Transcripts For BLOOMBERG In The Loop With Betty Liu 20141110

Will be the one breakthrough in bipartisan negotiations. The release of two americans held by north korea. Kenneth arrived at a military base outside washington. North korea sentenced them to years of hard labor. There is no ill will. He would not have wasted the two years upon himself. I think he looks back and he wants good to come out of all of this for everyone involved. North korea says Matthew Miller was trying to investigate the countrys human rights investigation. Residents have overwhelmingly voted for independence. It may force spains Prime Minister open talks with officials. They have a number of gripes with the spanish government, including budget cuts and taxation. A year of austerity. Plus, a deadly ignition switch problem. Gm ordered a half a million replacements which is almost two month before telling the federal government there was a problem. This is according to emails by the wall street journal. Viewed by the wall street journal. This led to the recall of more than 2 million vehicles. Uber trying to raise million dollars. 17 billion last year. The ceo wants a higher valuation this time around. Staying on corporate news, mcdonalds is out with sales numbers. Matt miller, it looks like mcdonalds is better than expected. Yes. Five 410 as far as meeting or beating wall street estimates with sales. Today, they beat estimates. Still on decline. 0. 5 , better than estimated. The u. S. Area has been a problem because of growing competition the menu was healthy little bit by the monopoly. A decline of only 1 compared to an estimate of 1. 9 . In europe, the economy has been a problem. Still seeing shrinkage, but only 0. 7 . In asia, where the real problem concern, that some of the food, especially the meat, could be dangerous. 4. 2 . Decline. Or a 6. 1 around the globe, things are better than estimated, but still falling. Mcdonalds hopes to simplify the mcribbringing back the for a boost in november. We will see how mcdonalds continues to trade on the sales numbers. Moving and shaking this hour, the Hedge Fund Billionaire john paulson. Last month, his hedge fund posted a 14 decline. That gives it a 20 loss for the year. It has been a rough month for the for them. Preferred shares of fannie mae and freddie mac tumbled. Paulson bet on Companies Involved in takeovers, spinoffs, and bankruptcies. Saw a lot of those and end. Wrappingaving trouble his head around it. Markets arecern still way too high. My next guest is concerned they have been propped up far too long by the feds easy money. And that we may be headed to japan style economic. Of course we want to lift up our viewers by saying we are headed for better prices here . Outcomes thatwo are possible. But that is way behind. Nations they should have started raising rates slowly over a long time ago. Let me stop you there. Would you see inflation . You can find places where it is mispriced. They look at something and say, this is better than what we had to for we will reduce the price. Things like education and health care and largescale purchases are far higher. They have been going up six or seven or 8 for generations. Theyre very concentrated in a short time. The prices are rising but does that necessarily flow into inflation . Up you are buying a car or paying for your child has his education, of course. And it affects your ability to do other things. There are things that are missed measured. I tend to look at the overall inflation rate. Has an impact on how people can afford to buy other things as well. Whether oil is expensive or not. Startedthey should have raising wages very delicately in 2011 and early 2012. Glass a long time ago. A long time ago. Designed to deal with an absolute catastrophe. Whoe are a lot of people live on fixed income and have a low risk investment. Half there would have been more dollars in the economy. Maybe. If the fed has started raising rates in 2011, 2012, if you look at the numbers they look at for inflationary pressures or wage there was nothing there for the last two years. Inflation is not the only mandate, number one. Has done much better. Since 2012, if you look at the trailing averages, we have been adding roughly 190 jobs a month. Which is quite good when he that, a during a lot of lot of it was government redundancies. Time, one outnton of every four jobs was government. Were adding more private sector jobs during this time. We were losing government jobs. I just take it from the other end. Janet yellen and Ben Bernankes issue was, if we start raising rates too early, might we be plunging the u. S. Into a japan style crisis . I would argue if you look at the history, these zero rates have embedded in japan zero growth. If you slowly raise rates also, keep in mind, they were very worried about u. S. Consumption. Giving people consumable dollars is a very good thing you read i think it ultimately distorts economic and financial and investment decisionmaking. A very slow process of a basis point or two every three or four weeks. Last point, the most effective tool the central bank has for dealing with this weakness is the ability to cut rates. Unless you normalize rates, that tool is not there. That is true. That is what mario draghi is faking facing right now. Looking at real Interest Rates. Tay with me for a moment moving overseas, president obama is kicking off a weeklong tour of asia and australia. The trip marks his second to the region this year. Phil mattingly is traveling with the president and joins us on the phone. What does the president hope to achieve . I think it is a recognition amongst officials that they really only have two years left to implement a central tenet of the Obama Administrations foreign policy. The main thing has been on the trade deal they have been pursuing. Leaders meeting today and the president himself saying theyre trying to boost momentum and work out issues. They are a long way away. They are. The tensions between china and japan are pretty high in recent years. For the first time they have met at the forum, tell us about this meeting. That is right. At least somewhat of a positive step, unless you look at the pictures of the two shaking one anothers hands. If you talk to officials after the meeting, they say, it was a good first step. A lot of instigating going back and forth from both companies in the last years, but at least they were willing to meet. They feel like this was a positive step over. They hope it is a repair to the relationship. A rough patch in the last few years. A very rough patch. On the last note, russia, speaking of relations, Vladimir Putin also attending the summit. How will the president deal withs presents . It is oh is funny to see the dance people play with. No one is really sure yet if Vladimir Putin and president obama met and shook hands but this is usually the time they run across each other. There will not be a an official bilateral throughout chancep, but a very good they will meet on the sidelines and have a discussion. But funny to watch how they tried to work with one another, who talks with who throughout these types of big summits so far. Travelingou so much, in asia with the president. Coming up, customers are getting planak the at their 2015 as the president hopes to avoid any missteps in the last year. Potential obamacare customers can get a sneak peek of the health plan today. The Obama Administration cannot the same make mistakes. The Affordable Care act face a threat of an entire repeal by a republicancontrolled congress. On friday, the Supreme Court will take up the case of claims that obamacare does not permit more, joining us for drew armstrong, who covers the Healthcare Industry and obamacare. And Neil Grossman is staying , managing partner and chief Investment Officer who wrote a book recently about my nails. Millenials. We had theys, Supreme Court deciding they would hear these cap this case. Watch the words established by the state. About 4 million americans. We will have an answer to that probably by june. Right now, people are going online to healthcare. Gov and shopping for plants. We are waiting for the next six or seven months. It is all on certain at this point. Why is it important they are reviewing this and why would they find this credible . Basically it challenges the federal subsidies in light of where people live and whether those states have their own coverages. Lets back up. Law basically said, states, you decide whether or not you want to run the marketplaces where people can go online and shop for plants and buy coverage on their own. Hit 4 only 14 states did 36 said no, we will leave it to you. The federal government set up its own shopping website and we ended up with a hybrid system of states. Going back to the case, what the law says is for subsidies, for people who have lower income, get a little financial help. It has to be established by the state. If it is not a statebased exchange, then it is a federal exchange. The question is, are the subsidies in 36 federally run subsidies valid. Your take on obamacare is what . From the economic perspective, one of the interesting things about the way it is structured, it makes the least exposed the ones asked to people. Most, young over time, i think that will have an economic impact. Less disposable income for things like starting families, investing in markets for their future and retirement. Obamacare should benefit millenials . If they do not have jobs, if there is parttime work homonym may have insurance. That is correct third but they still have to pay for it. If you do not have enough money to pay for it, the expense is coming elsewhere. Sayproblem is usually you to the young people who are the healthiest and least likely to need the program that you are paying a lot more for it so other people do not have to. That is true. Me being a former young person, i do remember that. But on the website itself, how do we know the Obama Administration is actually taking care of some of these issues . We will find out in about a week. I remember sitting in a room last year a week ahead of the thing launching, being reassured by the administration, we have tested this extensively, and it will work. Remembers it was an outright disaster. I have heard this before and im a little skeptical. They told us it would work and it did not. They have had a year to work on it now. Someume they worked out kinks. It started out a disaster and ended up a success. See when this and thing is opened, did they really get it all right. He just had an election where people are still trying to understand what the implication of republican victories mean. Of might look at the case what is going on as an opportunity for the republicans to move to the president and say, listen, we do not like this, and maybe we can find a compromise. Possibly. Lets hope. Thank you so much drew armstrong and Neil Grossman. Thank you so much for joining us. New book is available online. Get it wherever you want. Coming up, regulators take another shot at too big to fail banks. That could lead to a fight over higher capital requirement. A movie based on Disney Marvel comic book characters, again. We will be back. In the loopatching live on Bloomberg Television. Good morning. I am betty liu. A look at our top company news this morning. The world causes largest bank could face a buffer role as the Financial Stability ward tries to and too big to fail. Said the biggest banks might be required to hold capital as a quarter of their assets waited for risk. The rules will tend will not take effect until 2019. Japan passes aviation capital. To 80 of its 737 claims deliver between 2018 and 2022. The company said they expect demand to come from lowcost carriers which are gaining ground in asia where it 36 million in prizes were given two math mathematicians. She spoke to a legendary legendary investor and asked where he would be spending now, in china or in soaking valley. Isi think soaking valley ahead of the game at this point. Most of the innovation is coming out of silicon valley. China is catching up quickly. There are a lot of innovative ahead andcharging paving the way for entrepreneurs to come out and innovate. Now you know. 26 minutes past the hour. Bloomberg television is on the markets. Still digesting the jobs data from friday. A martin reporter, matt miller, has more on the market. Thank you. Time for your futures and focus segment. Oil futures are climbing back this morning and they did on friday as well. Back near 80 a barrel after dropping as low as 76 last week. That is just the closing price. Joining me for a look at what is striving up the price of oil and how you can make money off of these, dan on how you can make and scott bauer, Senior Market strategist at trading advantage. Lets talk about what is driving this move. First, let me ask you, what is that title . A slow i wrote about the financial is asian of oil markets. I was feeling to have a better insight. A lot of analysts tend to focus on fundamentals. Fair enough. Most fundamentals matter. What they tend to mistake or leave out our hot deep are how deep they are. That is what i wrote the book about. . Do you think, what about what we have seen in the last few days . A lotlly has been of new fighting in the ukraine. That stirred up again geopolitical tensions in the market for a long time, sort of forgotten under the weight of collapsing oil markets in the last few weeks. What you think about the last few moves . Dan isree with political, but also this forecast we are supposed to get later this week, almost recordbreaking cold temperatures. Were seeing a lot of the buying based on that. But we get them up to 81 level and that is an opportunity to short them again. See us trading back down to the 76 level very quickly. Class of is your trade . You have 81 and you want 76 . Exactly. If this rally continues here, whether it is later today or the back i am looking to break down to 76 where we traded last week. Shortterm range and that is what were looking at. Currently trading at 79 barrel dollars 79 per barrel. Scott thinks it will short or sell at 81. It is a profit of five dollars if everything works out right. Contracts of 1000 barrels, scarlet make 5000 barrels on the straight. I would not be so bad, but you have to have everything working out right. Indeed. It is 5000 per contract. One is obviously a very small position. I actually like scotts trade a bit. There are a lot of players out there facing an even minor rally. We will have to hedge production for 2015 and further out. There is for the shortterm for the shortterm, a rally. Thank you. Oils endless bit. On the markets again in 30 minutes. Stay with us on Bloomberg Television. Thank you so much. Matt miller on the markets. Turning to big headlines out of technology today, uber is in fundraising mode again. Looking to bring in about 1 million to finance its Rapid International expansion according to people familiar with the matter. Highly among one of the highest valued. I want to bring in cory johnson, in san francisco, because he loves to talk about uber so much. How much is the Company Valued at now . Was athe last evaluation 17 billion valuation. They are not alone in the spirit a number of privately Held Companies have seen valuations and are raising money in valuations. 10 billion is an impressive list of companies. The companies are much less farther along in uber, in whole four years in development. You have Companies Like snapchat, dropbox, pinterest, all with multimillion dollar rounds under their belt. To some extent, they are right there is global macro. Ober is offering it potentially somewhere. And in particular is an Interesting Company whose out in a is canceled lot of different directions. It is. I cannot believe they are only four years old. Theyre using the billion dollars they will raise to find International Expansion. That is always music to investors years. So where is uber going . Europe and asia are particular focus is. We have read a lot about the struggles in europe. Isa in particular interesting. There facing competition. In 19 cities,pany lugar is only in 10 cities in india, so the notion that the able to strengthen their downs sheets their Balance Sheets can help ring drivers to the platform. It works better the more drivers on the road. The experience of drives is not just replacing the existing tax market, and that is were places things get interesting with uber. What happened here is there are now more drivers driving goobers on the road than their word driving placards crutcher years ago. They have not just grown the market. The overall market by more than hundred percent. Matching other businesses they might end up in, such as financing, doing delivery, and other things, understanding traffic with so many cars on the road. Forget all that stuff. The car writing business is starting to change exists the existing and it expands the market in significant ways quickly. That is incredible. Thank you so much. Cory johnson, bloombert west edgar editoratlarge. Still to come, the battle for your living room. Tv programmers rush to the internet as more americans go beyond cable television. With a man who helped launch other networks. Plus, bloomberg gets physical. Bernie up the charts. Details are coming up. Are you watching this show on tv or under ipad or iphone . We are focused right now on how the tv industry is moving further online. 87yearoldek, the broadcaster cbs plunged into Online Television with a 24hour online news channel. We are part of the digital age and there is a digital revolution going on. Tbs is primarily a content company and we are creating great content in education in news and sports. Cbs joins a steady stream of personalities into the divisional round digital realm. Joining us now is a serial media entrepreneur who is working to revolutionize the way things are distributed in the world and online. The founder and ceo, with hits on Cartoon Network and nickelodeon. So you know what these 20yearolds like to watch. But is this sort of, was the move last week, when we will will we look back at that and say, that was the moment we knew everybody would go online . Kids, theyd those knew when they were 10 everybody is going online because they were going or else to look for stuff. Now at 20 years old, they do not otherny other experience than primarily going online and occasionally showing up on the tv set. I 19yearold when he was 12 said, what is nbc . [laughter] that was inevitable. Part of my predicted that 30 years ago, the kids would not know what the networks were, what we thought of as the networks. Has really come to pass as they have had an experience no less than two euros today could get around their ipads faster than their parents. They can indeed. Lets talk about pricing. I am interested. Lets dig deeper into this whole trend. 15 for theirge programs. Cbs, 5. 99 for their content. What kind of pricing are we talking about . Noah knows. Probably somewhere between an expensive cable channel like hbo and inexpensive basic channel like cbs. Many of us pay eight dollars for or for crunchy roll, for all m a, depending on what it is you want. Of us are comfortable in the . 99 price. Consumers. At solely. Is . 99 i an app that go, is it really worth it . At sign the same way. Exactly. I think the pricing, as we move over to the new mediums will be all over the place until we as consumers vote as to where we are most comfortable. Will we start to pay by show . We are more likely to pay by channel. I am interested in m a, i am interested in talk shows. I pay a dollar 99 for every law and order ever made on a regular basis. We will rebundle ourselves as to what is comfortable for us individually, and the pricing will settle in as to where we stop buying. The masses will eventually determine the pricing of all of this. The crowd is always right. They are, especially when it comes to what they are buying. Mean for the channels themselves, do they start to disappear as well . We will see a lot of channels disappear as fast as we have seen new ones appear. A very darwinian kind of world. Online channels much more rapidly than we click through on our remote control. We give something five seconds instead of five minutes. The programming will determine very rapidly what lives and what dies. Also for the advertisers. I go on youtube and look at some of the channels, but nothing sticks for me. Maybe a video might stick, but the channels do not stick the way hbo or cnn does. Without being rude, that is the same thing that happens to me, but i think it is a function of age. [laughter] are you calling me old . No, im calling me old. The kids become loyal. I have a channel that has been growing its subscribers and loyal viewing over the course of two or three years and he will come back on a daily basis to find out what is new. Classic think you are right about that. Were both wearing glasses. We just have to call it the way it is. Stay with me and we will talk much more about this because of next is a rise of digital also killing the music star. E will hear from an executive we will be back. Taylor swift pulled all of her songs from streaming Music Services including spotify, to feedi do not like the perception that music has no value and should be free. Is Digital Radio killing the music star . I want to bring in two music veteran he former the former president of views television. Fuse television. Our other guests washed and tv and served as director. You support it . The our Community Supports it wholeheartedly. Ands sitting down yesterday applause she applause everything taylor swift is doing to stand up for artists rights. Music stars are basically experiencing essentially what news organizations have experienced, the content, which is available online, is going to be free. Frankly speaking, they do not want to pay for anything. I pay for my spotify. Taylor swift may get it for free, but i pay for it here at ifo time paying for music there. Took ads, i still would be paying for it. Less, but that is the way of the marketplace, the way that the world has,. Nothing in the constitution guarantees anyone to make a certain amount of money. Those artists, they have seen great days and less gray days lately. I think taylor swift made a great decision for herself, but ultimately, it will not be the decision made by all artist. No, she is taylor swift and she can do that. Others who are loyal to her will find her music and pay for it in other ways area how should pandora and spotify and others, how should they respond . Theyre doing what they should do. Theyre saying, we would love to have taylor swift back when we can, but they are at the value of these platforms to just drive awareness of this. They make this from touring and selling merchandise. All the musicrms that can promote to consumers, it is still a valuable resource for artists. It was like that before outpost became popular. Most artists did not make any money from their music. They always made it from the other parts of the business. Thank mtv. That is how it used to be in the 80s. If you want to establish yourself, you would have a rocking video on mtv. Videos you create a great today, there are so many platforms and you can still create great content and get it out there and build your audience that way and monetize it on tour with merchandise. All you have to do is look at an artist like macklemore, who built his whole career online on youtube and on the streaming services, without much help from what we think of as a traditional record company. That is the thing about these new platforms. They honored new platforms. All these ways to make money. What does steven tyler make of all this . Wesley never really talked about this. He was focused on American Idol and clothing lines. He is making money from that. Look. He is always about doing what is best for his fans. Specifically talk about this, but i think if he thought it was really good for consumers to have supported him for 40 years, he would do it. Speaking of mtv, you mentioned youtube. Ofbe youtube is now the mtv this generation. It raises the question, do we need any more Music Channels on television . Do we need an mtv and vh1 . It would be fair to say mtv is not a Music Channel anymore and probably will not be. Puff daddy just started a revolt. He is having a tough go of it from what i understand. You can get music so many other places. Big specials like award shows, i am not sure. Thank you so much for joining me. Eric, thank you, as well as fred for staying with me. Of mtv. Formally with streaming Music Services under fire, we will hear from the cfo of Pandora Media tomorrow at 8 00 a. M. Eastern time. We will hear his response as well. Start athe best bond manager attracts more than 1 billion a month. A rough october for john paulson. His dad that mean means big losses. Bet means big losses. 1. 2 billion. The firm once was known for a concentration in tech stocks that led to a rapid fall when that sector crashed in the. Com bust. Janice has been hurt by underperformance and Employee Perceptions deception that manages a little more than half in the 2000s. Growth will attract investors and put some jews back into its portfolios. 56 minutes past the hour, Bloomberg Television is on the markets. We are pretty much a little changed here after the record highs last week tom including on friday, the all important labor report. Still ahead, a tough quarter for Warren Buffett and Berkshire Hathaway after a few Big Investments falter. Has the investor lost his groove . We will find out. We will hear more from the author of a new book who is taking on Real Estate Investors like donald trump. Loop watching in the live on Bloomberg Television and streaming on your tablet and bloomberg. Com. To the loop welcome back. Welcome back to in the loop. We are 30 minutes from the opening bell. The s p and the dow closed at records on friday after the labor report. President obama in china where business and economics are likely to be the focus. The president said the u. S. And china will grant longterm visas to each countrys citizens. He also said one countrys prosperity does not have to come at the expense of others. It is not a zerosum game. In spain, several million residents have voted to break away and form their own country. Catalonia held a referendum. 80 voted for independence. They have their own language and a list of gripes against the spanish government. The referendum may go to the top to the Prime Minister. Millioned half a replacement ignition switch is almost two months before telling investigators there was a problem according to emails reviewed by the wall street journal. The faulty switches have been linked to 30 deaths. We are under 30 minutes away from the start of trading. Lets count you down with the top 10 headlines hitting our radar. Matt miller and julie hyman are joining me. Number 10 salary talk for wall street. It is not a matter of who is naughty or nice, but what type of business you are in that tells you whether you will get paid well. Johnson and associates is out with numbers noting that m a bankers will likely see a 15 rise from last year while hedge shouldnagers and traders brace for losses. Withading has a lot to do what is going on in the world and less what you do at your own desk. Not as much, i should say. Trading volumes have been papering over the last two years. Worse. Gets worth we saw a bit in october. Now it is done. One month does not a year make. Much aboutare not as what happened last quarter, but what the future of the business looks like. Mcdonaldsine, posting sales that topped analyst estimates because the declines yes, they are still contracting, but it was not as bad as expected with global down. T comps they were expected to fall by over 2 . That is quite a recovery. Balancings a lot of to be done. It is still a decline. Still a decline, particularly in the United States business. That is under the microscope. Whichave a decline of 1 , is half of what was estimated, but you have to look at the longterm trend. Yes, it is a smaller decline, but what will next month break bring . At least the friend is the trend right now. For all of us fewer people are eating mcdonalds and people will be in better shape, but on the other ibnd they brought back the mcr last week, which is bad news for my dad. It is diet. It is the only thing i would yet mcdonalds and now im thinking about getting one for breakfast. Number eight, alibaba theyre looking forward to singles day. They are giving gifts to themselves because they are single. Some are estimating they could do over a billion dollars in sales. Baba ceo jack mama is ofk ma is gracing the cover Bloomberg Businessweek magazine. 8 trillion is what they expect. Jack ma is interesting in the story. Erg businessweek he does not care about shareholders. Apparently he gave a talk or sing a karaoke some recently where he was wearing a wig and lipstick. That 2010, well before the ipo. Sayingeeps coming out customers come first, employees second, shareholders last. You found Something Interesting on ali baba. I did. Somes starting at 12, and chemical waste. You can buy it by the ton. For singles day, i could see needing that. [laughter] betomorrow, we will interviewing the executive chairman of ali baba, one of the cofounders. He will be on tomorrow at 8 00 a. M. While the chinese are shopping, they are also getting fit hasfit as climbed climbed to the top of the rankings in china taking china most successful market. Fit . Nybody tried google no. Have not tried it. It works with android where and other types of wearable devices and it collects the data from different devices including external devices and puts them together in one pool. Maybe the future of figuring out how fit you are is not wearing one job own brand, but collecting from your phone, your watch, your shoes putting that out together. But what is interesting is google is dominant in china even though you cannot actually get on google. Com. The operating system is the most popular. I wonder if this is linked to singles day, people getting fit for themselves. As black friday looms closer, both Book Publishers are rushing the titles to the shelves to get prime exposure for the holiday season. Now, with so many people reading books online, ipads, what not, christmas time seems to be the only time where you think i am going to buy a book and give it as a gift. I was looking at the list of stuff theyre trying to rush out. I am not too excited. What are they . The new stephen king, patricia cornwall, the guy who says he was involved in the Osama Bin Laden the andy cohen diaries. That might be great because social media loves and he andy cohen because social media loves him. Read on yourly ipad . I only read physical books. I have tried. I like it to be paper. Coming up, our countdown continues with a look into Warren Buffett and his tough quarter. Has Warren Buffett lost his mojo . People keep asking that every time he comes out with a mistake in investment. We will be back with more. We continue to countdown to the opening bout. We are halfway through, and it is time for the deep dive number five is Warren Buffett and Berkshire Hathaway. They were held down by a u. K. Retailer whose shares fell 34 last quarter after the company disclosed private estimates were overstated. Warren buffett called the investment a huge mistake. I want to bring in jeff matthews, a longterm longtime Berkshire Hathaway shareholder and an author of secrets in plain sight. It has been a great longtime. It has been a while. Warren buffett flag this to investors his was a big mistake. A writedown of almost 700 million. This is a oneoffing. He does not make mistakes very often, and this was a big one, very public. He admitted it, and he is moving on. Where do you think he went wrong with tesco . There were issues people did not know about publicly, but you know, retail has not been his strong suit over time. Over the years. Retail has always been spotty with him. So, maybe it is just not a great place to be for him. And he got caught off guard with what senior managers were doing, so how could you see that . Absolutely. On the other side, he looks like a fortune teller with burlington this is the train set that he got at a steel. It, buyingout stole it at a time when people were not thinking the economy was going to retire rush recover anytime soon. Recover anytime soon. Right. He also got lucky with the oil shale, they became the largest mover because of geography. Their travels are over the balkan field. Right. It in lucky, and he stole hindsight. And that means he is generating billions and billions in cash. Even if he is reinvesting. Right. 15 million in dividends alone through september 30 of this year. He has now, jeff, a war chest of 60 billion plus people are asking, when will he deploy that, what will he do with his money . Well, stay tuned. The auto delay announced a month or so ago did not make a huge splash because it is not very sexy. It is auto dealers. It is auto dealers, yes. Great fit for berkshire. I know some guys who say they approached him and they thought it was a great fit and ultimately they have a deal. It is a wonderful culture and a business they will put a lot of money into because he thinks they will get a lot of dealers coming to them. It is the Warren Buffett name. It is the name and you have first and Second Generation auto dealers who want to pass that onto to their son and maybe junior is not that bright. That is one way to do it. Do think there is one lonely and pothole in the portfolio ibm . Is a pothole, and it goes back to when he was buying it had he made public, positive comments, and after saying he does not do technology, it is not in my circle of competence, he did technology. And you noted that seriously he has been silent about his support of ibm. Yes. Since the blowup, he has not come out and said how much he innie and how great it is. It will be interesting. He has been studying it for 50 years, right . He knows bill gates. He and bill gates bonded over talking about ibm he has been ibm. He has been thinking about it. You think he is in it for the long run . I do not see it anytime soon. Soon is the keyword. Jeff matthews ram partners. Uber is looking for money and wants a higher valuation. Much more on the latest fundraising. We will be back. Welcome back to in the loop. Lets get back to bring you the most important stories you need to know before the opening bell. Number 4 we were speaking about this with cory johnson. Fundraising mode, looking to bring in 1 billion to finance International Expansion according to people familiar with the situation. Cory johnson was saying there cityore uber cars and some cities and our then there were black cabs. They used that to pummel competition and drive competitors out of business. This is one of the complaints uber drivers have. Inr has taken over so much some cities that if they want to leave and go work for someone else because they do not like the rates, they cannot. Forget about dont be evil in pack. This is what you think about when you think about the growth of uber. You hear about the tactics they use the treatment of drivers, they have complained and protested, yet it keeps growing and growing. Customers love it. I have to say, i love taking uber around the city. You bring out the commodity of people. Look so angry. They hired david plouffe, the itest guy in the world, and is like the evil Company Hiring the nice guy from government. Potential obamacare customers can get a sneak peek at 20 15 plans and premiums after the government released a windowshopping feature overnight. They are scared. They want to make sure this goes as planned, not like the fiasco we saw last year. It is a smart move. They are making a more measured. Apparently, a lot of people do not know when the Enrollment Period is starting. It is november 15, but they have surveyed and there is a lot of confusion. You are right. The Kaiser Foundation said 90 of those uninsured did not know enrollment was starting and more than half of the people that enrolled last year are not going back. They say i do not want to do this again. This was a system that you were talking about earlier with Neil Grossman. It relies on younger people that probably will not need to go to the government dr. , Getting Health Insurance they likely will not need to pay for the older people who desperately need to use more health care than they could possibly pay for. These kids are out until 2 00 a. M. , seeing rock band, they are drunk all of the time. I do not know what Health Enrollment is. Is that really what all of them are doing . I hope so. Living vicariously. This is something that knows newt about, gm ordered switches to fix half a million cars two months before it alerted safety regulators to the problem. Twist, a piece of damning evidence against gm and the coverup in the company. L, i mean, didnt we i mean, didnt we already there was a detail coverup. Now we know more details. I get that this is a revelation and a great scope for journal, butet it reflects the problems the old structure had before mario vara mary barra opened the company size. Was the company it will back then . Yeah. Theyre still have to be consequences, even if that company has genuinely changed, which you could make an argument either way. I think she is trying to change the company. Ok. Will there be consequences of the poor behavior for this bureaucratic behemoth before she started . Im sure there will be, yeah. This is more than just about gm, but public trust and companies do what they presume is the right thing and this is one glaring example of the extent of this coverup and how much gm thought they could get away with it. And we could bring in the talk of government who was the Majority Shareholder the government owned, we all owned the majority of this company for a long time. But they were not managing. When these recalls were killing people. Look at the product, not government controlled, but nonetheless, companies do bad stuff sometimes. As we near the opening bell on Bloomberg Television, we are on the markets. We get a chance of where check of where futures have settled. Equity futures are slightly higher. Our top story and the opening bell is next. Welcome back to in the loop. Lets get back to bring you the most important stories you need to know before the opening bell. Our cris reporters market reporters julie hyman and matt miller join us. The fund is now down 25 so far this year according to people with knowledge of the matter, and one of them had to do with the unraveling of a deal in the face of a crackdown on inversion, and also john posens did notpolsons thats pan out either. He is getting his reputation back after some declines on gold. I do not know that he is getting it back. The positiveort months as well as the negative headlines. That is the problem. It is tough to be a Hedge Fund Manager anywhere. The macro we had another story pointing out the big macro funds, whether youre talking about Paul Tudor Jones the big funds there they were complaining about the lack of volatility. They wanted more volatility. They wanted more action in the markets. They got it, and october was a lousy month. It makes you wonder why you are paying these billionaires all of this money if they will get it wrong when it counts. For john paulson, he is still justifying his education. People think he was a onehit wonder from the 15 billion bets on the mortgage crisis. It was a hell of a hit. , the hand. Hell of a hand. I want to bring in troy. He says you should be putting your money in people like john paulson. Of course he would say that. We are admittedly biased, but over the long term hedge funds are there to provide returns. If you are hedged and have short positions, you will underperform and markets go straight up like last year. If you look at the full seven years which includes the bear market and a terrible crisis, hedge funds have put up incredible performances. If you look at correlation the concept of moving in a that helpsashion overall Asset Allocation in that when things get ugly and there are big corrections like last month or big dislocations, hedge fund the text capital. Why did calpers decided to leave hedge funds . There is a growing frustration with how much they are paying in fees. Calpers decision, the way they articulated it, to making meaningful, they had to scale it by a factor of 10. They look at the 4 billion they had, but to making meaningful, they had to take it to 30 billion, and the nature was too challenging. You do not think that two and 20 structure needs to go. It is a great point, the market has been moving to better fees. It is that we have been doing for years. Fees have trended down. The weighted average fee might be somewhere around 1. 7, 17. 5. Lot, isnt it . Still a lot, but not what it was. Gets kudoss troy because on our program you said three months before and after qe correctional correction we auld see a boom, and that is we got in october. We think the next six to 12 months look more range bound to upward trending. What is amazing about the correction is the vshaped and how all of the anxiety is washed out and we are pretty much back to where we were. One of the measures we are looking for is the Credit Suisse barometer of anxiety and it andures bearish to bullish at the lowest in three years. Is there really that little to worry about . That is what surprised us the most how sharp the snack back was. We would have expected a u rally. They should be concerned because of no other reason than qe over, but the u. S. Economy is making marginal progress. There is cash on the sidelines. Where will investors put money . Hedge funds compete against bonds and the forward outlook for bonds is not attractive. I have 10 of my portfolio in cash. Should i put 2 in bonds or equities . Equities. The you expect the fed to continue to raise rates as consensus would have them in the second half for Third Quarter of 2015 Third Quarter of benchmark it is like the Dollar Strength is almost like the theshaped. V is the shape the shape correction. On top of that, energy costs have come down dramatically, which is a tailwind. That being said, most forecasts are for fed rate hikes. We are on the later and, closer q4. It is data dependent. If unemployment keeps falling, maybe it is the second Quarter Company will be slow, gradual, gradual, and similar to what Alan Greenspan did. Great to see you, troy gayeski. Trump up, the book donald does not want you to read. That means i am reading it. Tycoon. And fall of the dealers are still taking aim at lehman brothers. We have the latest on regulators are still taking aim at lehman brothers. We have the latest on two big to fail. Stay in the loop. Well, last week i spoke exclusively to larry silverstein, the chairman of the 8 billion Real Estate Firm Silverstein Properties and he discussed his excitement over the world trade towers he is developing. The excitement is we are getting some revving up downtown at the trade center. You have tenants moving in, activity, lots of leasing activity, the path terminal humming toward completion. Right. The full extent of the Transportation Service opening sunday. Every place you look, there is activity, action. It is a very exciting time. Larry silverstein is one of the tycoons written about in a new book, a chronicle of the ups and downs of real estate moguls, a book donald trump, by the way, does not want you to read. Ball it is called. Mickey ward, the author joining ward,s morning vuicky the author, joining me. There is silverstein is cut from the same cloth of all of these tycoons, sheer optimism, they all say my property is the best and i will build the worlds greatest building. Ego. It is you are wrong. Of course, sometimes they are right, and sometimes they are not, and when it goes wrong, it can go spectacularly wrong. You look at when dealing particular to narrate this. One building. Which is a gm building. And the rise and fall of harry. Not just of harry but i go back 150 years and again inside of this dog eat dog world of highstakes real estate because this building is like the hope diamond of capitalism. It is the most Expensive Office towers in america, and for whatever reason, these guys all go nuts for this thing, partly because of what it symbolizes General Motors built it when General Motors was the most powerful and Biggest Company in the world. Right now it has the Apple Flagship store when apple is the Biggest Company in the world. I think it is what it symbolizes as much as anything else guard what did you learn about these real estate moguls . We will get to donald trump in a moment, but what did you learn from them . What theynteresting, do is really tough, and it does require a huge ego because the amount of money is enormous. The amount of risk is enormous. They have to have a vision that they really believe and to go in and create value, and you know, when they pull it off, the rds are huge, but but when it fails sam zell nixed this point he is like the Warren Buffett, the great sage, he says it is too hard to do consistently well all the time because you cannot see all of the different parts and you cannot control all of them every single time out of the gate. There is a part in the book where you mentioned sam zell sold equity offices not because he called the market right, but because blackstone was offering nine dollars. He said sure, take it. Yes. Himself isrump, who a real estate mogul, does not like this book, and maybe he has helped to sell some, to. Ironically. I am sure you have seen this week he said just finished reading a poorly written and boring book on the General Motors building by vicky ward. Waste of time. Why would he trash this like this . Why would he read it cover to cover if it was so boring . The first twitter back to him pointed that out. It is funny other peoples reactions when he reads the book actually, donald comes out in a. How does he come across . You see him passionate about building, quite kind to a really struggling head of acquisitions, a slightly tragic figure. You see him as a good boss, very loyal to a partner, even when the partner goes bust and is no longer so important to the world. You see a loyal friendship. You see his obsession with building, something we do not always see, but he might not like it and this is purely speculation on my part at the end of the day, heated he had the opportunity to buy that building when his partner went in 2000, 200 million thousand one. Today the building is worth 4 billion. Between 800g gap million and 4 billion. Did you respond or have you talked to him . I have been taking the high road. All right, great to see you. Author vicky ward. Coming up, the Worlds Largest banks could face a 25 buffer role as the Financial Stability board tries to and too big to fail. Banks might be required to hold capital cushions as much as one quarter of their assets. Erik schatzker covers the banks and has been looking into this for us. The simplest way to put it is the cost of being too big to fail just went up again. Yes, as you put it, mark carney, the chairman of the Financial Stability board, today, in basel, switzerland, announced a opposed rule for banks that would require them to maintain 20 of their riskweighted assets in a total loss absorbing capacity. Most of this, betty, would be equity, which is to say the first loss would be born by shareholders, but some of this, at least onethird, would be insubordinate that. That means under certain circumstances, bondholders would be required to shoulder the losses of banks that are in a default spiral. Of course, this is all meant to make the Financial System more safe and more sound, and limit l to zero, one would hope, that ultimately needs to be borne by taxpayers. Erik schatzker, bottom line, how will this affect bank profit . Bottom line, it will make it less profitable, some more than others. Citibank may lose the equivalent of 3 of their money 16modeled earnings according to research by citigroup. This rule is not set to be in force until 2019, but, of course, once it becomes finalized, the banks will have to start adjusting to it immediately, so it will have an impact on profits. British banksd will fare better because those regulatory systems have already put in place something similar to a mark carney proposed today. Thank you so much, erik schatzker. It is 26 minutes past the hour. Bloomberg tv is on the markets. Makers starting at about 10 00 a. M. Breaking news present obama calling for regulating internetmike phone companies. More on that in a moment. Breakingioned news out moments ago for the president hollande for the strongest possible rules to president calling for the strongest possible rules to and howthe internet they regulate phone companies. Peter cook joins me. This is a big deal how big of a deal is this . A huge deal, betty. It has triggered of the gray action. There have been those encouraging the fcc to impose Net Neutrality rules and those on the other side did feel the fcc should leave the internet alone and not impose specific rules on how traffic is policed on the internet. Count president obamas comment here as arguably the most important in a written statement and a video message released today, the president is calling for, as you said, some of the toughest Net Neutrality rules that have been under consideration to actually be imposed by the fcc. This is an independent agency. His appointed chairman tom wheeler must decide how to move forward on this. It is a huge step by the president to rush of the outcome at the fcc and call for rules that a number of Internet Service dividers like comcast, verizon, at t will oppose because they go much further than what has been under consideration at this point. What is important here and we point changing the regulation of the internet to treated more like a phone service a huge legal change the president is arguing for. It has been under consideration, and the president says you need to do this because it will give you the basic toughest enforcement power. The quote is i believe the service atreclassify the same time for bearing rate provisions and other provisions less relevant to broadband service. Tell so, the resistance how do you expect comcast another so, the resistance, how do you expect others and comcast to react . It was a possibility tom wheeler would do this on his own, that he has talked about a hybrid approach, a softer approach that would win more support her if he goes the president support. If he goes the president s route, this will end up in court. They were debating on whether or not to push for these rules by the end of the year. Or had been talk about a delay. Now the president is lighting a fire for them to do something sooner rather than later and do something sooner than we learned others have discussed recently. So much. Thank you well keep all right on this developing story. Eat or cook, our chief washington correspondent. Peter cook, our chief washington courts on didnt. The part correspondent. Peter cook president obama is in china. He says the main concerns about the protests in hong kong is both sides avoided violence. Economic sanctions are having impacts on russia. Gdp will probably stagnate in 2016. Thebank of russia links prices to the fighting in ukraine. Investors have their say on barclays socalled dark pool. Tois alleging a lied customers and hid the role of highfrequency traders. That does it for today on in the loop. Tomorrow, more on the battle for your years is digital is it really killing the music star question mark the cfo of pandora music music star . Pandora music ways in tomorrow date 00 a. M. Writing here on Bloomberg Television. It is 56 minutes past the hour. Bloomberg tv is on the markets. I am matt miller. Take a look at where we are 30 minutes into the trading day. You see the indexes are down across the board, but not huge drops. Really minimal. The s p 500 and the nasdaq down less than. 10 . 17,548. Jones at you see where Interest Rates are. The 10year note, 2. 31. Tight spreads their. Sticking with debt, even though credit hedge funds are lagging behind the broad index of bonds, they are still attracting a lot of the money from investors on track for the biggest fundraising year since 2007. Jamie to explain why this is happening, Lisa Abramowicz and joining me talk about why this is happening, Lisa Abramowicz. Lets talk about the performance of these funds it has not been earthshattering. They gained about 0. 1 versus a 1 gain for bonds globally. It is significant underperformance, especially since bond managers are paid handsomely for their management. What is the universe of hedge funds you are looking at . Were looking at relative value hedge funds that find discrepancies between relationships between different bonds and capitalize on where they should be relative to one another, and they often use leverage and try to generate a return regardless of the market cycle. Whether the market is going up or down, they try to generate a positive return. Why our investors piling in here . If they have underperformed recently, yet they continue to collect massive amounts of money, a ton of cash. 40 billion through the first nine months it has more than doubled in the last six years. That is without leverage. If you consider the leverage, the universe invested assets it is likely well north of 1 trillion. People are piling in. Every basis point of extra month of positive performance in bonds becomes a liability. You start to say deals are going lower and lower. Prices are going higher and higher. At one point at what point are we priced to perfection . It feels like we are on the precipice of an event, a big event. That is what a lot of people have been saying a hedge fund that oversees about 4 billion started a Short Bias Hedge Fund that would outperform significantly in a market route. You do have funds that are starting to prepare for exactly what you are talking about, going over the precipice, whatever that means, or whatever the catalyst may be. The question is, when will that happen . In the investment world, if you arent too early, you are wrong, so how do you generate a positive return while hedging for a massive downside, and that is been the conundrum for a lot of these hedge funds. The point is they can hedge. If they cannot hedge, then the point is investors are seeing a worthwhile investment even if he means lagging behind in the short run. In the longterm they are willing to pay for that. As long as they preserve capital, which they have been doing. Lisa abramowicz, thank you. She covers bonds for us. We are on the markets again in 30 minutes. Stay with us. Market makers is up next. Live from bloomberg headquarters in new york, this is Market Makers their cow. Over his drive for more cash. They want 1 billion for overseas expansion. President obama is in china talking about the economy and human rights. Can he break the logjam and get the civic trade talks going again . Steve schwarzman discusses his pledge to hire 50,000 veterans are in good morning. Im erik schatzker