Transcripts For BLOOMBERG In The Loop With Betty Liu 20140919

Its start with you, emily, because you will imitate you will interview jack ma later this morning . I cant wait. Do when he do we know any more about him . He certainly showed his personality. He has a lot of charisma and is a funny guy. We saw that come out of the roadshow. He reiterated customers first and employees second and investors third which has investors saying why should i give you my money. His answer to that is what that when alibaba went through hard times and this is their second time going public but it did not work out, this is their second chance. Time and left at that customers stuck around and thats what customers come first to him. I want to know what happens next. He stepped down as ceo a few years ago and has other interests like a private equity brand withtqai chi jet li. I am curious as to know how involved he will be. Like it underscores a little bit of this gathering comfort among u. S. Global investors. And a big Chinese Company certainly, there have been many questions about the Corporate Governance structure. Over the last couple of weeks, people have gotten more comparable with that structure especially as they have gotten to hear from him. On the other hand, some of them think they have no choice. They just want appease of alibaba which is so big and has a much potential. They believe they have to get him. They all want a piece of the china growth story and this is a way to play it. China is the worlds secondlargest economy after the United States. Its a managed economy which means the Chinese Government sets the growth targets and they usually meet those growth targets. Ands well managed choreographed. It is that middle, it currently consists of 40 of chinas 1. 30 6 billion population. They are really growing. In the terrified city has a lot more power than those in the tier one and tier two because they are spending more online. Coming up on . Why are they doing that . They never had access to some of the branded goods that they can afford. The more west you go from beijing and shanghai, they dont have the retail infrastructure and some of these more rural communities. The online marketplace created a place for people to buy that never really existed before. We have both lived in china so we know how ingrained elliott, how ingrained alibaba is. 80 of all transactions in china go through alibaba and that is growing. If you think that alibaba is n indication of chinese growth. The internet population is growing so currently, half of chinese users are on internet. That is expected to grow to 85 625 by the end of next year according to government figures. China is trying to shift from the manufacturing economy to a consumption driven economy. Guess what . As it is, china compared to the United States as a percentage of consumption to gdp is very low so there is so much upside. 80 of the more than ecommerce transactions go through alibaba. More than ebay and amazon combined. So what is left . Thate of the challenges is more people in china have money and more of them are on the internet and on funds and ken alibaba dominate mobile . . 10 is another huge conglomerate in china is arguably a mobile first company. Ken alibaba continue to grow as fast as it has . Jack ma is going where . He is going to a big lunch with a lot of highprofile people. Jamie dimon the jpmorgan and larry think of blackrock will be there. He is going on quite the world tour and will be going to the Clinton Global Initiative Event Next Week where he will hang with the clintons, presumably. Everyone is hobnobbing. The bestoadshow was type of marketing event for them. Sign that he wants to expand in the United States and he needs to build these relationships. People want to build relationships with him. He is the new it company. Thank you, guys. Dont miss emily changs big interview with jack ma, the chairman of alibaba coming up at 9 00 a. M. Eastern time on Bloomberg Television. Are you getting your iphone today . I am. I carry a few devices but the feeling of a new iphone is exciting. I have not gotten to touch it yet but i am excited to see what the big screen is like. What color did you get . I went with gold. I have a black one now. I will wait until christmas. It is the end of an era at oracle. Ceo Larry Ellison said he is stepping down from the helm of the company he founded almost 50 years ago. He has been replaced by two company loyalists. sey will take over as coceo and they were praise yesterday on the conference call. They deserve the recognition and they deserve the ceo title and im happy that her Management Team continues to look forward as a team. Bloomberg west editoratlarge cory johnson followed the story since it wrote yesterday. Larry ellison will stay on as the chairman and chief Technology Officer. Is this kind of window dressing at oracle . I think the transition has been underway for quite a long time. That katz will have is the role she has had and the Job Functions will remain the same. Larry is still the largest chair shareholder and chairman. The chief Technology Officer thing is important. He has always been very deeply involved in the trenches of the technology the company has developed and in later years, the technology they acquired. Executives of companies hes acquired and he said one of the things that happens is he talks about product and identifies unique technologies in some of the companies hes acquired. To focus onants this technology and price it for the customers and talk about how it will work. This is a guy who has always been focused on the technology that the Technology Behind this is what has driven this company. There was the true powerhouses in global business. This new structure, the ss, it makes me question why you need two people to do the job of one. That know and peer clear the performance of two ceos is sometimes better than one ceo and these are tough people. Atz is known for her sharp elbows and mark hurd always seems to come out on top. After a scandal of hewlettpackard and he showed up as oracle as the president and survived and did quite well. The company is also going into this structure into a very difficult environment where they ,re losing sales to competitors new competitors like workday, much Smaller Company and salesforce is much smaller. These are companies that are having success with Product Offerings that oracle cannot match. Oracle likes to talk about Cloud Business but the fundamentals of the company is swinging iron and selling hardware and selling software inside of that in the long term packaged software deals. This change in the way that software is purchased has created opportunities for their competitors and its something that has stunted oracles growth in recent years. Thank you so much. It was the vote heard around the world and scotland rejected the independence. 55 voted no while only 45 voted yes to break away from the u. K. Anna edwards has more. The vote was not as close as some expected. Yes, the poles were suggesting we would see something very close just a week or two ago. In the days running up to the vote, things have gotten calmer in the polls and we were seeing some coalescing around the number 52 for now. It turned out to be a stronger no turnout. The later poll suggested the final number was 55 no and 45 yes. It was a strong turnout, a british recordbreaking turnout which is why many people are talking about this being a victory for democracy. The u. K. Will not be the same place again after this. David cameron had to reaffirm divulgeitment to further powers to scotland but he had to go further and talk to the rest of the united kingdom. He called the english the silent voices in all of this. The english and the rest of the u. K. And wales and Northern Ireland had no say in what was going on in scotland. That left the feeling of instability. In some parts of the u. K. Can we saw expressions of discontent. Perhaps we needed to have more deevolution of power. It was not really a complete loss for the proindependent side, right . By mr. David cameron will be promising more power. Absolutely, more power in terms of being able to tax the way they want to and spend the way they want to. They are a have some devolved powers from westminster but westminster still maintains the right to overrule some of the decisions made here in edinburgh. That might be addressed. They can talk about justice and but there are sets of issues they can run from here. Thank you so much. Coming up, it is the hack attack that was bigger than people thought home depot talks about the big data breach. Alibaba maybe the exception and not the role and american investors are not 100 comfortable with china. We will talk about this with pulitzer prizewinning author who is a china expert. Interviewiss the big in the next hour with alibaba executive chairman jack ma from the floor of the New York Stock Exchange. Just ahead of his companys public debut today. Nearly 22sed billion in its ipo yesterday and priced at the top end of the does that warm reception in american investors are comfortable putting their investors in Chinese Companies even after a spate of accounting fiascoes including short seller carson locke and his discovery of the huge irregularities at sino forest. He told a group of students in new york last week that we have a pulitzer prizewinning author with us to talk about this. She has also worked in finance at Goldman Sachs and i was a senior managing director at vinmar securities. Her new book will be published next week. Rate to have you join us. Good morning. What do you make of the comments of carson block that if alibaba because its so big, if it wanted to defraud investors, it absolutely could. First of all, i have no idea whether or not there is that suspicion that it would become true. It is such a Large Company that its very hard to understand the entirety of it. There is a lot of vagueness in the numbers and the description of the ipo. We really dont know. Lets give it the benefit of the doubt and assume there is not that much opportunity for fraud. Absolutely, investors going give the senior Management Team there fulltime that the company is running efficiently and going to grow. Which is the issue issue of other Chinese Companies do u. S. Ler investors know what they are buying into when they buy into a Chinese Company like this . Well, no. There is not any way to know for sure what you are really buying. Hasink alibaba certainly distinguished itself in many ways from the other companies that have been listing in new york but also delisting over the past few years. When you look at alibaba, it has 86 of the Online Ecommerce mitered in china market in china. Thats an amazing feat no matter who you are. It clearly has a solid business. It has been able to expand and away none of the other Chinese Companies have listed before have gotten to that largesize in the ecommerce market. The fact that this ipo did so swimmingly for alibaba and the fact that they raised their price range, does this tell you and Global Investors particular in america that people are more comfortable investing in Chinese Companies . I dont think that alibaba really is representative of all Chinese Companies. Its an unusual case. Its one of the probably the only brent, the first brand in china is becoming global. Name, its a very magical name and not very chinese. In some ways, it is has been able to lul investors to thinking theres a pot of gold side but we really dont know. Are a lot of reasons for caution. What is your number one reason for caution . If you look at, what it is right now, its got 86 of the market in china. Haveit goes ipo, it will 170 odeon dollars in market capitalization. At the rategrow that a lot of investors expect in order to get a really good return . Compute a 10 annual return over the next 10 years, it will have to have a share price of 188. That is reasonable. Look at netflix and how it has quadrupled in the space of 1. 5 years. If you have to look at the earnings they will have to gain, and then the market cap it would have to game and get to that size, that will be pretty gargantuan. The Growth Prospects will be extremely formidable for alibaba. Price, if it issues more shares to expand, it will probably issue more shares, if they issued 25 more shares, that will give it a market cap of Something Like 500 billion dollars. How Many Companies have that kind of market cap on the stages in new york . You are looking at Companies Like exxon or Something Like that. Same, exactly. E can it really grow that much . 86 in the market in china is what has. China will grow in the ecommerce market will grow but it will have to expand globally. Alibaba has been extremely agile in china. Thank you so much for joining us. Coming up, new numbers out an obama giving both parties something to argue about over medicare. We are waiting for alibaba and its public a beauty day. 22 billion was raised. You are watching in the loop, i am betty liu. Telefonicas buying their broadband unit in brazil and will pay about 9 billion. Telefonica hopes to challenge competitors. The deal will boost telefonica shares market share in brazil to about 30 . Isman software at giant sap buying concurrent technology. Share topay 129 per help employees manage their expense accounts. Its the biggest deal for sap which is looking to expand its Cloud Business. Flight was forced to make an Emergency Landing yesterday when the cabin filled with smoke. The plane carrying 140 seven people from long beach, california to austin, texas experienced engine trouble minutes into the flight and was forced to turn around. Three people were treated for injuries and the one was taken to the hospital. Ceo will bethe retiring from jetblue. Hour 26 minutes past the which means Bloomberg Television is on the markets. Equity futures are slightly higher. We are waiting for the debut of alibaba. We seem to be sort of floating onto this rally that has started midweek after the fed came out and said they would keep rates low for the considerable future. We are on the markets again 30 minutes. Republicans continue to speak out against the president S Health Care law. Nook Government Data is likely to give them more reasons to complain. Seven point 3 Million People who bought health plans under the Affordable Care act have paid their premiums and are still enrolled on october 15 but that is nine percent last than the governments previous estimate which did not reflect how many people had paid their premium and were actually being covered. Joining us now for more his former New Hampshire senator judd gregg and bloomberg columnist peter or his, the former director of the cbo and also the omb and is now the chairman of the Investment Banking at citigroup. Thank you both for joining us. Senator, i know you will be at this event this weekend and the both of you will be at the event in dartmouth. We are talking about how to bring two sides together to continue to promote Health Care Reform in the United States. There are continuing questions still. The republicans feel they are still not adding enough transparency on healthcare reform. Probably true but thats not what we are meeting at dartmouth about. What we hope to do it dartmouth is bring together leaders in Public Policy and Health Care Policy with staff of the senate and the house, senior staff, on both sides of the aisle and try to come up with a few targeted ideas with both sides can agree on. Hopefully, it will bend the cost care in the out years particularly with medicare. Medicare is driving our fiscal problems as a nation and health care is but medicare is the key component of that. But hope to come up with some areas where we can agree. Those to, we can use move to legislative activity which will put in place better Health Care Policy that is more affordable. I think its the right approach. There will always be a fight over obamacare and its a major struggle of philosophy and execution but we are trying to find common ground. Peter, i know you have done research on medicare yourself and wrote a column recently for Bloomberg View about it. You notice this trend that medicare spending is actually slowing down, is that correct . Yes, its a pretty big deal. In the first 11 months of this fiscal year, medicare spending was up only 1. 9 nominal. View take inflation and beneficiary growth, real per beneficiary spending in medicare is lower this year than it was last year. That is a massive thing. If it were to continue, it would have really big implications for the federal budget and for lots of other parts of the economy. The key thing is we need to double down on moving away from feeforservice payment in order for it to continue. There are lots of good things happening in health care. But a lot of this slowdown in my opinion is based on the expectation that we will move away from feeforservice payment and we have to for the lead expectation. Do you expect that slowdown could affect the Health Outcomes of the individuals . Could affect Actual Health care of people . I think the best evidence this is data in no small part on the work out of dartmouth itself it suggests there is plenty of room to squeeze cost growth down without harming outcomes. If anything, perhaps it will improve them. We have example after example. Just yesterday, i saw Crystal Run Health care in new york looked at the variation across physicians within their practice and are able to take out 14 of costs in the first go round of what they did with no adverse consequences for quality. And sometimes its an improvement. As you mentioned with this event at dartmouth, you want to bring two sides together on this issue of medicare and Health Care Reform. That thereso noted can be a plan of action in place for the publics desk for if the gridlock in washington could end and there could be one party that dominates both houses. If in fact by the midterm gop has controlled both houses, what kind of action do you see the republicans putting in place . Subscribe to conventional wisdom which says if the republicans take control of both houses it will be just retribution. I think the opposite will happen. If the republicans take both houses and honestly expect they will take the senate and control the house, you will have a huge incentive for them to govern. They will control half of the government and they dont govern, people will throw them out two years from now. They will need to find places where they can agree and go across the aisle and get the president in the room to participate. One of the natural places to do that iS Health Care and specifically medicare. Thats why we are holding this conference at dartmouth which peter is participating in to try to find areas where that might be accomplished. Another area would be tax reform. There are many opportunities there are for reaching agreement and governing. Congress which is controlled by one party and the presidency being another party, leads naturally to any for both parties to do something constructive rather than just throw stones at each other. Peter, what kind of action could take place if in fact the scenario that the senator just outlined took lace up to the Midterm Election . The irony is that both republicans and democrats agree that we need to move away from feeforservice payment in medicare and we should be moving toward a six payment per beneficiary per person that has a risk adjustment at the front end so sicker patients get more money attach of them and some quality incentive or adjuster at the backend. The only difference between republicans and democrats right now is republicans basically would prefer that payment go to an Insurance Company and democrats would prefer it go directly through an Accountable Care organization to a hospital or physician group. Surely, we can figure that out. In the most recent piece of legislation from the chairman of the Senate Finance committee, the Bipartisan Legislation says we should have these payments and they can go either way. I think we can do a lot. Its not only that we can do a lot. This is an absolutely essential time over the next five years. We are either going to succeed in this transformation or the progress we are already seeing in the data already seeing a deceleration that will be lost and that would be a massive shame for the country. Do you think it would be lost if the gop took control of both the senate and the house . Not necessarily. It depends on what happens here. There are steps we could take together, democrats and republicans, to reinforce the better trend that has occurred over the past several years medicare and thereby deliver a much better fiscal future. You wrote in a Bloomberg View column the important point that has to be remembered is that you cannot address an issue like medicare or Social Security or tax reform unless you do it in a bipartisan atmosphere. The American People will not accept a partisan action in this area. They will consider it to be unfair. The key test for americans honestly is usually if the proposal is fair. Requires definition bipartisanship. To get anything done on these huge programs that affect most americans, you have to have participation on both sides of the aisle. I think it will be constructed constructive to have a Republican House and senate and a democratic president. Both sides will have to take the responsibility for governing an peter has outlined areas where we can Reach Agreement and i think there is more in the area without getting into the compensation over obamacare which is a side issue in my opinion to resolving the major problems of medicare. Fact getcould in bipartisan agreement, that would be a huge step for this country. If we can even get our congressional leaders to stay at work, that would also be a feat. I want to read an interesting statistic from the beginning of august until the middle of november, house members would have worked only a total of eight days out of a possible 103 days. After today, they will be gone for 54 days. We were saying this morning that we would love a job like that where we only have to work eight days out of three months. The senate is even worse. It has not had a significant vote on a major piece of legislation involving any sort of amendments or controversial in almost a year and a half. Its unfortunate that congress is dysfunctional right now. Is dysfunctional for many different reasons. It is not working right. Unfortunately, it is not getting leadership from the white house that i think is necessary for it to work right. Hopefully, after we get past this election, we can get things back in order and start seeing the government govern. The American People are frustrated with their government in washington and thats why this election is important and you will see it expressed their. What they would like to see is a government that governs on issues they think are important like as the economy and health care. Thank you so much, former New Hampshire senator judd gregg and thanks to peter or zach. Joining usjack ma live from the New York Stock Exchange and he will ring the opening bell on the first day of alibaba trade. People in new york are already lining up to get their hands on the latest apple iphone. There is the line on fifth avenue. Home depot has now become one of the biggest retail victims of a data breach. The attack happened over several months between aprilseptember and put 56 million payment cards at risk them a bigger than the one at target like last year. Julie hyman is here with more. I am more and more fearful. Difficult to prevent these sorts of attacks. The hacker somehow loaded malware on actual terminal in a store it sounds like and then infiltrated the network in that fashion. Even if you switch to new technology, its not clear if it would prevent exactly that type of an attack. This affected an enormous amount of customers at the company. Home depot says it has now gotten rid of the malware and gotten rid of the actual physical terminal where this occurred and now has instituted some new security measures. There were actually fewer cards stolen and the target hack attack. For home depot, it seems it has been less affected by all of this. The company came out with an new earningspershare forecast that incorporated the cost of investigating this act and they did not change the sales forecast. They are looking for nearly five percent this year. Why does it not seem to be a big deal . One of the reasons could be data breach fatigue. Customers are getting more used to the risk of this type of thing happening and a little bit more numb to it. If you look at the timing of the attack this one was revealed in september and many people are doing their home renovation in spring and early summer so its not the blockbuster time. Target, by comparison, happened over the holidays and home depot had a good response to the attack. They came up probably and talked about it and investigated it and target was a little bit more delayed in its response. What about implementing new Card Technology . Said theepot has socalled chip and Pin Technology that is supposed to be more secure is done and its Canadian Stores and is rolling it out in the u. S. Stores. I talked with other retailers. Andet is now in the process is now implementing this in the stores, walmart is well says it is rolling it out in its stores. If you look at the branded walmart and sams club, they are enabled for chip and pin and the card industry has set a deadline of next october for all retailers to be ready. The question is will they . Its expensive and they have to be ready but the banks have to issue cards that have this technology as well. Its not just about the retailers, its about everyone in the chain. Its unclear whether they will be ready in a years time. Thank you so much. Coveted by cops and crooks alike and widely known as americas handgun, the glock. But how much do you know about it . You may recover this scene from die hard two. 2 onat punk pulled a glock may. You would be surprised when i make in a month. Yeah. Its actually made of plastic and not porcelain and shows up on xray machines. Up next, more on the family behind the notorious handgun gflock. The billionaire founder and the estranged wife and children are locked in a bitter battle for control of the company and they are just now speaking out. We will be back. Gun sales in the u. S. Have had a slump and so has one of the most famous families associated with the gun industry, the glocks at stake is the future of their Family Business that has made its members its members billionaires. Paul barrett spoke exclusively to the glock family and joins us now. A news also author of book about a young lawyer who stopped at nothing. Youre making your television debut. Glad to be here. On this article you wrote for hope will bloomberg businessweek, is this the first time we heard from the clock family . Is the first time i have ever met helga glock along with her husband started this company in the 1960s and their garage in a suburb of vienna where they ran a secondhand soviet era Metal Stamping business. They were making Household Items like her and runs another things and eventually glock was given the opportunity to design a handgun and that became the iconic glock semiautomatic 17 round large capacity handgun that has redefined the gun market all around the world. Ago, thefew years husband fired his entire family , his wife and three Adult Children and said you are out and i have a new wife and brought her in. She is 50 years younger. Hes in his 80s . Hes now 85. Theres a natural question of succession as to who will inherit this billion dollar franchise. Mrs. Glock and her three children that they had devoted their lives to the company with the promise at least implied that they would have some role in its future. Now they are out and they are suing. There has been a divorce and there is a multifaceted litigation in the courts and austria over the division of these assets. Helga glock is claiming that her exhusband basically has secreted hundreds of millions of dollars and all kinds of property outside of austria in private trusts so that she cannot find it and get her hands on it. He is denying all of this saying he has given his family plenty of money and now its time for them to go away. It does not wish them ill. He has done nothing wrong he says, he just fired them all and says these things happen. Its fascinating. Its a universal story of the man who goes for ever from a very modest background and fantastic wealth and is at a certain point fires the first wife then replaces her with the much younger, glamorous second wife and this leaves people quite unhappy. It does and at stake is the future of this company. In your reporting, you like to dig into issues around controversial industries. Like guns and sports and now youre tackling the oil industry. You have written several articles on this but what right you into writing law of the jungle. Its a book about a campaign to save the rainforest in ecuador that went hardly wrong. In 2011, this lawyer from new york won and historic verdict in the courts in ecuador. It was a 19 billion verdict against chevron, the single largest environmental judgment anywhere. Basically, they had gone into the amazonian forest and they raised farmers and completely destroy the area . Texacoallegation is that which chevron acquired in 2001 had left the hind a huge amount of pollution in the previously pristine rainforest in ecuador. There is a huge environmental victory and the Indigenous People are speaking truth to power. However, that was not the end of the story. Chevron fought back. It said actually this guy is a fraud and the evidence he has marshaled is fabricated and he has coerced judges and manipulated witnesses. They investigated him and they sued him back in the United States under the u. S. Antiracketeering law and this past march, chevron won a verdict saying that the ecuadorian judgment was a total fraud. They said what had begun as this crusade to save the rainforest eve evolved into a corporate shakedown, racketeering enterprise. Now we have this collision of two judgments from two Different Court systems, the ecuadorian system and the u. S. System. These are irreconcilable judgments. After 21 years of litigation, that has now spanned activity in six Different Court systems around the world, nothing has been done to improve the lives of the victims in ecuador. Two decades and theyre indisputably is a lot of pollution there. Thats not the issue. Whats interesting is what happened to this lawyer. Essentially, he got lulled into this spotlight . He would stop at nothing to get what he wanted . Stephen and secure danziger felt he was going up against a scriptless follow and develop the fight fire with fire meant sally, any means to get to what he saw as the justified and legal or not. It has been described as the robin hood mentality. Im an outlaw but i am an outlaw for a good cause. Robin hood lived in the forest and was abandoned but may be righteous. Operating the court system where there are rules and eventually he tripped up on those rules. For him the end justifies the means. As our mothers taught us, that does not work out in life. Two wrongs dont make a right and you cannot lie in order to get to your end even if your and maybe legitimate. It sounds like a movie. One can hope. We will be back in two minutes on in the loop. Past the56 minutes hour which means Bloomberg Television is on the markets. Equity futures are slightly higher on the day we see alibaba listed its ipo. We are on the markets again in 30 minutes. We are about 30 minutes away from the opening bell. S p and the dow start at record highs. We will be talking with jack ma in a few moments. Back to the top story of the morning, alibaba begins trading today after the ecommerce a record 28. 1 billion. They will be ringing the bell in just a half an hour. All the rescue joining me from standard all could roski joining me from san diego. Of the key things that we could see is a loud supply coming out of this Company Event is being sold into this market space. 28. 1 billion the dollars in the ipo, but a unique thing is that they are allowing a Certain Group of employees and insiders as well. There is no lock agreement on shares. Theooks like allocation went to 25 different firms of 60 of the deal. That is a very concentrated deal. Some people could buy today who did not get allocation. Aul, noise have the most unusual take on the companies. Rpriced andnde corgi, a weird mix of ge engine partly, not really a tech company. What do you mean . It is like code. [laughter] on the price, they could have priced considerably higher. They are supply and demand as much as they are ecommerce. Full subscribers within a few days of the roadshow beginning. Quirky comes in because the reason why that number stock is because of cultural significance in china to do with wealth and prosperity. Bizarre, it is the characters that mean that. This is a very quirky thing. In terms of the structure of the company, this is really what it is. It is a Franchise Company that creates this kind of are medically sealed experience of ecommerce, but does it in a structure similar to general electric. It is a conglomerate that never really worked before. The structure of the company is more like ge. The fact of the matter is in is yourecompany, but saying the internal structure is more similar to a big conglomerate . Yes. But even saying it is a tech company, Tech Companies grow through product innovation. An unusual take on a market place. This company is not doing that. Innovation is not how it is structured. There is nothing new here. That is not a knock on the company, newness comes from having it organized under one shell like general electric. Thatll me about this fact this. Sc has how significant is it . This is a big deal. Nasdaq has been the historical home for tech stops. Even look at ipos at thehe early 1980s New York Stock Exchange. Now that they have the biggest one in the world is a huge deal. Verycompanies lobbied heavily to get the listing here. At one point they were even battling against the Hong Kong Exchange when it looked like they might go there. Theyve definitely rolled out all of the stops pretty conceit orange everywhere all of the stops. You can see orange everywhere. Were raising the issue hype around ite would bob and mike tell you around alibaba would tell you that investors are interested in Chinese Companies. I think they are double with those with they like those with 40 market share. What it is this this enthusiasm for an incredible share of a very large marketplace which is a great opener but does not tell us much about what is going to happen with this company in the future. What are some of the traders saying to you about ali baba . Are they doing anything different than they have before . One thing that they are doing is that people are saying this is a growth story. If people can see these Capital Gains that they get from ali baba, with the price discount it does not really matter what kind of other risks there until something goes wrong. Another thing is you do not see a lot of full running around in orange jacket like youve seen what those things. They are cute big and very understated at the new york which ishange, interesting for a ceo who opens his Company Meetings wearing lion king dress and singing. It is a completely different day here at the nyse. And assure a special day. Do not forget that emily chang will have her interview with happening after the bell right here. The wait is over for the new iphone 6 plus as people get their hands on the device. Were Just Moments Away from the opening of trade this morning. Introduction of alibaba shares onto the York Stock Exchange to be publicly traded. Investors willing to accept the risk of investing in a Chinese Company. Why is their comfort with that . In josh lernerg from Harvard Business school. Also with me is editor at large cory johnson. We just showed our audience a really complicated structure and alibaba. You would need a mathematics degree and a magnifying glass. [laughter] to figure out why things go where. Why is this so complicated . Is that a risk for investors . It is a huge risk. If you look at that chart, and i literally had to take out a , because theres are footnotes on that chart. There are numbers that are attached to that to explain the different pieces of the business. Who owns what, the stuff at the bottom is owned by jack ma, and contractual arrangements with companies in china. And then across the dotted line you have the Ownership Structure away from china like the British Virgin islands, the Cayman Islands, one Master Holding company in the Cayman Islands that the shareholders are actually buying shares of paren if. It introduces risk. We will be talking about valuation all day long. Is it better or worse than amazon . Is it cheaper than salesforce . Risk becauseze of of the Corporate Structure and it is risk it has played out before. This is in just the risk we have seen in chinese listings that have on sneakers up with accounting funkiness. In the with alibaba recent past when they have taken assets away from u. S. Investors and kept them for themselves. Professor, you chime in on this. There is sizable riskier . Here . Absolutely. But if we are looking for beauty and Corporate Governance, the tech space is not exactly where we want to start. You want to think about Something Like google with the multiclass structure which allows the founders to really have more control than their ownership would represent. We see a lot of examples of this in technology. This is in some case an extreme investors may say that we do not like the Corporate Governance that is here, but we like the company enough that we are willing to hold our nose or look the other way and plunge ahead anyway and buyin at the big valuation. Does that make it right . I everybody else is doing it, do not know how that is any safer for investors, right . It is a great question. I think it almost gets born to in thephy than finance sense that when we teach finance we say we do not like that separation of ownership and control we want one share, one vote. If you go sit down with google, they will argue that having the concentration of control on their hands allows them to do a series of longrun invest ends that they potentially would have gotten punished by by the market. You mightieve them, say we want longrun risky investments being done, on the other hand if you appear more cynical nature do you might say this is just an excuse for them insulating themselves from the discipline of the market. I do not think you can fairly compare first of all, the structure o of owning oracle is a simple one. Funkiness, and we have seen a play out with groupon, with the zynga, with companies that have a dual Ownership Structure. The companies that have dual Ownership Structure have underperformed their peers in the marketplace, Technology Companies or not. When things are great, Warren Buffett has a great line. When the tide goes out to be busy the swimming naked. When the tide is in you can see all of the ships floating like this alibaba thing. But when the tide goes out, the shareholders can get investors to say youre going to do something because we do not want the dual class structure that you are talking about. It is an additional risk. Investors need to be mindful of that when theyre comparing countries that do not have that risk. To the professors point, are we being too hard alibaba . There are lots of questions that linger around the structures of other Tech Companies. Im probably being hard on them today because they are in focus. But on days like today where people will be waving pompoms, and are much more excited than the opportunities than the risks, and they do not usually bite you in the front. On a final note, i think it is a great point that cory is making, that you can cover of a mistakes when you are growing fast. It is when you start struggling, when those issues come to light. I know it is Better Television for us to fight, but i have to agree with what he said. [laughter] thank you so much. We will be back in two minutes on in the loop. From china to australia to new York Apple Stores around the world are rolling out sales of the iphone 6 and ifo iphone 6 plus. Hype push itkend into the record books . What are you seeing out there . We are seeing some long lines. We are seeing people pretty called so far, but it is a chilly morning in new york and we are also meeting people from all over the world. Because is significant for one thing it gives apple some free press. We are out here covering it. It also gives investors a better idea of how much interest there is in this new iphone model. The one place we will not see long lines today is mainland china. Not because there is no interest, but because apple the properet shipping station ahead of the launch. That is why analysts are very divided over what this weekend will set as the apple sales record. It could be the first time in apple history that iphone sales do not outdo the previous model. The black market sales are skyrocketing right now. China is expected to get these six and is six plus models, we just do not know when. And by the end of the year will be available in about hundred 15 countries. In the next calendar year sales are projected to rise about 18 . Apples expecting to sell about 16 Million Units per whatever happens this weekend, were not longterm it is expected to pull ahead. But the people we are talking to out here agree with that. Thank you. We just a few moments away from the opening bell. We have the top 10 stories you do knowledge a miss, and the top stories you top 10 do not want to miss and the top talking to emily chang in a few minutes. Welcome back to in the loop. It is 26 minutes but the hour between some Bloomberg Television is on the markets. We get a final look at trades right before the opening bell. ,utures are rallying slightly and theres alibaba waiting for bell. To ring the opening we will check on the first trades soon. Here are the top 10 stories you need to know about today. At number 10, mcdonalds, the restaurant chain raises Quarterly Dividend by 5 to . 85 a share, lower than the . 92 that analysts had estimated. This shows that unfavorable light on them. Number nine, home depot. The really taylor says data was bigger than targets last year. Home depot security contract theres urged the company to strengthen cyber defenses in the year before the attack. Pimco software. Missed analyst estimates by four cents. Revenue also fell short. Theyve been evaluating strategic options. Stores have seen customers lining up all around the country this year. The new phones have set records, will they sell more than the iphone 5 . Is retiring at jetblue airways. They will begin charging passengers for their first checked bag and put more fees on the plane. What a disaster. Even for small people there is not enough room. Five, prepared to offer more than 6 billion for the oil and gas maker. Siemens is making the offer. Theyhoo , the companies can alibaba has been the largest for several quarters and that is likely to continue. Number three is oracle. Its the end of an era. Big changes. Down, hetepping started the Company Almost 50 years ago. He has had one of the most profitable runs in business history. Number two, concur technologies. Theyre are being bought for 7. 5 million. 1. 29 a share. This is the biggest deal for sap. Companyr one is the that everybody is watching today. It is alibaba. Shares are set to trade after the recordsetting ipo. We will be talking with founder and chairman jack ma in a few moments. There goes the opening bell. You just saw them ringing the bell. It is eight customers that represent alibaba that are day because they wanted to show that they support the customer first. They mustve had some sort of contest. And there were eight of them, which is a number that has been very significant in this. The shares are pressing and 68 our pricing at 68. Everything has a hidden message. As we wait for the shares to start trading we want to bring in the chief Market Strategist who just released a study that wrecked alibaba shares to rise 33 or more in the first month. That is down from 52 before the eye feel roadshow ipo roadshow. By the way, leslie picker is down the New York Stock Exchange because she is keeping track of what is going on ahead of the first trade. First off, were you surprised by the results . It was not a surprise because the survey also showed that the base we surveyed that the revenue would be the range would be increased, which it did. The other part of the survey that is interesting is we had a lot of interest and thought that up stock would trade between five and up 10 on the first day of trading. Those of the two places that record of the expectations surveyed. Actually a lot of interest thinking that it could than 10 offre from the price. Get a good sense of exactly where it is going to open, higher or lower, with them the next couple of minutes. Because what happens in the New York Stock Exchange is they take orders of supply and demand, and mash those together and show a range on this or next to me on this board next to me. It will show depending on demand. It does not just open and start trading like you would expect, it is a price discovery. We will get a good indication of that here in the next couple of minutes. When we talk about one of these big ipos there is always so much excitement about this. But one of the things in your recent note is you look not just at alibaba in isolation, but there is a lot of knock on effects throughout the market from Something Like this. If investors want to buy alibaba, what are they selling in order to raise those proceeds . What do think will be the most significant knock on effect you are watching for . We are watching for the market trading over the next couple of days. We found that when you look at the top 10 ipos of all time from the market has a small upward bias for the first five days after the deal prices. They have almost a sigh of relief that the deal has gone well. The second is a little longer term. Does it indicate a market top . Markets do not happen at bottoms, and the do not happen for the first couple of years after one. Ipos of the last 10 start at tops. The exceptions would be facebook. At tf you look at wireless, theyre well indicative of a market at the middle or the top. What was the difference for facebook . General motors had to, from under the u. S. Treasurys ownership of my and the sooner the better. The timing of that deal was more about politics than Capital Market cycles. Facebook was also unique because it was a unique point in that development of the technology company. It was an opportunity to go public. But if you look at the other eight deals, you have the market middle to the market type. Op. There werehat time both generally bad deal to buy. They have recovered since then. Biggest knock on effect will be whatever alibaba does with the money. If they buy a company and drive the stock up. App, nobodywhats feels that except for those who work there. But they want to make a difference. Absolutely. Tell me about how there is not a lockup. Like there was for facebook. The amount of, shares being sold in the offering is 13 . See you have in them an extra that is free to trade. That could pressure the stock because there is excess supply. But im told that more than 50 of the deal is going to 25 institutions. 25 of the most profitable institutions. So you have to think that these bankers, the ones running the steel, are smart enough to have the sense that those 25 institutions and help them to float size keep that smaller so we see a pop on the first day of trading. Institutional investors are not usually buyers of ipos unless they are buying it to divvy out to their best clients. That is right. Rare in Capital Markets because the track record is not there. We heard from a lot of claims that we spoke to that this deal is too big to ignore. Inn though it will not be any place major for a while, a they see it as interesting. As big as cap will be amazon, seo to see what can of model youre interested in. We are waiting for alibaba to trade, and for the jack ma interview. Thank you to my guests. Is now thejack ma person and mainland china. And we will be talking him when we come back. We are waiting for alibaba to start trading at any moment. Largest ipo in u. S. History. Reminds us again, because it is such a big conglomerate and has so many facets, break it down for us. Octopus,like an because they want to be all things to all audiences. They do not care whether or not they are wearing acquiring profit centers, they want to be in all businesses. A b2c play, that his business to consumer. They have ecommerce offerings. Pay, which ise ali no longer under their umbrella, but they also have ownership in that company. They have an online video platform that they have a 16. 5 in. Stment they also social messaging. What is most interesting is the online video. They are trying to make a big push into the entertainment business. Cs just outlined all of these different areas. It is almost as if one is not alibaba . Does this represent more comfort . That they are so subscribed man that people were so enamored . Does this show that investors are more comfortable with Chinese Companies, even the was the size of alibaba . Investors will be comfortable with anything at the right price. So 16 a share is enough of a comfort zone 68 a share will be enough of a comfort zone for them to buy this. The question is how long will they be comfortable to hold it for . Pop at thet not open, is there enough confidence for them to trust jack ma and have them stick with alibaba as they did with facebook . Right or cheap enough for all of these Institutional Investors to feel comfortable owning alibaba on the first day. This is a very big deal for those guys. Theyre pricing it to perfection so you see somewhat of a pop on that first day, not enough to leave money on the table, but you would expect to see some pop. Expectestors said do not this to start trading in the next hour or two. Behind the on scene to make sure you get the right price. , andu have Goldman Sachs they are working with the New York Stock Exchange behindthescenes to establish that opening price. Nasdaq, there is a human factor at the New York Stock Exchange. It is not much, but it is more than pure electronics. That is why were less likely to see the kind of debacle of the open that we saw with facebook. We are going to get that opening indication as they closer and closer to bringing the wires and sellers together at the right price, we are going to get a sense of the next two hours of where it is likely to open, but we will not know until the opening tray falls. Trade falls. And has to hurt the nasdaq. Bloomberg had talked to bob and he said that it does hurt to see that alibaba is huge and going stock exchange. That is ironic. And it is symptomatic of what happened with facebook. Alibaba is probably going to post its first trade during Market Makers. It is worth tuning in just for , some veryor people smart people, joining us to talk about it. Yahoo is a very big participant in this, and they have a stake worth billions. You were there when facebook add debacle. It was all on your program. Thank you. Still had from we are going to hear from the man behind alibaba. Jack ma will be joining us. The moment has come. We have been covering alibaba all morning long him and now the man of the hour is here with emily chang. Welcome to Bloomberg Television. I am here with alibaba chairman and cofounder jack ma. Congratulations. That you believed alibaba could be big even when the internet was in its roughest form. What you say to the people who thought you were crazy . Everybody should have a dream. What if that dream comes true . I believe 15 years ago that internet was going to change china and improve the world. Whether we succeed or not, somebody will succeed. If you do not work hard, if you do not keep working every day, nobody has a chance. We never knew that we would be here today. What do you do with all of this new capital . Would you buy yahoo . I dont know if they would sell. [laughter] the very important thing is that we want to build up a company. We want to make sure that our hel anything that can help Small Business growth. We spoke to were a semi or yesterday spoke to Marissa Mayer yesterday, with a very nice congratulatory email. We are a Global Company dealing with many governments. If you deal with them on communication, solve their problems, listen to them, that is an opportunity, and that is how we have survived for the past 16 years. We always try to say in love with the government but not married to them. This is our philosophy. Usual the problem they want to solve. What is the timeline for u. S. Expansion . We already have a lot of Small Businesses in the u. S. In california, and washington, we are selling alaskan seafood. Want to sell more things but we are coming here not to compete, but to help a lot of Small Businesses. A lot of things need to be done. It is not a competition. Ventureabout a joint with amazon . I would be interested in talking. Anybody thating, can help Small Businesses. We will be excited. You have a lot of u. S. Committees try to expand in china and they have failed. What kind of mistakes are they making . They need to send entrepreneurs there. Every market is a market economy. You have to make sure that you have the entrepreneurs there. Not only the professional managers. Try to make your customer happy rather than your boss happy. Patience, and have the time to do that. What we want to do is to have a lot of small guys because big guys are already in china. Small guys need help like us. And that is what we are excited about. Alibaba is so diverse and so sprawling. What kinds of Business Ideas have you said no to . To a lotaying no of ideas, because if i say yes, i will probably get 5000 opportunities every day. Based on the vision. Hoping to do business easier. If it does that we will consider parent if somebody says if comes to me and says we just want to make a lot of money, i am not interested. I focus my time on training and developing people. I focus my time on government relationships with all of the nations that are helping Small Businesses. That is strategic thinking. I do not do any operation work. What is your next surprise . It is coming. [laughter] i will you celebrate with your cofounders . Dinner lastbig night, and everybody cried and we send in 15 years we never knew we would make it through. We are thankful to the customers, the people who helped us. That is why we put the young people there with the customers. Years, theafter 15 purpose of working so hard as we want to make hes people successful. When they are successful, our success as a result. A Karaoke Party . I will try to squeeze more time when i givet back,. Congratulations. Thank you so much. Good luck. Thank you. The anchor, bloomberg west with jack ma. the loop it for in today. Coming up next week were going to have a bloomberg special program. Our titans at the table, and my exclusive interview with bob benmosche. Around theturning company to what he thinks of wall street and regulations now. That will be airing on thursday and and 00 p. M. Eastern time at 9 00 p. M. Eastern time. We are approaching 56 past the hour which means that Bloomberg Television is on the markets. Stocks broadly are changing. Rising, and weks have a new record high for the dow and the s p 500. In terms of which groups are doing the best in the s p, financialwe saw and consumer discretionary. And at this point all 10 groups are up so wed is a broadbased rally. We have been watching the jan which has yen which is followed to its lowest level versus the dollar based on what the fed will do next. Aiming in theis wake of that vote in scotland in which they voted to remain part of the united kingdom. The big story would be alibaba come the biggest ipo in u. S. History. It will start to trade this morning. Were waiting for it to open up on the near stock exchange. With a look at what to expect, but also in the coming days is our media analyst. We just heard from jack ma. How do you think the company has done in terms of selling this idea . They have done a fantastic job, there is divisional interest, they have raised the price. Success iding resounding success . There are many issues. The the ipo being biggest one, it was a great task for the underwriters. But with jack being there to talk about the longterm vision, and with the size of the deal that we have seen media arts that they have had a number of longterm Institutional Investors place laird orders, that should kind of help the stock trade today in the coming days as well. I guess we will see how it trades up. There was a little bit of irmuring in congress, and know the sec looked into the structure of the ipo which the company decided not to do it hong kong because of structural issues and what they would allow. Is that an overhang at all for this point . Or have they brushed that off . Governanceporate there are two factors. There is this issue where the partners are really the falconers, they control a majority of the voting stock. This is not similar to google or , i think word is clearly different is the whole structure of Chinese Companies where at any point the Chinese Government can just invalidate the contract and investors would lose all of it. In the spotlight because of the previous instance with alipay. 68 a share, we do not know where it will open up t. What is your perception of what we might see the coming days . Be 167 billion. When we look at global ecommerce, it is a slight premium to amazon. But if you compare that versus the chinese internet plays, it is a 20 discount. The valuations, there are two boys to look at it, and we will see how investors the you about it. There are two ways to look at it, and we will see what the investors think. Seen some fluctuations in the chinese currency based on different policies of the Chinese Government. Is that a risk to alibaba earnings . That is a risk that all of the Chinese Companies to face. So far we have not seen currency risk a big factor. I think as alibaba expands internationally and a bigger part of their business becomes international, some of the risk they go away. Thank you so much for joining this march to with the opening of trading. We could be waiting for quite some time as there is a price discovery on the New York Stock Exchange. We will have much more is the morning goes on. And Market Makers will be speaking about it next. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. A recordbreaking day on the New York Stock Exchange. There has never been an american ipo like this one. Raises almost 22 billion. Will the stock pop . I am going to say yes. The confusing Corporate Structure is what they dont talk about much. We will see what that may mean for investors. A windfall for yahoo . They are cashing in. They need to do something. What could she do with all of that money and will she spend it wisely . Marketre watching makers on Bloomberg Television. This is a very special day. Ira member you a i