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Speaker 1: Broadcasting Live to New York, Bloomberg to Washington, d C,

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Speaker 1: bloom to Boston, Bloomberg twelve Honors, to San Francisco, Bloomberg

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Speaker 1: to the Country, Joe Channel one, and around the globe.

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Speaker 1: The Bloomberg Radio Plus happened Bloomberg dot Com. This is

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Speaker 1: Bloomberg Surveillance. Good morning, eight thirty on Wall Street. I'm

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Speaker 1: Michael McKee along with Tom Keane. Economic Indicators brought to

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Speaker 1: you by a Commonwealth Financial Network. When it's time to

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Speaker 1: change the conversation, talk with a broker dealer r I

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Speaker 1: A that's ready to listen, call six or six two

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Speaker 1: three six three eight or visit Commonwealth dot com to

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Speaker 1: learn more. There are no numbers today. We start the

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Speaker 1: week with a day off we'll call it a travel

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Speaker 1: day like they do in baseball, but then coming up

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Speaker 1: a lot of important numbers. Tomorrow we get Retail Sales

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Speaker 1: p p I comes in on Wednesday, the same day

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Speaker 1: as the Fed meeting, and then the day after the

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Speaker 1: Fed meet we get the cp I. We also get

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Speaker 1: industrial production reports. This week we get the current account balance,

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Speaker 1: jobless claims Philadelphia Fed UM Housing starts at the end

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Speaker 1: of the week, so tomin is going to be an

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Speaker 1: extraordinarily busy week and it may actually be good data.

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Speaker 1: We need to point that out within all of this. Well,

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Speaker 1: let's dramatics. Is a senior US economist for UBS, Drew

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Speaker 1: h Are you optimistic about what we will have in

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Speaker 1: the bank at the end of the week as far

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Speaker 1: as U S data? Uh? You know, I think it'll

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Speaker 1: be a mixed message. And you know, unfortunately, having having

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Speaker 1: you listed means I probably you have taken this week

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Speaker 1: off if I want to get you know, truly the

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Speaker 1: bank for my buck for my vacation days. UM. But no,

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Speaker 1: I mean it should be it should be a bit

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Speaker 1: of a mixed message. I mean, retail sales look okay,

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Speaker 1: they don't look great. I don't think they're going to

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Speaker 1: disappoint anyone who's you know, somewhat pessimistic. They're gonna be good, uh,

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Speaker 1: or better than they could be. Um. Industrial production probably

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Speaker 1: be a little on the weak side. Um. And then

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Speaker 1: of course we'll get some surveys that looked to manufacturing

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Speaker 1: for next month or for the current months, like Empire

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Speaker 1: State Manufacturer and Philly Fed. UM. And you know, at

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Speaker 1: least on the Philly Fed. You know, we are expecting

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Speaker 1: that to move back up towards the zero level um,

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Speaker 1: whereas the empire state should see an improvement but still

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Speaker 1: remain below that break even point. So it'll tell us that,

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Speaker 1: you know, all is not well in manufacturing, but relative

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Speaker 1: to what it looked like last months, it's probably a

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Speaker 1: little better. We need to interrupt sometimes we have breaking

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Speaker 1: news which we're like, yeah, okay, Mike, this is a

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Speaker 1: big thing. You take the well. Microsoft is going to

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Speaker 1: buy linked In. They are valuing the deal at twenty

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Speaker 1: six point two billion dollars. Jeff Winner will remain the

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Speaker 1: CEO of linked In. They say it's a hundred and

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Speaker 1: ninety six dollars to share all cash deal right now,

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Speaker 1: one up from one, so, um, watch this one. Microsoft

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Speaker 1: just announcing it is going to buy Lincoln. It's a

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Speaker 1: forty nine and a half percent of premium, so they

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Speaker 1: are paying up to get linked In. And I would

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Speaker 1: notice cash. I've got a quick estimate of a hundred

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Speaker 1: billion dollars on the books at Microsoft, so twenty six billion,

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Speaker 1: and that does not assume and all cash transaction. But

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Speaker 1: as a quick glance, it's one quarter maybe two guessing

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Speaker 1: a visible cash but needless to say, they are not

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Speaker 1: debt encumbered. Their debt waiting right now A quick glance

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Speaker 1: again nine point six percent, so they got lots of

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Speaker 1: wiggle room right now. Microsoft little change down about four

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Speaker 1: tenths dramatics with us with ubs AN. Economists not usually

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Speaker 1: pontificating about big historic mergers such as LinkedIn being taken

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Speaker 1: up by Microsoft, but within a general brush drew, it's

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Speaker 1: about capturing growth because it ain't out there a nominal

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Speaker 1: g d P. You have an optimistic view, you and

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Speaker 1: Mori Harris, do we get back to an okay nominal

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Speaker 1: g g d P where the pressure is a bid

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Speaker 1: off M and A well, I think you do get

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Speaker 1: back to a better nominal GDP. I mean this year

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Speaker 1: is going to be probably a somewhat soft year because

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Speaker 1: inflation hasn't started to build up yet and real growth

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Speaker 1: is somewhat tepid. UH. Next year, though, UH, real growth

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Speaker 1: kind of hangs in and now and inflation begins to

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Speaker 1: pick up. And it's part of the reason why even

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Speaker 1: though our our real numbers move up very modestly, we

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Speaker 1: still have the FED continuing a rate high cycle into

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Speaker 1: two thousand seventeen because the nominal numbers start looking so

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Speaker 1: much better because the inflation UH figures are moving higher.

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Speaker 1: Do we see um companies start to be able to

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Speaker 1: make more money on the top line? Is that sales

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Speaker 1: improve enough? Do you think coming up over the coming year.

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Speaker 1: I saw a note this morning from somebody that said, yes,

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Speaker 1: that could happen. But at the same time, what you're

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Speaker 1: seeing now is companies are gonna have to pay up

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Speaker 1: for labor. So um, nobody really gains well. If companies

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Speaker 1: are paying up for labor, that's fine as long as

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Speaker 1: they're getting some productivity out of it. And you know,

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Speaker 1: if you ask me what the number one question and

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Speaker 1: the U. S economy is and which will tell you

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Speaker 1: where markets are going and where everything is going to ahead. Uh,

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Speaker 1: If you told me what was going to happen to productivity,

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Speaker 1: I'd have a much more informed view of the world

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Speaker 1: in terms of how everything else will play out. Uh.

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Speaker 1: And And unfortunately, you know, the productivity numbers are are

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Speaker 1: completely open question, and no matter how you try to

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Speaker 1: look at them, you can pretty much come up with

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Speaker 1: a model that gives you any answer you want. So

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Speaker 1: that's really not helpful from an economist standpoint. UM. And

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Speaker 1: so as I said, that is the focus if you need.

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Speaker 1: If I needed just one number, that would be the

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Speaker 1: number I would need. You got a thought on a

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Speaker 1: week where we're gonna see something like five central banks

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Speaker 1: meet and nothing happened. Uh, well, I mean that's that's uh.

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Speaker 1: You know, I call that a normal day at the

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Speaker 1: office for an economist. Um, it's a little joke there.

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Speaker 1: Might come on to work with me here. Uh. You know,

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Speaker 1: that's the problem with central banks. Uh. And I think

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Speaker 1: this is globally, is that they've all become so fixated

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Speaker 1: on financial markets. Financial markets are supposed to respond to

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Speaker 1: central banks, not the other way around. Uh. And when

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Speaker 1: you have the cart leading the horse instead of the

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Speaker 1: other way around, you typically can't steer very well. And

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Speaker 1: I think that's the danger of the Fed's moving into

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Speaker 1: um where every time the equity market has has a hiccup,

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Speaker 1: the FED pools back. Every time there's a single data

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Speaker 1: point that doesn't go their way, they pull back. You

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Speaker 1: cannot be data point dependent. You can data dependent. Drew

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Speaker 1: Mattis ubs with us again LinkedIn to be taken out

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Speaker 1: by Microsoft for a big premium. I believe, Mike, you

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Speaker 1: said do a per share. The first thing I did

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Speaker 1: is look for the Twitter effect. Twitter fourteen seventy five.

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Speaker 1: Up a dollar this hour of surveillance about you by

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Speaker 1: Palisades Auty. Visit Palisades Auty dot com. Here's Michael R

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Speaker 1: with news headline, Mike Tom thank you very much. There's

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Speaker 1: condemnation around the world following the nightclub attack in Florida

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Speaker 1: by a man police say called nine one one and

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Speaker 1: declared his support for an Islamic state group leader in Orlando,

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Speaker 1: Cruise removed the bodies overnight from the Pulse night club.

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Speaker 1: Police say Omar Matine killed forty nine people and wounded

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Speaker 1: fifty three others before he died in the gun battle

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Speaker 1: with police. Orlando Mayor Buddy Dyers as the city has

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Speaker 1: come together in the face of tragedy. Yesterday was the

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Speaker 1: most horrific day in the history of the city of Orlando,

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Speaker 1: and yet I stand here prouder today of our community

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Speaker 1: than ever. A team was previously interviewed by the FBI twice,

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Speaker 1: but he was released. Bernie Sanders as scheduled to meet

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Speaker 1: with his rival and presumptive Democratic nominee Hillary Clinton. Sanders

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Speaker 1: will meet tomorrow night after the party's final primary election

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Speaker 1: in the district of Columbia. Opening statements are set to

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Speaker 1: start today in a trial involving allegations by the US

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Speaker 1: government that FedEx knowingly delivered a legal prescription drive some

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Speaker 1: pill mills to dealers and addict. FedEx says it only

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Speaker 1: shipped what it believed were at legal drugs from licensed pharmacies.

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Speaker 1: Global News twenty four hours a day, powered by our

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Speaker 1: journalists more than a hundred fifty news bureaus around the world.

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Speaker 1: Michael Barr Tom Time Now for the land Rover Parsippany

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Speaker 1: Bloomberg NBC Sports Update with Good Morning, Mike Tom. Yankees

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Speaker 1: had an impressive winning streak snap as they dropped the

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Speaker 1: final two of the three game set at the Stadium

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Speaker 1: to Detroit over the weekend, including a four one set yesterday.

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Speaker 1: Promising start for Michael Paneeda gave up two runs and

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Speaker 1: six sendings despite taking the loss. According to Joe Girardi,

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Speaker 1: I thought he threw a good game. Um, you know,

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Speaker 1: it's the third one, four on a five. He's thrown well,

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Speaker 1: so I mean I think he's um, he's getting on

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Speaker 1: a roll and I liked what he did today. It's

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Speaker 1: unfortunately we didn't score him any runs. Um, but I

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Speaker 1: thought he could well. Yankees are five and a half

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Speaker 1: out and they're back below five hundreds. They travel to Colorado.

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Speaker 1: Mets lost five to three to the Brewers. To make

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Speaker 1: matters worse there, Skipper Terry Collins was filling ill just

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Speaker 1: a half hour before the game, taken to the hospital

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Speaker 1: where he stayed overnight in Milwaukee. The Mets they hosted

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Speaker 1: Pittsburgh on Tuesday, the hockey season officially over. The Penguins

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Speaker 1: beat the Sharks three to one in Game six. After

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Speaker 1: Shark tank Penguins Chrystal Tang on the importance to the

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Speaker 1: Steel City means a lot. Uh. The first time around,

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Speaker 1: I was young, I didn't know what to expect, but no,

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Speaker 1: I know hard it is to win it, how especial

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Speaker 1: it is, especially this year. Everybody kind us out, so

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Speaker 1: it feels even better. It's the fourth title for the Penguins.

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Speaker 1: All have come on the roads. The night NBA season

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Speaker 1: could be over. Game five, Calves and Warriors nine o'clock

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Speaker 1: tip off. Golden State is up three to one. Here's

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Speaker 1: the key, though, They'll be you without Draymond Green suspend

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Speaker 1: it for the flagrant foul when he punched Lebron James.

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Speaker 1: You realize though, if they win, he's not there to

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Speaker 1: not only watch in the building, he's not allowed inside

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Speaker 1: for the postgame celebration as well. And former Jets punter

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Speaker 1: Curly Johnson, apart of Super Bowl three title team, has

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Speaker 1: passed away at the age of eighty. That's your NBC

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Speaker 1: Bloomberg Sports update. Michael and Tom thinks so much. Greatly

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Speaker 1: appreciate that LinkedIn up with forty eight percent. Interestingly, Yelp

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Speaker 1: is up three point four percent, and Twitter Twitter almost

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Speaker 1: a little over six percent. On the news Twitter with

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Speaker 1: the elevation as well. I did the center tendency of

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Speaker 1: linked In back two and a half years and that

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Speaker 1: center tendency is about two hundred twenty four Microsoft by

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Speaker 1: LinkedIn at one. This is Bloomberg Surveillance. The Sports report

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Speaker 1: It is Bloomberg Business Flash this morning. I'm John Tucker.

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Speaker 1: Among the most actively traded UH in the pre market

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Speaker 1: this morning. Shares some LinkedIn Corporation right now a forty

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Speaker 1: eight percent at one fifty afterward that Microsoft is buying

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Speaker 1: linked In. This is a transaction value at about six

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Speaker 1: point two billion dollars. That works out about one nine

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Speaker 1: six a share for LinkedIn Corporation the US Index. The

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Speaker 1: futures are dropping as the investors shown risk across the

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Speaker 1: world that we have a global equities down across the world,

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Speaker 1: a caution permeating financial markets that's ahead of political and

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Speaker 1: central bank advance. We have a number of central banks,

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Speaker 1: but not a lot of movement expected this week across

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Speaker 1: the world with the central banks, and of course coming

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Speaker 1: up later in June the Brexit vote, and as a

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Speaker 1: result of that we see risk off of the markets

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Speaker 1: has and futures right now down six points the down

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Speaker 1: futures down sixty eight, attent futures twenty three points lower.

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Speaker 1: British pounds journal seventy six, a decline of about six

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Speaker 1: tenths of a percent, continuing to decline from Friday the

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Speaker 1: year one fifty eight. The yen one of the haven

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Speaker 1: asset's one of six o two someome strengthening there. That's

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Speaker 1: a nine tenths of a percent. Check the markets for

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Speaker 1: every fifteent ministry the tree any day right here, Bloomberg

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Speaker 1: Radio aspect, MICHAELNTO, Thank you very much, John Tucker. Then

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Speaker 1: there's the morning. Microsoft gonna buy linked In. The deal

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Speaker 1: valued at twenty six point two billion dollars. Microsoft is

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Speaker 1: going to finance the deal by selling new debt. Drew

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Speaker 1: Maddis is with US. He is with UBS senior US economists.

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Speaker 1: The FED is meeting on Wednesday. But I kind of

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Speaker 1: want to put the two thoughts together, Drew and ask

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Speaker 1: if the markets are if this is a sign that

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Speaker 1: the markets are very distorted, that uh, you know, money

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Speaker 1: is just free, so why not go out and buy something.

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Speaker 1: I don't want you to comment on whether buying linked

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Speaker 1: In is a good deal for Microsoft, but just in general. Uh,

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Speaker 1: it seems like companies can use debt, whether or not

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Speaker 1: it's a good idea. Well, I mean, low rates have

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Speaker 1: a lot have a lot of interesting effects on people's perceptions.

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Speaker 1: I mean, the other the flip side of it is

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Speaker 1: is low rates and the perception of low rates going

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Speaker 1: forward would mean that companies never have to make a

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Speaker 1: decision all right. You can always make the decision next

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Speaker 1: week or next month because the cost of waiting for

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Speaker 1: more information is zero, so can it can cut both ways.

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Speaker 1: And I think that's one of the things that FED

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Speaker 1: may be missed when it took rates to zero, was

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Speaker 1: that lowering rates doesn't always have to be or it

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Speaker 1: doesn't always result in the positive kind of outcomes that

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Speaker 1: the FED would hope that they would. How much do

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Speaker 1: you think the extraordinary policy that we're in now continues

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Speaker 1: to distort markets and pricing. I I mean, I think

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Speaker 1: I think it makes a significant difference. Uh, you know,

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Speaker 1: I think it it corrupts um consumer behavior. I think

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Speaker 1: what you see is that a lot more considered, there's

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Speaker 1: a lot much higher savings rate than there should be. Uh.

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Speaker 1: The logical reason for that is because a lot of

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Speaker 1: the workforces approaching retirement age and looking out into a

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Speaker 1: low rate environment and perpetuity. Uh. And that means that

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Speaker 1: what ever they thought, if they thought they had enough

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Speaker 1: money safe for retirement, they were wrong, and now they're

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Speaker 1: trying to play catch up in the last few working

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Speaker 1: years of their life. Drumatics from ubs. Thanks for being

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Speaker 1: with us, day Tom. Microsoft had been halted on the news.

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Speaker 1: It has just now started trading again in pre market.

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Speaker 1: It's down by five. Yeah, there, I am, i gotta

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Speaker 1: hit the red button. I'm I'm moving the Bloomberg around, folks.

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Speaker 1: Thomas going to merge and acquire a red button. Well,

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Speaker 1: that's that's what we do with i'm equity. There we go.

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Speaker 1: Now I've got it. Joining as Shannon Cross across Research,

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Speaker 1: who is aware that LinkedIn has a revenue of three

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Speaker 1: and a half, let's be charitable, a run rate of

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Speaker 1: four billion dollars and they will be acquired by an

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Speaker 1: almost hundred billion dollar monsters. Shannon, I'm gonna say it's

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Speaker 1: LinkedIn is five percent of revenue without nearly the even

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Speaker 1: don margin. Microsoft's EVA don margin is to be conservative,

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Speaker 1: thirty four percent. LinkedIn's is a third of that run

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Speaker 1: rate right now and it's been allousy. Maybe they get

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Speaker 1: pick a little bit what's the y here from someone

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Speaker 1: like you that's followed this pre bomber pregates. Well, you know,

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Speaker 1: I think from the standpoint of of Microsoft, it's an

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Speaker 1: interesting asset they're requiring from a social media perspective. UM,

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Speaker 1: LinkedIn has Linda dot com, which has a training platform.

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Speaker 1: You know, I find it kind of interesting that they

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Speaker 1: just basically finished shutting down Nokia, which is kind of

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Speaker 1: old old Microsoft, and now they're you know, buying a

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Speaker 1: cloud platform, you know, and this movement much closer to

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Speaker 1: their dollar cloud revenue goal. In fact, I would argue

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Speaker 1: that they need to take that up now. The little

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Speaker 1: bit I've learned of Mr Adela is he likes to

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Speaker 1: do things right. The first thing I saw when I

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Speaker 1: saw the red sticky is if you're behind in social

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Speaker 1: not only you need to acquire linked In, business enterprise

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Speaker 1: resumes and cross needs a new job, all that, but

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Speaker 1: if you're gonna screw around with LinkedIn, which is a

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Speaker 1: drop in the bucket, you might chell pick up Twitter

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Speaker 1: as well. Did that get into your strategic mix when

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Speaker 1: you see this news? Um, you know, I I think

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Speaker 1: I don't know. I like the idea of LinkedIn because

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Speaker 1: it's corporate focus, which tends to be I think where

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Speaker 1: a lot of from a cloud perspective, Microsoft is. Um,

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Speaker 1: I'm not on the Twitter bandwagon necessarily because I'm not

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Speaker 1: sure how far it goes. But I do think there'll

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Speaker 1: be a lot of consolidation. And you know, I mean

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Speaker 1: we thought, you know, saman Tech buying blue Coat this morning.

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Speaker 1: I mean, there's there are a lot of deals that

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Speaker 1: are going on. And I think to the point earlier

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Speaker 1: when you were talking to the economists, you know, free

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Speaker 1: cash is free cash. I mean, it's not really free.

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Speaker 1: We all know you need to pay it back someday.

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Speaker 1: But um, you know, Dell just placed forty billion dollars

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Speaker 1: worth the bond, Mike. The cash from operations comparison is

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Speaker 1: shocking thirty one billion Microsoft less than a billion linked In.

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Speaker 1: I mean, these are two completely different beasts. Well, it's obviously, uh,

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Speaker 1: you know, smaller acquisition for Microsoft, but it does look

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Speaker 1: like it will add to microsoft bottom line. I'm looking

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Speaker 1: to free cash flow from LinkedIn, Shannon, and they have

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Speaker 1: a pretty good track record of increasing it every quarter

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Speaker 1: so far. Yeah, I think, I mean what I've seen

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Speaker 1: of LinkedIn and again I did not cover LinkedIn fire

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Speaker 1: to Microsoft owning it. Um. You know, they've got a

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Speaker 1: pretty solid track record, and I you know, I think

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Speaker 1: Microsoft said it's to be less than a percent dilutive

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Speaker 1: to this year. You know, that's when you factor in

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Speaker 1: the interest expense that will be there because they did

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Speaker 1: think they're going to finance this with that. Um. Because again,

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Speaker 1: you know, a lot of Microsoft cast is offshore. But uh,

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Speaker 1: you know, it's a it's it's definitely a pretty anteresting move.

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Speaker 1: I think over time, I don't know what how it's

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Speaker 1: going to trade today, but I think over time this

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Speaker 1: is gonna be pretty well received. I'll go with that.

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Speaker 1: And and part of it is is people looking at strategy.

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Speaker 1: You know, we talked here about what the next quarter

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Speaker 1: is gonna be. I understand the bolton of enterprise and

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Speaker 1: as you mentioned cloud and that, but I'm sorry, this

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Speaker 1: has to put in play a good set of other companies.

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Speaker 1: I mean is that what you see is sort of

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Speaker 1: the end of two thousand and sixteen is the time

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Speaker 1: for the latest generation of these ideas to be taken

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Speaker 1: out by the big boys. Again, if this, if this

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Speaker 1: deal is seen well by the Street because of the

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Speaker 1: multiple differential is substantial right in terms of where Microsoft training,

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Speaker 1: I mean, EPs, Abada, any of those versus what they're

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Speaker 1: paying for LinkedIn. If this is well received, and again

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Speaker 1: Microsoft kind of the unique asset because they have a

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Speaker 1: lot of cash, but so do a lot of other

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Speaker 1: large tech companies. Um, I think you could see more.

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Speaker 1: I mean, you know, we met with Meg Whitman last

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Speaker 1: week and one of her comments was the absolute amount

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Speaker 1: we pay is not necessarily as important as the multiple.

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Speaker 1: So HP enterprise is still very focused on multiple. Clearly

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Speaker 1: Microsoft was willing to pay off with what they think

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Speaker 1: that they can ultimately leverage. You didn't wear a Hillary button, right,

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Speaker 1: tells a joke, folks, Mike McKee. This is a way

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Speaker 1: you measure UM cash flows and fold them into value

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Speaker 1: enterprise value to eat, which is a cf A like

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Speaker 1: ratio is a sixteen for Microsoft, it's a fifty four

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Speaker 1: for linked In. That's the premium pricing or lack of

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Speaker 1: IBATA generation of linked In. What is that one too?

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Speaker 1: It's like three premium to Microsoft. Do you have to

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Speaker 1: think about it in terms of what the asset can

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Speaker 1: do for what Microsoft can do for the asset come

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Speaker 1: on Shanninokia that worked out well, but you look at

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Speaker 1: but okay Oka is a hardware company with with phones

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Speaker 1: that didn't work. I mean, you know that was sort

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Speaker 1: of old generation. I mean you're you're buying you know,

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Speaker 1: it's the future. So again, I think it's something that's

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Speaker 1: gonna have to be worked through. But the question is

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Speaker 1: how much is Microsoft going to be able to leverage

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Speaker 1: it's cloud property and it's reaching the enterprise you know,

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Speaker 1: and and take the LinkedIn assets somewhere they couldn't have

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Speaker 1: gone on their own. Well that's my last question with

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Speaker 1: with it just a minute left here. Um, to be fair,

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Speaker 1: Nokia was Steve Balmer, such an adela. He's now bought

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Speaker 1: MIU Minecraft, uh and he's buying LinkedIn. What kind of

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Speaker 1: company does he want to run? Well, I think you

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Speaker 1: know he's he's trying to run the next generation company.

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Speaker 1: And you know, Minecraft had all sorts of sort of

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Speaker 1: ideas and reach into the children, the next generation and consumer,

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Speaker 1: you know. And I think LinkedIn is a is a

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Speaker 1: unique asset in you know, in that it's it's touched

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Speaker 1: with enterprise is so strong. Um, you know everybody has

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Speaker 1: a linked In profile at this point, um and a

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Speaker 1: lot of people. I mean, I don't use it personally

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Speaker 1: from a social media perspective, but when I go on it,

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Speaker 1: it's crazy how many people that I do interact with

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Speaker 1: actually post that. That is a first statement, Shannon Cross,

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Speaker 1: Thank you so much. I should mention folks is explain

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Speaker 1: m or that I've been known to be a linked

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Speaker 1: In influencer from time to time. That and two dollars cents, Michael,

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Speaker 1: get me a small Starbucks. This morning we say good

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Speaker 1: morning to Dan Roth over at Lincoln who's Microsoft influencer?

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Speaker 1: I'm a Microsoft influencer. Well there it is Microsoft to

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Speaker 1: buy linked In. A number of people suggesting this mating

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Speaker 1: could occur. Thank you, Shannon Cross, Bloomberg Survey. Let's stay

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Speaker 1: with us