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tv   Street Smart  Bloomberg  March 18, 2015 3:00pm-5:01pm EDT

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look at both things and not take away any simple -- >> chair yellen i want to check in with you on whether you have any concerns about levels in the financial inequity markets. -- bubbles in the financial by some conventional measures, are somewhat higher than historical levels. some sectors continued to pair stretched -- two of your stressed. the report specifically mentioned biotech and social media stocks as being substantially stretched. do you still feel that way and can you comment on bubbles and particularly these sectors? janet yellen: i do not want to
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comment on those specific sectors. overall equity valuations are on the higher side but not outside of historical ranges. in some corporate debt markets we do see evidence of unusually low spread and that is what was referred to in the report more broadly, we try to assess potential threats to financial stability -- we also look at measures of credit growth of the extent of leverage being used in the economy and in the financial sector and the extent of maturity transformation. taking into account a broad range of metrics that there on
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financial stability. at this point, the threats are moderate. >> chairman roberto, politico. i want to switch gears and ask about some of the tension between the fed and congress lately, with some lawmakers calling for more transparency -- transparency. i wanted to ask to what degree there might be room for the fed to consider some of these measures that would change up a voting seat on fomc. to what degree would that make it difficult? janet yellen: i believe the federal reserve is already one of the most transparent central banks around the globe. we provide an immense amount of information, both financial
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about our balance sheet and our monetary policy operations we publish our balance sheet every week. if you want to know exactly what is in the report fully a, it is listed on the new york fed website. i have press conferences, we issue minutes, and we have statements we released right after meetings and transcripts within five years, so if you put all of that together each transparent central bank, with respect to congressional changes that are under consideration, it would politicize monetary policy by bringing congress to make policy judgments in real time on
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our monetary policy decisions. congress itself decided in 1978 that that was a bad thing to do, that it would lead to poor economic performance, and they carved out this one area of policy reviews of monitor policy decision-making from gao audits. the gao looks at everything else that goes on within the fed. i think that is a central bank best practice, the global experience shows that giving central banks independence to make monetary policy decisions that they think are in the best insurance of the country and consistent with the mandate, leads to lower inflation and more stable macro economic outcomes. so i feel very strongly about that. but we are accountable to congress. of course we are ready to
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provide information that congress needs to evaluate the fed's decision-making in monetary policy and elsewhere. with respect to monetary policy rules they can be useful and i find them useful as a kind of benchmark for thinking about what might be the appropriate stance of policy, but to change a central bank to follow a simple mathematical rule that fails to take account of many things that are very important in making monetary policy for example, i was early asked about being against the zero lower bound which is an important, special consideration that would be a very foolish thing to do and i oppose it. with respect to proposals having
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to do with voting and the structure of the fed you mentioned, i would say for my part, i think the federal reserve works well. the system we have was put into place by congress decades ago. i do not think it is a system that is broken. of course congress can revisit the decisions made by the structure of the fed. there was good reasons for making the decisions about how structure voting and other things. i do not think the system is broken. i think it is working well. i do not see a need for changes. i think it is up for the board to review that. class of was wondering whether you could quantify the effect
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the stronger dollar has had on economic output so far this year, the extent to which it acid -- and what sort of obligation you feel, if any, to make life easier for the epb, the bank of japan, and many emerging market companies struggling with some of the issues we struggled with not that long ago. janet yellen: with respect to the impact of the dollar on the u.s. economy, i do not have a quantitative estimate to offer you but i certainly expect net exports to serve as a notable drag this year on the outlook, but remember you have to put that in context. a lot of things affect the u.s. outlook and while that is serving as a drag on economic growth overall, the committee continues to see a sufficient
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strength, particularly in private spending, that we are expecting above trend growth, even so. with respect to our neighbors we look very carefully at what is happening in the global environment. we realized that our own policies affect performance in the rest of the world and that performance in other countries have some influence on us, so we spent a good deal of time discussing global developments. it is important for us to keep our own house in order to put in place the policy consistent with the objectives congress has given us. i think a strong u.s. economy is certainly something that is good for other countries as well.
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we can communicate as clearly as we cannot monetary policy. trying to do that and will continue to do that. >> we talked about the risk of tightening too early or what about the risk of waiting too long, especially since it could take a while for fed actions to work its way through the economy . janet yellen: i agree with that. many studies over decades and decades showed there were lags in the way monetary policy affects the economy. that is why it has so much time and forecasts and discussing them to we want to put in place a policy that will be appropriate for where the economy is heading.
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that is a reason many of my collies, most of my colleagues are anticipating it will be appropriate to begin policy sometime this year in spite of the fact they are projecting that inflation will be low. they are looking forward and they see that by the end of 2016 and 2017, with the labor market recovering, and assuming that inflation expectations remain stable and transitory, influences, no longer affecting inflation, they see inflation heading back toward a 2% objective. so just as we don't want to be premature, in tightening policy and aborting a recovery we worked long and hard to proceed as far as it has, we also do not
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want to be behind the curve beginning to tighten given those legs. >> i would like to preface this by saying i do believe you stand for accountability. recently, bunch of us were in a room. they controlled the internet in the room. there was a week in the fomc. we do not know what happened. i have fast. i cannot get an answer. now congress is acting -- asking. both want to know. i understand that is an active case now after tito's ears of us
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sitting there. i would like to ask what you found as the board to you or not chairman then. your vice chair. what answers do you have and will you respond to congress? janet yellen: the committee and i personally take very seriously our responsibility to safeguard confidential information. we have policies and procedures that are in place if we are to follow -- that we are to follow if we believe there have been weeks of confidential information -- leaks of confidential information. this is not occur very often. if it does occur we follow those procedures. it has been reported our inspector general is engaged in a review at this time of this matter.
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in light of that ongoing review, i am not going to get into details, but let me just say we welcome that review and we are looking forward to that review with respect to congressional queries. members of congress have asked about this and will certainly cooperate in china to provide them the information they seek. >> the banking sector in terms of capital ascension. there is also seemingly a number of scandals involving manipulation libor, do you think the culture at the banks
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is where it ought to be and if not, what will the fed do to improve it and when? janet yellen: it has certainly been very disappointing to see what have been brazen violations of the law. we absolutely expect the banks we supervise to comply with the law and have controls in place that ensure compliance in organizations. while changing the culture of organizations is not something we could achieve through supervision we will make sure the banks we supervise have appropriate compliance regimes in place and to the extent that compensation schemes might be in
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senting such behavior, that inappropriately reward risk-taking that is something we will look for in our supervision as well. >> you introduced a compensation rule in 2011 there when do think we might see some movement on that role? >> the agencies are working jointly to bring out a rule on this. but we do have supervisory policies in place concerning the structure of incentive pay and compensation, and our supervision covers that topic now and we have seen, i think meaningful changes already in the structure of compensation and banking organizations to
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diminish ways in which it might in sent risk-taking. >> i guess i have two follow-ups. one in regards to craig's question. before the investigation according to the republican congressman's t or office, he says, it is my understanding that although the federal reserve's's general counsel was initially involved in the investigation, the inquiry was dropped. that predates. i want you to -- i want to know who are these people that struck it down and doesn't not revealing the fax going to go directly against transparency and count up -- and accountability? >> that is an allegation i do not believe has any basis in fact. i am not going to go into the details, but i do not know where that piece of information could
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possibly have come from. >> on his question, i think when you get asked about financial crimes in the public hears you talk about compliance, you get a sense there is not enough enforcement involved in the actions and that it is merely a case of a kind of trying to achieve settlements after the fact. is there a sense in the regulatory community that financial crimes need to be punished more forcefully in order for them -- in order for there to be an actual deterrent? >> you are talking about within banking organizations? the focus of the banking regulators is safety and soundness. what we want to see this changes
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made as rapidly as possible that will eliminate practices that are unsafe and unsound. we cannot come only the justice department can bring criminal action. they have taken up cases where they think that is appropriate. in some situations, when we are able to identify individuals responsible for misdeeds, we can put in place prohibitions that bar them from participating in banking and we have done so and will continue to do so. >> steve beckner. good afternoon, madam chair. the fomc said last september it will wait until after the first rate hike to stop or discontinue reinvesting proceeds of its holdings and stop rolling over
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maturing treasuries. what is the current thinking about how long after liftoff you should wait to stop her investments and rollovers? given the very large amounts of treasuries maturing next year, would it make sense for the fomc to vary the pace of runoff that it allows? janet yellen: we issued in september instead of normalization principles, and, as you noted, the committee indicated that we will eventually cease reinvestment will diminish the pace of her investments as a way of gradually reducing the size of our portfolio overtime. we said we would do that when economic conditions where
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appropriate after we began raising rates because we want changes in the target range for the federal funds rate to be the main tool by which we shift the stance of monetary policy. we have not made any decision at this point about how long it will be once we begin to raise rates before we reduce or cease reinvestment. we will see how things go when the committee revisits that and make a decision at a later time. you also indicated that we have a substantial quantity of treasuries that will roll off our balance sheet over the next several years. that is true and almost a hundred billion will mature and they will be short-term, obviously trevor -- treasuries
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at that point pair that is the way we anticipate diminishing the size of our portfolio. >> some people have suggested you might need to manage those runoffs of little more granular lee, if that is a word, perhaps pursue a different track for treasuries, or given quarters when you have very large amounts maturing and there might be a spike in long-term interest rates, that maybe you would vary the rate of runoff. any consideration given to that? janet yellen: that is something for which we have made no plans and i do not really have anything for you on that. >> greg and then peter pan -- peter.
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greg: productivity takes a long time before you can understand it. it has been very low in this cycle. what does that mean for fed policy? janet yellen: i agree it has been very low. disappointingly low. a positive aspect of what is fundamentally a disappointment is the labor market has improved more rapidly than might have been expected, given the pace of economic growth. the unemployment rate has come down more rapidly than i would have expected in the labor market has improved more rapidly than i would've expected. we have written down our estimates as potential output.
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in the long run it is a just -- a disappointing factor about the ultimate prospects for the u.s. economy. if it continues, i would expected to pick up. as you can see from the longer run growth projections, most fomc participants believe it will pick up above current levels. but it means it is something that if it persists, would retard living standards and low wage growth and improvement in living standards for ordinary households. >> peter, last question. peter cook: peter cook october television. first of all, you have been asked to this before. i want to see if you can clarify.
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when did you decide to raise interest rate, could that decision happen at a meeting that is not followed by a press conference? on my congressional question, i would like to get your reaction to the treatment you received up on capitol hill the other day. it did not look like a pleasant experience, certainly in the -- in front of the house. i wonder if you have concerns about that as the relationship deteriorates to the point that it causes you concern? >> let me start with a press conferences. let me reiterate it. every meeting the federal open market committee has is a live meeting. clearly, if we decided for the first time to raise the federal funds rate it is something i think would be appropriate to answer questions and explain in more detail.
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we have long had the capacity to call a press conference after a meeting we would hold by teleconference by conference call, and that is capacity that was used on a number of occasions by my predecessor during the financial crisis. it is something that remains a capacity we have and we would expect to use it if it were necessary. on the second part of your question, with respect to testimony it is very important for the federal reserve to be accountable to congress. we have a wide range of responsibilities and it is entirely appropriate for me to testify and be closed on a range of topics by members of congress . i think i need to be ready to answer questions on any aspect
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of federal reserve behavior and that is an important principle. >> europe and listening to the federal reserve chair, janet yellen. the federal reserve trapping assurances. higher borrowing costs as early as june and stocks seeing enormous rally on this move. the fed officials indicating they will rise lower than previously estimated. the s&p rallying over 1% are for market reaction, let's go right to bloomberg's chief market correspondent, scarlet fu. we're looking at the s&p gaining the most since the end of january on this. >> absolutely. staff took off on the fed statement. the word "patient" was removed but the meaning remained in the statement and the spirit of what the fed intends to do.
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a small step toward normalization. the liftoff is on the horizon. both the s&p and the dow are now in the highest in two weeks. that would be early march. treasuries also rallied. the two-year is now at a six week low. the 10 year is yielding less than 2% for the first time this month. we also saw the dollar sink afterwards. the euro topping 108, from below 105 earlier this week. similar movement in the end as well. saying this is a dovish statement. good for u.s. equities and bad news for the u.s. dollar. june is the earliest the fed could hike rates, but september he says is now the base case. you see that play out in financial markets. >> a recap of the news
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conference, we will talk to michael mckee, who is joining us. joining me as well global strategist president, and we are waiting for some other guests to join a spirit for now, mike, when you listened to this for the last hour, the biggest take away for you, when will they raise rates? >> right now, it looks like they are planning on october. they lowered the path of how far they think interest rates will go this year and they also lowered the forecast for inflation which means inflation is lower for longer, which means they can wait longer and they reached a target they say they can start late -- later p june is probably off the table right now. a 94% chance in september. that is the biggest take away at this point. >> also joining us, chief investment strategist. it looks like an october rate increase. what you think? >> yes. i am not so sure i would say it is october.
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i disagree that everybody's focused on the dropping. if i have a headline for today, it is at the fed now believes there is morph -- more slack in less inflation. that is not the near-term changes. it is the 2016 and longer-term implication. this has changed the market positive expectation of the path of normalization are not so much, is it june, september october. i think it is a secretary -- secondary importance. they lowered how quickly the markets expect, space and what they are telling the markets now, what the piece of normalization will be. that is why you see a powerful reaction. the entire front end of the curve. if i miss spoke i said october. i met september. they want to do in a press conference meeting, which means september. pete did ask -- she said they
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could do it but that is not their goal. >> peter cook is actually at the fed and he asked that last question. peter, what was your biggest take away? did you feel janet yellen got across a patient atmosphere with removing that word? >> she achieved the flexibility she set out to achieve with this statement and her press conference. leaving people to guess exactly when the fed will move because she is trying to make it clear that the fed does not yet know p or with that flux ability comes a certain level of uncertainty in the marketplace. she and her colleagues appear ready to be prepared to live with that uncertainty going forward. they insist they are data dependent and so should everybody else watching them. watch the numbers. a think it is crystal clear after what we heard in the statement and projections in the news conference that the timetable has likely slipped closer to the fall.
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i think june is less likely at this point than it was. >> we love to talk about that. you have been a little more spent -- more skeptical than the rest of our guests. you said no rate increase at all at this year. do you believe that? i said believe that. what happened today, forward guidance died. at the same time it actually got strengthened and extended into the new year. that is why you see a big decrease in stock prices in bond prices. it all suggests to me they are waiting for inflation to rise significantly closer to the 2% level and if you look at inflation projections for 2016 they have been brought down. i cannot see how that is consistent with increasing interest rates later this year. as i said before, they have canceled forward guidance. we will not have that. so you're going to be left with
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more confusion on what the fed will do. the fed will at even more volatility than they did before. the when you come to september i think the expectation would be the dollar is a lot stronger that it is in the eurozone is much weaker, and the inflation rate is still well below the 2% mark. she mentioned oil prices as well parallel prices are headed down for the next 2-3 months. even the inflation rate will be the second half of the year. i cannot see the fed increasing interest rates at all because leaving the situation and going back to tighter policy is very difficult and they're trying to postpone it as much as they can. >> they do say in their materials that 15 of the 17 members expect their rate increase this year. so they disagree, a vast majority disagree with your view.
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the only question really becomes when. as jeff rosenberg was saying the pace of rate increases will be slower. i have a question for him. she says, jeff, that she does not know really. she cannot give you a mechanical answer as to what confidence in inflation will be. what will the market look at? what will you trade on going forward? >> yes, she was asked that question and she highlighted a couple of things. she highlighted wage inflation and the actual inflation figures. those are things the market will focus on pit if i could just go back to the earlier part of the conversation, some of the comments she was making, there is another possibility, that that that just wants to get the first increase out of the way. they want to get it out of the way without causing financial market conditions tightening, which is code word for seeing a decline in the equity markets.
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there is a possibility you have an increase in the interest rates, and then you wait for a considerable time, to borrow a phrase from a different era, and that you can kind of square both ideas here at 15 out of 17 participants say we will increase in 2015 but the pace may be slower. you get one increase. janet yellen said something important when she said, we do not want to go back to 2004 where it was a highly expected 25 basis point increase every meeting. by increasing one time and waiting, that would be one way of normalizing but at a very slow pace without having the market expecting exactly what they're doing. >> i would disagree with jeff on that. if she wanted to do that, she could increase interest rates today and could have said we will not do anything for quite a while and the pace of the increase will be very slow. instead, she has just told you
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it will not happen at the next meeting but may happen in june and then she said they're looking for wage numbers, which continue to be very sluggish. i think what this is suggesting is she is not in the mood to change anytime soon. what investors would have this february 1990 four, when we had an unexpected increase in interest rates, -- >> and that would not be unexpected. we have been expecting this for a long time. clays except she does not tell you anything about the date. there is more confusion than there was before. it is dovish, but makes the market more volatile. question could not do anything today. she had promised not to. that would have destroyed the credit -- the credibility. if you're going to raise just once, the fed told us in their september market expectations how they are going to do this. the exit strategy they released.
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the first move will be twice five basis points. right now, 13 basis points. you are talking about a 12 basis points move. you would make it clear it would not have any effect really on the markets. question, i will actually get to you and what you make of what he was talking about it what is the risk you see created by janet yellen, or do you see risks taking off? >> it is a bit of both. on the one hand, the major impact of today is to ease some of the pressure on the dollar. you had a pretty strong dollar reaction here, weakening because you have so many expectations, not for just when they are going to raise interest rates, but how much they will raise interest rate. the dollar strength pressuring on both sides of the mandate in the form of lowering inflation and pushed debt -- pushing down economic growth. to the extent they can navigate an increase in interest rates without having a significant increase of the dollar has to be
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viewed coming out of today is a major win for the fed in clearing the path for raising the rate of interest rates. it makes june or september even more likely because it reduces the odds of financial market conditions tightening the fed, mostly wants to avoid repeating a june 2000 or a may 2013 environment. that kind of exiting from monetary policy undermined their goals of exiting monetary policy. they want to be able to raise interest rates without creating financial market conditions tightening. today's communication will help them eventually accomplish that. >> again, i disagree. a move toward increasing interest rates and he had done it, i think you would see the dollar appreciate strongly. it would have gone to 102 or 103 today instead of moved in the other direction. i do not think the fed is ready to have a stronger dollar weaken the economy.
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glass we have already seen it, on the new orders, for example. peter, i want to bring you back in here as well. what your take is in terms of the risks and what they might be. to: two things they somewhat conversation you're having here and what i saw on the room itself. it was striking to me jenny ellen, on the question of the impact strong dollars had an the economy, trying to almost dismiss it, saying we understand it is hurting exports, but it is also a strength in the u.s. economy and we believe the underlying strength is good. she tried to dismiss that. the other thing that was important she stress in the room was as she is looking at the inflation gauges out there one of her own gauges will be a further reduction of slack in the labor market. if she sees solid job gains they are prepared to raise rates, even if they do not see inflation moving higher, they see jobs moving higher and they will be there to go to maybe not
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in june, but maybe by september. >> jeff, you are not in your head? >> if you look at what is going on the labor market, i think it is very hard to see how we will have any kind of significant slowdown in terms of what we have seen in terms of labor market growth. the expectation that further improvement in the labor market will not be met, i think that is a very low bar here. the more uncertainty is about reasonable confidence around inflation. from there it is a tricky formulation. it is their confidence in inflation going back to 2% over the medium-term. the fed understands monetary policy operates with a long lag leading indicators with the most important indicator for what janet yellen highlighted, wage inflation. you look at the indicators saying 2.5 to 3% times -- kinds of wage inflation are around the
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corner. perhaps the fed will wait until that shows up or act on the leading indicators. both pieces of the mandate inflation and wages, -- inflation and labor markets indicate that liftoff here is between june and september. people will say today it pushes back toward september. >> a heated debate where the risks are and when the fed will raise rates. a lot of questions are still coming out of the testimony. peter cook, thank you for joining us. jeff rosenberg, thank you all for breaking that them with us. the t-mobile cb -- the t-mobile ceo is in new york today to announce the company's latest plan to rewrite the rules of wireless. stephanie ruhle is at the event. stephanie, take it away. stephanie: surprise, surprise, john wants to rewrite the rules. we never heard you do that before. john: i just want to say you are
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deathly not the coolest person in your family. stephanie: i brought my son here today. i knew it was going to be a party, but what is it for? why are we here? i came for the food. >> we have been ninth for two years ago now. the moves have been the way the company has gone from 33 million customers to 55 million. we are growing extremely quickly but we are about to do to the business sector what we have done to the consumer environment. >> it does not seem like a business partner. >> the revolution was about finding pain points and solving them to make structural changes in the industry. amongst those were no contrast, any time, financial data roaming. simple, transparent pricing.
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what is still happening in the business environment scarily, $83 billion of business wireless services controlled by four major carriers, 87% at&t and verizon. sadly, though $9 billion, 9% control by sprint. it is like used car land. it is haggling back off its processing. we announced real simple pricing and i am telling you, harry and i can sit down now. it is very easy. $16 a line, 100 lines, $16 a line or it over 1000, $10 a line. >> at&t and verizon have over 80% of market share. how much do you think you could still in the next two years? >> how much can they lose in the
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next two ears? look at the cfo. shockingly, his name is also stevens. i think they are warning. life must be tough. he said, listen, by the time we get done with all of our moods -- moves, 20% of revenue will be in the space you artie talked about. the 40% will be in business. what he was trying to say was that we are comfortable with this part. the pricing a talked about data flexible data pooling. you will like this one. business family discounts. i will not say it in front of harry, but that is bf the -- bfd. it is getting rid of age-old trickery where you come in as part of a family and you get a
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business discount. we now allow the first line to be handled i.e. a 50% discount. >> why is your plan so much better than theirs? classmate in a push. sprint's network is completely dead and everybody knows it. what sprint announced recently was an age old bundled service where you try to aggregate everything that happened in the office place. this is wireless services and we are focusing straight and i have very little concern. >> everybody knows you love to hate on the competition publicly. is that because there are not new subscribers to get? the pie is not getting bigger? so the only way for you to gain traction is to steal from these other guys? >> we love volatile environment because we are a share net gainer. in 2014, we gained 100% of the
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postpaid phone ads in the industry. 100% p are all 8.3 million new customers. we announced to does other things that i -- that helped the process. carrier free. we paid 1.3 million fees when people wanted to switch contracts. we also pay off phone contracts. >> how could you afford to do this? you are offering unbelievable deals. where is the bottom line for you here? >> we are the fastest growing company and we have the fastest growing profitability in the industry. margins in q4 were 30% and moving up. 2.5 years ago, i announced a three to five year plan in growth and profitability and we are right on it. the issue is not really us.
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we are growing and becoming profitable. it is those with the big fat overstated pricing that happened to get real or i will tell you, tomorrow, people will appear in at&t and verizon's office with a sheet of paper that says, hey, here is t-mobile, and i love that. i have one more thing. the last thing i announced today, you know i hate contracts. i brought them back. today i announced the un-contract. i am signing a contract with every customer, committing that anyone with a fixed rate plan i will not lower your amount of data or raise your price and here's the best part. every promotion that exists just became permanent. 5 million customers that bought $400. the >> -- >> this seems great for me.
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>> it is good for harry. >> he is not getting a phone. eight-year-olds do not get phone spirit where will you get the 2 million subscribers per year that you want. >> you need to do math. you're thinking about, this is at&t, who just announced they will at 400,000 postpaid subscribers in q1, almost more from tablets. you did not hear that coming from us. we gained 4.5 million customers in 2013 8.7 million customers in 2014, and growing. >> how did you start the year? >> very well, thank you. i announced something else today that is very important. at&t and verizon do not want to talk about postpaid ratios. one of the ways you gain customers is churn it low, keep your customers, and what happens to the postpaid base? in a ratio it means you lose as many as you get.
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i have never had a month since march of 2000 13. when you talk about verizon and they say they do not must talk about those ratios, do you want to know why? and guess what happened. >> we have to leave. i know how you feel about verizon and at&t and sprint. how do you feel about google? >> i like google and we are of anybody who causes disruptions. >> you are not worried they could be a competitor for you? do you see google as a partner? price some people see threats and i see partners and friends. alix: thank you for joining sp
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are we want to see reaction to the fed chair janet yellen causing craziness in the markets. the biggest rally since january scarlett. clough absolutely and volatility has come back as well. a triple digit move for the dow industrial. we have had 100 points. today, we got to almost a 400 point move. if you come inside the bloomberg terminal, this is a snapshot of how the equities reacted. you have got a straight line up come a big pop in the index is paid when janet yellen began speaking at 2:30 during the press conference, it took another leg higher. they continued climbing. drifting along as levels here. even so, looking at gains at better than 1% for the down s&p. the nasdaq is up 9/10 of 1%. some groups are doing better than others.
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utilities have been sold off in the days leading up to the announcement on expectations the fed would be sooner rather than later. they are seeing among the biggest recoveries. >> thank you para talk about volatility. highly the u.s. dollar, seeing its biggest drop since 2000 11 para joining me now on the breakdown of key voices on social media platforms and how they are reacting is the bloomberg market managing editor. we are watching tv listening to janet yellen and you're on twitter join to find out what is going on. >> how people are reacting in real time. a lot of it was simply about, people like to snark the fed. it is just like people knock it. just like, people really took -- they had a lot of comments about how she killed forward guidance.
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i do not know we have good tweet by matthew i really like but anyway, he made the point we come not to praise forward guidance which i really enjoyed because i like anything that invokes famous quotes. from our own economist here, who took a great shot and sort of summarized, let's see if we have it, modified policy rules humans one, robots zero. this is a big debate, which is there is a big criticism of the fed, that the fed should have rules, and janet yellen pushed back hard against that, saying there would be no purpose in -- no purpose in that. >> we have the cielo on a program yesterday, asking him about rate hikes. what am i looking at? they do not really care what
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will happen in the next 24 hours. that is a stark difference from what we wind up seeing in the day today reaction. >> there is a huge difference between how traders think about the fed and people in the real world do. there have been many surveys over the years in which business leaders do not rank interest-rate particularly highly in the factors that influence their decision p remain they do and they do not notice it whereas traders and investors, they hang on every word looking at the docks and so forth. >> was there a lot of chatter about the date? >> yes. everyone was like, ripped june out, who knows? >> thank you so much. anyway the close is coming up next. stay with us and we will be back in just tedious minutes looking at a huge rally on the s&p.
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>> look into our viewers around the globe. you're watching bloomberg television. i am out feel and this is street smart it moments away from a closing bell. investors are reacting to what we just heard from the federal reserve. the central bank opening the door for a rate increase in june . many say it could be later. let's get more from scarlet. we continue to see the rally billed and the decline in the dollar is very sharp. >> one of your guests earlier in our put it best when he said
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yellen is alive and well. rising as much as 248 points. that is a swing move of almost 400 points. it is right now up 205 points. that is pretty incredible to go from 400 points. within the s&p 500, all the industry groups, whether you are counting them as 10 groups or 24 groups, are all advancing. utilities, more interest rate sensitive sectors, are leading the advance and the expectation for a rate increase have now shifted to september versus june. the vicks is back below to 14 p are you are seeing the price of detection against a clients in the s&p 500 come down. treasuries took off the two year yield. now at a six-year low. the 10 dipping for the first time this month as the fed reduces forecasts for the fed funds rate forecast by the end of 2015 p are you talked about
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the stronger dollar being a big theme. in the past six months, that has not been the case today. we got a weak dollar. the trade really took people by surprise -- but it is a case where people had to take money off of the table because of this on expect it move here from the fed. alix: thank you. here with me to discuss all things fed lisa and carl. they are already having debates on set. and michael. i wish you are sitting here next to me. i want to start with you. what was your biggest take away? when is your fed rate hike? >> the move in the interest-rate projections, the statement at the press conference were pretty much in line. i saw the move probably a little bit more than apparently the markets were expecting. our call was for a june lift off. we are obviously on our heels after today's news.
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it does look like the center groups are probably more aligned with september. it does present a challenge to our cause for sure. >> take a look at the futures rate you see an increased probability of a rate hike increasing to 40% probability. carl, what do you think? >> i think september is probably still a main target here. they could go as late as october. i do not think that happens. i think the fed wants to wait to see what transpires in the economy in the first half of the year. we know the first quarter of data looked weird because of the weather issues. sit back and get a good sense of what q1 looks like an q2, -- alix: the better question is when is the next time they raise? >> your point, we were just talking before the show. this is a brilliant move for the fed. it's a caps off what the first rate hike will be and really
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moved to how quickly the pace will be. alix: it was a big day for all asset classes. the dow is up by more than 200 points. at one point, it was down by more than 100 points. it is seeing its biggest move since january. this is coming on the back of a much weaker dollar, a enormous drop in the dollar. its lowest level since 2009. this is because of the fed and janet yellen. the rate rise could be made at any meeting after april. she said not to get to trip the on the word patient. >> just because we removed that word, doesn't mean we will be
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impatient. alix: is the market point to be healthy enough for a rate hike in june? michael, you are thinking possibly september. do you think the economy is healthier than they fed might have given it credit for? michael: i think the forecast looks reasonable. they continue to underestimate how fast the unemployment rate has fallen. i suspect that the unemployment rate does move quicker down. we will see how much of it is whether in q2. alix: if they do end up raising and september, what will the pace be after that? michael: they will go slow every other meeting. i thought janet yellen would have placed more emphasis on the
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pace than she did. the contour of rate hikes -- there wasn't a huge change relative to the december numbers. i thought it was a lower starting point. alix: what you think about janet yellen's statements about the dollar? are we quietly entering currency wars? were they dodging the bullet? michael: if it was, it was very quiet. i thought yellen tried to say that the dollar of facts the forecast on inflation and growth. i thought it was hard to justify that kind of revision based simply on the economics. it looks like there was something else seeping in there. i'm sure the dollar was a factor beyond inflation. >> i don't think we should downplay that the fed talked
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about the currency. janet yellen is sending a clear signal. when that statement came out at 2:00 when they say we will need a bigger boat, i think that's what they said when they saw that because janet yellen said i am not going to play the patsy here and hike rates, kill the export sector and help the ecb and bank of japan. she said she is going to be sensitive to not clobbering the export and manufacturing sectors. consumers shift towards cheaper imported goods. alix: does that mean the u.s. economy isn't strong enough? >> they did mention they were
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concerned about the weaker exports, but they couched that by continuing to expect confidence. it was a hedged statement. she wasn't entering them like the bank of england, which came out and said we are concerned about how strong the pound is. >> the fed is sensitive to not talk too much about the exchange rate. the dollar is the domain of the treasury. it matters. we heard the same sort of distancing from exchange rate discussions when ben bernanke he was essentially to violating the dollar. -- was essentially evaluating the dollar. >> how much more breath you think that has? michael: the dollar has been tightly correlated with oil and inflation expectations.
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it is hard to separate what's going on with the dollar and inflation expectations. all of them get affected by the fed to the same degree. oil goes up, inflation expectations go out. they are equivalent for the outsider. alix: we have heard janet yellen diminished -- dismissed the plunging oil values. what did you think? michael, do you think she was taken oil more seriously? her inflation forecast was cut in half. michael: i thought her comments on oil were consistent. i thought it was interesting that the inflation forecast came down. the headline inflation forecast was unchanged, if not slightly higher. i thought it cut in a few different directions. >> it's not so much they are
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incorporating oil, but rather acknowledging that this move in the dollar will be a big deal. i hate to focus on this dollars story, but in december, the fed hinted that maybe there were some problems related to the dollar strengthened. in january, they seem to dismiss that and blamed it all on oil prices and dismiss other factors. now we are realizing that the strong dollar is clobbering import prices and having a real impact. alix: the supply and demand is part of it, but it can't be all of it, meaning there is an inverse correlation to the u.s. dollar. taking that conversation overseas, christine lagarde warning about possible capital flight from emerging markets. we are already seeing that. bloomberg created a proxy to track prices to see if demand
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for emerging-market assets are rising or falling. it is falling big time. significantly more than 2013. >> may be janet yellen is sensitive to this as well. she is focused on steering the domestic economy, but if we look back to history rate raises from the fed have not been kind. we have the latin american debt crisis in the 1980's. we had the asian currency crisis in 1997 and 1998. >> we have known this is coming right? >> it depends on the speed and how aggressive the fed is. >> it took some people by surprise. when you look at emerging markets, they had about $9 trillion of outstanding dollar denominated bonds that they will have to service. they will have to pay it back with depreciating currencies and
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creates a risky bet it could be a systemic issue beyond weaker exports. they need to be aware of it. >> what puts other central banks and a hard spot is you have to raise rates to keep capital and the country, but that will hurt growth. 14 central banks have lowered interest rates in the last four weeks alone. scarlett: i don't think this was central. michael: it probably was a contributing factor to them. it would be appropriate for how the em situation would affect u.s. growth. alix: is it that one central bank cannot act alone without some kind of consensus with other central banks also feel like they're nearing a rate hike cycle? michael: it shows were not an
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island and foreign financial conditions are going to be a factor. that came through today. >> a good segue there, as far as market implications, the bull market will remain intact as long as gains in the dollars slow. what does this wind up doing to markets? the average increase in stocks -- average return in six months after a rate hike cycle, 3.4%. the stocks are worth a little less. >> when we look at these rate hike cycles, people say that in tightening monetary policy, they can still be positive for stocks. in a normal cycle, yes, that can
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be the case, but were having these outside moves in the currency, and that is a game changer, making it difficult to say this is just like any other cycle. >> how many of the gains have are ready happen. how much more can be built on the promise of easy money? how much more easy money can we possibly get? >> it's not just easy money it's negative yields worldwide. that capital will have to come to the united states because we have nonnegative yields. michael: these are all one in the same. that has been arguably stimulative for the united states. in our models, and has been outweighed by the drag from the stronger currency and what that means for trade flows. >> tying this into a nice little boat here, it seems like the dollar makes most of its moves before a rate hike. michael, have we seen an end to
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the volatility in the dollar? michael: i'm not a currency strategist, but i feel like some of the pessimism on growth outside the united states is overdone. europe is starting to turn a little better. i think some of the more dramatic moves in the dollar are behind us. >> the fat is telling you that they want the dramatic moves to be behind us. it is difficult to forecast interest rates, but there are some rules that generally work. if you look at interest rate differentials, that tells you the direction of the exchange rate. if you look at where the two-year treasury yield was relative to european treasury yields, that interest rate differential partly based on the fact that the fed was moving while the ecb was easing, it told you that we should see strengthening in the dollar. now, the fed is saying they are moving later and slower because they are trying to quell some of that momentum. >> will that translate into a
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coma or stock market? everybody, thank you so much. love the insight. thank you for joining us. coming up next, tensions are high i had of greece's meetings in brussels. investors want to see some things happen in europe. that is next. ♪
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alix: tomorrow, big day for greece, fighting for its financial lifeline. they are meeting with the european union in brussels staring over a $2 billion year
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old repayment due on friday. the prime minister says that greece will not be scared why threats. what is going to happen? i am joined by pimm fox. and joe weisenthal. where are we in the negotiations. joe: it's never dealt with the country less helpful than greece. i thought that was a startling thing. pimm: the greeks take that as a compliment. they are playing hardball. alix: desperate ball. pimm: they have an economy of 11.5 million people. what is mario draghi and envelope merkel really want. -- angela merkel really want?
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the greeks are good at rhetoric. that's what they do. alix: you're looking at the 10 year yield on the greek bond at 11%. that is not sustainable. joe: they do need to convince their partners that they need some cash. they have payments coming up. they don't have that much time. there will be a point where the partners are feeling antagonized and it could get bad. you saw this in germany. the germans are saying, let it go. at some point, it could be happen -- happened that the ecb and angela merkel -- alix: next week, they will be meeting in berlin. two kinds of rhetoric out of this. angela merkel saying that it is the right time for talks. she is willing to go along way to find a compromise.
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in the next breath, she says that greece needs to play by the rules. we like you, but were not going to help you. pimm: where is this money supposedly going if they do receive it? it will be recycled right back into the very banks that lent the money in the first place. who are these banks? the banks in places like germany, france, the ecb, other big financial institutions. that is number one. the second thing what do they expect the greeks to do? they do not have a huge export led economy. they have tourism, agriculture, some small scientific instrument and medical companies but other than that, it's not a german economy. they will not export their way out of this. joe: i think there is a feeling that there is not that much exposure in europe in terms of the banking sector. it's all politics. it would not be feasible politically for germany to say
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that we are not getting all of our money. alix: if you look at who was funding the greek banks it is the emergency liquidity assistance from the ecb. just raising that amount by 400 million year old's, they will check it every week to make sure. the ecb is giving the money to the greek banks. they get the money from where? pimm: we keep recycling the money. alix: it's still a circle. pimm: this is not a new situation. this is an issue that goes back 10 years, 15 years when greece entered into those negotiations in those deals with goldman sachs in order to make that look a little bit that are and the bill came due. goldman sachs got paid and the greeks were left holding the bag. you have to find out who is going to suffer. if you have an 80% approval rating in greece is he really going to jeopardize that in order to cave into angela merkel? germans don't vote for greeks.
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joe: i agree. the odds are likely they will get a deal. there were meetings and negotiations in february -- >> thank you for joining me. let's get to scarlet for a quick check on the euro. scarlett: here it is. the fed cutting its rate rise projection. the euro versus the dollar just spiked to as high as -- this is the biggest advance since march of 2009. this is after the fed statement and announcement. over the longer term, this is been a steady the line for the euro. that plunge over the past six months -- there is that move
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today. there are so many short positions against the euro. people are betting and now rushing to cover that short. we will have more street smart after this. ♪
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alix: asian markets opening in a few hours. security talks between china and japan. it is a sign of a thought in relations between ages two largest economies. we have a preview. what will be on the agenda. >> halfway around the world, we are expecting top diplomatic and offensive issues from china and japan to kick off his dialogue. the last time was four years
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ago, so we are expecting to have a lot to talk about. at the agenda they will be talking about security, maritime issues, and territorial issues. first off, we have a map i want to show people. the territorial dispute concerns a small group of islands. they are 200 miles from the eastern mainland. only 100 miles from japan. they both lay claim to the small island chains. it's not so much the land it's watch -- what is under there oil about half a century worth of oil that could feel china. china wants it, but japan could also use it as well. alix: who is the biggest muscle
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at the end of the day? >> china will say, look at the maps. we had a claim to this, but japan can say the exact same thing. from 1896, japan has said this has not been laid claim to by anyone, so we will take it. alix: you were in hong kong for quiet a few years. what's the rhetoric like on the ground? >> in hong kong, it is at separate political machine from mainland china. but mainland china, when you bring up japan and their claims, there is a lot of vitriol that comes up. 2012, i was in hong kong and basically there was a lot of anti-japanese writting that happened. there was a man who owned some of the islands, and he sold those islands to tokyo. that really upset mainland
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china. a lot of japanese manufacturers were hit car manufacturers saw a decline. alix: interesting. we will be watching that for sure. thank you so much. we will be right back. ♪
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alix: welcome back to street smart. hero the top stories. russia accusing ukraine of breaching the cease-fire agreement reached last month. this is after kiev assigned a special status to its eastern regions. the united states and the eu have threatened more sanctions. shares of alibaba ending flat. today is the end -- of the lockup. many investors were able to sell shares. a german court has banned over. it will affect the company's
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services. the company will file an appeal and is not giving up on the german market. for a look at today's biggest movers let's go to our breaking news desk. give it to me. scarlett: starbucks got lost in the shuffle. it traded at a record high. the shares will begin trading on a split adjusted basis on april 9. in addition, they have reached an agreement with a chinese company to make and distribute ready to drink beverages in china. i just learned about this new category called rtd ready to drink. they will make it and sell the products in china. a new agreement in china and a stock split. speaking of stock splits to
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different stock splits are paving the way for apple to join the dow. it wasn't intel thesis split its stock for for one that they move to add apple to the index and take out at&t. that made room for apple. we'll keep an eye on that stock tomorrow. alix: thank you so much. elon musk is promising to end range anxiety for the model as. he made the announcement on twitter, offering as much detail as last year. for more on what we can expect cory johnson, matt miller, and editor-in-chief. i might be late, but what is range anxiety. reporter: when you get an
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electric car, you are afraid you'll run out of electricity annually stranded on the side of the road. elon musk is somehow increasing -- decreasing the anxiety we think we have about driving an electric car. reporter 2: either you could make it clear to somebody that they are near a charge point. or you can create a product that has an infinite range. alix: corey, isn't that what they're trying to do? they're trying to make a battery that cost less? cory: we interviewed one of the leading experts in the world he brought up this notion that the technology detects a -- that tesla has used, they've got all they can out of those batteries. while there is great announcement anxiety about what they might announce tomorrow the possibilities are limited.
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it is not a car for anything in everywhere and tell we have as many charging stations and gas stations and you can charge them in 3-5 minutes. alix: that seems to me that it will be about a refueling station. reporter: i think we are focusing on the wrong thing. we are not changing anything dramatically about the charging infrastructure of the car. i think it is getting better every time that they update these cars and tell people how far they can go, where they go, and when they go. reporter 2: if he was going to end range anxiety, he would have to put superchargers everywhere or make the battery in less. those are the only two ways to end range anxiety. i'm guessing that what he did was promised the impossible and he won't deliver. cory johnson has said that publicly, that elon musk blocked him on twitter. cory: i've been reporting on
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this all day. i wanted to make sure the punctuation was correct on the 20 and i discovered i was blocked from his twitter account. the ceo blocked me from twitter from seeing what he is tweeting about. he told us range anxiety is a bucket of golf balls at the golf course. batteries are important for this company. it's also really important for their financials. it's not discussed much, but they are selling a tax credit which they generate by making zero emission vehicles. the selling of a tax credit is a bigger part of their gross profits. they lose money, but their gross profits are relying on the sale of these tax credits they get for making batteries, but in fact they warned that it will
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not be an important thing going forward. 33% of gross profits were from selling tax credits that they themselves warned would go away. alix: fascinating. thank you so much. that big announcement is not a clock a.m. tomorrow. hackers targeting another health insurance company, where the 11 million medical records may end up and why cyber terrorists are turning on how companies. plus, it's hard to believe it, 4 billion people around the world still don't have internet access. a satellite-based startup has a plan to connect them in lesson five years. we will talk to the company ceo. ♪
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alix: another health insurance company has been hacked. information on 11 million people may have been exposed in a cyber attack uncovered six weeks ago but the attack may have started
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may 5, 2014. they say hackers may have access information like names, social security numbers, bank accounts and medical information. for a closer look at what this means, i'm joined by tom kellerman. on the phone from mountain view california is the former executive director of security at kaiser permanente. it is striking to me that hackers are very specifically targeting health insurers. why is that? tom: it is a treasure trove of information that can allow a hacker to leverage health-based extortion and leverage trusted e-mails for secondary infections. the best hackers in the world have moved away from targeting the retailers and are focusing
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on the most lucrative endeavor the health care industry. alix: it raises a good question. stewart, who took this? stewart: that is a good question. you can be anonymous 10 degrees and 10 layers deep on the internet. some of the speculation is chinese, but honestly intel we see full investigation details it will be tough. the who took it is less important than how they took it. being able to prevent this is the first foundational element. it's just so simple to get access to this data. we need to start to secure this stuff. alix: was this your biggest fear at kaiser permanente? stuart: we certainly had one of our biggest crisis management drills around this, using a large amount of patient health information to go outwards and
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having to respond to it. we had to spend millions of dollars every year on breaches. it has only grown since then. alix: tom, it was uncovered six weeks ago but started last may. how concerned should we be with this time lag? tom: most organizations only appreciate that they have been intruded upon by hackers after the fact. it becomes a question how an organization is prepared to detect how hackers infiltrate their system. if you shift the paradigm towards inward leaning cyber security. the industry has to invest further in that perspective. alix: where does the information wind up? who gets it in the end. stuart: it will be sold on the markets. the people who do the hack are not the guys who benefit from it
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typically commercially. they will sell that information to folks who will leverage it and then perform a lot of the fraud and selling that information for other purposes. it is more of a tiered structure for selling. alix: both you and stuart alluded to the cost any guess on how much it will cost the industry? tom: they need to invest a greater percentage of i.t. budget in cyber security. especially, most of the industry is moving towards cloud computing and mobility for doctors and service providers. they need to appreciate that the threat landscape has changed. alix: what about spending more
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at kaiser permanente? stuart: the folks that have the most part -- to protect have to spend more. these targets -- we only spent 3% of total i.t. on security, but honestly it should be 10-15% easy. unfortunately until you get burned and have to go to these crises, you are not going to learn that prevention is better. alix: it is reactionary at this point. thank you for joining me. we do have some breaking news on citibank. let's head over to scarlet. what do you have. scarlett: citigroup's ceo compensation totaled $14.5 million in 2014. this would be the ceo michael corbett $14.5 million, down
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about 18% from 17.6 million the prior year. that is a double-digit percentage drop in his compensation. the cfo of citigroup also saw his or her compensation dropped to $8 million from $9.3 million. 2014 was the year in which citigroup did not pass the stress test, where it would be allowed to return cash to shareholders through a dividend or share buyback and it turned out to be a big disappointment, surprise with the fed saying that there are internal processes that need to be rectified before they're allowed to return shared -- cash to shareholders. maybe that will increase. alix: thank you so much. coming up next, a new way to get cash without using a debit card.
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you know what, there is a mobile app for that. we will show it to you. ♪
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alix: this is street smart. here are the top stories. the fed dropping it pledged setting the stage for a rate hike. the central bank could raise as early as june. janet yellen told investors that once they start, they will go slowly. sony is starting a webtv service. the company began selling its service in three u.s. cities today. the services $50 a month and available through playstation three and game consoles offering on-demand programming and 85 channels. toys "r" us is leaving its times square store. the largest toy store chain will vacate the 110,000 square foot store next year as it faces a
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rent increase. a single store will not replace toys "r" us. they will break up that space. cut up your bank card, thank you are -- take your smart phone. a bank is launching a carless atm machine. joining me is the vice president of mobile ranking -- banking. you roll this out on monday. how many have downloaded this mobile app so far? >> we have over half of our customer base digitally enabled, and about half of those again are using our mobile banking service and have access to our new mobile cash out. -- app. alix: talk me through how this works. what do i do? doug: it is a simple way to get cash out of our atms. you sign into your mobile banking securely and then you simply request the mobile cash option, choose the amount of
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money you would like, and then you select mobile cash on the atm. there is a bar code that appears . you scan that and your cash comes out. alix: why bother? it's not like the phone can print money for you. what does it do for me? doug: convenience, this transaction takes 15 seconds from start to end, versus one minute as customers take their cards out of the wallets of purses and go to the various prompts on the machine. the other benefit is that you can set this up ahead of time. you can create your preferences. when you have your phone in hand , you just press the option on the machine and get your cash and iraq. the second benefit is security. i know from the previous conversation that this is important, but this mobile app
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does not rely on any can entry at the atm no card information to steal. it helps to protect our customers and our bank from fraud. alix: someone can still my phone and go to the bank and do that. everyone will want to have a secure network. doug: if your phone is lost or stolen, we don't store any bank or card information on the phone. if you were to have your debit card lost or stolen that is more problematic for a customer than losing your phone. you need to be able to sign into the phone and then we can also monitor and lock the phone remotely should it be lost or stolen. do you use it yet? i use it all the time alix: -- i use it all the time. alix: netflix on your next flight. he could be real. we will hear from the company
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using satellite technology to improve the internet connection at 30,000 feet. ♪
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alix: over 4 billion people don't have internet access. elon musk, mark zuckerberg want to change that. an internet startup called one web, once to get the world online by 2019. they have big partners, purging galactic qualcomm, honeywell. basically, netflix on your flight. joining me from washington dc is the founder and ceo, gregg weiler. walk me through it. >> our mission is to enable affordable internet access for
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everyone. that comes from the way we are doing that and building satellite systems. it is a priority we required over two gigahertz of spectrum. that is allows us to build a system of 10 terabits of capacity. that is more than all satellites combined today. that capacity will be useful for emerging markets, schools, health centers, and to expand their own internet access. we have a lot of extra capacity to be provided over oceans and develop markets that can be used in aviation, maritime, oil gas, and other markets. that looks like an incredible amount of satellites. how much will that cost? what is the r&d for you guys? we are spending over $2 billion for the whole system. alix: how has it been getting funding? >> qualcomm and version are the
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-- virgin are the main investors. alix: would you wind up selling these satellites? >> we will be launching the system and putting satellites in the sky, and in providing bandwidth to the ground. we developed a line of terminals that will be certified for aircraft, which is revolutionary in that it is only two feet long and one foot wide, which means it has no drag on an aircraft. it's very slim lined. they can provide up to 400 megabytes per second to an aircraft. alix: how much would that cost the in user? >> the price will come down because of the boy am and the bandwidth available is more than today. alix: you have facebook, google
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space x, all trying to write internet to the world great is there enough of this pie to go around? >> half the world is not connected. the other half is only intermittently connected. if we build our system, we will only make a dent on the problem of giving everyone access to the internet. we are focused on the spectrum the regulatory environment. we have acquired a large piece of spectrum available for this service. we work with a number of countries to enable ourselves to provide services. all those pieces are in place the satellites are designed, and we are in the process of launching the system. alix: uzbekistan excited about having the internet? -- was pakistan excited about the internet? >> we play a big role in
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emergency markets. the terminal that rockwell collins has announced and is a key piece of -- alix: we have to leave it there. fascinating story. we will be looking for you in 2019. ♪
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