Transcripts For BLOOMBERG Market Makers 20141021

Stephanie ruhle is at the robin hood investors conference and she has some big interviews coming up but first we have some breaking news, existing home sales for the month of september are just out. This was a very disappointing report last month. Michael mckee is in the newsroom. I will give you some good news, existing home sales come in better than forecast. We thought we would get a 1 gain, instead we get a 2. 4 game. Over the last 30 or 40 years, the average has been about 5,280,000. We are not significantly below that level. A significant rise in singlefamily homes up 2 . This was still driven by the move into apartments. The other thing we want to point out is that the inventory of homes for sale drops, 5. 3 months. That is only about 6. 8 months. Not a lothat theres of inventory out there and that means prices are probably going to go higher. Michael mckee with the word on existing home sales. The robin hood Investor Conference in midtown manhattan is where some of the worlds biggest investors are gathering to present their best investment ideas. Stephanie ruhle is standing by with one of those top managers. Larry, lets start with why youre here. At a year like this where it is so tough to add a great idea, why walk in this room and share with hundreds of people . I am really proud of the work that robin hood does. Its 26 year ofn operation and last year alone it invested 132 million in programs to help new york citys to help educate them, feed them, loathe them. That people need assistance regardless of whether the market is doing well or poorly or whether this came at a convenient time or not. I am proud of the fact that when something extraordinary comes along like Hurricane Sandy did, the robin hood leapt into action and distributed another 70 million of aid. As an investment committee, we come together to support a variety of these charity events, in particular the robin hood event. This brings together a unique number of industry icons. Not only can we share ideas that we can share a common passion for the city that we live in and for the Philanthropic Mission that we share. Wearing youryou red and black. 7,500 buys a ticket to robin hood which means you have to deliver a big idea. What is it . The idea that we talked about earlier in the morning was the idea that the birthrate in the u. S. Which has been negative for about five years between 20072012, the number of babies born fell by 8 . The birthrate is cyclical. There are many ways to invest in companies which will benefit from a positive birth rate. We gave four different examples. We talked about the hospital industry. We also talked about the veterinary business. Lets go back to the hospital. This. Ke the hospital does right now, how does that trade look . How me the way to express this two years ago when we first talked about hospitals, the big issue was with the core business care,eyes and with health would that come into being and what would be the uplift. In the Second Quarter of this year the first full quarter in which hospitals enjoyed the benefit of new exchange members, we saw adjusted missions meaningfully grow. We have seen that core trade plus reform to their benefit. Weve also seen the birth rate trade come to the hospital. Of 2014, theyrter saw a 7 increase in their admissions from insured commercial and exchange members. 10 of the hospital volumes are deliveries. Und we will see the birth rate cycle at a new leg of growth as we enter into an uplift in birth rates over the next three years. Community health care, when i pitch today. The acquisition of triad was transformative. We believe that this is on track to deliver the synergies promised that deleveraging will be rapid and they traded a won will cheaper than the industry. One multiple is 30 per share. Seehe success case, we will above average equity returns. Us understand if we are getting back to fundamentals. 35 onty health is up the year. Lets say we believe this story, how much of a hit to discover take last week . Several things happened last week. Of course there was a drawdown. Some members of the hedge fund and trading community, when theres bad news, the risk discipline cells to sell bad news. With sox get cheaper to their fundamental value, we buy them and when they get more expensive, they sell them. That Risk Reduction happen but in addition because of the ebola tragedy in the dallas area, people got very concerned for what does this mean for hospitals and hospital workers. This is an industry which does experience, the stoxx experience more volatility than the underlying business. There is another issue that could deliver forward volatility. The Supreme Court made the side inther to hear or not here objection to obamacare relating to the subsidies about whether the federal government can give subsidies to states in which the state to establish the exchange, the federal government did. Regardless of whether the federal government picks that case, there are four little words, the federal government can simply define that will make the Supreme Court case meaningless. You could see forward volatility as well, investors need to keep their wits about them, not worry about the daily trading and if you find a good company and good price, simply trading in the market. Realty holdings. Forget their is a sharing economy. They dont want to own, they want to rent, they want to share. It is in part because of need rather than desire. Was 2025, i was living with three people in a two bedroom apartment. The millenials have had a tough go of it. If you graduated college in 1999, you had hopes, dreams. To bind to different crisis in the early part of the decade. Its the things that normally happen between the ages of 25 and 35 got deferred. Such as pet ownership and homeownership and so we have seen a deferment and household formation, we are not predicting that the Housing Market will continue to increase in price 6 , eight percent. We think price appreciation will go back to normal but what you will see is housing formation low accelerate because wikipedia from the statistics, people have jobs and eventually they will. Ant to move on people are being born, they need to buy a house. Shouldve gone for a white picket fence. What we saw is in the 2010 period, there was a contraction in the vet hospital business. For the last three years, we have seen a fairly top and recovery but just like those other two factors, when people feel confident about their lives and futures, they moved out of mom and dads basement, they can buy a ring for their girlfriend, they can buy a dog, put off the marriage thing, or they can start to have kids. By a dog because they dont get engaged. Thus we have a lot people in our firm and our pet ownership is exceeding is my hasbeen came i would kick him out. Of you look at statistics because they announce better sequential Revenue Growth in the Third Quarter, we would see as an acceleration in the strands. Supports the analytics. The vet care business is admitted singledigit topline business. The audience interesting is that they only have one or two turns of leverage. This means they can go out and borrow a lot of money in the context of cheap Interest Rates. Get that inback and and veterinary labs. We see capital structure story there. There in millennial story and a nice defensive growth company. Inompany that was an lbo 2000, 2001. What we are saying is that they can move to a more rational capital structure. , one simply theory has to watch the actions of the management and the board. In thisast leg millennial madness, you Like Fidelity national financial, why . Almost freebeen money. They were at a conglomerate that was spun off and we own that successfully. They have sellers remorse and said, that part of that business lender processing systems, we want to buy that back and they recently bought it back. Investments that might not have been a great idea. The market doesnt like them. Can we have a core business which is when they started. Do court title business will better in the future because they have had this refinancing headwind. Headwind, theye should position if theres more housing turnover. Management through this entirely complemented complicated sleight of hand. We think theyre poised to have a better cycle. You just took my doors off. Getnnot believe you could that last part often just two minutes. You share these amazing ideas and millenials out there, guess you have a bright future. You are getting a house, youre having a baby. Do you want to get in case your girlfriend, dont by her dog. Thank you very much. Good luck, rangers this season. I will send it back to you. Thank you very much, stephanie ruhle. Back with an interview with Larry Summers and we will see what he thinks about buying your intended fiance about. I think it is a good idea. Fast food fallout. Americans arent going to mcdonalds the way they used to. Four have fallen for straight quarters. Chinas economy grows supposedly faster than expected. Still, it is the slowest rate of increase in more than five years. We will talk about the numbers and what they mean if they mean anything at all. Mcdonalds just cant seem to get a break. The Worlds Largest restaurant chains and profit fell 30 . U. S. Sales slump for the fourth straight quarter. We have been following this story. There are endless puns we could make with mcdonalds commercial slogans but really this business doesnt seem to be doing, is not free healthy. No comment on the food. Losing that glow. Theres no way to get around that. The most important thing, the future looking pretty bleak. A pressure will continue to mount in terms of the operating performance. You were just showing some of these a couple of minutes ago. 43 in terms of the pressure they are facing. But if that is because theyre going through this huge diligent review as they look to get back on track. Mcdonalds has been struggling in the u. S. Which is the largest demographic for a couple of reasons. Number one, more expensive. It used to cost under five dollars, now it is closer to eight dollars. They have been pushing prices as they have had to pay more for typical commodities including pork, beef, cheese. Discountsnot as many compared to many places. I spoke to a Research Analyst at bernstein told me that it is a competitive landscape. That yoully the fact have a lot of competition from the fast casual. Those individuals are going to places like chipotle instead of going to get a value meal at mcdonalds. Healthier food and you could eat it in your car without having to clean your car. What is the overseas picture like for mcdonalds . Are they doing better in places where people arent as fat yet . It has been very challenging for mcdonalds overseas. If you look at what has been happening in places like hong kong, china, japan, they have been struggling to get back on track after this mislabeled expired meat scandal which really rocked sales. Pressure, 200 stores are under this government crackdown. Nine Stores Including their main one in moscow have been shut because many would say the same store sales picture is terrible everywhere. Not down as much as expected. Europe, they are seen some momentum in places like germany and france. Russia maybe because people cannot afford to eat food there. The year maybe because the european economy so bad that people have to eat there now. The asiapacific region, africa, that accounts for some 25 of revenue. China alone accounts for some 10 of consolidated revenue. If you dont get the picture straightened out in those areas, you will have a very challenging quarter and that is why the cbo in a statement earlier said they are working on turning things around but dont expect a miracle overnight. Am i being unfair . I feel like it is not terribly healthy food. Economict sure if your analysis is on target. I think that matt or process the average person. Enoughrage person wants variety and choice. Thank you so much. I will look over mcdonalds stock performance. There is nothing good in this earnings report. We will see how it goes from here. It is a growth rate that the u. S. And europe can only dream of and maybe we should make it up ourselves. We will talk about chinas gdp when we come back. It is time for bloomberg on the markets. We are seeing at third day in a row of gains, the longest winning streak in terms of days of gains. Assuming we close in the green. I guess that is significant. Up more than 1 on top of the ecb buying covered bonds in italy and then sort of whispers of them buying or print bonds, though they turn out to be unfounded. Up 75u see the dow points, 16,474, the nasdaq gained the strongest. Oil rebounding here and in europe. Lets talk about cocacola, cocacola which is been having a rough time as of late, consumers are turning away from sugary drinks like coke, for example. Theyre turning away from artificially sweetened drinks like diet coke. Coke down the most and six years. The Third Quarter sales missed analyst estimates. The ceo announced a 3 billion costcutting plan to be in place by 2019. Not nearly enough to satisfy investors who are hammering the stuff. Bad news for co. , bad news for mcdonalds, bad news for chipotle. When youre ordering four burritos, you should get a diet coke to wash it down. Chipotle has had a seriously great year over the past. The stock was up 30 over the past 12 months. Now they say that growth will be 10 . Than that has to support that has investors disappointed. Some highlights from the annual robin hood investors names ine, the biggest the Hedge Fund Business give us their best bets. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker stephanie ruhle. Good afternoon, everybody. Thank you for having me. Slowsa reporting it quarter of gdp growth in more than five years. Now, 7. 3 , that is the figure, whether you believe it or not. It may not seem terribly sluggish, but what if china shifted down a couple of more gears to growth of less than four are sent. That is what a new board predicts in little as six years. On the chinese economy and policy is head of asia studies at the eurasia group. Good morning, 3. 9 is what the Conference Board says china will be posting in the way of gdp growth by 2020. And henceforth. Is that a figure you agree with. I think it might be a little bit premature in terms of the timeline but i think it is certainly the case of that is the future for china. We are talking about what is eventually going to be the biggest economy in the world and at that size. Bigger than the u. S. Economy, maybe by 2025 and at that point it is quite reasonable to expect that growth will be in the low to Single Digits just like it is in the u. S. Why is that the case . China is an awfully large economy, almost as large as the American Economy and is grown in excess of 7 . Why is it becoming larger than the American Economy require china to grow almost half the slows it is now. When you project that out moving forward and you look at productivity gains, you look at the fact that the government at a very basic level doesnt need to deliver this rapid pace of Economic Growth in order to ensure sufficient employment growth and i think that is what you have seen play out over the course of this year is that there are these concerns that of china is growing at less than 8 , there was no way the government would be able to deliver adequate employment and that clearly has not been the case. You are seeing a little bit of marketability to whether this lower growth environment. A lot of people like to look and talk about the chinese gdp growth figures without considering the inflation figures and in times, the flexion numbers are as eyepopping as the growth figures, canceling out most of what we see, most of what we are surprised by, most of what we are envious of, how does the inflation picture look Going Forward . Very clearly you authority got some clothes and deflationary pressure building up in the economy and i think if you look at the Global Oil Markets right now there is the concern that we are moving into an environment where they would be significant downward pressure on prices. Has beenhe case, there a lot of concern about debt levels, particularly local government levels in china and i could become much more difficult for those local governments to handle. How would you assess the success of the Chinese Governments efforts to make the economy more driven by domestic demand . In a difficultre time right now in terms of the mainstream consensus on reform. In my view, i think the markets have been too focused on Economic Policy reform and are missing a story about government reform. The Chinese Government is meeting this week with their focusing on things like legal and judicial changes that will be quite impactful in terms of being able to implement the reform. There are pieces of this agenda moving forward but it has been less focus on Economic Issues in the markets would like to see. We have been doing stories nonstop about the protests in hong kong, i think it is an important issue to Pay Attention to for social regions, for humanitys sake. It is obviously affecting the economy. How do you see that plane out and is this a oneoff or will we see these things happen elsewhere, possibly in the mainland . First of all, hong kong, it will be the case that you will see protest movements continuing through 2017 which is the scheduled date for the chief executive election which has become the focus of popular contention. I think what we see and hong kong is quite likely to be indicative of the future of Mainland China itself. Mainland, the government is struggling with middleclass expectations. Facing growing popular pressure on a host of issues. Those kinds of issues will be bigger drivers of public discontent in the mainland over time. Does the compact between the Chinese Government and the Chinese People need to evolve . You alluded to the fact that gdp growth of 4 should be enough to generate adequate job growth but what about these other things . Well, there are two stories. The government is trying to move away from deriving all of its legitimacy simply from Economic Growth and i think that is positive in terms of the political systems ability to the lower growth environment. Clearly, the commonest party has determined that nationalism is a popular driver of legitimacy for the party and i think that this in part the party has been seeking to replace growth with nationalism and that is driven some of the more aggressive foreignpolicy decisions we have seen. China to theant is u. S. Economy . Increasingly we see exports is more important than almost any other nation besides canada, mexico. Our biggest export target. Will that continue . Yes, i think is incredibly important and it isnt in the dependent relationship increasingly. Amount of investment will be a major growth driver here over time and i think that that is something that underpins relative stability because we need to have that investment and that growth. If the chinese economy doesnt grow as quickly as the government wants or needs it to grow, might the government be inclined to rethink some of its policies, the policies that has put in place regarding the entry of Foreign Companies and the stricture under which it demands they operate. This is an area where we have been relatively optimistic. In the markets there is a sense that the investment environment for Foreign Companies has become more difficult in china. It is shortthat term but not opposite of a longterm orientation. In the context of slower growth, the Chinese Government will need that job growth and increasingly that will create new opportunities for Foreign Companies. Thank you for your perspective. Helping us understand much better the latest tdp data out of china. More importantly, this Conference Board of chinese growth will slow less than 4 by 2020. He will take a quick break. The best thats a doing this. We will go back to the robin hood conference where investors are handing out tips for free. Is all about you, really. Ive never really watched the baseball game surrounded by toddlers but i did that. It was Research Effort on my part. It was very telling. Kids, dont watch baseball the way they did when i was five years old. It is not really the national pastime, we will talk about that, stay with us. Stephanie ruhle is that the robin hood investors conference all day. Some of the biggest bestperforming investors. The one biging out idea, where they are putting their money right now and perhaps you should as well. Tell us what some of these ideas have been. It has been an extraordinary roundup. Remember, it is founded by one of the best investors of all time. He sat down yesterday with stan druckenmiller, we had a chance to talk to number of investors who showed up with their number one idea. Tom wagner is a cofounder of night had capital, one of the most successful distressed and highyield investors out there gave us his best idea, it is American Airlines. Will not cause people to stop flying, at least in our americanut if they do, airlines is still cheap. If you look at the impact, it is a big event like 9 11, major destruction in demand, American Airlines will still continue to make money which is a far cry from the way the industry look in 2000 four or in 2001 when there are number of carriers with her little discipline with respect to capacity. Today, they have done an exceptional job in managing capacity. The number of aircraft they fly, number of available seats. Is it a play on airlines in general, why american, not delta, not southwest. American exited and grabs the lesson here go and we dont think that the market has begun to reflect the actual attractiveness of that company and its earnings power. It is my belief that American Airlines will generate in the next two years roughly 1650, 16 a share in earnings over the course of the next two years. If you look at the stock price around 35 alose share, youre getting almost 50 of your Purchase Price back. Looking at it on a pro forma basis, you are craving it for less than four times normalized fully taxed earnings which i think is pretty cheap. Is fuel price a factor because it is going your direction . It is, say, does not put them at risk of a significant rise in the price of fuel. Interestingly, American Airlines is continually cheap if not why the average per mile thrown in the industry and that as a result of not being hedged. It calls into question the actual cost of hedging. It might smooth your earnings, we dont fear lower oil prices, we actually think it could be an interesting tailwind for the we cannot just deliver long ideas, i had a chance to sit down as lucidly with the one and only gym chain us, the man that loves to go short and he had an idea sounds of the border down in brazil to short petrobras. Remember, the Upcoming Elections are taking place. The chairman of this company in orderntanglement is and his company isnt going to work out. Brazilian stocks have been pingpong balls. Our point was that it is such a unique animal globally as an energy stock that it defies that kind of simple analysis. This is the interesting thing, every time the poll numbers go up, the stock goes down. Every time numbers go up, petrobrass stock goes up. Ofre have been a number investigations and scandals swirling the company. Even if hesure that wins, he will be feeling warm and fuzzy towards this creature. Poor atconomics are so the petrobras, then we have really call that a scheme, not a stock. That theybelieve misled investors back in 2010 . We look at the companys projections. Suffice it to say, if you look at the table, they have been a tad too optimistic. Is that enough to call it a scheme . The company is cash flow in about 25, 20 6 billion. Its annually is 45 billion and another 45 billion in capitalized interest. The growth cash flow is only covering half of their Capital Spending and capitalized interest. So, they are not covering their dividends. Theyre having to borrow the shortfall. Is an enormous sinkhole from a financial point of view. To doubleectation output is laughable . Output. Can double five years, production really hasnt increased and we put a chart up. Production has increased. It has to double to basically service all of this new debt they are taking on and will take on to complete the field. Those are some fighting words from gym chain us. This isnt a stock, this is more like a scheme. He is taking this quite seriously. Guys wee couple of the have artie spoken to. To larrygo, i spoke robbins. In 15 minutes, i will be sharing with you and this was an interview with the one and only Larry Summers, the former treasury secretary. The global stress on our economy, who better to speak to dan Larry Summers. A might even have conversation about ebola. Minutes. U in a few stephanie ruhle, live all day at the robin hood investors conference where i will be joining her ever so briefly later this afternoon. Was the big kid in there, in the middle . You recognize that guy. Nat and some of his friends. Matt and a lot of his friends. I was up until 11 00. Too late. The world series gets with the Kansas City Royals hosting the San Francisco giants. Will kids be allowed to stay up past their bedtime to watch and more importantly, will they want to at all . I went straight to the source, a group of Elementary School students. Has the prosperity of americas pastime become a thing of the past . Problem, young people are tuning in. 12 is thene in favorite sport. What can the incoming commissioner do to turn things around . Todays Digital Generation of kids cannot stay focused on nine innings of baseball. Heck, i cannot stay focused. For answers, i talked abundance of children who cannot even spell the word baseball. I talked to a bunch of children who cannot even spell rd baseball. 30,will be up till about 11 are you allowed to stay up that late . No. When the bases are unoccupied, the pitch must deliver the ball within 12 seconds after he receives the ball. That rule has not been tenure. In bud seligs the games a getting longer. The average ballgame lasted only two hours 22 minutes and i can 50. Would taking baseball back to just two and a half hours per game be enough to get the kids to watch . To spendwould you like watching a baseball game . 45 minutes. Do you ever go to the baseball game . One. Went to it was so boring, i fell asleep. What would make baseball more fun to watch . A home run derby. Home run bass plugins only produce 0. 6 home runs per game. Just one player, nelson cruz hit 40 home runs this season. Everybody watched the game. Aw much fun are you having on scale of 110. A1. Much fun are you having . A three. Off theets turn television. Ok, how much fun are you having . A two. A little bit more fun than watching the baseball game. But that was fun. It was a lot of fun, actually. Thing i tookone away, it is time to bring back the juice. I am finding out through my research is that Major League Baseball this in mind of game times get stretched as long as possible because they are getting 12 billion from stocks and tbs and espn and they want to be able to put as many commercials in there as possible. A batter cannot step outofthebox once a pitcher is said but they constantly step readjusttantly to their helmets, their gloves. Pushing their cup down. Whatever they have to do to stay on tv longer, they will do it, because that is a chance for the batter to be on tv and improve his endorsement deals. Can you blame baseball if and foxx are preparing to step up for 12 billion. The problem is you will lose your core fan base. Kids dont watch anymore. Watch a yankees game on television . No, because i cant stand the yankees. You will notice that most of the game is empty. The stations are willing to pay. Would help. Es fewer games are deftly help. A faster game at an early start. Who was staying up until 11 p. M. . Football is awesome to watch. We will not get into that debate but would we will do is bring you back to the robin hood investors conference to hear from the former treasury secretary himself, Larry Summers. Live from bloomberg headquarters in new york, this is Market Makers. Jpmorgans 6 billion london well trading debacle . A new report shows the new york fed might have prevented it and the ugly truth from inside the central bank. He has run harvard on the treasury department, obviously one of president obamas top economic advisers and we will hear from Larry Summers in a bloomberg exclusive. Response to ebola shows how vulnerable the country would be to bioterrorism. Its the second hour of Market Makers. Stephanie ruhle is at the robin hood investors conference and shes got some big interviews and one especially is coming up. We will get to her in a moment but lets give you the full at 10 the full headlines. Assigned the Residential Real Estate may be a boost the economy, sales of previously owned homes rose last week to the highest level in a year. All of this is according to the National Association of realtors. The medium price of an existing home rose 5. 6 to almost 210,000. There is speculation that the Chinese Government will not an act in a largescale economic stimulus. Gdpd quarter chinese expended by 7. 3 which is the slowest growth in more than five years. However, it bp estimates we ited from economists beat the estimates we gathered from economists. The demand for exports was higher and plenty of skeptics remain. Among them is the famed short seller jim chanos. When i wake up in the morning, we keep an eye on china because i think it is the engine for Global Growth whether or not you believe the numbers are not. I think it is the largest credit bubble going on in the globe right now on one of the largest in history. He has been saying chinese growth simply cannot be sustained. Shares of mcdonalds are trading down this morning. It posted her quarter profit that was 30 lower than a year ago and sales in north america continues to fall and of no uarters in a row. It will focus more on mobile ordering. Regulators have hit jpmorgan with the 92 million theybased on claims that attempted to rig the libor and fine for colluding with Credit Suisse and others. And ebola vaccine may be is in africa starting early next year. The World Health Organization says first result from a child from a trial, there would not be mass users at first but Health Workers would get the first doses. Lets take you back to the robin hood investors cant conference in midtown manhattan. Before i get to it, i just want to mention that last night it went to the new york next game and they were playing against the milwaukee bucks. Who but the box last year . Who but theybucs last year . Two guys andt that made their new york city fortune in finance bought a Milwaukee Team second to the worst in the league. They walked into msg last night for their first game and they beat the new york knicks. Thats pretty good. They have to feel pretty good. And i will be tallying the wins and losses at the end of the season. Yes, yes, we definitely well. Its a preseason game. I thought they looked like a High School Basketball team and that they won the game. At robin hood in my green and black. I had a chance earlier to sit down exclusively with the former treasury secretary Larry Summers and we talked about a wide variety of things starting with the economy and what he makes of all of this. The challenge of assuring not just at the trough of a recession but also an ongoing basis that i was highlighting the secular stagnation those challenges look real rue out the industrial world. Look real throughout the industrial world. When the industrial world lags, that means challenges for the developing world. I think weve got very real growth challenges. They are not on the supply side. They are in they they are on the demand side. Islongterm unemployment 5. 8 in the u. S. And the market is in turmoil and all the investors are crying about the bad two weeks they have just had. Our real american suffering now . If you look at what they say do they think their kids will be better off than they were . Is the country in the right direction or in the wrong direction . If you look at questions like that, the answers are very disturbing. In terms of how people feel. Feel the most seriously unemployed have dropped out of the later force. Some of it is there are many people working parttime who wish they were working fulltime. This is doubly a critical piece but some of it is that wage growth has lagged and has been lagging for a long time. Think about it this way if you take what any major forecaster thinks is the potential of the economy, they have revised it down by seven or eight percent since the financial crisis began. If we are going to get to full employment and we may, the full employment we will get to and the level of output we will get to will reflect a very lowered bar from the expect to asians we had for this economy just six or seven years ago. The is the legacy of financial crisis and thats what economists call the historesis effect of the crisis. That is a reflection of the problems that we are having. Yes, i think there is a lot of reason to be very disturbed about the longrun trajectory of the American Economy and what it means Going Forward. Have theuch rather hands that the United States has right now than the hand that europe has or the hand that japan does. Think about this right now, the fraction of american men between 2554 who are working is lower than the corresponding fraction in france. Who is satisfied with the structural situation of the American Economy should ponder that with all our remarkable dynamism and all of that, fewer percentage ofer men and i choose that group notched just because it is most important but thats the one where there is the stronger social expectation that everybody will be working in sixlose to one american men between the ages of 2554 who are not working thats a higher fraction than in france. Use a europe is a worse hand than we do. Does the ecb have any dry powder left . They will do whatever it takes but they are only buying to your covered bonds. Could they buy back more bonds, bondsterm of some of the countries in the periphery where there are larger risk issues . Yes, they could do that. They do have dry powder. The other question is, how potent is the powder . I think that is a real question. I am not sure that when Interest Rates come down from two percent , come down from the 80 basis points they are in germany, that you will crowd in that much extra investment. I think the real action in europe is going to have to come on the fiscal policy side and europe, like the United States, has crying infrastructure gaps. What the imf said last week was a remarkable thing. Keynesian economic professor at an ivy league school. This is the International Monetary fund. They said that strategic Infrastructure Investment would pay for themselves in a sense that they would reduce debt burdens. Increasedif a country its Infrastructure Investment by one percent of gdp this year, after five years, debt burdens might be as much as seven percent of gdp lower. Thats got to be strong advice when you got the imf d crying austerity, its time to move away from austerity. Lets talk china for a moment. We got the gdp number last night. Do you think china needs a liquidity injection right now . Night was number last relatively favorable. I think there is a general tendency i wrote about this recently in markets to over extrapolate trends. China has had great growth for 30 years now. People assume it will keep going. The evidence is that most of the time, trends dont continue. I cannot tell you exactly when or how but i suspect there will be a certain amount of reverse and chinese growth at some point. You have also written recently how you believe the sharing economy uber could win regulators over. Why do you think thats the case . Here is a general principle about regulation when consumers complained to regulators, listen hard. When competitors complained to regulators, listen with suspicion. There is no consumers complaining about uber but many competitors are. The time to be suspicious is always when complaints come from competitors. Is thatt tells you there is more pressure being put on competitors and prices are being driven down for consumers. If i come in and monopolize a arabia if saudi monopolize the oil market effectively, that is good for nigeria. If someone comes in and produces a new energy source, that is bad for an energy producer. It does not always work and matters are more complex and we should obviously not have Companies Just based on circumvention of regulation. But i think if you take a broadbrush approach of worrying when its consumers that are unhappy and being more serene when it is competitors that are unhappy, you will find your way to the right side of many regulatory issues. Lets talk about financial regulations for a moment. People have been so antibanks for some time. Doddfrank was put in vice as well as the ball roll as well as the volcker rule. Wall street cannot act as a stabilizing agent in a more tom are we going to look at the rules and put in place and say maybe we went too far . I think what we saw last week and the big deal left the was not what happened in the stock market. Was a sixal last week or seven move in one hour in the bond market. That suggested it was the equivalent of a flash crash only up. It took place in the 10 year bond and in longerterm treasury bonds. Aboutaises real questions market institutions and the adequacy of liquidity that people are going to have to study. I think those problems have been there, by the way, but what happened yesterday or last week, pointed up some real risks that we will have to live with for some time. Yes, i think its important to think about assuring there is adequately put it in those markets. Will we be able to live life without qe yes just fine. Will live Interest Rates at the 10 year and now much lower, not much qeher, then they were before started. What a really smart man looks and sounds like. Former treasury secretary Larry Summers. Wish you were here. You will be here later . I well and i will see you this afternoon at robin hood and thank you so much. So much more of stephanies fantastic interviews coming this afternoon. Live from carl icahn the robin hood Investment Conference. When was that picture of him taken . Within the last decade . Or three decades ago . Up,s interesting, coming how the london whale could have been stopped long before he caused jpmorgan and its investors billions of dollars. Plus, more vulnerable than you might think and what ebola says about the threat of a bioterrorism attack in the United States. You are watching mac Market Makers. Could the fed have prevented the london whale . A new report from the Inspector General raises that tantalizing question. More than two years later, we are finally learning that the that the new york fed plans to inspections and was recommended to do a third but never conducted any of them. Moore is michael here to discuss this is michael moore. You know the fed well, does this surprise you . It doesnt surprise me particularly in the context of what we have learned recently with the various reports on how the fed conducts its nk examinations. Its bank examinations. You have around tough schedule under doddfrank without the rampup in personnel and experience and ability to keep up with what they are required to do. It is not surprising at all that there were things that fell through the cracks. They are a slow to change organization and they did not change fast enough. It reminds me of General Motors now that i think about it. They werent communicating in noterent people inside were communicating, what do you think about that . The occ must share some of the blame. There was a lot of breakdown in communication. On one side, its reassuring that they were aware of this trading and knew about it but on the other hand, there were pretty basic things they did not do. They did not write down these things and did not followup to zero they did these investigations. It seems like these are easy things to fix. Access tot given the full report. We dont know whether they knew these positions were responsible for the london whale trading laws were being put on. Heres what they do say they planned an examination in 2008 and another part. That was in 2010 much closer to the time when the positions that ultimately ended up blowing up the cio are being put on. As he found it on this report, they didnt. I dont want to characterize your response because i dont think youre giving the feta free pass but we have to ask for notthe reasons conducting these examinations are good or bad. The fed has to make choices as does every regulator whether there accurately funded or not. Coming up on the Inspector General notes that the fed has a tough time and they do have to make tradeoffs. Some of the recommendations they suggest that the fed put in thee are ways to minimize damage from that and mitigate the fact that they cannot be everywhere at once. I talked to the ceo of one of the biggest new york banks about a year ago and she said i have six regulators in our bank all the time and they dont know whats going on. They are good people and they are trying hard but there is just so much to this bank. This is the socalled secret goldman tapes. You can never get a full grasp and if youre not talking to each other, then whats the point of having six regulators in there if they dont know what they are doing. To what degree are you being persuaded . This report says the fed have this key problem or they had a few people who knew what was going on or had a better understanding but they did not communicate it to others. When those people were either transferred or left the fed, their replacements had no idea. Not everyone cares about the london whale. The question is would this happen again . The fascinating thing is this comes in the context of the old dudley and dan cerullos comments at a closeddoor meeting of the new york bankers suggesting that there are ethical cultural problem still remaining at these banks. They did not name the banks but you can guess who they might be. Dudley says of you guys dont change the way you do business, you may end up being broken up. Dan cerullo had a fascinatings ifeech were he suggested you are sending the wrong message to regulators, what message are your employees getting . Thank you very much to both of you. Well take a quick break and be right back. Coming up, preparing for a nightmare and what the government response to ebola says about this countrys ability to handle bioterrorism. From bloomberg headquarters in new york, this is Market Makers. Its 11 30 a. M. And you are watching Market Makers and matt miller is paying attention. I was looking up some casual dining experiences on my bloomberg terminal. This year has been the focus of a fight between darden restaurants. Dining chainual and activist investor star board value. And magner ofhilis gianos has been eating their lunch. They are in early adopter of online ordering. This i had in you do it yourself . Whichs called the viosk is partnered with chilis and corrects and collect the revenue for games. Its about ordering and games. Costetically, it does not chilis anything. You can just order drinks and dessert but not the whole menu but you can also pay your bill. Its in all of the 824 companyowned locations. They are in the process of rolling it out to franchisees. A spokeswoman told him that 70 of the guests opt to pay that way with these tabletop tablets. Times more likely to enroll in their email club and 2030 times more likely to fill out their Customer Satisfaction cards so they are gathering more data about these people and getting more connected to them at the same time they use it to order. I probably would not be ggianostchilis or ma but i have used this at a restaurant. Im normally in favor of human interaction. But this is a much better experience in i. T. Airport setting. Dont want for someone to bring you the check in on your card. You want to wait for somebody to understand english you are speaking. You can just tap it in. Dont you want somebody to tell you its a better option . Because these kind of restaurants, you know you will not get good food. All, they tend to sell a little but marwan views these tablets because you can get another beer more easily than if you have to fly down the waitress. They dont, yo have the entire menu but if you are ordering an appetizer or they are trying to upsell you, the computer never forgets to do that. A person can. Who else is using these . Brinker only be the restaurants . They are an early adopter but not the only one. Companies like Virgin America has rolled out more tabletbased interaction. There a summit that of the delta terminal in new york. Its the only good thing about a new york airport. Any airport. Brinker compared to darden, its not just about the tablets. Years,e past several strideshas made the that darden did not make. They own some other chains and got rid of those and concentrated more on chilis. It has gotten operationally more tight and has been returning a lot of cash to shareholders. Raised itsntly dividend and did a lot of buybacks over the past several years. We have a graphic of the various buybacks it has done starting that was an authorization for 575 million going back to 20102011. Thats the reason that investors have liked brinker over darden. I will pledge publicly to try thislis by the end of year. We will take a quick break but thank you for joining us. It sounds lovely. Casual dining. We will take a look at the robin hood conference and what it raises for charity. Breaking news from the Homeland Security committee they say they will require Airline Passengers originating leone, anda, sierra guinea to essentially enter the United States through airport specific screening measures. They will have to have the screening airports in five specific airports and to in the new york area including jfk and the other three include a washington airport as well as chicago and atlanta. They are him putting is no measure in place because 94 of those individuals affected from these areas of life through these five specific airports. Termss the latest news in of the Security Department in terms of trying to close in on ebola. I feel so much safer. Lets go back to the robin hood investors conference in midtown manhattan were 70 rule is standing by with the man behind the event, david salzman. More than just the man behind the event, the man who fuels robin hood. Welcome and thank you for having us here. There is a huge amount of new york City Charities and the live event business is massive. Im looking at the line up and we sit down with your biggest speakers and how does robin hood make this happen . We are lucky. We got great people web been incredibly generous to robin hood. Robin hood was founded by Paul Tudor Jones and glenn dubin came on board afterwards and weve been able to grow in concentric circles for remarkably intelligent and generous new yorkers who have banded together to help their neighbors in need. Between all this because weve seen so far, who is getting the most was . Everybody has been terrific. Eric schmidt to speaking right now. Earlier today, Larry Summers was speaking. Larry robbins present to the best idea early as morning and , paulday, David Einhorn jones its really a terrific line up of people. You did not mention my favorite. I had a chance to sit down with mickey drexler, an icon in the retail and fashion business. At a time when you look at Companies Like target and the gap in jcpenney bring on ceos that you not have expertise in the industry, heres what he had to say. I think retail is an art and a science. You better have both. You better have creative or else if you dont differentiate your product or has something that is not available and you build on price, you will eventually lose because someone will sell it for cheaper. Mickey drexler, man who rarely speaks. Why is it that everyone comes together and speaks for robin hood . What do you do that is so special . He was born and raised in new york and cares about new york. He wants to help people in his hometown. He wants to help people effectively. Hes a bottomline guy. , heavorite thing about him took one look at me yesterday and said you need a complete makeover, come and see me. Thats because he knows retail sales are down and in its and he needs new customers. What is the climate in new york really like right now . We are headed into winter. Talk to me about people in need. Homelessness is at an alltime high. We are up about 10 this year alone. Tonight, 54,000 people will live in homeless shelters including more than in new york . Yes, including 26,000 children. We are really in trouble and thats why this conference and thats what you are covering this conference means so much. How much money are you raising today . We will net more than 6 million. So much of that is due to you on bloomberg, thank you so much for being our partner. Thank you. I will send this back to Erik Schatzker, over 50,000 new yorkers sleeping in homeless shelters tonight. New yorks most successful are here at the robin hood Investment Conference to raise money to help them. Robin hood does a ton of good but to do the good, they need the money is why theyre holding the investors conference which is why you are there and i will see you later this afternoon. Do not miss stephanies interview later in the 5 00 our with none other than carl icahn. He will be on a panel at the robin hood conference debating the value of shortterm versus longterm investing. Larry think is on the panel as well. Im looking forward to that. We are back in two minutes. Governmentzig, consultant on bioterror. You have watched ebola situation play out over the past couple of weeks. Many aspects of it are not at all comforting. The cdc has criticized itself or the way its handled the situation. What does that say about this countrys vulnerability to bioterrorism . I think our bomar ability our bomar ability has been quite real i think our vulnerability has been quite real and i dont think we should exaggerated. The reality is the ebola experiences heightening our defenses and makes us more aware of the need for strong Public Health. Everybody is very alert for ebola. If that were used as a biological weapon, we would be pretty well prepared. What do you think about the criticism of the administration that we have not organized quickly enough . There are demands we got an ebola czar and that we block travel for some people. Slowly orppening too do you think it is measured and well thought out . I think its measured implausibly well thought out but happening too slowly. I think that is in the nature of these things. Reality is always more treacherous and messy than plans are with regard to it. Cdc and others are learning that you cannot be as confident as i think they projected to begin with. I am not in favor of a travel ban. The logic with regard to it is clear. The core of our problem is a bowl in three countries in west africa. If you ban travel, you enhance that problem in those places. To also encourage people distort and circumvent the travel ban by not being truthful about where they have come from. On balance, i dont think a travel ban is the way to deal with this. We could deal with it better than we have been but that is in the nature of these kinds of events and i suspect we always do better and we can always think about it better. Y instate a travel ban . Is this to placate the American Public . Why do it at all . I think the idea of screening travelers makes some sense. The idea of a travel ban responds more to psychologies in these cases than it does to realities. If we were simply being logical about this, i dont think we would ban travel. We would screen travelers from those regions. I read a piece about project from Columbia University and he makes reference to some of the cuts to funding 70 of its disappeared between 20052012 and lots of that had to do with sequestration. Level, a more local state and Municipal Health departments have been squeezed. Once a bioterror attack takes place, it becomes a situation not unlike ebola inasmuch as the human population in this country is exposed to potential transmission from those infected. Whichon what he discusses im sure youre familiar with, know you said a moment ago that we would probably be able to handle it but surely, this is left the company left the country less prepared than we would have been a decade ago . I dont think so. We are very aware now of ebola as a disease and if it were used as a weapon, i think we would be very alert to it. We would recognize it when it presented. One of the concerns about biological warfare is that it can be insidiously disguised. Nation is on hit hairtrigger alert with ebola, i think we would be ok. In regard to the more general point, yes, is the case that as we cut back on Public Health investments, we render ourselves more vulnerable both to natural events like this Ebola Outbreak and bio terrorist events Public Health systems are the broadest kind of capability, our best degree of immunity against these kind of things. Shouldcident shows we make them stronger and invest in them more. To be humangoing error everywhere. The cdc says their protocols were in place with both of the Health Care Workers who contracted ebola from thomas eric duncan. They say that these Health Care Workers made mistakes and that will always happen. Yes, you are right about that. I need to smile because you called me a doctor. I am not a doctor but i have a phd in history. You are right, you have to assume error in these kinds of planned responses. That does not mean that we or that makes us invest less. It should make us invest more. , dr. Ank you very much, dr. Of history that is. We will take a quick break and i want to correct myself that there has not been a travel ban issued. We are limiting travel from certain areas through five airports as was pointed out. There will be screening points there. Thats just to clarify. That will do it for Market Makers today. It was a pleasure spending the time with you. Day, we will be live once again at the robin hood and that investors conference and i will speak with amanda runs the biggest Asset Management firm in the world, larry fink. P. M. On street smart. At 5 30 p. M. , stephanie will sit down with carl icahn. It dont want to miss either of those. There is a lot of stars coming out of the investment world. They do a lot of great work and attract the big names. People pay 7,500 just to get in the door and pool that money and use it for philanthropy. It is not a charity were the money gets spent on operating expenses. Its not to keep people employed , all the money goes to the target charity. Thats excellent. Coming up tomorrow, the ceo of the Worlds Largest Sporting Goods company, mark parker from nike. Its 56 knots past the hour that means on the markets we are on the markets. There, stocks are rallying again today with s p poised for straight day of gains. That would be the longest for the index winning streak since august. Joining me today is kevin kelly. Lets talk about where the markets are right now. Youve got some volatility but fundamentals look pretty good. They are looking great so volatility has come back. Earnings is the reason. Before the earnings was focused on europe, ebola, and energy. Now that energy has stabilized, volatility is compressing even though Energy Volatility has increased by 100 . Ebola in europe still remain on the table. Weve got yahoo coming up later with earnings and marissa miles will speak for the first time publicly since the start board pressure. What can we see in terms of the option market . It normally prices and a 5. 1 move when it comes to yahoo . Alibaba has gone public, it is only a 4. 8 move because the market can value yahoo so they will focus on what she says about court yahoo which is valued at zero. It depends what she says in a comes to starboard and what they will do with the cash. Dollars depends on the tax vocations. Wieder to go down to 4. 8 . Its more stable. They are assigning it a core value. They know what alibaba is worth and they will assign a euro value to yahoo . They have a lot of cash to much cash has been earning money so the move is minimal. Cash tohoo puts that work right away, does that translate into anything on the option side . What you would see a strategic players coming in because they like what theyre doing with the cash and that would lower the volatility or if the market does not like it, that might be doing a merger with yahoo or a big acquisition, then you would see volatilities ike. Volatility spike. What about blackberry . Play byberry is in lenovo. You can buy the 12 call for about . 50 and the deal is supposed to be price of between 1518 dollars so its a great risk for reward. Thank you so much. Again 30n the markets minutes, money clip is up next. Welcome to money clip. Im Olivia Sterns and heres the rundown jim chen knows bets against petrobras we will have the latest he calls from the robin hood investors conference. Pay ishnology, apple taken out for a test drive. Around the world, talks between students and the Hong Kong Government are beginning a business are feeling the pain after three weeks of protests. Mickey drexler talks about the art and science of