Transcripts For BLOOMBERG In The Loop With Betty Liu 20140509

It is part of the brand and the revenue stream and it has fallen behind both in the hardware space and the streaming space. Brings applenics the headphones that everyone wears. On the music streaming site you have beats music that has garnered a lot of attention. I do not know how successful it has been on the business side because they have not released numbers. Right, so is it worth 3 billion . Complex many analysts would agree that it is not worth any analysts would agree that it is not worth that much. What is concerning is that youve never had apple acquire a brand, ever do big deals. Billion dollar deal for what essentially boils. Own to a brand that is cool it is not a new technology. It will not move the needle on the technology front. Apple has a lot of money. Overseas but the money is not accessible. Debt tos had to issue give shareholders value back. Yes, it is a blip on their overall cash balance, but if you look at their operations, it is not a small number, he even even for apple. It is marking a real change for apple. They had not acquired. It was about organic growth. This could be a significant sea change. It can be, and what would be interesting to see is when the deal is officially announced how many executives like dr. Dre and iovine stay with apple. Part of the reason beats has been successful is because you have those music people behind it. They will get a big paycheck. Will they stick with apple and make sure the brand continues to stay cool . Thank you, cristina alesci. Credit suisse is doing everything it can to resolve the u. S. Investigation into whether the bank helps american clients even taxes. We are joined by it is 26 minutes past the hour. Bloomberg tv is on the markets. We are joined by market Erik Schatzker. What is at stake . Presumably, everything, because it is believed they bank can not survive a guilty plea because many clients and customers cannot do business, the theory goes, with a criminal enterprise. That is why we go with the term g to jail. Too bi that is why the Justice Department is considering a deal where the bank would plead guilty. Lets go back to your question how important is it for Credit Suisse . The chairman of the board spoke at the switzerland Shareholders Meeting and said it is one of the most pressing issues facing Credit Suisse. One is the keyword. It is not the key issue. Credit suisse is not looking at this question as an exercise joe one, and they have believe there is a existential one, and there is a way to resolve this that does not effectively put the bank out of business. Can they survive a criminal charge . That is what we have yet to found i find out. The assumption has not been tested in 20 years. Was a bank that failed in the 1990s, and then a business a bank but out of business by federal prosecutors. I have made efforts and i will continue to make efforts to date to find out what clients of banks have to say about this issue. I put in a call yesterday to calpers, for example, which is known for strict corporate governance. Do they have rules that would prohibit it from doing business with a bank that is needed guilty or is under criminal indictment . The answers are not that easy to get. I hope to enlighten myself and everybody else. They do business with faces such an action . It is an important question. In the meantime, what happens to ceo brady dougan . Brady dougan continues to be the ceo of Credit Suisse, and here is the thing prosecutors may demand that the ceo lose his job as part of a plea bargain. We do not know that is the case. Those are the kind of things that are on the table. The other circumstances in which brady dougan might, again, might lose his job, is if the board loses confidence, but all signs point to that not being the case. He has led the effort to reshape Credit Suisse, moving away from proprietary trading, some of the credit markets and other markets it has been in. The board has been supportive. Ive spoken to the chairman of myself about his support for brady dougan, and i do not get the feeling that the board is anywhere close to withdrawing their support. If he loses his job, it will in all likelihood be because the prosecutors demand it, but we do not know that such a demand has been made. Thank you, Erik Schatzker of Market Makers. President obama has found an aly in walmart capping off week talking about the climate crisis. He will anger some. Happybor community is not. Phil mattingly joins us. Why is this . When it comes to walmart, the white house does not always get along. Whitet comes to what the house is talking about today, solar energy, walmart is simply the best in the business. They produce more son into energy than 38 states, not companies, state. Walmart is committing to double their solar output through 2020, and in that time period they will produce about 7 billion kilowatt hours. The white house has a difficult balancing act when it comes to allies, but when it comes to solar walmart is the best in the business. But he seems to be aligning himself quite a bit with private industry he seems to be aligning himself quite a bit with private industry. Why is this . If you talk to people within business, they look at the white house has something that tries to malign business. This white house, knowing they cannot move anything legislatively, is starting to work closely with private industry to move initiatives. They are working on executive actions. They have 300 Companies Working with them on this Energy Efficiency initiative including home depot, citibank, goldman sachs, walmart, apple, ikea. Theyhite house recognizes will not move anything they want, so lets align with private is this is, and white house officials feel they have been successful with this the last couple of months. We mentioned labor, and their protest to the meeting. They will be protesting outside of the event. Is the white house ok with upsetting them . Labor has been clear. They are not happy about this. They have been more than willing to protest and say some damaging statements about why this is a bad idea. The white house understands that everything they do will upset somebody. They feel they are doing enough to help labor that they can do Something Like this and be ok. The grand scheme, the white house officials are comfortable. Thank you, phil mattingly, our white house correspondent. Hour, and shaking this ceo levy who agreed with omnicom to pull the plug on a merger. They could not agree on who should be the ceo. Levy spoke about the breakdown on a conference call. The fact the we are not realizing a dream does not mean we have no dreams. It is disappointing that we have this dream that is not going through, but it is much better to not go to the church that to the judge. We are divorcing before getting married. Coming up, the nfl draft. We recap the first round picks, and dig deeper into a story about how most rookies and their agents will not get the big money. Plus, the flight over Online Gambling, andine why Sheldon Adelson wants to ban it. We will talk to the first casino to take a chance on Online Gambling. What does he have to say about that . So, are you ready for some football . Draft began last night, and Jadeveon Clowney was selected by the houston texas, as expected, as the number one pick while crowd favorite Johnny Manziel waited two and a half hours before going to the cleveland browns. The lower picks even will make it out pretty well on the minimum salary of 375,000, but for nfl agents, representing rookies has become more problematic and less profitable. It was not long ago that nfl rookie contracts cap going out and up, but times have changed. Football has become not all that exciting a business in terms of representation of rookies. The 2011 collective Bargaining Agreement drastically rolled back rookie salaries and furthermore our cost with regard to training the players and moving them around has continued to escalate. The agent is now obligated to pay for the training of an nfl player. The 2011 labor deal also lower the cap on agencies. We used to be a 4 max. Now it is a 3 max, and of course the agents can charge as little as they can stand. The difficulty has been some competition reducing their fees as much as 50 . Why pay more for an injured when salaries are set with little bargaining room . The first contract has become standardized in all sports. A sevenyearold could negotiated as well as a top agent. Back in the days when we were creatingdable years, new concepts, you could get an athlete much more money than the player approximate to him. Not today. When you get to the second contract, we are talking about nuance, structure, differences. When you talk about the real money in sports, that is the second contract. You have to somehow keep the relationship through the first four, and or five years to get to the more profitable contracts, so at the entrylevel, like moths to the flame, agents still try to do football, but breaking in is a daunting task. Interesting. Joining me now to talk more about the agent pay structure as well as the top picks, we have sports agent eugene lee. Did you have any clients yesterday . Nobody went in the first hour yesterday, but we should get some action this weekend. With these guys, it is basically their first contract. As an agent to help them understand what the contract is all about . We take a proactive approach throughout the process, letting them know that once they sign their first deal they will come into a lump sum of money they have never seen before, and it is about being fiscally responsible. How do you help them . We align them with the right financial advisor, let them know there should be a budget in place. A lot of people do not understand that your nfl salary, as colossal as it may be, is paid out over the course of 17 weeks and if you do not have the right plan in place, you will spend that money. A lot of guys understand this, but it does not sink in right away because you are so young, that your career is going to be short in the nfl. You have to make the money last. . O you help them out the average nfl career is under three years. There is a finite window where you could earn a substantial stream of income, but it is andt preserving the income, transitioning into a fulfilling second. Career. Here any are there any pitfalls you clients not to sign . Mostar boiler plates. Every team has signing default language. If the player conduct something detrimental, like the michael vick dogfighting incident, the team can recoup the bonus. Specific make it reasons for default. We like to narrow it down, conviction, felony offense in the jurisdiction where the team is located we have taken a broad umbrella and narrowed it down. What did you think of the draft yesterday . I thought it went according to plan. I did not think the texans could pass up Jadeveon Clowney. If you kill the head, the body will die. Teams rushed drafted players that could rush the passer and protect the passer and you saw a runon tackles. And Johnny Football going 22nd question mark that was not a surprise . I thought he would go higher. He too dangerous . Is a playmaker. His intangible set them apart. They have a winner. There is so much hype around him. Is that a risk of that hurting him . Best,ce lombardi said it winning is not everything, it is the only thing. For Johnny Manziel, if he can perform and win like he did at texas a m, all of the critics and pundits will be silenced. Speaking about winning, richard sherman, who came out as last season,ar just signed a fouryear, 54 Million Contract extension. Huge. Does he deserve it . Absolutely. He was the best bargain in the nfl last year, playing for 555,000. Out of the contract, 40 million is guaranteed. No matter what. No matter what. Eugene lee, thank you for joining us. Breadwinnersmale we look at what happens when women make more money than men, maybe not in football, but other areas. Puttingat a concept cookies together with frozen yogurt. It could be the only thing that will save mrs. Fields. We will be back. First. Bloomberg. You are watching in the loop , live on Bloomberg Television and streaming on your phone, tablet, and on bloomberg. Com. Good morning. I am betty liu. It is 26 minutes past the hour. Bloomberg tv is on the markets. Equity futures are lower right now. 04 . Sdaq is off by we see the continued pressure on internet stocks that has been dragging down the nasdaq this week. Other top headlines inflation in china fell to 1. 8 in april, the lowest level in 18 months, well below the 3. 5 annual target set by beijing and it could add to worries about deflation in the worlds secondlargest economy. Russian president Vladimir Putin arrived in crimea this morning, the first time visiting the country since the annexation. Earlier in the day, and he celebrated the three day in moscow, marking the victory over the nazis in world war ii. Analysts. Ped the Worlds Largest Hotel Operator says profit nearly quit drupal. Quadrupled. The cookie has crumbled for mrs. Field, the iconic bakery chains seen in malls. Brands international, and tcby are stepping in to roll out a new growth plan, combining both of those chains into one store, bringing mrs. Fields be on the mall. The socalled dual brand concept is part of a larger effort to boost domestic and international presence. Ofl courtney is the ceo Brands International and brought some cookies for us. Thank you. You are welcome. Cookies and yogurt go Better Together. Absolutely. They are the perfect match. They complement one another. They are brands that we have had in the portfolio for a long time. A lot of heritage. They are fun brands. We have been looking for opportunities to expedite growth and combining the two makes a ton of sense. Hundred you come to the conclusion . What was the data you look at . We look at our existing store base with mrs. Fields and tcby, and mrs. Fields what the mall lesser people will i continue to fall . People will that continue to fall . With more people shopping online, we have to figure out a way to differentiate, and we have these brands, and we figured out the best way to do it is to put them together, collaborate and find a synergy that exists between the two brands. You are looking at increasing your footprint, but youre not doing that in malls. And will be both and inmall, and outofmall experience. We could take mrs. Fields out of the mall and make it work. We can also create a third revenue stream, which is what you see here, our gifting item. We have a robust gifting. Com. Ion, mrs. Fields leveraging the expertise gives them incremental revenue stream. What is the franchisee and tcby . Mrs. Fields it is about 50 50. We started the cobranding strategy. We have one store the we converted from a mrs. Fields to a cobrand location. How did that do . It has lifted at 40 . That is a mall in chicago. Your franchisees say what . That franchisee said wow as they go along, there will be some learning, but introducing this third revenue stream, the gifting component you could have had that with mrs. Field alone. We could, but we never leveraged at. It was another moment for us. You had to he used to work with fritolay. We talked to the ceo of pepsico last week. She has been a big purveyor of a dual brand concept. I want to play what she said about why that make sense. The pairing of these two is like Peanut Butter and jelly. They just go together. They naturally go together. If youre creating a food and in thee portfolio, convenient space, you will be creating a pepsico. I would say that without a doubt. Your side at fritolay, what did you see that could support that . I left about 10 years ago. We started along those lines of figuring out where the synergies said,and like ingenuity it is like Peanut Butter and jelly. Chips and coke. Cookies and yogurt, they go together. In the summer you have the yogurt, and in the winter you have the cookies. A lot of that the other Better Together concept happens behind the scenes, so for her it is like what do the bottles think about it and how does that fit into Distribution Channels. For you, isnt more about what happens behind the scenes that will make this work . There will be a little behind the scenes, but it is giving partners an opportunity to incrementally grow the top line, which from our business, in a franchisee perspective, is what we need to focus on. Unit economics is so important, and for us to grow way to have a realistic, Sustainable Growth of revenue and profits. If you did not do this, we are you facing the possibility of having to close one of these brands . I do not think we were in the position of closing any of the brands, but it makes sense what we are really at a point where createsto tip, and this an opportunity to create a new business model, get to the next level, and reinvigorate the brands that have been around for so long. Everyone knows mrs. Fields. Theyey wear it before smell it before they see it. We want that sustained in the future. Courtney, ceo of famous Brands International. Thank you. Forng up, 10 rules breadwinning women. Make himnd abandons plans to create an advertising giant. Tell you what got in the way. There is a new economy where women are making more money than men, but what does that mean for your relationship, household spending, and even the divorce rate . One author found some fascinating facts about this. Great to have you with us. Emotionalhit a lot of points for men and four women, but so far, what has been the response . Wax people have said thank you for writing the book. This is a taboo topic. We do not talk about money in our culture to begin with, but when it comes to the relationship and the financial flip of is she making more, it brews a lot of opinions, but nobody had a rulebook. There is also a lot of complexity when you look broadly. When she makes more, there is more divorce, infidelity. Feelould feel he could emasculated. It is uncomfortable. Nobody really wants to talk about how much money they make anyway, so what was the most startling, or what were some of the most startling findings you discovered . Aside from the divorce and infidelity, she actually does more housework than a woman that makes less and research believes this has to do with her psychological thinking where she does not want to be considered a threat to her husband. If she knows that her income, her greater income could potentially be a threat to him, she wants to overcompensate. Another startling statistic is that when she makes more she is more likely to opt out of the workforce, quit her job altogether, that is if she perceives her job and income as being a threat to her marriage, and, if her husband, of course can jump in and be a breadwinner and support the family. That is really horrible news, not only for her personal income, but for the economy. Where does that leave the gender pay gap . Who are some of the women that you talked with . Women, alls of different fields, not just sixfigure, highpowered women, but single moms, women who found themselves in the predicament, middleclass families, single women that are navigating the new landscape, finding themselves a bit of a rude awakening, wanting to find their equal in terms of income and education, but as you know, if you are under the age of 30 in this country and a woman, in most metropolitan areas you are outer in your male counterparts. If youre looking for the narrow equal of your power coupled to oh, that can be challenging. Did you find there are some industries where it is less so that women make more . I think, since we are so businessfocused here on wall street, there is a paradigm of the man making more, and the woman stays at home. Certainly. Just to remind people, when she makes more than her husband, is clearly the gender pay gap exists widely in Industries Like wall street. There is a whole chapter dedicated to career, which helps women navigate the gender pay gap at work, while also navigating home. Anything positive . Rock certainly. This is why i wanted to write the book. Certainly. This is why i wanted to write about. It starts with the facts, and in the rules, the recipes for couples to ultimately thrive. Quickly, the headline, you have to be able to override gender stereotypes and expectations of what it means to be in a relationship, and what money means. If you think money means power, you are in for a rough ride. The couples that thrive are able to roll up their sleeves and do what has to be done, and that is a common phrase i heard from men, especially those that say stayathomebe the dad, take over the cooking and cleaning, fine, if that is what i have to do to make sure the family is taken care of. Whose responsibility is it more to try to make the piece, the womans responsibility, or the man . It takes two to tangle, but women are the ones coming to me most with these questions, so i wrote the book for them. As women, we are very good at communicating, and we are at the forefront, so it would behoove us to get the rules, bring them back into our relationships, and open the discussion. Thank you for opening the discussion. Thank you so much, farnoosh when shee author of when she pair, makes more. Your your buds to get bigger. Stay in the loop. It is time for todays louisburg big number bloomberg big number 35 million, how much the proposed merger between omnicom and publicis was worth. The two were unable to overcome obstacles that slow down progress, leading to uncertainty for shareholders, employees, and their clients. The allstock deal would have created a company with 23 billion in revenue and resources to invest in technology. For more on the now defunct omnicompublicis merger, Bloomberg News deal supporter. What happened exactly . There were two things that went on. On the one hand, there was the backdrop of this being a complex deal, merger of equals, and more specifically, there were a clash of egos. , who runs publicis, not known for his shyness or being humble. I think john wren at omnicom is much the same. What about tax and regulatory issues . Did that play a role . This was going to be a complex role. The idea was for the new company to be domiciled in the tax in the, pay u. K. , and have executives in paris and new york. Stitching all of that together was not insurmountable, but certainly significant, and that adds some contribution to this failure, but i resent the bigger executive issues were the main problem. It sounds like they needed to iron out more details before they announced the deal was going to happen. Matthew, this mean, for other deals in the space . I think consolidation will be very much on the agenda in the advertising space. There is a second tier of advertising agencies that may or may not have an independent future, and then the question becomes what do publicis and omnicom themselves do . I think their investors and employees will want them to take a break from dealmaking, but they could be back on the trail down the road. Does this put a damper on dealmaking in general . No. I think this was a particular case. This was always going to be ambitious. When we broke the news of this deal last summer, for about 24 or 36 hours, nobody believed this because this is when the this was not one of the deals that is speculated for years. It was always a bold move. Deals that are well conceived and have strong logic behind them will still go ahead. Thank you, matthew campbell. World is buzzing about that nonmerger deal, what is the future hold for the most heinous ad executive that does not even exist famous ad executive that does not even hamm sat down with stephanie ruhle. Reason the show begins with a man falling down. I do not know what the future holds for don draper, but i hope that he finds peace. You can catch the full interview of the start today on Market Makers at 10 00 a. M. Eastern time. Coming up, the war between tesla and the car dealers moved to another front. We will tell you which state is weighing a direct sales band. Yep, another one. Did you buy flowers for your mother yet . Forests across the country are preparing for a big weekend. We dig into those numbers. Stay in the loop. We have another big number for you today. Muchlion that is how americans will spend on flowers for their mom this mothers day. Beenbergs alix steel has digging into the business of flowers. Flowers yet . Our i did not, but i bought a card and it cost me nine dollars, which shocked me. S is expecting sales to rise six percent. Demand is seasonal, so these days are huge money makers. About nine percent of their yearly sales on mothers day week. Actually00 flowers, it eats out valentines day. Sellompany is expecting to about 11 million flower stems, five. 4 million roses, and 1500 plants. I never really thought about this, but where did they come from . Half of all of our flowers come from columbia. It is the main source of flowers. , followedakes up 62 by ecuador. Exported 311lly million already this year to feed our flower craving. The u. S. Reduces as well. The main grower is california. Market share has been eroded thanks to a freetrade agreement with colombia. The u. S. Wanted to stop growing drugs there, so they wanted farmers to switch industries and allowed many items like flowers to be imported into the u. S. Without a tax. Tax the cheaper flowers being imported, what is the impact the cheaper flowers being imported, what is the impact . Good, one is bad. The first affects u. S. Growers and they are decreasing industry revenue 1 , forcing many to close up shop. You have growers dealing with the drought from 2012, which also pushed up prices, making it difficult to compete with the likes of columbia. The other is for retailers, and that is pretty good. They love it. They get to buy more flowers on the cheap. Retailers have their own issue and the flower industry is a saturated market. You have a greek tetherss like walmart that can buy a lot, buy have bigeap, you retailers like walmart that can buy a lot, buy on the cheap. Has beenr of employees cut in half since 2011. Most of this has been centralized in the midsized florists, those with between one and 10 people employed. What are you going to get for mothers day . Do you know yet . No, but i threatened my kids. They had better get me something. A fun fact is flowers are not a are a big Seller Company not the biggest. Julie. Maybe you will get some bl jewelry. Aybe youll get some bling definitely not. I will get something homemade and cheap. [laughter] this is elon musk, who wants to do more than change the way america drives with the electric car, but change the way americans by those cars. Generally, if you want to buy a tesla, you go through a companyowned store. The Missouri Legislature has passed a bill and it is in front of the house, and it requires consumers to buy cars only through dealerships, and it is the latest in a series of similar moves by other states. Jerseysappealing new ban on direct sales, and tesla called the missouri bill a sneak attack aimed at hurting consumer freedom. For more on this battle, be sure to watch our special, tesla dealer disruption. It is on bloomberg. Com, or you can check it out for free on the bloomberg tv plus app. It is 56 minutes past the hour. Bloomberg tv is on the markets. Equity futures are lower. 2 . Q futures are down coming up, i talked to the former ceo of Sears Holdings, lou dambrosio, allawi it is so hard to find a good retail ceo. Borgota joins me to talk about why Online Gambling is here to stay in spite of Sheldon Adelsons campaign to stop it. We are about 30 minutes away from the opening out. You are in the loop. I am betty liu. Apple is on the verge of buying the electronics. The price tag, 3. 2 billion, apple biggest acquisition ever. Casinos in new jersey are looking to bring in more money. His Online Gambling the answer . We will talk to the president of allow onlineino to gambling. Ralph laurens short of estimates. Target shocked investors ousting the ceo, replacing him temporarily with cfo john mulligan, while it launches a search for a fulltime later. Target is among major retailers that needs a new ceo. Inrican eagle lost its chief january. Mikeney brought back ullman, but not necessarily on a permanent basis. Lou dambrosio is the former ceo of sears. He knows firsthand how hard it is to please consumers, and he , thee former ceo of avaya tech company. You actually were a retail ceo that came from another industry. How hard is that . Record couple of things retaliation eight a couple of things. Cal is a tough industry. Rings that differentiate retail it is 24 hours a day. There are hundreds of millions of transactions a year. The industry is going through a radical change. Surely, Consumer Spending has been constrained. It is difficult. That have happened in a lot of industries. Retail is a completely different industry. If you talk to the people that have been in retail forever, the merchants were king, and they still play a role, but right now it is about technology, information, immersing yourself with the consumer on a daytoday basis and having a continuous dialogue as opposed to an episodic relationship. The merchant gave you the advantage before, and now it is the technology. In the past, industry would say here is betty liu, the suit that she wears, and she fits in a certain demographic. Anduld anticipate her style make a buying decision one year in advance and hopefully get it right. Old school. Then we went to using the data in a vanilla in elementary way, propensity to buy you bought these types of suits. I will buy more. You will buy more of it. It has changed completely. We know what you want through the data and through the use of social technology. If i engage with you and you tell me here are the types of things that i like, and i make it worth your while to have an ongoing dialogue, we get to the third phase. It is from merchants predicting, using the data in the kinetic propensities, and then knowing what you want and being able to deliver to you in real time. A totally different set of skills. Hat has fascinated that is about social media accounts, not even what you are communicating with them directly, but what you are interested in, what you are posting photos on. Exactly. There is a plethora of information out there. I will say the one balance retailers need to be mindful of is privacy. How they mine the data should not compromise privacy elements, but if you set up the right type of interaction with them, the user, the consumer, they will want to give you information. It is not an intrusion, but rather a value for them. The industry is changing so fast, i think many retailers were potentially dismissive of how quickly the change was happening. Sometimes trends happen over of time even though they feel like they happen overnight, and if you do not change fast enough, bad things happened. Look at orders, block oster, tower records. Blockbuster, tower records. There is a fine line between bold and reckless. The skills of reinvention, the use of technology, understanding how to engage, use information, they are as important as the classic merchant skills in reinventing a retailer. Would it behoove a retailer to look outside of retail itself for the next chief . They should look to Silicon Valley . I think you will see a broader set of skills brought to retailers. For sure, the understanding of merchandising, what customers want, consumers want, members want, it is very important. In addition, understanding how to use technology, use information, how to maintain the ongoing dialogue said i could anticipate, so that i know what you want those skills will be equally important. That is why you will see, as opposed to historically where it was this retailer ceo became you retailer ceo, etc. , will see a broader away array of companies from which boards source their new retail ceo. When you walk into sears and began in the retail industry, what was the most surprising thing to you . The raw number of transactions, and how you really had to get things right every single day. Many other industries there are these episodic events. There is a sale that happens x times a year, or even if it happens frequently, the product is not change quickly. Food frosted flakes is frosted flakes is frosted flakes. Or smartphones. Phones change, but not as quickly. Retail has to be 24 seven. It is exhilarating. It was an industry i fell in love with, and given my wifes , th industry, help health, i needed to take care of things, but it is a beautiful industry. It recognizes skills that are important like the merchant skills, and it also internalizes how information is used the new shopping experience, how to engage a constant dialogue. Very dynamic. Think about it, who is the best retailer over the last 10 years . Probably amazon. Merchants. Ome i would say apple, amazon, or mickey drexler. [laughter] in addition to merchants, do you know what amazon has . Math people. Crunching the data. Crunching the data, and that is where you will see the new skill. I know you left sears for a personal situation, but would you want to go back into retailing . Right now, i am the chair of a great Clean Tech Company that is helping to sustain the planet, etc. We will see how things play out on the road. It is certainly a dynamic space. Lou dambrosio, thank you for your perspective. Lou dambrosio, the former ceo of Sears Holdings and avaya. Moving and shaking this hour, hiphop mogul dr. Dre. Apple is in advanced talks to technology, a company dr. Dre founded with music man jimmy iovine. They started the company in 2008, marketing the headphones as hightech, stylish accessories. Musicats has a streaming service that might be just as attractive to apple. They might make a killing on a deal like that. Borgota was the first casino in new jersey to offer Online Gaming. Will the best payoff . The ceo joins me. We are back in two the woman its. We are back in two w old minutes. Atlantic citys Borgota Hotel and spa was the first casino to offer Online Gambling. Slower than off many expected. I sat down with Las Vegas Sands billionaire Sheldon Adelson who had this to say about Online Gaming. Let me say this, there is no reason, nor any compelling reason to put a casino in everyones pocket. College, of age, students that go plenty of money, unfortunate people, working class people, middleclass people that will be andly exploited by and easily incentivize to go on the internet and gamble. For what . He calls that exploitation. We are joined by borgota casino and spot chief operating officer tom ballance. Sheldon adelson says this is exploiting the poor. You say there is no evidence that the people gaming online or any richer or poorer than those gaming in the casino in Atlantic City, and there is some argument that says it is harder for someone that is poor to gamble online. You have to fund your account with a credit card or a bank account. You cannot cash your welfare check and then run down and play with cash. So, what you seen so far . Who is actually Online Gambling so far . Well, what is nice about Online Gambling is it is a different customer than the one that comes to Atlantic City. It is certainly more casual customer. They play shorter amount of time. They play less frequently. Not are people that are really interested in committing the time and effort to make the trip to Atlantic City. It is a nice group of people that want to gamble online, but not as committed as the gambler that wants to drive all the way to town. Why hasnt gotten off to such a slow start . Why has it gotten off to such a slow start . It is a little slower, but we are encouraged by the growth potential. They continues to be awareness issues. There are a lot of people that do not know gaming is legal in new jersey yet. Our advertising dollars in the market and that will grow. Planning issues are well documented, and that has gotten better over time. The technologies that had to come together to make Online Gaming work are all improving everyday. Isnt there some validity to what Sheldon Adelson is saying when he says i am worried about money laundering, for instance, when you talk about Online Gaming . Some Credit Card Companies have been refusing to open accounts to allow people to fund those accounts to go into online betting. Exile will tell you this, it is ,ery i will tell you this it is very difficult to launder money through Online Gaming. Think about the process. First, you have to give us your actual name, your actual Social Security number, and then your address, and when it is time to execute the transaction when you might be laundering money, the Geolocation Service tells us where you are within 20 meters. That is not the environment in which people will launder money. There is no anonymity. You know as much determination online versus what you know as much of permission online for the person gambling as much Information Online for the person gambling as much as a person walking in your door . Much more. Online, not only do you know everything about the person, and it is all confirmed our Identity Software is sophisticated, checking a lot of databases, including the irs master for Social Security numbers. There is really no way to hide. Let me play for you another part of the interview with Sheldon Adelson where he spoke about regulating Online Gambling. This is what he said. For instance, here in the landbased casinos, we are toired to have required have the dealers shuffle a card a certain way. Howd he do that on the internet . How do you do that on the internet . Here, we are not supposed to allow underage people to gamble . How do you do that on the internet . There is no technology that a kid cannot get around. Is that true . No, it is really not. We have Great Software that checks on everything, who you are. We know the customer very well. Having been through the process, there are strict regulations. New jersey has hundreds of pages of regulations, as i am sure nevada and delaware have also. As far as shuffling the cards, the random Number Generator that runs the online game, it is. Ested, and it is a square game having grown up around the jersey shore, i used to go to Atlantic City quite often, but the whole city is in decline, and gaming revenue continues to fall and it fell considerably in 2013. The reason you want to go into Online Gaming is because your properties are seen falling traffic. It is a new Distribution Channel for us and we appreciate the opportunity. Some of the decline or a fair amount of the decline in Atlantic City is people that live closer to other casinos that have opened up in pennsylvania, new york, delaware, and maryland. It is an outreach to get closer to those customers. Thank you for joining us, tom ballance. Thank you, betty. Up, Antivirus Software makers are cashing in how the reason state of hacking attacks how the recent spate of hacking attacks means big business for the companys tried to protect them. Here is a look at the top tech stories on our bloomberg west radar. A big payday for will come executive qualcomm executive paul jacobs. He said he would step aside as the ceo. Hacking attacks are leading to more sales at symantec, the biggest maker of Antivirus Software. They forecast firstquarter revenue that beat estimates. They are shifting from desktop to mobile devices. Radioshack plans to close as much as 1100 stores to cut costs, and now the company will have to shut down a lot fewer of them because they are not gotten the goahead. That is the latest in tech and media catch all of the latest in tech and media every day at 1 00 p. M. Eastern time only on bloomberg west. You missed we are if away from the opening bell on this friday. We had a top 10 trades you do not want to miss. Keep it here on in the loop. First. Bloomberg. Welcome back. You are in the loop. I am betty liu. It is 26 minutes past the hour. Bloomberg tv is on the markets. Scarlet fu has the latest before the open. It looks like we are headed into the opera lower with points. Off 1. 5 we have wholesale inventories at 10 00 a. M. After the market opens. European stocks are down, putting a bit of pressure on the Broader Market here in the united states. We are focused on individual company news, including apple, in advanced talks to buy beat electronics. We will continue to cover that story for you throughout the day on Bloomberg Television. We are on the markets again in 30 minutes. We have a top 10 trades you need to know about this morning. Lets start with number 10, citigroup, being crowned the worlds biggest currency trader, ending Deutsche Bank nineyear reign. Citigroup, which last led the ranking in 2002, claimed more than 16 market share in currency trade. Number nine, herbalife the Ceo Michael Johnson sold stock for a profit. He has been battling with hedge fund activist manager bill ackman who has accused herbalife of operating a pyramid scheme. Number eight, toyota motors. They will start farming out manufacturing. They said they will move the terror the camera production to kentucky in the second half of 2016. Motors is facing another block in another state, missouri, who is considering a bill to restrict selling to auto dealers. New jerseyter decision to ban passed with selling directly to customers. Should you number seven is grubhub. They grew at an equal pace. Rocket fuel. Miss in. Ny reported a they also issued a week forecast for the current quarter. Number four, hilton worldwide. Firstquarter profit more than tripled thanks to rising rates in the industry, and they said the company is very optimistic about the rest of 2014. Number three, the cap. They gap. It would help an unexpected gain in april sales. They are investing 300 million in technology over the next three years, part of a larger effort to offset slowing mall traffic. Your number two stock to watch his ralph lauren. Estimates and issued a disappointing forecast. Ralph lauren says samestore sales declined 2 . Number one, apple. The iphone maker is in advanced talks to buy headphones make them eat electronics for for 3. 2ctronics billion. It would be apples largest acquisition ever. I want to bring in the Portfolio Manager at first eagle management. His call is it is a dangerous time for value investors, which is why he is keeping a fifth of his portfolio in cash. What are you worried about here . It is the kind of market where it is hard to worry about stuff because all of the news seems to be good news for my you have the monetary support, but the door seems to be open. I am not sure if we have walked through the door of silly season. Why do you say that . It sounds like a duck, and it is quacking similar to the previous cycle tops. It smells like a bubble . It has elements like that. They did not like the scale of the 2000s. You say it is hard to be a value investor. Why . Exit the market has not picked over if the market has not picked over everything, what is left over, there is something wrong with it. At first eagle, we do not have to be fully invested at all times. We have the option of holding cash if we cannot find anything, the foreseeable your investors are ok with that . They are. As long as you have a longterm or specter, you see how the cash longtermin perspective, you can see how the cash can help you in periods of distress. There were not many environments where we were fully expected invested. At the last time was 2009. A long time ago. Scarlet fu has been looking at a topdown approach as to why people are bullish. Lets get the naysayers outoftheway. We got a file in regard gdp in the First Quarter because of the weather, but as economist neil dutta points out, output with much stronger in march relative to the average in the First Quarter. There is momentum in the spring quarter. Jobless claims show a stability in the labor market as well. So, does that not make a good case for finding growth . Like i said, there are a lot of reasons to feel bullish and optimistic, but from a bottomup perspective, we are looking one at a time, it is difficult to find things that embody a significant margin of safety, and that is to be expected. What do you look for . What is the key thing that you look for . We like Good Business models. If we will hold something for 10, 20 years, we want a business that will be around for that long. We want a stable business, a Good Management team, or an acceptable management team. They will change during our time sheets. And balanced i can see how that is harder to find. There are plenty of Companies Like that, but it is the price element that is missing. Microsoft is one of the ones that you like. Alix steel has been looking at the case on microsoft. Microsoft had a huge run after Steve Ballmer stepped down, and the Company Makes a lot of money. The word response that we know week ec sales. Sales. Pc within that, microsoft can be losing more market share with people using lennox os and low price google notebooks. On top of all of that, there is scarce profit for the company in the smartphone world that is completely dominated by apple and samsung. Some of those worry spots, do they were you . Of course. Were you . You . Rry of course. There will always be that risk for microsoft. It is a complicated company, and the value case and 40 is not nearly as easy as it was in the id20s. The m the server business is growing nicely. And you like what they are doing in that is this . Weit is early to tell, but like what he did in that business when he was leading it. Have a go for with overall business we have not seen the as they go forward with the overall business, we have not seen the exact strategy. , a dose ofshpande reality. Abhay deshpande, the Portfolio Manager at first eagle investment management. Coming up, televisions original mad man jon hamm will be on Market Makers. That is coming up next her and we are just a few minutes into the session. They stay in the loop. At fedex, starting in january, you will pay more for some of your shipments as the Company Shifts to a weight packages,price your meaning some lighter packages will cost you more money. Cristina alesci, what is in this new system . It is interesting because a lot of people have paper towels and diapers delivered, and for the most part, that has been costeffective because shippers have been pricing those items by weight, not by how big the package is. For example, a paper towels right now and weighs in at a box of paper towels that weighs in at three pounds is priced accordingly. The sandbox might be priced at 30 pounds because they are theng in the price size. When you think about the fedex truck, you would think that a big box will take up a lot of room, and fedex is not getting paid fairly. It is surprising they did not figure that out before. Which raises the question of why now. The industry has been talking about this for years. The about the products we problems we had during peak season. Fedex, ups, on the delivery companies, they are looking at building up their systems to handle the peak times. They are looking at different levers they can pull to increase revenue to build out their system so that they can handle. He peak delivery time do we know how much more they are expected to generate by putting in this Pricing System . 180arly estimates indicate million dollars, but that does not factor in that customers might rethink the way they package things. A lot of packages come with extra stuff. Sometimes you order a book, and there is a lot more packaging material around it and it is bigger than it needs to be. What is really interesting is the most impact will be on the individual person or the small business, because if you look at amazon, they will try to negotiate a better rate for themselves and their prime customers. Their margins will not be hit as much . Pricere will be a increase for them. What is interesting is the brickandmortar guys are happy he could do anything that increases your cost for buying things online they will support. How will amazon handle this . Industry insiders were chattering about how amazonprime might exclude the lightweight items from your prime membership because that would be disturbing for members because what do you have in your prime account, diapers, it tells paper towels. Those are all light, but large items. Thank you, cristina alesci. Proposed takeover of astrazeneca has say some pushback. Twoers of congress and governors are worried about job losses. Your current has more peter cook has more. Pfizer faces some influential opposition. It already faces opposition from astrazeneca, the same can be said for the governors of maryland, delaware, and two key members of congress, who are pledging at a minimum to make this deal more expensive by closing a tax loophole the Company Plans to use. Employs people in maryland and delaware. In a tough letter to the pfizer ceo, the Governors Point to the commitment to maintain jobs in the u. K. If the deal goes through, and they are asking for a similar commitment. They say elected officials and the public have a right to know pfizers intentions with respect ofthe key u. S. Operations astrazeneca and the thousands of employees in our states his jobs may be jeopardized by fiber pfizers desire to reduce its tax ability. They are liability. They are concerned about pfizers history, and they are asking them to answer a long list of questions. The bigger challenge is coming from congress. Let me explain a little bit of what is happening. You have to go powerful senators that want to change part of the tax code that would allow pfizer to move its legal address to the u. K. As part of the deal. They are first of all, finance Committee Chairman ron wyden of oregon, and also, carl levin of michigan. Carl levin has singlehandedly been going after companies he thinks are not paying their fair share by moving abroad. They want to take aim at a provision in the tax code that allows u. S. Companies to reincorporate abroad if they merge with a foreign partner and a foreign partner has a certain percentage of the total ownership stake. It is something called tax inversion, and battling overseas they are avoiding the u. S. Tax rate, the highest in the world. Ron wyden wants to boost the requirement to having to own 50 . Cover the pfizer deal. How quickly could all of this layout . Play out . That is the question mark. It is an election year. There is a tax bill expected to come to the senate floor next week. There is pushback. There is a larger effort to overhaul the tax code, and some, including dave camp, say why do oneoff, lets fix the entire tax code. Hat is a much heavier lift there is no guarantee carl levin and ron wyden will get this thing through. How worried are lawmakers if this is approved it could lead to other similar deals . They are very worried. There are about 15 comparable deals like this over the last two years. They think there might be more in the pipeline. A lot of people are watching this carefully. They are not doing anything illegal. They are using existing u. S. Law. The question is whether or not that law can or should be changed and that debate play out on the senate floor next week will play out on the senate floor next week. Thank you, peter cook. Coming up, disgraced italian Prime Minister Silvio Berlusconi started serving his sentence for tax evasion. We will tell you what he is doing to pay his debt to society. Stay in the loop. How in the loop. Time now for the global outlook. Former italian Prime Minister Silvio Bersani began his Silvio Berlusconi began his Court Ordered community service, patients. Th elderly his sentence was commuted to one year of community service. Russian president Vladimir Putin made his first trip to crimea since annexing the region from ukraine. The trip was part of victory Day Celebrations that marked the 1970 that marked the victory over the nazis. London taxis are planning a uber with 10,000 taxicab drivers plan to meet at an undisclosed location. They are opposed to the app that allows them to carry customers without following the same rules. The parliamentarian elections , butcontinued successfully as a democratic process draws to willow, bloombergs the question how to run the Worlds Largest election . How do you exercise the biggest exercise in democracy . Saw 713last election Million People eligible to vote. Are 815e around, there million. They are a young country. There are 8000 candidates from more than 1600 Political Parties vowing for 543 seats. Voting takes place in nine separate phases. In a country this size, it might not be surprising, there are 919,000 polling stations nationwide where more than 3. 6 million electronic Voting Machines will be used. ,000 people help will run help to run the process. Efforts, some voters remain disillusioned with the Political Class in this democracy. Theyhem, another first, will offer an option beloved by undecided voters everywhere none of the above. That does it for today on in the loop. Next week, the focus on gambling continues with the ceo of Penn National gaming. What does he have to say about casino magnet Sheldon Adelsons vowed to spend whatever it takes to stop Online Gambling . We will see you next week. Have a great weekend. It is 56 minutes past the hour. Bloomberg tv is on the markets. I am scarlet fu. We are 30 minutes into the start of the u. S. Trading day, about four minutes away from the u. S. Wholesale inventory report and stocks are trading lower. The s p and the dow off by. 2 to. 3 . The nasdaq is down by more than 2 . It has been a brutal week for highflying momentum stocks, growth stocks. Euroasdaq is off by almost two percent. Well continue to monitor the weakness. Alibaba filed for what could be history,st tech ipo in twitter announced a partnership with amazon, but the biggest news in the social space, the selloff in these stocks. Index is down almost 20 after rising tenfold in 2013. Joining me with a look at what is driving the weakness is Bloomberg News joe seely. Tell us more about this etf. . Ow many stocks is a made up of there are about 30, 35 stocks, and it is anything from twitter, facebook, linkedin, pandora, yelp. It is a bit of a stretch to make them social media companies. The definition is loose, and the companies are trading at similar multiples, so they are put together in a group. I like that you say they are all its similar say they are on similar multiples. What have you learned about how people define momentum stocks as this weakness continues . They have huge p e ratios. People have great expectations. The dominator of that fraction the earnings, are pretty low. These are upside cases, companies and people expect to do well in the future, but might not be turning in earnings now. Deck to the global back to the global X Social Media etf. Is this popular . It has grown considerably since the end of 2012. It was only about 10 million. Knowledge that now it is at 120 million at the end of 2013. It has grown in popularity, and april was the first month it had an outflow since last june. Quite a run up. How are options traders fleeing this . Uestion playing they are trying to scramble to buy protection. They think the stocks are in freefall and they are buying puts to hedge a little bit error little bit. When you have twitter that has run down as much as it has, youll want to get something on the downside and if it keeps going, hedge the loss. The risk is if it rebounds and you are caught in limbo. Bywe started the segment talking about alibaba and filing for the ipo. Is it possible that Money Managers are selling out of the highfliers to make room for the alibaba listing . It is interesting. As we learn how much ali baba is worth any ipo price, we will rightur head around that, now, we do not know. In the future, it could appeal to these people because it is a value stock that has earnings and will pay you a dividend, maybe. , thank you for your perspective, of Bloomberg News. Were live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and stephanie ruhle. Apple nears a multibilliondollar deal with dr. Dres beats electronics. The house always wins. Not this week. It shares are falling thanks to a crackdown on illegal money transfers in macau. Another sign that biggest has turned into an asset stock for steve wynn. Im talking to jon hamm about his new baseball movie. How don drapers story will finally end