I am Erik Schatzker. On thisstic to join you monday. A lot of exciting things going on. Excited to talk about it all. The top business stories from around the world. Torture goal has railed out its largest lender. It will cost the government 6. 62 rescue the bank. Good being divided into a think an bad thing. Junior bondholders and shareholders are stuck with the unit containing the banks most toxic assets. One way to bailout of banks, give the government the good stuff and everyone else the bad stuff. Topranked economist for the past three decades cashing in. Ed hyman selling to evercore partners. The price is much as 406 million. Four years ago he began hiring top stock analyst. Mcdonalds is putting beef and chicken burgers back on the menu in china. The burgers had been pulled about two weeks ago when one of mcdonalds suppliers was found repackaging old meet. From the company have been arrested. Lex and Alarming Development in the ebola epidemic in africa. Nigeria has confirmed a second case in africas most populous country. That raises concerns over Infection Control practices. So far the epidemic is blamed for more than eight hundred deaths. In weste, one american africa being treated back here in the u. S. Another is soon to follow. That has some asking obviously why they were brought back to the country. Megan hughes looking into this. Makes the call to bring them back and why risk it . A good question. Obviously has raised controversy. Is where thesy americans were working decided to have them come back. One of them based out of north carolina. And a Christian Missionary group was running this hospital in liberia where the americans were working. One of the american is already back. He was apparently well enough he was able to walk into the hospital. The family says he is improving. The other one will be joining him as early as tomorrow. Themselvesations made the call. They felt the americans would get better treatment in atlanta rather than the liberia hospital where they were in court scene. Where the government comes in, the cdc and defense department, they have been called in to help with which is fixed, to make sure that transfers happen in a way that the rest of the American Public stayed safe. , whilelegitimate concern they are overseeing the transport of the people that the spread to the u. S. . Of course there is concerned. One thing youll hear from Health Officials over and over again is just how this is transmitted. This is not a super contagious airborne disease like you have with bird flu but talking about bodily fluids, luck, sweat, feces and make the case because of the Infection Controls at United States hospitals versus that and west africa we will not see a widespread outbreak. Director over the the weekend making the case. The plain truth is we can stop ebola. We know how to control it. The source int africa. We will not seal the borders of the u. S. We are reliant and interdependent with the world for travel, trade, economy, but to really the single most important thing we can do it to protect americans is to stop the disease out the source in africa. Logistics and the state Department Involvement in all of this. We are talking about chartered planes landing in military airfields in georgia. They are not flying partially. Being straight sent to the university, to the quarantines area where theyre working with the cdc for situation specifically like this. Megan hughes in washington. Over the weekend the red cross warned the virus is spiraling out of control in africa and has called for more international support. In washington a summit of African Leaders likely dominated by the crisis. One of those attending, the Vice President of liberia. Here is what he had to say. This is an emergency we have never experienced before. The control measures we need to be put in place have not been adequately so. We are now gearing up to that. So we need to move it very fast so it does not get out of control. All of ourhallenge development agenda, infrastructure. It will challenge all of the gains we have made since we came to power. This has been an issue since march. We are now 700 less individuals have died. How was more not done prior to this time . When this started, it was an entirely new situation in our country. There was a lot of denial it was bare. E felt we felt we needed to be more urgent and the decisions we took were too much. We believe in about a month and try to to move raise a campaign at the level the president did by setting up a committee that is allinclusive, working with the local communities trying to see about the borders, deploying security for the police and soldiers to make sure Health Care Workers are protect it. Do you foresee specific requests like the world bank or imf . That is why we have the Technical Committee to do an assessment of what is required to bring the situation under control within the timeframe, and that is on course. We believe we probably need more than that. A look at theake Economic Impact the epidemic may have. An expert on political and Business Risk in south africa. She joins us from london this morning. Ebola arethreats like what you do for living. What have you determined . Have thes point we light. Price Vice President talked about how this will challenge the progress made since the end of the conflict back in the early 1990s, and i think we certainly moved into that position where a lot of west african countries, specifically the countries affected where they need to start considering the impact. In some cases we have seen businesses already close. If we have a spread in the economic nerve center, a country recently declared as the largest economy in africa, we would definitely see an impact of the Virus Outbreak sustain for a very long amount of time. At this point, how real is the threat to nigeria . I know at least two have been diagnosed but it is not exactly close to sierra leone or liberia. Perhaps you could explain why there is such a risk to nigeria and what it would mean if in fact the epidemic were to spread. Obviously what happened was the medical advice suggested the flight risk of contagion is quite low. However, you can never discount quite every risk. However, it is important to flag of the individuals that have been identified as infected where individuals have already been identified by local authorities there as being at risk, they were already in contact with the victim flown to the country. So in that respect, i think containment measures have been much better than the measures we saw from regional authorities back in march when the virus was first reported. If you were advising a multinational corporation, whether it is a Mining Company in liberia or sierra leone or oil and gas company in nigeria, what would you be telling that company to do . Hadnd places where we have very high death rates already, i think we are definitely at the point where Companies Need to start considering pulling out nonessential staff for operations. However, if you think about the fact that the two confirmed reports were within a contained operation, i do not think we are at the point where we can start calling for companies to pull stuff out of the country. I think the best thing is Public Corporation and there definitely is an obligation for the government and the countries to ground Public Awareness campaign. Were seeing that happening today. We will talk later about the Financial Issues concerning new york Pension System. Other hand, the cdc has come out and said it can stop ebola, that it knows what to do and has the tools. Do you believe this is a problem that has a solution in sight . A very difficult one to say. We have an outbreak that has unprecedented given that we have no historical comparison. Would be very difficult to say how quickly we can bring it under control. However, it is clear better facilities would be the sort of thing that would give the public confidence. I think the cdc, obviously given the experience, would be well qualified to comment on the issue. The World World Health Organization has pledged 30 million. Does this seem like a figure that will do the deed in the end . Will they be able to work with that much or need more . I think at this point, given the government had requested 100 million, i think at this way we t assume the figure would the necessary measures would be factored into the figure. However, if we do not have a reduction in infection rates and death rates, we may see regional governments request a higher amount. Flex how good is the information you are getting out of west africa right now . How good is the information you are getting out iswest africa right now . It the worst outbreak in history but not as a west africa is known for transparency. What is the risk of foreigners and people like you do not know enough and worse than it appears problem is think the no longer that youre not getting enough information. In march there was a challenge of receiving information. Now the challenges we have too many people that have become of the wearer of the issue and there is a lot of information being related. I think one needs to happen is we need a very clear Central Point in terms of how information is communicated to the public. At the moment the World Health Organization has been doing a fantastic dog. Authorities are trying to keep the public up to date. If you think about the fact that you still have high levels of poverty with people that have limited access to the internet and media outlets, it is very difficult to spread that information to the public. Thank you very much. Coming up, Warren Buffett is sitting on a record file of cash. More than 55 billion. We are going to look at what he might actually spend it on. Or ae you a good tipper taxi drivers Worst Nightmare . The numbers that we will show you. We are digital. See the stories and interviews at bloomberg. Com. This is Market Makers on bloomberg television. I am Erik Schatzker joined by matt miller. Worth exceeded 15 billion of the end of june cash surpasses 50 billion at the end of june. When is he going to swing for coversces . Our analyst herbs are halfway up bloomberg and will help us try to answer that question. Cash surpassing 15 of the assets. Does not happen that often. When it does, what does he do . He looks first and foremost to buy the whole company. He did this with burlington northern. He has been a lot of not sometimes. There are about 80 subsidiaries. So the big examples of this is last year he spent 12 billion buying heinz. But the year before 11 billion amassing a stake in ibm. Now he has 55 billion. I have heard in the past times where he has had increments of that, 40 billion dollars and 30 billion. The most interesting part of the story i thought was right now everyone has more money than they have they have ever had. Does Warren Buffett amassed these huge cash positions every time everyone else does as well because then it makes buying opportunities scarce and expensive . That is a great point. It is not like he is by being in a vacuum. He is different than private equity, not meet using the same type of leverage. Using the same type of leverage. Some of his biggest purchases have been public companies. If you have stocks trading where they are a record highs, harder for him. Timesu point out going to of the doll. Last quarter 9. 8 times. Should only be eight times. Whether that makes sense to anyone at home, i am not sure. Basically the price tag getting inflated. The deal data definitely shows that. Or the kind of acquisition Warren Buffett will do at this point, the metrics may not equate exactly because he is looking at special situations in heinz. One of the biggest things they are doing there is taking out a bunch of costs. He got operators from three g that went in there and have been shaking of management. Likes he said he would work with them again. Exactly. He has been found to be a pretty creative guide. Has persuaded people to sell that were not otherwise persuadable. As he found himself in the past in a situation like this where thes hard to do this . Important thing to remember with buffett come and when you talk to shareholders, this is one thing they really emphasize about the guy, he is willing to because it is a tested method. His willingness to sit on the sidelines as giving him incredible opportunities at great times to buy. Of the financial crisis and the deals that were hugely beneficial. He can wait on the seat log longer than ted williams he famously said. Later obama quoting churchill. Day. To be a great like thank you very much. Covers Berkshire Hathaway and Warren Buffett here at bloomberg. Playing politics with government pensions. Taxpayers will have to pay the price. There is no solution. What could we do . Stay with us for hopefully an answer from arthur levitt. We are approaching 26 past the hour so time for bloomberg on the markets. One stock we are watching, pharmaceutical shares did sir john hoped the companys evil a johnment shares did sir hoped the Company Finds a treatment for evil love. A penny stock. The fda gave it a fast track back in january to expedite a review but then was placed on hold. A volatile stock. Live from bloomberg headquarters in new york, this is Market Makers. With Erik Schatzker and stephanie ruhle. This is Market Makers. Good morning once again. I am Erik Schatzker. I am matt miller. Talk about. A huge problem in the city. When politics makes his with tensions, safe to say that things happen. And pensionddling plans played a big problem in detroits bankruptcy. New york not much better. The catalog is in the front page. Here to discuss this with me is arthur levitt. Also former chairman of the sec and currently a board member at bloomberg lp. The top ofyou put at the list . The fact that new york state, new york citys Pension Funds are constituent government. Main five by the funds not one each with their of directors. That means seven sanitation stocks, pickthe the investments that the Sanitation Fund invests in. That is terrible governance to begin with. They do not literally pick the stock. They picked the people. People and from time to time pick the strategies. Verrules professional staff that is always a sign of a pension fund in trouble. If the trustees overrule the staff in terms of selecting advisors or selecting investments, that is a problem. I would not even call them bad governance. That is just nongovernment. That is really true. , 35 billion is spending 175 million and expenses. They do none of it internally. All of it is given out. The basic problem here is 170 5 million now, 15llion managed years ago 17 million in expenses on almost the same amount of money. The what they have done is basically blown the fees of 10 times and personally picking the people who receive the fees. Is part of it. The other part of it is the totally unreal assumptions a predicate what they will pay to the engineers. Was eight percent. Now seven percent. Should be two percent. That unrealistic rate set at the state legislator is a real burden on the city funds. They could never make it up. About 46 funded now. Seven years ago they claimed they were 136 . Be careful what you say about engineers. Blackstone advisory said Public Workers are expecting too much as far as pensions are concerned and almost got fired before they came back apologizing with a public letter. That is where politics comes into the picture. When politics tell the professional manager of funds what stocks, strategies are acceptable that is where you will have a problem. The goal of any Public Service fund should be what is best for the retirement system. Not what is best for society, the world at large what is best for the pension nears. How common is it to find a Pension System that observes the rules . Thought in detroit and chicago. Saw it in detroit and chicago. It is rampant and wrong. Is there a public Pension System you would point to to say that is how they should run the system . In california moving in thebeen right direction. But it is so rampant that we are about the new york state superintendent for Financial Institutions has subpoenaed all the advisers. There are huge fees involved. Fees that could be avoided if the funds were managed internally. They are not. This is taking money out of the pockets up engineers and the myriads of advisers. This will be looked into for possible corruption as well. Even if he finds the corruption, which is surely there, what if the able to fill in the hole . 63 underfunded, any way to catch up without the taxpayers footing the bill . Know, we want without the governor and mayor together because the State Government determines what the actual air it he will be. The state has said it will be seven when it should be to. Unless there is an agreement between the leaders, we will have no improvement and are heading for a massive wakeup call to people whose pensions are vitally involved and how they are managed, how they are invested and governed. Who ultimately takes the decision about cleaning up and perhaps even reforming a city or could besion system . The state governor. He could help him proceed with the work. Use that as a stepping off point to convene a commission on reforming new york city Pension System. City controller could do the same thing. Keep in mind these are strong, political entities, firemen and teachers. The teachers took umbrage when one of the private equity funds said there would be a problem in terms of unions receiving payouts in the future. They wanted to fire blackstone. Politics is really a drain on the system. Ultimately a question of whether the governor and mayor want to tangle with publicsector unions over this issue. Who are their constituents . Thank you. Join us. Ou to arthur levitt, former chairman of the sec and Economic Development under new york city mayor. Is notup here, america going eight for the movies these past couple of months. A summer slump for hollywood. Taking a closer look. I am Erik Schatzker. This is Market Makers. The government close to banning cell phone calls on airplanes in flight according to the wall street journal bus says the Transportation Department will lay out the objections to calls in december and late open it up for comments for months. Airlines say theyre the ones making should be the ones making the decision. The Symantec Software of security as a vulnerability. The latest action film from Marvel Studios was top of the box office over the weekend. It took an better than expected 94 million, the biggest august opening ever. Hollywood has not had much to cheer about yet. In the space of the space of a year, hollywood has gone from block buster blockbuster to lackluster. Dawn of the planet of the apes was just one of the films that fell short of expectations. A year after hollywood set a box office record, americans are staying away from the movies. Last weekend ticket sales were down 14 from a year ago. From the entire summer sales may fall 20 . In part you can blame box office bombs. Of course not all of this years movies have done so poorly. Captain america has grossed more than 700 million worldwide, but nothing has come close to last years ironman three am a 1. 2 billion. Movie theaters are feeling the pinch. The secondlargest chain, amc, said secondquarter profits dropped. The Company Predicts ticket sales will keep shrinking the next few months and will not record recover until the fourth quarter. That is when theaters may be rescued by the old hollywood standby, a sequel. Gamesree of hunger opens in december. The question we are asking, can hollywood lower moviegoers back to the big screen, and how are the Theater Companies going to cope with this summer slump himself . Asking jon erlichman. Obviously if hollywood does not make the big block busters, people are not going to go. The theaters must share the blame as well for the experience. Out,ey have to get people youre right about that. Long ago was decided there would be these big. Ovies some would be a hit with audiences, others would not. At least the ones that did hit with set the stage for tons of what theyd those are are relying on. Then i think the big question is what do you do when you have a bunch of theaters as the alternative . Part of what we have seen them do is additive stuff. Comfortable chairs, more concessions, dine in theaters to keep people there and charge them for dinner and booze. You have more fun features and more imax screens. Outside of that, what do you do . Films in not as many theaters. Them are focusing on live events, alternative programming watching sporting events or violate or opera. I would say the jury is out. They have to do something. Whether or not financially this is the best option for them, the decision was made long ago to have the multiplexes with so many screens. , amc andertain chains regal are an example that have teamed up to create their own movie. There is a studio basically owned by the theater chains to solve the problem of how do we get more theaters occupied in a time when hollywood is so focused on a few ranch isis. They want to make calculated bet on big films where everybody not,when but if they are what do you do . Is there anything stopping a theater from functioning as a cinema when they do not have a big tentpole film . For a fraction of the price amid maybe a third to go out and see oscar winner from 10 years ago . Is rep cinema a canadian thing . John knows what i am talking about. He is canadian as well. Smalltown . Man things they need to just serve better food. I go to the theater and they have overpriced really unhealthy food and i am sitting in a plastic chair. At home i can eat inexpensive unhealthy food and my incredibly uncomfortable incredibly comfortable couch. The expense ofnk food is going away. That is a primary way they make their money. I think eric is onto something. Live sports, ballet, opera. Are not drying me in yet. Drawing me in yet. What if you were an industry where you could get a credit toward your career or education for going to the theater to maybe see a documentary . I have done that in the nursing industry. To the initial question, which was how i need chile successful campus before the theaters, i think the problem is there was an over bill of theaters out there. Obviously this is a mature market in north america. The studios are focused on International Growth of the movie business. You are looking at a business that has been Slower Growth than trying to find interesting keep bums in seats. They can show true detectives in the theater instead of on hbo. There is an idea. Thank you very much. Thisll continue to ponder question here and explain what a rep the hitter is. Meantime, talking about the psychology of tipping. Whether taxidrivers are getting stiffed by passengers like you. Live from bloomberg headquarters in new york, this with erikmakers. Schatzker and stephanie ruhle. A rare opportunities for fans of batman, the comic book not the movie. Auction. E going up for they show him in the earliest appearances. The auction house not putting an estimate on item. Also up for sale, the incredible hulk. That could bring up bring in 300 million. Who buys these things . Who spends 300,000 on a comic book . Not me. Like me either. Me either. You do not have any problem spending 300,000 on a motorcycle. Lets are you a cheapskate . Data just released by new york city for the first time give us an idea of what a good tip really is and what a bad one is. With us this the head of our research and data for bloomberg mr. Eric week chemie. These are hundred million ride from all of 2013. Every taxicab ride. Where you got picked up. Lex every single cab ride in 2013 in new york city this will tell us a lot about to burst. This will tell us a lot. What we know is 55 of all payments are done on credit card. 45 cash. The cash tips disappear a racket leslie. No data on that. So here is the credit card data. You see the peak there. It is right at 20 . The two points that stick out more than the curve would suggest, that is the free button. When you get into a taxi for people who do not ride or no, you are only given the option of 20 , 25 and 30 , which i think is a little rich. Look at the numbers. Almost no one paying in the 1019 range. No one is overriding to pay less. If anything going to 27 . Actually moving them higher. When was the last time you took a ride in a new york city cab that was so good that you wanted to tip 25 . I dont know. A lot is related to small shares. We have all done that. Give the guy a two dollar tip. This is a soapbox issue. Labor for thelave evil richmond ali and owners. They really do not get paid very much if gas prices are high. If you dont hit them, they do not make minimum wage for the zero tip is actually the most popular choice. You saw, that zero is higher than anything. It is actually the seventh most popular choice secondmost popular choice. Manyising to me that that are zero. What is interesting is the time of day this happens. There are cities where it is not customary. That is true, foreigners are cruel. The peak is four in the morning. Midnight through 4 00 in the morning. Talking basically drunk people. People who did not plan on taking a taxi. People who have mentally calculated that have spent too much money. Probably the sober ones coming home late. I have a spanish girlfriend and a lot lot of german friends, and these cultures do not tip well. They do not believe in tipping. They do not tip when they are at home in europe. Vast majority are new york city people. Theyre a consistent from 6 00 until 8 00. That is guys like us taking taxis. Intohis gives us a window the psychology of tipping. To what degree can we extrapolate the on and taxis to or restaurants or barbers other industries that depend on this . It depends. That is why all of these restaurants the bottom of the receipt says here is what 18 calculate comes out to. They never say what 15 calculates to because theyre trying to drive that behavior. It works for the most part. Credit hard has chipped in pen on it as they do in europe, they will bring you a device to the table that gives you the tree determines offers, how much tip. Those options are lower than here. Because americans would typically tip 20 at a restaurant. 15 is well below the average. That is the interesting thing. 1520 is not the range anymore it is 2025. Lex as long as the money eventually goes to the employees and not to the risk rich. Estaurant tears after 4 00 they took the highest. It is a ride off. Thank you very much. We will be back after the short break. Stay with us. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. President obama to big business you have nothing to whine about. The president outlines how his administration has been good for the economy. How karl rove and his super pac have changed the election. P approaches back to school. Making the grade in the second most important time of year. You are watching Market Makers on bloomberg television. I am Erik Schatzker. And i am matt miller. Time now for the news feed. Portugal has come to the rescue of what used to be its against lender. They will bailouts Banco Espirito santo oh. It will be split into a good bank and a bad bank. General electric says it will invest 2 billion more in africa by 2018. The ceo calls africa one of the worlds most promising markets. Shares have grown from almost nothing to a big game. And it is safe to drink the water in toledo, ohio. Toldeds of thousands were not to drink the tap water, contaminated with toxic algae. The toxins have returned to acceptable levels. Argentina announced it has defaulted. Its restructured debt constitutes a credit event. Yet, the bonds continue to trade at . 80, perhaps confidence that a deal with argentinas holdout creditors can be worked out. Our correspondent has been following the stories since the beginning. Welcome back. Now . Things stand things stand at a bit of a standstill. Right now we will see if talks will continue between argentina and their holdout creditors, including elliott management. The judge at the hearing on friday was very disappointed that things have come as far as they have and he wants talks to continue. Both sides and said theyre willing to do so. Argentina is not interested in getting a new special master. Argentina is interested in getting a new special master. The name for the negotiator. They say he is not fair. What is stopping them from getting a deal done . Cannot dona says they a deal because there is a clause in the contract that limits them from doing so why come to the table . If you cant do better in restructuring, why even bother coming to new york city . This is the question Everyone Wants to know. Perhaps there are ways around it if third parties get involved. The way the government made it seem, they kept demanding that elliott agreed to those terms, which they obviously rejected many times in the past. Part of the problem here is any agreement is subject to interpretation by the courts, right . As i understand it, one of the rufo tions in the ru why dont you say what that is question mark it is the future offers clause. They cannot extend a better deal to elliott. They have to extend it to all of them. There is one word voluntarily. Argentina cannot voluntarily make a better deal than was offered in restructuring. There is an argument to be made that because these are court mandated negotiations it is no longer voluntary situation. Exactly . How much water does that argument hold . You would think it holds a lot. Argentina they are nervous. They are nervous and they want to settle with all of their holdout. Which goes way beyond elliott. Then it is not voluntary anymore. You mean it is voluntary. It is voluntary. That is the perception. Right voluntary, it is voluntary but only in elliotts case. Why not settle with elliott and wait for others to bring the case to court . These are questions that everyone has for the government the government refuses to address. There, hsbc is there are they willing to extend credit to argentina under a vague promise they will be repaid sometime next year . You mean credit to pay elliott what they are due . They would purchase the debt off of elliott or there were intervention by International Banks just making clear what they are providing reddit for. If they were to buy the debt off of elliott and the other plaintiffs, and get paid back by argentina at a later date even though it has taken elliott 10 years to get paid. There has to be a wink and a nod from the government this is ok. And what risk manager, Office Manager is going to ok a wink and a nod from a government to take on the pledges to repay them might be interpreted as violating the rufo. I am not sure that a week and not will be accepted if it is a government that is not the u. S. If it is not actually a problem. The chances of this getting done, even last week when the clock was running out, it seemed like everyone was pretty optimistic. After this weekend, it feels like some of the Major Players are not so sure. Bonds are down today, but not as much as you think they would be for defaulted bonds, right . In general, theres this idea that something has to happen. Something has to happen. Some way this is going to get resolved. The more time passes, the more negative people in the market are going to get the greater the risk. Risk. The greater the i think folks are hoping at some point someone will get involved. Someone will find this profitable. Someone will say, this is profitable to me, like jpmorgan did with a Spanish Company that they purchased argentine debt off of. The question is, when and how is that going to happen and will it happen soon enough to keep the market. Istic in katia. She is covering this argentine he and debt situation. And matt miller who covers business on the auspices of a wink and a nod. You would not think this would be a story, 10year old debt. It never ceases to amaze me. President obama has a message for the business community. Eddie and that is stopped complaining. He gave a wideranging, incredibly long interviewed two this weekend. Here are excerpts are placing constraints on them. I understand why they would be frustrated by it, but the flip side is they would be even more unhappy if the Global Financial system completely unravels. He is right about that. A total collapse would bum people out more than these constraints. He also gave a lengthy list of mainhe thought as his economic accomplishments. Here is another quote that is that is convincingly true, right . Lets bring in bill mattingly. What you think of this interview . He makes good points, but he seems defensive and angry. And thately defensive, is because they are so tired, fiveandahalf years into this, of people saying the economy is not doing well. Within the administration, there has been a lot of frustration about Corporate Executives making comments about the administration being unfriendly to business. I think the broader issue is said that this was a wideranging interview. It was supposed to be about africa. White house officials are desperate to make the domestic economic issue a primary issue going into november. They think they have a good story to tell, as you just noted with the list he kind of rolled off. They are trying to break through. They have not been able to yet. Angry. Also he was angry about some of the economist covers that have taken on the white house. One that particularly stung the white house. They had a jockey in a red white and blue outfit riding a turtle. Notices this. Tion the president notices this. I think there is extreme frustration that everyone seems to think that this administration is both antibusiness and the economy is not doing well, and they feel like inside they get zero credit whatsoever. Who is listening . I think it is safe to say that editorinchief is listening, but i think it is unlikely anyone the president is trying to reach is listening to what the president has to say. That is the frustration. That is what you see him continually going out. He has been seen around america, not in d. C. , not new york city, but doing events where he is speaking to the average american. They think he is affected in this way. They are trying to break through on the domestic economic issue. He held an hourlong press conference. Multiple times try to swing it back to the domestic issue. They keep trying to do this. Something like 45 , 56 americans list and economic issue as the major issue going into this election. That is way, way above were normally is except for 2010. He is not breaking through and i do not know that they have a plan other than what they have already put out there that allows him to break through. Guys, it is interesting that he went out to the economist. It may not be the magazine of record for his constituents. Although i think that is a fantastic magazine. Some of the problem is if someone starts the interview if they read the way it was published in the economist, which i encourage everyone to do, but he has to go through two thirds of the way through to get the economy. If youre not interested in theca, you will not go to end. The kind of buried the le de, is what youre saying . Yeah. Much play is this getting in washington . Lets put it that way. Not much. [laughter] it is difficult to break through. Half the town has already left. It is difficult to break through on economic issues, period. Everyone has moved onto foreign policy. About the gdpg numbers, it is a flash in the pan thing that works for an hour or two and moves on. Even though you saw it was two thirds the way down the interview, the president himself, even though the economist is not necessarily in arkansas people he wants to reach, every time he speaks he will spin it to these issues. That is interesting. If it breaks through, it could have an impact. Will it break through . As of now they have not been successful. Are right. Great, great pick up on this. I guess not a lot of other evil are looking into this. If you do pick up economist, goto page 10 and the interview and you can get to this part. You do not have to read all of the incredibly interesting and important stuff about africa. Although you should. Yes, we are not saying you shouldnt. Ng up on Market MakersMarket Makers is backtoschool time. Retailers have the upper hand. And rahm emanuel on why he was to shelter children got down south on the u. S. Border way up north in chicago. This is Market Makers. We are digital. See our stories and interviews on bloomberg. Com. Onthis is Market Makers bloomberg television. I am Erik Schatzker with matt miller today. Retailers are being forced to offer deep discounts or risk losing sales. It is a conundrum. Our next guest says it is loselose. Retail sales were forecasted to be down this season, this quarter. The backtoschool season is next. Ricketail analyst, or snyder. What is the grade . B i saw someone give it a minus. It is down. 7 . That is grade inflation. That is more like a dminus cplus. Given my career why is this happening with the economy recovering . This thing sitting in front of you. The bloomberg terminal . The computer. People are replacing what used to be windowshopping. Now they are screen shopping. They can compare prices from home and order it online, whatever is the best deal and they can go to the mall and snatch and grab. Erode margins. Not necessarily cause sales to drop. Topline problems. If you are selling the same number of units for less, it affects top and but going back to my original question, this is not to bait you, im just trying to understand we have created 200,000 jobs for six months straight. The economy grew 4 last quarter. All of these things, in theory, should portend that are retail performance. And cpi shows inflation. It is not much, but it is there. That has been a conundrum for all of us in retail because the metrics are pretty good, but yet the consumer is reluctant to spend. We have seen it from walmart. We have heard it from container store. They must be spending somewhere. They are spending. They are definitely buying cars. We can see from the numbers, they are buying cars. Item. T is another they bought apparel earlier in the cycle. Now they are buying cars to replace the cars they did not replace. I cover apparel stocks. They are late cycle in apparel. Back to School Shopping who is typically doing the buying . That would be either to themselves or parents with kids. Not if you have a kid in college, youre probably not buying a new car. So, what youre saying is they are going on amazon rather than buying it at, i dont know i did not say necessarily amazon. Note a not going to specific web retailer. There is only one. But, you know, they are going online to get things cheaper than they would in the store or they are going to be Cheapest Stores you mentioned walmart and target, for example, are not doing poorly. But say they are buying toothpaste. They can log on and say, oh, it is cheaper. That is a lot of work. Which stores, which trains are most vulnerable was to ones relying on foot traffic, not Online Shopping question marks Specialty Stores are most vulnerable because they rely on foot traffic. Like . Abercrombie fitch. Aeropause cell aeropostal if retailers cannot hold price, if they have to drop it to the market clearing price, jcpenney, ross they do not have the merchandise. Nordstrom is not doing a lot of backtoschool to begin with. They are doing some, but they have a lot of merchandise on which they can hold price. They have brands that people want. Merchandise is going to become incredibly important these days, because retailers are looking to hold that price that is under unnatural pressure. We should not downplay the fact that hollister, Abercrombie Fitch may not be doing well, because they are just not that hot anymore. This is a perfect example. They are not competing. It seems like they used to compete with each other and that was it. Now they are competing with forever 21, h m. Fronts very on two well. Price and merchandise. They have merchandise that people want at prices people are willing to pay. That is a tough combination to beat. The lesson should be if you are in the market for backtoschool, wait until school has started because all of these retailers will have inventories they have to liquidate at lower prices, right . I refer to that phenomenon as markdown chicken. I like that. That is grade. Who gets closest, who was the first one to flinch. You are so young. Then you have to go to School Without a pencil and paper. You are not going to go without a pencil and papal paper, but you may not have to buy that third or fourth pair of jeans. That is true. Thanks very much. In short back to school sales suck. Yeah. Why businesses are giving the african continent a second look these days. Stay with us for that. Coming up here on Market Makers, opening the doors to those children crossing the u. S. Border. You will hear from the mayor of chicago himself, rahm emanuel, and what he is doing. Still one ofove is the power brokers in the republican party. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. You are watching bloomberg television. This is Market Makers. I am Erik Schatzker. And i am matt miller at the start of this fresh week. Thousands of children are flowing past the Southwest Corridor and washington cannot figure out what to do about it. Congress left town on friday without an agreement on a bill to address the crisis. Some cities are offering to help though, and chicago was one of them, offering to temporarily house the children while their immigration status is worked out. Betty liu spoke with chicago mayor rahm emanuel earlier today. She is with us for some of the highlights in the low lights. A feisty interview. Feisty. It can be hard to talk about tough issues when youre dealing with tillman escaping the violence. How do you not feel sorry for these people . Of course. It is a tragic circumstance. The mayor joins others in cities like new york and l a offering shelter to these migrants children. It raises a lot of issues though, especially for those who live in chicago. How do you pay for this . When do we send, or are we going to send these children back . On the issue of how we pay for them, this is what the mayor said. First of all, the federal government helps out. Second, i have organized the Legal Community to organize pro bono help. I think it is a false choice, either or either or. We have economic choices. We have economic opportunities. And editorial said if you have the capability, we should offer assistance to these told them, but at the same time the editorial noted that they should be processed as quickly as possible through the system and very likely they should be sent back. However the mayor had a different take. Makee goal we have is to sure every person in every neighborhood has the skills and education to participate and join the middle class. That is our economic strategy. That children are part of because if they get educated, they are and that 1000, a mayor, an entrepreneur, a newscaster someone who will achieve the american dream. And i bet it is not one of them. It is many of them. He says the shoulders of chicago are big enough. Right. But he is confusing two issues here. One is the issue of Migrant Children crossing the border and the second is the larger context of immigration. Should we allow and offer the opportunities to every american, as we do to immigrants, and immigrants who have legally come into the United States and risen into the ranks of middleincome america. Although these are children. It is not the same, right . That is what i am saying. It is not the same. As you heard from him, it sounded like what he was hoping for is that these children would stay and they would eventually become productive members of society. Betty, that is a very elegant summary of your conversation with rahm emanuel. Listening to it, it took longer for the man to make his point. You called him on it. He tried to to call you want it. What happened there . As i said from the beginning, it is hard to talk tough when youre talking about children and children escaping violence. But there are very serious issues underlying this, which are do we set the precedent whoeverchildren, be it they may be, come across illegally and we do not send them back or they are given places in the system . That perhaps encourages others to come across the border. That is the signal that, i think, is disturbing to those who want a bigger dialogue on immigration. It is also difficult if your Approval Ratings are low in the city where you have to eventually face reelection, right . In the same way we have seen president obama recently get very defensive, he does not seem to be a huge fan of the press. Right. You get that feeling from rahm emanuel. And you got that feeling from him as well. He seemed to be taking a few potshots jabs at the media. Himself withbs hes gesture, people saying is playing politics here. He is just trying to curry the hispanic vote by joining in on the chorus of offering these children refuge. Betty, he may not like it much, but good for you for getting him off his talking points. Yeah. Dont we want as many children as we can get in this country . As we are concerned about the aging population retiring, they are our future and they will pay for our retirement. Of course. Interesting issue to say the least. On an entertaining topic. Betty, thank you very much. Betty liu. Coming up on Market Makers, risky business. 20 of opportunity for businesses in africa and lots of risk that comes with it. A plenty of opportunity for businesses. African heads of state are headed to washington this week. They will be meeting this is leaders to talk about trade and investment on the continent. Here is a question though. How good of an investment will that be . And what will the african economy look like 50 years from now . Ons nichols eggs a look at the nicholsnities hans takes a look at the opportunities and risks. Populations are swelling. 1. 6 workforce could reach billion by 2060, triple what it is today. In that time the economy could dramatically to 15 trillion. That is an increase of per to 56 hundred dollars. Impressive growth, but it is just a third of todays income and south korea. Those trend lines continue with foreign direct investment. African leaders will have to guarantee stability. The numbers and the odds are daunting. Most of the worlds fragile states are in africa. Among them, it egypt and libya. For that idea about how quickly Economic Investment can dry up, consider the arab spring. At the same time, Subsaharan Africa sought a 5 increase in investment. Perhaps nigeria, home to one in toe africans, and poised surpass the American Population by 2050, best represents the continents hopes and hazards. Gdp could reach 20 billion in 2030, but insurrection and violence could shave off millions. F the economy relies on oil and gas, which has spurred insurrections where they are extracted. And boko harams kidnapping of nigerian schoolgirls further exacerbates anxiety about the countrys future. There are 22 countries reducing oil and gas and africa today. In a decade, there will be 45. International correspondent hans nichols is in washington this week for the africa summit. To me about the countries in africa getting the most foreign investment. Fdi is the agenda down there. Look at south africa, they are doing pretty well. The other oil and gas extraction countries are doing pretty well. Let me take down the list. Nigeria, ghana, egypt of course not Subsaharan Africa. N you look at that, right there are Extraction Industries there. Others have Extraction Industries that are about to become very viable. 22 african countries have oil and natural gas. There will be 45 in a few years. A remarkable statistic. The question, is there going to be the governance to make sure the middle class can ultimately benefit . Lets talk about the viduals lets talk about the individuals. Matt miller here on Market Makers today. What does middleclass mean for the individual . Defines it asank someone making two dollars a day or more. This is not your traditional western european or american middle class. This is a considerably lower number. Heres the interesting thing about Consumer Spending in africa. When you look at companies thinking about investing in africa, it is not just the big infrastructure companies. It is not just the big transportation companies. It is Companies Like walmart. Companies like harley davidson. You look at the Growth Potential is explosive. More workers longterm, but in the short term, more shoppers. That has businesses pretty excited. Guys . Our International Correspondent hans nichols. He is in washington this week. Much more coverage of the africa summit tomorrow. Will be speaking with the former new york mayor michael bloomberg, the founder of our , andt Company Bloomberg lp penny pritzker. And tomorrow, we will be talking to blackstone ceo Stephen Schwarzman about his firms opportunities investing in africa. And he spoke to the president of somalia as well. That already happened. I am just saying. It is an allstar event. He is a ringmaster. George w. Bush called him the architect of his reelection. Karl rove is still one of the power brokers in at least one wing of the republican party. Someone on twitter pointed out he is not the boss of everybody. It has been 14 years since ran george w. Bushs Successful Campaign to recapture the presidency. And he is back out at running the super pac american crossroads, at the center of the gop effort to win back the senate and the white house. Fill mattingly got an exclusive hil mattingly got an exclusive look inside. The behemoth of the American Election cycle. American crossroads. They spent hundreds of millions of dollars. Isamerican crossroads responsible for this advertising. And they lost. The feet brought soulsearching. Groups president and ceo. They like to feel like they are investing in something that will have a Material Impact on the country. Funding was slow at first, but a favorable electoral map and a refined donor pitch started to take hold. It spurred investments. The deployment was a new, sharper strategy. It stayed out of primaries, but in 2012, that opens the way for new candidates who lost in the general. Crossroads took no chances in 2014, strike an agreement with other groups to spend big in primaries. North carolina was a big test. Crossroads spent 1. 6 million dollars. It was a level of coordination we hoped to continue into the fall. Forti is the groups political director. Take a look at the last five weeks of tv spending in the race. An american crossroads supplemented the Campaign Push in a big way for a month, and then the u. S. Chamber step then. It is illegal for the groups to mitigate directly with campaigns. But there are other ways. Like using the media to demonstrate where and when they will spend on tv advertisements. You see the groups layering in. That is a coordinated effort. Onthere is also there are the ground pulling operations, targeted ads. Nto north carolina, louisiana, iowa, montana. We will look at what is going on now, how much help the candidate needs, what theyre found raising looks like fund raising looks like so when they can go on the air. The real test looms in the general election. Law knows his donors are looking for returns. Our donors expect this to be like a private equity fund. We make good decisions based on a careful look of the data and ground research. Joins us now from washington. Very interesting way that they skirt regulations there, looking for loopholes, i guess in a sense that is the american way, isnt it . The Landmark Supreme Court decisions in 2010 opened the door for these groups to plug the political system with outside money there has been a constant evolution. These groups have figured out ways to coordinate better with one another. That is a big thing you have seen republicans work on this cycle. But also make sure they do not in any way beverage from the main message of the candidates in the primary campaign. It is laughable how simplistic it is at times, but it is very important if they want to be effective. Could it get more simplistic . Instead of putting a story in the associated press, or an organization like bloomberg, just put it on twitter . But you know the interesting i was doing when the reporting on this, you talk to folks on both sides of this, and democrats and republicans, they point to the Campaign Websites as the best places to find information. You can go to the candidates youtube page and they will candidate. Of the just standing there, not doing anything. They can take that and use that. A politician standing there not doing anything at all. Shocking. I never would have expected Something Like that. The twitter idea is a good one. Oakley they can use that if you would suggest that to them, that would be great. Its for joining us. Market makers will be back in just a moment. That is going to do it for today, matthew. Thank you for joining me. A pleasure. We should do this every monday. And why not . We have a bloomberg exclusive tomorrow. Interview. H i probably will not be here. We have Stephen Schwarzman. That will be hans nichols. Sorry, i keep thinking about the argentine debt situation. I believe he was on this morning with tom keene and adam johnson. Right now it is time for bloombergs on the markets. Here is our chief markets correspondent. He was on bloomberg surveillance. Thank you for that shameless plug, guys. Stocks are meandering after the worst weekly drop in more than two years. Investors are adjusting after corporate earnings as well as the announcement of a portugal bailout. Joining me, jim sperber, the kmivatives strategist at him partners. There is a lot of handwringing over the fix and what it has done over the last couple of days. There is a lot of handwringing over the vix. What is going on in terms of volatility . It tells a good story, but there is more to be told. You can look in vix or the vix futures curve or the s p 500, which shows implied volatility over time , so yes, the vix, does tell go back, it a story i think we have a graphic up. There it is. The white line is what happened as of august 4. The lower end is what the term structure look like at the beginning of july and the other is from december 2012. Those are the boundaries we look volatilitythink of cycling. It is not just a pop in the vix like we saw last week. We look of the structure flattening and what that ultimately means to us, there is more to this volatility event than what we saw last week. What does this mean for the pullback from last week . Should we not dismiss it so readily . Exactly. The message is really not to be too cavalier about that. We have seen these last somewhere between 10 days and two weeks. We are just a couple days into this. As far as the s p 500, give you just want to frame the magnitude potential pullback is directly in the 1990s and early 2000s regimes, these pullbacks were 3. 8 percent. We do not think it is the 15 , 20 being talked about, but we think it deepens from here. It does deepen from here. Lets move on to individual companies. Of course there was news last week of iliad from france making a bid for tmobile, which has been rejected. It has been known for some time that sprint was preparing a bid for tmobile. This was a bit of a sopranos last week. Iliad is just a Little Market cap company. Tmobile, the you are talking upwards of 27 billion. They are trying to build 20 trying to buy 20 of the company. What that might do with the margins is speed up sprints bid u. S. A little bit. We do think that sprint makes a bid. U. S. Would trade around 36. Given a regulatory path, there has to be a disc out there. Sure. Given a regulatory path, there has to be a discount there. Sure. There are a couple things we like. We like the calls against the implied volatility. That can be monetized through the other trade we like that has more complexity is in sprint. The stock is down more than 30 year to date, down sharply on the iliad news. We go out to september, we want spreads. E buy call to the upside. D you have eight to one on sprint. Thank you very much. The chief strategist at mkm partners. Money clip is up next with adam johnson. Welcome to money clip where we tied together the best story, news, and business news. Africa is coming to the u. S. Trying to do the u. S. As the ebola virus casts a long shadow at home. Offers temporary shelter to hundreds of children crossing the border from mexico. And Warren Buffett, you have cash. Only problem is no one seems to be biting. A u. S. Tour ux