Alt Investments Go Mainstream: Money Moves (08/05)

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Aug. 5 (Bloomberg) -- "Money Moves" brings insight to investors looking for alternatives Deirdre Bolton talks to the professionals in hedge funds, private equity, venture capital, angel investing and real estate. Find out where they see opportunities. (Source: Bloomberg)

But the president's likely choice in the long run.

They are both economists.

She knows the fed and the sensitivities of the fed.

She can make the system work more smoothly.

Dallas the field.

Catch any fish question are i cut a lot.

You want the truth?

It was this big.

We will be back with more on the markets in about 30 minutes from now.

Money moves starts now.

? welcome to "money moves." we will show you what investors and entrepreneurs are doing, as well as what is happening with hedge funds, private equity, and real-estate.

For investors are stuck in their portfolios with alternative assets as interest rates rise.

We will speak to two about where they see opportunities for yield.

Gold and natural gas strategies as a hedge fund.

An ambitious start up that appears to be the warby parker of clothing companies.

We start first with commodities and hedge funds are betting on gold, oil and natural gas.

Matt miller is tracking the numbers from the newsroom.

Hedge funds are not exactly bullish on gold.

Definitely, betting on the short side, cutting their bullish bets for the first time in over a month, sending gold to a five-day losing streak.

The reason is the economy, looking so good in its recovery, giving the fed less incentive to keep its printing presses running.

We side gdp grow faster than forecast, manufacturing at the fastest pace in two years.

Unemployment at the lowest level since 2008. gold fell to $1,300 a troy ounce.

The same is true of 17 other commodities today including crude oil.

Prices will rise and futures and options combined out numbered short positions according to the ice.

We have seen the price swing back and forth between gains and losses as africa n countries announced that it will be pumping more oil.

Natural gas also at the lowest level in 20 meweeks.

Low temperatures have said temperatures down.

It has been hot this summer, would be great to get a cool down.

Thank you so much, matt miller.

Some time today, major league baseball is expected to announce punishment for players connected to performance enhancing drugs.

20 players are involved but the spotlight is shining on yankees third baseman alex rodriguez.

He faces suspension through next year.

He may be able to continue playing if he appeals.

With me now is say yes to has trained -- is a guest who has trained with baseball players . do you see any parallels between that investigation and what is going on with major-league baseball?

The two investigations are very much alike.

What is going on with major- league baseball is their version of insider-trading.

That is when drug use really is, something that happens off the field in a way where you may know it is going on, you may not, but you find out about it and there is a different story.

Major league baseball has agreed to 50-game suspensions for 12 players in their role with biogen.

We are still waiting for that announcement, once again.

I wanted to bring you some sound that we got from the former mlb commissioner.

I do not know that the drug problem in baseball or any sport or olympics is ever going to be over.

That is the beginning of wisdom.

The problem is, the chemists are coming up with things that will perhaps -- enhance performance.

They are well ahead of the cops.

All of these sports are threatened because that form of cheating, malignancy in sports ruins the sports.

Do team deserves some of the blame here?

I bring up the yankees because, to some extent, in the locker room and at the top, someone is turning a blind eye to this.

That is part of this investigation, and what have you, but what is interesting is the trade-off between the short term and long term.

You have these mega contracts, lots of money, lots of time.

Things are bound to change within 10 years time.

You do not see those kinds of contracts anymore.

You think you do not, but they do slip in.

There is nothing wrong with it from the labour side, but now with the information moves now, very different from where it was even three years ago.

Can you compare and contrast but is happening with a-rod now compared to barry bonds?

Here you have two players that sort of have an attitude.

You have to wonder, what is the endgame, what are they trying to get?

And then you look at other players who said i cheated, i am sorry, and be done with it, compared to what bonds or alex rodriguez is doing.

It is usually pride, arrogance, or tried to get something out of the deal.

Ball park attendance has been falling all season long.

Does making an example out of a- rod -- is that good for baseball?

It is great for the lead, the commissioner, everyone involved, except for the players that got caught cheating, unless they want to go through some forgiveness.

At the end of the day, it is great.

It helps clean out the system and makes players accountable in a way that they were not before.

There is an issue with the balance of economics.

As long as players have a chance of making it out of their situation -- such as players in latin america trying to make it -- there is always going to be an incentive to get an edge, as stephen cohen did with hedge funds.

The payoff is so big.

You are exactly right about that.

That is what fay vincent was getting into in his remarks.

The incentives are so huge.

The trade-off is, i might get caught, but what are the consequences of it?

If you can get away with it, maybe you can burrow yourself in a hole for a while and then come out.

As long as you can come out with your money, maybe not such a bad trade-off.

Which pro sports have done a good job with ped's ? baseball is doing it, hockey, and the nfl has been brilliant.

When a player is caught, they do not make news about it.

People just do not pay attention to those suspensions.

Sports being a safe harbor for investors.

Why is that, when there is a risk of cheating, an a-rod blowing up in our faces?

At the end of the day, there is huge money going into media.

There are not many safe harbors in other markets.

Sports tends to be around.

We may like baseball more, football more, maybe soccer will come on line, but the truth is, people go out to sports events, they engage, they participate on a number of different levels.

Sports is simply reliable.

It changes, but it is reliable.

And that is what investors are looking for.

Thank you, lee igel.

When we come back, the president of time warner cable ways-in on the standoff between time warner and cbs.

And dan loeb is accused of trying to scare hollywood.

You can also watch us streaming on your tablet, phone, and on bloomberg.com.

Welcome back to "money moves." you can also watch us streaming on your tablet, phone, and on bloomberg.com.

I'm scarlet fu.

With treasury yields and grinding higher as the federal reserve appears to slow bond purchases, and investors are seeking purchases beyond stocks and government bonds.

My next guests are also looking at distressed equity and other investment opportunities.

They are both with me in new york this afternoon.

Could afternoon, gentlemen.

I will start with this idea that bill gross started as the new normal, this idea of seeking yield through alternative assets.

It seems to be a natural outgrowth.

It depends on the price you start from.

Our markets are the mirror opposite of where we were in 2008, 2009. liquid credit markets are providing low yields and share prices are up from its low.

Not highly valued, but not an environment where you can look at fantastic index returns from depressed prices.

That is because of the good performance of the economy.

Good but not spectacular.

The idea that the new normal has changed the way that we value fundamentals has pushed people to the sides.

The worst performing place in the last few months has been in the high-quality liquid bonds, exactly where you should not be right now.

People got paid for taking duration risk.

Now you want to be in credit risk, junk bonds or distressed debt.

How should investors prepare for a rising interest-rate environment?

Order duration, or parts of your fixed income should be in bonds or distressed debt.

Is that a chronic trade?

There has been a lot of talk about that.

Not at all.

You can buy a high-yield etf, mutual fund, and those investments, you get much lower.

Hedge fund allocations are now at 16%. which strategies are best suited to higher interest rates?

Think of short strategies, strategies not correlated to the broader market.

That will not perform well when markets go down 50%. when you get into a more mid- cycle environment and use the market correlations like stock picks, more discerning performance among investors, not just getting out and getting in, that is an environment where you can get -- short strategies to perform well.

That is one area.

There are a lot of things that might be crowded trade for a couple of months, but for a couple of years, they work well fundamentally, and there is still a lot of financial distress.

Assets are available price for higher returns in a liquid market.

A couple of months versus a couple of years.

The duration of your horizon has changed.

You have to trade down sometimes.

You may need a logger investment time horizon, but the alternative, we were expecting u.s. treasury returns over the coming year to be negative 3%. how do you maintain than when there is so much uncertainty, when the fed will trim interest rates?

It is difficult because there is volatility in all of these markets.

What you have to do is figure out where is the best about you long-term and in treasuries it will be difficult to make any real returns over the next few years.

You either have to shorten your duration to lower volatility or go into high-yield bonds or distressed debt to get some return, but it will be more volatile.

We have seen companies issuing debt because of those record interest rates.

Have they raised the cash they need to, will they still be tapping the markets when interest rates rise?

Tension u.s. companies are in the best shape they have been in in terms of liquidity, but maturities are always coming up, they will always be tapping the market.

The u.s. high-yield market is $1.60 trillion right now so there are plenty of funds to choose from.

You have said that energy is an important theme across as a class is.

Why is that?

These are longer-term themes.

We have gone through a decade of rising oil prices.

Earlier, commodities were in plenty supply.

And you as we had energy investment quadruple relative to gdp, so a lot of things , commodities, exporters around the world, having very low yields, fantastic improvement in finances.

These have come to an end point.

Lots of things that will not work every month and quarter, the domestic energy consumers look better.

Generally speaking, as we mentioned before, equities will benefit from debt expansion, rather than bondholder returns.

Thank you.

We are just getting started.

Stephen whiting, jeff paskins.

Just ahead, new swap trading regulations go into effect today.

One of eight registered platforms can clear the trade, and they are with us.

Warren buffett's big electric car bet, and why china will be making a big move into the u.s. and around the world.

And mark zuckerberg's comments.

What has some investors so excited about facebook.

? a facebook has been on a tear with the stock jumping 50% since the company's earnings report, and it all comes down to one thing, mobile.

Nyu professor scott galloway is with us to talk about the nagging challenge and almost every on-line media company, how to profit from mobile.

You call facebook the most nimble $1 billion company in the world.

Why?

They have been able to pivot like no other company.

They did not have a mobile product couple of months ago and now it is 41% of their advertising revenue, a third of their revenue, and recently they enhanced the facebook exchange.

This is a company that is literally able to develop a robust products that impact and move the needle, and it is getting to be a big needle.

The speed at which they have managed the transition to mobile is particularly impressive.

Is this adequately valid in the stock?

I do not consider myself a value expert, but i know someone at nyu who called it a continuous bair.

He thought it was priced to protection at around 38, but he believes it is actually not a good buy.

He says it is not a great valley right now, but their growth is focused on asia.

The fastest-growing region.

How can consumers there react differently than in u.s. and european markets?

A mixed bag.

More access from the mobile device, and they seem to be more engaged, larger communities, an exciting thing about social media in asia, there certain areas where the social network turns into commerce.

There are signs that people are willing to buy once they come off of the social network.

It is more than just advertising.

It is those high-value clicks that may end up in the purchase.

Google still gets a majority from ad revenue, but facebook is growing their business faster.

How did facebook accomplish this?

Even more impressive than their growth is, unlike google, they are not experiencing an uncomfortable arbitrage as they move to mobile.

They are getting the same at a price on their mobile as pc.

They are able to say to advertisers, maybe the product was underpriced to begin with.

The targeted products that shows up in the news feed has greater clicks at a lower price.

That is a nice cocktail in the business world.

As a result, they have gotten the same price for mobile apps.

That is one thing that comes up consistently in google earnings, that mobile rates are much lower than desktop rates.

Is this something that other platforms can mimic?

Twitter is doing this.

In their quest to justify their $10 million valuation, they want to monetize their platform.

They are taking a page out of the facebook playbook and focusing on a retargeting product.

When you consider facebook's product roadmap, you say one of the mistakes that they made was sponsored stories, and withdrew from that.

But the premise behind that lives on.

It is an example of a great company.

Google and facebook try this.

They try a lot of things, and if it does not work, they kill it and move on.

Like true innovators.

Thank you, scott.

It is 26 minutes past the hour, which means on the markets.

We are looking at a bit of a sell-off today after the s&p closed at a fresh record high on friday.

Right now, down about 4.5%. the dow is down 60 points.

The nasdaq is down 0.01%. this is despite strong ism data, growing at the fastest rate in five months.

Cliffs natural resources.

Their stock is up for the third day.

They reached a deal with one of the unions.

More after the break.

? welcome to "money moves," where we put the focus on alternative assets, places investors are putting money outside of the traditional stock and bond markets.

I'm scarlet fu.

Third point reinsurance says it plans to raise as much as $322 million in an initial public offering.

Hedge fund manager dan loeb is a shareholder and almost all of their assets are managed by third point.

Now for our other top headlines, let's go to adam johnson in the newsroom.

Actor george clooney is attacking dan loeb for his criticism of sony.

He is pushing the company to spin off its entertainment business, which clooney's production shop is housed with.

He says that dan loeb knows nothing about the movie business and is trying to spread a climate of fear.

Chinese battery maker byd is working on negotiations overseas.

The world's first artificial beef burger hit the grill in london today.

They were made from stem cells and cost $300,000 to produce.

Sergey brin front in the money.

They want to find ways to grow meet in labs -- meat in labs to reduce the number of gas emissions lead off by livestock.

When we come back, inside the oldest motorcycle manufacturer.

I like that picture of you and your ride.

There is a new twist in the patent fight between apple and samsung.

Megan hughes has the story from washington.

This was a surprise.

A pleasant one for apple but not so much for u.s.-korean trade relations be done certainly not good for samsung.

No president -- relations.

. certainly not good for samsung.

U.s. trade representative mike froman overturned the itc order that banned older models of iphones and ipads.

He had concerned that import bans would give standard essential patent holders and to leverage in licensing fights.

Their case centered upon an industry standard, and these standard essential patents, which stands -- samsung had agreed to license.

You remember in january the administration sent the itc proposal guidelines on this before considering their issue on proposed bans.

U.s. centers also got involved here.

A samsung spokesperson said that they were disappointed with the decision and said that apple were unwilling to agree to a licensing deal, and that samsung were negotiating in good faith.

In terms of apple, we are talking about the iphone 4. it is an older model, so why does it matter?

It may seem like ancient technology to you, but they are used for the entry level.

It is part of the strategy to get late comers hooked on the iphone.

Under the ban, they would not be able to import any more of them.

Analysts say that it would have been a hit to apple, but temporary.

We are expecting a new version out maybe this fall, so that would mean that all of the models would move down a rung, so the iphone 4 is close to being obsolete.

Thank you.

Speaking of washington, new swap trading rules issued by the commodity futures trading commission are taking effect today.

Swap trades will be cleared by swap trading facilities, stf's. these are meant to bring market participants together.

Christian martin is the co- founder and founder of terra exchange, one of only eight stf's that have filed.

You call it the beginning of a process.

Can you explain?

It is important to remember how many big banks we have lived here in the financial industry and they do not all indicate a flash of lightning.

They indicate the beginning of a process.

The end of the regulatory unknowns, beginning of certainty, injecting more confidence in the marketplace.

How significant, then, are these stf's in building the trust?

There is two parts of legislation, the clear mandate, that was phased in starting february, and now comes the execution.

Just like the new york stock exchange, the execution venue, cleared.

We are an execution venue, and then it is clear dead one of several clearinghouses.

We identified tera as one of a participating.

That seems like a small number.

Three years ago when dodd- frank passed, it was thought there would be upwards of 40 or 50 applying.

There have been only about 10, and they have different value propositions, but there is certainly a lot of market share for us to exist.

You wanted to address the changing needs of market participants.

Dodd-frank is still a work in the process.

What had extent that great for you?

Only title 7, a small part of it, and deals with otc and swap trading.

Most of it has to do with banking and mortgages and the like.

Our part is getting close to fidelity, allowing the market to move forward.

Not final yet.

Are you worried there could be more changes or amendments, alterations in the days and months to come?

The biggest pain will be the cross-border trading globally.

Those things will shape themselves out.

There was a breakout last month with the cftc agreed to were cooperative with foreign regulators, but that is still to be played out.

How much interaction do you have with regulators, what rate would you give them through this transition?

We work with the cftc regularly.

All things equal, you would have to give them an a. while it took longer than folks would have liked, this is an enormous market.

One of your previous guests recognize that the market is healthy.

Globally, a 700 trillion dollar market place.

Taking their time was probably the right thing to do.

Thank you so much, christian martin.

Just ahead, the president and incoming ceo of time warner cable, rob marcus talks about the standoff between time warner cable and cbs.

You can also watch us streaming on your tablet, phone, and on bloomberg.com.

? as we have been reporting, time warner cable is at loggerheads with cbs over rights to rebroadcast content.

Time warner cable has pulled cbs content for millions of subscribers in big markets.

Joining me now is betty liu.

With her is a special guest, rob marcus, the incoming ceo of time warner cable.

That is right, some of the program that you enjoy not allowed to broadcast right now.

Thank you for joining us.

I know you have issued a letter to les moonves, ceo of cbs.

Are a couple of issues on the table.

You said, let's go back to the economics of what was agreed in the deal and then operate under the original terms of the contract until you come to another deal.

What are those economics?

Let me start with a couple of background items.

Our priority here is making cbs programming available to our customers as soon as possible.

The key is doing that at a fair price and on reasonable terms.

What we have offered today are a couple of choices.

We think they are an expeditious way of getting programming back to customers as quick as he can.

Choice number one relates to doing a new deal based on the new economics that we just recently agreed to -- a price that was agreed to.

Correct.

And then other turn that go back to our earlier contracts, expired last week, with cbs, and the goal is to make absolutely clear we are not looking for any expansion of rights.

We are willing to live with the contract we have had for several years now.

It is not ideal for time warner cable or its customers, but in the interest of getting the product back to customers, we are willing to do that.

What is the actual retransmission fee?

We will not negotiate the specific price terms.

It is not something we ordinarily disclosed.

Are we fighting about digital rights, is that it?

We are negotiating over the overall terms, including fees and other related terms on which we will have access to cbs programming for our customers.

You said that if that is not acceptable, let's go a la carte.

Choice #2 takes the decision out of the negotiating room where we have to debate the value of cbs content to customers, whether all customers should be forced to buy that 51 to buy any other video products.

It gives the customer the choice.

Having cbs make the product available on an a la carte basis, let them name the price, and then we will ensure every customer dollar that goes to cbs programming is remitted to cbs, we will stay out of it, and customers can decide if they're not the product.

You are doing that because you want to make it transparent how much they are paying for cbs programming.

We want customers to decide whether or not they subscribe to cbs content.

Hang on, we have to take a quick commercial break.

We will be right back with rob marcus, incoming ceo of time warner cable.

Welcome back to "money moves." i am betty liu.

I am here with incoming ceo of time warner cable rob marcus.

We wrote -- we spoke about the letter that you wrote to les moonves.

Have you heard back?

No, we have not.

We just wrote this afternoon.

We have not heard anything since last friday when the contract expired.

Do you have a deadline in terms of when they can respond?

Our principal focus is getting cbs programming back on the air as soon as possible.

That is the primary objective we are after.

But is there a drop dead deadline where you say, we have to get this done?

We are about connecting customers with the entertainment they love.

We will not give up, we cannot give up.

There was an interesting piece today in "the new york times" that said you two are committing suicide.

Barry diller is laughing because time warner and cbs are fighting over digital rights, and in the meantime, customers can just sign up for aereo for $9 and get the program that way.

We are incurred in customers to go get aereo in the interim.

At the end of the day, we have to be confident that we deliver the highest quality video experience to our customers, and ultimately, that will be the driver of why they want to subscribe.

In the meanwhile, -- you are not afraid of losing customers?

No, we are urging customers to go get and has to get the over the air products for free, signing up for aereo, and that is how they want to get content.

Before this dispute began, we were encouraging them to go to cbs.com.

Unfortunately, cbs has taken what i would consider an unprecedented step, to block our internet customers, video customers from all cbs product, even if it is not on cbs.com.

That includes customers who actually get video from directv or one of our other competitors.

It also includes competitors to access cbs content through an affiliate not owned by the cbs corporation.

They are not able to get that.

Correct.

They are unable to get the content.

You and i spoke in washington about the rumors of time warner cable being combined with charter.

Rumors are that there will be another stand.

Do you share the view?

What glen said was that interest by john malone in the cable industry, more specifically in time warner cable, is a validation of our assets and business model.

I would agree with that.

As far as the m&a speculation, i said to you before and again, we are guided by a single principle, maximizing value for our shareholders.

Have you been approached again?

I will not confirm that we were approached previously or again.

Jim dolan said today that he may forgo television altogether and just stick to broadband.

Is that something that you believe in?

I believe his comments are a reflection of a difficult dynamic which we have been experiencing for some time.

Programming costs continue to escalate at a rate that far out its -- exceeds the rate at which customers would bear the cost.

That is not a healthy dynamic.

Would you ever get rid of video?

I am not ready to say that, but we want to make sure our customers get a great video experience.

Rob marcus, incoming ceo of time warner cable, thank you for being here.

We have much more coming up.

We will get another check on the markets ahead of -- after the break.

? tomorrow on the "money moves," me and the founder of the start of healthcare consultancy.

The company is called sure fiat and aims to get you in touch with a doctor within 15 minutes.

And we will need a digital company disrupting the textbook market.

Tomorrow we will hear about the company's new app that promises to make students wallets co a lot further.

In the meantime, it is 56 past the hour, and that means bloomberg on the markets.

Let's take a look at how markets are trading.

A bit of a sell-off in the markets.

The s&p selling off after their record high on friday despite the fact that we had better than expected economic data this morning, and the ism index of service industries showing they grow at the fastest pace in five months.

Two quick names i want to highlight for you.

Tyson foods is one of the biggest movers on the s&p right now, shares of 4%. they are seeing record profit on chicken and fatter margins on their beef products.

Berkshire hathaway shares are also higher after they reported second quarter earnings at the end of last week.

They have seen strong growth in their railroad business.

It is time now for the sector report.

Weather conditions could be setting up for a bull run in cocoa.

Joining me now is a specialist from citigroup.

Cocoa is up the most and 11 months on the dry weather in ghana the ivory coast.

How bad is the situation?

Right now, the weather is not hurting supply.

We have plenty of supply.

We are coming into the main cocoa crop.

They will be harvesting this in october.

If we have problems continue, we could see a short crop.

You also mentioned that you were concerned about something called black spot disease in nigeria.

Tell us about that.

If you have too much moisture, the pods will turn black, and the cocoa beans, which are white to start with,

This text has been automatically generated. It may not be 100% accurate.

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