Carl Icahn: Street Smart (07/11)

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July 11 (Bloomberg) -- On today's "Street Smart," Trish Regan and Adam Johnson find your last trade of today and first trade for tomorrow. (Source: Bloomberg)

"street smart" is joining you right now.

Billionaire investor carl icahn, a first interview with the man that calls himself -- a no-brainer.

Live, at the closing bell.

And the s&p 500 hits a record high.

Ben bernanke's change of heart since the bulls running.

-- sends the bowl running.

How marc andreessen is advising the bigger names in tech.

From new york, this is "street smart" with trish regan and adam johnson.

The s&p 500 surges to a record high.

Welcome to the most important of the hour.

We have 50 minutes until the closing bell.

We are scouring every market for your first-rate tomorrow.

We are sitting here near session highs.

A lot coming up, including an interview with carl icahn at 4:00. that will be blockbuster.

I am not -- there is a lot happening outside of dell, just talking big picture.

Let's go to the big picture, three charts you need to see right now to understand what is happening.

Look at the dow industrial average, up 158 point.

Real simple, we learned yesterday "we will face -- accommodative for the foreseeable future." they're going to keep putting money into the system.

Meanwhile, if you are putting more money into the system, you can imagine what that will do to the dollar.

You are creating more dollars, in effect.

You have the dollar index down 1.6%. finally, one of the other beneficiaries, golf finally -- gold finally getting a bit.

About day we saw a green day.

Let's go to the stocks you need to be watching as a go into the close of trading.

Julie hyman that the markets desk.

First of all, i am watching advanced micro devices.

The best-performing on this day when we are seeing the s&p, a record.

Amd got hired -- higher as well as bank of america.

They are accompanying -- pointing to the migration away from pcs including video game consoles.

That key to the upgrades today.

Demand for those consoles is going to help amd.

D.r. horton, one example of the rally and homebuilders today.

We are seeing rates come lower on those ben bernanke comments after the close yesterday.

Radioshack, we have one red one, down 20% after the company is getting a financial advisor to explore ways to restructure its balance sheet.

A lot of concern about that report as those shares plunged today.

Now to our top story, ben bernanke is sending mixed messages.

In less than a month, we have heard two different things from the chairman.

Here is what he said on june 19. the incoming data supports the view the economy is able to maintain a cruising sprague, we will it gradually reduce the pace of per purchase best -- the pace of purchases.

Here is what he said.

Monti -- monetary policy is needed in the u.s. economy.

The market clearly favored wednesday's comments.

The s&p 500 touching a record high.

As the conflicting comments, we are cutting through the reentering -- frederick to get to the reality.

Our closer, chief u.s. strategist, howard, s&p senior index analyst and we have larry mcdonald, a credit strategist.

Good to have you here.

What do you think?

Is he a split personality or is he testing?

I do not have a phd to get into that.

I think the issue is he did not say anything different.

Because i've accommodative would be $55 billion in purchase just as much as $85 billion.

These are extraordinary measures.

I do not think he said anything different.

People are interpreting it.

It is misinterpretation of what he is saying.

People are imposing their own desires.

Why is it one day they are feeling one way and the next day they are feeling another?

Why our investors allowing themselves to get whipped around by every statement?

It is when we expect the increase.

Now he is it a little bit.

It is going to take a while.

It is coming.

Also, earnings do not start until tomorrow.

Talk to me tomorrow after the open.

After we have wells fargo and then we can see how the banks are actually doing.

As you pointed out, it is those company, wells fargo account for four point two percent of earnings in the s&p 500. what is going to happen?

They should make the number but the question is how are they going to make it?

Is a going to be changing the reserves?

From the housing on bond rices, how much is that going to be?

Are they making any kind of loans, which would be unusual.

How they do it is important is how much they make on it.

Larry, let me ask you.

Which statement do you believe?

What we heard on june 19 or what we heard yesterday?

You have to be careful.

Listening to fed governors, five years ago bernanke said fannie and freddie balance sheets had decent the quality -- decent liquidity.

I think you have to take them with a grain of salt because they are constantly trying to massage these.

The one thing i take away his equities back to all-time highs.

-- equities are back to all-time highs.

Fed fund futures were up out to march of 2015. and now they are right around august of 2014. in other words predicting -- they will move up a year earlier . is above 25 basis points.

That is what the market thinks.

The market used to think arch 2015 and now it is saying august.

In other words, people are trying to shift opinions as a result of all of this.

Especially in high yield.

Where are you, tobias?

What is going on here?

Are we going to see tapering this year?

Re-think tapering is going to happen.

Again, -- we think tapering is going to happen.

Again, the market is running for?


Some of the tapering issues are going to come back.

I think howard was right.

I think the earnings guidance is going to be much more important.

You think the numbers are too high?

I do not determine the market.

Clients are telling us estimates are too high on the street.

You're talking 11% right now.

Based on the bloomberg consensus numbers.

We are growing one percent, two percent right now.

What is going to take everything higher in the fourth quarter?

Especially with gdp that is only two percent.

Margins are already maxed.

Not to mention what is going on internationally.

Brazil looks challenge.

Europe is struggling.

Even if the u.s. does get rid awry traction, we still have some of these drags.

Everybody had -- does get some traction, we still have these drags.

That is not happening.

Where does that leave equities?

Forgive me, because you are our bond cut.

Let's go to howard.

I also have a difficulty with the estimates.

Very high but the guidance is not that bad.

We have not seen people coming out with positives and negatives have have not been major impact.

They have not been the results are anything.

They have not been a shutdown.

It is not the negative economics we saw two years ago or so.

So the guidance still holds good numbers and cash flow is very good.

We may or may not set a new record this quarter but that is a big difference between now and 2007. the cash flow is there and companies have good war chests.

If that is the case, somehow as i listen to you, tobias, i do not get the impression you are telling all of the clients at citigroup to go out and keep buying stocks not really.

We are not saying they are overvalued or anything like that.

They are just a little bit ahead of themselves and we think we have to back off a little bit as you gets guidance.

Howard is right.

Next year is it even worse -- it is even worse.

I think you're going to see them act as a restraint on markets.

Maybe we have a three percent downside risk and then once we clear that we can get a strong rally.

We are stared looking for 18% on the s&p. we are still bullish.

Just a little bit ahead right now.



-- pick your spots carefully.

Larry, what is your call bonds?

I am looking at five years in the banks.

It is still much wider on the big financials over the last couple of weeks.

The equities on the big financials are at the all-time highs.

The equities are up almost eight percent from the june 24 lows are as the five-year credit default swaps -- measuring risk.

In other words, the credit is massively underperforming equities.

I since -- i think, i am not buying into this rally in the financials.

I just want to get a final consensus from you on what, why you think the market is acting different depending on what they hear from bernanke.

He is saying the same darn stuff every time.

It is just that people hear something different.

Why is that?

Do they not know what to think?

When we were looking at the data in may, we were on our own models for this, it was near euphoria, which has been a negative signal.

And then it plunged and now is much more reasonable.

People got built up late in may and that has dissipated.

The froth is gone.

There was so much excitement as soon as he said anything, they were done.

He popped the balloon.


And i appreciate the view on financials larry is talking about, it is not that financials are horrible stocks, all of those things are good.

But bond yields moving higher also does put their valuation because they tend to be asset- sensitive.

It seems like there is a disconnect.

We are going to leave it there.

Thanks for being here.

Howard silverblatt, tobias is not going anywhere.

Carl icahn joining us to tell shareholders, get an appraisal.

He is going to tell us about his no-brainer in a first on bloomberg interview.

But first, mark entries in tells us what he is -- mark entries and tells us what he is saying in sun valley.

The annual conference in sun valley as were some of the biggest deals and ideas are hatched at the most powerful titans get together.

Jon erlichman is with a man who sits on a board of some of the biggest companies, marc.

Jon, eager to hear what he has to tell us.

Thanks a lot, adam and our thanks to marc for joining us here.

We are not going to talk about how that affects the bankers who are on the street but that is another story.

Are you surprised by the reaction to some of the comments you have made in the last few months on this issue?

I do not know.

I think people get emotional.

I think it is objective reality.

The number of public companies in the u.s. in 1997 was 8800. today this 4100. the vast majority of activities are on the private side and that is a change.

One of the stories is that microsoft has decided to make -- do a major ribbon is a in.

I was picking to someone in the set every couple of years you have to rearrange the deck chairs otherwise shareholders get angry.

Does that factor into your thinking on this issue?

If you are big company like microsoft, you have a lot of -- whatever else you do.

For a small company, you can get into real trouble.

For example, if you need to raise money, and you come under a debt by short sellers, you may not be able to raise money.

So it is very dangerous to be public unless you are strong and established.

We like to say companies need to be a fortress before they go public.

The executives at twitter get asked by people like me every day, when are you going public?

Theoretically, given the fact they have investors who are investing in twitter early on, is that a company that could avoid going public forever?

I think they could avoided a long time but i think they have built themselves into a powerful company.

I think it is more powerful than they think any more powerful business.

I i think they can take their time.

When is the most -- what is the most powerful thing about the business?

I think the actual business is working better than people think.

It is a phenomenon.

It is doing incredibly well.

I am curious about you personally as somebody who is in a lot of boards.

I am sure that works well for the businesses you are building better the same time, do you get frustrated and say, maybe i should not sit on a number of boards?

I am curious -- cursed by curiosity.

I love building companies at all sizes.

It is interesting to me, one day i will be with an entrepreneur with four employees in the next time it will be at hewlett-packard.

I get to see the full spectrum of how these companies operate.

I was curious to see your partner blog about the management change of zynga.

The structure of mark pincus reporting to mattrick, this is another public company issue.

Are you on the same page on that issue?

I think we have different opinions.

I agree with the concept of two in the box.

Goldman sachs had co-ceos.

It actually can be done but it is a tricky thing because the people have to mesh perfectly.

It works well where people have long histories and relationships and understand and trust each other.

It can be daunting for a new ceo.

To not really be the sole person in charge.

We wish them the best and we hope it works but it is a challenge.

Let's talk about your business.

You have built out a network.

The portfolio companies can build their businesses in all of the areas they need to go to be a real player and potentially do it while they stay private.

As you build that out, it makes me think about, not identical, but the pitch kkr was making in the 1980s. there is a lot of reasons why you do not have to be a public company.

Kkr is one of the friends we studied when we target our firm.

We have drawn inspiration from them.

We think it is possible to thrive for a long time.

One of the things, it you have more investors that will come in at later stages.

We have invested later than traditional capitalist for companies that are going to stay private for longer.

So you have investors who will actually step in and participate later than traditional vc's. i know when you last joined us, you spoke about your retail investments in what is happening in the areas where you are investing.

You have the barnes & noble story, there is a story where they have a tech attachment through the nook.

Can it survive?

The no caps been very impressive.

It is pretty impressive.

-- the nook has been very impressive.

It is impressive.

The problem is they have to compete.

Amazon is good at what they do.

It is hard for somebody to compete with those guys in the long run.

Click speaking of google, i know you're a champion of google glass and the opportunities ahead.

You talked about what it could mean down the road but what does the one thing marc andreessen has done that you think is cool?

I have no sense of direction.

I have no idea where we are right now.

I do not know which way is north.

Having a map with you all the time and always knowing where to go in your field of vision is amazing.

It completely changes your orientation of the world if you have no sense of direction like me.

We have something in common.

Thank you for your time.

Adam, back to you.

Thanks, we should note that the parent of bloomberg television is an investor in andreessen0 core wits.

What do audi have in common?

You will have to stay tuned and find out.

? this is "street smart " and we are streaming live on your time love foam and every place you are.

-- tablet and phone and every place you are.

It is happening this week and a wide variety of corporate interests are making their voices heard from a-z, and audi to zappa.

What do companies like audi and the musician frank sapa have in common?

An interest in the u.s.-eu trade talks.

For years the german automaker has lobbied american regulators to allow automatic dimming headlights and u.s. cars.

A role does not allow them but the talks bring a beacon of hope that will change.

The music industry wants consistency on royalty payments, like how much does the trust get paid when "don't eat the yellow snow" plays on the radio.

Record labels should pay artists the same way the eu does.

For any industry, changes could being big money.

The deal would create the largest free trade zone with nations representing a third of world commerce and the cumulative gdp of $33 trillion.

Analysts warn the details will be a challenge.

Regulations in the united states are different from europe and both sides have deep- seated reasons for doing that.

Food labeling is another sticking point.

French vintners want for coming wines be labeled champagne.

In 2006, some american producers were allowed to be grandfathered in.

And campbell's soup is looking to and then import restriction on the american practice of rinsing chicken with a chemical solution to kill germs.

Consumer advocates are worried influence will lead to backdoor deregulation.

Europeans have very strong genetically modified food labeling laws.

U.s. companies wanted to steamroll into the european market.

Corporations are lobbing hard on both sides of the atlantic.

Megan hughes joins us live from washington.

A fascinating look.

I can only imagine what it is like to negotiate 10,000 different roles.

You are talking about consumer advocates and food, what else are they worried about?

Consumer advocates are afraid negotiators are going to take the weaker law on a number of issues.

So greenhouse gas emissions, chemical regulations, and it is hard to overstate the number of industries and interests involved.

We heard from presenters this week, oil and gas, unions, ebay, so a wide cross-section.

A lot of people working on this in washington and europe.

Megan hughes, one can only imagine what it must be like to negotiate 10,000 separate negotiations.

Ask for joining us.

-- thanks for joining us.

We will be talking to wells fargo and jpmorgan right after the break.

? by this time next week, all of the nation's major banks will have reported earnings.

Jpmorgan and wells fargo are kicking us off tomorrow morning and they are the bellwethers you need to be watching.

The results of jpmorgan gives us an insight into the health of wall street and the financial markets and wells fargo, the biggest mortgage lender, it is the key housing market indicator.

That is why they are important.

We want to break down what you need to be looking for.

Dom chu , what are we focused on?

Let's talk about the big banks overall because what we are looking at is an environment where these financials have had a great run.

They have rewarded investors quite a bit year to date.

With the jpmorgan, the story is going to be about sales and trading.

How did all of the fed tapering talk affect the sales and trading environment?

Did we see volume start to drop off?

We are talking about the initial part of the summer, red before the phenomenon.

That is a p morgan.

Are they stable?

Did they show a drop off from the last quarter?

With wells fargo, the interest rate environment has changed quite a bit, especially for mortgage lending.

Those fargo is the biggest mortgage lender in the land.

How much of that has affected the way customers are looking at home purchasers?

Are refinancing taking a hit?

All of that goes to wells fargo.

With that, that is the story.

These are going to be the first indicators of how the season could shape up.

Let's start with wells fargo.

What are you anticipating?

We have seen the housing market shows signs of strength.

How is wells fargo benefiting?

They have been benefiting as revenues have been picking up, especially on the origination side.

The transition of this quarter's going to be important to see higher interest rates offsetting the give up their going to have on the origination side.

If they can migrate through that transition, we believe they can produce their 14th consecutive quarterly growth, which will continue on the pattern they have been talking about.

You're predicting growth, jason e morgan not the same -- jpmorgan, not the same?

Not so much.

You also have what we're just talking about, the spike in interest rates in the trading losses on the fixed income side.

We might see some pressure there.

If they can avoid that, it will be a good quarter.

Sounds like you like wells fargo better.

Because of the consecutive growth versus what the street might expect.

Scott, what do you think?

What are you doing and when are we going to get out of them tomorrow?

I want to break something down.

They are trading of the top, it has led this rally going forward but i think it is getting a little top heavy.

I would make a trade based on earnings tomorrow with not a shortfall but maybe not great guidance going forward.

They're looking for $1.44 a share.

It is going to be hard to get to their top end.

Going into earnings tomorrow, i would buy a july 55 put and sell the 56 call.

So we are right there.

I can knew that somewhere in the area of 30, $.40 to me.

I'm going to look for a quick drop in the stock.

Long-term, the stock has a decent future.

I'm going to look for a quick drop in the stock on earnings tomorrow.

You sound like you are concerned as well.

What is interesting is the one thing i want to bring up as part of the bigger picture story for wells fargo, jpmorgan, and all of the banks, the coming capital environment is what you want to call it.

These banks are going to start to have to retain more earnings and not pay as much in dividends.

There was a time when investors looked at thanks as dividend machines.

That -- at the banks as dividend machines.

We will be looking to see if there is any kind of hint during the conference call about how those trends play out for big banks.


How exactly do these new rules play into earnings?

We will hear the first rebuttal from the banks.

As they have been able to digest the new requirements.

I do not think dividends are at risk.

What we are looking at is maintaining the speed and the pickup we have been seeing over the last couple of years.

Are going to leave it there.

Thanks to marty and scott and tomorrow, everyone, wells fargo cfo teams phone -- tim sloan is going to be joining us.


Bulls, but your horns back on.

We are coming up with insight and action.

And the bloomberg businessweek cover that is grabbing everyone's attention.

There it is.

We speak to the reporter behind the story, the hedge fund met.

? time to sharpen your horns.

Time for some insight and action.

Not been easy to be a bond bowl over the past couple of months.

We are looking at the 10-year.

We are quoting it in price terms.

Down to about 91. painful.

That is a loss of nine percent.

Very difficult to be a bond bull.

And yet, thanks to the sky, wait a minute, not so fast.

Highly accommodative monetary policy for the foreseeable future is what is needed in the u.s. economy.

In other words, bond bulls, buff up your horns.

He is still supplying the liquidity and we know why.

He has been very specific about his targets.

Look at this, unemployment is still too high.

Inflation is still too low.

Right now unemployment is 7.6%. the target is 6.5%. we have a long way to go.

Inflation is only 1.1% versus the target threshold of 2.5%. that is why he is going to stay, native.

The data is still bad.

Here in lies the opportunity, take your pick.

There are plenty of choices as to what you want to buy because so much has fallen in the past few months.

You have the 10-year in white.

The same when we showed you before.

You have corporate s, that's down.

Or if you want to go farther out, high yield bonds are also down.

About eight percent.

High yield yielding about seven percent.

Take your pick.

I will.

How closer, -- our closer, tobias levkovich, still with us.

Do you agree?

Are you ready for a bond comeback?


[laughter] take that, adam johnson.

Adam is entitled to his opinion.

I have a wonderful t-shirt i bought that said i could agree with you but then we would both be wrong.

My wife thinks it is appropriate.

Nonetheless, the idea that we just went through a 30-year bond bull market , if you could lose nine percent in two months, imagine what you might lose in the next five years.

You can't get interest rates below zero.

We also heard from the chairman, he could not be more clear, and he is going to stay, native.

You have artie seen the -- stay at, dated.

-- stay accommodative.

It is not a comfortable place to be anymore.

It does not mean rates are going to run away tomorrow.

Two people have time to get out?

Crowded trades are always tough to get out of.

Look what happened in the emerging markets when everybody decided to leave.

Most investments are like hotel california, you can check in anytime you want.

When everybody decides to get out, there is a mad rush.

It is like screaming fire in a theater.

Everybody is burned.

You would be making out of the theater when it comes to bonds right now.

I would be bringing down the allocation over the next few years.

Not just because you are in equities.

I have to go back, 19 months ago we were going on the raging bull thesis, america is going to enter a new bull market.

That means you take out the old highs.

We have just done that.

We're talking about a five-year run.

We have manufacturing that is looking better.

The shale gas revolution in all of its bet -- benefits, pipelines, we have technology and mobility still being a strong driving force.

Andreessen was talking about what has changed in that world.

And you also have housing coming off a multi-decade bottoms where we are still building at an incredibly low rate relative to what have done.

With a much larger population.

You have four pillars of growth over the next several years.

It means, you know, the fed is scaling back, or bond prices are going down, -- equities follow earnings, not bonds.

Multiples did not improve the last three years.


The earnings have been there but can we greece margins?

This debate has been going on forever.

We have been fighting it tooth and now three years.

Let me give you one wonderful concept, the i.t. sector, if you take it out of the s&p 500, margins are below where they were in 2004. technology is driving it.

Have you seen this cover?

This cover of businessweek?

We have the reporter behind this.

Take a look, everyone.

An eye-catching new cover out of businessweek.

We will talk about that.

That is a cover and.

? it is the magazine cover that has everyone talking today.

The eye-catching depiction of the hedge fund myth, debunking the idea that hedge funds are actually beating the markets.

Sheila joins us right now on said.

The cover shows this perception versus reality.

The perception about returns and while the reality is that there is a struggle against the s&p 500. have they lost their group?

One of the things i discuss in the article is the fact they have gotten so large and there are so many of them.

There are upwards of 8000 funds managing $2 trillion.

They are also chasing the same opportunities.

It is very hard to squeeze inefficiency out of the market when you have thousands of people trying to do the same thing and you have computers competing with you.

This whole concept of alpha changing.

The idea they're going to be able to generate alpha to justify their fees is going to be much harder in the future.

Does it suggest the golden age of hedge funds is coming to an end?

And the peace i look at a group, there are five fundamentals are's in 2007 -- five fund managers in 2007, 2 of them have both left to the business of actively managing money.

They are both older.

And then we have filled out: -- philip falcone, who is in trouble.

He has been barred from investing money for outside investors.

John paulson had a spectacular run through the housing crisis.

Made billions of dollars.

Became a huge star.

Since then he has really stumbled.

And then finally, ken griffin of citadel, who scaled back his ambitions.

The 2-20 has been such a standard.

It is expensive, given this environment.

Our hedge funds going to have to change?

There is going to be pushed back on the fees.

That is definitely coming.

Thanks, sheila.

Not only can you pick up the issue on newsstands, you can get it online and on the cap which you can download on your ipad.

Coming up, some chart attack.

? take a look at this, the highs of the session, up 178 right now on the dow.

. a lot of optimism today because ben bernanke said just yesterday, last night, looks like he is going to keep the stimulus going for the foreseeable future.

That is adding to a gain better than one percent on the dow.

Time for chart attack where we bring you a chart that will make you smarter and a little bit of money as well.

Are closer says when it comes to jobs it is not just about payrolls.

Take it tobias.

-- take it away, tom bias -- tobias.

In that sense, we watched the manpower survey on hiring intentions.

What are companies telling them they are going to be doing?

It has 18,000 companies in the u.s. and 30,000 in the americas.

Something like that.

The 18,000 in the u.s. gives you insight to what happens over the quarter.

Let's bring in the camera and show everybody what tobias is talking about.

There you go.

That is the manpower survey.

It is showing you that is it improving . we have had the highest point in four years.

But it is improving.

The companies intend to hire more people.

Despite everything you hear.

If that is the forecast, when we get the actual results -- now we see.

One follows the other.

Basically companies say they're going to higher, they do, and then those bars are actually coming in over the quarter.

That blue line is sticking out a little bit beyond the last white bar because that quarter has not come in yet.

Should we read into the fact there is a difference between the blue line in the white line?

Should it be higher or something like that?

The white line, it is correction.

We still have all of these confidence issues people talk about.

Health care, should i bring on people long-term or should i use temporary staff?

Those thing still exist out there but generally speaking you talking about the environment where there is more intent to hire and that is something everybody continues to debate.


Thanks for joining us today.

Always great having the strategist from citigroup right here in the house on the show.

A thrilled to have him.

From victoria's secret to microsoft shuffle, we have the top 10 stocks you need to know.

And the next hour, my first bloomberg interview with carl icahn coming up right here.

Do not miss it.

? ? if you missed everything that happened during today's session, don't worry, we are getting you caught up on the only stocks you need to worry about today.

Number 10, directv.

John malone is urging charlie ergen to merge-ish network with directv.

-- to merge dish network with directv.

Rio tinto is up 7% today.

They are headed for their best run since 2010 after ben bernanke said that the fed will have accommodative monetary policy for the foreseeable future.

Bridgepoint education, the stock is surging, up more than 20%. that is the biggest game in more than four years.

The companies ashford university unit has received accreditation approval.

Top shareholders said they considered making an offer for the piano company.

A private firm clover agreed to by steinway.

A chipmaker getting upgraded . amd will benefit from their transition away from supplying the pc market and the new playstation and xbox consoles that are coming out later this year.

L brands is up 3% after june comparable sales were flat from a year earlier falling short of the increase.

Interesting here because you have the shortfall and yet the stock has been going up.

A little bit of a head scratcher.

Given what we are looking at , not surprising.

How did i know you were going to go there, adam johnson?

I am not sure what is up with the balloons but it all looks so festive and fun.

Number four is dell, it is trading up a fraction.

Carl icon has issued an open letter to their shareholders pushing for them to get the cradle the appraisal.

-- carl icahn has issued an open letter.

Radioshack dropping nearly 10% on reports that they are seeking a banker to fix their balance sheet.

They might need a whole bank.

This has been problematic for a long time.

They have been facing a string of debt maturities and other issues.

Progressive is down 1% after they posted second-quarter profit that missed analyst estimates.

They found it harder to add customers after raising prices.

The bond yields were near record lows.

Obviously, she is not doing enough.

Coming up on our number one stock of the day and it happens to be microsoft.

The tech giant is reorganizing into fewer units and promoting several executives.

This comes as the largest software maker works in hardware and in web based computing.

They might and near the highs of the session.

Right now, we are looking at the sixth straight day of gains for the s&p 500. a lot of optimism in the market.

Investigators cheered by -- investors cheered by the comments that ben bernanke made.

He would keep the measures going for the foreseeable future.

There you go, the close of trading.

23 points on the nasdaq.

23 points on the s&p. the nasdaq ending in positive territory.

It is time for a wrap up.

Let's kick off with julie.

We have this record for stocks woman not only on a closing basis but on an intraday basis as well.

It is 17% for the day.

It has a lot if not all to do with ben bernanke and the comments he made late yesterday indicating that the tap is open.

Whatever analogy you want to use, the fed is not pulling back on stimulus.

I am looking at in the market internals.

Just called off of the highs and lows.

We have 133 new highs today.

There are no new lows that were made in the s&p 500. in terms of the groups that are doing the best, it is a pretty broad rally.

All 10 groups are higher.

Technology doing the best followed by materials.

You have people getting into the cyclicals here.

If the economy is doing all right, the stimulus is continuing, you'll tend to do that.

They are piling into a little bit into the treasury market.

If the fed will keep the bottom line process going, why not go along with them?

Let's go with the long bond.

The u.s. government sold $13 billion.

The yield is slightly below analyst estimates.

Indirect bidders includes foreign central banks.

If you look at the price action for those bonds, remember, we have auctioned these bonds off near two-year highs in terms of yields.

Multi-year highs for the yields.

If you look at the overall scheme, the 10 year ended the 30 year, yes, we did see lower yields.

This was the sixth straight day of gains for the s&p. that means that yields fell for four straight days.

Tomorrow, we will get some catalysts at least on the economic front.

Tomorrow morning is producer prices.

They come out at that time and later on in the morning, you get their initial reading.

There is the preliminary confidence numbers around 10 a.m.. a couple of more catalysts for that bond.

Carl icon --carl icahn told shareholders to exercise their appraisal rights.

This is to determine the true price of the company.

This could be above or below michael dell's offer.

The 60 day window to drop the appraisal means that shareholders could have their cake and eat it too.

He wrote -- he is joining us right now.

Always good to talk to you.

What makes you convinced that this is a no-brainer?

We look for these.

In this case, if you go for the rights, you will have literally a free put until december because they themselves have said that they will not be able to close this until sometime in october and even then, it might be optimistic.

Therefore, if you go for appraisal rights, you have 60 days after the time it consummates to pull out if you want to.

Sometimes, good things happen and the company would want to get rid of these appraisal rights that make a different deal with you.

Also, you might want to continue to go and get the appraisal rights adjudicated because i think that dell is worth at deal more than the $13 60 five cents that michael dell is offering.

You have the 60 days.

What would cause you and other investors to withdraw their appraisal rights after they have exercise them?

You have not exercised them.

That is my whole point.

I have until december.

If you go for appraisal rights, you don't have to exercise them and go to court, you can just say i've decided to change my mind and take the money.

It is basically a free put.

What is the opportunity?

Well, for one thing, you might have dell before that time is over, not to want to have to go through it.

That has happened many times.

That can give you a premium.

Another thing might be is that you really do, i think it is worth more, but obviously that could change.

That is a long time.

You can see how well hewlett- packard is doing.

So, you can decide during this time whether or not you really want to go through with them.

One of the reasons i would imagine that michael dell and silverlake would not want to have that appraisal rights issue hanging over their head is because they would have to go to the court and it would come down to one single judge making the decision on the evaluation.

They might say that the company is worth a $20 a share, all of a sudden they are playing a very -- paying a very different price for the company.

Aren't you taking a similar risk because that same judge could say, we think it is worth less?

That's right.

Usually, the history of appraisal rights is that you get more.

I want to make the point that you can make that decision sometime before the end of the year and my opinion.

You don't have to take the risk but you still might get the reward.

That is why it is a great risk reward ratio.

We have made fortunes over the year.

It is amazing that a lot of people don't do it because it does not appear obvious that you cannot possibly make money.

You could do convertible bonds against the short position on stocks and you had no risk.

When the market row, you made a fortune.

-- when the market broke, you made a fortune.

These are no-brainers.

I will be talking about them from time to time and i mention them in my twitter account.

This i will try to get a little bit of a advice.

You can follow him there on twitter.

How about making me your first.

I will make you my first one.

Maybe my second.

No fair, no fair, i want to be first.

You will have some ideas out on twitter.

Let's get back to tell.

What do you think that michael dell and silverlake could do to make you feel like you are getting the right amount of money for this company right now?

A lot has been said , we are only looking for a bump.

We are looking for a fair price.

I really do like this company.

We have put up $5 billion one way or another.

Obviously, i think that iss has read this completely wrong.

They drank the kool-aid that michael dell put out saying that how bad this company is, the risk.

If you don't go for this deal, you have this gap.

Between getting this money from carl icahn and you have to worry about that.

I don't think that anyone questions my credibility.

This it would come up after we have the money, we will do it.

We have never promised the deal we did not deliver on.

I think that they have completely misread this.

Ironically, this is a lot less than the time that you have to wait to get money if you go with the dell deal.

You have to worry about china.

You have to worry until october.

I think that china will go through.

You have to worry.

There will be a bigger gap until you get the dell deal.

Then, will he when the proxy fight?

The point is very simple.

I have a very good record.

I think i have great credibility.

I think that i will buy it and put up the money.

Why would anybody vote for dell?

Unless he comes up with a superior recap to mind, might recap is saying that we will give you $14 and then we have to stop.

By the way, you heard it first on this program, we are going to be coming up with a higher bid by tomorrow morning.

You are coming up with a higher bid?

A higher bid by tomorrow morning.

A little bump on my part, that is what i am looking for.

You are giving us $14. you have a 73% taking.

I think this is superior to the 1465. -- 14.65. we will add to that bid.

We will add a warrant to that.

The bid will be superior , even what is superior.

We are giving $14. they are 75%. then they will own the stub or 25% of the stock.

We think it is worth more than 14. we will do a warrant which will be valuable.

This is vastly superior to the dell deal.

We take umbrage with the iss.

I think that this was just -- this is iss , if your ceo is willing to buy your falling knife for the privilege of catching it, there is probably a price at which you should let him.

Dell has no future at all.

If you respect them, they claim to be.

They are drinking the kool-aid that dell tells them.

In the pc area, this is the second change going on.

Dell will be able to take advantage of that.

That is why we have such a great record.

You don't have to look quarter to quarter.

In fact, you don't make money for that.

Dell has made 14 billion in acquisitions over the last few years.

Dell is in a great position to take advantage of the secular change going on, in our opinion.

At the risk of being a modest, i have been right a lot more than i have been wrong.

We bought oil at 2000 when nobody liked it.

I don't have to prove my record.

I got to say one thing.

Lex you are up 1200%? yes.

So, therefore, i am better qualified to say what a falling knife is and i say that with all respect.

Let's go back to this deleware issue.

This has known to be unpredictable.

If you're in a situation, you are waiting for them to come through in that appraisal.

That is something that could theoretically take a lot of time.

There are a lot of smart professionals that do this and tie it up.

I spoke to one this morning that is pretty big.

They have done a great job.

They have done a good job of going in and getting these appraisals.

Especially in this case, which is unique.

You have a company out there that is just badmouthing this company and is paying 13.65. if you really dig into it, i believe it is worth more than that.

You could argue with that.

They will pay you interest.

When the appraisal is done, i think you get about an eight percent on that money.

By the way, there are many banks that will loan you.

That means that you don't get liquidity.

So, there was a lot of various guys that have made a great deal of money doing this.

In this case, it is a no- brainer because you don't even have to do the appraisal, you can wait until december.

So, that is why i say this is a good thing to do.

I am not telling you go by dell.

I am not here to say go.

You say that it is an embedded put option.

You are buying more time to get a higher profile.

The chancellor of the court already dismissed complaints of an unfair option that happen as we all know about a month ago.

You are effectively putting yourself in his hands to run the appraisal process.

He is a respected judge.

He said he would not give expedited discovery concerning whether the auction was fair or not.

This has nothing to do whether it is fair or not.

That is a different case.

We are saying, we think it is worth more.

It is a completely different question.

You might not get the judge but the perception is that even though it is a completely different case, maybe he is your tight enough that somehow he does not look at it as objectively as one would want.

There are different cases.

What happens to all of those institutional investors that need to be invested in public companies.

Once this is taken private and all they really have essentially is the right to an appraisal claim, would they be able to stay in that?

I will not say this is for everybody.

There are institutions that will do this.

That does not mean that it is not a good thing to do.

It almost makes it easier for the company to make a deal and a settlement when there are not that many appraisals in there.

So, and other words, this is not for everyone.

That almost makes it more exciting.

In what sense?

Well, if you have less appraisals out there, very often the company wants to get rid of them and settle them.

So , it is happening very often.

They will just go along and settle it.

A lot of good things can happen.

I cannot tell you how many times over the past we went and did these no-brainers.

People would laugh and say to me, how can you ever make money on them?

In 1968, i made 10 times my capital.

They said, well, the market is booming or something like that.

For you to make money on this, the market has to go down precipitously.

I said, what the hell, i have no risk.

Then, the market fell apart.

There are arcane areas where you can do the puts, the calls.

But i am saying that these do exist.

I cannot tell you why you will do this.

You have an infinite risk reward ratio.

A lot of times you make a lot more than you believe you would have.

This is the own option.

I do think he is getting a great bargain.

People do what is in their own self-interest.

Michael is a smart guy.

I don't think he has run the company very well over the last four years.

I think this would be a major bust.

That does not mean that he is not a smart guy.

If this ceo is all mice, he is catching a falling knife.

That is not what he does.

That is not what people do and you cannot blame them for that.

Look at him, he is going in and catching a falling knife.

He knows the company better than anyone.

He is paying for it.

In your words, if he badly wants to have it.

I don't think that anybody would accused him of doing this for charity.

If you are in charge today, who would you put in?

Any ideas?

There are three or four guys that are really good for this.

Nobody is going to accept a job if they have another good job or even if they'd don't, walking into a beehive or a proxy fight.

Chesapeake, biogenic.

After we changed the ceo, he went from 22 to 240. you take a look at that company, you take a look at philip services.

Motorola is a great example.

None of these guys would have taken the job if they were walking into a proxy fight.

I think that would be an added factor for this company to bring in the right ceo that could manage this company a lot better.

I think that michael dell, i not against him.

Very often the founder of the company should not be running it later when it matures and i don't think he has not done a good job and i think the board has been asleep on the switch.

They should have held him accountable years ago.

They have had a very poor performance.

Instead of saying that you are out of here, they are going to reward him.

One of the interesting things, when i read the merger agreement is that it did not have any provision that would allow for michael dell and silver to get out of the deal in the event that shareholders did exercise the appraisal rights.

Sometimes there are clouds in the deal.

If enough shareholders come through and say that we want that opportunity to exercise our appraisal rights, i imagine it would put a certain amount of pressure on silverlake, on michael dell, on anyone financing this to say, we don't want people doing that, we don't want this going for this course because this is a real gamble.

I see you did your homework.

I think that we understand that.

It is very unusual that you don't put in a provision that you can't opt out of a deal if you are the purchaser.

The banks don't like them.

Therefore, there is the motivation to sell the appraisal right thing.

But, maybe the board did one good thing in this whole deal because i think the board has not acted really for shareholders.

That is my opinion.

On this one, i think it was good that they were not allowed . they would face a $750 million penalty.

I think that dell will definitely close.

I think there is risk there.

There are material efforts to change risk, too many people go for appraisal rights.

I take umbrage of well, you have to worry about the cap.

For icon.

What about the cap.

For dell.

-- take umbrage of, well, you have to worry about the gap period for icahn.

What is your plan for running this company to get it back to where was two years ago?

It is like asking a running back, what was your plan when you saw three guys coming at you and the guys good and he gets around him.

He did not have a plan.

These things have a life of their own and if you want to talk about a plan here, i think that there is a great secular change going into the clouds.

The pc is not going away.

That is not going to be the screen, the mouse, the keyboard.

This is the forefront with some of the technology to take advantage of that.

They have service in the back office.

People did not like motorola solutions for a wild.

For a wild.

This is embedded in every fire station and police station and everyone was ignoring that.

We made a great deal of money with that.

The issue i will say applies to dell.

You found a ton of opportunities.

Your friend bill ackman feels he has found the opportunities telling investors that he is raising a billion dollars to buy the stock for the largest u.s. company.

Some people think it could be fedex.

What do you say?

I think is not urban -- i hope it is not herbalife.

I have said my piece on that.

Carl icahn , you're coming up with a new offer tomorrow.

You are sweetening your offer.

Can you give us any more hints?

We are going to come and add to the package which we think is superior already.

We think that it will be around $20, buy the stock at 20 and we will give the shareholders a piece of that warrant.

We think that will make it utterly superior and we will go to the independent board.

We will show them this and tell them that we think it is superior.

This is our recommendation and we hope that it has traction.

You cannot be sure, obviously.

So, we will see what happens.

So, you heard it here first.

You heard it here on bloomberg tv first.

Thank you so much, carl icahn.

We are back talking about his higher bid for dell after this.

We just wrapped up our interview with carl icahn.

He says he is coming up with a higher bid by tomorrow morning.

Joining us with reaction, jon erlichman.

Cristina alesci, and our reporter from bloomberg industries.

What would this look like?

What you can financially inch -- you can financially ensure this in different ways.

Weekend have all caps, no cash.

Dosh you can have all cash, no cash.

-- you can have all cash, no cash.

The structure depends on the underlying business.

How much is this worth and how much can you extract out of the company?

Would you have private or a completely privately traded into tea, or a partial stub remaining with a private into tea, or a private into tea with a potential call option -- a private entity , or a partial stub remaining with a private entity, or a private entity with a potential call option.

You are actually getting three into teas out of -- three entities out of this deal.

It is getting more financially complex.

What happens to the underlying business with michael dell in charge, without michael dell in charge, with carl icahn in charge.

He said he would be absolutely looking for a new ceo.

He had about four people that he was considering.

He may not have to.

Think about this 60 days.

As we were talking about earlier, their merger agreement has no provisions that say that michael dell and silverlake can back out in the event that shareholders seek their appraisal rights.

And get a higher appraisal.

They could get a lower one, too.

Suddenly, a delaware judge says, it is actually going to cost this much.

That is a big headache.

As we are talking about eight economy that is improving.

The longer this goes, the more likelihood that dell's fortunes turn around.

There was more financial complexity and what shareholders want to see is less financial complexity.

This could be a way of carl icon responding to the shareholders that want to see him increase his bid.

-- this could be a way of carl icahn responding to the shareholders.

That is what they were trying to get him to do.

Whether this structure that he is proposing is going to get other shareholders is still a big question because at the end of the day, what shareholders wanted to see was just a simple structure.

Instead of that 72% takeout, pump it up to 80 or 90. i want to bring john into this conversation.

This company is not dead and michael dell would not be so interested in taking it back over taking it private over silverlake if in fact the pc business was entirely dead.

You cover the pc business, it has certainly been struggling.

What do you think, not good?

What's there is always a massive debate on that issue.

-- there is always a massive debate on this issue.

We have the former ceo of intel who says, no, you are wrong, the pc era is not over yet.

Michael dell is passionate about this.

This is the best game of bluff on the planet.

We have to see if carl has something up his sleeve in the next 24 hours.

The board has fiduciary duty to take a closer look.

Do michael dell and silverlake, do they continue to play their game of luck?

Let's walk through these next steps.

Tomorrow morning, he comes at with a higher offer, he has the warrant.

It is presenting something differently to the board.

Looks very likely that they will stay put a must carl icon up with an offer to buy more of the company.

Right now, he is proposing to take out 72% of the shares at $14 a share and leave about 20% of the company public we traded.

If you bump that up, then you get into an area where you have an apples to apples bid.

And it truly is a superior offer.

. can they vote this deal down?

We will not go with silverlake.

You of evaluating a new option.

That is when they become comparable.

With 72% or 80% -- that is only a fraction of the company.


That is why they said that a bird in the hand is worth two in the bush.

That is why they did not take a look at carl icahn 's proposal versus michael dell and silverlake.

They only waited it against the standalone option.

Is it time to go back and look at this?

First, you have to make the decision on the michael dell and silverlake offer.

Then, you progress to the next step.

Which is more uncertainty for shareholders.

Amid the pc business which is 11% down year over year.

The pc business is not going well.

One of the points he made was like, you can have your cake and eat it too.

This is a risk free scenario because you have 60 days to essentially make up your mind.

The shares will drop if the vote goes against michael dell and silverlake.

You can still take this.

There is the intervening time which will have fluctuation that people will not want to deal with.

This is close to the closing dates.

All of this comes at a single date and a single point.

You have option one, you take the deal.

You have option two, you vote against the deal.

Or you can vote to exercise your appraisal rights.

Then you have that 60 day window.

60 days of time, yes.

It will be an interesting time between now and the 18th.

Thank you so much.

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