Transcripts For BLOOMBERG Market Makers 20150313

Being prepared for on the sunny island of cuba. Good morning, everybody. Welcome to Market Makers. Stephanie so much to cover this morning. In just a few moments, we are going to be speaking to bill ackman about the potential fbi investigation around the company herbalife. I am going to talk Consumer Confidence. That number is out. Huge number. Scarlet this is a preliminary read of university of Michigan Consumer confidence. We have an unexpected decline. Economists were looking for the rate to stay steady. The unexpected decline has been a big semen on it big theme in Economic Data this week. When you look at the effect on markets, the market is climbing through 100. It has passed the second day. Treasury is where it was. In terms of how the equity markets are performing, you know have u. S. Stocks 0. 5 for the dow industrials. It calls into question what janet yellen the fetter doing next week. Erik scarlet fu, thank you so much. A new turn in the government investigation about herbalife. The fbi is investigating whether Billionaire Hedge Fund manager bill ackman or people working for him tried to manipulate herbalife shares. His fund had bet 1 billion against herbalife in a short position. The government is looking into herbalifes marketing practices and the stock has lost half its value in the last year. Bill ackman will be joining us in just a couple of minutes on Market Makers. The glut of oil has gotten so big we are running out of places to put it. That may lead to more price cuts. Estimates were boosted for u. S. Production, oil production, that is, this year. In japan, a milestone. The benchmark japanese stock index closed above 19,000 for the first time in 15 years. Japanese stocks of gained more than 10 this year. Alan greenspan says there is not enough Capital Investment. He blames the government. What we are confronted with right now is a very serious problem caused by the fact that Capital Investment has been falling far short of the requirements necessary to keep the stopped going stop going and therefore, productivity. Erik he wants congress to address the issue, but said congress is afraid to do it. Stephanie lets get down to business. Following our top story. Bill ackman of Pershing Square is on the phone with us. Bill, i want to start with you on the record, lets just make it clear, have you, your firm or anyone when you currently or previously employed been contacted or subpoenaed by the Justice Department or the fbi . Bill no. Not to my knowledge. Stephanie not to your knowledge. Bill no one at Pershing Square has been contacted by the fbi. No. Stephanie what about consultants you have worked with , like Global Strategies group . Bill my understanding is that Global Strategy Group has been contacted by either the doj or the fbi and some of their subcontractors have received subpoenas. Stephanie you have paid Global Strategies group to do what . Bill they are a Government Relations firm and they consult on and help advice with respect to dealing with the government the state, local, federal, as well as lobbyists. Stephanie you pay them to help you with the herbalife campaign . Bill thats correct. Stephanie beyond Global Strategies what other consultants or other parties have been contacted by interviewed by, or subpoenaed by the federal Law Enforcement or prosecutorial authorities . Bill i have no idea. Erik Global Strategies is the only when you are familiar with. Bill them and maybe some people they have subcontracted. They are based in europe and then they have groups they work with who do similar things in different states. If we are working with a regulator in a certain state or government official, we might hire a local lobbying organization. My understanding is that it is not a massive number, but i think it is a handful of people who are perceived that the government has asked to talk to. Stephanie are you concerned that you are the big fish . While you have not been subpoenaed, the fact that the fbi was the doj has contacted consultants are people who have worked with you, are you secured desk concerned that you are the ultimate target . Bill no. Not at all. Stephanie why would they go after them . Bill i dont think they are actually going after anyone. Look, herbalife is now under investigation. It is the anniversary of the federal trade commission. It is two years for the ftc. It is over a year since the doj launched an investigation. I have been here before. Interestingly, herbalife works with the joe well frank firm and they fire them in december and hired another firm who represented mbia and they have a similar approach. Lets see if we can attack the attacker. Im sure the have been lying government lobbying government questioning everything we are doing. The government is looking into making sure Pershing Square did not do anything illegal. If you read the story in the paper, the story says that this is in connection with mark amend place market inflation. Michael johnson went on tv and said there has been a market manipulator in the stock. Market manipulation is when someone intentionally makes false leading statements about a company for the purpose of driving down the stock or driving up the stock. I have made only truthful statements backed up by enormous research. All of our materials are on two websites. We have every presentation we have made that has been put up there. We have video and audio recordings, we have transcripts we have all the documents we used with respect to our research. No one has provided more transparency about the work they have done. Stephanie the video that you have shown, you showed a video with us a month or two ago that video that you showed, was any of it edited . Maybe that one could make the argument that if you look at a fourhour video, what he actually pieces together and puts in the presentation is sliced and diced to tell the story. Bill i strongly encourage you to watch the entire video, which we put on our website and on a greatest hits collection of excerpts. The excerpts accurately characterized the video and the whole video is there for people to look at. We have given that to the government. It was a threehour video done by herbalife of a private meeting of top distributors talking to the other distributors in the presence of Senior Management explaining how they deceive people. It is remarkable. Erik im going to interrupt you for just a moment. I have not watched the whole video. I have watched some of the experts. Our colleagues come away with a different impression then you. I am paraphrasing here. They say that the video goes into some of the practices that herbalife may have once upon a time engaged in but ultimately amounts to annex or tatian not to engage exhortation not to engage in such practices. People say that there are some bad practices and they may have done them, but we should not be doing them. Bill by the way, the reason why herbalife business is declining is because they are starting to tightening up their compliance regime. The problem is that they cannot operate legally and do business. Their distributors are still out in the world misleading people about the socalled herbalife business opportunity. It is not just their distributors. Erik that may be. But that does not address the question about your characterization of the video being accurate or what other people, how other people would characterize it. Bill the video is a document. Anyone can watch it and draw their own conclusions. We have not mischaracterized it and no one has ever accused us of that. I appreciate you drawing attention to the video and i hope people watch it. What i can tell you is that herbalife is a pyramid scheme and they are harming people by inducing them to sign up to a business proposition with air going to lose their investment. Stephanie clearly, we know that you feel this way. This has been an epic battle. Clearly you did not want to see this in the paper last night and today and you dont want to have to defend yourself on tv. Why not shut the trade down . Your investors have to be sick of it. You dont need this garbage. Bill im sure our investors are sick of it. You look at Whitney Tilson on lumber liquidators. This is a company that is causing harm apparently by using illegal wood but it is cheaper and it is exposing people to formaldehyde. It is a healthy thing for a short seller to identify a company that is defrauding consumers. Stephanie whitney has spent pennies compared to the tens of millions of dollars. You had a former whistleblower who was going to be involved in an abc documentary that you have to pay, you have to backstop that guy. That is a lot different. Bill we manage a lot more capital than whitney. When we spend money on a particular investment, whether it is a hostile takeover or a public short we size the spending and context. We spend a few Percentage Points of capital here and we think it is going to be a good reward. I have said publicly that if we think it is not a good risk reward, we will cover. We think it is a good risk reward is because we dont need the government to act to make a lot of money here. Pyramid schemes pop and then they dropped quickly. Herbalife has missed earnings for the third time. They have raised guidance in july of last year. They took the guidance back in q4. They redid the guidance just recently. I think they have no idea how the business is going to do and i expect they will miss earnings yet again. Over the course of this year. I think it is a very good short just on the business fundamentals. I do think that the government is going to act at some point and shut the business down. I think it will be a terminal short. We are short the stock for economic reasons. It is helpful when you are short a company that is actually harming people because the government is motivated not to help shortsellers, they are motivated to help victims. I make the analogy to lumber liquidators. By exposing fraud, you can help protect consumers. We are doing the same. Again we have an economic motivation. Can i finish speaking before you interrupt me . We are working on behalf of our investors. Fortunately, there is also a good for Society Benefit for shutting the company down. Erik pardon me bill. I was going to ask you what then about the possibility that consultants you have retained Global Strategies, for example, may have made false statements to regulators while employed by Pershing Square . What if that is the case . Bill i have no idea. We have not encouraged anyone to make false statements. Believe me, you dont need to make a false statement about herbalife to be negative about the company. We think the truth is what is powerful and the truth is that the company is harming people. We dont need to encourage people to exaggerate. What more negative can you say about argo life than it is a criminal enterprise that is harming people . Erik to your knowledge, what kinds of questions have they asked Global Strategies . Bill i have no idea what questions they have asked or what answers were given. I really have no idea and im not sure it is my business to know. If you want to call up the government and ask them, i would encourage you to do that. I have a lot of confidence in the department of justice. We hired someone recently from there. We have extremely capable lawyers. They know good from bad and right from wrong. It is important that the accuser, us, it is not making up stuff when a company is harming people. I cant at you the nature of the discussions, but we have very proactively worked with the Government Agencies here in assisting them in understanding the company and we have had many private meetings with the government in conversations. They dont tell us when and whether they are going to do anything to herbalife but they seem appreciative to read the information. We are registered investment advisors. We are audited on a regular basis by the fcc. They look at our trading and our emails. If the government had any problem with our activities, im sure they would let us know. Stephanie you did hire former federal prosecutor jenna dabbs. She has never done anything in Securities Law. Why this or skill set suit you if it is not that you are worried about an investigation . Bill she is terrific. I have known jenna since the mbia days. My philosophy with respect to hiring people is i hire talented people. She spent her time on drugs and narcotics, but she also spent time in her white color days working on Securities Law and compliance issues and things like that. Those are the principal areas she is focused on with us. We are not concerned about drug use that Pershing Square. Erik is there any connection into possible stock manipulation and the departure of your former chief Legal Counsel . Bill absolutely not. Roy is terrific. He is an outstanding guy. He is enjoying life after working extremely hard over eight or nine years here and i expect he will be assisting one or more president ial candidates getting elected and that is his passion and he has done very well economically at pershing and that has allowed him to take a break. Stephanie do you think herbalife is behind this campaign and that they went out and hired a highpriced pr firm to pump this story out . Why do you think herbalife themselves, why did they not to sue you two years ago for manipulation . Bill to be very clear, George Sartre personally cleared reuters and pitched this story. Reuters look into it and decided not to run the story. Then he pitched the new york times. New york times said it was old news. 48 hours ago, we heard from the wall street journal. We said we were happy to answer any questions and they ultimately chose to run the story. Herbalife wants to sue us. And they are welcome to do it. The reason why they dont is that we have a lot of information from former employees who have shared information with us and the government. We would not get the mother load we would if we had access if you accuse someone of being a pyramid scheme and they sue you saying they are not, then we have the right to actually have access to their records to prove it and that would put us in a position as strong as the ftc in terms of getting documents and materials. That is why they dont do that. Erik i want to understand what you are just saying. George sartre whom stephanie and i know, very wellrespected pr executive, pitched what exactly . The allegation that stopped me list manipulate stock manipulation took place or something based in fact that they are investigating stock manipulation . Theres a big difference. Bill my understanding that the story was pitched by George Sartre multiple times. I have heard this from the press directly. He is entitled to do that. As far as i understand, the government has contacted some employees or subcontractors of Global Strategy Group. They are a firm that we hired. The reason why i am on your show as i am happy to answer any questions you have about any thing that we have done. When someone comes out with a story like that and makes it sound like i am personally under investigation, we want to respond to that. Erik we are not alleging that at all one iota. We want to understand what this may mean for your position in herbalife and to your investors, to them you have a fiduciary responsibility. Bill the answer is very little. If the government asked for me information, we would provide it. It is clear when market manipulation is. It is when someone artificially tries to move a stock price by sharing false or misleading information and that is clearly something we are not doing. Can i finish a sentence . Very few people in the world would come onto bloomberg tv after an article like that in the paper. Im doing this to be helpful. Im doing this for reputational reasons. If i cant finish a sentence, it is hard for me to be on your show. Go ahead and ask your question and i will do my best. Stephanie sorry, bill. I wanted to get a better understanding. These letterwriting campaigns and groups that have gone out and complained. One of the issues people are asking because you have organized them all, you have paid them. Couldnt one make the argument that you are fueling this . Bill we have absolutely not paid any employees to make public statements. There have been over 1000 herbalife former employees who have filed complaints all over the country. We have paid them nothing. Ok . These are people who have been harmed by the company and it is the governments job to decide whether they want to act. The ftc had an informal inquiry of herbalife that began we believe sometime around the time that David Einhorn asked his questions in may 2012. It was not until march 2014 that the ftc launched a formal investigation, which requires a vote of the majority of the commissioners at the ftc. They did 18 months worth of work. Brando understood how controversial the work was. This was a time when carl icahn another people were on the other side publicly promoting this thing. The spite all the noise, the ftc looked at the victims and launched a formal investigation. We know it is an intensive investigation. Herbalifes financial obligations add back what they are spending on the ftc investigations. They spent 4. 5 million in the Fourth Quarter alone on dealing with the federal trade commission. We know there is a very intensive investigation by the ftc. On our end, we spend nothing responding to subpoenas from regulators with respect to our activities on herbalife. If regulators have any question about anything we have done, we would be delighted to share information. Market manipulation is not something we have done. I encourage you to talk to lori about it or go to the ftc website. It is someone makes intentionally false and misleading statements. Clearly i have not done that. Erik at this point, what is your breakeven on herbalife . Bill i dont know exactly. It is something in the range of the current market price. Erik would you mind repeating that. Bill we short of the stock around 47 or 48, but if you add back the expenses, it is somewhere in the neighborhood of the current market price. Erik 36. Bill something in the mid30s. Stephanie do you believe you have investors who want to say that enough is enough . Bill i remember we had an interview at the robin hood event and the stock was at 73 and you told me, shouldnt you be closing this down, you have lost a lot of money . We dont make investment judgments based on what our investors think or what our investors want to do. We make investment judgments based on a purely rational assessment of risk and reward the opportunity for profit and the potential for loss. In the case of herbalife, if you have been following what has been going on with the business, just look at what is going on with currencies. Herbalife is going to be destroyed on currencies. They produce the vast majority of product. The cost in u. S. Dollars and they sell the product in the following countries, venezuela brazil, mexico russia, and the european union. Look at where the euro is. Look at what it has done since january. When you have u. S. Dollar cost and you have foreign revenues and the u. S. Dollar has appreciated 25 against the euro what do you think is going to happen . That is before you consider the fact that they are having trouble just recruiting new distributors. What i am saying is that the business itself is collapsing. The risk of being short gets reduced. In the meantime, the government has been at it for a long time. The ftc has had a very intensive investigation in the company over the last year. It would not surprise me if in the relative short term, this calendar year, the ftc does something. We do not believe that herbalife can survive if they have to change their practices in a way to make the business legal. Erik very quickly before we go how much does a cost Pershing Square to keep the position open . Bill much less than it did in the past, interestingly enough. Our short position, the company look no longer pays dividends. The cost to borrow has stayed modest. Options to have a clock associated with them and we have paid to roll our options. That does cost money. It is not a particularly large position for us today. It is in the mid5 of capital. Herbalife stock price has declined significantly so that is part of that and pershing has had a wonderful 4014 and a very strong 2015. This is not a particularly large position for us. Every once in a while, i have to do it little bit of public relations, so it looks over two days like this. Stephanie, more so than erik. Stephanie im glad you got that in. We have to go to commercial to pay our bills. Thank you for joining us. There are not a lot of people who put themselves out there, you are right. Bill ackman certainly does. Thank you for joining us. Bill ackman is the founder and ceo of Pershing Square. Erik we will be back in a couple of minutes. Announcer this is Market Makers with Erik Schatzker and stephanie ruhle. Erik welcome back to Market Makers, im Erik Schatzker. Stephanie i cant believe we have another hour and a half. I need a gin and tonic and a nap after that. Erik we just spoke to bill ackman. You can see the full thing on bloomberg. Com in a short while. In case you missed it, we are going to talk about the top business stories of the morning. We have been reporting that the fbi is investigating whether he and or people working with him try to manipulate herbalifes shares. He told us that the breakeven is in the mid30s. Herbalife is trading at 36. Bill told us that he nor anybody else at Pershing Square have been contacted were subpoenaed by federal authorities. He said one of his outside contractors has been contracted by the fbi, but he said his statements by herbalife have been backed up by research. The dollar is up again today. It has not been this strong against the euro in years. The euro has now dropped below 1. 06. The dollar is up against a gauge of its major peers. The Prime Minister of greece said his company has started country has started fulfilling its obligations. He said that the eurozone will need to do the same. I believe that the end of the day will show all of the misunderstandings and we will go on with this honest compromise we did in february. Our intention is to implement the decisions. Erik european lenders of said they will not give any more emergency aid to greece unless greece reforms its economy. The manhunt is still underway for the man suspects who shot the two Police Officers outside the Police Headquarters in ferguson, missouri. President obama will be in phoenix, arizona today visiting the hospital that triggered the investigation into veterans affairs. Some members of congress say veterans are still not benefiting from changes in the law that were made to improve treatment. It was another record year for the ncaa. Revenue rose up 8 to 989 million. That is almost 1 billion. Three quarters of that is media rights, like the money they give to desk get from get from the ncaa mens basketball tournament. Stephanie scarlet fu is looking at the action. What have you been looking at . Scarlet lets check out how herbalife shares are doing. This is a chart of herbalife. It is fairly limited because we only have an hours worth of trading. Herbalife are at their session high. The stock was climbing while you are on the phone with bill ackman and they are up 11 . We will continue to monitor that one. There is talks that fbi is looking into bill ackmans role in manipulating the stock or people on his team or people hired by him. Stocks are declining overall. The latest data point on Consumer Confidence showed an unexpected drop. Earlier this week, there was an unexpected dip in retail sales. Gas prices giveth and gas prices taketh away. The dollar index zoomed higher. There is a oneway bet on a stronger dollar. Oil prices are off by 3. 2 . Oil supply is up. Are we running out of places to store it . The Japanese Stock Exchange topped 19,000 for the first time in 15 years. U. S. Buyers are jumping on the bandwagon. Money has been shifting from u. S. Stocks to overseas markets. We mentioned oil earlier. The Brazilian Oil giant is at the lowest since august 2003. This is u. S. Shares. It is not considering delaying its earnings release. The company was in talks with creditors to extend releasing audited results. The backdrop is that they need to find a way to figure out how to best account for corruption lawsuits, how to best recognize the lawsuits. They have a deadline of may 31 to release those audited results. Stephanie thank you. Erik coming up. For once president can sympathize with republicans. Stephanie that is a stretch. Erik democrats are staying in the way of a trade deal he wants to get done. Stephanie welcome back to Market Makers. It is time to bring you up to speed with what is happening in the top business stories. Here on Market Makers just a few moments ago, it was bill ackmans turn to speak. The billionaire investor talked about reports that the fbi is investigating him and the people who work for him. Bill ackman says he has only made truthful statements about herbalife which he has called a pyramid scheme. He says neither he nor anyone from his staff has been contacted by the fbi, but he did say agents had contacted at least one of his outside contractors. Samsung is going upscale in order to take on apple. The company will use more premium materials in its mobile devices to win back customers. Apple has now tied samsung for the lead in the Global Smartphone market. Samsung plans to offer more phones with metal casings, slim design, and highdefinition displays. There has been a big drop in Consumer Confidence this month. The university of Michigan Consumer sentiment in index fell to a fouryear low. Americans are optimistic but that is being tempered by uighur expectations and a rebound in gas prices. The gauge of Current Conditions also hit a fouryear low. Erik the president and republicans dont see eye to eye about much. Free trade is one issue they appear to agree on. Democrats are opposing the president , putting at risk the Transpacific Partnership obama want signed, sealed, and delivered before his term is done. Congresswoman, welcome. Good to be here. Erik where is it that you and the president disagree . One of the single biggest issues we face today is that people have jobs that dont pay them enough. It is a wage issue and wages have been stagnant. How do you deal with the consequences of stagnant wages . If you take a look at the trade agreement, the Empirical Data demonstrate take a look at korea where a trade deficit has gone up 70 . It has resulted in a loss of about 75,000 jobs. The Empirical Data says that these trade agreements have depressed wages. If you are concerned about what is happening in the lives of middleclass families and their jobs and their wages, why would we proceed down a road with a trade agreement that is the same template as korea and come out with the same result . This is an agreement that there are five or six chapters that deal with trade. The rest is a shift in policy, whether it has to do with pharmaceuticals. There is no currency chapter, which is one of the biggest issues. If your goal is to do something about middleclass families, you dont go down this road. Stephanie what do you suggest we do . I am a supporter of trade. I think you have to have a new agreement that does not put at risk American Workers. In terms of a fast track or Promotion Authority you have to have congressional input into that process. You have to build into the treaty enforceability, whether it is labor rights whether it is environmental regulations. You have to put lots of things on paper. If you do not have enforceability it is meaningless. Erik can we really talk about American Workers and monolithic terms . Of course when Economic Conditions change by virtue of a trade agreement, some people may get hurt, but some people may benefit, as well. It has not had a positive effect on the wages of American Workers. Erik all American Workers . You can go to someone like jeffrey sachs, who is a strong proponent of trade agreements and most recently at a forum that we held he said that this agreement is about investors. It is not about workers. The results for workers will not be a positive one. Think about vietnam. . 56 per hour. American workers are going to be competing against vietnam in this effort. If you dont deal with currency in this effort, you are going to depress wages. Empirical data demonstrates that these agreements have not helped. Stephanie what du need to see this deal include to get behind it . It is a very interesting question that you have had. They have had been negotiating this deal for four point four years. It has been negotiated in secret with regard to the u. S. Congress. Stephanie why is that . You tell me. You have to ask why they did not open the process. I asked to be engaged in the issue of food safety in 2011. The fact is is that it has been a document that has been classified. We cant see it with a staff person unless that staff person has a security clearance. You could not take notes on it. Your point, i want to get to your point. This is so far along in several years ago there was the, how could we change this process in terms of congressional input . Committees of jurisdiction being involved. Congress having a view as to who the negotiating partners are making sure that the objectives the negotiating objectives would adhere to before we move forward. Congress certifying that everything has been met before there is a vote. None of that has happened. I would just say to you on this agreement, it is so far along, im sure many chapters are closed on this already. What kind of input can we have at this moment . Erik it is not really possible to negotiate an agreement like that is it . Lets say you are able to take this approach with everything go other country that is in the table in the Transpacific Partnership. One congress cannot negotiate with multiple legislative or parliamentary bodies at the same time. We would never get a deal done. The point is we want congressional input into the process of negotiation. When you have negotiated 4. 5 years and you have not come to the congress at all to ask about , what is your input into this process . These are the people we are thinking about negotiating with vietnam, Brunei Brunei is under sharia law. That means they flog women, they discriminate against gays. In 2007, we had environmental agreements down as well as labor agreements. Today, peru has walked away from the environmental agreement and they walked away from the labor agreement. We have no enforceable mechanism to do that. We want to say here, these are the countries we think makes sense to do this with and then we go backandforth as to who they are. What are the negotiating principles . The objectives . Lets agree on those and then months have a say when it is negotiated about what happened. Those pieces have not happened. The only thing we are being told is that we want fast track authority, which is no public scrutiny limited debate, and no opportunity to amend the legislation. Furthermore, you will recall this one the public said to members of congress on the Affordable Care act, read the bill all we are asking for is to read the bill. Erik im afraid we have to leave it there. Congresswoman rosa delauro making the case against fasttrack authority for the Transpacific Partnership and the case for more congressional input. Stephanie coming up, watch out cuba, you have not seen this Many American tourists in decades. Stephanie welcome back to Market Makers. Starting next week, new yorkers interested in visiting cuba will have the opportunity to fly from jfk to the cuban capital. The new route operated by a California Company as part of expanding efforts to develop the caribbean island for american tourists. Willem marx reports. Willem an expansive New Enterprise of American Enterprise may be donning among the ancient rooftops of old havana. For Michael Connors it was another entertaining day at the office. These are the mail drops. You would just put your letter in there. [laughter] willem he has been leading his fellow americans around this World Heritage site for 15 years. Sharing his love of cuban culture and his fascination with the unique architecture. Baroque, rococo neoclassicism. Willem these are highpriced tours. There is a lot of bureaucracy and a lot of history between the two countries, but we have so much more in common. Willem to appreciate the Common Ground many required travel licenses from the u. S. Government. How tricky is it to get the license to visit here in terms of bureaucracy . It is tricky. We apply every year for this license to take people to cuba for educational, humanitarian cultural, people to people exchange. Willem while these tours constitute tourism in everything but name, the recent changes in u. S. Trade restrictions may mean more americans will arrive. Cubas beaches have long attracted europeans. More americans could mean a challenge. More than 10 charter flights leave for cuba each day. How do you think the cuban government is going to cope with the challenge if there is a huge influx of tourists . I have no idea. They are having a hard time working with the people that are coming now. Willem 3 million global visitors contributed 2 billion to the Global Economy to the cuban economy last year. As familyrun guest houses and cafe attract clients away from state owned hotels and restaurants it is the private sector that has the most to gain. That is thanks to a new u. S. Policy, which encourages entrepreneurship in this communist country. Stephanie our own willem marx in cuba. Welcome. We know how much you love it there. We saw you rolling cigars. [laughter] can americans visit cuba as a tourist today . Willem no. You can go under 12 specific categories. Stephanie cultural is vacation. Hold on. Cant i say, i want to go to cuba to look at the art . Thats a vacation. Willem you need to have records of your trip. Stephanie i will take pictures of myself looking at the art and cuba and i will have pictures of that in five years. Erik 3 Million People visit cuba every year already. How much of a difference is it going to make if americans go there . Willem pretty dramatic. American numbers will be up around the same amount and we are seeing more interest from germany and the u. K. Americans could double or triple over the next few years. Stephanie i am going to be german in my next life. Wherever i go on vacation, there are always german tourists. How many days of vacation do they get . Willem marx, thank you so much. Erik we will be back after a short break. David live from bloomberg headquarters in new york, this is Market Makers. Stephanie the plunging pc market. The personal computer business has been shrinking for years. Intel says it is going to get even smaller. Eric wilpon ended up using get the economy in europe back on track . Will quantitative easing stephanie how to make the most of the Great Exchange rate. Eric did you see the credit on that photo . Our guest host for the hour, david zervos. Stephanie people want to spend their summer on the mediterranean. David zervos is our special guest host for the hour. The chief economist chief Market Strategist many people just call him the guru. If you would like to hear from the guru today, you can for the next hour. This guy truly understands the global market. The you feel like getting some news . Earlier this hour we got bill ackmans assigned of the story. We have been reporting that the fbi is investigating whether mr. Ackman or people working for him try to manipulate herbalife stock. He has bet a billion bucks against herbalife shares. He told us that neither he nor anyone else at his firm have been contacted by the fbi. He did say that one of its outside contractors has been contacted by the agency. His statements about herbalife have wondered percent in fact the glut in oil has gotten so big we are running out of places to store it. The International Energy agency says that may lead to more price cuts. They boosted their estimates for u. S. Oil production this year. The inventory already at a high. For disney, nothing succeeds like success. Disney had announced plans to make a sequel to frozen. The company also shared details of its new star wars movies and plans for more films in the Marvel Comics franchise. The five movies we have released so far have averaged a billion dollars each in global box office. We are planning to release 11 more marvel films in the next four years. Stephanie just what parents want, more frozen. Closing at a record high. Alan greenspan says there is not enough Capital Investment. He blames the u. S. Government. He told betty liu that Capital Investment is bring this being crowded out by government spending. What we are confronted with right now is a very serious problem caused by the fact that Capital Investment has been falling far short of the requirements necessary to keep the Capital Stock growing and therefore productivity. It is not working. Stephanie greenspan says congress should address the issue but both republicans and democrats are simply afraid to do it. There has been a big drop in Consumer Confidence this month. The university of Michigan Consumer Sentiment Index fell to a fourmonth low. Americans are optimistic about the economy but that is being tempered by weaker income expectations and a rebound in gas prices. Samsung trying to compete with apple, going upscale. The Company Needs more premium materials to win back customers. Apple has tied some sun for the lead in global smart phones. Sams hand samsung plans to offer more phones with metal casings and highdefinition screens. Eric mario draghi says he believes quantitative easing will boost the eurozones sluggish economy and ward off deflation. Will it work . With us, david zervos of jefferies. We can begin this conversation a lot of ways. What makes the most sense . David lets hear from oppenheimer. Stephanie what a guest host. Will it work . For Financial Markets the answer is a resounding yes absolutely. This is probably the biggest experiment we are seeing and we are seeing a lot already. We are seeing the fed, the doj this will be even bigger because of the negative field negative yields condition we are operating under. How does it work in Financial Markets . It works by forcing private investors to buy anything because the ecb is basically buying everything under the sun. It is very good for credit, very good for longterm bonds and good for equities and best for the euro because it forces a lot of capital outflows. The biggest impact in Financial Markets is the reality is that the eurozone is the biggest provider of savings for the rest of the world. By definition, it has to spend a lot of capital send a a lot of capital out of the eurozone and the ecb is forcing the process to be even faster and more dramatic. David we saw the playbook for five years. The fed was successful at keeping the dollar week. The dollar weak. It never broke 89 until december of last year. S ps were 700 at the beginning of qe1 and 2100 recently. Too easy trades and that fiveyear playbook were weaker currency stronger stock market. Took our longstanding s p long that we have been pushing because of qe1 we did not get to the point of whether it works for the economy or not. We took that and we said lets take the playbook, we know what worked and lets just cruise across the atlantic and take that playbook to europe and buy stocks. Eric the starting point for the europeans is so different from where it was for the fed. 10 year treasury yields were what . David they are worse. The unemployed and rate was 10 . Today, closer to 13 . They are worse in europe. Eric the starting point it is dependent on david i dont think so. That is a common misperception. This is not about driving yields lower or getting credit into the economy. This is about the portfolio balance affect. Or some people out of riskfree assets and getting them to take risk. That risk becomes the seeds of the next upswing in Business Cycle. Instead of sitting with your money in the bank you go out there and invest in electric car company or Energy Company or overseas. That risk capital generates the real returns and real growth and real Business Cycle that ultimately propel you out of the recession. Eric now we are talking about whether it is or is not going to work for the economy. David that mechanism that has worked here will work there. That is what we learned about qe. By restating the asset value you trigger animal spirits. You trigger that business and Consumer Confidence because you are seeing stock markets and bond markets rallying and then you start feeling more optimistic about the future. What is important is, at the same time, you are getting an effect on credit and credit lending. The latest bank serv service in europe is showing remarkable the elements. Development. It is turning positive again. The expectation of lenders, the Economic Activity there is demand. It has gone up. These are major points that basically you are already beginning to see signs taking place. This has elements to begin working for the real economy but it is very early. Stephanie lets address the mechanics of this bond buying program. It is a huge amount of paper they need to buy back. Blackrock things it will be tricky. It is a very big number. You get into june and july and august, it will be hard. Stephanie you think there are holders out there who will say no i will sit on my hands . No doubt. They dont want to lose that yield and they will sit on it. Stephanie the you agree . Do you agree . David we have already seen it. At 28 basis points italian two years are at zero. There is a lot of debt in europe. Italy is over 100 of gdp. Germany is right up there. A lot of french that. French debt. I know what we are going to do, we are going to invest all of our pensioners money at a negative yield. Does that sound like a good idea . We will guarantee a loss on the investment. They will change their rules. We cannot hold this stuff. They never designed the rules for negative rates to begin with. Nobody did. You will see everyone from the Swedish Pension funds and danish Pension Funds to the french and german Pension Funds scratch their heads and go, why are we holding this stuff . Stephanie wall street lingo, mr. Zervos. There are some temporal effects. You have the holders that look at the yield and say i have a guaranteed loss. There is a large part of the Investor Community that does not hold to maturity but you buy a 10 year bond, you have a sixmonth view. That is where the swap can happen. You have the shortterm players buying this stuff in anticipation of further rallies. Stephanie eric eric the action has proven that qe is not fully priced and the markets. Where will the euro be trading . The dollar is inexpensive here. The euro by historical standards could go to the low 80s. We are seeing that with japan. I think just like with japan in these conditions if the policy were to work, they currency has to stay cheap. It is part of the policy, part of the process. Eric give me a number. We can break within six months and find ourselves in three years with an 80 scent handle. David \ i think so. Its also a lot of the problems there. Getting europe to grow and its potential with the right Monetary Policy could be exactly what the world needs. Eric teaching the europeans to love and 80 sentcent euro. David zervos is staying with us. Thank you for being with us. Stephanie when was the last time you bought a desktop computer . The slump in sales indicate it has probably been quite a while. Eric it is friday the 13th. Time to play the yearbook game. He is a Corporate Executive that graduated from high school in new york in 1959. You can send us your guesses. Email us or tweet us. Who is this guy . Eric you are watching Market Makers. Time for the top stories of the morning. Bill ackman had his say today. He responded to reports that the fbi is investigating either him his firm or people that may have been employed. Come to find out if any of these people have manipulated herbalife stock. He says everything he has said about herbalife is true. We have not encouraged anyone to make false statements. You dont have to make false statements. The truth is the company is harming people. Eric herbalife says it is confident in the strong fundamentals of its business model. There was a surprise drop in inflation. Prices dropped. 5 . Stephanie the demand for desktop pcs are down. International data corp. Predicted global shipments of personal computers would decline 4. 9 this year. Following intels latest forecast, ibc has cut its outlook even further. Crawford is with us be a discuss the future of the pc business. Are we all going tablets and smartphones . Not necessarily. There is some good news in this. The tablet Market Growth has come to a crawl as well. What you are seeing is that a lot of the uses that folks have come whether they be business or consumer a lot of the use cases they have for browsing have been met by the tablet. Tablets last longer. It is harder to get people to upgrade their ipad or android device. If you are using the tablet you may not be looking to that original pc that you used to use for all of your internet needs. It turns into slower upgrade cycles around the board. Eric lets talk about a couple of things. The one thing people want to know, is the pc refresh cycle that surprised so many investors last year over . Initial stages of the pc refresh cycle are over. Last april, microsoft ended windows xp and you saw a bump where Enterprises Need to refresh their fleet. That was the big bump. You will continue to see people upgrade their pcs in markets across the world but that will be at a slower rate. You will see windows 10 come out later this year. You may see the pc market avenue and flow for a while. Avenue and flow for a while. The stronger dollar creates headwinds for a lot of pc manufacturers in terms of component costs. The pcs become more expensive in emerging regions. Eric even addressed some of the points that intel made yesterday. Where does idc disagree with intel . Intel cited lowerthanexpected demand for business desktops and inventory levels across the pc supply chain. I think where we diverge a little bit from intel is in this whole idea that it was xp driven. You are talking about an operating system that represents 1015 of the installed base an operating system that doesnt have support. You are barraged with messages that this operating system is no longer supported you are not getting the same level of patch support. I dont think it was annexed. Issue i dont think it was an xp issue. The use case for the pc has changed. There was some inventory overhang associated with it a lot of low and tablet products that were shipped that needed to be worked through. Eric intel is feeling the pain. Where else will be see the pain . You are seeing the pain in a number of different places. If you are asking what does the supply chain look like, you will see Memory Companies potentially affected as well and you could see this flowing through two other component manufacturers like hard drive manufacturers. Eric the chief Research Officer at idc. Stephanie stay with us. Stephanie coming up europe on the cheap. You can thank the strong dollar. Where you can find the best deals. Eric it is friday. Time to play the yearbook game. A Corporate Executive, graduated from in 1959. Im not from Strong Island. That is all the producers are telling us. Email or tweet us. Stephanie who is that cleancut cutie pie . Eric some strong eyebrows thats for sure. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Stephanie welcome back to Market Makers. Eric with us for the hour, our guest host, david zervos of jefferies group. Look at how the stronger dollar may keep a lid on consumer prices. Julie hyman did a little more digging to figure out how the s process might work. Not so simple. Walk us through what you learned. David is quite a lot about this. Bloomberg news is out with a story that said and eventually because of the stronger dollar we should see Lower Consumer prices or things like apparel and electronics made outside of the u. S. If you are making your goods and currency and currencies that have depreciated, you have more spending power. Maybe that means you will pass on your savings to your consumers. I focused on apparel specifically because that is an area i tend to talk to people about. They said it is not that simple. If you look at where apparel is made for u. S. Consumers, a lot of it is made in china. China is the top exporter to the u. S. Of apparel. 36 come from there. You see the top that are listed here. If you look at the chinese run over the past year, its about 2 down. You do see bigger declines for the indonesian currency, mexican peso. You look at the biggest exporters of apparel you are not seen much of a change. Therefore, not that much of a savings. When American Companies are doing their buying from suppliers they are doing it in dollars. The contracts are set in dollars. Eventually, down the line, or perhaps they might be able to negotiate. They dont have a lot of renegotiating power at this point. If there is an effect, thats why you would see a delay. David i think the delay fits well with the macroeconomic models people have used for years to try to figure out the dollars impact on gdp. You go to the number one model the federal reserves u. S. Model, they see big impacts from that dollar move but they are all like multiple quarters out. They dont hit initially. We are not going to see the real effects of this in terms of those lower prices coming through significantly for a few quarters. We do see it in financial assets. It hits very quickly. The s p is down a percent. The euro has moved about a percent. It is doing what it is supposed to do. That financial story is a very in your face story. The daytoday story, how much of a head wind is the strong dollar going to create and how much of a benefit is it going to create through these lower prices will be harder to get. You do get the oil store quickly story quickly. There was a disconnect. I was talking to analysts who cover these Apparel Companies and they said we are not hearing from these guys because it is so overwhelmed by the decrease we are seeing in the euro. I took ralph lauren as an example which gets two thirds of its sales from the u. S. And canada but if it of its sales in europe. Any currency benefit is more than wiped out by the sales they are making to europe Apparel Companies themselves are saying one thing. Economists are saying we will see a decrease in import prices. We have seen a pretty sharp decrease, a sevenmonth straight decrease in import prices. The apparel folks were not quite able to explain why we have seen this decrease. Even though the Apparel Companies maybe they dont want to highlight it right now at a time when the business is struggling and theyre getting this benefit. It is unclear why there is that schism. Eric julie hyman. Stephanie we can hear the commercials now. Bargainbasement barcelona. Paris for pennies. All because of the strong dollar. Eric time to play the yearbook game. Here is our contestant . A Corporate Executive. Graduated in 1959. Send us your guesses. Email us or tweet us. Once again, no simple tweets. I dont want the name. Stephanie give it some flavor. Stephanie welcome back to Market Makers. Visiting europe got a lot cheaper thanks to the rising strength of the u. S. Dollar. The euro hit a 12 year low against the u. S. Currency. Here to tell us how to make the most out of this Exchange Rate is jamie friedman. Where are the deals . What do we do with this opportunity . Europe has a 25 off sticker on it. It is aligning with marge, one of the most popular times of year to book travel. Aligning with march. Interest in italy and paris and london and that is where we are seeing the deals right now. Eric is it across the board given we are talking about a common currency . Is the discount and paris the same as italy . In paris the same as italy . We are seeing strong deals across the board. Hotels in the summertime around 89 and paris. Stephanie what is this going to do for Domestic Travel . Are they looking at overseas . We will have americans going over to europe, absolutely. We will start seeing a lot of amazing deals in new york city because the europeans are probably going to stay in europe. There are a lot of rooms that need to be filled in new york city over the summer. We are already seeing a 20 drop in summer rates. I go to greece every year. Those are the pictures you saw. Im looking forward to it getting cheaper. It is great news for europe. This is a long time coming. Mario draghi dragged his feet for a long time. I heard a quote about the german finance minister in 2010 stephanie will we see you in a speedo . What does all of this mean for you and your site . People are enthused about Summer Travel . Because march is such a popular time to book that Summer Travel, we are already seeing a boost. We are seeing it for europe as people are starting to decide whether stephanie can you quantify it . Italy has gone up 20 . Eric interest level or actual bookings . Interest level. Eric lets talk about greece for a second. We are talking about travel. Greeks would love to see more tourists. How much of an impact can a cheaper euro and more tourists have on a desperate Greek Economy . David it needs a lot more than a 105 eurodollar. A . 50 euro would go a long way to fixing greece. Stephanie airlines, flights are still really expensive. Will we see a drop there . There are a lot of lowcost carriers worth checking out. You might pay a little more for baggage fees but you are saving 40 off another carrier. Eric if you wanted to go to italy, you are not going to get there on norway. You will have to go to oslo, perhaps. You might have a pit stop and make a big trip out of it. Eric you might be able to do it for very little money. David a lot of people like to do multiple cities when they go to europe. Places like the Czech Republic it is 26 or 27. They are giving that city away. Stephanie i will visit all of them. David you Market Makers from europe. Do Market Makers from europe. It will be an evening show. Stephanie im with you. Eric im in. I already got my tickets. Stephanie thank you so much for joining us. Eric right now we will bring you uptodate on the top stories of the morning. Goldman sachs forecasting a big drop in commodity prices. One measure of Global Commodities may drop 20 over the next six months. Rising supplies will drive oil and costs lower. U. S. Stockpiles and production have not been this high in more than three decades. American confidence in the economy took a hit this month. We got the university of michigan preliminary Consumer Sentiment reading. Americans are still optimistic about the economy but it is being tempered by weaker income expectations and a rebound in gas prices. The gauge of Current Conditions also hit a fourmonth low. President obama says he is embarrassed over that letter republican senators sent to iran. It warned the iranians that any deal the president reaches could be discarded by the next president. The president spoke to fox news. For them to address a letter to the ayatollah who they claim is our mortal enemy in their basic argument to them is dont deal with our president because you cannot trust him to follow through on an agreement that is close to unprecedented. Eric one of the signers of the letter ron johnson said perhaps it should not have been addressed to irans leaders. The company that offered wants to come up with new drugs. It has accumulated Genetic Information on 830,000 people and will now use that data to try to cure diseases. Stephanie it is friday. Time to play the yearbook game. He is a Corporate Executive, graduated from shaman a high school in 1959. Send us your guesses, tweet us. Im pretty sure people have given us the answer but we want the most creative answer. Lets go kids. Eric it is friday. Time to play the yearbook game. Stephanie the yearbook game every once in a while, he is a human. Who is this man . A Corporate Executive who graduated in Strong Island in 1959. It is the one and only lou gerstner. Head honcho at ibm. The first one to come back the eyebrows louis, louis woo hoo gerstner. Eric david zervos brings lots of flourish. Stephanie flair. Eric flair and flourish. Explain to everybody what it means. David you guys were the first to receive the no haters had. We wrote aps called the stocks are for lovers, gold is for haiters. The idea was pretty simple. If you believe this risktaking is going to create good stuff you are in the lover camp and you should buy a bunch of stocks. If you think it is going to create inflation and it will be like the 1970s, you will be in the hitter cap and you should just buy gold. Hater camp and you should just buy gold. We made this cap called no haters. We moved it across the atlantic to germany and the german word we had the same theme and we are running really hard and we have the s p found on the year and i feel good about the trade. Stephanie we have it down so far. David and it will keep going. Eric what will you be writing about next . You are famous david what do you guys want me to write about . Give me a topic. Eric you wrote a lot about u. S. Monetary policy in japan. David we could go to em. I could spend some time on why it will be 1998 all over again. Stephanie you pull in a lot of lyrics from songs. I will recommend i dont mind. Think those lyrics will resonate. That is it for Market Makers. We sat down with bill ackman. You can catch the full interview on bloomberg. Com. It is 56 past the hour. That means Bloomberg Television is on the markets. At midday, falling deeper into the red before next weeks fed meeting. We have given back most of yesterdays gains. The dollar stronger following an unexpected drop in Consumer Confidence and Producer Prices joining me for todays options insight is if you look at what we have gone through the last couple of days come i wonder if you could give as a narrative of what the stock market the narrative driving the stock market right now. Last friday, we had the jobs report thinking everybody what is the narrative . We have a lot of conflicting data right now. What the market dislikes even more than that data is uncertainty. That is where we find ourselves now. Yesterday looked like we would get a bit of a reprieve but today we are the 2045 level was key support that got taken out today. We see a picks that is still relatively cheap. Im looking for positions i can put on that have a bit of a bearish view or are short the market to hedge my book because i am still long. I can buy relatively cheap protection here. How does that change in the three days before janet yellin gets her News Conference . Are we treading water until then . We might be. I would expect volatility to increase. As we get closer to that event speculators and hedgers will come in and push the price higher. For someone concerned about that , i would want to be looking for protection now. Looking for protection now. Lets get to your trade on adobe. Such report earnings on march 17. It tends to rally, in six of the last eight quarters. Will we expect the same Going Forward . I think we will expect a move higher. It moves a lot on earnings day. This time around, the Options Market is targeting just above 81. I can look for a call spread out to next weeks expiration for fix . 60. Im getting a bit more aggressive because the move they are implying is a bit cheaper than that 7 average. I can better than triple my money if im right here. Give me an overview of the market because we are still getting troops and drabs of earnings drips and drabs of earnings. We are technically driven right now at the tail end of earnings season. We start up again without color in april and then get into another full swing. Until then, we are in a no mans land. Talking about a no mans land. Thank you so much. Money clip is up next. Pimm welcome to money clip. Here is the rundown. Bill ackman says he is not manipulating herbalife stock. He says the fbi has not contacted him or anybody in his firm. Oil prices had for their fourth consecutive week of decline. Alan greenspan says it has not hit bottom. Ford cranks out the new f150. Demand for the pickup is strong. Another