Transcripts For BLOOMBERG Market Makers 20150415

I am Stephanie Ruhle. That is crazy. Erik i love that he said more or less will somebody find my introductory remarks or i will have to improvise. Stephanie getting glitter out of someones hair . Its a long process. Erik we will start with the top stories of the morning. You just heard it. A tense moment at the ecb conference as mario draghi was speaking. A protester jumped onto the table and started shouting. It would be good to continue the press conference if i had my introductory statements with me, otherwise, i will have to improvise. Thank you. Erik mario draghi was not hurt and he resumed his remarks after two minutes. He says there was there evidence that his policy is already working and he believes it will succeed in inflation across the continent and stoking inflation across the continent. Accusing google of antitrust laws. Google is abusing its dominance of the internet Search Market and unfairly waivers its own Comparison Shopping service in search results. That was more or less expected. They say they will investigate android mobile phone system and they say complaints are not just coming from europe. One out of four individual companies that are complaining are u. S. Companies. Companies from the United States also play a major role when it comes to these is this associations who have complaints. Erik google has 10 weeks to answer the accusations. Nokia was once the biggest maker of mobile phones and now it will be a Global Leader in another industry. Nokia has agreed to buy alcatel. Nokia will improve the market share in china and take on contacts with contracts with verizon and at t. Bank of america posted fourthquarter earnings that beat analyst estimates. One reason is a big drop in expenses over the past five years. Bank of america spent more than 50 billion linked to disputes over the veils of mortgages and mortgagebacked bank securities. Most of the expenses out of the way, the ceo has been trying to increase revenue. Shares of pboa are down and if it is all about expectations, it does not mean the profits are better. First quarter the chinese economy. Chinese gdp rose since 2009 and they are growing at an annual rate of 7 . It all pointed to a slowdown that is deteriorating. That has led to speculation the Chinese Government will have to take more steps to stimulate the chinese economy. When you Bloomberg National poll finds it deep partisan divide in the u. S. When it comes to israel and iran. 45 of those surveyed say they support israel outright and 47 say the support is real but not when u. S. Interests diverge. When it comes to president obama and Prime Minister of israel benjamin and Benjamin Netanyahu 9 of democrats say they are sympathetic toward netanyahu and 15 say they are and 60 say they are dedicated 16 say they are dedicated to obama. Stephanie Stan Druckenmiller spent years working with george soros before striking out on his own. His fund was returning 30 annually. He is sounding the alarm on the fed and i had a chance to sit down with him in an exclusive interview and ask him why he is so concerned with fed policy. Stan druckenmiller it is not that im predicting some catastrophe in three 00 two years, i am not. In three or four years, im not. The risk of growing into early to me is much more favorable than going to wait. I dont hear anybody saying that. All i hear is the opposite. The risk of going to early is much greater than going too late. If the risk of going too early is, oh, my god another tantrum or god for bid, a tempers and corruption stock prices or a slowdown in gdp growth and you have the potential and i only say the potential for a deflationary and something even more serious down the road it seems to me a nobrainer. Either way, 25 basis points . Really . We would still have negative real rates. Do they think 25 basis points will bring on the next depression . Stephanie ray dalia says 1937 is happening all over again. Stan i have trouble with that 1937 analogy. Stephanie all right, why do you have trouble . Stan i think the two periods are quite different. Number one, i talked about a Balance Sheet recession. The stock market and Household Net Worth were still 20 below where they were in 1929 eight years later. Stock prices and Household Net Worth are at noon highs and the Balance Sheet is not in the state it was in in 1937. Number two from 1929 to 1937, we had a cumulative 18 depletion in this country. From 2007 until now, we have had a cumulative 16 inflation. The feds favorite measure of inflation has never been below 1 in any of those years. Finally, in 1937, unemployment was still over 14 . It is currently 5. 5 . I have a lot of respect for mr. Dalio but i think that is what makes markets. Stephanie we hear from a lot of people talk about deleveraging you dont see this . Stan no. We have releveraged from an already high level six years ago. That is how we got into this. We had too much debt. The facts are, world that according to mckinsey and the last six years, it has gone to the 7 trillion, that is with a t. 57 trillion it has grown to 57 trillion, that is with thea t. It is currently 290 . There has actually been not only a deleveraging from the high levels of 2007 we are doubling down on increasing the debt. Stephanie who is the we . People are talking about corporate Balance Sheets and reducing the debt, are they wrong . Stan yes, they are wrong. Corporate debt in 2007 Corporate Credit was the . 5 trillion. Where do you think it is now . Take a guess. An elevated level, 2007. 7 trillion. It has come from 3. 5 trillion to 720 and dollars. Either way, we are not talking about quality stuff. Stephanie what are we talking about . Stan highlevel loans covenant light loans which were 100 billion then at 500 billion and now it at 300 million run rate. The debt back then was 28 of what is berated and now it is 71 brated. I think the fed and everyone agrees it was a bubbly. It was a bubbly period. Stephanie the argument is that these companies have stronger Balance Sheets and is someone not reading the perspectives . Stan i have not read they have a stronger balance with but i have heard there are no rates. 4 45 looks great four or five looks great. Stephanie when they froze up in the markets, they could not get out. You think we are in a credit bubble . Stan i think the risk of a credit level is extremely high and if it is not addressed pretty soon, things, difficult three years or four years down the road. A good start would be raising rates all the way to 25 races points. Stephanie realistically. Stan that would be a big step. From 2000 two 2006 or 2007, we had negative real rates for three or four years. We had incredibly negative real rates now. By the way, the Unemployment Rate where it was in 2004 and 1996 were considered boom times. We have zero rates. Stephanie how about Larry Summers . Mary is saying the thing to be concerned about is on the market equity. Isnt that one factor and there are a lot of things to look at . Stan i find it curious that Larry Summers has now become once to listen to the bond market. Because of the stock market and currency market are sending different signals. I would not be too concerned about not bond market sending a signal when the fed has bludgeoned any participant. That rates will never go up and they will be low for long and shallow. And it may be in two years 28 races points, maybe that is not a natural clearing rate and that is a rig price and maybe some of those people do not want to pay you 20 aces points to give you pay you 28 basis points. Stephanie any comments on the fed and its effect on the u. S. s Strong Economy . Stan as you know, that is a big piece of what i do for a living. Honestly, i can find no correlation between the level and direction of the dollar in the economy and intuitively, it does not make a lot of sense. What happens is it is negative for corporate profits. That is a very small part of the economy relative to who it benefits which is the consumer. The consumer who was 70 of the economy gets a big increase of the purchasing power when the dollar goes up, so i am kind of befuddled. Just looking back at the evidence, the dollar went from 80 to 160 five june of 2008. Under the dollar 30, shouldnt we be going into an economic boom and great inflation in 2008 . My recollection is that is not what happened subsequently. Or i remember when i was at soros the yen went from 78 to 47 in a rapid period of time, 1995 or 1996. Did japan experts this great Economic Growth with because the currency went down 50 or 60 . In fact, when i look at, a strong dollar has been associated with a Strong Economy. Im not saying it causes it. It is like saying ice cream causes hot weather. I dont know the cause and effect, but i have been looking at this for a long time and while there is evidence that the dollar if thats corporate profits, i cant find the evidence that the currency has that big an impact on economic activity. Stephanie there you have Stan Druckenmiller. He basically disagrees with everyone. You can if you are stand. If you are stan. Erik now he is working for himself. Stephanie he is. We will have a lot more of my interview with stan in the next hour. We will be hearing about the lessons he learned from george soros. Erik we will play about the protester who interrupted Mario Draghis News Conference. How was she able to get that close to the ecb president . Stephanie if you are going to do it, do it with glitter. The bond market goes to the dark side. We will be speaking with the ceo. Stephanie welcome back to Market Makers to go i am Stephanie Ruhle Market Makers. I am Stephanie Ruhle. Auto making rebounded but other industries retreated. That is being blamed on a strong dollar which is hurting oversea demands. Cheap oil has led Energy Companies to cut back operations. Intel arrived this morning that the largest chipmaker forecast of secondquarter revenue in line with analyst estimates. Intel says sale of personal computer chips are falling but demand is increasing for Data Center Chips needed to turn out information for mobile devices. Intels First Quarter earnings matched estimate. In new york city, hundreds of demonstrators marched last night to protest police brutality. It is said to be one of 28 across the nation. There were some arrests although police are not saying how many. Meanwhile, an offduty Police Officer returning home was assaulted by two protesters when he got out of his car to investigate. Those are your top stories of the morning. Coming up and 10 minutes, the hangover from the financial crisis. Not every country has recovered. We will be speaking with the head of the Capital Market and liquidity in the bond market. Liquidnet says they have the solution and they are going after google. Why go after android . We will find out. Erik stephanie, a shocking moment in frankfurt. Mario draghi was attacked at his regularly scheduled News Conference. She was wearing a tshirt that read and the ecb dictatorship. Mario draghi resumed his remarks a few minutes later. Alessandro was in the News Conference when it happened. Alessandro i can only imagine everybody in the room was taken aback. The protester was taking off to a room. Describe the scene inside. Alessandro it was a normal press conference. A pretty relaxed atmosphere as mario draghi has already delivered. Mario draghi started reading his introductory statement, a few minutes in. This girl was sitting in the front row, jumped on the table. It was quite a remarkable leap and started showering him with confetti. And crying and ecb dictatorship. She was whisked away to a side room. So far, we do not know whether stephanie can i ask how exactly she got that close . It is a press conference and she does not look like a member of the press. Alessandro it is something the ecb is investigating. The press conference is open to journalists, so we imagine that maybe she got in the immediate presentation from someone. We dont know yet how she got in. Erik the tshirt read, and the ecb dictatorship. Where is this woman from . Brandon there is a clue in the tshirt we will get to. You remember the protest about one month ago around the ecb building when it was inaugurated, cobblestones ripped off the pavement . Cars set on fire . This is not that. I have been looking at the stephanie blockupy. That is a clever name. Brenden they are not tied stephanie throwing glitter can be very confusing for him. Erik if we are going to throw anything, why are we going mario draghi into the same campus brenden that is a fascinating point because it seems mario draghi that is in the same light as these other people. We see him as europes great softy, providing stimulus where nobody else would. He is still seen as not doing it nearly far enough by huge portion of the european left. Stephanie brenden is a doing his homework here. Erik this could be im not trying to paint off protesters with one brush, but she is protesting the man. Someone who represents banking in general. You look at occupy wall street care it hated everyone and their brother if they worked anywhere near wall street. Bbreneden this is something more like code pink. Generally angry. If you look at her shirt, her shirt reads and ecb dictatorship, but there is an extra letter in the word dictatorship. There is a k in there. Stephanie oh, you got the whole feminist brenden there is a whole another stephanie i got it. Erik ive got to interrupt. This is a good conversation but breaking news. We need to take you up to scarlet fu. Scarlet Aaron Hernandez was found guilty of firstdegree murder by a jury in massachusetts. This follows seven days of deliberation and today was the seventh day. The jury has found guilty of firstdegree murder. As you know, about two years ago in june 2013, he was with the man who was the boyfriend of his fiancees sister. The two men were seen together according to the Associated Press and he was later found that in massachusetts. Found that in massachusetts. Aaron hernandez now 25 years old, found guilty of the first degree murder. I believe he also faces charges of weapons and ammunition in the shooting death of odin lloyd. He has found guilty of firstdegree murder. I will bring you more details when i get them. Erik thank you. The latest on the conviction of Aaron Hernandez in massachusetts. Lets go back to talking about the ecb. I am not sure if we have aless andro still with us. Stephanie we were talking about the additional kb in a dictatorship. Brenden there is a broader problem that erik and i have talked a lot about. He was recently in greece and there is one way to look about the problem of the European Union that they have by now. Th ee eu is in a race. Their institutions do not work very well right now and they have to improve them more quickly than the various protest movements that are real political powers. It has to reform faster than they can object. Of course. By no means, we are sure that the eu and the euro will win the race in the long run. Erik in the long run, yes. And that is because in the short run, there are these populist forces emerging on the left and right unhappy with the consensus, right . The consensus that built europe and has become the status quo. Brenden we can argue about that austerity but the problem is even if you believe austerity is the correct policy and you believe greece needs to go through extensive structural reform, which it does, you have a problem if you enforce that policy, people do not like it. These places are democracies. Even if they are stephanie even if they needed they do not want to experience it. If you are a political leader in greece and you want to get elected, how are you going to do it . This is a country where people do not pay their taxes. Erik i dont understand why it would be mario draghi that takes the brunt of the criticism. At least at the moment. She should be going after the gentleman brenndden later today. Will interview later today. Brenden lets agreed that protester is silly. Stephanie i got the spelling was clever. I will give herb a bonus point for that. Brenden the model that used when planned the original bailout package for greece admitted that the models were not right. There was a way of thinking about austerity four years ago that we do not think anymore. Stephanie i am glad that you work for television now because you are really good. Erik brendan greeleyal. Alessandro was with us earlier and we did not get to say goodbye. We will be back. Live from bloomberg headquarters in new york. This is Market Makers, with Erik Schatzker and Stephanie Ruhle. Erik welcome back to Market Makers. I am Erik Schatzker. Stephanie im Stephanie Ruhle. Erik breaking news weekly crude inventories are out and they can be market moving. Lets find out where they stand with scarlet fu. Scarlet west texas intermediate, look at the chart behind me. Right now, continuing to build on that advance. Gaining about 2. 25 in that range. This is after the department of energy said that we had of build of 1. 2 9 billion barrels of oil classic. The consensus and nine analysts was a buildup or 3. 5 million. We had a build of 10. 9 million barrels. Crude supplies have climbed for 13 weeks and at a record high. This does not change with the bill. It is smaller than anticipated as it moves in that direction of more oil than we know what to do with at this point. Wti building advances and up by 2. 8 percent. We are basically trading at a twomonth high right now. The high since february 17. I will put it up so you can see it. There is the six month chart. All the way back you know what, we have gone further to december late december. The highest so far this year. Erik thank you. That is scarlet fu. Oil inventory out moments ago. Stephanie the top business stories of the morning. Antitrust regulators in europe are hitting the google on two fronts. The European Union accused google of abusing its dominant of the internet Search Market. It says google unfairly favors its own Comparison Shopping service in search results. That was expected, but now, the ee says it will also investigate googles android mobile phone system. Regulators say the complaints are not just coming from europe. There are four individual companies complaining, they are u. S. Companies. Companies from the United States also play a major role when it comes to these Business Associations from that complaint. Stephanie google has 10 weeks to answer these accusations. It is a deal that will create the worlds against maker of equipment that hours global phone networks. Nokia has agreed to by the French Company alcatel. It will allow nokia to improve in china and take on contracts with the two biggest wireless carriers in the United States. Verizon and at t. Well, china still has one of the worlds fastestgrowing economies but it has not grown this slowly since 2009. In the First Quarter, chinese gdp grew at an annual rate of 7 , matching as in output investment and retail data. It all points to a slowdown that is getting worse. China is trying to transition to an economy consumers and services make up a bigger share. The new impetus is showing momentum. In general, it is still small in size although it is going fast. We are still relying on a traditional Growth Engine and that is declining and has huge impact on our economy in the short come. Stephanie that is leading to speculation that the Chinese Government will have to take more steps to stimulate the economy. Fuel costs have Delta Airlines flying high. First quarter earnings they are forecasting they will save more than 2 billion because of the collapse of oil prices. Also plans to reduce International Capacity next winter because the strong dollar has hurt overseas sales. Erik 6. 5 years after the financial crisis, risk to the Global Financial system are rising. The monetary stimulus is creating address dangerous excesses. The director of Capital Markets in washington, jose good morning. What risk are you most concerned about . Jose risks are rising over the past six months. Risks to the Global Financial system are much lower than a few years ago, so i think that is important to put things into perspective. The risks we are most concerned about is the risk othat the policies in place in europe and japan may not be as effective as one would like because the Companies Look at the risks and there is side effects coming from low Interest Rates and the consequences that financial could have in emerging markets. Erik which add up to what . Are we looking at the increasing potential for another financial crisis . Or is what you see more contained . Jose i would not say that we had the potential for another financial crisis, but i would say is that there are a number of challenges that shows financial instability Financial Stability is not strong. This is something that can be managed in a number of policy actions are taken. For example, in europe and japan , they have policies with smart reforms, fiscal policies, in the euro area, unclogging bank credit by loans in banks. And in the United States for the feds to have action from the low Interest Rates have now. If the emerging markets prepare themselves with better financial mementos for this race, i think that this is something that will be manageable going forward. No dangers of a crisis, but some things to be alert about. Erik what is the probability that this policy action is going to be taken . The sense that i and many other people have, and perhaps you have the sense as well, is that this policy fatigues. So much has been done since the financial crisis in the way of we could look at just america, for example. It applies similarly to other countries. Lawmakers seem to want to get on with angst and they dont want to deal with Financial Stability any longer. They want to talk about job creation and Economic Growth. Different things. Jose in order to solve the problem of job creation, you have to to put in place the policies which are needed for that. For example, in the case of europe, Structural Reforms are key. To further job creation, but also making banks apply credit to the economy. Making banks Strong Enough to supply credit to the economy, this is something that will be very important for job creation and growth in europe. Action has been taken in this regard in europe, but more needs to be done in the United States. Something that will be very critical would be for the fed to engineer a smooth exit from the zero Interest Rate they have. I think we expect the fed to do a good job. Stephanie do you believe the fed should have already raised rates . Just yesterday, when we spoke to Stan Druckenmiller he said on many levels it is too late. The consequences of leaving rates this low for this long cap force affects if they raise then if they raise them too soonj. Ose jose i think the fed is pursuing the right strategy. Look at the data. Raise Interest Rates according to mandates inflation, maximum appointment. I think the fed is perfectly justified not to have rates raised and to take this approach to it. Erik you talk about side effects in your remarks today. Earlier, you used the word excesses. Where are the excesses that you see in Global Financial markets . Jose well, financial side effects needed to be countered by appropriate credential policies. For example, we can see some adverse side effects from low Interest Rates in the insurance sector the Life Insurance sector, the time benefit pension fund because they could be compromised. One could also see that in the high yield bond market in the United States, valuations are relatively [indiscernible] those would be areas where policies need to focus in order to make sure that Financial Issues do not arise that can lead to trouble in the future. Erik thank you very much. Stephanie when we return, how to fix the liquidity problem in the bond market. Liquidnet thinks a dark pool is the answer. We will be speaking with the ceo. Erik lets bring you up to speed with some of the top stories. As ecb president mario draghi was about to deliver his remarks, this happened. A woman jumped on the table and began shouting. She was subdued and mario draghi resumed a few minutes later. The secondbiggest u. S. Glenda bank of america, beat analyst expectations. With most of that behind them, the ceo is a trying to list revenue. It is 100 jobs 100,000 jobs and counting in oil industry. The number of layoffs announced in the world since crude prices began collapsing last year. The wall street journal says 91,000 of those jobs have been cut. Most of them come in Oilfield Services and drilling. In 15 minutes of, google under fire. Accused of violating antitrust rules and investigating googles android platform. You will hear more from Stan Druckenmiller. Plus, former secretary of treasury sat down with peter cook. Stephanie one from thinks it has found the solution to those controversial dark pools. Liquidnet already operates a black trading article on the equity side. They are getting ready to introduce want to the Corporate Bond market. Here to tell us is seth marrin the ceo of liquidnet. Why do we think it is broken . Seth we have an enormous emergence of events. We have had about 1 billion and dollars coming from investors over the last seven years. We have had Interest Rates that have been at historic lows and you have had a massive issuance of debt over the last seven years. And you have had artificially low Interest Rates. Corporations have issued massive amounts of bonds. Youve got a situation now where investors historically, are told to invest 1 of their assets for every year of their life. Today, with Interest Rates going up as Interest Rates rise, the values decline. For the first time in 10 years 20 years even, these investors are going to start seeing red on their statements. These are unfortunately, the people who can least afford to lose the money. Erik they are not going to lose the money if they hold the maturity. If you on a fixed income security and maturity and credit is good, you get paid. Stephanie for all those investors who panicked in 2008 and sold and who didnt and who hadnt had sold, they would have crushed it. Seth that is very true. Since then, Interest Rates have gone down. Most individual investors do not own the bonds themselves. When investors want to redeem them, they have to sell. We have to give that money back to investors. Traditionally, the bond market is 20 years behind for the equity markets have been. There is very little technology that is involved. It is not a facilitated market. The deal is in the last five years, they have dropped the amount of stephanie inventory. Except inventory, the capital they can apply by 80 . Erik mostly because of regulatory actions. Seth they are simply not able to facilitate this. They can position if they cannot position it within their own firms anymore. That huge exit door that was made there, how the bond market is works, it is no longer available. If investors start redeeming their funds and these funds have to sell bonds to make money to get back to their investors and they cannot get out of these bonds easily and we saw a good example in the recent flash crash which is the most liquid market in the world. Erik how does the dark pool health . Dark told helk pool help . Seth for the first time, rather than having to go to a facilitator or intermediary traditional dealers we are asking everybody to pull everything that they want to buy and sell. The same way we did with equity market. Since they own the majority of the securities, if there is a buyer and seller the first time, they will be able to me stephanie and you can take the high yield market the bigger to Goldman Sachs, and they say they are making it 90 or 91. Seth if those sides get a better education, better execution, technology can stephanie if this works, are you going to decimate the highyield debt . Seth i dont think so. Used on the dealers to help facilitate for everything we will not be able to cross. Stephanie our decimate them because they cannot take positions. Seth traditionally, this is where they have been making the majority of their money. They need us as much as the Fund Managers do. The underlying assumption here is that the seller of the bond is going to get a better price in your dark pool then he would on a dealer desk . Stephanie why . Why . Erik if that is the case, the market maker is not doing his job. Seth no because the amounts of capital he has is not as tight as it used to be. As more and more as the liquidity evaporates, spreads get wider which means that when they do make markets, they do make more money. Erik whether the market is great or dark, the spread between bid and ask is going to exist. The guy who wants to sell is going to want to sell more than the guy who wants to buy. Seth in what we have found in our markets and we have gone out to major Asset Managers in the United States in europe, because we are watching in the neck we are launching in the next few months, they note liquidity is the number one concern. It is not about better offers. It is about splitting the difference in the middle and making sure that if you want to sell, you have a ready buyer because our system will find the other side of that trade with a real order on their desk ready to trade then and there. Stephanie it is unclear when you say, they need us. In my mind, you are the worst nightmare. Seth they cannot position as much as they can. Stephanie that is a reality they do not want to address. They dont want to bring in and outside guy. Seth they have to get off their books as fast as possible. They neither liquidity and we will have the majority of the assets of the highyield and investment great on our system. Where else are they going to off load it . Stephanie what you may be presenting his reality, but the reality that high yield traders at Goldman Sachs or do not win to his knowledge. They will not hand over their bread and butter to you. Seth i would agree fighters ago when the banks were flushed with cash and they had five times the amount of money to apply to the business. They no longer have that. Stephanie why would they give the little they have to you . Seth they are not giving us the capital. They will make the markets they make, but when it is in their inventory, they have to get it out as quickly as possible. Where else are they going to do it . They will try to other dealers but ours as well. Erik before you have to run, you are so certain you have the support of these institutional Asset Managers when on the equity side, they are banding together to create a competitor. Seth it is because Everybody Needs liquidity, we are not the only solution. In this marketplace, you need multiple solutions. You need a dark pool are gusts which is going to be the first in the debt get. In the debt market. But you need the dealers and the facilitators. Stephanie i think you need a new brand or name. Dark pulled dark pool . It sounds like darth vaders vortex. It is a terrible name. Erik the ceo of liquidnet seth marrin. Stephanie Market Makers will be back in a moment. Scarlet byron scott group at the breaking i am scarlet fu at the breaking news desk. Trading at a onemonth high after giving him forecast reassured investors. Remember, it had the wood expectations are in the first when it warned firstquarter sales would come in lower than anticipated because of the stronger dollar, but it has now signaled that growth that gross margin will be about 62 higher than what analysts were predicting. Service and data centers supporting sales. Meantime, open higher but turned south. It turned on weaker coal target declines. Csx has a neutral are lower volume for this quarter, according to the company on a conference call. What do in Revenue Growth is locked . You give back cash to shareholders. Announcing a Buyback Program and invest and increasing their dividend by 13 . Finally, analysts called nike and gopro positive. The latest survey says they remain the top apparel and footwear brand. We will be back with more Market Makers. Announcer live from bloomberg headquarters in new york this is Market Makers. Stephanie european regulators accuse google of antitrust violations. Erik hank paulson uncensored. On bankers, income inequality and who he supports for president. Stephanie when it comes to food , beauty is in the eye of the beholder. Should the Food Industry reject billions of pounds of produce just because it does not look so good . Welcome to Market Makers. Im Stephanie Ruhle. Erik i marriage im Erik Schatzker. Stephanie the top business stories of the morning. Factory output in the u. S. Barely climbed last month. Arnold making rebounded but other industries retreated. That is being blamed on the strong dollar which is hurting overseas demand. Cheap oil has led Energy Companies to cut act operations. To cut back operations. A protester jumped up onto the table of president bush while president mario draghi was speaking. While president mario draghi was speaking. Before she was hauled off draghi resumed speaking and said quantitative easing will continue until prices are rising consistently. Until the end of september 2016. In any case, until we see a sustained adjustment in the part of inflation, stephanie draghi left Interest Rates unchanged. Do you remember when gnocchinokia was the biggest maker of phones . They have agreed to buy alcatel. The deal will boost nokias position in china and give the company contracts with verizon and at t. In fall river massachusetts a jury has found Aaron Hernandez guilty of firstdegree murder. Hernandez is convicted of killing a man who was dating the sister of hernandezs fiance at the time. He could get sentenced to life without parole. No more toga parties. No more flounder. Im talking animal house. Dartmouth college has shut down the fraternity that was the inspiration for that movie. Dartmouth was not happy that the alpha delta house branded fl esh of 11 new members. The frat had already been on suspension for several other infractions and apparently dartmouth does not believe in double secret probation. I want to point out what i find interesting about the stories. In order to get into dartmouth, you kind of have to be a super nerd. How do you go from being a super nerd, number one in your High School Class to a complete beast animal, branding the skin of your pledges . Wheres the disconnect . You go from valedictorian to, nine months later, im going to brand someone. Im going to get branded. Erik were going to talk about google. The eu says this company is behaving like a regular goliath. They accused google of violating antitrust laws to illegally steer consumers toward its own products. Heres what the antitrust chief had to say this morning. Google cost favorable treatment of its Shopping Service is an abuse of googles dominant position in general search. Google now has 10 weeks to respond. I will carefully consider the response before deciding how to proceed. Erik thomas vignette agrees. He is in brussels this morning and cory johnson is in san francisco. You represent some of the companies that have complained in some cases aggressively about googles practices. People here do not get what the europeans are upset about. What is it that google has done and is doing that makes this practice is unfair . Thomas in europe, google has a larger market share than in the United States, about 95 . What it is doing is, in the search results it provides in europe is providing advantages to its own services, in this case google shopping. Placing those results in a more advantageous addition than those of others. Our view is that that disadvantages presume disadvantages consumers. Google services are higher than they would pay on others. In general, a dominant Company Engaging in that sort of discrimination is on your awful is unlawful in europe. Stephanie what is it that google needs to do . Disprove what you are saying . Thomas they need to seek to disprove that they are dominant. I would suggest they will fail. They will have a difficult time indeed. They will deploy other arguments. They should do so. Any company that is accused of violating antitrust law isnt tired to do process is in titled to do process. Im sure they will say things like, this is our page, we can do what we like with it. I do not think they will succeed without either because that is simply not the law. If youre in a dominant position, you not entitled to do whatever you please. You are not entitled to do whatever you please. The u. S. Court of appeals in the Microsoft Case set up at the fact that you own a baseball bat does not mean you can start beating people with it. Erik if thomas is correct and his constituents are correct and google has to make changes what will it have to do . Cory lets talk about what this is really about. Innovators, companies that want to sell stuff on the internet and offer Services Airline trips on the internet google is hiding those businesses and keeping them from succeeding according to this complaint and what the fcc staff found in the u. S. This is kind of a black eye for those in the u. S. Who decided not to follow charges. Google is saying we can use this to push our businesses and we can say this is what the consumers really want and when we are successful we can say, we were right. The eu has a number of things available to a number of penalties. They can ask for changes in business practices. They can ask for fines. It will be interesting if they pursue this further and talk about things like a breakup of the company or the u. S. Charges their mind and source to get interested again. This is a secret in Silicon Valley no one likes to talk about. You will not believe what google is doing to us. The results from their search pages are different from the phones and we cannot get traction with the business going through google. It is hard for us to have a business anywhere near them. If you into our area, we are in trouble. Erik it is googles fault that they have a 95 market share. As much as customers prefer the Google Search to beinging or yahoo or anything else available. It is not a regulated business as telephones would be or wireless airwaves. I know this will send ossetias question. Like a this he shifts question. Why is it wrong for google to take advantage of that . Thomas it is not inappropriate for google or any other company to build a great product which consumers find better than other products and to obtain a high market share or even a monopoly. We would contend that along the path to achieving the dominance it has, particularly in Europe Google engaged in anticompetitive practices that led it to have such a high market share. That is not to say that google has not been highly innovative and made great investments in technology. The real reason why google has such an impregnable market share in europe in particular is because it has such a huge advantage in the scale of users data. Stephanie couldnt one of the reasons be because google is awesome . I use google because it is the best. That is why google has that information on me. Cory i suggest that they have that advantage because they have that advantage. Amazon tried to do this about 10 years ago. They had a terrific product they just could not get the traction. Google hired all the engineers who were working on it to change google. It is the expansion from search into other businesses that is the problem. When google uses that search advantage to bury competitors in shopping or airlines and travel. That is what they are accused of doing and that is what the problem is. Erik thank you so much. Tori johnson is our editor at large in san francisco. Thomas, thank you for joining us. Stephanie moore withstand druckenmiller. He will be telling us more withstand druckenmiller with Stan Druckenmiller. Hank paulson talks about wall street. Stephanie welcome back to Market Makers. Stan druckenmiller is sounding the alarm on the feds zero Interest Rate policy. He thinks the fed needs to raise Interest Rates now. He thinks they should have done it a year ago. Stan has been criticized by paul krugman for talking his book and fear mongering. I spoke with stan and asked how he responds to that. Stan i would never say anything negative. Stephanie you said a lot of negative things. Stan i said the risk of going too late, because i think longterm are higher than the risk of going to early. In terms of talking my book, i would say this. Markets have been very accommodating the last several years. Luckily, we have taken full advantage. Stephanie what is that mean accommodating to your style of investing . Stan there has been a bull market in a lot of equity markets. It is been conducive to making money. To some extent, it has been rejuvenating because it felt like the old days. The other thing i would say, in terms of talking my book as you said, ive been saying this for a while. My style of investing, i can change my positions in 24 hours. I do not get why this is about talking my book if ive been saying it for a year and couldve changed my portfolio within 24 hours. Stephanie you say the one thing you learned from george soros, when you see it, that big. Bet big. Stan there was a while ago. I think the divergence between monetary policies between the United States and europe in may of 2014 presented a textbook opportunity and currencies opportunity in currencies where we were tapering. Theyre going to start qe. Theyre going to a negative deposit rate. They were going to a negative deposit rate. The euro was overvalued for a long time because they were streaking shrinking their Balance Sheet. Ive never seen a major currency trend last less than two years. It would be remarkable to me if the run in the euro is over. It would not be remarkable if we paused for a while, the way the yen did in 2013 and went sideways. That is one that that has not changed for quite a while. Another big bet is japanese equities, european equities those of the only big bets. I have new ideas im flirting with. Stephanie what . Stan i am optimistic on crude prices. I think they will do better than the forward curve because as my protege said a year ago, the cure for high prices is high prices. He would also say the cure for lower prices is low prices. It means prices at 50 have caused a lot of behavior in terms of future production expiration budgets. It should pretty much clear up the supply demand outlook by early 2016. I think that is different than the world is thinking. I also think there is one other wildcard. The chinese stock market is up 140 in six months after being in a downtrend for five to seven years and is doing so on record volume with record breadth. If it was any other stock market, i would tell you there is a 98 chance china will be in a cyclical boom six to 12 months from now. Because it is china and we do not know the nature of what we are dealing with relative to normal mature, developed markets , i would downgrade that assessment stephanie because you dont trust the data . Stan it is not the data. I dont trust the markets. Whenever i see a market explode on record volume and record breadth, like day follows night, six to 12 months down the road youre in a fullblown recovery. The reason that happens, i think there is enough of that it is certainly greater than 50 . Stephanie when you say you like european equities, do you actually see economic recovery or are you just seeing from an investors standpoint bargains you can make money on . Stan i see economic recovery and i see a lot of Great Companies. We just had a discussion about china. Analysts have been downgrading bmw and volkswagen because of chinese exposure. What do you think happens with a weak euro getting you in earnings tailwind if chinese recovers . You have Great Companies like airbus that are much more competitive than they were against boeing but all our anecdotal evidence is europe looks pretty good. Stephanie do you have a Favorite Company . Stan in europe . I like the telcos a lot. I like the ones i just mentioned too. I do not have a favorite, i have a portfolio. Stephanie what do you think about ibm . Stan im encouraged. They seem to have taken some steps to balance between Financial Engineering and investing. Im discouraged that they are still so timid in that direction. Stephanie yesterday, i spent time with Mike Bloomberg Jordan Spieth and Stan Druckenmiller. If there was ever a time to feel like an underachiever, it was me yesterday. How about those four . Erik i love listening to what stan has to say. I love that some of it is, why didnt i see that and a lot of other things are not the conventional wisdom. Stephanie except for the fact that those mistakes so many people make is to invest emotionally to chase after something. His point is he is made the biggest mistake of his career when he invested emotionally. When, in 2000 he bought at the top of the tech market because he is looking at guys around any got his head blown off. He says you have to think rationally and you will have that moment and he is crushing it. Erik he seems pretty calm. Unusually so. Comfortable. Confident. Stephanie next to me, anyone is. You remember ibm, he went short a year half ago. He said he has more constructive about what they are doing in terms of strategy. Erik a lot of people are around to the same view on ibm since then. Stephanie back in one minute. Stephanie treasury secretary hank paulson sounds off on wall street. Erik it is not too ugly to eat. We will talk to the woman who has made a business out of rejected produce. Announcer live from bloomberg headquarters in new york. This is Market Makers, with Erik Schatzker and Stephanie Ruhle. Stephanie welcome back to Market Makers. I am Stephanie Ruhle. Erik im Erik Schatzker. Markets in europe are raging green once again. Scarlet fu at our breaking news desk. Scarlet raging is a good way of putting it. Stocks flying high with the broad stock 600 at a rush record. Mario draghi claiming success from the bond buying program. The euro, weaker 1. 06. German 10 dear dish german 10 year he continued unfazed. He says quantitative easing will continue until a sustained adjustment in inflation is reached. He also said concern over any kind of bond scarcity is premature and in addition he has not seen any evidence of any asset doubles. Any asset bubbles. It was good enough to get stocks raging. The ftse, up a. 2 up 8. 2 . These are world beating gains. Next to china certainly. Sizable advances. The nokia deal, a reversal of what we saw yesterday. It had gained earlier on some relief according to Jesper Lawler of cmc markets. After tell lucent i can tell lucent giving back some of its advances. Stephanie one of Hank Paulsons Top Priorities as treasury secretary was the u. S. Relationship with china. An issue he also dealt with as ceo of Goldman Sachs. In his latest book he offers his take on doing business with the peoples republic of china. Peter cook was in nyc yesterday and had a chance to sit down with hank paulson and talk about that. I believe you talked about more than just china. I think you talked about banking. Peter we did. Mainly the focus was on china. I wanted Hank Paulsons take on the political environment in washington. The rise of Elizabeth Warren and the antiwar street sentiment that still prevails six years after the financial crisis. He calls it regrettable. Hank i believe very strongly that income disparity is a huge issue in this economy. When i was treasury secretary i think it shock some people i i believe that is a problem. I think the way to solve that problem is not pointing the finger scapegoating republicans. People scapegoating china or wall street. We have had demagogues throw the history of this country. Throughout the history of this country. We need problem solvers. Peter do you think in this involved deepika in this environment do you think in this environment hank it is regrettable that bankers are being demonized. I view markets and banks as being a noble profession. I think in terms of difference they can make, in terms of helping people plan for their retirement. In terms of funding innovation and new businesses there is nothing wrong with pointing fingers at the banks and making a huge effort to clean things up correct practices. The problem is if it ends there if all you do is say it is the banks fault. It is not the policymakers who have not dealt with it. Im tired of the fingerpointing. I want to see people working together to restore our competitiveness. These are not economic issues. They are political issues. Peter do you see a 2016 president ial candidate who meets your test . Hank im sure there are a number of them. I happen to be a jeb bush fan because i see him as a problem solver. Someone who has excelled as a governor. Someone i think well have the programs to get the economy growing and is not divisive. I like where he is on immigration. I like the fact that he is authentic enough that he has not said, i used to be for the common core in education but now ive changed. We have a process we need a real leader to emerge who is going to bring our country together and do some of the things that need to get done. Peter not a huge surprise that he likes jeb bush. You can hear hank paulson weighing in on 2016. His defense of wall street. Not a lot of other people singing the same tune is hank paulson these days. Stephanie he has a different background. He would love to he will love to point the finger at wall street. Erik if hank paulson were graduating from dartmouth today what would he be doing with himself . Peter i asked him that self. I asked him that myself. He first thought he would be a forest ranger or an english teacher. Stephanie hold on. Wait. Im going to back that one up. You are saying, you believe he graduated dartmouth he thought he was going to be a forest ranger or english teacher but somehow ended up the most competitive one of the most competitive investment banks on earth . Peter he went to work in the nixon administration. He was a policy guy at the pentagon and then the white house before he ever came in touch with wall street. He is a different background than maybe a lot of people think. He was a Football Player in college. He is a defender of wall street. He feels that these banks do a public good even though some of the practices may not be all that good currently. He has mixed emotions about some of these things that he is still a defender of wall street. He is morbid conservationist these days but he is still active in the china gate he is more of a conservationist these days, but he is still active in china. Erik chief washington correspondent, peter cook. Stephanie Market Makers will be back in a moment. Stephanie welcome back. Im Stephanie Ruhle. More breaking news on Aaron Hernandez. The verdict was in, guilty of firstdegree murder. Scarlet Aaron Hernandez was firm formally sentenced to life in prison without parole. It comes after members of the victims family spoke. This comes about one hour after the jury found he was guilty. Of firstdegree murder for the shooting of odin lloyd fecund 2013. It followed back in 2013. The defense had to pivot their strategy at the end to a knowledge during closing arguments that hernandez was there when lloyd was killed. Aaron hernandezs troubles are not over. More legal problems because he is awaiting another trial that is tentatively scheduled in may for an alleged double murder and 12,012 double murder of two men in 2012. Stephanie my kids are 20 years younger than he is, they would know what to do. Being 23 is not a good defense. Scarlet p are pressured into it is what you are pressured into it is what the defense argues. Stephanie horrible situation. Very sad for the family. Erik coming up, all of that food that gets thrown out because it is not pretty enough for stores. The woman who is turned it all into a business. Stephanie welcome back to Market Makers. It is time to bring you up to speed with top stores of the morning. European regulators have accused google of breaking antitrust rules. Google may have expected that after a four year investigation. Eu regulators have also said they opened a probe into android software. Toyota is ending a selfimposed freeze on building factories. The automaker will spend about 1. 4 billion to build plants and china and mexico. Toyota has not built any factories since the financial crisis. It is now facing a production crunch. Aaron hernandez has been convicted of firstdegree murder. A jury in massachusetts found that hernandez killed a man who was dating the sister of hernandezs fiance. At the time hernandez had a 40 Million Contract with the patriots. That conviction will be automatically appealed. Erik 6 billion pounds of food is wasted on farms every year because every vegetable that comes out of the field is entered into a beauty contest. Cooking carrots crooked caret and dented apples get thrown away. They are just as edible and tasty. Claire cummings is the waste specialist for a Food Service Provider and catering service. We have been saying how you built a business out of this. Claire imperfectly delicious produce is a program were talking about the shapely turnips. This is a program that we launched in partnership with our Partner Company our Parent Company to help farmers. Youre doing this by getting this produce out of the fields into the hands of our creative chefs who can come up with great ways to incorporate it into our menu. Stephanie im the farmer, i bring my stuff in, whatever his misshapen goes in the trash . Claire traditionally it will either go to a landfill where decomposes and if it is not going to a landfill it is getting to a compost bin and we are wasting resources that went into growing and processing that food. Stephanie they do not look bad. Claire there is nothing wrong with it. Stephanie youre going to chop it up anyway. Claire flavor is what matters. Not appearance. Erik what is the wholesale cost of a pound of carrots . Claire were seeing a range of savings. Anywhere from 10 to 50 . It depends on the crop. We are an average of 30 savings. Through this program we have been able to save over 46 tons of produce in two states in less than a year. Stephanie do you how about the products they have that no one buys . It goes to the store but when i am picking my way through eyelid the pretty apples, what happens to the literally bad apples in the store . Claire i cannot speak to that very well because we are in food service. My guess is that they are being donated or possibly getting thrown out. For bon appetit, we have been able to save a ton of this produce by incorporating it into our menus. It has proven positive. It has been positive for our chefs and managers because they have incorporated it into some delicious dishes. Erik do you think there is a chance that the public will ever catch on to this . We know already there are folks who like to buy organic produce. They are into heirloom tomatoes stephanie is laughing. Stephanie he means produce. Erik they start to look for or be comfortable with the misshapen carrot. Stephanie people are buying heirloom tomatoes because they taste more delicious. Erik that is a valid point. Claire consumers play a big role. If they are at the supermarket and they see a shapely turnip they should show the ugly vegetables stephanie your chefs are taking the turnips. By the time i eat your food i do not know. How do we convince america to go for the ugly turnip . That is the next step. Claire they have to know the impact it is having. All of this with did produce is contributing all of his wasted produce is contributing to issues like climate change. Consumers have to understand there is an important piece of this puzzle in figuring out this waste issue. Erik thank you very much. Youre doing great work. Stephanie we are leaving on crooked carrots. Erik more on Market Makers. Stephanie tomorrow, the queen of the skinny girl empire stephanie frankel. She is making a comeback. We will be speaking with one of bravos originals. We will see you tomorrow. Scarlet it is 56 past the hour. Were midway through the mate midway through the u. S. Trading day. Stocks in the green from second day. The s p up by a third of 1 . The dow is at its highest since march 5. Oil up by more than 4 after a government report showed u. S. Crude stockpiles climbed by the least since january. It gave oil the green light to go higher. Oil at 55. 51. Joining me is jerod, senior strategist at the gc partners. We have been struck by how lackluster and feckless the trading has been. Why is that . Everyone is waiting on hold for the next data point that is going to move their fed outlook. I think people are trying to get clear on what the actual effect was on big factors like the strong dollar. Until there is more clarity, it sounds up a lot of traders are sitting on her hands. Scarlet weve seen evidence from the rail sector. Csx cut its fouryear forecast. We heard that norfork southern was doing the same. Isnt that a bearish sign for the Broader Market . The big drivers of demand for the railroads are in arguably secular decline. Some of the things might not come back for a long time. I know oil is rallying. I would be surprised if it stays above 55 for long. You can argue that the for all the buybacks and effort they are making, it seems like theyre trying to fight a tide they may not be able to hold off. Scarlet we might have found stability with oil but it does not mean oil is ready to rebound . Right. Scarlet ok. Lets move on to trade. The frenzy in chinese equities. The chinese economy grew at a slower pace than expected, depending on what your whisper number was. 7 annual growth. You are looking to use the etf fx i as a way in the chinese market. It is near 52week high. What is your strategy . To take advantage of the momentum while taking advantage of the bullish sentiment. There is a chart of the new accounts that are open it looks very similar. Theres been a massive frenzy and that has created bullish sentiment so we are taking advantage of that by buying at the money call about 50 strike in may. I like 44 or 45. You can do this trade for a debit of about . 50, your limited downside risk. Upside breakeven is about 58. If settles anywhere in there youll make up to two or three times that debit. Anything longterm, thats lower chinese growth is a positive. It percent growth or 9 growth would be a bad sign. The fact that they are slowing gradually is what is driving a lot of the longterm push outlook. Right now i think longterm bullish outlook. Scarlet this is all shortterm trade. Any vision outward beyond that would be a fulls game. Money clip is next. Pimm welcome to money clip, where we bring you the best stories in business news. I am pimm fox and heres the rundown. Who says Central Banks News Conferences are boring . Mario draghi is interrupted, but he takes ongoing. Chinese economy continues down the road unless beleaguered hacks. He sees in improving economy and china as well with many other contracting calls. The Spacex Falcon nine rocket has a successful takeoff. It has the lan