Transcripts For BLOOMBERG In The Loop With Betty Liu 20140708

Offering ideas for regulating the brave new world of High Frequency trading and dark pools. Peter cook has more on the hearing. Big names are testifying, and they do not all agree on what is going on in the market. Definitely, betty, some differences of opinion. It includes the said adels and majorfounder players in the business of stock trading and they have different views on the basic debate happening right now are the equity markets effectively rigged against average investors, as suggested by flash boys michael lewis, or has it helped by lowering cost and improving liquidity benchmark the debate liquidity . The debate should reveal changes. Ken griffin will make the case that all of the innovation has been a good thing and he will also take a swipe, according to his prepared testimony, at some of the critics. While investors have benefited, most legacy record participants have lost out. I simply cannot compete in todays hyper competitive and incredibly efficient marketplace, so we should not be surprised that they publicly year before the old days when they extracted disproportionate rents from investors on the basis of anticompetitive as this practice is business practices. He also talked about higher regulatory standards for dark polls and Retail Investors aboutg more information how much their broker was paid for having a trade routed in a particular location had others location. Others have different opinions. Stryker says that trading venues like the nyse should get deference. He does not think it is fair some investors are able to trade in dark markets about earlier person directly with lit markets and he is also calling for a ban on the maker taker incentives, fees paid to brokers for bringing investments to certain platforms. Viewll get a different from joe bannerman. Of trading economic price controls are a blunt instrument likely to cause disruptions and consequences that are unforeseeable and potentially detrimental to all types of investors. Peter cook, thank you so much. Our chief washington correspondent, peter cook. I want to bring in my guest post for the hour. D. Chard gelfon lets talk about what peter was discussing, the idea of dark p ools, that there is stock manipulation going on. You are the ceo of a public company. How much is that a concern or how much do you want to watch out for . I would put in a broader context, transparency in general. All kind of weird things happen to your stock during the day. In the last 10 minutes a goes down 1 or the other way, and you really do not know why. As someone running the company, you need to be oblivious and satire martin that over the longer term, but as someone who investment cares about and run it over the longer term, but as someone who cares about the investors, something to look at is the issue of shorts. They do not have to care. There is not a lot of exposure. I think there definitely needs to be a window into it. What you arelike saying is we need a bit more transparency because clearly, as a ceo, you do not want to say you are watching your stock price every moment, but if youre having more transparency, you are saying is a better thing for you because you are tracking your stock price . Not me, i would say ultimately my investors because people will call up, the weekend bad,ffice will be good or and it will go a certain way and say what is going on . Asked have you seen any have you seen anything suspicious in your time that imax . I always see what i would call funky trading patterns that i did not understand, and if i do not understand in the business, how with the Retail Investor understand . Why can we not get people more information . On a broader scale, you have been running imax for the last five years as ceo, seen the ups and downs. Really 20 years in one way or another, that he. Betty. Right, you have been at the home for so long. So many ups and downs of the economy. What do you see in the jobs market . How do you feel about the economy, particularly the business going through your theaters . In twoll separate it parts in terms of my business , we are global, in 38 countries. I do not think the United States is the engine of growth. Asia, taiwan,e the philippines. Places like that. That is where it feels to me it is running strong. In the u. S. It seems kind of moderate, not as good as it looks, or bad as it seems someone in the middle. So it is a little lukewarm however, yet other parts of my life it is hard not to see the economy strengthening. Larry summers wrote an oped and he said the great economic problem for millennium has been scarcity people what watch more than can be produced and the challenge has been to produce as much as possible and make sure everyone gets their fair share. The economic challenge of the future will not be producing enough. It will be providing enough good jobs. Would you agree with that . I would mostly agree with that because the advantage of technology is that it creates more productivity. The other side of that, of course, is if there is more productivity, there will be less higherquality jobs. That is difficult. Some timethat i spent thinking about. How do keep progressing the situation, which you really need to do, and that imacs we are always looking to things at imacs we are always looking at doing things bigger and more efficiently, and that is one of the challenges facing us right now. , ceo of imax,fond you are staying with me for the hour. Onaking news following the wires. Abbcie raises its offer for shire. Shire said that they had undervalued the company. Germanys secondlargest lender commerzbank will likely be the violationsolve allegations, paying a fine. I want to head to our berlin correspondent, hans nichols. What impact might this have . It is having an impact on commerzbank shares, down almost 4 this morning. We should put this in perspective. It is a potential half 1 billion. The indication is that would be the low end of the fine. You can always go higher. Compare that to the 9 billion that bp para had to pay. It is a similar violation. Bnp paribas. Pay. D to it is a similar violation. They are not talking about felonies. He will have to plead guilty to anything criminal. In a matter of degrees, it is less than being be there being pete parra bnp paribas, but it could be a run for potential action against deutsche bank, which could be higher, lower, but commerzbank has the provision of side to cover this. It is a lot of money, but they would probably not have to do a Capital Increase to cover. Bottom linet to its what do they need to do to make sure they can afford the fine . Well, if it stays in the half 1 billion range, heres what we know from commerzbank. At the end of last year they had about 1. 2 billion dollars set aside for legal cost. Violation, hen could cover the half 1 billion. The question is will there be other cases . Will they be caught up in another u. S. Regulatory crackdown . Then they might have to do a rights offering. Hans nichols, thank you so much. Hans nichols, our International Berlin correspondent. Moving and shaking this hour, facebook ceo Mark Zuckerberg. He says connecting everyone to the internet is one of the fundamental challenges of this generation. Are in an opinion article in the wall street journal. Uses only onethird of the world has internet access. In the meantime, he is grooming the next generation of facebook employees. They just flew out a 17yearold they were recruiting. One of the persons recruited included a facetoface meeting with Mark Zuckerberg himself. The teenager accepted the job offer and some Silicon Valley internships, as we told you, they are paying 6,000 a month. Not bad. Also moving this hour, a cnote tycoon,the casino the son of who is known as the godfather of macao trading. It is the only place in china where casinos are illegal and it relies on high rollers for 60 of its revenue. Lawrence isos, looking to combine the best of the east, his own legacy, with the best of the west, where he was educated. What has las vegas inspired in the or what have consumables done to help you casino moguls there done to help you along . What in asia, they build slowly, and their more conservative, but in las vegas they have 3000, 5000 rooms, the shows, the nightclubs my philosophy is more along those lines, go big, or go home. Having seen that that is workable and doable, i think that is how i developed city of dreams which is big vision. Big vision, and we need to give customers something they have not seen before it is always about being more innovative, eager and better bigger and better. We will have much more from lateritans at the table in the program. You can catch a full episode tonight at 9 00 30 p. M. Eastern. Raises theuber stakes, going headtohead with new york city taxis. And, we will tell you how transformers is transforming the movie business. Dont you get it . I have to get back to my family. Oh, my god have you seen it yet . That is michael bays transformers blockbuster, which has been a big performer in the u. S. And it is expected to be a major hit in china. It could become the highest grossing film matter of all time, surpassing avatar. We are back with someone who knows a lot about the moviemaking business. Richard gelfond, the ceo of imax, who has over 150 theaters in china and all over the world. O you expect transformers could be the biggest movie ever in china . There is no question about it. If you look at the numbers, they are shattering every record. Imax, our opening weekend, doubled the previous record. 4. 5 million dollars, the record, and this weekend we did about 10 million. What is more interesting is the transformers did better in china than in the u. S. I think it will do a higher growth in china than it does in the u. S. , and this is early signs of a trend we will see into the future. China is going to pass the u. S. In 2018,of box office 2020. It is not just the u. S. Box office when people think about them. It is the u. S. And china. What is great about this film . Great answer great question. It is a nuanced answer. Michael bay did so much to appeal to chinese sensibilities. Was filmed ind hong kong or mainland china. The World Premiere was in hong kong. There were premieres in shanghai. The premiers were pretty close to the release of the film in the u. S. It was worldwide, and the best thing they did in the film was they had a reality show in china where the contestants, the three winners, got to be in the movie transformers. People watched and were really excited, and they were already pretty prepped when the movie opened. It had chinese sensibility. What happened in the boxed box office, they used to be domestic, and then made for international audiences, and now they are being made with chinese offices audiences in mind. We have a chart of ticket sales in china in 2013, and they far surpassed the next closest international market, which is japan. 3. 6 billion. Billion, and a u. K. Pretty far behind at 1. 7 billion. Do you expect that to widen . No question. It will widen over the United States. Hollywood, are they waking up to this will we see more chinese characters in hollywood movies . It will be more about china . I am smiling when you say that because i was on a panel in china at the beijing Film Festival and some u. S. Executive said it was easy, put some chinese characters in the movie or film something on hunan road and it will sell all over the world. Is that true . That is not true. You have to hit the culture. That is michael bay did. He integrated the Chinese Culture into a global story and that is all we will see more of, not just to china, but to russia, and real actors from the countries. But only in Big Box Office rollers . Some of the more dramatic movies do not play well in china. You will see the rise of local films. China. Chinese films in there was a russian movie called stalingrad and it was made by a russian studio. I think the middle market will be filled with more local productions which will be dramas, comedies, because comedy is somewhat local, but the big block asserts will be more local stories. Richard gelfond, stay with me. You are my guest post for the hour, Richard Gelfond of imax. Prosperity. Ing is the bubble bursting for expensive cupcakes . One bakery chain is calling it quits today. 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. Here are our top headlines. Mbs bake shop has crumbled the bakery chain closed all of its stores. They had expanded to 48 Stores Nationwide after beginning with one store in new york city. Samsung is forecasting a recovery in sales after posting secondquarter profits that missed wall street estimates. Analysts say the worlds Biggest Smartphone maker is feeling the heat from apple and chinese competitors. They are counting on demand for fourthgeneration products to revive growth. Pope francis is making big changes at the vatican Bank Following a scandalplagued the year that saw more than 2000 accounts locked and profit dropping 97 . The bank, known as its the institute for religious work plans to break off investments. It is it is 26 minutes past the hour. Bloomberg tv is on the markets. Equity futures are declining yet again. You can see s p futures are down about. 2 . A member, the earnings season is about to begin. Alcoa will be reporting results after the close. Stocks will be determined largely by what earnings we see over the next several weeks. We are on the markets again in 30 minutes. State to fate to vice when you think of gambling, macao might come to. Ind testing is casino revenue makes up 60 of earnings and last year brought in 45 billion, seven times what las vegas made, and it is also the place where the ho family and Sheldon Adelson are placing big bets. You can see it all at the latest titans at the table. For over four centuries, macau was under portuguese rule, and today it is the closest point to china where gambling is legal. Built a gambling empire. He paved the way for other investors to make it a in big in macau, and today one of the investors is his son, lawrence ho. My father revolutionize the casino markets in macau. Throughout my career, and my life, it has been about trying to prove myself. Correct it was important to you to ash it was important to you to it was important to you to prove you can build a company from scratch . He partnered up with James Packard and their Properties Include two extravagant resorts whose opulence gives las vegas landmarks and run for the money. It is the destination for urban entertainment. City of dreams as an interactive resort where tourists come to put their chips on the table, spend that highend boutiques and stay at highend tells. Hotels. How have the casino moguls helped you along in terms of inspiration in macau . I think many times in asia, people build slowly and they are more conservative. When you go to las vegas and you see the megaresorts, 3000, 5000 rooms, shows, theaters, nightclubs my philosophy is more along those lines, go big, or go home. Bigger, better, and wetter. Heart of the vision is to attract visitors through performances including this house of dancing water. Lawrence is bringing glitz and , but Sheldon Adelson says he invented the concept and he will conquer macau. Wrongly predicted that i if i never open and that opened i would be in bankruptcy immediately. They did not want to believe that someone else could do this. They grossly underestimated me. Sheldon adelson did not just succeed, he dominated. His first resort was so successful he made back the initial 265 Million Investment in just the first year. 30,000 people showed up more than 30,000. We do not know the exact number because as they waited to get in they knock the doors down. Sheldon adelson went on to build a massive 6400room central and the 2900 room venetian macau. As many of Sheldon Adelsons heres have peers have noted is it is his success that is leading las vegas in the dust. Did you ever think macau would surpass las vegas in the way it has . Yes. What convinced you . When we first applied there billion. 2. 5 when we first opened las vegas sands, 5. 5 early in dollars. 2 billion that 3 billion in two years. The business was there. I thought it was going to grow because there are 1. 3 billion chinese. , Atlantic City has seen the opposite. Casino revenues have fallen almost every month for the last eight years, following forcing gaming resorts to close. Casino, which filed for bankruptcy for the second time two years, my file a suit may file a suit and a buyer cannot be found. We are joined by the manager of the boutique Chelsea Hotel in Atlantic City. Gelfondax ceo richard knows about the gaming industry, having once invested in a casino in california. Curtis, lets start with you on Atlantic City. You heard Sheldon Adelson say he created a model of hotels, entertainment, and gaming all in one. How come that did not blossom in a place like Atlantic City . Well, Atlantic City was a resort for 100 years before it was a game in gaming to resurrect a town about 40 years ago and it has had a mediumsize casino in the marketplace for the last 40 years. The scale of the town is an island and it was never able to build a huge megaresort, but gaming has taken a hit because it has been encroached upon in every jurisdiction surrounding Atlantic City. The monopoly Atlantic City once enjoyed has been encroached upon and it has left a need for real innovation in the marketplace. Click some of innovation includes putting more , thatment and innovation includes putting more entertainment, and essentially more activities for people, and i know some of your imax theaters are in these gaming complexes, arent they . Asked as a matter of fact we as a matter of fact we have an imax theater in Atlantic City. The question is how much does it add to casino revenues . Does it keep people away from the tables or keep families at the tables . Vegas went through this period where they try to become more of a family destination. We have imax theaters there and things like circuits and certain to select cirque du soleil. Do they do well . I think it is more of a casebycase basis. You invested in a casino yourself. I was part of the group that invests in a native american casino years ago in california. And you got out . I learned a lot about the casino business. It was phenomenally successful. These project governed by tribal governing boards, they are difficult to navigate, so i keep my gambling now to 21 in vegas. [laughter] , Atlantic City, a place known for gambling for so long, will it ever come back . I think to say Atlantic City is terminal is premature and unfair. We still have 27 million visitors a year and there is innovation happening. The Senate President Steve Sweeney and the new Jersey Legislature introduced a bill allowing for boutique casinos. I think Atlantic City, with a history of multiple hotels and restaurants congested along the boardwalk has an opportunity to develop, like london and monte carlo, a highly curated boutique casino product that could be innovated as opposed to the onesizefitsall casino that have been there previously. You are talking about boutique Gaming Properties what exactly does that mean, Curtis Bashaw . It is changing the paradigm. Instead of having the gaming floor be the heart and soul of the facility, you are turning it backwards to Atlantic City was a resort for 100 years before it was a gaming town. A billiard room would be off the main living room of a home. We think that smaller boutiques, curated casinos, could be attractive to the new generation of gaming persons, younger people that want the experience. They do not just want to feel like a commodity standing in this huge, vast space. We believe the idea of going a little more intimate could lure in different types of players. Richard, a final note on macau you know the chinese consumers so well. Are the people going to your theaters in china, are they the consumers going to these Macau Properties . I think thel, answer is yes. We are a luxury brand for people with disposable income, and the thing to remember about china is there are a dearth of Entertainment Options there are not sports leagues, concerts every day, things that are happening in central park here in new york people have to look for things for disposable income and that is providing tremendous demand because people do not want to leave china. The movies,er go to shopping, or gambling. Richard, stay with me. Richard gelfond of imax. And Curtis Bashaw, thank you for joining me. New yorkers are looking for a ride to the airport, and they might be surprised to find out is cheaper to take a town car than a yellow taxicab. We will tell you why in a moment. This mornings big number is 1. 2 billion that is how much the Ridesharing Service uber raised last month, valuing the company at 17 billion, and that might be why they feel like they by 20 with all of that cash on hand, and that is creating a firestorm, adding fuel to the fire in the fight cab andyork city Limousine Commission. We are still with Richard Gelfond, who is an occasional user, but josh, slashing prices by 23 , they are stoking the taxi drivers what is the message uber wants to send . They want to break the back of the taxi drivers here . I think uber is mostly worried about the riders, the 20 temporary cut. It is not that big, the jury luxurious town cars. The last time i was in one, it was a camry. Theyre trying to say uber is not a luxury product. One thing to keep in mind, they are doing a temporary cut. It is a promotion and they will not get have it forever. They are taking the amazon approach, losing money to gain market share. Try us out, and maybe you will stick around. Is it really a cut or a bait and switch . ,y wife likes to use uber especially on a rainy night when you cannot get a cab. You punch in where you are at, you think you are paying x dollars, and all of a sudden it , and up and it is four x you are standing there with your umbrella, and you say yes. Is this all a facade . They are cutting it right 20 , but in reality if it is windy out, there is a premium, if it is snowing, there is a premium. It is a good question. Basically, ubers prices go up when demand goes up. You have surge pricing and saysrs get mad, and uber it is actually good for riders, making it easier to get a ride, and now they are lowering prices , and they say lower prices are good for drivers. They say is that with lower prices more people will use more people will take rides and that is more for the drivers that will be making less with each ride, but if a lot of people start calling, surge pricing will kick in. You see this in san francisco. Do you use uber . Often . You will find this a strange analogy, it will go back to the question we started with the hour the hour with, dark ppols the question is transparency. The pricing. Why does that bother you . Because at the time you do not know what you are getting into. It is the same thing as markets. Consumers are entitled to transparency, whether they are trading stock rockets or riding in a car they called up. You feel the system is rigged against you. What not know about you, but when i get the surcharge, i feel that they zoned in on my phone. [laughter] the taxi drivers i know they have talked about uber being illegal, breaking laws, but the Business Model, ultimately, it is not illegal. They are free to do with they want to do here. It is very complicated. In various cities, it depends. You have regulations that what you have to do. In uber new york in new york relativelyis noncontroversial. The former Deputy Commissioner recently left the taxi and Limousine Commission and went to they are having interesting conversations there. The interim commissioner is not opposed to these ideas of rightsharing in general. I think theyre getting a fair shake in new york. Thank you, Josh Brustein also, thank you to our guest host, Richard Gelfond of imax. Story, tunethe uber into Market Makers when they. Peak to the general manager we will be back in two minutes on in the loop. Security for International Flights in the u. S. Has been tightened over rising concerns of extremists coming from syria, and there is my new plan to directly confront the growing threat of terrorist attack there is now a new plan to directly confront the growing threat of terrorist coming from the middle east. Phil mattingly joins us. What is the threat . Eric is it is holder big enough that eric holder will get a speech in oslo. Over 100 americans have traveled to syria and a lot more from the european side. The big concern officials on both sides are waiting right now is those individuals have the ability to travel back to the u. S. And back to europe without theiring a visa these ease of which they could travel if they are radicalized is a major concern, big enough that the attorney general is going to come out and lay out a series of steps to counter that. What about International Cooperation what the u. S. Officials expect on that . Thisll be the big push you hear from eric holder today. International cooperation is necessary to try to counter this and here is why you saw the tsa announced they will require some International Flight travelers to turn on their iphones, ipads, to show that they are actually working. That are concerns International Counterparts are not taking the threat as seriously as the u. S. Is and that is what you will see from attorney general eric holder, trying to elevate, working together to counter this before it gets out of control. Thank you, phil mattingly, our white house correspondent. Lets switch gears to talk about what is going on tonight on Bloomberg Television. Been on this our titans at the able, the rise of macau special, looking at how the ho family and Sheldon Adelson gamblingcau into a mecca tonight at 9 00 30 p. M. Eastern. 9 30 p. M. Eastern. And the tortoise big National Tortoise big said that that mole money, more problems. Well, for political candidates, it seems money is only their friend when it is in their campaign war chest, not in their personal Bank Accounts as income inequality emerges as a top issue in elections and last prosperous less prosperous candidates are attacking those who are too rich. Yang yang, is that what we are seeing . The irony is former secretary of state Hillary Clinton, her income gap has drawn attention. In michigan, a republican with assets in the tens of millions of dollars, mostly in apartment complexes run by her husband, is being accused of helping the rich and powerful at the expense of voters. In georgia, former Dollar General ceo david perdue was accused of failing to understand this is an election, not an auction. Perhaps the most high stake isction Mitch Mcconnell being attacked for quadrupling his net worth on the backs of hardworking kentuckians that he cannot afford it. Together, the three are the wealthiest Senate Candidates in the 12 most competitive states according to data compiled by bloomberg news, and the attacks that they are rich and out of touch could make a big difference in the key races. Ok, do they actually work . That is what president obama and the democrats are counting mitt it worked against romney in the president ial race. It is a big message for them. As it turns out, the strategy would be stronger in a president ial Election Year because you see higher Voter Participation with a lower average income. Still, with the senate races, the out of touch card could work. They might want to take a different approach in 2016 if Hillary Clinton and her 100 million make a run for it. Yang yang it is 56 minutes past the hour. Bloomberg tv is on the markets. Equity futures are lower on top of losses we saw yesterday. Earnings season about to begin. Alcoa reporting after the close today. We are on the markets again in 30 minutes. Up, Lloyd Blankfein plans for the future he is grooming the next generation of leaders at Goldman Sachs. We are about 30 minutes away from the opening bell. You are in the loop. I am betty liu. Heres what we are working on futures indicate the stocks will open lower today with the air getting a bit and in the markets. Bbvie is making a fourth bid to buy shyer with an increase over the last proposal. Germanys commerzbank might be the next target in alleged violations. Theyre likely to pay a penalty of at least half of a 1 billion. The u. S. Has brought 22 cases against banks since 2009. Last weeks fine against bnp paribas is the highest on record. During this with more is rumored into being editor bill cohan. , the latest example of what seems to be a crackdown on big banks. What you think will be the bottom line, the overall impact . Well, betty, this is a Long Time Coming as well. There has been wrongdoing by banks that we have known about 2008, andince 2007, here we are in 2014. Obviously it takes a long time to develop the cases are now they are pursuing them. They all seem to be coming at once. You know, the bottom line is these are all foreign. Finds. Fine, andpay the hopefully not repeat the behavior again, but it is not peoplee as holding personally responsible or putting out of business. Anyone that is at a bank right now and looking at the career on wall street and saying do i want to stay in this or not, when they see Something Like this, another headline, another authority going after another bank, does it make the decision a lot easier . You mean whether to stay . Yeah. Look, most are not involved in the wrongdoing that occurs, whether it is trading to air and or the sudan. Most people are going about our lives, doing their jobs, and they are happy with the pay they get a taste of the risk they are taking with their own capital. Ratio is notreward great, the hours are long, it is hard work, but you get paid more doing that than almost anything else, so why would you leave . How do you think it will affect the ability for banks to way outlly earn their of these regulations that have been imposed on them . Look, betty, i think it has become a cost of doing business, unfortunately. Moregan chase, they paid than 20 billion for their fine. Jamie dimon got a raise for putting this behind him. The stock was up Something Like 26 last year. I think the market says these things have to be paid, it is extracted is the cost of doing business. Hey these things, and yet beyond it pay these things, get the on that. The reason i asked you about is because issue there is news out about Lloyd Blankfein at Goldman Sachs and these dinners or lunches he has been hosting with Younger Associates over the last year or so, wanting them to meet the more senior directors. Some might say he is trying to just create at relations in the bank, looking for a deeper bench, but others say he is worried about retaining his best talent. Look, he is doing exactly what he should be doing, which is identifying the next generation of leaders at goldman Hank Paulsons identified him 15 years ago. It is exactly what he should be doing, and then introducing these people to the corporations board of directors, socializing them, getting them to know one another. That is exactly what he should be doing. I do not think there is any question or fear that this next generation of leaders at Goldman Sachs is about to decamp anytime soon. I do not necessarily see it as a retention tool, but i see it as ok, we have these leaders, we need to introduce into the board because it is the board that makes the decision about who the next ceo or leaders of the firm are and they cannot make a decision without knowing them, so it makes perfect sense to me. So, he should be doing it, and the question is are these leaders really doing it the way Lloyd Blankfein is . Thank you for joining us, bloomberg contributing editor bill cohan. From banking to attack, theres one more week to weigh in on a proposal that would allow more charges for fast internet over their lines. Megan hughes has more on this. Has been surprisingly quiet. Since the fcc voted to move this fcc voted to move this process forward, google and facebook, worth mentioning, neither have had lobbyists visit. The process has attracted more than 6000 600,000 comments. Comedian john oliver generated public outrage, arguing that the proposal is bad for Internet Users, and here are some of the comments after the segment. This is a horrible joke in which everyone is screwed but the internet providers. Another 1 i didnt know how you can attend what you are doing is not demonstrably evil. And Public Comments outrage, but out of the 600,000 comments, nothing from google. What does this say about googles strategy . Well, it is certainly a shift from what we have seen. It might not be a shift in their position, but it is definitely more passive approach. In terms of position, google did sign on to a may 7 letter with about 140 companies, and called the proposal a great threat to the internet, but that was before the vote. Googles spokesman is not commenting be on the letter, and again commit was a group letter. They might still back then neutrality as an idea without necessarily wanting to be the big or break face Net Neutrality without necessarily being the big corporate face of it. When you talk about the biggest search provider with 60 billion asrevenue, it might not be much of a financial incentive for them to be the key player on this issue. Megan hughes, thank you for that. Megan hughes in washington. Toe is ticking for apple unveil its first new product in more than four years and one group is anxiously awaiting the launch. We will hear how advertisers are gearing up for that announcement. We will be back. Breaking news out on American Apparel one of their creditors is asserting a default on its loans to American Apparel. Senior markets correspondent julie hyman has more the breaking news desk. 2 million loan, and the two sides have been in talks on how to come to an agreement. Lyons capitol has wanted American Apparel to reinstate the fired ceo. They have been on his side in this situation, and apparently the talks have failed, and now lion capital is saying the company has defaulted on its loan. American apparel, for its part, disputes the notion of default, n can not ceaseio with financing prior to july 19. There has also been discussion with sources that might consider providing finances to replace n capital. Owed to lio it seems there is some negotiating behind the scenes, but this has been the specter hanging over American Apparel ever since it fired doug turney, that this would be a possibility, the default. Doug attorney was fired several weeks ago. The board of the company said after an investigation it was asserting misuse of funds as well as Sexual Harassment after various lawsuits alleging Sexual Harassment have been settled or otherwise dismissed. Capitalthe latest,lion saying it wants Michael Turney back in. Julie hyman, thank you. Therell be much more on the American Apparel story for sure. That stay in retail, the technology retail. Investors are not the only ones eagerly awaiting the launch of watch. Advertisers are waiting for the for a into the space. We are joined by the global smo at interbrand. Great to see you this morning. Not that we are wearing things google glass, the i make goodtch, do they cases for advertisers, graham . Are a good extension. Any device that offers the opportunity to see more media is potentially offering an attractive market for advertisers. It is a logical extension. Who could be the first movers . I know i am asking you to speculate, but who could be the first movers in wanting to use the space for their own project . A lot of brands are exploring what is taking place along the wearable space. I think the logic of people with social media through simple platforms, very accessible technology, the easier it is to check in with what is going on around you, the easier it is going to work. Biggestwould be the downfall or downside to advertising on these new types of platforms . Potentially, it is going to move advertising on still further. We have seen a tremendous change in the Advertising Industry over the last number of years. Clearly, the movement away from 30second spots into much more focused media. This will require even tighter discipline about how it is advertisers get their message across with in reduced spaces and within a very human interaction. Graham hales, on specifically atch, we know that apple has been hiring lots of people from retail. They also recently hired a Senior Executive from a watchmaker ahead of this launch. What do you make of this talent recruitment coming from apple . Well, it is very interesting. Apple has, for a long time, understood the importance of design and aesthetics within their products, but now we are seeing more of a luxury angle attached to that, which would premium it is a shame. The other interesting part has been in the area of health and wellbeing. We are starting to see perhaps how these pieces of technology will be used for health and wellbeing applications, not just how they look. So, it is a new category, right . They are kind of in between these two spots. This is where technology is able to bridge what we currently see watches being for in some respect it is a timepiece, but in another respect it is a big statement about you, a great gifting item we are not say more technology coming into what a watch could be. Capabilities in what is a reductive piece of technology. ,raham hales graham hales great to see you this morning. In a moment, samsung comes up short the worlds Biggest Smartphone maker getting hurt by competition from china. We will be back in two minutes. Todayco boss bill gross 200 billion that, but how made . Ave on investors were are joined by lisa brummel its. Have they made money this year . What they have, very well, and to award bonds, they are piling back in, buying back into bill gross and the idea of rates staying lower for a longer period of time. To give you a sense of how well they have performed, a straight broad market, 3. 9 returns so far this year, really quite good, the best return for the period since 2010. If you look at something more foreric, it is nine percent the year. It is more of an esoteric asset class, but in terms of bonds, people are piling back in, saying all of those fears that cause us to rank records amounts of money from these funds have not come true. At what point are analysts crying wolf question mark we will not buy it anymore. What about the second half of the year . You expect the same inflow or not . That is what people are wondering. Inflows are just one pocket of the whole equation, but you have sovereign wealth funds around the world the need to put their money somewhere, and global Central Banks are suppressing yields and keeping borrowing costs low for a longer period of time, there is a lot of cash out there and needs to go somewhere. It seems like bill gross, at least in the short term, will make some money on that 200 and dollar that 200 million that. I think a lot of people are endorsing that view. Ofthank you, Lisa Abramowicz bloomberg news. We are a few minutes away from the opening bell. We at the top 10 traits you not want to miss right after this break. Top 10 trades you do not want to miss right after this break. Keep it here on in the loop. First. Bloomberg. Maxwell comeback. You are in the loop welcome back. You are in the loop. I am betty liu. It is 26 minutes past the hour. Bloomberg tv is on the markets. Correspondentets scarlet fu has stocks before the open. The market has accelerated in the past hour, and we are looking at a lower open here. It is quiet before the storm as earnings begin after the market closes with alcoa officially kicking off the earnings season. Wells fargo kicks off earnings for big banks friday. Treasuries are rising, with yields on the 10year down to two. 58 with the strongerthanexpected jobs report last week prompting banks to move forward their estimated dates for when the Federal Reserve might begin raising interest rates. We are also looking at oil prices. A barrel,w 110 reversing a rally that began about one month ago when islamist militants seize control of mosul. The idea is as much as they have been aggressive in the country, they have not disrupted supplies down south, home to three quarters of the oil exports. We see crude oil, nymex, trading at a onemonth low at 103. 54. Thank you, scarlet fu. As countdown the open with the top 10, the only stories you need to know before the open. I start with number 10, 3d systems the maker of 3d printers could benefit from homer moderate robotics being developed home robotics being developed by intel and google. Number nine is chesapeake energy. Units of the oil and gas are down after Natural Gas Prices declined to the lowest in six months yesterday. Forecasts are for lowerthanexpected temperatures in the northeast. From sell, fresh price been cut by Goldman Sachs. By twoher upgrade from neutral, groupon, and during entering a period of easier yearoveryear comes. Number six is petsmart. Shareholders are encouraging the company to sell itself. Long View Asset Management joined to consider a sale. They said they are reviewing a way to return more cash to shareholders. Number five, United Continental they will outsource or that 630 union jobs to 12 u. S. Airports as part of an effort to cut costs and the affected jobs include ticket agents and baggage. Number four is guests shares are getting a boost this morning from analyst at Piper Jaffray who up date upgraded from neutral to overweight, citing promising sales in europe. Ve, makingthree, abbi shire, which iuy hope will bring them to then negotiate which they hope will bring them to the negotiating table. The drama continues for number two, American Apparel, disputing predator lien lion they haveaim that default it. American apparel said they got a that they hadon defaulted. American apparel says they are in talks for other sources of financing number one is alcoa. The kicks off earnings after the bell. It is the First Company in the s p to report. It will have the highest per share proffered in more than two years. Could that set the tone for the earnings season . I want to bring in robert. He is a senior portfolio manager. He is back in the Money Management business. He is raising fresh capital for his global fund. Be in his holdings will consumer driven stock. His call is to bet on the emerging middle class. Why Thomas Robert . The greatest growth story in the history of capitalism is going to be this global middle class which will be about half of our population. It will be bigger. Folio in of your pope consumer desmond driven shares . As the Consumer Market is going to grow they will go after products we have taken almost for granted. It is going to be unprecedented. The demand for these products whether they be household products or food and beverages or electronics. Side going to be a big buy for the next 10 years. I know you have some stocks in your portfolio that youre ready to talk about. Julie, you are looking at some of the calls on valiant. Basically this is the biggest story involving their partnership with l ackman. Bill ackman. The latest in all of this is that ackman has nominated some people to the board. When you look at valiant stock. This is how they have done since all of this began back in april. It is interesting because we have seen the shares go down. There has been a lot of turmoil if the bit is going to be successful. You can also look at the projected earnings growth. Went up by 40 . Back to dot is fixed grow by half. As a shareholder, you have to wonder if this is worth it. It has already been very acquisitive. We are going to be longterm ntlders of valea pharmaceuticals. This is not just a oneoff. This is a Business Model we think and work for 10 years on a global basis. We are very happy to own the stock. Another stocking a focused on is boeing. I know scarlet has been looking into the some of the macro issues around boeing. Its dependence on the United States export import bank. This helps Foreign Companies by u. S. Made jets. Would support 10 million of 2014 sales. Itsoing loses that report finance arm would have to shoulder 9 billion in customer finance needs. There shares have fallen 6 . Are you pricing that in, robert . We are not concerned about that. The one thing we know markets today is there is plenty of capital. We are not worried about boeing being able to Access Capital for their needs. The one thing i do know about boeing is 16 of the worlds population have flown on an airplane. There are a lot more people the want to be traveling in the years ahead. Boeing is going to be a big beneficiary of that surge in air traffic growth. If you were to place your bets on ex im bank, what would you say . Ofi havent given a lot thought. I dont have an answer for you on that. I really cant say. Thank you so much for joining us. Up, it is not all great for elon musk in china. A businessman in china says he was the first to have the tesla name. Inijuana goes on sale washington state. Stay in the loop. The United States recently increased the scrutiny of air travelers. A new plan will directly confront the growing that of terrorist attacks coming from a the middle east. On thettingly has more details of the announcement. What measures are in place . The attorney general announced a four prong action plan for International Allies to take on what he calls a cradle of violent extremism in syria. It a global crisis. A threat so grave we cannot afford to be passive. The plan works like this. The u. S. Is asking its allies to and prosecutor will prosecutorial toolboxes. It gives them more power to detain individuals that may or may not be the going to syria or coming back from syria. They are calling for increased undercover operations. They have implemented several without giving too many details. He is calling for International Cooperation on further undercover operations. His calling for better information sharing on lists of travelers. In the final point he is calling for community outreach. The u. S. And the International Counterparts need to do a better job of reaching out to muslim communities trying to stop travelers and stop radicalization before it happens. The is an intensive plan at attorney general is rolling out. It is underlining the threat u. S. Is causing fear under officials. Ideas on what those undercover operations were . He is not going into them is specifically today. I talked to officials who were involved in the speech. Thingsre two specific they were looking at. One was a couple arrested in texas a few weeks ago that it plans to travel to canada and then head to syria. The other is a 19yearold woman who was arrested in colorado that had travel plans to look up in syria. There are more going on according to officials. Thank you so much on that raking news. Lets switch gears. Lets at the top tech stories. The Biggest Smartphone maker predicts the sales will bounce back in the third quarter. Missed wall street estimates. Doubled revenue. That is according to a new filing. They have raised 150 million. It gives them more flexibility on when to go public. Sued intors is being china by a businessman for trademark infringement. Registered thee name before the automaker entered china. The man wants 4 million. He also wants tesla to cease operations in the country. The stories are only on bloomberg west. Wash and become the second state to permit the legal cell of marijuana. Stores open their doors to sell. It is still being highly regulated. Jon erlichman is that i one of those approved stores in washington state. This is the only store in washington that is selling. Yes. It feels like an apple product launch. You get the media and people line up. They are definitely not selling iphones. This is a store called cannabis city. This is the first legal place in seattle. There are many places across the state that are ready to open their doors. The is been unfolding for last 20 months. We know colorado and washington gave the thumbs up for these legal pot stores. In the case of washington state, there was a lot of regulatory work they had to do to get to this point. In colorado a lot of people pointed to the Medicinal Marijuana industry there. It was already quite regulated. There was a need to get the growerson phase and the and here we are. There you are. It kind of reminds you of a product unveiling. Might be seen lots of sales of pot in washington state. Does that mean more tax revenue . I think what we have seen so far, look at what has happened in colorado. The tax revenue being generated by legal pot is in the millions of dollars. It is not the estimates that were first thought. We have seen a similar reduction in estimates for washington state. A couple of years ago they were rejecting 1. 9 billion. It may have brought that down substantially. This is heavily taxed pot. It is generally going to be higher than blackmarket pot. That might keep the man down. The slow approval of these various players that came together to make the industry becomes a supply and demand issue. A regulated industry, who knows how big this could get. I know you will be out there all day in front of that store. Jon erlichman is our senior west coast correspondent. A global crackdown on the syrian terror threat. We will be asking what can be done to stop the threat from spreading here in the u. S. Stay in the loop. We are seeing israeli retaliation for rockets launched over the border. Tensions may be escalating. That breaking news from eric holder, commenting on the increased threat of the syrian militants. We want to bring in the council of foreign relations. Richard, good morning. I want to get your reaction to the attorney general and the andtegy to bring in allies tamp down this serious threat. Is this going to work . It is welcome. It doesnt change the reality between sevent and 10,000 people who are already part of isis who have been fighting in places like syria and iraq. The danger is that when they are prepared to leave they will use their european or american passports and travel around the world. It wont help you with them. This new set of proposals by , we haverney general to see if europeans are willing to work with them in principle and implement them. A lot has to be done. This is not a transformational moment. What would be the key for the europeans . One b key for them to be involved in this . Ando crack down on funding anything going this direction to be careful about who they let out and who they let him. It means a lot more what we would call Homeland Security and tsa. Their equivalents in europe need to tighten up the borders in both directions. Is there much we can do to protect our own borders . We have seen the tsa say there is going to be new role rules about traveling with your phones. Sensehave to get a better for the new generations of explosives and other things. Intelligence is your best protection. You try to stop things as far away from the border as you can. The people get inside United States than it is an infinitely more difficult lawenforcement challenge. A that is why the biggest concern is people who will be traveling on passports like american passports that we accept. That is the real danger. I want to switch gears for a moment. Israeli troops are pounding the gas a strip right now. Gaza strip right now. This is not going to end anytime soon. What to the president do . What should the response be to this fighting . I hate to be Debbie Downer but there is not a lot we can do. The ceasefire that has been it in place for a couple of years is breaking down. You have had hamas rockets shot at israel. Youre not going to have a low level Israeli Campaign in the aftermath of the brutal killings of the three young israelis and the philistine in. This is one of the many faultlines palestinian. This is one of the many faultlines. Thank you so much for joining us, richard. A quick programming note, and tune into night. We have seen casino revenues soared to seven times of that in las vegas. She is now the Richest Woman in hong kong. She is taking over his legacy. Recent episodet of titans at the table. I do know how they calculate that. If they say so. That youre part of a legendary Hong Kong Family . A senseel that we have of legacy as you said from my familys contributions. Ofre were 450 years portuguese presence here. Macau. Er helped create he paved the foundation for today. He created the gaming industry. We would very much want to help to grow macau that is more exciting. And more important. That is why we carry that torch. You can watch the whole titans at the table. Is 56 minutes past the hour. We are on the markets and i am scarlet fu. We are into the trading day. Stocks are falling for a second day. The s p has lost one half of 1 . Nasdaq is the biggest loser of the three off by 9 10 of 1 . Alcoa is reporting earnings after the bell. Treasuries, prices are rising. Was a stronger jobs report than expected. Some other banks of moved forward their dates for when the Federal Reserve might begin raising interest rates. Crude is below 110 a barrel. This is a reverse. Lets move back to equities for a moment. Oneaba may make its debut month from today on august 8. Box is making some news. It receivedng its, a round of funding. Joining me is leslie picker. When we look at rocks, they delayed the ipo. Is that a problem in the ipo market overall . I think this is specific to box. You saw other Companies Delay their ipos. Both of those companies have come out and done ipos and gotten their deals done successfully. Box is the lingering party that delayed theres and will continue to do so. This 150 million cash infusion will allow them to say im a little bit longer and wait for markets that may be more receptive to their Business Model. This is fairly late stage financing. Obviously when they were filing confidentially they were testing the waters. They were meeting with investors and getting a sense of the appetite. That gave them the sense was not the right time to go public. Now they have a private round of funding that values them at 2. 4 billion. The risk is the Public Market will be valuing them at a lower valuation than the private market is. It puts the onus on box to boost that valuation and pitch to investors at their worth a lot more. We are going to look backwards a little bit. The Second Quarter was marked by all these Chinese Companies listing in the United States. They are pursuing listings in the u. S. When they could do it in china or hong kong . The markets were troubling and volatility was higher. It was not the best climate to do ipos. Companies e text Tech Companies settle the sideline. The Chinese Companies were willing to get their deals done. Why and how is that possible . A lot of these companies dont have profit and they have a weird structure. That is why they came to the u. S. They dont have the exposure to a massive growing Internet User base. Investors looked at that and said this is an opportunity i cant pass up. These deals were working. They were performing really well. Investors saw that as a way to yet a return of these types of investments. Last question. Alibaba is still on schedule to go on august 8. At inare still looking early august listing. The markets are looking very amicable to that type of listing i now. We will stay tuned. Leslie, thank you so much. We are on the markets once again in 30 minutes. Market makers is up next. Live from bloomberg headquarters in new york thomas this is Market Makers with Erik Schatzker and stephanie ruhle. Merger mania. Usnson since he will tell what is hot and what is not. We will see more those International Appeals driven by tax breaks. Cashing in on cannabis