Transcripts For BLOOMBERG Market Makers 20150210

Sugary drinks that are not selling like the used to. Welcome to Market Makers. Im Stephanie Ruhle. Erik schatzker is out today. Have a special cohost this morning. There is nothing worse than a person sitting next to a person getting their name five euros sample deli bobby o scarlet fu is in the newsroom wholesale inventory data. Wholesale inventories increase at a slower rate in the month of december. Again of 1 10 of 1 . Looking for an increase of 2 10 of 1 . This marks a slowdown from the 8 10 of 1 that we got in the november period on the month over month basis, that was a drop slightly larger than what economists had been anticipating. Carl written on a word warned that this would not generate thats pretty much the case right now when you look it how stocks are performing. They are holding on to their games. Hard to say. Stephanie it is time to take you to topic the stories of the morning top business stories of the morning. Shares of cocacola are trading higher this morning. Coke was helped by costcutting efforts and a price hike. A warning from swiss bank ubs. The stronger swiss franc and negative Interest Rates may hurt its profits. The Bank Reported lower than expected earnings at its wealth unit Wealth Management unit. The white house is creating a new agency to oversee cyber security. That is according to a Senior Administration official. The agency will analyze threats to the government and private businesses. President obama is asking for 14 billion to combat online threats in his ladybug latest budget request. Jetblue airlines will become the first major u. S. Airline to assess access apple pay during flights. All of jetblues in crew flight members will be equipped with ipad minis. This is an easy question. Who needs cigarettes . No one, including cvs. Cold medicine flew off the shelves in an offset of this at to offset tobacco related products. Lets bring in alix steel. She has the latest. Flu season was bad for us. There were other reasons why cbs did cbs did well. We all just got sick and that is what helped cbs. Vs. Elevated above the trendline at 2 . Much worse than 2000 the worst since 2009. This is how it goes for cbs. The First Quarter in 2013 was awesome because it was the worst flu season in four years. This year, echoing that white line. You can expect to see that pay back down the road the company added about 40 basis points to its pharmacy due to the flu. Youre looking at 37 billion. Stephanie why was the flu so bad this year . The got the vaccine wrong. It is working about 23 of the time. You are looking you make the decision to put the flu vaccine a year before in february of the flu does not hit until later on in the year. If you get it wrong, yet people party sick. Theyre looking to develop some sort of universal vaccine but that could take years. Fabio the front of south the front of house seems to have declined. They are doing in food in fusions and they are lining up to go to your house. Theyre becoming more of a mini hospital situation. Health and wellness in a deeper sense. That Business Model is the question. Stephanie what happens in the summer when we are not suffering from symptoms . Guest they said prescription drugs across the board. For sturgeon drug benefits as well as the formal care act the Affordable Care act which will was interesting about front of house sales, they are to connect to decline 4. 5 this year. The weakness because of Tobacco Sales will be felt throughout this year but their margins were up in the front of the house. It did not affect pharmacy sales. In that respect, the trickle effect stephanie why not go to a walgreens . Even if anybody smokes of the table, no one would admit it. Guest when i did smoke back in the day, i bought at the bodegas who would not card me. Stephanie did out steel just mentioned on tv that before she was 18 she was buying cigarettes . Guest it is new york. The pharmacy revenues were about the continue to strengthen. Stephanie this segment got more exciting than i was planning on. Alix steel, breaking down earnings out of cvs. Cap, one of the handful of retailers to report better than estimated numbers after the closed. The clothing chain has a lot of work to do so lets bring in julie hyman. Gap is across the street from our studio. Every day, there are 70 off signs. Guest there are. Stephanie hows it possibly great for the gap . Guest it is not great for the gap itself. The gap owns old navy, Banana Republic those guys are doing ok but the gap itself is not. For the Fourth Quarter, comparable sales were up 2 . The Company Raised its earnings forecast for the full year. It does not come at with the full report until the end of the month. If you look at the gap, it is still a problem. Sales were down 6 . Banana republic was up 1 and old navy hit it out of the park, up 11 . That is an area of strength and old navy comprises about the same maybe more in terms of overall sales versus the namesake stores. You have to fix those namesake those namesake stores. Art pack just came in and took over. He was inside the company already, he was with the Innovation Unit most recently but he had been with the company for some time. He took over from glenn murphy. He has been making changes. He shut down piper line which was Online Division of the company. It was such a small part of the company the gap said it is not worth it. He also fired rebecca bay the creative designer who came into the gap a couple of years ago to much fanfare. She it works through h m to bring a new aesthetic to gap. Art peck saying, it is not working. We will get rid of the position entirely and focus on the chief merchant position. Stephanie what is the difference between crete a director and a chief merchant . Guest a creative director will have more design capability. The merchant is looking to other places for ideas rather than doing the design themselves. Fabio as a macro guy, errol posco Urban Outfitters had sales of like 13 . It was a low of quarter for relatively pick in expense of clothing. Relatively inexpensive clothing. Guest it Beat Estimates but it was still down 9 . Part of the reason the Fourth Quarter looked strong on a relative basis at retailers is because expectations were dismal. Last holiday season, they did horribly. There was the combination of the Winter Weather which hit them. They were stuck with too much inventory because nobody expected the weather to be as bad as it was. On a relative basis, there had to be some improvement yearoveryear. The question is, now that we have a job market that is improving, will we continue to see that push . Stephanie when was last time your inside and aeropostale . Guest i am not target demographic. Stephanie i love some j. Crew. Julie hyman, breaking down the numbers of the gap. Why leaving the eurozone may turn out to be more than just a greek tragedy. How witty. This is the real thing. Just like the drink that comes in the red can. Stephanie welcome back to Market Makers. Im Stephanie Ruhle with obvious underbelly with fabio sando. Ukraine says its troops broke through defenses in the eastern part of the country. Jordan is ramping up its fight against Islamic State. According to nbc news, jordan is deploying thousands of Ground Forces to its border with iraq. The goal is to keep Islamic State fighters from crossing the border. In india, a setback for Prime Minister modi. His party suffered a defeat in local elections. The Winning Party promised voters food and medicine. Sticking with europe, the eurozone may be headed into the danger zone over greece and its bailout. That is according to the british chancellor in an exquisite interview. It is clear that the risks to the World Economy and british economy of this standoff between the eurozone and greece is growing each day. I think the risks are a miscalculation or a misstep leading to a bad outcome is growing as well. Stephanie European Finance ministers meet tomorrow over how much money to lend greece. Big issue, will greeces new government live up to terms of the bailout . Lets bring in ubss chief economist, reinhardt clues it seems that we are not paying enough attention to greece leaving the euro. How serious is it . Guest we think it is a risk that might be underestimated in the global markets. We see good room for compromise to evolve over the next couple of weeks. A copper mines that would most likely involve lower Interest Rates on greeces bailout loans and probably somewhat greater fiscal flexibility. These negotiations are likely to be difficult. Fabio it seems there is a tremendous amount of posturing on that. You feel the greek policy the way separates and the finance minister have been proceeding do you think it is helping their case to show how firm they are . Do you think this is going to drive them further apart in increasing the chance of something no one wants to happen . They do not want to turn this into a manhood exercise with frau merkel. Guest there is a great deal posturing. It would increase the political hurdles for miss merkel to make a compromise. I think the compromise still looks likely because the opponents of greece on the other side, the would like to avoid greece leaving the eurozone. Stephanie when it comes to negotiations, what do you think chancellor merkel will let greece get away with . Guest i think lower Interest Rates, longer maturities on bailout loans, greater fiscal flux ability is likely. A redline would be a cut in the notion of values of the debt. Haircuts. A major role back of Structural Reforms. It is one thing to grant further Financial Support to greece but it is a different thing to see that the new government makes a major retreat from the parts of Structural Reforms that the germans and allies regard as crucial that the structural improvement increase continues so that eventually there is light at the end of the tunnel. Stephanie is it a surprise that greek stocks are doing so well today . Guest we have seen news that the European Commission is making a compromised proposal. The path of negotiation will still be long. Eventually, both sides have great incentives to step toward each other. We will have a better idea over the course of this week. The finance ministers meet tomorrow. The heads of state and government meet on thursday. What i would like to see eve all from these meetings evolved from these meetings, a framework for these negotiations to take place and then signs of goodwill. Fabio put a mouse podemos in spain did not exist. Now they are we look at the greeks, they want to increase minimum wages, the pensions from 750 euros to a thousand in two years. It is a laundry list of antiStructural Reforms. That is an easy thing to say make the rich pay and we will keep going down the same way for the populace. My question is, my thoughts on that would be, how much concern do you think the germans have in the back of their mind that what we have seen as populism picking up in the week states . Greece is in power, italy is growing. Is that not part of the reason they might climb down . Guest what is at stake goes beyond greece. It is an issue in portugal spain and cyprus as well. A more to a more limited extent in ireland. Whatever concessions have to be granted to greece might have to be replicated elsewhere. This is likely to make the German Government more cautious. In the end, there is a look workable solution for all involved. Stephanie who holds much of the greek debt . If we were to see greece default, who would get hurt . European banks . Guest by now more than 75 of greeces debt is held by the official sector that is above all the europeans, the imf and ecb. Nowadays, should greece leave the eurozone, the damage would arguably be less than it would have been in 2011 and 2012, at a time when a larger share of the greek debt was held by the private sector. Fabio it would seem to me that they still have structural issues on the tax side. Do you think they will do anything about increasing the rate of Revenue Growth from at least legitimate sources of taxes . Im taking a bullet grunt list. 2000 names the lebrongrande list. The former prime finance minister has gone to great efforts to strike is family members names off the list. You sit there and go, i can see why the greeks would be saying everyone has to pay. I can also see what the germans would want structural reform. It may be something they can agree on. Guest the new greek government has said that they want to go off to some go after some of the taxes avoiders. Some parts of the structural reform port program the government has proposed might be fine to agree on for everyone. It is other issues of the Structural Reform Program such as hiring new state employees, altering privatization, raising minimum wage, renting a 13th pension payment. These are the steps from a europeans perspective, go into the wrong a european perspective go into the wrong direction. Stephanie is there a date when greece is either in or out . Guest february 28 was essentially a deadline set by the eurogroup of finance ministers. The greek government has said over the last couple of days that it will not ask for an extension of this deadline so this remains important. I would hope that out of the meetings that take place in brussels this week, we get an agreement that this deadline will be extended so that all sides gain more time to bring these negotiations to more fruitful conclusions. Stephanie thank you for your thoughts this morning. Reinhard cluse. Stay with us. Remember what happened at sony . We will show you how to keep your messages from becoming a national joke or even worse lose your job, lose your friends. Stay with us. Stephanie call it coke plan b. The company responding to those who want nothing to do with sugary drinks. Plus, an interview with jay powell. What he thinks about raising Interest Rates and congressional attempts to audit the central bank. Stay with us. Live, from bloomberg headquarters in new york. This is Market Makers. With Erik Schatzker and Stephanie Ruhle. Stephanie welcome back. Im Stephanie Ruhle. Fabio i ams Fabio Savoldelli filling in for Erik Schatzker. Stephanie microsoft has raised almost 11 billion in its biggest bond sale ever. The Company Increased Sales by more than 50 of demand. Microsoft is one of a handful of companies with top aaa ratings. Leon cooperman says he is embarrassed by last years performance. In a letter the ceo of Omega Advisors says the firm missed its mark on foreign energy. The portfolio is down almost 3 to the year. January was a big month for another hedge fund firm. Bridgewater associates, the Worlds Largest Hedge Fund Manager posted an 8. 3 gain last year westmont. Last month. Spiderman will be reunited with Marvel Comics lineup of superheroes. Sony pictures will produce the next spiderman movie with disney. Sony licenses the character from marble under a longterm agreement, even as most other marvel characters belong to disney. The last film was a disappointment at the box office. This new arrangement will allow spiderman to appear in marvel films with characters like captain america and ironman. Apple shares, and hitting a new milestone this morning. Scarlet fu is in the newsroom with a look at the stock the cannot go wrong. Scarlet a new record high of 12127. They need to close above 11994 to set at a new alltime closing high. The company increased the sale of its swiss bond debut selling 1. 2 5 billion swiss francs in bonds. As 1. 3 pi billion dollars. 1. 25 1. 35 billion. Apple is selling 875 million francs in nine your notes nine year notes. The implied yield is about 75 basis points on the 15 year notes and 37 point five basis points on the nine year notes. Apple supposedly has a neck for timing the bond market right. It tends to sell right before yields hit lows. That is what happened to 2013. We know apple has put the of cash generated. All of this cash it is making to the bond sale, used to get back to shareholders. Stephanie how much do you think apple is up on a percentage basis over the last 10 years . Scarlet let me take a look at the terminal. Stephanie 2000 . Take your college fund, your retirement money, youre an allowance, by apple stock 10 years ago and it all worked out. Scarlet it is backward looking, well have to see how it plays out. For now, people are happy. Stephanie moving on to another company. Coke reported fourthquarter earnings that beat analyst estimates, health by crosscutting helped by crosscutting. Costcutting. The new product is not a soft drink or even a juice. It is milk. Hope is betting big on a new, expensive process, lactosefree milk sold under the label fairlife. Olivia sterns is here. Were also joined by ken shay. Why milk . Guest it is in stores as of today. It is 50 more protein. 30 less sugar. It is twice the price. The head of cocacola north america says if it works, it will rain money. This is about creating a higher quality, value added beverage in the health and wellness space with a can mark up the price. Take of it like vitamin water for milk. Stephanie k ken, what do you think . Guest coke is addressing key trends. Touting it as high protein, low sugar, lowfat and all those buzzwords were consumers are going. Coke has a fair shot of succeeding here. Stephanie have you tried it . Guest i have not. Coke will meet with the investing Community Next week. Im sure they will have samples so i can report back. Guest what kind of milk do you serve your kids . Stephanie my kids drink 2 . Guest i bring this up because one of the issues with milk is that there is very big Price Sensitivity every time someone is given the option to get the . 66 people trade down. It is hard to find the pricing power. Coke wants to apply their marketing expertise. Stephanie are they looking to sell milk to the masses who are buying gallons of milk or are they looking to buy it to sell it to the person who is considering buying Coconut Water . Guest it is aimed at the vitamin water crew. Fabio the vitamin water crew is a lifestyle situation. Like Monster Energy drinks. Nobody needs go pro, the camera on a stick. Wholesale milk consumption is down around 70 . I have 216yearold boys. He idea of them want to be seen with the Monster Energy drink is possible. Slick lets plan back some milk, it is not happening. Stephanie five be a for the cool factor. Guest when was the last time the was cool . Fabio milk mustache. Stephanie never. Who shot Alexander Hamilton in that famous duel . [inaudible]. Got milk . Stephanie kos was coke was successful in raising its prices for what drinks . Guest coke is selling more small bottles. Some of the channels, more so. They raised prices. It is common nation of both as opposed to one big increase on one product. Guest coke has to change the growth. Double sales growth 1 . Sales of sort of sales of soda are falling. If you look at nondairy alternatives like almond milk booming, up 36 . Stephanie 36 growth of 1 of thestephanie are you calling me out . [laughter] fabio you are running an oprah show. Stephanie alix steel before she was 18. Alix steel, can shake, thank you for giving us the latest. There cocacolas new noncaffeinated beverage. The high and white stuff. [laughter] when we return, the future of the federal reserve. One governor wants to make sure it does not include more congressional oversight. An exclusive interview with jay powell. Stephanie welcome back to Market Makers. Im Stephanie Ruhle. Along with my coanchor for the day. Top headlines from around the world this hour. Another sign that chinas economy has been hitting speed bumps. Chinese Consumer Prices rose at the last paste best lowest pace in five years last month. This may give chinas centralbank more room to ease monetary policy. Rush upon president , Vladimir Putin is one of our cc his gift to the egyptian president , and ak47 automatic rifle. Talk about tone deaf. Russia agreed to provide egypt with more than 3 billion worth of weapons. The parents of an American Woman held hostage by Islamic State say they have been officially told of her death. On friday, islamic said Caleb Mueller had died Kayla Mueller had died. Jay powell says it is not time to raise Interest Rates and that he is ready to battle republicans over their push for more oversight over the central bank. Powell sat down with peter cook. Jay powell is not ready to declare that the economy is cured is he . Guest he think the economy is in a better position right now. He is worried about two things based on our conversation. He still worries that inflation is not moving toward the feds target. Hes not confident it is moving at a fast enough pace to the 2 target. He is impressed by the recent job gains. He says the last report was great but he still thinks there a slack in the economy. This into what he told me in our interview. It feels like there is plenty of slack left in the economy. You have people working parttime for economic reasons. People who want to come back into the workforce who are not in it. Wages have been low and do not suggest tightness in the labor market yet. Those things indicate that the natural rate is low. Guest the message i got from jay powell from listening to him yesterday, he is keeping an eye on the data but he is not rushing for lift off. I would not suggest jay powell is among those pushing for an Interest Rate hike. Stephanie is he worried about the strong dollar slowing the economy . Guest he is worried it could be a head wind but he says, it is a sign that the u. S. Economy has turned the corner. It is a good sign overall, not enough to slow down the momentum. Fabio when you are in the room and talking to these guys everyone talks about the Unemployment Rate in the participation rate. The offshore sector. How much of these secondary factors you think get into the conversation when the fed is meeting . The reality or implicit feel of the economy is one of higher unemployment and the official number. Guest janet yellen has expanded her dashboard her list of indicators as to what those labor market guideposts will be. It is fair to say that there is a host of things they are factoring into their equation as they decide when to raise rates. Went to have lift off. For jay powell, it is front and center inflation more so than what he is seeing in the job market. He is convinced of the things have turned a corner. It is inflation that is front and center for him. It is too low. Stephanie what is yet to say about congressional action in terms of creating more oversight over the fed . Guest this was the reason we sat down. He had a speech at the Catholic University law school. He is adamant about these proposals on capitol hill to audit the fed and impose more oversight of the federal reserve. He feels this is a threat to the feds independentsce. This is an area or country should but out. This is about Getting Congress the meeting by meeting making apollo monetary policy. When that happens, politicians want more policy that resorts results in bad economic outcomes. We have had lower inflation and has been under control. Why would change that now is a mystery. Fabio he has standing with a lot of republicans. He worked with george h w bush. He is been advising republicans on things like the debt ceiling. Can he convince republicans who may be on the fence that this is a bad idea . Stephanie ideas on greece . Guest he wants it to be result orderly. He says is an it is an issue for european policy makers. He does not want it to spill over in other parts of the world. There is no guarantee that that will happen. Stephanie you can see peters entire interview with jay powell on bloomberg. Com. Here on Market Makers, how to make your digital footprint as small as possible. We will be speaking with the cofounder of the secure messaging act at wicker. Stephanie here today, gone tomorrow, that is the mantra behind wickr, and messaging act that promises its users a lot more security than competitors like snapchat. Here to talk more about how the startup is keeping your data safe in an era of Cyber Threats is one of the cofounders. Why are you wearing sunglasses inside . Guest it is bright on the stage. I am lucky enough to have not had any pictures of my eyes on the internet yet. No pictures on facebook or google. That is one of the ways that i try to keep my digital footprint small. The lesson for everybody here is to be aware of the digital footprint you are leaving and try to minimize it in different ways. This one is extreme for most people but there are other ways you can do that. Stephanie why would you want that . Im not texting anything dirty or sexy. Why do i need all this privacy . Five io is looking at my phone like, maybe she is. Guest there was a group of researchers at Carnegie Mellon there were able to take pictures from facebook and match. Com and different places and connect it to your Social Security number and be able to steal your financial identity. The more pictures you have out there, the easier it is. It is not about having no pictures, but fewer pictures is better. Stephanie who is using wickr and why . If i were a conspiracy theorist i would say isis wants it. Insider traders wanted, not regular people. Guest the interesting thing about wickr is we have no idea who are users are because all of our users are anonymous. The only way we know is when people reach out to us and tell us. It is all of the celebrities and financial people, billionaires. People at have things to lose. We also see tons of kids sending hundreds of pictures of day the awake or. They see it via wickr. They see it as a sharing app more as more than an app for privacy. We are most proud of the human rights fighters that are using this to fight dictators every day. Stephanie what about human rights violators that want to use this because they do not want the government to see what they are doing . Guest that is a question we always have to ask and say any good tool is guaranteed to be used by good people and bad people. There are some tools we have agreed as society that we need including clothes shoes, cell phones, the internet facebook all things used by terrorists everyday but they are a benefit to society and it out raise the what outweighs the risk. It is not about the tool, but the act. Fabio there is a substantial difference between the use of the fact that issue exists and can be worn by a terrorist is in no way analogous to creating an app whose specific intent is to hide from the nsa. In its advertising, it says nsa quality proof. Guest we do not have that we do not have ads. We do not say that. I think the main reason we made wickr was to protect our friends and family from the data brokers. They are more aggressive than any government collecting every piece of information they can and storing it in keeping it and selling it. Private communication is very important. It is a universal right that is important to a free society. This is how we can have evolution instead of revolution. Stephanie howd do you guarantee your users that privacy . They are believing what you are telling them. How do we know they will not get all their stuff will not be everywhere in three weeks . Guest no security is perfect but we consider ourselves the best in the world. The human rights fighters that are using us in the field for the past three years are the best testament to that. At the same time, we pay hackers every day to hack us. A milliondollar hacker budget to make sure we state number one. Stephanie a milliondollar budget in wickr does not cost anything. How do you make money . Guest you should ask that of all the Free Services you are using. Stephanie i am asking you because im interviewing you. Guest we plan on turning on our revenue engine this year and we were charge users for premium services. The idea is we want to charge the top 4 of our users for power features that are enabled. The main app will always be free for everyone. Theres enough to support our mission. Stephanie what does someone need beyond what wickr does . What is premium . Guest messages that live longer than six days would be a premium service. Right now stephanie we have to leave it there. Nico sell, cofounder of wickr. We will be back in a moment. Live from bloomberg headquarters in new york this is Market Makers with Erik Schatzker and stephanie will. Stephanie the missing merger of the end of the year. We dont know when and if if contacts will be allowed by Time Warner Cable. The man behind the game blockbuster grand theft auto makes a push into china. Will hear from k2 interactive ceo. Well talk with another of the worlds best performing hedge funds managers,. Welcome to the second hour of Market Makers. I am Stephanie Ruhle. Erik schatzker is out today. I get to be here. He is a former head Fund Hedge Fund investor. I have to ask before i go to the bulletin. Goldman sachs only hired 3 of their 267 applicants. Everyone is saying that people dont want to work in finance. Youre a professor at columbia what is the answer . F they did not have five options courses. Attendance is down in the finance side. Everyone wants to be the next mark zuckerberg. It is the hog cycle. Everyone wants to be a tech entrepreneur. A lot of would the nba graduates, that train may have left the station. You may want to go to the finance classes. Stephanie lets take you to the bulletin. The top business stories of the morning. The Justice Department turning up the heat on four of the Worlds Largest banks. According to the New York Times prosecutors want the banks to plead guilty to criminal charges. Of currency manipulation including citigroup, jp morgan berkeley, and the royal bank of scotland. They say it may take months to negotiate final deals. Shares of cocacola are trading higher. The Worlds Largest Beverage Company posting fourthquarter earnings that Beat Estimates. Cocacola went through costcutting efforts at a price hike. Compromises before tomorrows meeting. The greek government will implement 70 of the reforms included in the current bailout deal. Authorities are sounding defiant. Unfortunately the socalled medication is toxic, and the worst thing is the attending physician knows this. But has commitments to continue prescribing it even if he knows and admits and private that it causes harm and does no good. Stephanie Angela Merkel has signaled she will not compromise on any terms in the greek bailout. Almost half of the victims of a scam artist got their money back. Every creditor with a claim of 900 76000 dollars or less has been paid in full. They have made made off investors have made. I want to take you back. Fabio, i want to talk about greece. The greek exit. Fabio there is a fundamental structure to trade that is successful for hedge funds. What we find in general is there are three characteristics. Consistent with fundamentals, a varying opinion, you do not want to be with the crowd, and you want to have an asymmetric return. A lot of the situations their forward curve in the futures market looking for a june or july rate hike, a lot of that is in the market. If we look at the fed, first. If we look at the italian bond spreads italy is continuing to tighten. They are tightening versus Deutsche Bank as we speak. You are seeing an element of market complacency. At the retail level, italian deposits added banks by manning the street deposits at banks are up on the order of 18 since their peak. The greeks have had the good sense to take one third of their money out of the Banking System which is extraordinary. Stephanie theyre taking the money out of the system because they dont trust their own system. If they do not trust their own system, is that not another sick all that greece is failing . Fabio yes, but the hot money has left. Getting in front of that is your friend. Stephanie is in the hot money hedge fund money . To put on a successful trade you have to have a varying opinion, they are the hot money and the ones with the trade. Fabio that is why you do not want to be in the greek trade. In the italian trade you have seen deposits go up 17 . If they get a whiff of a problem in the italian Banking System there will be a run of tremendous magnitude on the italian Banking System. Stephanie that does not seen to be the case now. Fabio you have a 10 chance of that recurring, but with less of it. It is literally trading for one 10th of where it was. Stephanie are investors not paying attention to what is happening in greece . In 2012 their cdf and blew out. Fabio the balances they will probably kick the can down the road. You have a 90 chance of that not happening that may cost you one dollar. If you can put on a trade that if it does happen in some the goes wrong, and you see the greeks speaking in that language, and Angela Merkel says she will not set a bad example for the italians and spanish and lets them go you will have a huge payout ratio. That is what Hedge Fund Managers are looking for, asymmetric payoffs. Stephanie what is the hedge fund five . A lot of hedge funds got hit the wrong way. Fabio not many would of had that carryon. I dont think they sought going as far as it is. Rbrazil, with the spread widening and a Tremendous Positive carry you see a fair amount of investors in brazil and people playing the fed tightening. Above all it is a long dollar play. It is a function of if you want to be long dollars versus oilproducing currencies short canada, and energy currencies. Youre seeing people looking at fixed currencies. If there is a heck up, the people who have said currencies going back to the sterlingdeutsche mark trade of old, the currencies have been locked in. People be trying to get the venezuelan bolivar. The great white whale of hedge fund trails. People love that trade. Stephanie this is why fabio is here. Erik i hope youre enjoying the slopes. When we return, we are talking table. A lot of you thinking service would be better when comcast takes over Time Warner Cable, you could be waiting for some time. He has had his hedge fund you the top of the charts, he did last year, we will be speaking to the president of man growth. Stephanie welcome back, im Stephanie Ruhle. It is time for the top headlines. A warning for ubs. This was bank says earnings may be hurt by stronger frog and negative Interest Rates. Last month they said they will the market when they lifted the cap on the frank. They reported lower than expected earnings. In china, auto sales rose 10 last month. Chinese consumers continue buying or suvs and minivans. Suv sales rose 62 . Local authorities have tried to limit the number of vehicles in their city in an attempt to fight air pollution. In france former imf g has taken a stand in his trial. He has been accused of arranging parties with prostitutes. He told a judge of the number of parties have been exaggerated in the press and it was not that many. One year later, and still there is no deal. I have to keep moving. If i dont i will talk about it all show. The number of prostitute parties. Fabio it is a reasonable number, really. Stephanie comcast. 45 billion dollar Time Warner Cable acquisition. It is doing nothing. It is being examined by regulators. Analysts and investors are being skeptical it will go through. Time warner cable shares are trading at 145 dollars a share, well below the 159 share offer prize. Lets ask former fcc michael cobb who joins us from washington. We are joined by Bloomberg Media reporter alec shipman. Michael, what gives . Michael hundreds of thousands of americans are against this deal as it is happening force in washington dc. The commission is alive to the fact that it has anticonsumer written all over it. It is talking about a control of 40 or 50 of the highspeed broadband market. Over one third of the video market. Content, distribution. It is too much for people to absorb particularly on the heels of the comcast nbc merger a couple of years ago. Everyone thought we would not hear from, cast again while they absorbed that. They are back with another 45 billion deal. The fact is taken as long is encouraging, but do not rush to the conclusion the deal is dead. They are putting in fullpage ads in the New York Times. And the washington post. They still have lesions of lobbyists. Legions of lobbyists. It will be a battle between now and the closing bell. I am more hopeful that i have been that this deal which should be dead on arrival several months ago when i got to the fcc will be turned down in the final analysis. Stephanie alex, what do you think . Alex one thing says the fcc is taking on a tighter look at this , and the different rule changes we have seen. Obama coming out, and the commissioner tom wheeler of the fcc day that broadband will be treated as a utility other than price regulation. The two bumping up the minimum broadband speeds have happened recently. You can say it shows that the next stage is they will take a hard look at this deal. The other way of looking at it is they are setting up strict rules so that when they approve comcast Time Warner Cable there will be able to say we set the groundwork for a tighter regulation of broadband, so when we accept this deal we can say comcast owns 57 percent of highspeed broadband in the u. S. , but we have a rule saying they have to be net neutral. I think it is probably the latter. The analysts and the people involved that i speak to expect the deal to go through, and it will be surprised if it doesnt. Stephanie michael . Michael history is on your side when you say that. Few mergers have been stopped in their tracks. They come with conditions, concessions, and things that sound good but do not get enforced well. You cant put this at more than a 5050 deal at this moment. In a way this deal is particularly hard for regulators to make because of the competition. At t tmobile was blocked by the doj because it is a case of a competitor being taken out of the market. Here they do not compete so they would need to take it out on a Public Interest doctrine. Saying they wouldnt want a company owning all of this broadband because they could push back on Netflix Facebook startups and not be net neutral. When you say we will enforce net neutrality, that seems to signal we are aware of the reasons why we may not accept the deal. We will a the groundwork so that when we except the deal you cannot point and say, all of that broadband accumulation would happen. The fcc said they could realize this and that is why they did this before accepting the deal. Michael what you are seeing is the rise of internet as a factor in merger law. If we look at staples and officemax, office depot, that will only be permitted because there is an unseen competitor called amazon. In this case there appears to be no geographic overlap between where they are and where they provide cable. Alex not only that but you have different projects like dish sling buying a smaller package of tv over the internet only. That is now a competition. They are steering away from television. It is one of three products that Cable Companies offer. We are now only focusing on one, they be the most important. You can put additional conditions on the deal. You can say to comcast, you need to build more highspeed internet and your combined comcast Time Warner Cable footprint. That may be a feather in obamas cap. He can say, we accepted the deal the fcc said ok. We got more americans access to highspeed broadband. Except the deal, put conditions on it, we get what we want. Next the deal, we get nothing. Michael, what do you think about the structuring of the internet . Michael i dont think there are any sets of conditions making this deal palatable to the oblique interest. It is too much power in one company. To the Public Interest. Theres too much power in one company. Why they dont compete with each other would be a Good Research project for people to look into. When you take the comcast footprint and put it into other localities, and you have one company control the 24 or 25 largest markets, that is not anticompetitive, i think it is. The general direction of the commission on the internet, i think if the february 26 vote comes out as we hope, this is a sign there has been a wakeup call and a realization in the importance of the infrastructure. When the president of the United States and the American People are talking about something as seemingly arcane as title ii regulation, and knowing what that is, that means this is a central issue for our country. It should be because the Communications Infrastructure is vital economically democratically and for the news and information we get to govern ourselves. Stephanie , thank you for giving us your review on something we may not see something come to pass. Michael a former fcc commissioner and alex sherman. The next frontier for the companies behind the blockbuster game grand theft auto. Bobby os favorite game. We will be speaking with the ceo of take two interactives. Stephanie the videogame business is bigger than publishing and movies. Building an increasingly large base, game makers are getting in line. Taketwo interactive said down with cory johnson to talk about big news in the videogame business. Lori, are you a gamer . Cory i dabble because i feel like it is my job to know how they work. I have not gone full into that sex and violence that is grand theft auto. Grand theft auto is doing so well. I sit down with Strauss Zelnick to talk about grand theft auto and where it will grow. They will launch a pc game. There is an Interesting Development in the last couple of months. China is allowing game consoles. The xbox is in sale in china for the first time ever. The Sony Playstation is approved for sale in china for the first time. Given the controls of the Chinese Government over content, i asked Strauss Zelnick if they would every be a grand theft auto game in china. Strauss overtime the Chinese Government will understand that the Entertainment Properties do not contrast Chinese Culture and they can coexist. I think the Chinese Government needs to protect intellectual property with greater vigor if they Want Companies to participate in the market. Cory it is a fascinating game as the console businesses are growing fast. Stephanie i am not playing grand theft auto anytime soon. There are lots of other people playing, they do not need be. Cory johnson, bloomberg west editor at large. If you want to catch the full interview it will be at bloomberg west later today. When we returned the Worlds Largest publicly traded global hedge fund. It is one of the top performers of 2014. We will speak to the president of mangrove. Live from bloomberg headquarters in new york this is Market Makers. With Erik Schatzker and Stephanie Ruhle. Stephanie welcome back. My partner, Erik Schatzker, is out so i have Fabio Savoldelli a former Hedge Fund Investor and a professor at lumia business school. Europe is closing up shop for the day. We need to look at those markets. Scarlet fu is looking at the action overseas. Scarlet look at the bloomberg monitors. Recovering from an early stumble and closing higher for the six time in seven days holding near the highest ends december of 2007. Everyone is fixated on greece and germany before the emergency finance meeting tomorrow to discuss funding needs. Greek stocks rising ahead of that at 8 , though it is unlikely deal will be made tomorrow. Ubs is down 2. 6 . That could hurt earnings. Lets go to the euro chart. It shows the euro flat at 11316. At 113. 16. The volatility is speaking because of the discussions with greece. And the greek 10 year yield. This is the movement over the past five days. Last wednesday a starter that 9. 5 and has been rising steadily. On prices go down, yields go up. It was above 11 today before settling to 10. 25 . 3. 24 to be exact. We will be monitoring these in the next day as the finance ministers meet. Stephanie thank you. Over the past few weeks we have been highlighting the worlds top Hedge Fund Managers from bloomberg market magazines 2014 hedge fund 100 list. These had the best performances of the year. We have president luke ellis. It is the Largest Publicly Traded Hedge Fund and the flagship diversified fund was up 32 in 2014 ranking number five on the list. Luke welcome. 32 . How did you do it . Luke it was a good market environment for strategies and for ctas. The cross market correlation was down across normal types. The research we have been doing had a little bit of luck and a nice value on top. Fabio one of the questions that has been fascinating in the man group is you have developed a portfolio ranging from glg all the way through to the ahl which is more specialized and cuttingedge. One thing that struck me was evolution. One of your products does nontraditional investments. It will invest in things that have not been impacted either huge crowds and by the government. In the middle, you have the diversified, the more traditional cta. The evolution was up 20 over three years. Diversified has been running at about 8. 2 . Over the past three years. Candidly, the Traditional Fund jamals fund is down 23 . We are seeing weakness on the part of human beings and machines are doing better the less they are trading in traditional assets. If this is a trend that may reverse, or as the fed slowly withdrawals we may see better performance by the humans . Luke you have two different effects. Last year was year for computers. The simple answer is that computers can do more things at once. A computers cta can trade 300 markets. Humans, not so much. Humans trade five maybe 10 things at once. Computers can look at 10,000 stocks a day, and, 30 or 40. In cross market correlations are low the ability to do a lot of different inks is valuable. The diversification benefits helped us last year, making it a good time for computers. Humans have a tendency to get bored of a particular market environment. Fundamentally this market environment has been the same for four or five years. We have had relatively cheap, if not free, money from the feds and from the japan. That has led to get performing bond markets and bigger moves in equities and effects. Humans have a tendency to want to say, i call the term is. Most correspondents want to tell you something different. The reality is the market environment has been the same. Computers do not ever go to a Cocktail Party and have to sound cool. They just do with the numbers tell them. Stephanie in 2013 and 2012 cta suffered. How do you know when to go cta and not . How can people feel that way about eight cta, the way they do about a person. Luke it is part of a portfolio of exact of investments. It has a lot of sense to have them in a portfolio. It makes sense is when the opportunities are right and correlations are low ctas will make a lot of money. Despite the big moves last year discretionary guys struggle to make money. The thing is that ctas will do well when correlations are alone. Can i predict when the correlations will be alone next year, im afraid i cant and i dont think anyone else can. Correlations are back to longrun historical levels at the moment. It is not extremely low, we just had an unusual time when the fed started qe1 we had three years were correlations were particularly high. We have an environment where ctas work well. Fabio how are you preparing for greece, and he will to better humans or computers during this uncertain time . Luke it depends on the outcome. If the outcome is different if we really do get a radical shakeup in markets, those big turning points favor humans. If what we get is another model through, that favors computers. They are not trying to look cool. I cannot tell you what will work better. The firm should have a variety of different investment techniques to offer clients different options to see what suits their own portfolio. Stephanie when you say human traders and it asterisk it poured, is it safe to say that we have been in a strong pool wrong a strong pool run market and investors dont want to trade in the market anymore . Luke a lot of investors want to call the end of the bull market. The next person tells you it will be the end of it will be different. They will look very clever afterwards. The number of people who said it is the end of the bull market over the last three years, a lot of people. No wonder members the ones that called it wrong. Humans want to be there at the turning point. When markets carry on in the same environment, if you ask me my basic few at the moment, we have money printing going on from big Central Banks in the world. Money is still close to free. In that environment you get the same market environment and the trends continue. Fabio do human beings have a hard time buying bonds with the negative yield . Luke yes. I think they have a hard time buying bonds at a 2 yield. We are all been trained in a world with 4 or 5 bond yields being the norm. I cannot tell you what the final outcome of the process is. It is clear that a number of Central Banks will keep money cheap. You should not make an assumption that bond yields cannot be negative or they cannot go more negative. They can. Stephanie we need to take a commercial break. Will be back with the president of the man group, luke alice. You are watching Market Makers. Stephanie welcome back to Market Makers. Now for the top headlines around the world. In ukraine the government shoots a pro offensive against prorussian rebels. They say troops broke through defenses in the eastern part of the country and a new round of peace talks will begin tomorrow. Jordan is ramping up the fight against the Islamic State. According to nbc jordan is deploying thousands of Ground Forces to the iraq border to keep Islamic State writers from crossing the border. A Group Calling itself cyber celliphate threatened president obama. They hacked a u. S. Military twitter feed last month. We are back with man Group President luke ellis. Man group had one of the best performances of 2014. Already up 7 at the end of january. Luke the swiss franc was interesting because the volatility is so low. We tend not to trade it in excise. It created a lot of volatility across a number of instruments as you saw. Swiss bonds were very good. There were a number of opportunities to make money. Canadian Interest Rates were the best thing last month. The surprise rate cut benefited us. Stephanie it seems we are on a marketing push. You have 70 billion under management, how big do you want to get . Luke we have no growth target. The point is about delivering returns and looking after our clients. If we do that, and people like to invest in the product. We do not have growth targets as a firm. Fabio what is the strategy luke. My old team at Merrill Lynch as a man business card. The guys at numeric. Theres an Excellent Team called pine grove that was well marketed and construct did. What is the objective in the u. S. . Are you trying to become the goto provider of provider among middle and lower and institutions in this part of the world . Luke the goal of the firm is to have as many highquality in essman teams that are differentiated as we can find. We dont want to do one of everything. We are trying to do things with a high quality investment team. People we like who can make topquality returns. We want to add them into the plot form. On the client side it is a mixture of direct institutions, large institutions, and working with the retail. Like morgan stanley, where we do not want to direct retail business, but we can work with partners to provide them with product. We are at heart a manufacturer and are happy to pay other people to build a wide distribution network. Stephanie thank you. Man Group President. Luke ellis. Stay with us, we have more to cover. Stephanie welcome back to Market Makers, i am Stephanie Ruhle. Tomorrow i will have an even more exciting day and you will join the. Not tomorrow, thursday. It is hard for me to get the days of the week right. It is the boys and girls investment harbor conference. They have had this investment idea Conference Since 2006. They have read the s p on most every year. Last year the s p was up 15 . Boys harbor up 24 . Last year his idea was up 50 . He asked me who was number one. With the hot 100 issue. What name we have not spoken about, is ms. Donald. Mcdonalds. We tried to ask him about mcdonalds couple of months ago. He was a little cagey. Now mcdonalds has had a brutal quarter. We have to find out is bill doing anything with mcdonalds . Back to get it up on herbalife. It was this conference a couple of years ago, that weinstein spoke about the london whale and bet against him and exposing the trade. It is a big event that i will be interviewing bill ackerman on thursday. If you will not be there, i hope you will watch. Fabio i will. It is interesting and people doing things for a good cause. Stephanie this thursday you can get tickets. You should watch. I will be there. Or now, we have to sign off. Did you enjoy yourself . Fabio i had a lot of fun. Stephanie that will be it for us. Thank you for watching Market Makers. Approaching 56 minutes past the hour. Bloomberg television is on the markets. Avoiding a third day of losses on a deal to avoid a greek debt default. Earnings from Companies Like cocacola. It is the worst performing sector in the s p 500 with crude Oil Prices Sliding at 50. 80. Join me for todays options insight is kevin kelly the chief Investment Officer at break on capital partners. Kevin are u. S. Stocks more sensitive to the developments in europe . The negotiations between greece and germany than european stocks which continue to move higher in the absence of real resistance . Kevin they are trading at higher multiples. The u. S. Market is around 17 pe. The currency impact on earnings. If we look out for the rest of 2015 you are seeing 0 in sales growth expected from analysts. Scarlet there are a lot of question marks with outlooks. The dow has gained 4. 8 . Then it lost and is now down 1. 8 . We have been volatile but have gone nowhere. Kevin we started in a volatile stage. On the dow 70 of the days have been 100 moves going back into the uncertainty scarlet 100 points. Kevin 100 points. Scarlet there was a lot of common we cap moving higher. Kevin we have not dipped below 16. Last year we were trading around 12. We are seeing a tight range of 1623, staying elevated. Well have to see that pass through the next earnings cycle. Scarlet what expectations are being priced right now that it means greece as funding will be resolved this week month, or quarter. We know how long these drag out for, especially considering europe. Kevin it is significant. Greece leaving the euro would be nominal. It would only set a precedent, that is why everyone is worried. They want to keep the unification. Looking into it greases making crazy demands. One demand is they want reparations from world war ii which germany conceded to 25 years ago. One thing you need to look at is what is happening in europe alone. They are growing. If you look at german factory orders they were up four point 5 last month. That is because the euro has depreciated. Scarlet you have a trade for us where you will short the euro. Kevin the hero has already move down 20 . The options can be in your benefit for move like that. Because it has move so much you want to buy the 110 put on the fx see, the current the currency shares hero. If there is a grexit you can hedge that by going along this etf. Scarlet youre looking to make money with the euro weakening further. I want to bring up the team retailer. Very quickly seeing as the best gain in more than a month because of holiday retails were not as bad as they have been warned. Kevin the real option activity is an abercrombie and rich. They are trading at 3. 5 times puts the call, eating there is a zerosum called. There has been a tough space and earnings of not being good. Aeropostale declined 9 . The real detriment is to abercrombie fitch. Implied volatility is elevated or today off of this news. Reverend 21, h m the faster retail spaces very competitive. Scarlet maybe investors are counting on it not being as crowded in the future. Money clip coming up next. Welcome to money clip where we bring together the best stories, interviews, and video in business news. Heres the rundown around the world. Investors get an idea of what greek compromise look like. Cocacola reported results beating the estimate. In bank, playing it cool on a rate hike. J powell says we are not there yet. In a bloomberg exclusive. Playing it cool, todays wild ca