Oneoff. Hes not going to go into Eastern Europe crane. Eastern ukraine. They are not going to want to do more and less he does go into Eastern Europe crane. What about restricting Global Investors to invest in russia . Sort of an investor sanction rather than an economic sanction . The western companies that are in russia are all reconsidering. Ive had calls already on this. Theyve got to try to plot out what has happened not only in the next few months, but in the next several years. Things dont look good. Investment in russia is going to drop of its own accord without doing anything. And the russians are going to have to really step up their game to Keep Companies there. Fascinating discussion. Saudiou solved this arabia needs to pump more oil. Gary, thank you. And the makers of jack daniel have something to open a bottle about. We will talk to the ceo coming up next. Its time for bloomberg on the markets. Here is a check of where markets are trading. Its a pretty green day. The s p up by about 0. 5 . The nasdaq leading the way. The real story, Building Permits rising almost eight percent month by month. It totally blew vast blew past estimates. Maybe Going Forward we will see more construction and more people buying houses and more positivity in the market. Checkout out shares of microsoft. The ceo said the company will unveil a version of the office for the ipad. It is an operating system for apples ipad. You can get the basic, and then if you want the upgrade, you get to pay. How do you move customers over to the software without to live totally diluting the brand of the same time echo why would you want to use office . Because it is office. Its dylan thing i love using on my husband matt computer its the only thing i love using on my husbands mac computer. Gold is off at the moment. Also as the fed continues to pare back on its tapering, that will hurt. Silbert moves in tandem with gold. Silver moves in tandem with gold. That is dorky. And copper is at a fouryear low, early getting destroyed a little bit. But on an uptick right there. More than two dozen states have launched a new campaign against smoking. They are targeting retailers. We will talk to idahos attorney general. The attorney generals are at the forefront of this thing, just asking a favor. Loved also, Frank Sinatra his jack daniels so much the flask was buried with him. Jack daniels is returning the compliment. We will talk about that next. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Except not, because we are filling in. I matt miller. And im alix steel. Hooky for young theyre playing hooky today. We will be here and we will continue to be here for you. Normally, when we think of activism we think of how icon, dan loeb, and others. But we do not think of sam zells. He is considered the godfather of the Real Estate Investment trust. He said the industry, its reputation is at stake. Betty liu has the details, because she has been speaking to mr. Zell. Who has gotten on his bad side . It is these two. Lets pull up the picture of both of them. It is adam and his father, barry portnoy. A real of them run Estate Investment trust. The 6 million fund has Office Properties all over the u. S. , one in philadelphia, by the way, the one in millon center. There is a shareholder fight. Activism is very uncommon in the real estate world. Why is that, by the way . You would like to think they are nicer. Owners have been in the business for decades. It is a gentlemanly type of trust me, it is ruthless as well, but in terms of outsiders coming in and trying to oust the board, which is what is happening here, that is not very common. Basically, zell has teamed up with jeff blau of related, and keith meister. And by the way, blau and meister have a 10 stake in this company. They are saying that the portnoys are using the commonwealth to enrich themselves through an Asset Management company that manages the commonwealth. It is a little bit convoluted. It is complicated. This is all to the detriment of the shareholders. I had jeff blau on our program last week. This is how he got them sam zell involved. We called him and said, what are you be our proposed chairman if we were to win the fight why dont you be our proposed chairman if we were to win the fight . He called back and said that he is actually very busy, but this is so important to him, proper governance and is roll as a leader in the industry, that he has to do this. He views this as an obligation to make change and fix the governance practices that are were occurring here. Because guys, the money at stake for zell im in, this worth 4 billion. We are only talking about a 90 Million Dollars taking commonwealth. That is nothing. It is a drop in the bucket am a but he is doing it because he feels the Retail Industry is directly linked to him. Hang on. Hes just doing this to be a good person . Because ing this yes, in a nutshell. Now he looks like a nice guy. Portnoy say this is ridiculous. Isy say them sam zell only in it, they claim, for the money. But they have listened to shareholders, they say, and they looked at options including declassifying the board. I talked to sam zell on the phone. What he said he would do if he came into this company and became the chairman, he said he would go ahead and internalize management, get rid of the bylaws that disenfranchised shareholders. Just like equity residential, his own. Ande is no strategy to it we would correct that. And of course, the portnoys, they say that is not true and they have implemented their own strategy and given time, it will work. It feels like carl icahn all over again. Sam zell and carl icahn have worked together. They are buddies. There you go. And they have also been on opposite sides of each other. I dont think you want to be on the opposite side of carl icahn or sam zell. Probably not. Not without your armor on. We are going to take a quick break. We come back, a new tactic in the war on smoking, and more than two dozen states are involved. We talked to idahos attorney general. Attorney generals from 38 states are asking big retailers to quit selling tobacco. Ceos of rite aid, walgreens, safeway, walmart, asking them to go the way of cvs, which recently opted to go smokefree. The attorney general of idaho is here, and he was part of that contingent. He joins us from boise. Why did you decide to take this plunge . When you are elected attorney general, they give you both a carrot and a stick. Sometimes use the stick and sometimes use the carrot. Right now, we are trying to use the carrot. And graduations and kudos to cvs caremark for being the first one in the industry to step forward and say we will no longer sell Tobacco Products. This is similar to what happen a number of years ago with rvs. When arbys was the first one to step out and say, we will no longer allow smoking in our restaurants. We are hoping there is a domino effect here. We congratulate caremark. But why now . People have been smoking for decades. Have you seen some kind of huge resurgence in idaho that is making you take this step now . Well, why not now . This is a good time to do that. Cvs caremark is one step forward and has taken this step, so now that the iron is hot, it is an opportunity for us to congratulate them, to recognize their effort, and to encourage others to follow suit. I have to ask. It makes sense to me. You dont want someone to sell cigarettes, which clearly cause lung cancer and death, in a drugstore that is supposed to promote health. But it is not illegal, right . And this is still america and it is a free market and we are all free citizens. And you are a republican. It is odd to hear this kind of nanny state Central Planning talk from a Republican Attorney general. Well, actually, it makes a lot of sense. This is an issue that we thought about for a long time. The fact of the matter is, we are not telling companies what to do. They are free to act in the mike in the marketplace as they choose. And tobacco is a legal product to be sold in their stores. The question here is whether we can encourage the participants in the marketplace to recognize the downside of tobacco. I get it. Stick, carrot and the and this is carrot. But then you imply the stick could come. Seems odd, especially from someone who should champ and champion liberty and free business and free markets. It is absolutely championing to try to do a regulation like this. There is no threat and regulation. There is no threatened litigation. There is not there is no stick here. It is a legal product. But the question is, can i encourage Good Behavior in the marketplace . We can do that as attorney general. This is a great day for Public Health as well. I have to be totally upfront front with you. I smoked with for 11 years. If you took away my store, i would just go and find another store, and there will be nothing that would have stopped me. Because you are addicted, right . You are addicted. Would you consider other programs, like education, outreach, quitting programs instead . The fact that cvs caremark is choosing not to sell Tobacco Products does not solve the entirety of the problem. It is not going to make the problem go away, but it also sends a very powerful message to you. Of the current smokers, 90 of them started before they were 18 years of age. In a pharmacy where you are selling health, selling products that are good health right next door to the tobacco, and then you have a cessation products. That is confusing in the marketplace. We are encouraging the market place to act responsibly and try to commend those who are acting responsibly in the market place. You know, that makes sense, and obviously, its kind of strange when youre in the position of providing health care that you are also selling something that is addictive and killing people. Walgreens probably sells fatty foods. This is what i wonder. Is diabetes not even more of a problem . These companies rely on american addiction to sugar and sugary drinks. And beer. Well, beer is good. Walmart sells beer. Are you concerned that they are selling these sugary beverages that are clearly a health issue for the American Public as well . That is a health issue, but of a different character. Tobacco is an age restricted product, and it is the only products, when used as this is marketed, will kill you. Other impactsain of sugar and other kinds of things, but tobacco is unique in that regard. There are about 480,000 premature deaths per year for the use of tobacco. It impacts our economy at the rate of about 299 billion a year. There is tremendous impact from tobacco in our marketplace. I want to get a response from you in terms of what other companies are saying. Rite aid, we reached out to them and they said, we appreciate the attorney general took time to share their views. We are always evaluating options and programs for our stores and customers. Rite aid provides cessation products and additional resources, including our pharmacists who are available to counsel people trying to stop smoking. But they will also offer them a pack of cigarettes for 10. You know, equal opportunity. What other responses have you gotten . We are waiting on a variety of responses. Said, we started out some time ago with rvs, and arbys was the first Fast Food Restaurant to say, we are going to stop smoking in our restaurants. We hope there is a domino effect among the other. The other pharmacies. Ultimately, we hope they will stop selling Tobacco Products, too. It is a positive thing that the attorneys general are willing to step forward in a very professional way and invite lead of cvsllow the caremark. We ought to be congratulating and giving kudos to those who want to act responsibly in the market place. We think that is great. Inc. You so much for joining us. Thank you so much for joining us. Are trying to give them the idea to ban beer . Im just saying here is proof that god loves us and wants us to be happy. Im just talking about the junk, the mac cheese and all of that. A glass orraising two to jack channels last night. That is coming up next. Heres a story that caught my this morning. Everyone eat breakfast. Pancakes, bacon, eggs. They are actually getting more expensive. The Financial Times is reporting some of the reasons. Copy has been hit by unseasonably dry weather causing coffee has been hit by an unseasonably dry weather causing prices to rise. And the crisis in ukraine, which is one of the biggest exporters of wheat. What is your favorite . Bacon. Would you pay more for your bacon . I would. There you go. You dont hear a lot about this, especially from antifed people, right . Especially from these inflation fear mongers that we are seeing prices go up and everything from milk to bacon is getting worse. Stores like starbucks, for example, locked in their cost for a year or so he for. They will probably not have to buy more coffee until the end of the summer. Going to starbucks, dont complain about pricing, right . Costconscious, bruegger own coffee. But brew your own coffee. Andut eating at mcdonalds things like that. But if you eat at and donald, you have your own problems, beyond inflation. Quite a long happy hour, shares of the maker of jack daniels whiskey and other top foods just hit an alltime high. With us is the ceo and chairman of brownforman, which in addition to jack daniels reduces southern comfort, janis joplin favorite. Produces southern comfort, Janis Joplins favorite. Joining us. R i feel like ive been talking to a litany of liquor ceos about whiskey and berman bourbon. Brown spirits are increasing in popularity. What is behind it . Thank you for having me. They are doing very well is the reason you may be talking to them. Articulately the american whiskeys of late. For those of us who have been around this industry for some time, we have had has been headwinds for so long as bourbon producers and hit tennessee with bourbon producers and Tennessee Whiskey producers as we have been for so long, it has caught the interest of many both inside the industry and outside. I think i read recently that the market share of whiskey, bourbon, these types of spirits has grown to 30 of the total liquor market. 35 . Is that true . I would have to see what you are referencing in terms of the industry data. I know one statistic that is very telling, at least when i will refer to from the United States, and this comes from 2013, that the growth of some of the whiskeys generally outgrew vodka, which is the first time in this country and an amazing statistic. That trend may have been underway for some three decades. Chart. Ust showed this spirit sales are 35 about all sales. It is not that bourbon and whiskey are 35 of spirits. In thewe have seen industry a lot of consolidation, particularly leveling out overall in the industry. What do you think about that . I dont know that the industry is, in fact, consolidating in fewer owners. Globallyy fragmented as an industry. Depending on which statistics you use, there is data that says that top 10 manufacturers and leading companies in the world may only 20 ofte about 15 to the total volume. Can thered too Many Industries compared to any industries that are consolidated, ours remains quite fragmented. A company like ours, for example, has less than one percent of the total volume worldwide. Though, bacardi has actually put out there that it is looking for more brown spirits in its portfolio. I wonder what kind of conditions would you consider selling yourself. We are family controlled and have been since the company was in 1870. The Company Remains very committed to the future of brownforman. To be quite honest, with the results that we are posting in the future we see ahead of us, we dont see any change in that posture. Have the guys from bacardi been down to louisville lately . A longave known them for time and have done work with them in the United States and the u. K. And have had partnership. There is a lot of speculation out there that relates to consolidation, particularly the since the announced suntory being deal. It specificmment on acquisitions that we are undertaking or any that anyone else might be doing. But we cooperate with them on ustry affairs and do word work distribution in key countries. That sounded like a maybe. It sounded like they know each other. They are family owned. Let me ask you about the kind of bourbon that you are selling. Im a huge fan of jack daniels. I like the different versions you occasionally come out with. But in general across the country, it looks like people are looking for more expensive, older bourbons, older whiskeys, flavored. This fireball liquor has become very popular. Are you making a move toward unorthodox flavors and higherpriced product . You have outlined the two dimensions were there has been significant growth. We have been at the forefront, we think, of the ultrapremium business with both back jack daniel expressions, called gentleman jack, and single barrel, going back 20 years. It is wonderful. It is wonderful. And also the Woodford Reserve that we reduced in the mid1990s. We like to think of ourselves as one of the original craft the steelers. We have enjoyed great success. And the other one of the original Craft Distillers. We have enjoyed great success. And the other thing is that you dont see other forms of whiskey. American whiskey lends itself to flavoring. Like southern comfort, right . We have owned it since the 1970s and because of the impact of no competition, one of those on isitors that we tennessee honey. It is very highly competitive right now. We intend to be at the forefront of it. You brought up tennessee. I want to get to the big debate is going on right there. Last year, Tennessee Law laid out requirements for spirits to be labeled Tennessee Whiskey, which in essence, kind of made it. Lead jack daniels and other distillers in the state actively trying to change the law. They say you are trying to have a monopoly there. What do you say to that . They are wrong. There is one major distiller who is making a lot of noise down there. The Craft Distillers, the small guys, are also against the law. Its not just the one big guy. Who is the one big guy . Most of the Craft Distillers are on our side. This is the one thing i will say about it. A year ago, the state legislature and the governor signed into law the standards of identity that exist today. And the reality is that anybody who produce debates in any of the categories of distilled itrits around the world, meets those standards of quality vigorously. It is very true of scotch whiskey, cognac, tequila, bourbon. The unique thing about this is that jack daniels from any size or scale, really, the only wellknown Tennessee Whiskey. It has caused a bit of a scrap down in tennessee. It is getting more press than it would normally get. Got it. All, we appreciate your time on all of the subjects. Of brownforman. We will be back in two minutes. Live from bloomberg World Headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Regulating bitcoin a top treasury official says government oversight will actually help virtual currencies. Alibabas Charm Offensive the chinese ecommerce to has flooded washington with highpowered lobbyist says it prepares for its ipo. They are the last word in good taste we will tell you but the company that makes the flavors for thousands of things you buy. Welcome to Market Makers. m matt miller im alix steel. Theres a lot going on. A full docket of things today. With an important official from treasury today. I am excited about that. In the meantime, we are going to talk about russia and the United States. The day after the United States and eu imposed sanctions on russia, president putin called by mia an inalienable part of russia and called the referendum fair. The referendum was open and it was fair. , they have expressed their will. They want to be in russia. Peter cook is in the house from d. C. Good to have you here. How soon are we going to see tougher sanctions . We have already heard from ill Joe Joe Biden who is in poland. Speech, butusual the message is right there, they are going to annex crimea and they are not going to move further into ukraine. Not everyone is sure thats going to play out, so everyone is prepared to ratchet these sanctions. We had a top treasury official today who happens to be the most disliked man in russia. He is responsible for imposing sanctions whether it is in iran or russia. I asked about the credibility factor and whether or not sanctions are tough enough to threaten the russians in any way. Powerful tool, a flexible tool, and one that we have in other circumstances demonstrated we are quite capable of using. Understandrussians we have a very good track record sanctionsf applying in an escalating fashion in response to an escalating threat. Escalating fashion is what is important. The u. S. Has maintained along with the eu that as russia takes additional steps that they want to leave some latitude for russia to back down. At the end of the day, you need International Cooperation and it has to come from europe. Whether we will want to see western europe hurt itself is the big question. The hit list announced yesterday by the eu and United States was not exactly the same. There was some overlap in some suggestions that europeans had not targeted people close to Vladimir Putin because theyd did not want to take him off. [crosstalk] both to is room for move higher. You had friends come out and say they are rethinking a military agreement they have with russia but only if the u. K. Crack down on russian oligarchs. Is there a French Military . The interaction between europe is more important. There are so many different levers to pull here. Moveer any of them will Vladimir Putin in any particular way is not clear. The indication is absolutely not. How far will the United States push it . Will we see state banks targeted by the United States . Russian state banks accessing the u. S. Financial system that would be a big deal. Would we go after their Energy Companies . How much would that help since russia is clearly going to annex crimea anyway . We should tell them so they have ample time to prepare. Damage and still do inflict pain . Even if they stay in crimea, the thought on the part of the u. S. Government is youve got to do something here so you dont send a message not only to Vladimir Putin but other countries around the world who might want to make moves in regard to territories in question. Was a fascinating morning and the reason the undersecretary was here, peter and i had breakfast with him and he gave a speech about the coin. He was talking about the u. S. Considering a framework in which it can regulate bitcoin. Very interesting to hear from a treasury official about this, isnt it . There have been some real questions in washington about how do you regulate bitcoin . Is it in fact a currency . What we have heard consistently david e government and david cohen is one of the highestranking officials to spell it out. He says theres an opportunity for bitcoin to be a good day, something u. S. Entrepreneurs can take advantage of. But we are going to demand transparency and the same rules of the road at we demand for other currencies for other markets. We were asking him if he thought he could regulate the coin with existing existing legislation. Listen to what he said about how to regulate bitcoin. Where we are today, we are very comfortable we have the appropriate regulatory tools in place. O stop tools in but just as the industry evolves, we will look at our regulatory approach and evolve to ensure we are staying at least abreast of the risks that may be developing . The bottom line is he was saying today the way they are regulating bitcoin is at the entry and exit points from fiat. You dollars for bitcoin, that is where the regulation is and not within the coin transaction world. I was pleased to hear him say matt miller had not violated any u. S. Laws with his purchases around christmas. Is moving so much faster than regulation. At core thats part of the issue. That was suggested, but it doesnt seem it is the case. One of the most interesting things i think is he told us they brought someone from the Bitcoin Community into the bank secrecy committee. So they got somebody in the community an Advisory Panel offering advice on how to deal with bank secrecy issues. But he will not say who it is. It could be the head of the Bitcoin Foundation that controls the coin source court source code. It was fascinating and it was great to have some time with him today in conjunction with what then lost key is doing in new york just pushes along the Regulatory Framework so we can have a bitcoin exchange. A brave new world for bitcoin regulation. Not sure the government has figured it out but david cohen and others are trying to be on the leading edge of stop we do know that russia and china are against bitcoin, a free and democratic currency, so it has a very american flavor to it. Thank you for joining us, peter cook, chief washington correspondent dropping in for the breakfast this morning. The General Motors chief executive is trying to push the company pass the ignition switch scandal which has led to millions of cars being recalled. Her newest move is appointing a 40 year veteran to the head of Global Vehicle safety. Jamie butters joins us now from detroit. She was in charge of quality control, right . Isnt that the same thing . In manufacturing, engineering before hrm product development, so she was never really a quality engineer. They have had processes for decades on how to handle these things, but the thinking is by creating a separate position, you give it more focus and someone who isnt beholden to one of the particular groups. Youve got purchasing, design, Parts Engineering and once things start getting messy, the fingerpointing can go crazy. It can be helpful to have someone there as the internal umpire or referee to say these are the guys who made the mistake and this is how we are Going Forward from here. Wasnt part of the issue that the Corporate Structure was so filter thesecannot issues efficiently . Any word on changing the large structure . Fax it is still going to be an extremely huge company. Theyve got 10 vehicle brands around the world and i dont know theres going to be a lot of radical reshaping of the company. Ways to be able to elevate this and have a mechanism to take action when they find out there is something wrong. Thats what you keep seeing in the timeline. Problem, wee was a discussed the solution and we didnt do anything. They need someone to say we need to go ahead and do this or this about it. A seems they should have done recall instead of just a Technical Service litan, telling dealers to fix something and set of telling everyone to take it to a dealership and get it fixed. Do we know anything about the how muchreholder did the government know about this . The Treasury Department was the piece of the u. S. Government that held the shares. No evidence they knew anything other shareholders did not know. All shareholders could have known there have been complaints filed with the national Highway Traffic Safety Administration and there had been these Technical Service bulletins. Recalls. Onrecall no evidence of it at this point. Jamie butters runs are auto coverage out of detroit. Agrees sharingy is caring. I do, do you . I guess. I dont know where you are going with this. One city is cracking down on uber, the ridesharing service. We will talk about that next. Turning over the keys to the Magic Kingdom who will succeed bob iger now that anne sweeney is out . Market makers live on bloomberg television. Your tablet,s on bloomberg. Com, apple tv we are available in a modern digital world. I thought you were going to break into song any minute. It is the biggest blow yet to shed to to ride sharing services. The supposedly green city of seattle has imposed new regulation. Julie hyman is here with the details on what may be a big setback for these companies. Its so weird that seattle is so technologically advanced and hip. I guess the Taxi Commission is just as powerful there as it is in other places. They are limited to the number of drivers they can have on the road in seattle, so each of three services, sidecar, uber and left lift is the one with the pink mustaches. They can each only have one hundred 50 drivers for a total of 450. Estimates put their current driver ranks at 2000. This is a big problem because this service possible reason for being is they work on demand. A lot of demand at rush hour and theres only 150 drivers available. To have an going issue. I wonder if that is going to lower prices. Raising prices during peak hours is to get more drivers on the road. Competitionthere is . Regardless, it is tricky for your Business Model when you have a limit. The city council is going to review these rules and might get rid of driver caps on entirely. It also sounds like they will impose new rules in terms of insurance that is required. Insurance regulations are something some of the services are adopting in some cities, but this is different from what we have seen in california. Government negotiating with Ridesharing Services to come up with regulations and seattle becomes the first city to just come in and impose regulations. A statement from uber. It said 30,000 people wrote in to the city and said the city council has chosen to ignore the voices of nearly 30,000 constituents and move to put hundreds of drivers out of work. It also says the fight is not over. Its not clear what recourse it has. What kind of lobbying would we see . We know the taxi lobby in new york has been so antiuber. Taxi commissions across the country have a kind of mobbed up reputation. I wonder if the citizens of the city can do something to all . Ome that at they have been discussing putting these regulations on for a year, so it is interesting it has gotten to this point. These Ridesharing Services dont have much time until regulations go into effect. The mayor signed the rules and about 10 days and may have 30 days until they go into effect. Especially in this economy, that they would take that step not just putting people out of the work, but they are limiting the number of taxis, street. Thats not as disturbing as people might having a job. It sounds like seattle is out in front on this. A lot of other cities and states have talked about it but we have not seen Actual Movement yet. I have yet to take an uber car. Took one. It is expensive. It is expensive. Its a luxury item. It is a limousine. They do have a taxi service, but when i tried that, they have not been available. Julie hyman giving us the latest on uber. Its a hot topic. Along with a shot of jack daniels. The disney meeting today may talking about who will take the reins. There are fresh concerns about who is first in line to become the next ceo. Jon erlichman is in l a with more on the potential management moves. What do we know about the Succession Plan . Its crazy you are going to leave disney . Thats nuts to me. Up when the kids grow and you can try Something Else and youve been around it, i think anne sweeney has a certain curiosity about tv direction, so shes going to give it a shot. Going toas if theres be an overnight change at the top. Ceoiger is going to remain until next year and will stay on as chairman until 2016. They do have some time but theres always a lot of guesswork because ceo changes matter and this is a big company. What we do know is there are a couple of internal candidates that have been mentioned as part as possible successors. One would be the current chief Financial Officer who used run the parks business. The individual who runs the park business now is used to be the cfo. They swapped jobs to get a little more experience because this is not just a media company. It has a lot of moving parts. Theyve got cruise ships, merchandise, cable, a lot of different stuff. To fully understand the business, you have to try running different parts of the business. In the meantime, you have to wonder how much uncertainty does this create for investors . What are you hearing about that . Lets take the fact that they have to make a decision on the tv side. And sweeneys decision to leave is her decision. She could have remained in charge of that very important part of the business which includes disney channel, the abc what disney has a chance to do is showcase some of its other talent. Lets assume her job is taken by someone who is already in house. Whether its someone like gary all of a sudden theres upwards of the year to see what that person can do in that job and maybe make the argument there is someone else internally we should think about as a possible successor. Abc is the only thing i watch. I really hope once upon a time is not going away. You watch network tv . I do on my i touch. Eminem, making amends in washington. Ollie bob a does some friend raising. We will talk about it next on Market Makers. We are approaching 26 minutes past the hour, so its time for bloombergs on the markets. We are seeing green were seeing gains across the board after yesterdays gains, so a real boost even though Vladimir Putin says russia is going to annex crimea. Very interesting there and the s p gaining for the second day in a row. Hewlettpackard up after barclays lifted its recommendation on the personal computer maker. Barclays saying it is a deal, go and get some. Hewlettpackard shares up 3. 4 . Thistop following today is the video Game Retailer dropping after walmart saying it will start selling preowned video games later this year. Gamestop pretty much owns the market but it looks like that could change if a big giant like walmart gets into the game. Its reputation alibaba has enlisted some highpriced talent to lobby washington as a gift closer to an ipo. A very interesting story there. We are talking about big money in the biggest ipo this year. Plus, the company that knows what you like and puts the flavor in the food you eat everyday. We will tell you all about it. Ons is Market Makers bloomberg television, streaming on your tablet and on bloomberg. Com. Live from bloomberg World Headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Welcome to Market Makers. Im matt miller. Im alix steel. Its a very is the newsday. Im going to kick it off with the newsfeed right now the top business stories from around the world. New yorks attorney general wants to know if highspeed. Raders have an unfair a edge theyre investigating services that offer faster access to trading data than the public gets. Thanks and rapidfire trading from thehose places new york stock exchange. Of course they have an unfair edge. That is what they are paying for. Malaysia says they are trying to narrow the search court orders for the missing plane. They have asked for u. S. Satellites to be used. The disappearance is the second longest in modern aviation after amelia ehrhardt. Jackson won 11 nba titles with the Chicago Bulls and the los angeles lakers. Now hes taking on one of his toughest jobs yet. He has been named head of basketball operations for the hapless new york knicks. He will be paid 15 million a year but we dont care as long as we win. Right . Hapless is not a good ring. We have been hapless. Heading toward its initial public offering, likely setting up one of the most highprofile event in years. But the work in washington behind the scenes may have helped clear the way. Phil mattingly took a look at the companies work. It all starts with the top trade office. The u. S. Trade representative has a report called the notorious markets report. This a sickly labels marketplaces that are the worst when it comes to piracy and counterfeiting. How does this apply to alibaba . Was listedce portion in 2011 and thats when they sprang into action in washington. It is a typical Washington Play they started spending money on lobbying. They also brought on board the former top lawyer for the u. S. Trade representative, but the interesting thing when i look back on everything that happened as the company did not just hire people and let them work. They started making significant internal changes. Thats where things started to improve and the next year they were taken off the list. It went beyond the traditional d. C. Lobbying. What did it mean for the u. S. Chinas relationship when alibaba was taken off the list . It is a big deal. Company in just a the u. S. , this is diplomatic. When the u. S. Trader at placed them on the list in 2011, chinas Commerce Institute openly complained about it. For the u. S. And chinas relationship, this is crucial because when they took it off it was a tariff to china. The relationship continuing outreach and piracy and counterfeiting is always one of the key issues. From the u. S. Perspective, as they look at the u. S. Industry, when they can take what alibaba has done, take major changes, cooperating with law enforcement, reaching out to industries and benefiting themselves when it comes to they can say their crackdown on piracy has been ineffective and that makes u. S. Companies more comfortable. It makes more sense, but does works . Ge the way it i think it is on a company by company basis. As we look back through the 18 months, there level of outreach to the individual industries is what set them apart. They reached out to the motion they signedciation, agreements with all three of them. All three were initially complaining about them and they stopped. Their trade groups are still complaining, but they openly admit in their letters and campaigns that they have gone above and beyond in trying to correct some of the issues. I dont know if this goes countrywide, but what the u. S. Appreciates is they have set a new model where they are not bringing highprofile figures to lobbying, but going above and beyond the individual industries to help themselves here. Dont wantt is you them to be selling counterfeit goods on the website and its easy to see what they are. Are they selling counterfeit goods on their website . They still are. Thats why you have the Apparel Companies just stop . T they wouldnt that be better than spending millions on lobbyists in washington . Just stop selling counterfeit goods. This is like there he day. They have people putting product on. Million,rted over 87 87 million products, that they believed were counterfeit and had them strip down. It led to the arrest of about 300 people related to counterfeit operations. You will see this in some of the letters they filed they acknowledge there is more work to do. They are getting credit right now because they have worked harder and done more in terms of what is tangible that regulators can see and they appreciate that. They dont see that from every chinese company. With moreou so much on what alibaba did to go public in the u. S. Seems like they could do a little more. Its hard if you dont make the goods. Somethingtry to sell illegal on ebay, they will stop you. I will check it out. I want to do some research. Up, not everybody is thrilled by president obamas sanctions against russia. A couple of old political opponents say it should have been a lot tougher. Some of the targets found them hilarious. Republicans have not been shy in their criticism of president obamas foreign policy. John mccain told trish regan that the sanctions announced by the white house yesterday dont go nearly far enough. When a country invades another country as they did ismea and if the response seven russians assets are frozen , i would not call that a vigorous response. In fact, im deeply disappointed the president did not announce stronger sanctions and a plan for military assistance to ukraine. Rival, mittis 2012 romney, in todays wall street journal. Paragraph, butng you get the point. Al hunt is the host of political capital. What does propitious mean . Went can see mitt romney to Harvard Business school. I dont have any idea what he meant will stop when was the time to act and what should we have done . That romney made a strong case against barack obama but he did not say what he would have done, what should have been done, how it would have in any different. Its a rather weak editorial. On the other hand, there is a conundrum of sorts here. Theres not much he could have done. I think john mccain is right, theres a lot more, those early sanctions are rather tepid, but the thinking all along from europe and the u. S. Is lets do this now, give him a chance to find an off ramp and if he doesnt, then we ratchet it up. Thistalked to david cohen morning from treasury and his message was pretty clear there is a lot we can do and these sanctions will now escalate if Vladimir Putin continues to make these provocative moves. I think that is right. Theres a sequence and there is an effort to give him a chance if he wants to do back down a little bit. This guy is a thug. No one knows if you will back down. Some people are quite skeptical. The bottom line is theres not that much america or the west could do. On the other hand, it adds to this notion that somehow obama is not as strong as people would like. Theres not a lot of way to get out of it. Of the criticism from republicans is just campaigning at this point . I think mitt romneys is not future oriented, it is past oriented. He still bitter that he lost and john mccain is a cold warrior and is very upfront about that. ,es for aggressive interventionist, whether its serious, china or the ukraine. Thats not any surprise. He has a different perspective than the Obama Administration and i think his is a serious criticism. Are a lot of people in washington cold warriors . The Younger Generation is asking the question why does the u. S. Seemed to champion democratic expression in other places but when it happens on Vladimir Putins back doorstep, all of a sudden we ignore a vote . I actually think it is going the other way. I dont think its antidemocratic, but more of a neoisolationist feeling. I dont think americans want to get involved elsewhere. I think theres a sense weve been to extended. But may be a dangerous view its a growing sense in the American Public and american political community. Neil ferguson calls that the geopolitical taper. Al hunt there from washington, you can watch his show, political capital. When we come back the company that puts the flavor into the things you need. Thats coming up next on Market Makers. Company is called International Flavors and fragrances. You may have never heard of it, but you certainly tasted their products. They add flavors to a lot of the foods that you buy. Bloombergs rachel crane got a look at the flavor lab in new jersey. Be tiny dark bottles in these labs are filled with mysterious potions. They hold the flavors millions of people taste and smell every day. When you think of snacking met a tater chips or cereal bars, do you think of a flavor . They all contain flavor. He is the Vice President of flavors at internationa flavors and fragrances. The publicly traded Company Makes a lot of what we put in our mouths taste good. How many products on the shelves have your flavors in them western mark in general, about 90 of the products contain some type of flavor. Flavor is more than what our tongues senses. Its also about what our nose smells. Start in thers kitchen lab with aromas. This is the first step in the process, capturing the sent. , gatherstes a vacuum the scent molecules and then what . It pulls the aromas into this sand like material and is capturing those are romas. We take the stand and analyze it to find out what the orange is made of. The computer breaks down the aromas into a fingerprint. Then they use these fingerprint as a recipe to create a scientifically enhanced flavors. We call this one pineapple compound. Flavors like the ones that iff create are more reliable and costeffective than using the real thing. For example, oranges. It helps to have some of the real jews, but if its not of the quality you want, adding that flavor will give you more consistency and a better overall flavor. A food Company Might use an iff flavor to make sure every pint of orange sherbet faces the same tastes the same. That itso make sure more flavorful than one without the additional flavors . Thats what we hope you are going to see. Lets see if you can tell the difference. Its great. Do you see a bump in the orange or are you not sure yet . Ive got to do it again. Yes. This one is more orangey. Bland. E is a little more you picked the right one. There tightlipped about which products they put their mark on, but they work with all the major food companies. Theres a lot of secrecy about who is doing what with him. Is that because they dont want anyone to it flavor . Once we get the flavor for somebody, they dont want us creating something similar for someone else. Part of it makes sense to me. You want all of your products to taste the same. The other part of me is kind of grossed out. The flavorving taste. I get that you want your products to be uniform, but i dont want someone adding chemicals to my food. I just want to eat the regular food. It looks like the vapor and then they transform im going to start looking. Inif its 90 of everything the supermarket, you are not going to find any food. If you open that ben jerrys and it doesnt taste like chunky mark doesnt taste like chunky monkey i dont think they have artificial food in the artificial flavors and the chinese food i get. The s p 500 may be about to make another run at a record. Bloomberg is going to go on the markets to give you the edge you need will stop the edge you need. That is it for Market Makers. Rik will bee and e back tomorrow. They have leave schreiber tomorrow. Onter known as ray donovan the showtime series iwatch. Hes also the cofounder of band general store. That should be a good interview. Its going to be too much attractive man. Its going to blow up the camera. Im going to leave it right there. It is 86 minutes past the hour which means bloomberg is on the markets. Lets get you caught up on how things are trading at mida. U. S. Stocks are rallying the second day of gains for the s p 500 and dow industrials. The snp andnts on this comes after the s p had its worst week in a while. Some Industrial Production grew more than forecast and the rightg numbers coming in in line with what analysts were looking for. Certainly not discouraging anyone because there was a lot of noise around the february data because of the weather. Treasuries have pared their gains and you can see yields are down. Not i much. Yielding 35 basis points. The dollar has been a big mover as the Federal Reserve begins its twoday meeting. We will get word from janet yellen tomorrow when she holds her for her First Press Conference as fed chair. Right now, the dollar is very little changed at 79. 44. Stocks are at a needing for a second day, rebounding from the worst week since january, putting the benchmark back on track to make another run for any record. The last record set on march 7. Joining me right now is scott our. Is this a relief rally or is this continued strength as the Federal Reserve holds it twoday meeting . I kind of look at it both ways. It signals continued strength. I say that because just last week, we saw volatility spike well over 15 and its down almost 20 . Are going to see this rally. If we get just a bit higher, watch out because thats going to signal new highs at 189. Trending higher with higher lows, but its back down to below 14. 5. Absolutely. The activity is focused on april and now thats down about 12 or 13 this morning. Below the 200d day moving average, so thats market is counting further unrest at least for the nearterm. If anything, vix is in a holding pattern. We are also seeing a lot of auction activities and shares of facebook. Is this a rampup before the Company Reports results . Youre looking at a big trade that went down yesterday and a customer that was long the june 65 for a while sold those out and ruled those up to buy them a 70s which is an upside earnings play. Short term, theres major pointt below 66 point 66 five, but there is upside play there. I need to ask about your trade you are bullish on gold for the short term. Youve got a trade on the gold shares these are next week auctions that will expire a week from friday. I want to buy the 131134 call spread. The reason i like that is take is all the russia and gold following the technical chart right now and is very bullish. I like the spread and i can buy it for . 85. Scott bauer joining us from the cboe. Lunch money is up next. Money,me to lunch where we tie together the best stories, interviews, and business news. I am adam johnson. Message. As the new ceo of gm apologizes and gets critical over the massive recall. Theng rules for bitcoin, treasurys point man on Money Laundering lays out his game. A bloomberg exclusive. 28 attorneys general go after retailers and the cigarettes they sell. And in cancer engineering. College