Transcripts For BLOOMBERG Market Makers 20140520

Drive customers away. Microsoft unveils a new version of its tablet. Epic fail. A newlds unveils character to promote healthy food items to kids. One problem, it is totally scary. Welcome to Market Makers. I am stephanie ruhle. I am at alec still, in a four Erik Schatzker and was on i am alix steel, wh in for a chapter, who was on assignment this morning. Credit suisse agreed yesterday to you the guilty to charges that help americans illegally invade that it evade americans illegally taxes. This case shows that no Financial Institution is above the law. When the department of justice conducts investigations, we will always the always follow the law on the facts, wherever they may lead us. Profitability or market share can never and will never be used as a shield from prosecution or penalty. There were concerns that a guilty plea could prevent clients from doing business with Credit Suisse, but those concerns seem to be unfounded. Shares are up on the day. The markets seem to be feeling positive, which is extraordinary. We have a Bloomberg News backing reporter, a Bloomberg View columnist, and an attorney with paul hastings. Break down exactly what happened and the ramifications. Credit suisse pleaded guilty to criminal charges and they have to take 2. 6 billion to the fed, the new york state banking regulator, and the department of justice. Pleaded guilty is a subsidiary of the parent company, and we thought that might happen at some point, and that is a way to shield larger banks from collateral fallout. Change iny is a game terms of how the department of justice is going to be going after banks in the future. The question is what this is going to do to Credit Suisses business and what kind of impact will that have. Clients are reevaluating their relationships but that does not mean clients will be leaving the bank. Credit suisse can still operate in the u. S. And abroad. We are in a way and see what this what impact this has on the bank. I dont think it is different in the final analysis from what happened to ubs, except it was elevated slightly to a criminal charge, but it was a criminal charge that was contained, so that the form of that would be limited. If you look at the Market Reaction to the stock, it has been limited. It was done this way principally to allow the Justice Department bit that talk back a walk the dog back of it. If you are brady dougan you have 2 choices not the guilty, give up the name, truly lose customers. They are not going to protect the lot s are on not going to protect you when things are on the line. A guilty plea yet preserving your reputation, that will line up. There are 2 aspects to this. Since we mentioned ubs, when did they settle their claims . 100 years ago . They have to move forward without this hanging over their head. Thing. Ubs did the smart it is better to get these things out of the way sooner rather than later. Goldman sachs learned that less learned a, didnt ubs lesson . In the Global Markets business they are practically dead. No, not at all. Ubs is kicking it where . They are still one of the biggest ones in the world. Done remarkably well. Does a guilty plea actually matter . We have Credit Suisse going over and saying we will make sure this doesnt impact their business, then whats the point . You make a very good point. If you are an individual doing a guilty plea on a criminal charge, it is fatal to your career in finance. If you can contain this a dirty word from the subprime crisis if you can contain this to a subsidiary and not have this spill over but the other aspect is fascinating. Wasnt holder the administrative person who said we really dont want to mess with these banks, hey are too big to jail . This is a full 180 from the adc we heard out of is office a couple years back that did not allow prosecutions to the place. Thats not true, they were never too big to jail. That is his quote. You had every prosecutor on the state and federal level dying to get a conviction of a bank or Senior Executive at a bank in order to show that they really did make them pay for 2000. Its nonsense. Let me point out where you could have been like the s l crisis where there were literally thousands of convictions. People were reviewing mortgages and then or not reviewing them signing affidavit attesting that they spent, review the documents, verified everything. These people sign off on it 200 or 300 lowlevel. Someone gave it been that order, between jamie dimon it could be laziness. They could have been instructed to actually do that but decided they would rather go to mcdonalds that day for lunch. I have to red flag you can do 8 to 10 of these a day. Cie indicia ofa actual fraud. That is a business practice. That is a felony perjury. You cannot do that, and there should have been hundreds of people, they shouldve rolled them over like lowlevel drug deals to find out who is the senior person he said dont worry about centers of property law, just process this like it is a factory, just crank it out. Theyey have had 5 years thought they could get to a Senior Executive, believe me, they would be doing the rolling. They have been trying for five years and they havent done it because i believe the criminal conduct just wasnt there at the highlevel. Dougan at Credit Suisse lose his job . If he doesnt, who is going to take his place . What do we know about Credit Suisse who is next in line to o this . Second, some of the criticism is coming from the fact, as we touched on before, where are the individual charges . It has less to do with charging the bank and more about going after individuals. We didnt get that in this case and several people were terminated over this that were already under indictment. We have not seen major reservations are people charged. That is what people want to see at this point. And capital strategy and Bank Strategy irrespective of this this is going to hit capital ratios as well. 2,000,000,000 is not already less than i think that has already been taken into account. That plan is only under white. Thatwill not be a real plan is already underway. That is not a reward issue. Real world issue. Lets pretend i am a Hedge Fund Client and today is the day i decide who my prime broker is going to be. Suissen, ubs, or credit does this guilty plea affect the decision i make . Probably not. We have seen this happen with Deutsche Bank, goldman sachs, j. P. Morgan. The easter neither admit nor deny. Now they are forcing the admission. If it hurts them for couple of what maybe, but after is jpmorgan up to, almost 20 billion in fines . It hasnt hurt them. Going forward, this will be very quickly forgotten. Wall street people are notorious for remembering almost nothing. You have to remember the nature of the crime, and for the , anstor class, by and Large Institution that maybe went over the line in saving taxes is not considered to be a hanging offense. Aay disagree with that crime is a crime is a crime but it is a different crime from hsbc, which was the bank of choice for terrorists and drug lords. What does this mean for bnp paribas and the potential settlement . You have to look at it individually. You also have percolating with that the issue of the french government, and we have heard rumblings that it has gotten involved in the process and say that we will make sure our institutions get fairly. Same has been true when we look at Deutsche Bank and what they did with their capital raise. The German Government monster keep them whole. Wants to keep them whole. We saw a little bit of that with ups and switzerland. Lets be blunt, citigroup and bank of america were bailed out because the United States government did not want to see them go belly up. Isnt this the case where the United States government is coming out guns a blazing . Good investors mind could investors mind . Really goingder is after these guys, maybe i dont want to invest in financials right now, maybe i wanted to back bush want to step back . Maybe i want to step back . I hate the whole uncertainty meme. This removes some of that, removes the ambiguity of what the future might hold. One is once it is behind you the stock goes up . My best guess, yes. We know what the settlement is and we dont after worry about fines in the future related to this transgression. Thank you all for helping us break this down. Geiger, and the one and barryloomberg views ritholtz. Microsoft tries to get it right when it comes to tablets. We will see if it really is an improvement or just another swing and a miss. This is Market Makers on bloomberg tv, streaming on your phone, tablet, bloomberg. Com, live on amazon fire tv and apple tv. Welcome back to Market Makers. I am stephanie ruhle, and im excited about our next guest. Investors seem to be getting behind carson blocks thesis on mobile. D nq shares of fallen over 40 over the last month and 70 since mr. Block called the company a massive fraud back in october right here on Market Makers. Carson block is right here with his reaction in his first interview since the Company Announced the filing delay. Remind us, what is your thesis . Who is this company . It is a Chinese Company that made a security app for mobile phones and it claimed to have about 6 million paying users of the time we wrote on it will stop it is no more than 250,000 paying users. 2012. E of over 90 in we think the real revenue is fraction of that. We think it is a substantial fraud. Between october and today what happened . The company benefited from this rally in Internet Companies and online companies. The stock sold off on the theany it vehemently denied allegations, with ad hominem attacks on us, our committee will investigate. The q4ey announced numbers, which were impacted because their auditor was likely very present at the Company Looking at things closely, the Company Reported a surprise loss. That is when the recent selloff really started. Company delayed its annual report twice. They said that we wanted to wait for the independent investigation to become fluted to be concluded before filing the report. The Company Making these statements, the u. S. Side, quasimanagement, they have no idea what is going on with the audit. How do you know that . Well, because theyve missed the deadline twice. They were promising the company would complete its audit on time. On april 30 this is something where i think the u. S. Side managements conduct recently is reprehensible, if not potentially illegal. On april 30, the first deadline , theyhey missed for 20f put out this bullish press release talking about how the Directors Committee investigation so far has not found any wrongdoing. Now buried in there was, oh, by the way, we cant file our 20f today. The stock closed up 11 . Investors paying over 12 a share that they to own this, and it is now 7 in change. Why isnt it fair for them to say that so far they havent found anything . Pwc has not issued an audit opinion. I question what is holding up the independent committees results. The Companies Said initially before it missed the deadline in early april that the independent committees results would be reported in the 20f. Pwc wont issue the audit opinion and they cant file the 20f. Why arent they releasing the independent committees results . What this pretty clearly says to me is that whatever the directors on the independent committee say, it is being driven by the audit opinion. If it comes back are qualified, they issued the whitewash statement. If it does not come back unqualified, it changes. Why arent legit Business Partners stepping up . Would lookt sprint at Something Like i would guess that sprint looks Something Like this and says i want to get the f out. The company has released numerous press releases the past 2 years about partnerships on the u. S. Side, yet it hasnt materialized into any meaningful revenue. On the flipside, whenever we asked and since our report from others investors have asked, you have all this international revenue, roughly 40 outside china, but it is not u. S. Who are the partners overseas in the middle east . They refused to answer have you reached out to see the details of the partnership . No, we have not reached out to sprint. We are concerned about doing that for legal reasons. We will Like Companies such as sprint and other socalled partners and makes me think that i should really stop i have a starwood credit card and it makes me think i should release a press release saying that muddy waters is partnered with starwood. We dont know if this will be in any way material how far are you going to take this trade . You could actually take the money and run at this point. Why wait for the report to be released . You have already made a ton of money on this trade. Why not get out now . Well, i dont know if it is 5050. You have no idea. It is impossible to know and youve made a ton of money already. It is impossible to know. However, things like this dont happen to cocacola, ok . Clearly there is an issue with the audit. The company is telling investors that peta bc is going through extra compliance that pwc is going through extra compliance layers. I dont believe that. I think pwc is not going to communicate to the company if they are considering resigning. It is impossible to say what is going on. But i do feel that it is probable that the company does not get an unqualified audit opinion. For youthis a take to say i was wrong, this didnt work out, i believe what they are saying . There are 2 things. That is being wrong in your thesis that the company is a fraud, or that it is incapable of generating cash. And then there is the stock going up. In the case of focus media, it is a fraud, it was a fraud. Acquired at a premium to where we sure did shorted it. Bizarree acquisition is. And a lot of people in singapore have questioned it. What is it a rally where i am out . There are times where we certainly can look at a stock and say we can reenter. Hedge. Imes we will nq andrelation between his other China Internet stocks that is really on the holcomb of the thesis on these companies has never changed. Are you looking at other Chinese Companies . Everybody is focused on alibaba. What should they be looking at . With respect ali baba . Or in general . You always hear a lot of numbers. We know you cant have a site visit because they are not letting you off the plane. [laughter] i do know ali baba is a real business, i will confirm that. But for people in china to commit fraud in the Capital Markets is completely asymmetrical trade. Nobody has been materially, meaningfully punished for defrauding u. S. Investors. As an investor you have to ask yourself, why wouldnt they lie to make the numbers better . In general should there be fear for u. S. Investors looking at any Chinese Company because they cannot trust the numbers . I think they should trade at a discount to their western peers, because of the issues with the numbers and also with these Internet Companies you dont own the underlying company. You own a derivative of the company. Beyond the scope of this show, but that is something passionately they wont understand vie . Is that what you are saying . Im just kidding. More than whats they should be selling for given the risks. What is your next target . Could be china, could the u. S. , could be european. It is definitely on this planet. Is definitely on this planet. Yesterday, when you heard the u. S. Government naming names and going after Chinese People as it relates to cyber security, what is your take . Are you finally saying, great, people have woken up . U. S. Stomach or job on being skeptical of the security risks the u. S. Has done a good job of being skeptical of the security risks china poses. In europe and the eu they have not done that. The u. S. Government is doing very well in that regard relative to the rest of the world. Hose email has w been hacked, likely by the chinese come im sitting there aboutng, yeah, it is time. By the same token, we are doing the same things to them. We will see how the chinese react, but im sure this will be an escalating situation for some period of time until we both pullback. Carson, always great to get your insights. Carson block director of research at muddy waters. This guys never afraid to go short in a big way. You have to give microsoft points for persistence. I guess. Lets see whether it will fail in the upgraded tablet. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and stephanie ruhle. Welcome back to Market Makers. I am stephanie ruhle. I am alix steel, in a four Erik Schatzker. I dont have a matching suit and tie combo. Today microsoft is introducing a new smaller version of its tablet, the first generation of which failed to get much market share from Industry Leaders like apple and samsung. Will these new versions do any better . East wen has come love that. He is outside the event in downtown manhattan. Microsoft already took nearly 1 billion writedown of its surface tablet. Why do they think this will do any better . Look, they have got to do something in the tablet and mobile business. T has not been a total failure substantial loss because they were not moving enough to make a profit. Microsoft is willing to take losses here. The android tablets at nine percent, apple has everything else. It is emanated by apple right now it is dominated by apple right now. Is it about selling hardware or about selling windows . It is about market share. They have to put the pedal to the metal on think about tablets like nokia. These will spread the gospel. It is all about the crowd. You have to read the gospel for it to be spread . Battle. An uphill he has inherited a lot of headaches but so far he has come out of the gates pretty positively. Move the needle positively in terms of market share. What do you need to come to consider this a win what do you need to accomplish to consider this a win . They are way late to the game. At this point it is about them trying to gain an incremental 200, 300 bips of market share. How long do they have to make this strategy work . One of the issues at play is that it was too microsoft is a hardware maker. They were ticked off about the 8 was promoted as a device where you touch the screen and they refused to make those devices. You would not see those devices in the marketplace. At the same time, it came with andown hardware and surface made by dell and partners of microsoft. At the same time, it has managed to tick off a lot of their Business Partners. What do you think . At this point it is about the Cloud Strategy and tablets and mobile are the facilitators of that. Now it is about dell and not just talking the talk but walking the walk but if we change the way , has looking at the glass there been any concrete evidence there is no evidence that makes you feel better sleeping at night just a possibility . With ballmer, the frustration is so high that it is a breath of fresh air with mandela nadella. It showed he is not just going to be gates or ballmers righthand man but you are diluting your own products allowing the iphone but they have to diversify. Nadella looked in the mirror and saw what he had to do to change it. Do they still have a hardware business . Surface, nokia, those are the contentious issues in terms of what had the success they will see. 6 months is a critical period. Cory, would you agree . The existing board made the decision to buy nokia, and the xbox has been a Great Success for them. To keepexpect them trying hardware. It is an odd strategy for the company but i think they recognize they dont have the Partner Relationships they had in the past. If they want Hardware Devices they have to make it themselves. Lla do onch does nade his own and how much was laid out for him and he doesnt have a choice . When he took the job the company was set. They made the nokia decision which dollarweiss, midi was in the best for them, but they made the nokia acquisition and at committed to a giant organization. He table was already set the fact that they picked him inside guide to run the Company Shows that they are open to tremendous change. Way i read what cory is saying, he was given lemons and has to make lemonade. How confident could he be about this company at all . Listen, he is in a tough spot and is making the best of it . Look, they are going to have to do acquisitions. It is not going to be easy. But after a decade, finding a company willing to change again, can they change, can they be successful . Have . Long does he 69 months from in terms of a goodwill period where investors want to see some sort of success as a result. Cory, would you say 69 mont hs while he is still in this honeymoon period . No come i think love is in the air for much longer than that. The importance of what goes on with microsoft in the cloud, they continued to push windows 360. This Company Remains one of the most important in technology. They are going to be in a strong position for a long time to come. The importance of the product for microsoft in the world of computing and all technology cannot be underestimates. Saide last time we fortresslike balance sheet, it cannot work out well. My kids want everything. Nuff said, by stephanie ruhle. Back, watch out, europe. You are going to see a lot more activist investing. Welcome back to Market Makers. I am stephanie ruhle. Seems to be recovering but stock valuations remain historically cheap and it has led to a number of campaigns doubling since 2010. Will carl icahnstyle activism become the new norm in europe . I dont think so. I want to bring in the chief Investment Officer for elians in europe. Activism in europe . I dont see the likes of a carl icahn orbital acumen or bill acumen kicking ass and taking names over there. I dont, either. Rsu are seeing manage becoming more activist. In a lot of industries ui seeing companies spinoff divisions that were nice to have but didnt really do anything to the core competence of the business. Are there companies that need outside activism . There are families there who have been that Led Companies for generations will stop for generations. Are they the perfect end of company to go after . Some of them really are, as you say, and the stone age. But the volkswagens of this world are leaders in what they do because they have family ownership that takes a 20year view. Not a 20minute y what is the distinction between shareholder laws in the u. S. Versus europe . Are they nicer there . Actually, they are not nicer. The ways its to shareholders to become more active, there are more Defense Mechanisms naturally in the european system. And governments are getting involved. You have the french government getting involved, u. K. Government getting involved with astrazeneca. It is a good and bad thing going on in europe. The types of deals we are seeing in the telco space suggests the european regulators and government know that instead of having 43 suppliers of juncos we should 5 like you do in the u. S. They recognized some elements of scale crude ring benefits to customers and also in terms of investment. The flipside is that they dont want things to be too capitalistic. Enough lasttress time, the financials. The government is not procapitalism and finance per se. France right in the middle . Germans are not synthetic to banks particularly full sympathetic to banks particularly. The psyche is different. When you look at places like greece, spain, portugal, many people from the outside think we have gone too far, too fast. Unemployment in a country like spain is 50 . Youth unemployment is higher than that. It is longterm growth concern. Now that you have spent yielding less than the u. S. , i would argue it probably is crazy. I would leave you and your audience with is that this is an international phenomenon. Asia and america is buying the peripherals. Europe to some extent has stood to the side. Why, because europe knows better . I was in spain last week, it still sucks . There is an element of that but europeans are generally more cautious, more conservative. We lost a lot of our clients in italy who bought italian bonds when they yielded 8 and now that they yielded 3, they are beginning to feel that the valuation trade has moved too far. Onwhen i was going to greece vacation i had a lot of people saying buy me debt. Our u. S. Investors underestimating risks that are still over there . I would say in general because the time horizon for fixing greece is measured and probably a decade. There was a collapse of gdp of over 40 . It makes the Great Depression here feel like it was a practice run. The recovery will not be a sharp vshaped recovery. People who are sending their thinking this is an easy trade for the next couple of years, they are likely to be disappointed, simply because the economy is going to take a lot longer to change. Banks,k at the greek there were rules there are 3 of them and before the financial crisis there were 24. The 3 that are left should, and gary, have a stronger recovery wheree that sectors recovery has to take place. What do you want to get across . The punchline is basically that europe is 30 cheaper than the u. S. And the Growth Prospects in the u. S. Are overrated compared to the Growth Prospects in europe. When we look at the types of returns were looking for in the equity markets, income stories work very well. You have a lot of attractive assets in both categories. The opportunities in europe are sectors rather than regions . No, where not looking at it particularly in this sector basis. You can find lots of companies that yield over 5 growing their dividend at 10 here. Does the story change if the ecb pumps more money into the system . That might attract even more money in. My concern is that he is now in great danger of overpromising and under delivering. Whatever the ecb does in june will only have an incremental benefit and the next 612 months. Do the parliamentary elections mean anything . Only have a national level. Everything will move on naturally. Beernational investors will looking at how much of a protest vote there is in italy or spain or greece or france. When youre looking at european stocks and areas you are interested in, do you want more global diversified play . Inyou get the World Leaders europe but you also have a restructuring itself because of the tougher times we have seen in the last 23 years. What you get generally in europe is less exposed to the u. S. 30 turnover in european companies. It is significantly less exposed the airurgeoning emergingmarket. If you think emerging markets will be a growth story sometime in the next 2 or 3 years, europe gives you both. What is the downside . I over. Won alix and she wants to vacation in france, i plan on yachting in the mediterranean. What is the downside . Expectations are much too high for what mario draghi will do. The idea that a weaker euro is what is required to stop deflation in europe is not going to be fixed by whatever heounces inch whatever announces in june, and the markets may travel and when they arrived they get disappointed. You still won silver. I want to go there every day. From ali on scoble investors. Mcdonalds gets a reaction to its campaign with a new creepy creature, and it is not the response the company wanted. This may be one of the big social issues of our time. No, it is not. Or people, us included, have way too much time on our hands. We are talking about the response to the new mcdonalds happy meal character. It has eyes popping out of its head and a gaping mouth with big teeth, and it causes a big uproar on social media. Ulous. Ch i think is ridonk whocares . Take a look. Maybe i am a creep. I dont think that is super creepy. I feel so bad for the digital people who created this. Theirere amounts are scary . Big and it is a twitter is fighting back. We have a couple responses that are kind of funny. Isok, so that person who going to have nightmares, and they need more important things in the life or they need to watch a horror movie. I guess i do connect with this one. Seriously, it is just a graphic. It is not i am not a big mcdonalds aficionado. I guess my sons will see that they justwant want to eat cheeseburgers and french fries. Another response fair. That thing had a really big mouth. Im just saying. The current spokesman for mcdonalds is a super creepy clown with hair from the 1970s. He got a makeover. Still a total creep. Red blazer and a striped rugby shirt and just saying. Scarier than that freaky little box. That is why i cant go to the circus. It is time for bloombergs on the markets. Stocks are falling as retailers such as staples and Urban Outfitters slump. There you go. If you look at the u. S. Markets across the board taking a breather, but one other name, astrazeneca, as you know, rejected another takeover offer. And the stock is feeling it today, moving slightly up in the green. Interesting. E will be right back, guys we have a lot more for you. Up, the chief Financial Officer of the happiest place on earth. Live from bloomberg headquarters in new york, this withy barr Market Makers. Stephanie ruhle and Erik Schatzker. Daredevils from some into skydivers. Gopro. The republican civil war. Tea Party Candidates go square off in three crucial primaries today. Keys who the will get the keys to the Magic Kingdom . We will speak to the companys chief Financial Officer. Welcome back to mary barra i amket makers. Stephanie ruhle. And i am alix steel. A lot to cover. The top business stories from around the world. The eu has accused jpmorgan of changing rates. The eu says they took part in a cartel to manipulate the rate. Agricole says they want to examine the complaint more closely. More top turnover at target. Talking about the discounter replacing the head of the moneylosing operations in canada. Target named three new executives, Vice President for merchandising, former ceo step down earlier this month. And warmer weather is finally bringing people out of their houses and into home depot. The nations biggest Home Improvement chain says sales are rebounding in the second quarter. Though estimates they will recoup the end of next month. O going public. They have filed for an ipo. Daredevils can make it he owes. They said they will now position themselves as a Media Company. Bringing in our senior west coast respondent, jon erlichman. What does that mean . We have one. My husband uses it when he goes skiing with my kids. Active people. We use it when we are doing certain types of taping. I think you have two stories. One is that everyone uses gopro thethat shows up in numbers. They said they were in the process, and now they are giving us the goods, the financials. Pretty good revenue for pretty Young Company. Up 80 seven percent yearoveryear. Bikers like to take when you go offroad in. Up to 87 yearoveryear. On the media side, i think it is partly about meeting the story when you go public and say what is next . You do not want to be a one trick pony. That is super successful. There is a lot of competition. You can say someone else can create this. We talk about drones now. There are consumer drones that will use the gopro camera and use another model to make their own camera. Is there a way to make the technology . The media side of it is, a lot of people of loan the video upload tehe video. Likee these cool, videos this. If someone is going to be a content creator, why not gopro . It is truly out of left friend. Left field. A youtube you have channel, it opens the door for other things. Channel. A gopro not like and the other on demand channel you might have. Now talk about rolling out other platforms, too. That is the start of the Media Company, and a great story to tell if you are trying to go public and generate more revenue. Camera wind up shooting movies right now . I think it makes people think about what you need to spend to make a movie. We did a story about google glass teaming up with film schools. They have been giving google glass to various film schools across the country to see what they could come up with. One film has artie been viewed Something Like 2 million times. To wheres google glass who travels from the u. S. To india to see his mother, and it is a bit of a tearjerker. That is all it is, following someone in their travel. That is what is so cool about gopro videos, it makes you feel like you are a part of a moment. It makes perfect sense. What are analyst looking at this what you set off the top is one of the questions, how much is tied to this one camera gap though there are multiple versions of the camera. Camera because there are multiple versions of the camera. Can you display . How to be aknow Media Company . Who is employed there who understands media . A young, savvy guy. Who hassmart person powerful people behind him who have been helping him to build the business. I think if you look at the other industries that have started to adopt the technology, beyond traditional media, that is probably where the most immediate opportunity is. There are values and benefits. Guess what . Dude come i think that is a super hot brand. I that he surfed dude, think that is a super hot brand. Great to have you here. Moving on, we are going to the other side of the world. The russian Prime Minister, Dmitri Medvedev spoke exclusively with Ryan Chilcote from the Saint Petersburg economic forum. The Obama Administration pressured western ceos and canceled plans to attend this year and in the Prime Minister answers questions for what they are doing with the old soviet union. I think this is bad. It reminds me of the decision. Ade in the country business interests suffer. Themselves. Sk ceos i have met with some of them. Why do they have to sacrifice their business interests for this strange sense of solidarity . It puts them in a difficult position because they want to make money on the one hand. Bringing market ideology to the market. That is what the soviet union did in the past. U. S. Is exactly what the administration is doing now. It will affect the interests of u. S. And european business. [inaudible] [indiscernible] there is only one more thing i would like to say. I would like to remind you know sanctions were imposed like during the cuban missile crisis or [indiscernible]. Partnersand european are trying to scare us. It will lead nowhere. When the new president takes office, the sanctions will be forgotten. That was Ryan Chilcotes exclusive interview with the russian Prime Minister, Dmitri Medvedev. N important topic really interesting. The top hollywood executive on why youtube is getting it right right now and how shortterm video is changing the marketplace. That will be the one and only ben silverman. Leader,te majority Mitch Mcconnell, just one of the established republicans racing at tea Party Challenge today. We will dig into that and a whole lot more when we return. You are watching Market Makers. We are streaming on your phone, tv,et, bloomberg. Com, apple and because we are so new and hip, we are on amazon. Time now for some bloomberg west top tech and media headlines. Twitter having talks to acquire or partner with music startups. One of them is with some cloud sound cloud. T rowe price dumping a quarter of its twitter stake during the tech slump. Twitter fell 27 in the first three months of 2014. Them, joinot beat them. A top official in the Limo Commission is leaving for uber, will be head of Police Development and community engagement. Decidesilverman used to what comedies you would be watching on nbc. He ran the entertainment business. Now he is hooked on shortterm video. Not that different from what he used to do. I had a chance to sit down with him last week. Are absolutely seeing pattern shift across different mediums. If you look at Something Like youtube, really the dominant absolutelyplayer, it is hitting a younger demographic who is able to produce in short form and deliver content and sell and publish onto youtube and others trying to professionally upgrade the shortterm content. We put out properties and videos plans thatdifferent sometimes when someone discovers watch 10, they may threeminute videos in a row that become a 30 minute show. You see the viewing patterns longer patterns as well, but most of what we are talking about is the shortterm and stuff that makes an impact, cat on the skateboard taking a p and the baby chasing him. That kind of video is a oneoff and works in the short term because you can watch it on your phone, tablet. You have a show coming out similar to what you did with ugly betty. A latino show attracting a latino audience. Is bigger. Ence 90 of the consumption growth for Big Companies like pepsico, cocacola, Procter Gamble will come from the multicultural audience in the u. S. Kids, puerto rican parents, a whole range of different people and the american world. I think that you have to recognize that by telling the story. We have people who look like everybody else. Really believe in that and am passionate about that. Latina after the script came in. Has the talk about who power in terms of platform. It is still the networks in terms of the biggest distribution or are producers more excited to work with amazon or netflix . I think it is all horses for courses, meaning we left the good horse race and can see the kind of decisionmaking storytellers, producers, actors and directors in various agents and managers which involve questions for wear with this live most effectively . If you want multicultural comedy, that does not work as well on the digital platform. This works for a show that has an audience connected to it. When you are on your couch watching 9 00 because that is when the show is being put out to air, going back to when you were two, you feel this communal vibe. That is why those work. Netflix you need something more like you are in the know. The way that kevin spacey talks to the camera in house of cards. A commercial platform and nbc were that conversation interrupted by a commercial and you are in the know. I grew up watching sitcoms. We watch things has totally changed. Clearlytent died . Our way of telling stories and delivering jokes has changed. Cultural changes. The stories can be the same. And the greek playwrights are still the underpinning of 90 of what we see from a television and movie perspective, but the format and the way we tell those ugly betty was cinderella. Does that mean the office is still a sick on . It expanded the definition of the sitcom. No laughter, single camera. People who did not look like jennifer aniston. Is the male equivalent . Whatine wilson not exactly we had grown accustomed to in television that just proceeded it. That opened up the door for things like modern family. We really knocked the door down so tina fey could come in behind it. Think we expanded what a comedy could be. We did not limit it. That was ben silverman, former head of nbc entertainment. Breaking news concerning general motors. The company recalling two white 2. 42 million vehicles anin f our new recalls. The company expect them to take a charge of 400 Million Dollars in the second quarter, including the previously announced 200 million charge they are ready spoke about. Looking at 18 crashes and one injury associated with the cars in the recall. There have been no fatalities. The Company Announcing stopping sales of the 2015 escalade. General motors recalling an 2,4 million. 2. 4 million. Seems like a proactive move maybe this is an example getting ahead of the situation. 11 million recall so far. Everyone wanting to get ahead. That is what we continue to see with general motors. Lex we will take a break. When we come back, we will take a look to see how the stock is reacting. Take a break. L we are also taking you to disney. They have found a way to make war money out of the block after superhit frozen. Disney on ice. We will talk to the ceo. Welcome back to Market Makers. I am stephanie ruhle. Mickey drexler looking to europe and asia for the companys growth. He was in hong kong for the opening of the stores in asia. In a few weeks headed to paris to scout out store locations there. He spoke with bloomberg. We have looked at the world and it has become very small. Everywhere, iers traveled to hong kong 30 years ago and was different than america. Now wherever we go we see people dressing the same, looking the same. Why not now . Great cities in great style and passion will always be in fashion. We are just looking to grow and grow appropriately. The one and only Mickey Drexler taking over the world. Approaching 26 past the where. Time for bloomberg to take you on the markets. I think the markets might be read. Nasdaq pretty much flat. Looking at staples. Or looking at gm . Selling the most in two months after forecasting disappointing secondquarter profit. The company showing 200 closing 225 stores. Rising competition from amazon. Eriks,favorite of Urban Outfitters. I guess you can only buy rubik cubes. They have their own brickandmortar stores. Gm. Lso taking a look at we just reported 2. 4 million newcles recalled in recalls. That brings the total to 13. 6 million or the entire year. That is more than gm recalled during the past six years combined. Total charges so far having an ab 400 million. Taking a hit of 1. 3 billion in the first quarter. No fatalities so with the current recall. Clearly a surprise. Stay with us. When we come back, speaking to the cfo of disney. Live from bloomberg headquarters in new york, this witharket makers. Erik schatzker and stephanie ruhle. Marketme back to makers. Jon erlichman spoke with disneys chief Financial Officer , j resumay rizullo. What was the biggest take away . He is an interesting person. There was talk about who would be the next cfo. He swap jobs a couple of years ago. A lot of people look at him as potential successor to ceo. A lot going on right now. The at t indirect to be deal is important. Him what the reaction was to the deal, here is what he had to say. Whether it is that particular merger or the comcast Time Warner Cable merger, it is no surprise to us there is consolidation in the cable space. Relationships with all those Companies Involved in the mergers. We, like everyone else, are in the process of analyzing and trying to understand how that will affect the ecosystems on the road. We continue to look for implications to us. Very early days for both of those. Likethink on some players content players are cautious because they get paid by these providers. Those costs are one of the factors for why you are seeing these deals. Reducing transmission fees in essence in order to get the content. Yes. No signs of that happening right now say we will see what happens with your cable bill. What about their own deals . They have been busy. Makers studio. Talking about that at the milken conference. A lot of people talking about that deal. A very strong culture. What happens when you buy Companies Like lucasfilms or by a Young Company . We did ask him about that. To leave theike user interface in place as much as we can. We like to keep ticks are pixar and marble marble keep pixar pixar and marvel marvel. And not let what has been successor will wash over them like a tidal wave because we buy companies that are already well run and we think we can access the i. T. And use it further through our big ecosystem. Breathing room but you are buying them, have to keep tonight on them. We talk so much about bob iger. One of theeo . Big things theyre working on right now is the shanghai resort. He is one of the players who got the ball rolling on that. Not all that common to see to how two highprofile people switch jobs. Has created a fun parlor game for us. Thank you. New york ande in bringing us a great interview. Come theome back establishment shrinking fast. Mainstream republicans pouring millions of dollars into a campaign to fight off tea Party Candidates. That and a whole lot more when bree returned. You are watching Market Makers. Stay with us. Welcome back to Market Makers. Today we are seeing three big battles, primary elections in kentucky, mississippi and idaho with incumbents trying to fight off the right wing challengers. Withng at what this means josh green in washington this morning. Break it down for us, what the tea party has done for the republican party. They have. By all rights the republican should have controlled the senate or years ago. Party teacle an odd Party Candidate ended up winning the race. So this cycle the republican establishment was adamant they would not fall prey to these kinds of candidates and got organized early on. A lot of backing from business groups to prop up strong establishedminded candidates and allow thing allow them to prevail in order to have the best chance of winning the race in the fall and handing it back handing the senate back to the republicans. The tea parties still in it to win it. What are the races to watch . Are not a lot of close races today, which is assigned i think the establishment has done a very good job of this. One is a congressional race and idaho where mike simpson, a former dentist is the established candidate. Running at the tea party lawyer. The chamber of commerce and other groups have poured into Million Dollars. Looks pretty clear he is going to win. The other big race coming up is the Georgia Senate republican primary where there is a huge field, five candidates, and two of them are hardcore tea partyers. Looks like they will finish four and five. There is another area where the establishment has managed to sideline. And then you have the incumbent in mississippi running against an upstart lawyer thomas Chris Mcdaniel who suddenly is in trouble, not because of ideological dispute but because one of the supporters broke into footageg home to film of cochrans wife whos suffering from dementia. The blogger is now in jail. Is nearly ask that important. Really no chance of democrats will win in the fall. Still an interesting look at the tea party dynamic. Even if the tea party does not make headway and does not republicans have moved to the right in the past few years . I guess that depends on your political view. Interesting thing we have seen over the past few weeks in the early primaries is not only does the Establishment Party moved to the right but some tea parties have moved to the left. A case like the man who won the Senate Primary but an established guy who called on Mitch Mcconnell and said i am looking forward to serving with you. A very right wing House Speaker in north carolina. Adopting the tea party positions. Not a lot of room between the tea party and establishment anymore. The tea party is actually winning. Tea party not winning. There you go. Josh green, Bloomberg National correspondent. Some of the worlds top ceos gather at the white house today to push for more Foreign Investment in the u. S. President obama dropped by the meeting. Withf the people there is our own phil mattingly. He literally just walked out of a meeting with the president about direct Foreign Investment. Right off the bat, the white house trying to spur direct Foreign Investment. We are ready have more than 10,000 people in this country and looking for another place to open the maintenance base. This was a great interface to the government. When you look at the u. S. , there is a lot of consolidation in the airline industry, do you see that as a model for europe . Do you see that as competitors or mergers . Far the. S. Is by biggest market outside of germany. The airplanes Cross Atlantic every day. A huge market for us. It has consolidated 24 big layers. To four big players. Again, the u. S. Could see several model for the industry. Do you see it heading this direction . In the u. S. , for sure. A lot of small airlines, some of them subsidized. I think were much better when it comes to the product. That is why the customers appreciate our brand and product. We have seen carrier start to beef up in advance of the summer season. What is your and expect patient trafficwise over the next few . Onths you com people have moved capacity to the north atlantic. Will play thentic role in the coming summer. A global company. You are at the white house right now. Diplomatic issues can be difficult for any international company. How do you feel that you and u. S. Have handled what is going on in the ukraine right now . Air transports have always played an interactive role. Good times and bad times. Flying in the ukraine. Once again it shows the importance of the north atlantic relationship. Did you have a specific message for the president today . I asked him about air force one. A much more modern airplane. No sense he is going to make the trade at any point . In the near future. When you look at what is going on in latin america, how do you the position right now, particularly with the issues going on in this way left in overall latin america has been a success story. We have added flights, added capacity. Unit on thed an Mexico City Service a couple of weeks ago. To Mexico City Service a couple of weeks ago. Could not have picked a better day to come to the white house. Thank you for joining us. Microsoft introducing the new surface tablet. We will get the first look. I am excited. Day with us. You are watching Market Makers. Stay with us. Microsoft just finished unveiling the new generation of surface tablet, including an new mini version. R biggest take away . Away,ggest take demonstrating how important it is for the company. They really want to have this device in place. People computing. Listen to what he had to say. A major milestone on the journey. Dreaming theh designing the device that takes the best of the tablet and laptop and enables any individual to be able to read and create and write, allowing you to watch a , enjoynd make a movie arts and create art. That is the device we want to create. That was a motivation for the surface line. What is interesting most of all about the new push for the device is not the fact it is a little bit thinner, lighter and the positioning is all about replacing the laptop. Pointing out 93 with the nikon also have a laptop. In carrying all that is too much. And carrying all that is too much. They are also using microsoft software. It is interesting. Up one team to replace the laptop. Went bigger, sort of to your point. Bigger and lighter. If you are michael dell and seeing iker soft announce a think theyre thinking about the relationship with microsoft and how it might change over time. They make so much money selling software to their partners. All right. Cory johnson, editor at large at the surface unveiling. We will be back with more Market Makers. Stay with us. You are watching bloomberg television. That is going to be it for todays Market Makers. Tomorrow we will go back to school. Speaking College Endowments with Notre Dame Scott malpass. A favorite alumni, jimmy dunn. Looking forward to that. Approaching 56 past the hour. Bloomberg television is on the markets. Scarlet fu has more. Thank you. The stocks are trading lower for the first day in three. Company results from retailers like Urban Outfitters. The cboe,heck in at lead option strategist. You are running markets are headed lower from here. Why is that . Absolutely. In the interest of full disclosure, my daughters 12th birthday today. Wanted to get that out of the way but looking behind us in the old traderg with an down there, things are eerily quiet. We have seen the vix down. Stocks struggling to break higher. Things areg nervous too quiet. Yesterday the lightest volume of the year. Favors may be a pullback. When there is not a lot of activity, volume pretty thin, if this down . It was not down until something really bad happens. Series of lower highs starting to really compress. Given the fact we are lower on the vix, we it seemed it trade down for brief time. I think the downside may be a point them here. The upside should be pretty sharp. Certainly a magnitude standpoint, i think were long the vix. Getting long the vix. You have a trade for us on the Exchange Traded fund that tracks the s p 500. Absolutely. Same idea there. I am going long. I am buying the 190 put. Paying under a a. 5 volatility. Volatility. I have never seen that low of a number. Paying 1. 45. Will not take much of a down mood to get this thing going. I am adding to it today. This is a bearish trade. You could maybe lose your whole premium. I will maybe sell next week if it does sell higher. 97 forly willing to risk the chance to make two dollars on any type of pullback. Also, i wanted to highlight home depot because it reported earnings this morning that the stock is higher even after the company gave a forecast that was not quite what analysts had been looking for. What are you seeing in the Options Market . Big volume. Home depot trading in the high 77. I think some guys covering the short call. Maybe reestablishing. The volume. I think thee reaction to the stock, given they did up the outlook. Earnings and revenues. I talked to the traitor and he likes the stock. The fact that it has rallied after bad news. Comparatively cheap historically. The fact it is down lengths to the stock moving higher from here. The Options Market looking for maybe a slight uptick. Lex looking at home depot shares up by 2. 8 . Thank you. , on the markets again in 30 minutes. Have a great afternoon. Welcome to money clip. Im adam johnson. Taking a look at todays menu. Medvedev has says the new cold war is at stake. Go pro is going public. It is a great opportunity for us to show you some videos that will make your stomach turn. Gender at work. How the New York Times shows there is difference for women and men in the office. Fight,ourics food taking on the industry