are at an all-time high, the stock market and household network at an all-time high. it looks like people think this break they are hearing is doom. investors have a little bit of volatility phobia. big guys thinking this is normal. >> tony, you are being a worrywart. >> corrections are normal until they happen. this is a healthy correction that is long in the tooth and
well overdue. aggressively,ing i agree with everything the people you mention have said. ultimately, the market moves with the direction of earnings, the direction of earning smith the direction of earnings moves with economic activity, that moves with the yield curve, which moves with fed policy. if you look at those influences over time that direct which asset class investors are going to move to, there is no alternative at this point. the only reason you are buying the long end of the bond market is the current year -- at the current yield level is if you demfearful of economic ise. it will be a good year, stocks at a better price. >> alix is looking at some specific sectors, including industrials. and some hurdles facing companies. >> we heard from caterpillar
this morning, the big question there is capex spending, they do well because of construction spending, only 29% of sales. it comes down to mining, rio tinto cutting its 2015 capex to $8 billion. you have rising interest rates in the euro zone, five-year loan to 10 year loan is at 16%. weaker manufacturing out of china. >> tony, does that worry you for industrials? thesounds like we have lost connection to tony. that was tony dwyer, equities strategist. ach jobs coming to neighborhood near you, looking to opened factories in the u.s. stay "in the loop." ♪
starz debuted its new series on saturday, bringing in michael bay to produce the drama. it is the biggest push by the cable channel to move into original programming. the series has already been ed for a second season, susan lyne is on the board. jon erlichman, you talked with some cast members? you know a lot about the history of black sales. -- about the history of "black sails." i wanted to be a pirate growing up. this is a big deal show for talk at a time when we lot about network tv or cable tv or pay-tv players like starz and hbo versus netflix, who can have the biggest, most buzzed
about original show? has a lot of room to push forward some of these big shows. this is the big one right now. there will be a few others over the course of the year. hoping to get the same kind of buzz that they get with "spartacus." somebody like michael bay behind that, it is really about having the relevant service, the one that people gravitate towards. if itr a subscription or, is not a subscription service, just be talking about it all the time. it is a big situation for sure. >> susan, you are on the starz board, some might say you had hbo, showtime, and the -- a&e, what took starz so long>? in chris a few years ago, he started the premium content move. he was at hbo and did "the
sopranos," the first of these es that make people notice cable. what we have seen since then is the flowering of cable networks based on great programming. he knew that it was going to be important for them to have some signature shows. job, this is great the first of a number of shows you are going to see that will really put starz more on the premium content map. remer, amc six or seven years ago was running second and third runs of movies. >> that does not cut it anymore. men," so they did "mad the vampire show, "breaking bad haircut they are a serious place for any great content producer to go. you had to pick shows
yourself and see what was going to work. how do you know when a show is a hit? >> you do not know, that is the point. you can have a great script, you can have what you think is a perfect cast, and then something goes flat. maybe it is not the right director, so many things have to come together for it to really work. what is great about cable is that what it takes out of the random hit you get from being put on the wrong night. you can lose your show after a couple weeks if you are on -- >> if you are in the wrong time slot. >> in broadcast television, not getting the ratings. prettyle, you are guaranteed your entire series will air multiple times, giving you a chance to build a naughty and. -- to build an audience.
>> jon? >> with a show like "black they have already committed to a second season. in the old world, the pilot, all that money, i am curious to know what you think, there has been discussion about that. kevin reilly of fox is saying we're moving away from pilots. do you think it is financially a mess to have a model like that? >> do have a model like the networks have had forever with pilot seasons. you waste a ton of money. you often are not able to get the cast you would really like because they are already committed to someone else for that for a month -- for that four month period. it is a better option if you can turn it into a year-round business. >> what about original videos and content for aol?
great firsted a slate of original video last april. been verythey have successful for us. about 140 million views thus far. we will continue to do it, aol phenomenal a job as a platform and producing original video. they're learning a lot from the first season and they are going to double down next year. >> no better time to be a creator in this era. jon, thank you, jon erlichman in l.a. susan lyne stays with us as well. fish growers gather in australia for the tuna-rama festival. stay "in the loop." ♪
global outlook. taiwan's foxconn is in talks with u.s. states, including arizona and colorado, to build manufacturing facilities for making tools, molds, and connectors. apple seeks to have products made in the u.s.. vodafone shares fell after at&t announced it will not make an offer for the u k based mobilephone company. according to u.k. takeover rules, at&t cannot offer to buy vodafone or a 30% stake or more in the company for the next six months. the tuna tossing contest at the 53rd annual tunarama festival took place yesterday in port lincoln, australia. the winner is the person who throws the tuna the 5s. this year's winner through a 36
yards/ threw it 36 hal. -- 36 yards. when youu work smart have activist investors like carl icahn breathing down your neck? as part of my book, "work ," kirk, let's start with you. how does a ceo navigate when you have people as vocal as carl icahn? >> you have really got to understand what are the priorities of the activist investors. at the end of the day, is there prior need to add shareholder value or to look to themselves at the expense of everyone else?
parties are key, that will drive their behavior, how they will shape strategy and help or hurt ceos. >> what usually takes place on the board in a dialogue with ceo's when you see somebody like carl icahn take a significant stake? >> i think the advice that often them,in is negotiate with give what they are asking for, they can cause a lot of trouble. that is not the route aol took. we believed our ceo had the right strategy and was losing -- was moving the company forward, that turned out to be accurate. what do you say to a ceo or to a board when someone comes in, do you say give them the board seat? >> they have got back to -- they have got to step back and important, the most thing for shareholder value is the stakeholders involved. if it makes sense, let's step
back and discussed that. if not, you bow your back a little bit. >> nine times out of 10, it gets hostile, no getting around that. >> correct. >> how do you think ebay should handle the situation with carl icahn? >> i think, once again, the board and the ceo to need to step back and understand what are the benefits or drawbacks. what are they really going to get from this relationship. if they feel like the drawbacks are more significant -- >> they do not agree with him, so, i mean -- to be ank it is going situation where there will be a battle, the pushback and they will have to dig in and figure out what they want, if they cannot get it, they will have to take other steps. you feel how much do pressure from shareholders having to do with the share price? >> it is always on our minds.
as it should be. these are the people who have invested in our company. and in our strategy. we owe them a lot. i think that what you have to be careful of is making short term compromises that you know are wrong for the long-term strategy. and that is always the challenge for a ceo. >> keeping that balance. >> susan, you were in my book, we talked about what it is like for you to be -- first, you are a pioneer in the media industry. you helped position -- you help positions many women did not in media. was it like for you now to see other women ceos like ra, ursa minor, -- marissa mayer, sheryl sandberg? >> the only thing i would say is what took us as long as it did?
these are incredibly capable women. it is great to see boards and companies just making a clean decision about who will make the best ceo. it does not matter if it is male or female. these women got to where they are not because somebody said we need a woman ceo. but because they said this is the ceo who will get us where we need to be. >> is it annoying to see, when mary barra was on the floor of the detroit auto show, she was a rock star and she had not even started. because of the fact that she was the first. >> that is going to happen. it is a nice thing for young girls to see role models like that. if there is extra press around it, all power. >> did you feel that, too? >> you know, when i was very young, i was often the only woman at the table. certainly, by the time i got to
disney, there were a lot of women leaders at the company. even back in the mid-1990's. this has been a process. " theu watch "makers, documentary that aol and pbs yearyou can see that 50 history of moving women forward. it is the greatest social revolution. >> kirk is saying i agree. >> i have got three daughters, i love the subject. tothank you so much, great have you. susan lyne, ceo of ram group at aol. kilrk, thank you for joining us. that is it for "in the loop." tomorrow, former partner at equity international joins us to chat about his new ventures in emerging markets. tomorrow at 9:00 a.m. eastern. ♪
worst drop since 2012. the dow getting a boost from some better than expected caterpillar earnings. it is time for futures in focus, gold futures of falling ahead of wednesday's fed meeting. greg bender used to trade gold futures on the floor of the comes. -- of the comex. gold prices have risen for five straight weeks, remember what happened five weeks ago, the fed announced it would taper. how much of the run-up in gold is down to the fed pulling back. >> if you look at the timing, a on december 31, since january 1, it has been a story of rising gold prices. is this just a correction against the bigger their -- --ger bearish trend >> double bottom or flight to safety? >> the double bottom, you had a
bear trap. a bear trap happens when you take out a support level on a closing basis, short term trade is rush in based on the barest there is indicator and no follow through. you had rising prices back in, the dollar reversing agents the yen. looks like it might be a better gauge of fear then the -- than the vix. butaybe not better, different. it acts similar, it will rally on equity request -- on equity weakness, it is quick to get gains when there is a sense of calm in the equity markets. for anyone looking to buy as a hedge, you need to monetize that hedge fairly quickly, it is not something you can hang onto for a couple weeks. >> a different way to gauge fear
in the markets. something interesting happening traders gold vix, getting burned? >> buyers getting burned. options,aders buy getting long volatility. if they don't get paid implement that -- if they do not get paid and movement, they do not get paid. ow, $52, ingh minus l 2014 we have been averaging below that. two weeks ago, we had a $21 range. last week, with everything that happened, the range was $42. you can look at that as an indication that -- a sense of -- inency in bill gold . the gold market. like?t do forecasts look 160 on the downside.
short term, if you are going to close at 1270, we could see a run-up back to the 200 and moving average around 1230. >> how much short covering ahead of wednesday's meeting? >> there could be a fair amount, it will be a bumpy ride. >> thank you so much, that "on the markets" in 30 minutes. "market makers" is up next. ♪
>> live, from bloomberg world headquarters in new york, this is "market makers." with erik schatzker and stephanie ruhle. >> merging market massacre. the selloff worse start to a year since 2009, china is getting the blame. >> what was he thinking? sony caught up to the cofounder of one of silicon valley's most successful venture capital firms, who compared the treatment of the wealthiest americans to not see germany. nazi see germany -- germany. >> and ahead of the super bowl, nfl players hooking you up, but it will not come cheap. off anre coming extraordinary