Welcome to "money moves." where we focus on assets, and we will show you what entrepreneurs are doing as well as what is going on with private equity and real estate and more.
And the travel ambitions, the crossa of an idea, coming your way.
Plus, the growing muscle of the chinese company alibaba and what the future of yahoo!
Will be affected by it, and we'll introduce you to an angel investor with one of the best track records, and all of that in the hour on "money moves." and boards special committee may delay thursday's all important by a vote.
Cristina is with us.
Our deals reporter.
Which names are for the michael dell partnership, and which are against it?
It is quite an impressive roster on the carl icahn side of the equation and growing.
Just yesterday, we had to low- price, reaffirming supporting him, and we had at blackrock, as well, being vocal in shareholders' meeting to turn this deal down.
One quick thing we should note, there is a twist here, in a sense that shareholders can vote no up until thursday, and then on thursday, they can vote yes, which is why the special committee will have to wait to determine whether or not the vote is going.
Is that usual?
It is usual, but it sets up a game of chicken.
The shareholders can vote no, no, no, unless there is a delay to get a bump.
At least, that is what they are posturing.
It is anyone's game at this point.
With your reporting, is there any reports as to what side they are leading towards?
From a port numerical standpoint, michael dell cannot vote his shares, and we have talked about this before.
That is about 60% of the company, and that means 84% of the shares are up for sale, and carl icahn already has about 20%, including his shares, he and what that means is another 23% or 24% to vote to, and, again, if you do not vote, it counts as a no vote, so that is why it is coming so close to the wire.
And, i guess, we would be remiss do not talk about this, because it is trading even below the price.
There is a lot of money going into the stock since the deal was announced.
They want to know that they can cash out, and they are not getting that.
That is what is sending the share price a little lower.
But, at the end of the day, what has michael done for this company?
Since his returning to the helm of the company, the share price has tended to about $10 before the deal was leaked and we broke the news, so you are going to give this to him on, presumably, a cheap price, after he has done what he has done for the company.
All right, we have a lot to talk about over the nexta couple of days.
And the connection between a billionaire hedge fund manager, dan loeb, and an insurance company, and almost all of the assets are managed by the hedge fund.
Noah, he broke the news.
Glad to see you.
Why are they looking to do an ipo and today is a reinsurance company public?
-- and take this reinsurance company public?
One of the things they would do with the additional capital is go out and maybe underwrite some more.
The way this all works is the reinsure goes out.
They sell reinsurance to other insurers or reinsurers, and until they have to pay claims, they can invest the money, and the way that this is set up, basically, all of the invisible assets of the company are managed by loeb's hinch funds.
I know he controls about 11%. who else is in the mix.
There are a few others, and it is not sure what the exact amount is.
Ok, what the hedge fund managers.
Reinsurance is one way for them to get money into their hedge fund.
It is a way that is less subject to redemption, which hedge fund managers obviously take a lot to think about.
And one of the other reasons, and bloomberg news has reported on this in the past, is that there might be some tax benefits for the hedge fund managers by setting these up.
Does this strike you as odd though, big picture, even these hedge fund managers that have -- still as a money manager, a trader.
Even these big brand-name is have to find different tricks to get more money in house?
That is a fair question.
At the same time -- it is pretty much status quo.
It is certainly a technique that has been employed.
He has used this as a way to go out.
Noah joining me there.
Elon musk, known for tesla motors and spacex, the hyperloop.
Alan, thanks for joining us.
We have mentioned earlier that musk has described this as a cross between the concord, rail, and something hockey.
He has proposed getting people from los angeles to san francisco in about 30 minutes, so a lot faster than you can do it by jet travel, and, perhaps, less cost with a high-speed rail system.
Ok, faster and cheaper.
That sounds good with almost any project, but what will he face?
Well, that remains to be seen.
He has not unveiled all of the modes of the program.
What he has said is on august 12, he will have a press conference and share his proposal in detail, and he is open to bringing in partners to develop the system.
It is not clear to what extent he will personally stay involved and put his own money in the project, but we will learn more next month.
This is a system you can set up between los angeles and san francisco, for example, for less than what they are planning to build right now.
What inspired him to work on this?
That is a fine question.
I know he has expressed a lot of displeasure over the high- speed rail system.
He called in the slowest bullet train system ever proposed.
It will cost billions.
So i think on one level, he does not like that much spending for what he thinks is too slow a system, and he has a different idea.
We will learn a little bit more in a few weeks.
The extent of his proposal.
alan, you have told me is not the only person working on these types of projects.
Is there a potential for a national larger system?
I know a few years ago, there was talk of high speed rail in texas.
His competitors to the program right now would certainly be the california high speed system.
There is another small company in colorado who has proposed something very simpler.
They are holding about six passengers in them.
You can link these systems of.
The company in colorado has been doing this a bit longer, but it seems like a similar proposal.
Airless tubes, shooting passengers or potentially cargo at very, very high speeds, to 4000 m.p.h., according to the company.
We know that elon musk is very well respected.
How is the hyperloop consistent with the common denominators?
I think it is all connected in the sense that he does tend to think about big ideas and concepts that other people are not pursuing.
This is in keeping with that.
With spacex, they also has a reusable rocket.
He wants to go to mars and colonize mars.
He does think about a high concept project.
It is fair to say that he thinks big.
Bloomberg's alan ohnsman with the latest on elon musk and the hyperloop.
One of the most prolific agents investors.
Where she is finding opportunities in start-ups and also more traditional businesses, as well.
Also, a former hedge fund manager will join us in a little bit and tell us what alternative options he sees existing for bond investors.
He says hedge funds are a mirage.
That conversation coming your way on "money news." -- "money moves." ? welcome back to "money moves" on bloomberg television, and streaming all day long on bloomberg.com.
A active angel investor, more than 35 companies in the last few years, and only one of them is struggling.
Her blog is widely read.
So glad you are here.
Especially on this impressively hot day.
We just mentioned 34 out of 35 investments are alive and thriving.
What is your secret to decision making?
Because i do not know anyone else who has that track record.
Someone is going to.
It depends on how you judge.
I think it is a combination of different things.
I have been involved in the tech industry for over 20 years, and i am a bit of a generalist with regards to how i invest.
I think the entrepreneur is fantastic, and this is a void that makes sense to me and needs to be filled in the next five years, i kind of jump into the game.
When i understand, it is already too late.
Do you ever feel that, or is that a stupid thing to say?
That is a stupid thing to say.
The majority of companies i have invested in, there is one on to ignore, and that is it.
They are the team.
Maybe they are co-founders.
They are lucky if they have someone in the office.
I think there are five that i have given their first dollar to.
I am a total mentor, as well.
I look at helping them from the beginning, helping them build their foundation, pushing them to have meetings every four six weeks, and i do not let up.
You do not let up.
That is your point, extremely varied.
In a personal finance, gymnasiums, restaurants, and this really is incredibly varied.
Is that just the nature or the byproduct of, you said, of having 20 years?
I think it is a combination.
My husband and i are in the startup community.
Yes a very big thesis for what he invests in, so i feel the i should not follow a thesis, you invest in tech companies.
Invest in one thing, consumer products.
Curiosity in intellectual stimulation.
It is kind of fun to look at these different businesses.
They all have the same issues.
Are there common denominators that stick out in your mind, whether it is a restaurant, whether it is a startup, something you say, ok, this is an x factor to me?
It is all about the on jupiter.
If you're buying a house, you cannot move the house.
You can decorate it, but you always own the property.
You are in bed with that entrepreneur, no matter what.
Having to be run by women, is this something that happens along the way?
Is this something that is conscious in your part?
There is definitely a difference.
When i started writing a blog, which is now 10 years ago this fall, i started to become a chick magnet.
They were saying, "you are singing my song.
And there are few female angel investors and few female vc's. i could tell you about a restaurant i went to the night before, raising kids in the city, and so i think it really resonates with a lot of women, and i started to hear about women and their businesses, so all of a sudden, i had women coming to may, and they are interested in getting involved.
And i heard from more and more women, we cannot get funded.
We are having a really hard time getting funded.
I was thinking, this was a great idea.
I think of a few that are particularly women focused.
Maybe that is a harder business for the average person to wrap his and around.
I think a lot of men might not understand what these women are building, but certainly, as the businesses grow and become more profitable and have really great revenue, everyone understands.
Everyone understands the dollar signs.
What are you seeing in new york?
I do not want you to single out something from our portfolio because you love your children.
I love them all.
General opportunities where you think, ok, the more exposure i have to this, the better?
There is nothing, per se, but we have seen some huge shakers in the technology industry, and now they are building on those.
The thing is great about being an angel come if, in fact, a business is worth $20 million, that is ok for me, right?
It would be great if it were $100 million.
It does not mean that i will start thinking about that as a vc would.
They are investing in these companies.
We are seeing companies that are very singularly focused, versus wanting to be something for everyone.
I think every industry has something that is changing, said that is the special time period.
Good to see you.
Joanne wilson, active investor.
And other tech companies can learn about how the site alibaba is run, and also stay with china, accusations against one of the biggest drug makers, glaxosmithkline, saying they pushed their drugs on doctors.
More on that in a minute.
Sex, bribery, facing -- fixing tax receipts, and other allegations facing smithkline glaxo in china.
These are serious allegations.
Glaxo not the only company having to face this.
Probably the highest profile cases since rio tinto and probably part of a growing trend of chinese regulators trying to crack down on foreign companies, so they have detained four glaxo executives, saying they used travel agencies as conduits to receive bribes, and they say some even received sexual favors, and the drug agency's transferred them.
They say they are deeply concerned, and they are reviewing all relationships and will cooperate.
Out, in theory, does this work?
K2 somebody as a bribe.
There is very the impact on the glaxosmithkline stock.
This is a drop in the bucket.
They made $1 billion.
There with the very latest on glaxosmithkline.
It is 26 minutes past the hour, and that means it is time to take us to julie hyman in our data center.
We are seeing a pullback in mixed economic data.
This is not helping stocks.
We have earnings weighing on the market.
Coca-cola, those earnings missing estimates, volumes disappointing around the globe and in north america.
Goldman sachs also falling.
Looking at trading in fixed income commodities versus other banks.
We will be back in 30 minutes with more on the market.
This is "money moves." i am deirdre bolton.
We want to bring you your bloomberg top headlines with "street smart" co-anchor adam johnson from the newsroom.
We begin with the latest twist in the saga of edward snowden.
Officially asking , russia asking him to stop releasing documents.
Temporary asylum would allow him to move freely within russia.
Shares of goldman sachs dropping today, even though they were topping earnings estimates.
Net income doubled in the second quarter.
Goldman is seeing a surge in underwriting revenue.
And confidence is building, at least among home builders.
The index notes the confidence, this month hitting the highest level in seven years.
Economists say the recent increase in mortgage rates seems to have had a limited impact on the housing market.
That could be because we are still at a very low level.
Coming up at the top of the hour on "street smart," ben stein has got a message for fed chairman ben bernanke.
That is today.
We look forward to seeing you there.
I look forward to it, as well.
We want to bring you some breaking news.
The billionaire who controls liberty says he is out of the race for the german the telecom company, kabel deutschland.
We will keep you updated on any further headlines.
That quick one in the meantime.
Now, we want to focus on yahoo!. it is trading lower after the close this afternoon.
One part of yahoo!
That is really discussed but important to its future is its stake in alibaba.
Chinese internet retailer.
It as more goods passing through it and ebay and amazon combined.
We have a senior technology analyst joining us.
Scott, thanks so much for joining us.
Talk about this alibaba part of the equation.
What does this mean as far as the earnings and revenue go?
Well, what is important to keep in mind is yahoo!
Only owns that minority stake that you referenced, so it really does not roll up into the operating earnings picture.
However, from an asset value perspective and a people think about yahoo!
As a stop, here it really adds, we think, significant value, and we could make a good argument that it is the assets that are most relevant to the valuation of the company right now.
We mentioned that quick a statistic.
In this whole alibaba universe, more good passing through than between abbas on and ebay combined?
-- between alibaba and ebay combined?
And it seems like alibaba is only growing.
A lot of people do not know about alibaba.
Another thing to keep in mind, which it is astounding, it is not just one or two businesses.
They have a platform centered on business to business transactions.
They have a platform on business to consumer transactions, much like people think about, when they think about ebay, so this is really an e-commerce powerhouse that is centered in china but increasingly is looking abroad for customers and growth, and what is really noteworthy, we think, a lot of u.s. companies have tried to be successful in china with very, very limited success.
Hyundai took some assets and $1 billion, and basically in exchange received 40% of alibaba.
Just last september, they received 6 to $7 billion for half of that, and the other half they still own and are waiting to monetize, perhaps after an ipo.
Scott, it is hard to think about alibaba without thinking about jack, and legendary figure.
We know he is not leaving the company and is staying on as executive chairman.
What does this mean for the company?
It is interesting that he made that transition.
There is a new ceo and a new cfo, as well.
Perhaps, they are gearing up for a new chapter in the life of the company.
Jack is legendary.
He built in this business from the ground up.
He was competing at the time with ebay, which had its own offering in china, and people questioned the alibaba business model of not charging fees and building a user base and loyalty, and look where it got them some 10 years later.
I think is fair to say that ma is still important to alibaba, but he, himself, does not equate to the totality of the company.
I think the role he is plano is important, but he is not running the company any more.
-- he is playing is important.
Do you accept that, and does that valuation makes sense to you?
There have been a lot of indications really since september of last year, when yahoo!
And alibaba consummated a share return transactions where essentially yahoo!
Return shares of the alibaba group back to the company in exchange for that sum that we referenced earlier.
Of course, that agreement contemplated alibaba going public at some point over the following couple of years, which, you know, includes 2013, 2014, as well.
We did not think that alibaba was going to be published this year, and i think so far, we are right, and we think this could be associated with the things you referenced, the timing of an essential ipo , and there has been speculation about where alibaba would list, whether it would list in hong kong or the u.s., and that needs to be addressed, also, but a lot of people think about alibaba, and they think it could be worth $100 billion, which, i think, at this point is somewhat a stretch, when you think that china is still a market where there is a lot of uncertainty, regulatory, legal, what have you, but also, yahoo!
Has to play -- pay a lot of taxes if they are going to sell any further stake in the alibaba group.
Great chatting with you, scott, with an analyst, scott kessler.
When we come back, seeing opportunities, especially in fixed income, especially outside of bonds.
In fact, he says bonds are over.
That is next on "money moves." welcome back to "money moves." on bloomberg television and streaming all day long on bloomberg.com.
And starting his own advisory firm, best known as the author of a hedge fund, and he has a new book coming out in the fall called "bonds are not forever." simon, always glad to see you.
What made you dedicate a whole book to how bad bonds are right now?
Almost all of the books that you look at tell you how to invest in bonds, and conventionally, investors do still, and yet, one of the things remaining is that if you go on the fed website, the fomc makes its forecasts on the economy, and they will tell the interest rates are going to be at 4%. i imagine that if ben bernanke was sitting with us, what do you think?
And he would say, not my money.
I mean, he is a noncommercial investor.
What if rates do not go higher?
Are you worried about the timing?
You wrote this book, and we are in a sin to be rising interest rate environment?
It is not that we are forecasting a crash in bonds.
This will not cover inflation after taxes.
This is not enough to make bonds attractive.
The rates may go up, but this will be unattractive for a long time.
Better things to do with your money back and include -- fill in the blank.
Low volatility stocks.
We have a number of strategies.
We have edged out the market risk.
Creating in reinvesting.
Equities are really the only way to beat inflation, so the question for the investor is, how much equity and how much cash should i have?
Because the bond market is distorted by federal reserve activity.
And then, of course, which equities?
Because you cannot just put them all in a basket and hope for the best.
Johnson & johnson, others.
Companies that are not going to keep you up at night.
I mean, simon, these are affected.
These are equally as affected by the fed and their decisions.
Let's look at the typical portfolio.
About two% yield on the s&p. this issue about a 7% return expectation.
The yield you are earning on a treasury security, that is what you are going to get.
You can put part of that into the s&p 500 and keep the other in cash.
And this will give you the same return as a 10-year treasury.
Interest rates generally are distorted by government activity.
If the government wants to buy bonds automatically, do not compete with the government.
They will wind.
Do something else with your money.
Simon, that is responsible . i want to bring you back to the book.
Bloomberg business week wrote an article from the cover and the content about hedge fund performance, and that is the cover.
"the hedge fund myth." the basket of hedge funds is underperforming the stock market, at least according to our research.
I am not surprised.
They have outperformed every year since 2003. this is now the 12th straight year.
I am utterly joyless about the cover.
I think i was far too mild with the cover of my book.
I would not be here if i did the art cover of my book.
Simon, always great to see you.
Congratulations on the new book.
Simon lack, the soon-to-be released "bonds are not forever." we have a quick break to take, and when we come back, buzzwords.
Welcome back to "money moves." welcome to our buzz word to improve your vocabulary.
From capital partners, ron, we know that you, as bank regulators, want to impose new regulations, so with that in mind, what is this?
It is a very difficult risk, a very dangerous risk as we saw in 2008, and subsequently, and it refers to the quality of a counterparty.
It goes down while your exposure to that particular counter party is going up, so both things are moving the wrong way at the same time.
During a crisis, aig and the housing meltdown, can we pull out an example?
That is the classic, a classic example.
What is happening is these investors are sitting on them, and on the one hand, there is a guarantee.
When they look at the guarantee, two things are to about it.
They say, a, it has got a fantastic credit rating, so we do not have to worry about it, and, b, they had an underlying asset, so they did not think they had any risk there.
But then the underlying risk starts to come in.
You need that guarantee, and suddenly, you have a big exposure to the guarantor's, and their risk is increasing precisely for that same reason.
So that exposure and risk of default both moving higher at the same time.
Exactly, and almost all of these risk models treat these as independent variables.
You have got one bucket that says a and one bucket that says b, but they are not looking at them blowing up together.
When this really tends to bite you is when things like that happen, when very highly rated institutions lose their credit rating, or highly secured traunch as.of debt instruments start to get into trouble.
What are regulators trying to do to mitigate some of the risk?
One of the things that has really exacerbated the risk is the development and expansion of the derivatives market, so one of the things that is helpful is to have these clearing houses that are sitting in the middle.
That is one idea.
And another thing we talked about earlier this week is to get away from this idea that you have your risk adjusted levels of capital inside of the banks.
Instead of looking at every risk by the type of risk, go to a more simple model that takes all of your risks into account at the same time.
This brings up this bigger picture issue of how hard it is to manage or at least to evaluate the risk.
What this really proves is nobody has developed an algorithm to see the future yet, and we cannot model all of the possible risks just by looking backwards at the previous history.
It will happen, as bill gates said, carbon based pets.
Thank you very much, bob, as always.
Remember, if you do have an idea for his next buzz word, you can go ahead and tweet it to him @bobrice3. we will be back.
. . tomorrow on "money moves," next-generation opportunities in mobile and digital media.
Plus, advancements in software aimed at protecting your company's most sensitive information.
All of that tomorrow on "money moves." in the meantime, it is 56 minutes past the hour.
Time to check on the markets.
Senior markets correspondent julie hyman has the latest.
Let's check in on stocks at this hour.
Earnings really weighing in on the -- earnings really weighing on the markets.
We could see tapering from the fed since markets are doing better.
We will hear from ben bernanke tomorrow when he testifies before congress.
The s&p down almost 6.5%. one of the group that has been falling today -- automakers.
That's because goldman sachs analysts downgraded the group to a neutral for the first time since 2009, saying rising rates tend to be a risk historically for this sector.
We are seeing general motors and ford of drop.
We are also seeing a sharp decline in shares of tesla.
For perspective, this is a stock that has more than tripled this year.
But it is seeing its biggest one-day drop since january.
Goldman sachs also cutting its target for that stock price.
Among other things, setting the sustainability for demand in the long term for those tesla cars.
Let's move now to a specific part of the market and get another look at another sector.
Today, we are focused on the consumer discretionary group, specifically the business of food and beverage.
Dominic chu has more on what the restaurant industry can tell us about the economy.
You are looking at an employment figure for restaurants.
Are we seeing increases or decreases?
We are looking or signs about where the economy is headed.
Here is the interesting charts -- we look at employment versus sales.
The white line represents the year-over-year change in the numbers of waiters, bartenders, other restaurant workers.
The yellow line as sales growth for the industry.