Marketing campaigns quite like this one. The firstecomes league with welcome. I am stephanie ruhle. Thrilled to be here. Matt is in the house. I am filling in for Erik Schatzker, who is on assignment. He is really on assignment. Not one of those on assignment. I was just in sonoma on a track. Tough job. We have breaking Economic News to get to right now. April, mikeh of mckee is taking us through the numbers. 1. 3 increase does not, go whole lot, but it is the best since last july. Home sales rise to a 4. 6 5 billion annual rate. We have been talking about this for a while. Condos and cars, people are moving into that area, away from singlefamily homes. Condos up 7. 3 . We are seeing a better trend in home sales, but not in the singlefamily area as much as multifamily area. Supply goes up in the month of april. That is good news. We have been waiting for more people to put their homes on the market. That may have an effect going forward. Thank you very much for that. Not exactly hitting me estimate. Gamerock was the big there. Blackstone, there you go. Both winners, though. Time for the top business stories from her on the world. Same old story at sears. The first loss got even bigger. Sales fell almost seven percent. Sales has tried to boost cash by selling or spinning off assets, like clothing units. There is a new leader at the stock exchange. They are retiring defeated by a guy i have known for 20 years, tom farley, a great guy. In thailand, the army has staged a coup. They will seize control to restore peace. Now, shares of the online jd. Com, williler, start trading at any minute. They are above the expected range, 1. 8 billion. The company has been losing money for three straight years. Were bringing in cory johnson, who has been following the story in new york and san francisco. You were here and i was there. How does that happen . We can switch back. This is a big deal. It is a very big important company. A lot of comparisons made to amazon. Com. Probably closest to that business the deal itself is interesting. Theres only a 15 stake. Cent is taking a big stake in these guys. Jd. Com is getting wedded to the mobile messaging platforms. So the deal they are selling that stake. It underscores how important this company is and how it is growing. It is that a 60 clip and going public with a health evaluation. The company is at 11 billion. It is already a beast and growing bigger. Growing closer to profitability. It is really an interesting business. I know how it was marketed they wanted to compare themselves to amazon. Can they really build themselves to be that big . Yeah. One of the reasons this is so different from alibaba is it is so amazonlike. There are a couple hundred warehouses. 1600 delivery stations throughout china. This is a business with a great big physical front. They do a lot of delivery. So, as a result, there is a big presence, set up to grow quite a bit. Not just in the inventory they can carry, but also doing into the market in china. It winds itself to a Popular Social Network and platform in china. It could be enhanced sales growth. When you think of chinese amazon or ebay or etailer, you think of alibaba. What does this mean for their ipo . This is their big competitor. They came in with an interest in alibaba. Theyre considering investment in alibaba. The jd. Com numbers look really strong. You can see where the profitability will come, probably in short order if the trend continues. One of the ways wall street shops these things is if you like alibaba, youll love this. They try to get these deals out before. This is a giant business in china right now. Thank you very much for that, cory johnson. Back in san francisco, and i am back here. Now to a deal that may not be in the works. An activist Hedge Fund Wants to sink their claws into darden restaurants. Than five percent of the company and want to block the plans to sell red lobster. Now they are starting a proxy battle to replace the entire board of directors. Lets bring in Cristina Alesci who is all over the story. She loves red lobster. Absolutely. I am there every week. Night one very late who eats lobster late at night . I dont think so. High school . Accusing the is management of basically giving away red lobster. They lay out all of the map in a letter to shareholders. Theyre saying that darden sold its business for 2. 1 billion. Once you back out taxes, you are looking at proceeds of 1. 6 billion. Guys, listen to this. The private equity firm that bottle of red lobster bought red lobster, sold as real estate for 1. 5 billion. You have a value of the operating business that amounts to 100 million. Theyre saying that if you had taken our advice and on a taxfree spinoff of the real estate, you could have realized more value by telling the real estate an operating business separately. Ion, star board is saying why would you sell your company now when youre having such a problem with shrimp costs rising . You said this was a terrible impact on your operating business. It is a shortterm thing that could resolve itself. Why so when you are in a stronger position . Why not so when you are in a stronger position . The triple get better. The shrimp will get better. Do they really need to replace their entire board . It is a realistic outcome here. Darden has upset shareholders at this point. They could just be angry enough to go ahead and elect thsis board. This is why this deal is so interesting. We could see an actual outcome driven by the activists in this case. We will have to see when they do this. The other shareholders have supported star board to request a meeting to talk about this deal. We have seen other shareholders support them. Have we heard from darden . We have not yet. They will have to not a pretty significant pr campaign. This is resonating with a lot of press. What do they actually want to do . They want to break up the business. They want to unlock what they say. They want to unlock value by breaking up the entire comp any. They think it could be run a lot better. They think management is trying to protect its jobs. Think you for giving us the latest. We know that darden is going to get bigger. We have gone to every headline this point. Except the biggest ones. Our own executive producer is graduating from nyus school of business. Congratulations, ben. We will have to dig into that and more when we come back. We will take about for a boozy lunch. Ebay is trying to recover from a cyber attack. We will see with the data breach will do to the companys stock price. And how can you make the stalemate on capitol hill payoff for your portfolio . This is Market Makers. We are also streaming on your phone, tablet, and on the internet. And you can see us on amazon i are and apple tv. Ebay is the newest member of a hack attack club. They have been the target of hackers and the users personal information may have been stolen. There seem to be a growing number of these attacks. Few investors really care. We took a look at some of the historical hacks to see how shares have performed in the wake of these attacks. We should point out that there are different kinds of attacks. When target loses your financial information, it is different then gmail losing your birthday. We should point out that eric does not often visit us. Bring it. When you look at the Stock Performance of these companies with these problems, like target and now ebay. These actually turned out to be great by opportunities. All of the stocks have a little drop, then recover. T. J. Maxx is now up five times lace it was when they have problems. It is more than target. What happened to their stock after . Usually there is a 1015 drop and then it comes back. Same thing with target. They brought it all back, but that is a problem because other things are happening at target. The actual drop was completely recovered. Adobe had a breach as well. There were a number of accounts. 3 million credit cards were affected. Jpmorgan had 0. 5 million debit cards. Target is more than just a breach. The t. J. Maxx one is an interesting example. It is a Similar Company in similar scale in terms of the numbers. They have more than recovered. They didnt even take that long. Youu all see a drop will see a drop, but it is usually low. They lost birthdays and telephone numbers. Not financial information. That is a different case than target losing a credit card. They all have the same types of problems, they do not ever expects the stock price anyway. There is no incentive for them to worry about it. They do not get her when these columns happen. The market just move on. Is too soon to tell with target. Did you see the last that they were doing on business . What is good for target as they have this great excuse. They had problems before this. The whole canadian area there stopped peace their stock peaked before this. Now they can say we have this data breach and it will cause all these financial problems. That may or may not be true. All right. More titles than Queen Elizabeth i think shell may has one. She has a lot. Master of the realm one word, queen. Were thrilled to have you here today. When we come back, are they clients . Wall street found people willing to borrow money with Interest Rates over 100 . Paging jordan belfort. Six years after the subprime loan market brought down the u. S. Economy, wall street is back at it. Were talking about loans to people who cannot find credit elsewhere. Interest rates can reach as high as 125 . You heard that right. 125 . Investors are buying, securitizing, and selling off those loans. We have been looking into the subprime boom. This is seriously shady. Tell us about this business. Who is running it . How did this happen . The business has gotten up to 3 billion per year. These are loans to Small Businesses that are exempt from federal consumer safeguards. There are several big, legitimate companies that are doing most of the business. I focused on one called World Business lenders. Founded by . A guy who used to run a mortgage company. To Deutsche Bank just before the crisis for almost 500 million. It was great timing. At the time of the sale, he negotiated a twoyear, 17 Million Contract for himself. When he left, he started the subprime Small Business lender. He does have somebody from jordan belforts ranks working with them. Is run byining is a guy named brian herman who got his start under belfort, got his own boiler room. Where are the regulators then . If you sell a company to Deutsche Bank for 500 million and pay 70 million the next few lendingtart the Company Money at 125 Interest Rate to Small Businesses and employ the guy who can charm jordan came camp dan belforts how is this happening . They only lend about half of states. I could not figure out why, but it seems like some states have stricter laws about Interest Rates than others. Michael corleone he did not need a license. What is the feedback . He is allowed to do it because it is Small Businesses, right . To put these people their personal assets on the line to back the loans. That is right. He will have people put up a car or house or property. They do make it clear youre supposed to use the money for your business. World Business Lenders is not going very well. As of last year, it was unprofitable. I was told by an executive that they joked they would be able to make money if they could pay their salesman and reprocessed pontiacs. He did not want to comment. You got a comment from the lawyer. In serving the underserved smallbusiness community along mainstreet usa, World Business lenders complies with all applicable laws and endeavors to ensure positive experience for its customers. Unless they are repossessing homes, cars, and trucks. Which probably ends up the case a lot of the time. You have some specific examples. About 20 of the borrowers default as of last year. We talked with a family in brooklyn, who distribute cosmetics and wraps to bodegas. That is a combo. Covered. U [laughter] they went out to borrow 45,000 and ended up getting 12,500. They were sued for 23,000. The rate on their low was 110. They actually sued for a prepayment penalty on the assumption that since they had defaulted, they now own all the money right now. They would have to pay the extra prepayment fee. When you were doing research, did people compare the loans . I did. I am asking about you and i we did. I tried very hard not to draw the comparison. Interestingly, i found that they found their usery cap. They found a company on 5th avenue that was a Small Business lender. They were backed by the mob and charged five percent per week. That was a big reason they instituted this criminal usery law. A lot of the borrowers i talked to said you could get five percent per week. The borrowers stop they do need access. They do need to have an upper hand. It is not all bad. These guys said they should have known better. Their business is going badly and they wanted a chance to keep it going. These guys gave it to me and i mightve gotten out ahead of it shut it down earlier. Who knew one company combo. Like chocolate and peanut butter. We will talk about the prophet around paralysis on capitol hill. Always making money off of the guy who is down. A man who has created a basket of stocks. And a first the wnbas land to get more fans in the arena. This is Market Makers. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and stephanie ruhle. All combat. I am stephanie ruhle. And matt miller, in four Erik Schatzker. This is shaping up to be the most donothing congress in history. You may have noticed. And maybe a bad thing for the country, but gridlock is good for your portfolio. Dan has figured out how to make that work. He is the head of policy d. C. Policy a analysis firm. He has built stocks that profit from dysfunction. He joins us from washington with details. Thank you for joining us. Lets talk first of all about this gridlock. Is it really the worst in history . I dont even notice it anymore. Gridlock is the normal function. The founders wanted us to have some sort of gridlock. This is shaping up to be an interesting year. I think that the gridlock will be very significant through the summer months. There have been two bills in the last few weeks with strong support. And Energy Efficiency bill last week was floated on the senate floor. This week, late last night, there was a patent bill. These are smaller. They had more support. It tells you that we are not going to get much done for the rest of the year. Investors have been saying theyre not doing anything in d. C. Were just trying to figure out were those opportunities will come from. Lets pick it down a little bit more. Fannie is one of your picks. Why do you think this is the right time to belong . First, it has been a great trade for the hedge funds. Theyre are making the same that that we are in this. Thisu want to belong on function, then fannie mae represents that. If there was legislation that would be passed into law, there may not be much recourse for shareholders. The Banking Committee passed a bill last week. That will not get on the senate floor. There is no resolution in the house. That buys time for the court case to work its way through. A number of managers are suing the government for sweeping me profits. Theres a belief that the Asset Managers they win that case. That means theres a lot of value in those stocks. It has gone from one dollar to four dollars. Most people believe theres probably more value in there. Had he used the keystone with this . Some i get, some are harder to parlay. Since thee pipeline, president allayed any action for means itcourt ruling, will not be decided until after the election. If the republicans win, it will be approved grade if the democrats win, it will not be approved. Climate change will be a big issue for the democrats. A company like this is benefiting because they are building an alternative pipeline system. Conversely, the big play was a company that is going to build the pipeline. Hes like pretty big selloff after the president delayed his decision. There should be weakness in the companies that are working to fill that pipeline. Traitor around pressure to raise minimum wage . There is. It is a little more dispersed than others. What we have done is an extensive analysis of which countries are lobbying the most for minimum wage thing increased. Yum brands was the Number One Company on that. Another one was starwood hotels. There will be action on the minimum wage in the senate as we go through the summer. Right now, were in the posturing stage. It looks like the republicans will win the senate. Why would they raise the minimum wage to 10. 10 . That means it probably will not get through. Yum brands would benefit from that. I want to talk about best buy. They had their Fourth Quarter of dividing revenue. I use it as a showroom all the time. I purchased up there. How could they be affected by gridlock . Startre is a big move to Internet Sales that would put these retailers on equal footing with internet retailers like ebay or amazon. Com. Coming out of the democrats winning the 2000 election, there was a lot of hope that there would be this Internet Sales tax put into place. In fact, most of those supporters do not get done in 2013. Here we are in 2014, it is still not done. The clock is running out. The Senate Passed a bill. It has been hard to get things through the house. The proponents of doing this will try to put Internet Sales back on a bill that comes through in the next month or two. Best buy will continue to suffer from that. You do see a lot of internet retailers charging sales tax. Corrects. E, you locate in the stat have to start urging sales tax. Amazons presence is growing. Ebay would be