Boom to Bust: Market Makers (07/19)

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July 19 (Bloomberg) -- On today's "Market Makers," Erik Schatzker and Stephanie Ruhle use analysis, insights and A-list guests to help set up your daily market trades. (Source: Bloomberg)

Over the past couple of years, it has been difficult trying to move it onto exchanges.

People are saying, do we need to have these complicated derivatives when we can just use futures?

Market participants are concerned if you have an investment or security that needs to be hedged with a swap, that can create invisible risk.

We will talk more about that complex issue.

We will be back.

? detroit to goes bust.

The governor tells us why he put the motor city in bankruptcy.

A $2 billion bet that may never pay off.

An exclusive with the ceo who says he is not giving up on the controversial keystone pipeline.

We will tour what could be the most expensive night of your life.

The hotel designed to embrun -- impress.

Good morning, you're watching "market makers." i'm erik schatzker.

We want to turn to our newsfeed.

The most important business stories of the day.

We will start with general electric reporting better than predict earnings this morning.

Beating analyst estimates thanks to heavy global demand for jet engines and gas drilling equipment.

The company says the backlog is at a record level.

The trial is getting more interesting.

Lawyers for a former goldman sachs banker says they will call john paulson to the stand.

He could justify as soon as the trial's third week.

Men's wearhouse is going upscale.

It is buying a brand for millions of dollars.

Abboud label.

Last month it fired george zimmer.

It is the biggest municipal failure in history and will have dramatic effects.

100,000 creditors big and small are all scrambling to deal with the fallout.

Michael mckee has taken a look at the staggering scale of the collapse of the motor city.

He is here to tell us about it.

This is a very unique event.

Very few cities ever file chapter nine bankruptcy.

This is detroit's -- decades in the making.

A city too big for its population.

Here is what you and that with.

$18 million in debt.

Unsecured creditors are owed 11.8 billion.

This is a city that is running a shortfall.

They cannot pay its bills.

They would have a tough time -- they will have to prove they were insolvent and have to go into bankruptcy.

It will be a very complex case to try to figure out who gets paid and how much.

What is the next step in this case?

Do we know for sure whether it will go through bankruptcy?

We don't. the judge is appointed and the city has to prove it was insolvent.

There will be lawsuits about that.

A reorganization plan has been proposed.

If it holds, he is talking about paying creditors $.17 on the dollar.

A couple of things will be controversial.

The unsecured creditors, most of them are the city's pension funds.

Is he going to be able to take away and give people a haircut?

That is an issue that could go to the supreme court.

Another issue, -- it appears based on the reaction we saw yesterday that they were somewhat surprised that this filing came sooner than they anticipated.

It was a race to the courthouse.

A little bit of drama.

There was a suit demanding that may not file.

They were asking the judge for an emergency injunction to prevent the city from filing for bagram say.

The city asked for five minutes before the respondent.

They filed for bankruptcy.

The unions are not very happy.

That is how it has to happen sometimes.

Thanks very much, michael mckay.

-- michael mckee.

We have one of detroit's creditors here this morning.

The chairman and ceo of fundamental advisers put $1 billion focusing on the stress and a special situations exclusively tied to the missable market.

You are a creditor -- the municipal market.

What are your thoughts?

Complexity is an important word to describe the circumstances.

We have pension obligations relative to general obligation bonds.

The priority of liens is going to be important.

The discussion is going to be about how the city right size of itself and prepares to become viable and attractive to businesses and families and get back to making hits.

We have got to get back there.

Before we get to that point, as a creditor, are you happy this morning that detroit filed for bankruptcy?

Do you have more faith in the process of negotiations with the pension funds and unions?

Nobody is surprised by the news, if you will allow me to use that word that happened yesterday afternoon.

When it happened was the only question.

Chapter nine proved to be a viable for them and -- forum.

Is that a model for detroit?

That was a singer problem.

We have one assets that had a broken capital.

-- that was a singular problem.

They will retain the asset.

There will be a researcher in and refinancing of that asset.

Beachwood has several problems.

A broken footprint -- beechwood has several problems.

-- detroit has several problems.

Multiple problems, much more complex.

The value of the solution has far-reaching implications for other municipalities.

We will get to that in a moment.

As a creditor, is he your friend?

I think we have many friends and discussions to have.

And he is a thoughtful and substantive forward thinking professional grade manager.

He is at the forefront of this discussion.

Kevin orr has done a professional job of putting together a proposal.

No one can argue that is thoughtful and considerate.

This is a significant problem and professionals are going to dig in and work through it.

Walk us through steps that we will need to be -- will need to be taken no matter whether it is kevin's plan or somebody else's plan.

What are things detroit will have to do in order to get to the other side?

Very little doubt about the fact the city qualifies up early for a chapter nine proceeding.

This noise about whether the race to the court, i think will dissipate quickly.

The legal challenges?

I have not looked at it closely.

The idea that detroit is broke, i don't think there is much dispute about that.

We will look at solutions like asset distributions, restructuring of existing obligations.

We will look at reducing services and the benefits to pensioners and residents.

That is an ugly discussion but it is necessary and appropriate, in my view.

The most important step is how does the city return to greatness?

The cradle of the industrial revolution, a nice place to raise a family.

Gave us the model t ford.

How does the city do that to win your confidence as an investor back?

Attract businesses, new enterprise and get back into the business of expansion.

Appropriate spending on infrastructure.

We need to find out where the money is going to come from.

We have broken systems there.

I read in the paper that residents are waiting about an hour to get a response to an emergency call.

I don't know the accuracy to that, but we are talking about aging infrastructure.

11 than in dollars of unsecured debt.

What will the recovery being -- $11 billion in unsecured debt.

I don't want to comment.

We are involved and i don't want to comment on recovery.

It is hard to look beyond the jordan.

Given the news that we have had, is chicago the next detroit?

Orange is the color of fundamental advisers.

What i will tell you is, illinois, puerto rico, other mentalities -- other municipalities face the notion that government has gotten big and the tax base has receded.

That is an important question.

Hopefully it is a bright future.

Great to have you with us.

The chairman and ceo of fundamental advisers, a creditor in this bankruptcy.

Coming up, we will talk much more about the future of detroit.

We will talk to the michigan governor.

What do we learn after bitter 90s -- ben bernake's talk?

? what does they big as a means for the bond market?

-- what is the bankruptcy mean?

Good to see you.

What does it mean for the bond market?

It means a lot of things.

It means the most issues are for the municipal market.

It is really about preservation of principle.

When you have a big headline about default going on, even though it is a very small holding, it is the confidence concern.

We have been trying to prepare people for these issues of that there is not a panic.

You undermined confidence and that is an issue for the flow into the market.

That can have repercussions.

What about the bankruptcy itself?

What presidents might it send?

Those are issues that we will have to work out the pending -- there is a potential president that would be unsettling.

Conversations around the treatment of creditors, potential treatment of the secured creditors, bonds, what kind of spillover this has in terms of michigan bonds but also more broadly as to whether or not any of these approaches might be pursued as morels.

We think this is very specific to michigan.

You will talk to the governor later about that.

Those are important issues.

He is taking an approach different from what other states have done.

That is going to have an impact on michigan.

Is it a conclusion at this point that this event is going to raise the cost of municipal credit across the nation?

I would not go that for, that it will raise the cost of municipal credit everywhere.

It has the largest impact in michigan.

That is the obvious point.

People will look beyond that.

Illinois and puerto rico.


The issue is, does uncertainty make it more difficult for other areas like illinois and puerto rico?

May be the inevitable there?

You are barely hanging on because we have market access.

This is the story in puerto rico.

It is very circular.

You have market access, so you maintain credit rating.

An event like this can pull conference back and that results in a loss of market access.

That is were the spread of these issues in detroit can be a broader issue.

You said the important thing to watch is the treatment of general addition bonds.

They are considered so safe.

That is the broad impact.

The big numbers are the pension and liabilities.

Those are the issues were the most economic issues are.

The bond holder issues to the secured bond, the larger portion and also the treatment of a general obligation bonds.

If detroit is the rock that rick snyder has thrown into the pool, how are those ripples affecting the rest of the market?

Do we see any kind of ripple affect or appeal of other securities?

A great question.

They are in the portfolio setting, municipal bonds are safety.

They are already being questioned for issues that have nothing to do with detroit, which was bond losses because of rising interest rates led to market losses.

People are considering how safe is the principal here relative to income?

They ripple effects are, where do they go into the bond market?

Floating rate loans have been benefiting.

They are not safer in terms of credit risk, but in this environment -- it is insulating.

We had two days of testimony and q&a from the fed chairman.

Did you learn anything different about when and how he will scale back the stimulus and how that affects the bond market?

I learned what i was expecting to see, which is if they bond markets overreacted to month and the fed would push back.

What we got.

He said market conditions were too tight and we will push b ack.

We backed off.

How does he put the genie back in the bottle?

He is trying hard to stuff the genie back into the bottle.

It is hard to do.

The genie is, interest rates are n't going to be zero forever.

Expectations for when the first interest rate increases rose quickly.

Now, we're pushing it back.

I think it is very hard to to get that genie back in the bottle.

Does the treasury yield go lower before he goes higher?

That will be about the economic data as he reminded us.

We have a slowdown.

A big surprise in this whole time.

, is the economy was weakening and recent data has been weaker.

We could go lower if that is the case.

We don't think we will have significantly higher interest rates.

Around 250 is were what end up at the end of the year.

It will depend on where the data goes between now and then.

There will be a healthy range around that level.

Great tcu.


Terrific conversation.

Jeff rosenberg is the chief investment strategist for blackrock.

Coming up, when it comes to business, he is a live guy.

We will tell you why the executive -- from the trial of mobster coming up.

? live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle.

This is for you and howard executives out there.

Ever wonder what you might learn from a wiseguy?

An accused mobster is on trial in boston accused of masterminding 19 murders.

The magazine lists a number of things he did right in his career of crime.

The cautious when hiring.

Getting into his inner circle was tougher than being hired by google.

That may have kept him out of prison.

In his case, terminating an employee had a different meaning.

Love what you do.

After he killed someone, he was nice and calm for a few weeks.

He never stopped learning.

The fbi found a huge collection of nonfiction books about gangsters and crime in his apartment.

It sounds like you love what he did.

I guess you kind of have to if you will do it for that long.

There is new news.

A witness against him was found dead earlier this week.

No signs of trauma but one friend told the news that he was murdered.

Prosecutors say that he went on the lam after he was tipped off by a corrupt fbi agent.

It was not just those and his inner circle.

Yet a network of informants -- he had a network of informants.

It gives you insight into how he was able to run his empire.

He avoided the authorities for so long.

Also, the movie the departed is based on this.

It is half past the hour.

Time for bloomberg to go on the market.

We will look at earnings today.


Check us out.

Shares are down 9%. after the $900 million hit.

That was painful.

General electric shares are rising more than 4%. it is a story of many parts to many businesses.

People are disappointed that google has not been able to translate a strength in a desktop advertising to mobile advertising.

That is the theme we have heard play out with facebook as well.

Now, those chickens are coming home to roost.

We talked with an analyst who covers google earlier and he says there is not much to worry about.

That does it for on the market.

We will check back in, in 30 minutes.

We will be right back.

? you are watching "market makers." dreamworks is opening a new front with pixar.

Turbo, a film about a racing snail in which netflix will play a big role.

Jon erlichman went to dreamworks to take a closer look.

My name is turbo.

Dreamworks animation tells the tale of a snail who joins a big.

Really big.

Watch him race in the garage and fantasizing about one day being able to compete in the indy 500. the director dreams big also.

It started 10 years ago with a pitch competition that dreamworks had.

Dreamworks hosts competitions.

The snail pitch was a hit.

It was not until two and a half years ago he finally got to make his movie.

The summer's hottest animated films have been based on proven characters.

Bexar's monsters university and despicable me.

They hope it will of the -- appeal to the fast car crowd.

That experience, getting to feel what that is like this early gave me a sense of where we wanted to bring the film.

The film will head up a tv show coming to networks -- netflix in december.

Part of a plan to boost tv revenue by 2015. netflix has become a popular way to watch television.

My kids spend a bulk of their time watching netflix.

Now the hope is kids will spend time in the theater watching turbo.

Welcome are you a ray of sunshine?

Jon erlichman is in los angeles.

It seems as though the success of this franchise is predicated on how well turbo does in the opening weekend.

What happens if the movie flops?

There are estimates that have come down based on box offices and forecasters in the last week.

I guess the answer is that life goes on.

I spoke recently with the ceo of dreamworks in idaho.

He addressed there is a lot of competition.

That is always the case.

There are some that are big hits and some that have not done as well.

The key for dreamworks , let's do more of that to offset the realities of putting a movie in the theaters.

You have to cross your fingers.

Is it that tv is much cheaper to produce?


There are other avenues and players that want content.

The netflix deal is for something like 300 hours of original content.

If you're dreamworks and you have got a lot of already established characters, the opportunity for someone who was saying we need original content to feed the beast, you can create these new characters, get them to the theaters and get people there with them and have this other avenue for revenue growth through the likes of netflix.

, in the morning we have a good idea of how fast this goes.

Good to see you this morning.

You can catch jon erlichman and the entire bloomberg west team at 1 p.m. eastern time here on bloomberg television.

We have other bloomberg west top headlines for you at this hour.

A big market debut.

Retail me is about to start trading on the nasdaq.

A valuation of $1 billion.

The company has a gross margin of 94%. that is wider than any company in the s&p 500. some cable tv customers would be -- may be blocked from cbs programming.

Time warner sets cbs to much money for to carry its programs.

Up to 600% more than other broadcasters.

They are running ads warning customers may lose cbs top lineup starting next week.

Both sides say they're still trying to reach a deal.

A breakup of troubled bookseller, barnes & noble might have lost almost eight dollars a share.

The chairman has expressed interest in buying the traditional bricks and mortar business.

Microsoft is the most obvious bidder for the note business because it already owns a stake.

All about unlocking the value for shareholders.

We come back, how to fix america's decaying infrastructure.

The answer may lie overseas.

Stay with us.

? this is a "market makers." setting bridges.

And if her social problem and the solution.

-- america has an infrastructure problem.

Using cash to create an infrastructure bank.

Joining us is an analyst.

You have looked at the proposal.

Does it sound reasonable?

It is no secret that infrastructure is currently around the country.

We have new research that takes a deep dive into this problem and into the new plan exploding around congress that you just summarize.

The plan has promised.

It is a way to unlock the $2 trillion in overseas earnings and bring it back to the united states to be invested in infrastructure through a bank to solve some of these problems.

The plan may be too good because there is nothing to prevent congress from using these funds to fund all kinds of different projects from education to aids research.

Therein lies the heart of attention.

One of the criticisms that we saw during the recession is that it was not targeted to the right project.

There was excess spending.

How do you regulate and determine these projects and what the priorities are?

That is a key question.

I referred to that original stimulus from obama as cotton candy spending.

It was over before we knew it.

It funded short-term projects like potholes.

It employed people for a couple of months.

The idea would be to set aside money for long-term projects that have high returns over the course of the lifespan of the project.

Instead of these short-term projects that disappear after a quarter.

Does the analysis try to evaluate whether companies might be willing to do this?


We are always focused on companies.

Some companies would be very receptive to unlocking their overseas earnings, bringing it back to the united states.

Those happen to the companies in the service sector.

Multinational service companies would benefit a great deal from a program such as this.

Other programs would depend on the tax rate.

The last in line to take up such a program would be energy companies.

Knowing the winners and losers would be a crucial part of any kind of plan to implement it.

What about the fact that we are trying to have a corporate tax debate in this country, a personal tax debate?

There is momentum to change the tax cuts and rewrite it.

The psychopathy of something like this -- does that, kate something like this?

-- does it complicate?

The transition is costly.

This helps with the transition from a worldwide taxation to a territorial tax system.

Companies may be on board for just that reason.

Let's say we want -- people have proposed and what are alternatives for overseas profits and giving them a tax break in the process?

Taxation is one of the ways.

Whether you do it on overseas earnings are corporate earnings.

That will be a way to fund an infrastructure bank.

Private partnerships would also lead to funding of an infrastructure bank.

Those funds are thought of as coming out of a general treasury funds which has impeded progress.

That fund is marked for so many other different types of government spending.

When you have a pot of money at the end of the day, it is subject to desires for a lot of different projects.

Because of the sequester, there are government programs that are underfunded.

If you want to use it for infrastructure, it could be applied to a lot of different government programs currently.

A very timely topic, especially in light of detroit.

Thank you , nela richards.

The women's chamber of commerce reports that women owned about a third of america's small businesses.

You might think they would have a good shot at the $500 billion awarded every year in federal contract dollars.

Bloomberg has learned some agencies, that is not the case.

Megan has more for us.

The white house fell short of its goal in this department.

Across federal agencies, women and small businesses got about 4% of contract dollars in 2012. shy of the government's goal.

It is not even close to that.

The worst the top 10 concert and agencies, the energy department.

Women own small business , $305 million of contracts.

This is after the obama administration tried to boost women-owned businesses.

Administration officials say the program is still going through a wrap up.

-- ramp-up.

At the energy department, six awards were set aside last year.

As a, they said aside just one -- at nasa, they set aside just one.

Do we know why these are not being met?

Nasa says women represent small percentages of business.

If you take a look at where most of the energy department awards went last year, it was big vendors like your lockheed martin, urs, bechtel and the top 50 got more than 90% of the award.

In the energy department defense, a lot of the contract spending goes up or national labs.

Those are usually run by large companies and universities.

Thank you very much.

Megan hughes with the latest on why small businesses owned by women are not getting a fair share of those federal contracts.

For more on our coverage of washington, to tonight at 9 p.m. to political capital.

Special guest, john mccain.

That should be him it -- interesting with immigration.

Coming up, high rollers, fat cats, they big-money gamblers that las vegas loves.

We would take you into a hotel suite designed to attract the richest of the rich.

That is next.

? if you ask the fed chairman, there is not a threat of inflation right now.

If you ask sushi lovers, they would probably disagree.

Scarlet fu shows us this mornings off the charts.

They crunched numbers to find which big cities paid the most and least for raw fish.

No word no word on whether they got to sample.

In new york city, we are paying the priciest of all the cities that we surveyed.

The average price is 26% higher than the national average.

L.a. is not that far behind.

The best deal in the nation, new orleans.

D.c. is in line with the average.

For everyone in washington -- it is strange because you would think that new york mli would be closer to the coast.

Part of it is rent in new york.

They have to make up for the cost so they have to charge higher prices because rent is so expensive.

How does this relate to overall inflation?

Over the past two years, sushi prices have gone up about 8%. rising 5.5% last year and 2% this year.

Prices in the u.s. rose 1.9% last year and 1.4% this year.

There is a big difference there.

Do we know whether the sushi you're getting on the coast, which are closer to the fish, are any better?

I think it depends on the owner's. better than the sushi you might get in cincinnati?

That is true.

I wonder how much sushi comes from japan?

It makes it more expensive for us to import because of the weakness of the japanese yen.

From the plentiful waters -- the sushi that we heat -- eat here is from local waters.


Sara and i will debate whether or not we support a japanese fish later.

Property prices are rising in a las vegas, a town not long ago known as the nation's foreclosure capital.

Hotels took a hit during the.

One thing never changed -- high prices for the city's most luxurious suites.

Have a look.

It is not something that you would see everyday.

It is 9000 square feet.

There is an elevator, cascading waterfall.

There is a similar bed.

Bathtubs on the second floor.

Wall-to-wall tvs.

You can sleep up to 12. a full-size bar.

There is a massage room, a workout area.

Pretty much your dream suite.

It may be one of the biggest suites and las vegas.

I don't know others that have such a beautiful view.

Glass overlooking -- whether it is a group of guys come in and want to spend the weekend or whether it is a high roller that is staying with us, if it is sorority girls.

All different types of celebrities have stayed here.

Whether you want to have a party or if there are just two of you.

When you come in, you get to have car service from the airport.

You get your own butler that is assigned to you.

It is the most luxurious.

You get what you pay for in las vegas.

"to $40,000 a night.

Best it can go up to $40,000 a night.

$30,000 a night.

Our producer has stayed at the palm for $89 a night.

It looks like a man came to me, all the red, the bar.

I was not impressed with the infinity pool looking over the city.

It looks better over the ocean.

I wrote -- would agree with you.

It was cool to see.

It is 56 past the hour.

Julie hyman has the latest.

The desert vantage is you have to be in las vegas.

-- the disadvantage.

We are seeing declines in stocks.

It largely has to do with what is going on with earnings.

We are seeing a disconnect between trading and technology and industrial stocks.

Technology earnings have largely been disappointing and we have seen positive earnings on industrial side.

Microsoft, a big disappointment here.

They are expanding their biggest drop since january of 2009. you have to go back quite a ways . fourth-quarter profits are missing by the widest margins in at least a decade.

The company is writing down the value of surface tablet inventory.

900 million dollars.

Google is missing estimates because of a shift to mobile computing devices.

Amd beating estimates but focusing on growth margin shares have done very well.

A look at treasuries as well.

The fed chairman, tap-in pushing down yields and the treasury market market.

We could see the second weekly gain in prices for treasuries.

It looks like that is where we are setting up our yields going down once once again.

On the flipside, gold is nearing a three-week high.

Traders are getting bullish for the fourth straight week.

It has to do with the fed chairman going back.

The dollar is weakening.

The dollar index is weakening along with yields.

The theme here is ben bernanke has reset expectations and convince the market that stimulus is here to stay.

Putting the genie back in the bottle.

When the comeback, the trait -- detroit has gone belly up.

We will talk to the man who pulled the trigger, michigan governor, rick schneider.

-- snyder.

The keystone pipeline -- you will hear from mark stirling.

Stay tuned.

? . . motor city meltdown.

Michigan gov.

Rick snyder is here to tell us why he put detroit into bankruptcy.

The controversial keystone pipeline.

The transcanada ceo speaks about why a project may never be built.

And ice-cream on demand.

You are watching "market makers" on this sweltering friday.

I'm sarah eisen in for stephanie ruhle.

A federal judge has denied a request by bp to suspend payments on the gulf oil spill.

The company says that payments should be put on hold while possible improprieties are investigated.

It originally estimated would pay out $7.8 billion in disaster claims, and now the government says the actual costs are unknown.

Shares of retailmeannot are up.

It has gross margins of 95%, fatter than any other recipe 500 company.

Sales and earnings at google both fell short of estimates.

It is still trying to find a way to make it big in doble advertising.

-- mobile advertising.

Microsoft is taking a beating today graybar down as much as 9% after earnings missed estimates -- it took a beating today.

They are down as much as 9% after earnings missed estimates.

Cory johnson have been falling microsoft four years.

Why did the surface slop so much?

I think you just call me old.

No, no.

Interesting times for microsoft.

Because of the big change to mobile computing.

The big story from this quarter is the slowdown in sales of pc's and how badly that hurt them.

And indeed, windows 8's role in that.

Whether pc sales are bad because windows eight was not well received, the fact of the matter is that sales of windows 8 and the machines are really weak.

That slowdown, mind you, up $4.4 billion in revenue in recent weeks is not nothing, but it is a lot less than it has been.

That is the problem for this company.

Their flagship product, windows, the new release is not catching on.

A lot of other things went ok for microsoft during the quarter, but that was the thing that jumped out.

Most people have never used one of about that is why microsoft is taking a $100 million -- have never used one.

That is why microsoft is taking a $100 million writedown.

What is the problem with the surface?

Have you used one?

Yes, i used one at a time that i needed a new tablets because in a moment of celebration when the san francisco giants won the pennant, i threw my ipad into the air and it smashed into the sidewalk.

There are things that are nice about it, but it is a lot like a laptop.

It is heavier, thicker, a different kind of machine.

To the write-down, i think it is being misunderstood by wall street.

Microsoft was selling the surface, the cheaper one you're looking at right there, for about $500. they lowered the price substantially this week to about $350, depending on the model.

Their inventories probably priced closer to the $500 range.

They're still sitting on tons of inventory, and it will not say how much is directly surface related, and they took a 900 of write-down -- $900 million writedown.

When they chopped the retail value, they had to take that big inventory write-down.

They could have one when $5 billion in inventory still sitting in microsoft or somewhere in the -- they could still have $1.5 billion in inventory still sitting in microsoft or somewhere in the supply chain, but they're not telling.

Here they lowered the price substantially and that may change the game for the servers.

We just came off of a huge announcement . steve ballmer is restructuring the company and a bet big on windows 8. what happened with that?

Microsoft iterations of software, the first one out of the gate is not usually good.

Bachus seems to be the way they do it.

There also -- that just seems to be the way they do it.

There also seems to be a change in schedule of releasing.

The macintosh operating system in just the last year has nearly doubled in terms of share up to 3%. but before we get too excited about the direction of things instead of the size of things, there are more people using windows 8 that are using maxx in its entirety.

-- than are using macintoshes in its entirety.

While we have you here, questions about google as well.

A lot of questions about whether this trend toward mobile technology that we are all experiencing is helping google as much as it potentially should be as the market leader.

What are you kidding?

I'm always wary to connect the dots of various companies.

There is the trend of the problem of the shift to mobile advertising not being high revenue for most companies, including google, then for desktops or laptops.

That being said, there has been a change in the last six months where computer programs will instantly send.

When you load a web page, there is an option going on behind the scenes -- there is an auction going on behind-the-scenes to decide which advertisement will display.

And there are adjustments in that.

The that may be what is going on with google.

Cory johnson, bloomberg west editor at large.

You can see the whole team at 1:00 p.m. eastern and 6:00 p.m. eastern time.

Back to our top story, we have never seen a city this big go bust.

Detroit filed for bankruptcy, 08 $18 billion to bondholders and retired city workers.

The shock waves will undoubtably be felt beyond the city limits.

We talked to machining governor snyder.

Thank you for being with us.

I would like to begin with this question.

You have said that there was no alternative to a bankruptcy filing.

Why is that the case?

Why, for example, could you have not done what many people expected he would do and raise taxes?

It you look at it, this was the right thing to do.

Kevin orr had been negotiating in good faith with creditors.

In terms of raising taxes, that was not a viable option.

The citizens there have already been paying the highest taxes in the state and they do not have the option to pay more.

Let's solve the decline and then make it stable and then grow the city of detroit.

While this may be viewed as a low point in its history, this gives us a platform for future growth.

What help, if any, are you prepared to give them as they participate in this bailout?

A bailout should not be on the table.

It is about investing in start programs to give better services to the citizens.

We have been doing that.

We have the number of programs in terms of helping to remove blight, removing public safety, parks and recreation.

There will be focused approaches, and we have had good partnership with the federal government.

We will continue on that path.

It is not about spending money, but getting better services to the citizens and being smart about investment.

Did ford -- excuse me, chrysler and general motors' experience in bankruptcy when you confident that this was the right path for detroit city?

In terms of the two automakers, it is helpful for the general public.

They sought out how that -- they saw how that process worked.

They continued to sell cars and now they companies are flourishing.

-- those companies are flourishing.

Now we can grow.

People do realize how many great things are going on in detroit all the time outside of city government.

Young people are flocking to detroit.

Let's solve the city's problems and grow.

What will the state plan to do if this bankruptcy is thrown out?

I think we will be successful on that.

You cannot take it for granted, but if you look at $18 billion in liabilities, currently, the city is paying 38¢ on the dollar toward legacy cost that will climb to 60¢ on the dollar in 2017. that is unsustainable.

The city is broke.

Let's be honest and putting a plan to treat creditors barely, give them a number they know they can get paid, but even more -- to treat creditors more fairly, give them a number they know they can be paid.

Response times in detroit for police cars -- police calls are 58 minutes.

That is unacceptable.

Correct governor cider, why do you have faith that this is going to work?

Why should we have faith -- governor snyder, why you have faith that this is going to work?

Why should we have faith is going to work?

I knew it is not a perfect comparison, but you compare the city to a company.

A bad company with a restructured balance sheet is still a bad company.

And detroit has a host of problems, not all of which will be sold by bankruptcy.

-- will be solved by bankruptcy.

This provides that format.

We are putting in the process a place for long-term success.

If you go back to 2009, we were at the bottom.

We are in a comeback state today.

And at the state level, we have $580 million in our rainy day fund.

The best budget in decades has been done in our state.

That will give us leadership and direction.

We are partnering with them and we will succeed together.

Is there a plan in place for a road to recovery?

Their demographic problems, populations problems, tax receipts, an economics struggles as well.

We are systematically looking at those issues, putting plans in place.

We're not waiting to come out of bankruptcy.

Let's do as much as possible during this entire process, and a number of steps are already in place.

We're working on public safety.

Things are already in the pipeline outside the city government's financial issues and service problems.

We are moving in a positive direction already.

A bankruptcy filing, by definition, ruptures the foundation of trust the the -- i trust that exists between borrower and a creditor.

Post bankruptcy, why would anybody land to the city again?

You could say that in any kind of bankruptcy.

Why would people mind to a business?

Look at both automakers -- why would people went to a business?

Look at both carmakers.

They are doing very well.

It is just making sure we go through this process and do it right and do it well and put in the right procedures and practices in the long term coming out of this.

What does this filing mean for other troubled places in michigan, flint, pontiac, and others?

Each situation is individual.

I would not analogize one to another.

Detroit has roughly two billion dollars in revenue and $11 billion in liabilities.

They are broke.

We are.

To get this job done.

-- we are going to get this job done.

What does this say for other municipalities?

Like pr?

I was hired to give the best service possible.

I will give results to the citizens of detroit and the other 9 million people in michigan.

It is the right thing to do for detroit because it is a format for future growth.

I'm not getting caught up in the politics or all of the other things.

We're going to get it done.

Governor, good to have you on our show.

The governor of michigan, mr.

Rick snyder.

Coming out -- coming up, bullish on biotech.

We will seek what is causing the recent run-up in biotech stocks.

? the bull run in biotech shows no signs of slowing.

And believe it or not, it is handing investors some of the lowest risk returns.

Olivia, what is fueling the frenzy in biotechnology stocks?

It is the drugs themselves coming out of the pipeline.

We have seen a huge amount of innovation in the past couple of years, in particular with drugs that treat cancer and their generating blockbuster sales.

That chart ferret -- barely does it justice.

It it has returned 160% in the past three years.

Tenfold in the past three years.

The thewe are actually seeing a more pro-active fda with more drugs more quickly.

They approved 39 drugs last year.

That is the highest in 15 years.

Correct us -- correct aside from the fda, but sort of innovations are we seeing?

We are seeing things in genomics.

We are really beginning to see that pay off in the pipeline.

Drugs are designed to treat diseases that are single gene defect diseases.

For example, vertex pharmaceuticals, they have a drug that treat cystic fibrosis.

It has doubled right there.

And i mention the risk factors.

Stocks that outperform the market often come with the added risk.

Correct when you think of biotechnology you think of volatility.

That sharp upward line we just saw in vertex is because they have positive trial results on that one specific date.

But if you look at the bloomberg rankings, biotech he beat 67 other groups.

They are generating the best record -- risk adjusted returns among the industry.

It thanks for highlighting that for us.

Lvs turned covering biotech for us today.

-- olivia stearns covering biotech for us today.

Coming up, copy.

The people who grow the beans are getting crushed.

? there is a glut of coffee on the market and brazil has to do with -- has to figure out what to do it half a billion pounds of it.

There may be an option.

You know what that a lot of coffee is going to do to prices.

It has risen 60% since hitting a low in 2011. last year, prices hit a four- year low.

Growers could have the option to sell at market prices fall below $1.37 per bag.

A larger package will be unveiled in the next few days.

Falling coffee prices have been good for companies like smokers, who has cut the cost of its soldiers brand.

-- smuckers, who has cut the cost of its folgers brand . correct it is time to go on the market -- it is time to go on the market.

European stocks are falling and they are appearing with wiki -- pairing a weekly gain.

They are carrying a weekly gain.

Let's give you a sense of what is happening on the markets.

Big decline in european stocks pairing a week beginning -- a weekly gain.

Microsoft and google also down.

Positive reaction to earnings from general electric.

It is a bit of a mixed picture.

Six of the 10 sector groups on the s&p 500 are rising, but as you can see the market is down.

One other stock besides he is doing well today, capital one financing.

Yet another financial services stock that has beat earnings estimates this quarter.

And this is the point worth making, capital one is a bank.

$20 billion in acquisition over the past eight years.

It has become the eighth largest bank in the country.

An effective commercial, i must say.

What is in your wallet?

I have a capital one in my wallet.

We have a little bit more coming up in the show.

We will talk to an executive who has two billion dollars riding on the controversial keystone pipeline project.

? six years, that is how long transcanada has been waiting for approval of keystone xl, a pipeline that would bring heavy crude from canada down to the gulf of mexico.

It has already cost transcanada more than two billion dollars and has become a political football for president obama i sat down with the ceo and asked him what happened if the keystone does not get built.

We have proposed a project recently that will convert one of those gas bought -- gas pipeline systems of away from saint john to alberta.

It collects on the east coast to canada.

Correct -- on the east coast to canada.

Market access is a priority for them.

They will support projects that are proposed.

When are these the want to do in a safe and environmentally sound way.

We will find a way to market access.

We have proposed a project that is called energy east.

It is an 800,000 per day -- barrel per day in conversion.

It will give us tidewater access to the other markets.

And there are others that are interested, the chinese, the japanese, the french, the u.s. multinationals.

They have all invested in the canadian oil sands.

This is one of the only places on the globe you can invest and get it produced.

It will find its way to market.

Heavy oil out of canada is going to find its way to the gulf coast, regardless of the keystone pipeline.

It is getting railed out of canada.

It gets real to the mouth of the mississippi river and its put on tory burch and make his way down there.

That movement is fairly small today.

-- and it gets put on to boats and that makes its way down there.

That movement is fairly small today.

We are looking at more public safety risk, more environmental harm, more emissions.

It does not make any sense.

The market will continue to move oil because it makes sense to do so, not because of our pipeline.

President obama said he will not approve keystone if it exacerbates the problem of carbon pollution.

What do you think he meant by that?

Ryding the president has been pretty clear that -- i think the president has been pretty clear that it is important to him, and it is important to everybody.

It is important we not exacerbate emissions and the effect it has on the climate.

But the simple fact is, we have past that hurdle.

There's no question in my mind that a 1,200 km carbine -- pipeline in a maze of other oil pipelines is not going to the impact the reddit which we refine the crude oil, nor the reddit which we produced the crude oil.

It is just efficient transportation between a and b. if it is not approved, the oil will still get from a to be.

The the but -- the prime minister himself the told me this himself.

And there's no question that politics has played into the approval process and is part of the delay.

I do believe at the end of the day, logic prevails, especially with something as important as this.

The u.s. the largest consumer in the world of this product.

It must be frustrating.

No question that the process is very frustrating for us.

It has been very expensive.

How much do you have invested?


About $2.3 billion invested.


-- about two $0.3 billion invested.


It is not a comfortable place for us to be.

That said, we continue to invest.

The procuring costs alone are extraordinarily expensive.

And eventually , those costs many feds -- manifest themselves to the consumers.

You at transcanada have been hoping for a ruling on keystone xl by the middle of the summer.

We are already there.

When you think we are going to get it?

River will be very willing to work three years ago.

Then we were hoping for one -- we were hoping for it to work three years ago.

And we were hoping for one this summer.

I'm hoping for something soon, which will then set the stage for the 90-day transition timeframe.

At this point, you still be in the pipeline in the second quarter of 2015? it is a difficult and challenging objective at this point.

We need 24 months approximately from the time we get a permit.

At minimum, we're looking at third quarter of 2015 and possibly later.

Correct -- based on what we know today, it is hard to see how to get a presidential permit.

Correct art -- are we looking forat a new reality for however rare in america?

I think so.

A new reality has been set in our industry.

It has changed public awareness and a desire for greater emphasis on review.

I think that it's positive for the industry.

At the same time, what i hope is backed we want -- what i hope is that we will not see more of a process to get through to the end.

A great conversation with the ceo of transcanada.

I love how you ask him about the timeframe and he said two or three years.

Six years longer than the second world war is how long they have been waiting.

He said we have already cleared that hurdle.

They said it will take at least a certain amount of time after that.

At this point, he does not think it would be able to start that pipeline construction until late 2015, possibly early 2016. it becomes ever more expensive.

And the cost goes up for him.

He is already $two 0.3 billion in?

Yes, and a lot of that is costs he cannot recover.

A lot of it is specific to keystone.

It could cost transcanada and its investors a lot of money.

We are asking what the chances are that it will ever get built.

We will be back with more "market makers." ? with its scorching temperatures outside, today is a great day you might say, to talk about -- you know, we're going to be going back to that story in one second.

It is probably worth talking more about the keystone pipeline.

Moment ago, you heard from the transcanada ceo.

That is the company hoping to build the pipeline from alberta, canada down to the gulf coast.

It seems like a marriage made in heaven.

Unless you're in environmentalist.

The president has yet to approve it.

Kevin, one of the things that stood out in that conversation is this notion that the oil will find its way to the gulf, not just export markets like china, for example.

It will eventually get to the gulf either way because it is so cheap that there is economic incentive to get there, by rail, by barge down the mississippi.

Is he right?

Yes, he is, and that was a great interview.

As long as you are using it for fuel, it is money in the ground.

And money does not stay in the ground very long.

It will get to a market.

The discount from the resources in canada will be all the reason you need to put it on a train.

And to get it down to the refinery.

It is not the best environment for some producers when they are taking steep discounts, but it will still get to market.

No question.

The other.

He made, if it will work to get to the gulf that way, by rail and by barge, there will be significantly greater risk environmentally, and also the risk of accidents that could lead to the kinds of fatalities that we saw in quebec just a couple of weeks ago, a tragic accident when real cars filled with crude oil derailed and cost at least 30 people their lives.

That is where you get when you ask a pipeline by to talk about the issue.

If you talk to a rail by the -- a real the the person, you'll hear about the options that real provides.

Well is becoming increasingly multi level.

You have places where it can go into pipelines and places where it is by rail.

He won both.

In this particular -- you want both.

In this particular incident, it was very tragic.

The challenge of trying to gain out when this could happen, what is the most realistic case for when this could be approved and when it could start to take effect?

I think his perspective on this is one where he had had enough reasons to revise where he was cautious as a ceo.

If approval could be september or october, there is about 75 days, plus a final 15 in the national interest determination for other agencies to comment.

If they do finally get the environmental impact statement out this summer, that would put them into the early 2016 for the first flow.

When i asked him if this was a special case for a new reality for all pipelines, he said it was a bit of both.

If part of that is true, what does this mean for the pipeline industry?

Extraordinary approval processes for keystone, and others as well even if it is not six years.

We do think it is bigger than pipelines themselves.

The environmental movement has passed for transportation projects to be reviewed on the basis of their upstream and downstream environmental impact.

That is a massive change from the way things usually work.

As he said, it is just a door -- when is a door just a door?

As he said, it is just a door when it is enabling upstream and not causing damages downstream.

It is a change and it means everything will be harder going forward.

It was great to talk to you and to have your comments on his perspective.

Coming up, talk about a cool idea.

Is green delivered on demand.

-- ice-cream delivered on demand.

It is a whole new way of using technology.

It tough assignment there for dominic chu.

? it is 97 degrees in new york city today.

Because of the committee, it actually feels like 100 -- because of the humidity, it actually feels like 107. a great day for ice-cream.

Dominic chu went to midtown manhattan to find this story.

Ober is now delivering ice cream?

What we are seeing right now is uber, the car service a pp get what you need, when you need it.

It operate in a number of cities.

Today, you will see them delivering ice cream.

Rather than go to the application on your phone to call a car, you can scroll on the application and hit the button that says ice-cream and a guy will deliver ice-cream to you and five of your closest friends.

Why are they doing this?

They're looking to expand.

This is a company that 18% growth month over month.

We're also talking about a company that is 12 times the size of this party did accompany just a year ago.

If you look at what they are all about, they are trying to expand in cities where they currently do not have a presence.

From a jurisdictional point of view, some cities do not some citiesuber to operate -- do not allow uber to operate.

Here they are trying to drum up support an effort for this particular service.

They want you to lobby your government to get this operating in your city.

Demand will be high, along with the temperature.

This is a huge push for them to try to get into more cities.

If you want one of these things, get ready to wait in a long line.

It is a hot one out here.

And dominic chu reporting from midtown manhattan.

Clearly, the business model faces challenges.

They're facing regulators in cities.

The drugs are not sure ice-cream is the way.

They're trying to wrap -- i'm not sure it ice-cream is the way.

But they're trying to rally the public.

It is supposed to go up to 117. you are going on vacation.

But not yet.

The options bet on mcdonald's is next.

? that is going to do it for today.

A great week here on "market makers" and everyone deserves a great weekend.

You deserve a good vacation.

I just might be taking one.

Are you going?

I'm going to canada.

Where else?

We will be reporting earnings from apple, netflix, and facebook.

Right now, just about 56 past the hour and what does that mean?

It means it is on the market with two behind.

-- julie hyman.

We are seeing a pullback today.

We're coming off a record high for the s&p 500. this is partly because of earnings from microsoft and google pushing down the major averages.

And speaking of earnings, we now have a bit of a summary for this earnings season.

We do not even have half the companies in the s&p 500 that have reported their numbers, but thus far about 72% of them have beat the analysts estimates in terms of earnings, but 55% in terms of sales.

That is perhaps what is driving disappointment and a sense of caution going forward.

It is time for today's options update.

Next week is another busy week of earnings.

Mcdonald's reports before the bell on monday.

If you happen to be an options trader, today is allow states to set up that trade.

The analytic team has been looking at -- to show you what the analytics team has been looking at, we are joined by dominic.

Mcdonald's past couple of quarters have been choppy, partly because of what is happening overseas.

They just announced this week that they will be in the vietnamese market, which is interesting.

But the big news that everyone is looking for is how much they will write down due to foreign exchange losses.

About 50% of their profits come from overseas, 37% in europe alone.

With the stronger dollar and fed capering, you'll get less u.s. dollars for that money -- fewer u.s. dollars for that money.

The other companies we have been hearing from this season have been seeing weakness in europe and asia.

You might have a double currency effect as well as just the falling demand.


The market is very tight.

Their focus is on the value menu items.

Akamai note margins with the

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


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