Transcripts For BLOOMBERG In The Loop With Betty Liu 20150325

In the takeover. Berkshire hathaway are getting 51 of craft. A solemn minute of science of silence today. They were mourning those lost yesterday when a german plane crashed. We are learning today two americans today a former u. S. Safety investigator says authorities want to know why the pilot made no distress call. Collects that will certainly be the number one item they will look closely to see what is going on around the cockpit. Betty a hong kong conglomerate is no written passes biggest wireless a 53 billion deal. Defense spending will be the point today when the house starts budget debates. Lawmakers are not sure. There are six republican plans. Against lawmakers who want to lower the deficit. Facebook founders reaching out to Software Developers today. Reaching out to the companys conference in San Francisco. We will let out designers reach facebook users even better than now per facebook shares are at an alltime high. Forecasting adding revenue this year just 37 . Those are your top headlines this morning. Warren buffett teams up with 3g. They bring kraft foods and heinz to the same shelf. Your dinner table. The deals have got shares surging. Warren buffett shared this statement in a deal. He said, this is my kind of transaction for more, i want to bring in julie hyman and craig, who covers Consumer Retail and has been covering the news for us. First off, this is classic Warren Buffett tiered walk us through how quickly the deal can together. Craig it has now there are the American Food companies have fallen on hard times. There was talk that 3g was gearing up to make deals. Craft was out there, kellogg. It came together very quickly. Last night and into this morning. Absolutely. It has been rumored they were looking but it is not clear what they targeted. Betty Warren Buffett is saying he is looking for more acquisition to her you can just hear him saying people eating mac cheese forever. Julie he is talking about these worldclass companies but what 3g has been doing is cutting not growing the top line. It is cutting the bottom line and so as the folks on surveillance where do you find the growth from when youre looking at these companies. A troubled business over the past couple of years in the united states. You have this trend toward fresher food and what is perceived as healthy food and not boxed mac cheese or it is going to market shares to Companies Like any. Perceived as better by some folks. Betty what about regulators . Are they likely going to approve this . Craig you would think these guys know what theyre doing, so it is hard to predict what regulators would say but you would think with them involved, they would have a decent chance of getting through. Betty what happens to management . Julie the ceo of heinz would be leading the combined company. Craft is artie seeing management turmoil. Departing last year and then there were more Management Changes just in february. One would think there would be more. 3g has a tradition of cutting costs. Part of that is cutting costs so it would not be shocking to see the playbook repeated in this situation. Betty thank you julie and craig , who has been on this story as well. Lets turn to another story now. The crash in the french alps pier 1 hundred 50 people were killed when the plane went down yesterday, including two americans. The search and recovery operation is now focused on finding evidence as to why exact way this lame crashed. The plane passes cockpit has been found but badly damaged. The search continues for the second black box. For the latest update on the Recovery Mission we are joined by hans nichols, who is in the area. Tell us how the investigation is going so far. Hans it is very busy. About five helicopters are getting to the site. One challenge they have had with the site is it is on a steep slope, difficult to land a helicopter. But they have established a footpath into the area. If you look tiny, you see the alps. We understand recovery workers are able to work. They do have access to the site. A german minister said earlier today that there are literally millions of airplane pieces authorities on all sides. Unlikely to be any survivors. The speed with which that airplane hit these mountains, spreading it all over the place you begin to understand the challenges for these recovery workers. They fit together like a jigsaw puzzle and try to figure out what is what has happened in the crucial eight minutes. We are coming straight down. They may still have had a glide path according to aviation officials we have been speak to. They have recovered one part of the black box, the voice recorder that may have given us a sense of what happened in the cockpit, whether or not the cockpit heard the calls from french air authorities asking what has happened in the plane. Remember they knew the plane is falling at a rate it should have been. There were no mayday calls from inside the clock hit and the search is still on for the second part of the black box, the data reported. Betty thank you so much. We will have further updates on the crash throughout the show. Stay in the loop with us. Back corporate front, keeping a close eye and American Express here it shareholders will be eager to hear from a ceo on how the firm plans to recover from a string of setbacks heard it has been a rough year. You can see what disappointing earnings, job cuts, the end of partnerships just about a month ago, as well as losing a critical antitrust ruling. Joining us now from washington elizabeths investors. Collects it is an important day for shareholders. There has been a string of bad news for the company in the past months. Investors want to hear specifics about how the company will recover from the loss of their relationship, their jet relationship, as well as the antitrust policy you mentioned. They also want to hear reassurance that the setbacks are not indicative of your problems for the company. Betty just outlined for us four things he needs to adjust. Elizabeth one of the first ones is American Express has for a while now been falling back on some of its own growth goals, specifically revenue growth. Particularly, that is something investors want to hear more about in light of the fact costco, one of the biggest retail pollard scholarships, one out of any 10 cars, that potentially goes away next year and how that factors in in terms of broader financial goals. That is one of them. Betty better rewards is the second goal. Lower costs, and wider acceptance. Wider acceptance meaning what . Elizabeth American Express is excepted at fewer stores than cars. For the most part American Express charges at a higher rate. That is something they address. They announced a program where they will be trying to sign up more Small Businesses across the u. S. It has been a year now and additional attention on American Expressss relationship has come into focus, particularly in the past few weeks after they lost the lawsuit. They should threaten the Business Model charging higher rates. Betty thank you so much. Much more ahead, more on the brandnew home, we will talk to enterprises joining me in a few moments. Plus, sex discrimination case rocking Silicon Valley. What does it mean for Silicon Valley women . We will be back. Betty u. S. Surveillance claims. Junior Officials Say the iraq is a giant to retake saddam husseinss hometown from islamic extremists is. It is the first direct involvement by coalition forces. The governor of new jersey is trying to give his likely bid for the presidency a shot in the arm. Republican Chris Christie resumed his home state appearances, holding weekly meetings last month. He still is not officially a president ial candidate. He says he intends to announce his vision his decision in late spring or summer. A gender discrimination lawsuit against Silicon Valley Venture Capital firm. Lawyers say she is an accomplished junior partner. The firm says she was a failure who sued for payout and was shown the door. Some tech adVenture Capital companies to reexamine cultures and practices even before the jury reaches a verdict. Coming up, one financial advisorss word for with words of wisdom. She has got 22 billion in assets for properties and he has got 22 billion in assets and properties in 20 companies. The global ceo is still to come. Staying in real estate, home buyers are out with old and in with the new. Sales of listing homes rose at a slower pace than last year while new purchases merged to his sevenyear high. This is seemingly good news, as evidenced by enterprises over the past few days, it will paid an uncertain picture for the housing recovery. Want to bring in the ceo for more. It seems like it is good news. Sales are surging. But this home market that we really care about that is 90 of the Housing Market here. Why would anybody buy a used home . Betty what are you seeing in the new home market . Overall, it is a very positive trend. Everyone is excited about one months data. But what is accurate is the trend has been very positive. That is the big Housing Market but in general, trends are positive. Betty is it different this year . What is it, exactly . What is the feeling . Is it the got . The norm is 1. 5 million starts per year in this country. We finally have broken in one million. That is how far down we went. We should be some percentage higher than last year, for sure. Betty homebuyers make up i believe a third of buyers in the country. Are they little shake your here given where we might the in rates . Part of the challenge has been very difficult particularly for firsttime homebuyers. That is slowly getting back to normal. The normal that suited this country well for decades. Betty i found an interesting number that there is 5. 2 million renters in this country right now. That is one million more than last year. 5. 2 million renters poised to buy homes. If you are selling your house, even got 5 million of them out there. What are they looking for . Does the numbers surprise you at all . Does not. A lot of people doubled up after the recession. They went back home or rented with friends and theyre waiting for the right opportunity, waiting to qualify. Everything is going up and that really helps the call the cause for buying homes. Betty you Just Launched a new model. This is more modern . Very much. We launched it and then brought it over to washington, d. C. Extremely popular. Were introducing more. Betty these are modern homes. What are the features . Features people want to have in their home. Designs have been changing. Lots of gathering space. A littleknown can where people can have their computers and do a little internet search in the middle of the day, while their cooking and watching tv and in the Family Gathering space. Betty a connected room. Multigenerational living. Less absolutely. Were seeing with aging population people have a place for the parents whether they visit or live with them for extended stays. That means a proper bedroom on the ground floor. That is a growing trend. Betty stay with me to we will talk to the ceo of enterprises. Betty good morning. The u. S. Economy is on a roll. Here in new york, you can see by the amount of cranes operating a commercial sites and also the number of angst being signed, including the one retailer barneys did. 57,000 square foot downtown Flagship Store at its original location. Barneys will release a stays called equity one, a subsidiary of a Shopping Center starting later this year. The chairman of equity one is with us. Also staying with us is the ceo of one of the biggest homebuilders in the u. S. You are both heavily involved in florida real estate. How big of a deal is it to release the location back and what does it say about the commercial Real Estate Market . I would say worldwide. That means a lot to us and it means a lot to new yorkers. I think it is a great story of going back to its roots. Barneys would just be the first one in a row for other big names. Betty you specialize in retail outlets not just here but overseas as well. You are in poland czech republic, finland, sweden, minority countries. This is a smattering of Different Countries around the world. Im curious if the dollar is helping you at all. Chaim it does help a little bit. We as a Global Company diversified over currency. We are not too happy because we are hedged, when one currency drops. Betty it does not make you want to do more deals, does it . Chaim we do our deals on the strength of the real estate not so much the currencies. Betty what will be the determining factor for you in making deals Going Forward . Collects in the u. S. , we look at every property this is going on today. We are out in the market every day. Ara hovnanian ara northern california, the Silicon Valley area has been blooming. Texas is one of our strongest markets because of the oil market and even dallas, which is less oil. Betty does that match you . Chaim two out of three. [laughter] Silicon Valley, the bay area. We have the secondlargest operator and owner in the bay area. We actually own a major portfolio in texas in 2006 that we sold out. I totally agree it is a very strong market. Betty what would make you reenter the market . Are you looking at it at all . Chaim we are in the process of moving from secondary markets to the metropolitan areas. We find in major cities in San Francisco, one of those cities same as new york city and same as washington dc or around the world. A small city with only 20 Million People. These markets really attract us and we deliver the growth there. Ara an better Pricing Power because others cannot go there. Chaim exactly. Ara we find the markets in the boom times can be very profitable. Betty thank you for joining us. Breaking news out, i mentioned durable goods was going to come out. It is out now for the month of february, down 1. 4 , the headline number. Scarlet fu break down the numbers for us. Scarlet this is an unexpected decline for durable goods in february. Economists were looking for an increase of 2 10 of 1 . If you break it down, backing up transportation, you look at only nondefense goods, excluding air shipments, airplanes, it all comes down to a disappointing read, a drop of 4. 1 when you bring transportation, one for 1. 4 for nondefense, excluding aircrafts, and only a gain of 2 for nondefense aircraft spirit there are provisions to prior months which show a lower provision. Perhaps because of stalled export growth on the back of a smaller dollar. The dollar hitting its low at 96. 63. The 10 year yield coming down to the recession. U. S. Stock futures are a little bit lower but it all comes down to little changed. Betty thank you so much on that. Here is a look at our top stories this morning. A major deal, north america passes third biggest food company. The Brazilian Private Equity Firm teaming up with Warren Buffett in the takeover. Archer hathaway getting 51 of craft. Craft shareholders get 59 dividend. We are also learning two americans were among those killed in the crash of the german wings jet. Workers observed a minute of silence today. They were mourning the six crew members and 144 passengers who died yesterday when the planes went down in the alps. We will tell them why the airbus crashed. The recorder was found at the crash site. Officials talked this morning about the problems crews are facing in the rough terrain. It very large for the moment. It is quite difficult. That is why aircraft unleashed. Betty google executives reportedly held a flurry of washington meetings while the Company Facing antitrust group. They checked laws and found google employees had fitted visited the white house about once a week since president obama took office. Regulators decided not to file and to press charges against google three years ago over the advice of staffers. Republican ted cruz takes a shot exit at his wifess employer. She is taking an unpaid leave from Goldman Sachs while her husband runs for president. He said goldman can be a force for both good and bad in society. Ted cruz my criticism with washington is they favor wall street big business and that is why i have been an outspoken opponent of crony capitalism. I think the business, a fair building a better mousetrap, great. But it should not be government wavering. Betty he says they should not get government subsidies. Where many big things are not done, the fairway in washington. Coming to the capital to receive a congressional gold medal. The highest reward Congress Gives to civilians. He teared up during the ceremony and soda john boehner. You can see it is quite an emotional ceremony. Those are the top headlines this morning. Coming up facebook has doubled since the trading debut. Mark zuckerberg still has more to prove. Were live in San Francisco for an update on his latest pitch to developers. Betty scarlet fu looking at the early action, including the crash deal. That is right. Combining it with clients. Certainly leading to a big swing in kraft shares, a big jump. It could also lead to more consolidation in the Food Industry overall. Youre seeing gains in other names, a global snack and food spin off of craft, up 3 . Campbell soup also rising. Other food names that could be in play. General mills to another gainer here. Another m a transaction, but from last night. This is from the tech space. The printer maker is buying for 11 per share, a 47 rhenium at the last close. It says it will use existing Credit Facilities to fund the purchase and its core dividend of 36 per share is not at risk. Betty thank you p we are also keeping our eyes on facebook. Shares keep hitting new alltime highs as the Company Continues to host its today developing conference in San Francisco. Facebook shares has have been drifting higher at . 85 per share. Optimistic Mark Zuckerberg can keep attracting at dollars and fend off challengers on twitter and google. Cory johnson will be all dealers all years on the pitch. First off, what do you think his pitch will be to these developers . Cory this is a magical hour. There was a little bit of a clue last night. The announcement was set off by facebook mester, people saying, hey, the general rooms are open. Go check out those things. It has not happened here yet, but i think one of the interesting things we might take a look at here are twofold. First of all, the focus on mobile and messaging for facebook to it we have talked about facebooks move to mobile since the ipo. What we have seen is the acquisitions of instagram, whatsapp, the growth of Facebook Messenger, 500 Million People worldwide. We got a clue a few weeks ago only found out facebook would make ways to make payments. I wanted you to think about this big idea of not facebook at facebook but is anything as a platform. It is the holy grail of Silicon Valley, to create businesses of other businesses. Application developers and showing up to learn how to put their business on top of facebook so things like the messaging app could become a platform for other developers. It is sort of a humanist notion that they still develop on the app and facebook will begin to monetize and make money. Betty clearly if you are a developer, you will take this seriously, but are the developers really going to use facebook make facebook a priority for them . Cory i think we will hear specifically about video mobile technology. Facebook has been in another a number of acquisitions to acquire ways to help advertisers file users from different devices, from their phone to tablet to desktop, but also understand whichever which advertisements are working particularly video ads. That requires an enormous amount of development. Every advertisers doing a live some amount as well. Missing it into Facebook Messenger and the ad free app one of the most powerful messaging platforms in the world. If theyre able to convince advertisers and developers to make that happen on facebook with revenues coming to them that will create an ecosystem where a lot of content creators like the New York Times and bus feet and so on, advertisers and developers, all want to come to facebook because that is where the money is. Betty thank you so much, cory. Up in early ahead of the Developers Conference. Thank you so much. Much more is ahead. How to get a sweet sediment settlement from your seats we divorce. Michelle smith a top financial advisor. You may want to listen to what she has to say. That is coming up next. Betty workers observed a minute of silence today paired 144 passengers died tuesday when the plane went down. The badly damaged recorder was found in the crack in the crash site. Requiring telefonicas unit the price tag is 15 billion. The deal will create the u. K. ss biggest wireless provider by customers. It marks a milestone in the billionaires efforts to remake the hong kong conglomerate. It may take a year. Telefonica expects the transaction to be create completed by june of 2016. Defense spending will be the sore point today when the house of representatives begins as it debates. Lawmakers are not short on choices. There are six republican plans. Those who want mores defense spending pit pitted against those who want lower deficit. Those are your top stories are coming up in the next hour, the demise of the gaming industry. They leave it all on the table in the face of regulation. What that means for big businesses. Plus one highprofile advocate against trading. Weighing in on arms race taking hold in the industry. We will to you whats up as we mark the oneYear Anniversary where he says the market is rate against the average investor. One of the biggest divorce settlements in u. S. History was handed down last year when harold was ordered to pay his wife almost 1 billion. It was all over the place. We saw the picture of this check egg everywhere. A shocker. A billion dollars. There were enough settlements out there where there was a growing market for Financial Advice tailored to thousands of ceoss and other High Net Worth individuals. Michelle smith is the ceo of financial visors, one of those who runs Specialist Training for financial advisors. Great to see you this morning. I know you cannot name names but what is the difference between one where youre talking about 1 billion, and one where youre talking about 100,000 . Michelle people get accustomed to the money they make and the money they spend it you still have to split money. You still have to do with the children. The High Net Worth once, a couple extra comments. It is very complicated. Betty what is the most comp kidded factor . Michelle you have got complicated stuff to deal with, people where women maybe getting 90 of their divorce settlement, if your husband is the ceo, youre getting 92 and hundred percent of the settlement disposing of that in a way that will not hurt a market where you have got your net worth in one stock. It is not Asset Allocation as usual. It has got to be dealt with in a specialized way. Betty a lot of these are women. I want to be fair. These are women. I imagine they have not worked during the time their husband was building up his career at the very top. How do you calculate what she gets out of that, if she was a stayathome mother . Yes. She worked in a different way. It is a state which is often 5050. Disclosing assets and disclosing income, how do we get all the information we need . Betty how do you . These are savvy people. Michelle they are. You do it in a very willing way to disclose, or you go through the formal discovery process. Betty do you find the test. Commits are your number one source of finding out where the money is in . Michelle if a woman does not even know what investment accounts, what hedge funds, what is in your name, the first roadmap is a tax return. It is not exactly 100 clarifying, but it is you questions to ask to find out. About 15 years ago, people were walking into my office, and women with divorce settlements, and i always say divorce settlement is an early death the earliest Retirement Plan it woman will have, especially if she gave up her income earning ability. This settlement has to last longer than a Retirement Plan. It is an interesting dynamic to look for a 45 or 50 euros woman and say, this might have to last four years. I started 100 focused. Betty you now specialize in the divorce of wealthy women. Michelle it is 90 of my client base. Betty thank you so much. Speaking about tourism, cruise lines are looking to grab your dollars. Check out this footage of me skydiving. It is all part of our latest series cruising the high speeds tomorrow. Be sure to tune in for that program. Betty millennials a switching monthly rent for mortgage payments. Can they afford it . Plus, maybe they live off of big fees and mac cheese for a few years, they will be united under one brand and move toward a megamerger. Full details are next. Betty welcome back to in the loop. Futures indicate stocks will be higher at the open. Investors taking a report that shows a slide last month and orders for durable goods. These are volatile numbers. A major deal from north americas third biggest food company, heinz and craft and kraft are merging. Some headlines from the conference call, the call ended. Heinz and kraft not planning on Share Buyback for two years after the deal closes. The cost savings will be about 1. 5 billion. Two americans among those killed in the crash of the germanwings jet. Workers observed a minute of silence, mourning the six crewmembers and 144 passengers who died when the plane went down in the french alps. Investigators hope the cockpit voice recorder will tell them why the airbus crashed. The recorder was found damaged at the crash site. A French Police official talked about the problems recovery crews are facing in the rough terrain. The area is very large for the moment. Maybe there are bodies on the top of the mountain. It is quite difficult to get the bodies. That is why the operation will be done by aircraft on. Betty the other black box, the flight did a recorder, has not been found. Defense spending will be the sore point when the house start the debates. Lawmakers are not short on choices, there are six republican plans. The debate will pit those who want more spending against lawmakers who want to lower the budget deficit. Google executives reportedly held a flurry of washington meetings while the company faced an antitrust probe. The wall street journal checked wall white house logs , google employees visited the white house once a week since the president took office. Regulators decided not to file antitrust charges three years ago over the advice of staffers. Big m a news. Warren buffett teaming up with the Brazilian Firm 3g to bring kraft foods and heinz together. Shares of kraft surgeon, up 35 in the premarket trade. Ed joining us now. This is remarkable in many ways. One is that it may be the biggest deal done without a big bank. Ed we are still trying to figure out if that is correct. This is one of the largest transactions ever done without a bank. They have lazard, center v iew no Goldman Sachs or morgan stanley. Betty is that unique buffett . Is this a sign of a trend . Ed weve seen a trend longterm of independent advisers, they hate being called boutiques, investment banks taking a bigger market share. Center view and lazard are at the forefront of that. Longterm it is a trend but to do a deal of this size with just two banks is unusual. It speaks volumes about how confident 3g and buffett are and their ability to pool capital, they did not need to borrow. Betty buffett has plenty of cash. What about kraft shareholders . Ed they have a noncontrolling stake in an enlarged company. One. 3g said on the call they will be able to get by 2017, 1. 5 billion annually out of the combined group in synergy. A large company, a noncontrolling stake. 3g and buffet has come out and said we are not in this to do a quick flip. We want to hold this long and make it a Better Business of her time. In terms of owners, it is hard to find a better combination than those two. Betty it is interesting that the two of them woke everybody up with the heinz deal. Food companies are targets. Now they have kraft. One of maybe many targets for both of them. The speed of this, between 3g and Warren Buffett and kraft and heinz, this is pretty remarkable. Ed it is phenomenal. We have seen him before, this is not the first time they have done something quickly and certainly that they have done it under the radar. The news of this was last night and the thing gets announced this morning. They keep it very tight and that reflects, they keep a few people on the deal. But our understanding at the moment is a developing story and we will get more. Right now, the first conversations they had on this was the second or third week of january. They made the approach to kraft. Kraft was opened to have a discussion. To go from there to where we are now is unbelievable. Betty these things take months if not over a year. Ed especially in this environment when there is pressure from shareholders and scrutiny on every deal to go from there to where we are today speaks to how accomplished these guys are and how efficient they are. Betty great to see you, ed hammond of our m a team. The crash of Germanwings Flight 9525 in the french alps. Two americans among the 150 killed when the plane went down. The search and recovery operation is focused on finding evidence as to why the plane went down. The cockpit flight recorder has been found. As you can see from these images, it is badly damaged. For the latest update on the Recovery Mission, we are joined by bloombergs hans nichols, who is near the crash site. Lets focus on the recovery of the flight recorder. As we were just looking at it, it is badly damaged. Is there any hope that we might get some information out of it . Hans yes. In part, the technology has changed over the last few years. Now it is no longer analog, it is digital. Easier to capture a voice recorder and have it intact. Previous reports reported that in the cockpit recorder it was slightly damaged. Our Aerospace Reporter in toulouse is reporting it is likely they will be able to retrieve data from that. That should be an easier task. They still have not found a second black box. This is a black box that includes all the important technical flight data. Thrust, engines, what the altitude and speed was. They lost contact, the last reading was at 6800 feet. That is important because when you look behind me, the snow line starts at about 7500 feet. There is also a point where the not really takes off. From reports from recovery workers the terrain is so difficult they had to helicopter in. They do have, they have established one land route. Because of the difficulty of that and the terrain, they will have a difficult time piecing this together. There are not big pieces of the airplane. Betty hans, we have got a live shot of the site where the germanspanish and french leaders Francois Hollande Angela Merkel and Mariano Rajoy are going to be gathered at the crash site. What do we expect to hear from them and what has been the coordination between the three countries . Hans by all accounts the coordination has been excellent. I expect pledges of solidarity moments of mourning and sorrow. They will go eight climbers down the road to a smaller town. We do not know whether they will physically take a helicopter and view the crash scene, it is still an active operation so that may be unlikely. Once they get all the pieces of the plane assembled they have got to put them back together. Betty thank you so much, hans nichols, our international correspondent. Further updates on the crash in the alps throughout the day. Stay with bloomberg television. Still to come, how the big gaming mecca it may be ending its hot streak. Macau and the impact it could have on u. S. Operators of properties in the city like las vegas sands, mgm. Well have more. Betty counting down to the open with the top headlines. Number five macau. Capital of agent may see its winning streak end. With that, maybe fortune of las vegas sands. Slashing monthly gambling revenue forecast by 27 as xi jinping called on the couch to move beyond gambling. The city expects gaming revenue what Atlantic City pulled in o ver a year. Chad is an analyst at Macquarie Capital for more. Las vegas sands do they have to be worried . Chad the chief executive of macau delivered his policy address. He delivered that through three groups feare to beijing, to the operators saying we need this to be a nongaming destination. And to the local citizens who have had some major wage inequality. One of the most expensive places to live and wages are low. There are major social issues. Make this an international place, not just for gambling. Gaming will be an amenity but not the sole purpose. Betty all of these operators then this was coming. They have been preparing not just to build hotel rooms but also to build themes. Melco, ryn by the son of the casino magnate who build iup macau. We visited him last year and i will show you some of what we saw. He was telling me i know that we have to build more than just gambling. Chad yeah. That has been the message ever the past five years. No one expected the gambling results to be as healthy as they are. The government is in a good position because they have a surplus. Diversification is the main thing. You see some of the new projects have nongaming that you would only see in las vegas. Some of them are bigger than what you would see. Betty lawrence was saying in their new Development Studio city they will have a batman theme inside or some sort of attraction inside their project. Sheldon adelson, who has a big bet in macau he is frank about the fact that he has made billions. I asked him last year. This is what he said, listen. Do you ever worry that the Chinese Government is going to look at the money pouring into this little enclave called macau . Some of the money is going to sheldon adelson, the government is going to turn off the tops. Sheldon no. People bring it up, they say do you think the Chinese Government is going to they do not care about sheldon adelson. Betty they do not think about sheldon adelson. Sheldon adelson is thinking about beijing. Chad the government did say who has to sell their promise over the past 10 years. With sheldon adelson, he delivered the dream. No one else really had the courage to do that. He has built a strip similar to las vegas. No one else thought you would have the returns that would keep you in business and here he has as one of the most wealthy people in the world. Betty is it going to go back to bite him . Chad the good thing with their business is they are more relying on the mass market and nongaming. They do not have a huge vip segment. The real Anticorruption Campaign is hurting the vip market. Betty and you have seen that, the vip market has declined since the anticorruption. Chad, Macquarie Capital analyst on gaming. If you want to watch more of our interview and learn more about macau, watch titans at the table the rise of macau on bloomberg. Com. In the race of the white house candidates can and will candidates can alienate a lot of people. Should it be your wifes employer . Heinz and kraft merge, is it a good deal . Betty i want to get back to bringing you some of the most important stories you need to know about. You are looking at live pictures of Angela Merkel, you can see Francois Hollande and spanish Prime Minister Mariano Rajoy. All three of them, Angela Merkel in the middle. Making comments and visiting the crash site the airbus a320 Germanwings Flight that went down yesterday. One flight recorder has been recovered. It is badly damaged. The investigators believe they will be able to get some data out of that but we are searching for the other black box. We will keep monitoring that site and the news coming out of it. Joining me for more is bloombergs alex sherman and Lisa Abramowicz as we count down to more stories. Number four, ted cruz, in an interview with all due respect, ted cruz basically saying that his wifes ties to Goldman Sachs, that goldman should not be given any special favors from the government. Heres what he said about this. Ted cruz like many other players on wall street and big business, they seek out and get special favors from government. They are entitled to practice their business but without subsidies are benefits. Betty he also failed to mention that his wife worked at goldman. Lisa i love it. He says he is proud of her and yet he said did not mention which business. He does seem to suggest that certain businesses are better than others. He said i think big business, if they are building a better mousetrap, great but it should not be government favored. Alex goldman has a reputation of being government sachs. Hank paulson, bob ruben. This is not a new thing. There might be special treatment towards goldman in particular among all the investment banks. But what is interesting is ted cruz is a republican. We are seeing this hatred of Investment Banking still prevalent within politics on both sides of the aisle. This may be one way ted cruz can differentiate himself from the other republican candidates. Betty facebook plans to unveil tools at its Developers Conference today that will allow developers to reach an audience and also boost revenue. Facebook shares broke an alltime high last week and trading now at 85. Some of that has to do with how well facebook has done on mobile. That has been a driver for revenue and also the share price. Lisa which is why they are putting an emphasis on this. They want App Developers to use their platform to develop the next big thing so they do not become obsolete. Alex winwin, App Developers want the 1. 4 billion person audience facebook delivers. Betty exactly. There is apple, that is number one. Number two, catch it meets correlate. Ketchup meets kool aid. Kraft will merge with heinz kraft owners will own a 49 stake of the combined company. Alex we heard a lot of grumblings that Warren Buffett was interested in this. Lisa im trying to figure out their next product velveeta ketchup. Betty your dinner menu. As we near the opening bell, futures are slightly higher. Our top story and the opening bell is next. Betty welcome back to the in the loop. Joining me is alex sherman and Lisa Abramowicz. Number one, oil. Crude awakening for commodities as wall street says the u. S. Is running out of places to store oil. Theres another 20 Million Barrels of empty space located i love this, on top of the field tanks. Who miscalculated . Lisa reminds me of having a closet in new york city. You find extra space. But it highlights to me, all these Companies Want to store oil because they want to sell in the future when it will be a higher price. If they are all storing it now, wont that suppress prices in the future when they go to sell . This seems like it could be a spiral. Alex i have used this example before, in a retail example it would be like if a Department Store cleared out its inventory and then got a new one and then think now we can raise prices we are out. Really what has happened, a bunch of other little Department Stores have opened. The inventory is still there. People are just going to different places but they may find out when they try to raise prices no one wants to buy higherpriced stuff because the other stuff is still out there. We will have to see. Betty Oil Prices Continue to go down. Stocks are getting ready to start trading. Joining us is doug who helps of receive 1. 7 billion as the chief Investment Officer of his firm. Last time he was predicting an end to the bull market. Do you still feel this way . Doug we still think it is pretty late, april 9 inning eight inning or ninth inning, we think the next big move is to the downside. Weve had fairly broad new highs earlier this month. Theres probably higher highs to come in the next several weeks. I think an important part will be later this year, leading to a decline of maybe 25 . Betty that means you have been surprised by the tops since you made your call . Doug the strength and nasdaq has been exceptional. We are only up a couple percent yeartodate. Small caps have revived a little in the past month or so. Obviously foreign markets have surprised us on the upside. The u. S. Has not done a whole lot yet yeartodate. We have to respect the action of the tape to some extent. We do not like the values, we have argued that last years tapering moves constituted tightening so we have already had tightening in the system that is working its way through. We have up the value of the dollar 20 in the last year. So that also serves as partly as a move. Alex you say you are not ready to call a top. What will it take for you to be ready . Is there doug something you are looking for . Doug we would like to see more internal weakness in small caps in the transportation stocks. Transportation stocks now after having been outstandingly strong for a couple years, have leveled off in the last three or four months on a relative basis. We would like to see some weakness in the financials. Internal weakening within the market itself. Lisa if you think the downturn is coming, how are you hedging against that . Doug we almost always have a quantitative hedge on within our portfolio of some size. We had a quantitative strategy that dates back short to 1991. It is quantitative shorts basically overvalued stocks with weakening fundamentals and weakening relative strengths. We have got a latitude to shift net equity exposure in our portfolio from 30 to 70 , we are at city 5 right now. At 55 right now. We will go down to the 30 percent or 35 . We still have a foot in this, respecting the action of the market. Betty you think the bull market is ending you think the markets are overvalued at this point. Doug right. Betty there are some areas where there is deep discounting going on. You call them value traps. Doug that has been our concern for a while on the emerging markets. We have liked in the values we have seen for a while. Typically we like to see a big washout, a big capitulation of investor sentiment. It still seems like investors want to like the emerging markets. Betty it is not just emerging markets. You see value traps in the u. S. Doug we are concerned about i mean, energy is shaping up as a value play. I think the values are there. I heard you talking about the prospects for the oil price before our segment. What bothers us is there still seems to be more excitement over the fact that we can get oil 60 off and we can get the Energy Stocks at 25 to 30 discount. There is more excitement than fear surrounding the energy patch. It would not surprise me at all to sea oil trade down towards 35. That might shape an opportunity to move into energy later in the year. Lisa what are you looking for to become more bullish on the market . From 55 to 70 . Doug to go to 70 , i mean, we are going to need a significant correction values. It is not just where the s p and dow are priced. This is overvalued market. The median or typical stock is at a pe price to cash flow multiple higher than it has ever been. Higher than 2007. To get back to 70 , we would have to go through an entire bear market cycle. If we really blast off here even in overvalued territory, we would entertain going back to 60 or 65 , the 70 max is really reserved for a situation where all pistons are firing. Cheap values, fed policy is accommodated, depressed sentiment. We are a long way from that. Betty before we go, i thought this was interesting. Apple you say apple at 4 weig hting on the s p is a worry. Doug we do own apple across our quantitative strategies. Not in proportion to its s p 500 weight, just above 4 . This was a tongueincheek study, you do not want to belong to the 4 club in the s p 500. Every other company that has made it to the 4 level of the s p has been unable to stay there. It is the law of large numbers, competition and that sort of thing. That being said, apple is cheaper than many of the other stocks that made it very briefly into the 4 club like microsoft, cisco ge in 19992000. Betty we will see. Doug we do on that stock right now. Betty you are making an argument against your own stock. [laughter] doug, chief Investment Officer of leuthold group. Speedhungry traders are in a competition to be the fastest in squeezing profits out of the industry. A few moments into the session. Betty now turning to the new chapter in the highfrequency trading debate. Two Key Competitors in a technological arms race have called a truce. Kceg and the worldclass wireless joining forces to create a global network. Terms are tired of being in a race. Regulators and many firms are trying to manage the cost of speeding up. Joining us is joe the partner at Institutional Agency brokers and author of broken markets, a favorite of Michael Lewis celebrating the one Year Anniversary of flash boys. It woke everybody up to highspeed trading. On this story, the two Companies Seeking a truce is this just a fact that it is costing more money to get faster . Joe it is an arms race and nobody wins at the end. The revenue associated with the smaller gains they are making in speed is not enough to cover the costs. You are having problems. Some firms are going out of business. Some are trying to consolidate. Here is the problem, once one person decides i will jump on the line and get a new Microwave Network and put lasers on top of the building everyone else has to do it. That is the definition of an arms race and it is still going on. Even though there was a little consolidation there is a lot of spending. Betty what does it mean for the structure of the market . Joe the problem we have, people call us high trading critics but we are Market Structure critics. The structure has changed to allow it has been a fragmented market for years. 11 stock exchanges and 40 dark pools. To connect those is where the speed comes in the play. Betty is getting more and more disposed urgent it is getting more and more distorted. Joe that is not real liquidity that is fragmented liquidity. We would rather aggregate it. You do not need 11 exchanges and 40 dark. Even highfrequency traders will say it is too many because they have to pay to connect for hardware and to the exchanges. It is cost prohibitive for them as well. Betty Michael Lewis has an answer. Hes making the rounds on the anniversary of his book. His answer is to slow everything down. I want you to hear what he said. Michael lewis if every exchange, every market took the responsibility to make itself fair by eliminating the speed advantages the problems would go away. The exchange itself, the speed, it is a source of revenue for the exchanges. It would be a collapse of their Business Model. Joe we love Michael Lewis. We love the book. Betty he loves your book. Joe we appreciate that. You cannot regulate speed. We would never come in and say technologically we want to slow things down. What i want to do is have a fair market where he is right certain exchanges are selling privileges. That is where we have to talk about it. There is something called a sipm those do not match, how can you get into match you cannot, you try to speed it up. Nasdaq has to spend more money and try to do that. One of these solutions has been to slow down the market to match up speeds. Betty there is lots of quote unquote riggin going on. Last week we talked tog theres a lit of quote on quote rigging going on. Las weekt we talked to tim of cftc about spoofing. Joe the cases, it is prop traders who are layering books. That is illegal and should be dealt with. The cftc has more power than the ftc on that. The problem is the highspeed. Does the ftc have enough . Technology to catch it . Betty thank you so much. Coauthor of broken markets. Betty be sure to tune in thursday for a look at the cruise industry in titans at the table cruising the high seas. I sat down with the heads of two of the Worlds Largest cruise lines, the ceo of carnival and royal caribbean. Real caribbean launched its newest vessel which is the Third Largest cruise ship ever built. Both feature number cards and skydiving with a capsule ride into the sky. Above the statue of liberty. I asked carnivals are not about his response to the rival ship being touted as a game changer for the industry. Arnold there will be a lot of people who will not want the sale on quantum. Betty you do not see it as a game changer . Arnold in certain features on board our ship. Quan them, and the contemporary category where people are looking for lots of activities and that type of stuff, a mall of america type of experience is a game changer. Betty arnold called quantum the mall of america of ships. Well, im not going to comment on what he said. I think you will have trouble finding a mall on board. Betty see more thursday at 9 00 p. M. Eastern on bloomberg. Duking it out on the high seas. Kraft foods merging with h. J. Heinz in a deal orchestrated by 3g capital and berkshire hathaway. Krafts chairman spoke about the cost savings. The combination will generate substantial synergies, which we currently expect to be about 1. 5 billion, as well as many revenue expansion opportunities domestically and abroad. Betty with me to discuss this is marshall, the chairman of his firm. Lots of m a experience including the deal between disney and abc that is still paying off. What is your take . Marshall this is fascinating. It is not an acquisition, it is a merger. It is not really what people associate with private equity it is a very different model of private equity. In some ways, if i can use an expression, this is repackaging packaged food into new configurations corporately, kraft having been separated from mondelez and heinz being taken out of the public market. That is a spin on it betty this is interesting. You say that 3g is pioneering a new model. Tell me what is different about what they do versus traditional pricing. Marshall what i think 3g are doing is an old model of capitalism, involved ownership on behalf of something called stockholders who are properly represented by something called owners of capital and stewards or directors of companies who are involved in driving value over some period of time to complete the thought that is not unduly compressed. 3g has a longer horizon. They are much more involved in the companies. They are putting money in, as they did with and anheuserbusch, tim hortons and burger king. They are looking for cost savings and revenue advancements. I do not think it is an accident they came out of brazil where you can sell more products on the packaged food side. Betty international is a big piece of it. Marshall direct involvement not a quick flip. There is no 3g fund, this is aggregating capital on a large scale. Betty old wine, new bottle. Marshall old ketchup, new bottle. Betty kraft has had a hard go with some products. What could this new merger what could this do . Marshall one could be a bit cynical about repackaging these companies. The fact that it is in a newer larger bottle does not mean it will make it better. What might make it better is reducing cost of distribution if the products could be sent through similar channels at lower costs. When the private equity revolution was started in the 1980s, it was all about taking fat out of lazy companies. The easy way was to take out the fat. That is what 3g is good at. Betty marshall, thank you for your take. Back in two minutes with more. Betty the latest around in the budget battle is in an intramural fight a monkey republicans. Defense hawks versus fiscal hawks, the showdown plays out today. Peter cook, who is going to win . Peter the best bet is that defense hawks are going to win, there are more of them. This afternoon something that we do not see that often in washington. 6 separate budget votes. Basically, three republican plans and three democratic plants. The one that gets the most votes is going to be the house budget resolution. This is the plan cooked up by john baker, the Queen John Boehner the queen of the hill approach. Oen comes one comes from tom price of georgia. The plan would cut the budget, 5. 5 trillion in spending cuts. It would repeal the Health Care Law and add more defense dollars 94 billion in defense spending. 20. 5 billion of that would be offset. The second plan, more likely to prevail, is the same except it does not offset those defense dollars. It raises a little bit more, 96 billion. This is a push by defense hawks to get as much money as they can coming forward. John boehner thinks this is the plan that will prevail. John boehner the way we are considering all of these budgets is the most democratic small d, where you can consider this. The budget alternative that gets the most votes goes to final passage. That is a great way to do it. Peter democrats do not like either one of these plans, they will have the opportunity to offer some alternatives. In this fight, the defense hawks are going to beat fiscal hawks within the republican conference. Betty the next step in the battle is what . Peter the senate needs to act. The house votes today and there could be some opportunity for curveballs. Then the senate is going to vote as soon as tomorrow on its version of the resolution. A republican plan that democrats do not like. If the republicans can get the house and senate to merge, they have a spending blueprint Going Forward. That is going to set the battle lines for the budget battle in the fall with the white house overspending. The real prospect for a government shutdown, a debt ceiling as well. This is a precursor. Betty is that the big one, the debt ceiling fight . Peter it is the big battle to come. We had the debt ceiling, the budget to play at. Lots of challenges between this Republican Congress and white house over spending. Betty more on the votes this afternoon on bluebird. On bloomberg. Stay tuned. Tomorrow we are talking wages, why arent they budging . The ceo of paycheck. Live from bloomberg headquarters in new york, this is market makers. With Erik Schatzker and stephanie ruhle. Stephanie buffett does it again. He teams up with a familiar partner and orchestrates a merger between kraft foods and heinz. Matt i checked out one of fords new cars. Stephanie living large, the place where it seems like travelers money is no object. Matt welcome to market makers