The president is in support of, mothers like me are in support of, but the question is, our shareholders . Mostly. If you are going to assess the economic investor impact of a decision, like the one they just made, not selling Tobacco Products says look, no further than the stock price. Last time i looked, it was down only like . 30. This is a major move. This is the First Company we are seeing doing Something Like that. The question is, will it be broaderbased . Will it be broader . Will walgreens step into it . Air mark had their earnings this morning. They provide the food at the big stadiums out there with a great morning, but what do you buy there . Hot dogs, beer, popcorn, soda. We are beginning with breaking economic news. The markets are watching for any piece of data very closely to get a sense of what is happening in the u. S. Economy. A key gauge of the u. S. Service sector is coming out. M . I have got some good news for a change. Not only is it up, but up more than expected. The Economic Indicator actually came out better during the month of january, for a change. Subindexes all improved as well. This is their version of production rises, as will the new orders index. Not a lot, but enough. Suggesting that the economy may not be going off into a ditch. The one that everyone will be watching today, i have got it behind me here on this graph, 56. 4 from 55. 6, we saw a decline in the manufacturing index, worse than expected manufacturing for adp numbers, this is the first good news we have gotten, indicating that things may not be terrible when we get the Labor Department report on friday. We leave you with some good news about the economy, which we have not had a lot of lately. Help us to put this into perspective. Clearly, we need to see more data, but is this better news today than the number from monday was worse because the Services Economy is so much larger than the manufacturing economy . Be, butior, it should the iso nine manufacturing , anythingso broad that is not manufacturing, it does not have as good a correlation with how the economy performs as the manufacturing one does. The other issues that the manufacturing one, as they said affectedoom work, was by the weather. Services that will be less affected by the weather, we have to separate that out and we will not have a good picture for several months, although i know that does not help you right now. Thank you very much, michael mckee. Now you are going to turn to someone who needs a little bit more help than that. Yes, puerto rico. The os miele. Dios mio. It does keep getting worse there. Talking about the fiscal situation, not the weather, which is better. A move that has very large applications for investors, 75 of all muni bonds are focused on mutual funds. Mutual funds have specialized in holding about that puerto rican bonds. Why . They have curious tax advantage is. Better ones than state bonds. Puerto rico has 70 billion in debt outstanding and by law cannot declare bankruptcy. Bond analystipal who wrote the report is with us now on the telephone. David, here is a question for you. Junk, yes, but why not lower it, if you are that concerned about their ability to repay . What is it really worth at this point . Estimate of near term liquidity, they are not running out of money tomorrow or in six months, so we do feel that they have diminished capacity in terms of nearterm liquidity, and they will have to access the market, we believe, sometime by the summer. So, what levels of protection do you have in the current rating . The assumption is that they will be able to access the market at perhaps an elevated price to restore some of their liquidity. Can you kick a dog while they are down . Do they still have that window access to the Capital Market . We currently have them on credit watch. To the extent that they are not able to do that, there could be further downgrades in the future. At this point they believe they will still be able to access the markets at a price. Report you wrote that puerto rico has no margin for error over the next couple of years and you acknowledge that the current government is doing a number of things, taking steps in the right direction, if you will, trying to close the fiscal deficit and keep puerto rico from digging a deeper hole for itself. Lets say that that does not work out. Lets say that no margin for error is broken, if you will. What happens next . What is the way out for puerto rico if they cannot declare bankruptcy . Haveneral Obligation Bonds a priority over Everything Else under the constitution. They would get paid first. There would be some difficulties. You are talking about the difference between legality and willingness to pay. I believe you are talking about what if they chose not to pay. It would be a new and entirely different legal situation at that point. We are not expecting that right now. That the provisions of the constitution, giving priority payment to bondholders, would take effect. What about things on the ground and puerto rico . We talked about inequality here, but you have investors buying up real estate and robert e when the actual people on the ground, puerto ricans, are suffering. We are just looking at the ability to repay bondholders. I cannot comment on that. What do you think about the possibility for either restructuring, which would not be done under the auspices of a bankruptcy court, but is still possible in theory, or if that does not work out, debt repudiation, which seems far fetched, but if you cannot go bankrupt, you are left with very few options. One of the options, i suppose, could be renegotiating the terms. For years they have been refinancing Debt Services each year and pushing it into a later year. Can negotiate you many different things. We will see what they do over the next couple of months. What do you actually think . What are their real options . If you and i have this conversation in six months, what will things look like . They will really have to make some severe budgetcutting efforts. They have already made some pretty unprecedented changes to their pension systems. People talked about that for years. They actually put that through. In most years over the past decade they did worse in the budget by midyear. Midyear they are doing better than what they budgeted this year. It is partly, perhaps, because they had to do this, but they really are taking some hard actions and making good faith efforts to try to close their budget gap. Good faith efforts to not necessarily mean results. From your perspective, they cannot avoid a downgrade or restructuring. In our view the real overcurrent is the economy. The economy gets much worse, it will be very difficult to entertain their budget. There are some signs, recently, that they might have stabilized, or that we have seen temporary periods since 2006 when they contracted every year except for one, temporary periods where things destabilized, but what is going to happen to the economy over the next year . That is the wildcard. David, what about wall street . Is it in the best interest of the banks to keep this fiscal situation in puerto rico contained . The reason i ask that question, look at what is going on in detroit right now. Detroit offered to settle with its dealers are 165 million. Now all of a sudden kevin or is going back to the banks and saying, you know what . These deals are not legal after all. Many of you hoodwink dust. Should the banks be concerned about that . One thing that you alluded to earlier was that puerto rico cannot declare bankruptcy, unlike detroit. Under the constitution, they have to make a priority for geo debt service. That provides an incentive to try to work this out. As to whether there would be some sort of restructuring, i could not say. We believe that at the current , it does appear in the near term they have, for a short while, have good facilities in liquidity. We do believe that they will be able to access the market, but we will watch for that. Do have an expectation that it will be an elevated price and that the current rating level, buyers might not be in the market, but there are other buyers who are interested. Allt calls from investors the time. There is a range of different opinions and a price point at which they could access the market. What you need to say is that there are distressed investors in the wings here, and they can swoop in, but if they are not big global they are not playing . There are investors. I am not sure how i would characterize them, but i do talk to them on the phone every day. David, thank you for spending this time with us discussing puerto rico and your decision to downgrade the territory and its debt to junk. Toi am still struggling understand this story, i think you need to send me down there, executives. Cvs, you know what is going on there today, going cold turkey. What will that cost the company . One of the most Successful Hedge Fund managers of 2013 Deion Cooperman is with us shortly. We are streaming on your smartphone tablet. Catch us on bloomberg. Com. Back to Market Makers. Everyone is talking about the big news from cvs. The First National drugstore chain to stop selling tobacco rod x Tobacco Products. Olivia sterns is here with more on this surprise move. Olivia, investors, eric and i have the question what is this going to do to the companys broader line bottom line . People love the message, but what does it do to Company Profitability . As you have been saying, this is a really big deal. Did you realize they are the second largest retailer in the u. S. After walmart . I have spent a lot of time there. Bet you are not buying cigarettes. Retail. Retail make up about three percent of their total pharmacy sales. Lose about 2 to billion in direct tobacco sales. What about the ancillary sales . Lets pretend you go to buy cigarettes are a couple of days. You could be buying gum, letter 10 werade. Are matt miller. I try never to do that. Generally a bad idea. Sales,e is the new york and that isales, revenue. Why do investors seem so sanguine . Put it into perspective, right . Investors are fairly coldhearted people, they will make decisions that maximize profit. Cvs traded on multiple sales, so if they lose 2 billion in revenue they shouldnt. Lose at least 1. 2 billion dollars in market cap, but they have not. And this suggests that somehow investors see something positive here. John over at Raymond James says that cvs could make up some of the loss and thinks there are other ways of offsetting sales, but the bigger issue is the changing business model. They are going from being a Retail Health pharmacy more to Health Care Provider. Not only does it feel better to do business with them . Thing about it honestly. Do you walk in there and think about the customer . I walk into cvs because there is a drugstore next my house. They want to get more into the Health Care Provider business. You are seeing them more and more opening up these clinics inside the stores. They are offering Prescription Drug plans. That is what this is about. You have seen walgreens doing this. If you want to think of cvs as a Health Care Provider, you do not want to see cigarettes on the shelf. What do you want to see . Ry goes, chocolate, great gatorade . Soda pop . That is a good question. Walgreens came out with a statement saying that they are also considering evaluating whether or not he should keep selling Tobacco Products. Obviously, the president is very happy, he came out with a Statement Today saying that he applauds them for the move as one of the largest retailer pharmacies in america. Setting a powerful example and attempting to reduce tobacco related deaths. This from a quote unquote former smoker. Good point. I do not know if you are about to ask me i do not know if they are about to keep selling ecigarettes. Ari herzog put out a note this morning saying that they believe this will have no impact on tobacco manufacturers as smokers will still buy the products, they will simply go to other retail stores. In your gut, what do you think . It makes sense. If you are smoking, you are addicted. Those are existing smokers. Maybe it makes it harder . Harder for kids who might want to take up smoking . Lesser, but less convenient. Just less convenient, right . Yes. Convenience matters. I think the indirect sales is a bigger issue. You are going to find your nicotine one way or another if you are addicted. If you go there to buy your cigarettes, you might go there for something else. Money. Where they lose that is what i think. Youre up there, then it is gatorade, doritos, condoms. You keep mentioning condoms. Do you always pick up condoms when you go to the cvs . [laughter] you are buying cigarettes you are not a responsible person. Endless chaos. When we come back we will be talking about twitters first earnings as a public company. We will have more on what to look for, next. You are watching Market Makers, here on Bloomberg Television with me and stephanie ruhle. Theirr, they want to put own spin on disclosure. There will be an analysts call, but it is taking questions only submitted through a special. Here to tell us what we can coryt from twitter, johnson, from san francisco. What are your thoughts on twitter . I am sure that you have many. First of all, that notion, they will only take the questions they want to take. They can look at the questions ahead of time and not answer them. This should have been baked in when they did their ipo. This is one of the most closely watched and manage ipos we have ever seen in the last few years. Not only because it responded to the failures of the facebook ipo , but because this bubble lishs market really mandated an ipo that was carefully managed, which usually include baking the first quarter. Thatare betting not only the quarter will perform better than expected, but we are also learning that one percent of the shares outstanding are short, so the really is a big battle going on this quarter on the stock market that may be completely independent of business results. Like how concerned should we be that twitter has already saturated the market . The brings this up all time. Super bowl twitter use was massive, yes, but only up three percent from last year. And we have seen the same kind of plateau with other investments with other events. People are active on twitter, but not more active. I think you will see that and a lot of numbers. International is a big deal for this company, i think. Much more of their business is international, i think. And if the monetization is international and quite low, the growth rate has been slowing even more dramatically. That will be one of the things that people really dig to the numbers to look at. Is i think that monetization quite low, again, even if the total number of users and usage does not grow. What do we expect to hear from twitter on the data moving front . It seems to me that there is a huge unexploited opportunity in big data for twitter. While that is true they have a real difficulty with advertising right now. They did a big acquisition right resultshe ipo and those will be listened for to see if there is anything that came through on that. There is a big story going on in technology that we had not planned on talking about, but i think that people should be paying attention to, the fringe stock completely collapsing today, and the bubble ending everyone is going to find out more about that at 1 p. M. On bloomberg west. Market makers will be back. Thatoomberg has learned new york state is opening a currency trading investigation of more than one dozen banks. According to people familiar with the situation, benjamin loss key is behind this. He has requested documents behind or related to the Foreign Exchange trading practices of several banks, including goldman sachs, deutsche bank, lloyds of , credit suisse, and Standard Chartered banks. Spokesman for the banks declined to comment. The back story here that was reported on in june is that some employees at some banks were sharing information about their currency position with counterparties at other banks. This is the back story to this investigation that they have reportedly opened up. Investigators in the u. S. And europe again looking into this last year, it has heated up and now the new york state financial regulator is looking into it as well. We are keeping an eye on the shares of financial stocks right now. U. S. Stock markets are at the session lows, giving up earlier strength. Banks continuation of how are struggling and how some investors are doing quite well, that is our next topic here. All this month we will be talking to the worlds most Successful Hedge Fund managers. We are going to do it right now. Bloombergs market magazine is out with their top list of outperforming Hedge Fund Managers. Overseas returns 22 in october. Lucky him. Lee, you have Better Weather than us, better returns than most. As you look at 2014, some say that we are facing a tumble, others say correction. What is your macro view . These kinds of selloffs create opportunity. The correction was to be expected and was probably healthy. Onre were too many players the same side. You folks have an exhibit on your terminal where you solicit the display solicit and display the opinions of 21 different strategists and it is interesting, at the end of the year, 20 have the markets up for the year, one strategist had it down. The vast majority of people pulled up and invested long and stocks, long in japan, shortly end. Now all of a sudden they were not thinking about it at that time, emergingmarket issues, thinking about some slowdown in the economy, the markets taking a quick five percent hit. For a number of months i have been arguing i was just going to say that you pointed out that the market was down five percent, six percent, based on the outlook. What do you think is going to happen . Will the stock market and the gear up or down . I think it will end of the year up. With profits growing very slowly , corporate profits growing at five percent, s