Next is "market makers." ? ? the turnaround takes hold.
Cost-cutting boost citigroup profits to the highest in more than four years.
The trial that could put john paulson on the stand.
The sec verses goldman's fabulous fab.
50 million twinkies cannot be wrong.
Inside the campaign to bring back an american snack icon.
? good morning on this monday here in new york city.
You're watching "market makers." it is time to get straight to our "market makers" news feeds.
The chinese economy slowed down for the second quarter in a row, gdp rising at a 7.5% annual rate, pretty much in line with estimates.
There is concern that they may -- they may miss growth credits -- growth targets.
Retail outlet sales going down in june, about half of what economists were estimating.
From bloomberg.com, a huge retail deal north of the border involving two of canada's biggest retailers.
They have agreed to purchase drug mart for $12 million, loblaw at a 20% premium to their closing price.
I have been shopping there many times.
Owned by the billionaire west and family as well.
North of the border.
Down here, three years ago in fact, goldman sachs said a dubious record, paying $550 million to settle claims linked to corp.
-- two home mortgages.
Now on trial for the very same security, will they finally, finally win a conviction on this crisis?
We will be asking a former watchdog of the bank.
What does it say if they do not?
Also, an american classic treat, returning to store shelves.
Eric is excited and of course we are talking about twinkies, in a few minutes we will talk about the relaunched with their marketing guru.
Did you know that the original feeling was banana cream?
I did not.
I think i still wish it was.
First, our top story, investors parsing the words of ben bernanke more than ever this month, everyone looking for hints about the end of qe3. michael mckee is here, just back from his visit to the rocky mountain economic summit in wyoming, where he sat down exclusively with two top fed policymakers.
They gave me some hints on their opinions.
There are certainly disagreements.
Some like regular filling, some like banana cream.
[laughter] the interesting question to ask would be the risk/reward balance the ben bernanke talked about some time ago to determine where they were going around qe3. some are very much in favor of risk and want to get out.
I think the risk is growing at the size of the balance sheet, with a length of time that week, the fed, have intervened in financial markets and markets in the way we're doing.
I think that risks grow with the size of the balance sheet and intervention.
At some point interest rates have to normalize themselves in a way that is beneficial for the economy as a whole.
The longer that we wait to do that, this risk/reward cost- benefit analysis that we want to think about, for some time the cost exceeded the benefits.
You have been saying that for some time.
Do you find more coming your side?
You would have to ask them.
I think that anyone who has read the minutes of the fomc meets -- meetings know that there is more discussion about financial stability and risks that may arise from our actions and that we are very conscious of that.
The committee wants to be very conscious of that.
It is a hard thing to fully see and measure and quantify.
Our analysts and investors correct when they read the minutes and essentially conclude that the majority now want to start tapering getting out?
I do not want to -- i do not want to speak for anyone else on the committee, it is important that the committee is clearly not talking about it.
The committee is concerned about risks to the balance sheet.
When we started this program we talked about how we did not know how effective it would be on the employment side.
Weighing all those costs and benefits is an ongoing discussion the committee is having, has had, and should have.
That is certainly one opinion from inside "the federal -- from inside the federal reserve.
Jim was there from the same bill is bad, we will interview him in the next hour, he is concerned that they may be stopping too rarely.
But not for growth reasons.
Like charles foster, he worries about distortion in the market and inflation, too much disinflation.
He is not convinced that he would vote for capering yet.
All right, disagreements inside the fed.
Our economics editor, michael mckee, on this very divided fed.
It has been a long turnaround for citigroup, the nation's third largest bank.
Last quarter they made more than $4 billion for the first time in four years.
Scarlet fu is all over the breaking news and is here now to put it into perspective.
Just as jpmorgan is very sensitive to trends in the capital market, citigroup has really been a barometer for emerging markets and international growth.
There were a lot of questions about how badly they would get hit by the sell-off of bonds this past quarter.
We saw results that were fairly decent.
Second quarter numbers beat analyst estimates after adjustment for accounting.
$1.25 we back out the adjustments, topping the highest analyst's estimates.
It was down slightly from the first quarter.
The theme is certainly more around trading revenues and equities helping out with better numbers.
Which is what we saw on friday from jpmorgan.
But the improvement of credit quality trends is something we need to highlight.
Citigroup released $784 million in reserves that they had set aside for bad loans and then decided that they were not getting that kind of bad loan activity and they released it straight to the bottom line.
It is not a high quality kind of number, but it is the kind of thing that people look at.
Michael corbett, the new ceo, is really having an impact when it comes to costs.
The best way to measure costs is revenue, especially the efficiency ratio.
If you look at it, it has declined dramatically and a lot of that has to do with job cuts.
The group has been getting thousands and thousands of jobs.
And they plan to hire more.
They said that they would fire 11,000 workers, down 3% from last year, 2% from the first quarter.
In the early comments from the conference call, he said they were on track with their $900 million cost savings plan this year.
We talked a lot about this in the past and it has become the buzzword in banking circles.
Revenue mix to profitable enough.
In the middle east and that two employees.
Compare that to 50% -- 57% for wells fargo, down from that height in citigroup.
Scarlet fu, thank you very much.
The latest on citigroup earnings, bank numbers coming for this week.
When we return, he once called himself a fabulous fab.
Today he goes on trial over claims that he misled investors.
? ? here in manhattan today, a former goldman sachs banker gets his day in court.
The sec is accusing fabrice tourre of misleading investors.
A quick look back at how the then 28-year-old became a symbol.
Just the mid-level goldman sachs banker when the sec accused him of fraud.
After testifying along side top executives, he became one of the faces of the financial crisis.
Am i pronouncing your name correctly?
Chances are you know him better by his self-styled nickname, the fabulous fab, made infamous by an e-mail he sent on the eve of the mortgage meltdown.
In 2007 he was hoping for investors to take one side of the complex trade with a derivatives instruments based on subprime mortgage bonds.
What made abacus different was that they were ranked by john paulson.
He was betting against the housing market and asked goldman to create an instrument he could short, in other words an instrument designed to fail.
The sec said that fabrice tourre illegally withheld that fact from investors who took the other side and eventually lost more than $1 billion.
He helped to select the mortgages?
In many cases, yes.
Goldman settle the allegations for $550 million, but fabrice tourre decided to fight the charges with goldman sachs footing the bill for his defense.
Another e-mail from two dozen 7 may explain why.
-- 2007 explains -- may explain why.
Fabrice tourre is now working on his ph.d. in economics at chicago and traveled to rwanda to volunteer with local farmers, earning a new nickname according to "the new york times, close but breezy.
-- ," breezy.
Here is speaking to reporters.
[indiscernible] looking forward to [indiscernible] for more on the trial and what it means to the sec, a former special inspector general for tarp and former federal prosecutor is with us, a graduate from the nyu school of law and bloomberg contributing editor.
Rate see you.
Let's talk about the significance of this trial.
The federal government has had a hard time getting convictions.
Will they have a better chance here?
This is not what they would call the man with the face of the financial crisis.
A 28-year-old, relative kid making a couple of million dollars when this all went down, midlevel guy, that will present some challenges for the sec during this trial.
Last time around when they went up against an individual, brian stoker, the jury rejected the claims in part because they were saying that he is just a scapegoat, this is just a lower level guy.
Where are the significant players?
That will be significant.
Sense to me like you would not want to prosecute this case.
Look, it is a tough case and not as clear-cut as you would think, but that does not mean it is not important, especially from the perspective of the sec.
A loss here could be very harmful to their reputation.
I was just going to say that there was a lot at stake in terms of reputation.
There is this sense out there that the sec is not good at trying these cases.
And if they lose this case the way they lost the stoker case, it will reaffirm that, which is particularly important right now.
The new chair recently came out to save ever-changing corner store and bought -- cornerstone policies in terms of allowing targets to settle cases without actually admitting liability.
If they take this policy and start implementing it on a case by case basis -- we would see more trials?
You would see more trials.
More individuals faced with this choice.
They could not get stoker, they cannot get the fabulous fab, maybe i need to roll the dice and go to trial.
What about the human element in this case?
The fact that we know so much about his character at goldman sachs and afterwards, volunteering in rwanda, does any of this enter the courtroom?
He will most likely testify.
This is not a criminal case.
He will most likely have to testify to defend himself.
There is no reason to use the fifth amendment.
We will hear from him and he will get attack on cross examination and it will give them an opportunity to paint a complete picture of who this guy is.
Look car defense lawyers, they will go right to the defense that worked in the citi case, for trying stoker as a mid-level guy -- portraying stoker as a mid-level guy, not the one responsible for the crisis.
This idea of fairness, the idea that fabrice tourre should be on trial because prosecutors were able to uncover a certain e-mails that may not have really -- we did not know anything about this guy before.
These e-mails are offensive but lack but it does not mean that they demonstrate something illegal.
The demonstrate a lack of maturity.
He is not being tried for lack of maturity.
There was a that he was unconcerned about misrepresentations to investors.
The jury may take away something else, an image for values and a lot of!, not exactly that of a criminal genius.
Goldman sachs, it does not mean much for them, they settled.
I'd think it is important to them as well, they are footing the bill for this.
In business circles, it was a monster settlement that was considered a shakedown of sorts.
They felt that they were having a public relations told to have these charges out there, suggesting that there was not really any bad comment.
Goldman was able to cash in on that perception.
If he is found guilty and will be some bad news for goldman sachs in that it reaffirms some of the worst box.
But firms like goldman sachs would be much more likely to rather admit confirming or denying them losing a child.
Going through the whole show of a trial that exposure and on and on, it would make good business sense for them to settle.
That makes sense for them from that perspective, this will sort of help to deflate the sort of gains that came behind them.
Fabrice tourre, -- neil barofsky, great to see you as always.
Coming up on "market makers ," said j.c. penney has a new strategy.
Will it bring shoppers back for the crucial back-to-school season?
? ? it is hot outside.
95 degrees in new york city.
A beautiful shot of the skyline.
J.c. penney has made a push for a comeback with their new ceo, and the back-to-school season will be imperative.
Deirdre bolton is here with their strategy.
Guess it is not too early to talk about back to school?
It is not.
This is a really important season for our top -- all retailers.
Second most important, actually, after dollar days.
More employees will be outfitted with red-branded lanyards.
One legacy decision from the former ceo was to make j.c. penney younger, hipper, cooler, but it seemed to create more confusion for customers than not about who was working there and was not.
If you go there today, there will be employees with a red lanyards, contributing to the overall idea of getting traffic back.
I spoke with the head of the kids division about how this would shake out.
This is what she told me.
Customers have been coming in over the last 10 days since we launched online with photos of the items they are excited about, coming in and asking for them.
I think we will see some exciting traffic.
You think that fresh kids will be able to drive back to school traffic?
It is a great new story that we are out there talking about.
Did you have a chance to ask about the entire leadership change?
We sure did.
We talked about the different feel, even for her, and here is what she told me.
The difference for me is the lead feeling the energy to work with such an experienced an accomplished ceo.
He is great with the financial community, everyone here is responding to the financial leadership.
Since he has been back at the helm in april, stock has gone up 18%. at least the market has a little bit of confidence in what he is doing.
A little bit.
Still, it will be an uphill battle.
Thank you, deirdre bolton.
26 minutes after the hour, meaning that bloomberg television is on the markets.
We'll be talking about stocks this morning after the s&p 500 closed last week at a new record.
Trading higher approaching the post-crisis high after the jump in second quarter earnings.
Gold is on the rise as well.
Wti crude, trading slightly higher right now.
No strong direction for oil right now.
I have to say we are on the markets again in another half of an hour.
Great, what is next?
Bringing david beckham to america, the national football league going to canada?
Plus, one of the sweetest comebacks of all time.
They would like to think so.
Eight months after twinkies go, they're back on store shelves.
Marketing strategy, coming up on "market makers." ? ? could he be the man who brings an nfl team to canada?
He owns the toronto maple leafs, the most valuable franchise in the nhl.
He is with us from toronto this morning.
Tim, why not begin with the nfl?
Could you bring 18 to toronto?
That is up to the owners.
That is certainly something the marketplace can handle.
No question, it is one of the top four markets in north america.
The nfl game is vibrant in canada.
At the same time, we have a canadian court volley that is important.
That culture and the three down mentality has to be part of the thinking and structure going forward, but should the nfl believe that toronto is the right marketplace, and i think ed is, maple leaf sports and entertainment could be involved in that decision making process.
We could not own the team.
There cannot be corporate ownership in the nfl.
But we would certainly go out of our way to being a part of making it work, i think it would be great for toronto and canada.
Presumably the company never hold a majority interest would be doing the broadcasting of those nfl games in canada.
Would they be supported?
Well, they already are.
They both have packages for the nfl and our great partners.
The support that the nfl has in canada is fantastic.
As well as both of them being great partners to the cfl.
There is a commitment to the nfl, cfl, and football overall.
If there was an opportunity to have a team that was canada's team, that would be intriguing, but there is a lot of work to do.
This has to be led by roger develop and the nfl.
We will always follow his lead.
They control the destiny of their league.
Entertainment is an interesting company, why would you want to leave that job for this one?
Maple leaf sports and entertainment is exciting as well.
We have great owners, and to win a stanley cup with the maple leafs, the fact that the raptors are canada's team with a marketplace of 45 million people for the nba to be the only team in canada, toronto really reinvented the expansion of major league soccer.
There are challenges and great opportunities with all of those franchises.
One of the top three live music entertainment markets in north america, when you have the kinds of resources that you have, without broader and larry and i want to win, they want to try to grow the company.
It will double the value in size of this company.
That is an exciting challenge.
Toronto is a great place to live and i am proud to be a part of this.
It is not just a question that it sounds like, because as a long-suffering leaves fan, i know how long it has been, but at the same time police have become the less valuable franchise in the nhl, night after night, with incredibly lucrative broadcasting deals.
A moot point, given that there owned by the broadcasters.
What you need to win?
I think the philosophy and direction the owners want to take is all about winning.
We believe that we can increase the value of the company by winning, not the other way around.
The only thing that matters is the increased value of the company.
When you have roger m. larry, -- roger and larry, their only focus is winning the championship and the trophy.
We have the resources in and market to do it, now has to be our challenge.
Flat out, for me if we do not take a run at the top during my tenure, we have failed.
So, winning is our priority.
It is what we think about every day.
My priority on behalf of the owners is to build a culture of accountability that demands winning, first and foremost.
The rest of it, net profit value on the company, bill take care of itself if we win.
We understand that that is the benefit of winning.
Most people would say that you cannot win without spending money.
What kind of investment will be required to take the least on the one hand and your other teams to where you want them to be?
We are already making it.
We live in a world with a salary cap, luxury tax, and with mls we have a predetermined budget that we have to live within.
This is not about not spending enough money, we are spending every penny we can.
In addition it is about a culture and environment, so the mastercard center, the kiev center, the training center for the raptors, among some of the best, we need to continue to create an environment and culture here where the players, trainers, coaches, general manager is, everyone understands that unless we win, our job is not done.
We need the accountability.
The money is not there, -- the money is there, we have the deepest resources, but but bridget we do not have is an accountability of culture about today.
This has to be our moment.
This has to be a new legacy.
It has to be about the tradition that we create going forward for these teams.
We want to live on today and what we can build going forward.
I would wish you luck anyway, but as a leafs' fan, i really mean it.
Thank you, tim, coming to us from toronto this morning.
Hon become back, a classic.
Back from the dead, yes once again you will be able to bite into a twinkie.
? / ? one of america's favorite snack foods has come back from the dead.
Twinkies have been off shelves since hostess' declared bankruptcy last november.
A private equity firm has purchased twinkies and other brands for $410 million and they will return to store shelves today.
Thank you know about twinkies?
You do not know the half of it.
[applause] clapping  ? cream filling.
1930, you were right about the banana cream filling.
The twinkie, being branded the sweetest come back in history.
How difficult is it to relaunch an iconic, 70-year-old brand?
The man spearheading the relaunch, he is the vice president at the ad agency [indiscernible] this is already a very well- known brand, so how are you trying to reposition twinkies and brand them again?
That is the challenge.
It is a unique opportunity for a brand that has gone away and has now come back, making it more relevant, more relevant for people who think of the only in the u.s. -- nostalgic way.
Twinkies were off the shelves for eight months?
How much value do you think you lost in eight months?
An important point, lee wanted to make a big point today with the launch.
We needed to get back into the habit, get people back into the habit of buying the product.
I would suggest that that might have been helpful, when they were pulled off the shelves, everyone was outraged.
But were they outrage for eight months metal or did they just are buying other things?
That is interesting.
A couple of days after liquidation, there were tens of thousands of comments in the social media sphere that tailed off very quickly.
People -- it did sort of move out of their consciousness.
This idea that they last forever, everyone thinks that, that they have this enormous shelf life.
What is interesting about the new twinkie is that you are extending the shelf life.
Do you like the idea that people think that?
It has always been a myth about the product, that it will last forever.
It is a faddish bridge refreshed -- fresh baked product, just like any other cake.
It has been a part of the relaunch, but still, it is about having a fresh product to enjoy.
Do you think you could sell a healthy 20, organic twinkie?
I was looking at greece's pena buttercups, the paul newman brand has the healthier alternative, sold at places like wholefoods.
That is something we definitely want to look into.
Steffy innovation is very important.
I will not say that organic is the key.
It seems to me there might be an opportunity.
We want to come back with the the original product that everyone loves in the next step is to innovate and meet other consumer demands out in the marketplace.
How else might you innovate?
There are suggestions that we might look into things like gluten free.
You could also go into serving sizes stack size.
-- serving sizes.
We have done that promotional the over the years.
It has not been back with black i am curious about your social media strategy -- it has not been back -- i am curious about your social media strategy.
How do you capture a strategy like that for twinkies?
We want to put something out there for consumers to talk about.
We encourage them to prepare their cake face, capture it on video, instagram, upload and share, it becomes part of the discussion on cape -- social media.
We have a base of consumers prior to liquidation of we were able to reach out to and we are growing them again.
Great success today on this first day back on the market, trending on twitter.
Where do you look first, twitter or facebook?
Probably twitter, but facebook was behind.
Twitter is just more -- more to the moment.
All right, good to talk to you, larson stiegemeyer, good luck with the relaunch.
He does the marketing for everyone's favorite snack.
Did they have those in canada?
The twinkie of hollywood, no nutrition, but a lot of fun, but there is a big gap between what critics 1 from alan -- adam sandler and the public.
? ? i am erik schatzker, you are watching "market makers." jay-z has put his sports manager cap on 4 [indiscernible] it his his first sponsorship deal since hooking up with him.
He also appears in commercials, jay-z been certified as an agent by the baseball and basketball players unions.
Getting into sports.
A real businessman.
All right, moving along, sticking with pop culture, currently ruling the domestic box office, "despicable me 2" and "grown ups 2" are ahead at the box office.
For adam sandler, his movie career seems to be revolving around the idea -- ignore the critics.
Bad reviews, a recipe for success?
He has not been a consistent box office star.
This will be his 14th $100 million movie.
We have a chart illustrates this nicely.
Put it up.
Of what we have here is the line that shows the rotten tomatoes ratings for his movies, the percentage of good reviews from critics over the years.
Reveal the chart that shows the opening weekend domestic box office numbers for those movies.
There is an inverse relationship here.
Critically acclaimed movies do not do much for his box office numbers.
To give you a couple of examples, "billy madison," it's a cult favorite rated fairly high for him, but only made $6.6 million.
His best movie in terms of acting, "punch drunk love," made only have $7 million.
It was a serious movie.
"funny people, closed but about a term of diagnosis, made only $22 million.
Those are opening weekend numbers?
Over time they made more, but not much?
Look at the bad reviews.
Prison inmates taking on football guards?
And then "grown-ups, close but if you saw the trailer you pretty much saw the movie, but it does not matter, $41 million, people showed up in force.
What is the why?
People just like him.
They like him as a man child, basically.
His movie career is predicated on to ideas.
Not just ignoring the critic, but telling the same gags over and over.
People like it.
Stupid voices as well.
People like it.
Opera man on saturday night live.
I do not know.
The inverse correlation between his movie career -- we actually have the numbers on the negative correlation, it is -0.5%. there you go.
It is now time to go back to bloomberg on the markets.
Julie hyman has the latest for us.
First let's check in on the markets and take a look at what is happening in stocks at the moment.
All lot of oscillation today.
Right now all three major averages are in the green but that has not been the case for the bulk of the day.
Empire manufacturing in the new york area, data coming in better than estimated.
On the downside, retail sales came in at half of what was estimated.
We are now turning to a market that you do not hear about every day, whether futures.
Some people are making big money off of this little known market.
Joining me to discuss this further, jeff, let's start off, first of all -- what exactly are weather futures?
How does it work?
How big is this market?
Weather derivatives that derive their value of of the market as opposed to price.
Let's say you are a soybean farmer in north central iowa and are concerned about of late crop, so therefore you go back to may and look at excessive rainfall.
How do you actually manage that risk?
Those of the types of clients we work with.
That is where this product makes sense.
It is about risked mitigation as opposed to -- it is about risk mitigation as opposed to guess work.
On the hedging the effect of their wide that -- the effect of the weather and crops?
A lot of these transactions occur at the airport.
We have developed something where retail stores or farmers can take proprietary devices and place them at their site.
We can transact off of that primary data.
How big is this market?
As you said, it is not something we talk about every day.
Most traders groups are not diving in here.
What is the demand for it?
That is an interesting question.
Liquidity in the system, this is not a tradeable marketplace, but there is a tremendous amount of capacity.
It is heavy on the reinsurance side but educational curve has slowed this down.
We believe that working on trading on site but eliminating of the basis risk is really going to help eliminate what we believe to be a barrier to education.
On the flip side i thought the stock market was unpredictable but i suppose the weather takes us to another level.
Hot here is what i would tell you.
The clients that we work with are using this to hedge.
If you are in a business that is dependent on the weather, it is very speculative.
If you are coming in here and using the marketplace to create certainty for your business, that is an entirely different animal with a reinsurance company that has a large portfolio that can take this non-correlated rest inside their portfolio and it makes sense.
All right, jeff, thank you so much for joining us.
That is it for bloomberg on the markets.
You have the latest every 30 minutes, 26 minutes in 56 minutes past the hour.
"market makers" back in two minutes.
We might be looking at another masterpiece, "sharknado." ? . . live from bloomberg headquarters in new york, this is market makers with erik schatzker and stephanie ruhle.
Looking for hints about bernanke and the future of qe3? we sat down with policymakers and got their take.
Hulu is once again off the market.
You will hear from one of the owners.
Making good business out of really bad movies, the company behind social media sensation "sharknado dear co.
-- "sharknado." i am sara eisen , filling in for stephanie ruhle.
We spent the whole preshow watching "sharknado." we need to take you to the newsfeed.
Citigroup's sword, profits the estimates.
It is the biggest retail takeover ever.
And deal valued at almost $12 billion, 27% more than the last closing price.
J.k. rowling is back under the bestseller list.
She wrote a mystery under a pen name.
Everybody is looking for hints from ben bernanke about the end of qe3. economics that can or -- economics editor michael mckee is here.
He came back from jacksonville, wyoming where he sat down exclusively with some that policymakers, including jim bowler.
-- jim bullard.
He is the guy who first proposed quantitative easing.
He was the first one to suggest we might want it tapered.
He is not convinced that he is ready to vote for tapering yet.
He gave a lengthy explanation about what is going on in the market and economy right now.
Here is why he is not ready yet.
I think the minutes show there are differing opinions and there is more data to come in here.
One thing i have been concerned about his fairy low inflation in the u.s. area both corn corn and headline inflation are heading around one percent.
That is a very low level that has caused us to take action in the other direction in becoming more aggressive.
I would like to see inflation pick up a little bit or get some kind of reassurance that we could see a path that could come back to our target.
The pb iab numbers showed inflation starting to pick up at the producer level.
Are you reassured by that?
Does that suggest to you that the inflation will come back up?
I saw that report this morning.
Pbi is pretty noisy, not always reliably related to our preferred inflation measures.
We will have to see.
It does suggest there may be some pickup here.
I will have to analyze that more than i had a chance to this morning.
Ben bernanke give you a shout out in his speech this week, referring to his good friend jim bullard.
We all are committed to lowering the inflation target.
Would you like to have something like that in a statement?
Is there more reassurance from the committee that they see things the same way as you do?
I appreciated that he reached out a bit.
He is right, that the company does not intend to increase its inflation target -- increase its inflation target.
I think we had to sort this out during the fall.
Hopefully all will go well, this will turn out to be just temporary dip in inflation.
The economy will be back on track.
If it does not go that way than i think we have to think about what to do.
Obviously you will not vote until the end of july and then again in september.
Given the numbers that they are today, is the employment component strong enough to vote on that basis?
Rex one of the things i will talk about today, i will look at one of the employment numbers.
Something like play roles -- like play roles -- like payrolls are stronger than they were last summer.
In that sense you could say the labor markets have improved over the.
That we have been doing the so- called qe3. on employment has come down some, as well.
Ours is not different than others --. how much of this is part-time, how much of this is full-time workers?
You have had the labor force participation issue, which has been dogging us rue -- dogging us through the last five years.
There is a mixed bag on labor markets.
I do think that the main indicators of the payroll employment definitely improved since september 20 12th.
We have more jobs numbers coming out in cpi numbers coming out.
At this point he is waiting for more data.
He is not convinced us some of the others.
What was so interesting was how he approached in this area he issued a statement afterwards.
Very critical of his colleagues.
He is worried about how the markets understand the fed and how they see what the fed is trying to do.
Obviously they got that overreaction in the markets.
It would be six .5% unemployment.
-- it would be 6.5% unemployment.
Thanks for the comments.
Michael mckee speaking exclusively.
Jim bullard is launching -- the latest inflation report is tomorrow.
There is yet another player in the battle for bandwidth.
We are talking about at&t and its purchase late friday.
The deal will give at&t the second largest -- the deal will give at&t, the second-largest wireless carrier, new customers.
Let us bring in is tina alessi.
Why did this make sense for at&t? the different customers are lower end.
What this comes down to is spectrum.
All of the wireless carriers want to serve the customers that want better data, faster data, and they cannot get enough of the spectrum until the government can go ahead and auction off more of it.
Until then we have a finite amount.
At&t tried to solve this problem by trying to move -- trying to buy verizon.
Now they are forced to buy smaller players at a higher premium.
It was a pretty big price.
Some people say that perhaps it is too much.
One thing we do not snow just to get his who else is taking a look at this because one player that does have prepaid customers is metro pcs.
T-mobile bought them for you years ago.
-- bought them a few years ago.
Some analysts today are out with reports saying we could see t- mobile will reenter it.
Collects there will be a bidding war?
There may be.
It seems like the spectrum is being bid up to a premium here in the united states.
What are the in occasions of the wireless industry -- what are the implications of the wireless industry as a whole?
The number three and four player, that is sprint and t- mobile, will be forced to go ahead and do other deals.
Remember, sprint has a cute -- a huge cash seduction.
This is going to be an all-out war.
Just today sprint announced an unlimited plan for text, data , and voice we are going to see each of these players getting very aggressive and is not that the number of consumers are not necessarily growing but you figured they are going up.
We are going to have more on the spectrum more just 15 minutes from now.
And whether there is anyone left to buy.
And hulu is off the auction block.
What is next?
We have an exclusive interview with disney ceo bob eiger.
Now that the bidding war for hulu has ended without a winner the big question is what are the missing owners going to do with it?
Companies agreed to pour $7 million and the streaming service and may be looking for another partner.
Jon erlichman spoke to bob eiger about the decision . what are they going to do with all of the cash?
A few different things.
We have all been in the position where we thought about selling our car or selling the home and going through that process.
You realize how much you like the asset.
Part of that happened with hulu.
This profit determines the value for the owners themselves.
Eiger of disney like to the idea that you can find amazon, netflix and others in the same breath.
To get it closer to where netflix is they are going to have to spend more on technology and content and on people.
Here is more of that exclusive video.
We believe that by attracting great people, continuing to attract great people , make sure we have great technology and use a fine interface and invest in the content people want, this thing can turn out to be something big.
I will say on the people's side, they have an interim ceo.
He would not say anything more about whether that would become a permanent ceo or any other leadership changes.
You paint a pretty interesting picture.
Hulu, netflix, and amazon all competing.
What does hulu need to do to even the playing field?
On one hand hulu has put together some impressive numbers.
They have 4 million being subscribers.
That number doubled in relatively short order.
One of the reasons netflix is in the position where they can say they are bigger than hbo is because they have north of 20 billion subscribers -- of 20 million subscribers.
That does not include the international number.
The business model is a little bit different in that you have the paying subscribers and supported models.
It in the past there seems to be some dispute on where the focus should be.
Where as netflix is all paid and focused on getting the house of cards type shows, hulu may have to put a lot of money into one of those standout shows to try to field some of those eyeballs.
We will continue to follow it.
Jon erlichman on hulu, the deal that was so hot.
The owners just decided to hang onto it.
We are asking the question, what does the future look like for hulu dax -- for hulu?
David, full props to you, you said it would be a huge mistake to sell hulu.
Why did they shop it at all on the first place and what ultimately do you believe led to the conclusion that they should keep it?
First of all, we have to give a lot of credit, strategically, to bob eiger and rupert murdoch for not selling this asset.
The pressure existed to create a competitor to netflix and amazon, to make sure that there is a nether buyer for content in the system.
In the short term and independently funded buyer probably could have helped earnings in the near-term.
That was really a key driver.
That and the fact that it was a joint venture, those things are difficult to manage.
What they did was they decided that in a sense the earnings benefit in the short term , from having a nether independent owner, was not important enough to overwhelm the long-term strategic value of this brand.
I give them a lot of credit for that.
What do we do now?
Now we are at a new generation of television consumers.
It really does not mean a whole lot.
What hulu represents to me is the brand of television that brings the consumer into television, not just from a content perspective but how do you interface with television?
Do you want to log in to a bunch of different apps?
You can go to a white label hulu and that brings you to television.
That is a big part for me.
How does hulu tap into that and do you like the idea of partnering with time warner cable just to access more content for hulu?
I think it is a terrific partnership area the more pay- tv partners, the better it becomes because it will be an -- the better it becomes a global authentication platform . it is going to be better funded.
It is certainly a promising business.
I think they have plans for that business.
There is so much value to this platform and that is why i am so encouraged that these big companies are holding on to it.
They have agreed to sink $700 million into the project?
What is that going to get them?
Is that going to get them to do what they want?
I think at the end of the day you have to scale the amount of content relative to the amount of subscribers you have created it is a chicken and the egg kind of thing.
$750 million, if you think about that as an annual run rate or budget, it is probably about where netflix was two years ago.
I do not know what the total budget number is.
I think it is encouraging that they are funding it with that much money incrementally.
I think it is a very encouraging sign.
It is probably not enough to compete with a service.
It is enough to keep the momentum going.
It is enough to get the competitive landscape that jon erlichman paid for us.
Should they be scared for what the new hulu is?
The reality is in the near- term they should be best -- they should be less scared.
An independent buyer would probably come in and compete more aggressively in the near- term.
And the longer term they should definitely be more scared.
Netflix and amazon try to move into that space and define television, disrupting the echo system.
That is going to be much tougher for them with the existing players owning hulu.
Terrific analysis as always.
When we come back, do not cry for her argentina.
The country's central bank says make sure you use the hundred peso bill.
In argentina, ava perrone is making a return.
She was the first lady who young and became the subject of a hit broadway musical.
She is now on a commemorative version of the 100 peso note, worth a little more than $18. the problem is a lot of small businesses have been rejecting these bills because they are not familiar.
The central bank has sent out a warning to merchants, you will be fine.
It should surprise no one that the government team -- she is a member of the party that has dominated argentine politics since the late 40s. just like ava perrone, fernandez is having inflation of 25% per year.
Because of madonna we all know who she is.
It is 26 past the hour, time for bloomberg to take you on the market.
We are going to start with the stock market because stocks are fluctuating between gains and losses, a mixed bag in term of economic data.
Worse than predicted retail sales report for the united states economy, having an impact.
Citigroup is the big focus.
They are rising more than one percent on better earnings.
Let us not forget that citigroup is trading above 60 bucks because they had that reverse split not too long ago.
It certainly looks a lot better.
Let us talk about the vix, volatility right now , wages will decline.
What does that mean?
People are betting that the fix is going to go down.
Cracks -- perhaps that is a good signal of complacency.
Look at what we saw in june when ben bernanke started talking about tapering and the bond market level.
Yields spiked in the bond market but the fix also spiked.
Perhaps that is keeping stocks from falling too high.
They aren't lively.
When we come back, a blast from our banking past.
Congress is looking at whether it should or should not bring back something like the glass- steagall law from 1933. we will have that more for you.
We are talking about the spectrum war, at&t has fired the latest volley.
What does the battlefield look like now?
Who is winning and are there any small u.s. carriers (? we have a telecom analyst to talk about all of that.
The way you calculated it, at&t is paying much more.
The headline is just for the stock.
They are assuming that not only the debt that exists, there are these power lease obligations that they are going to have to pay out over the years.
They will probably accelerate that.
We have been trading at $17 per share.
The shareholders get $15 in cash but they also get it in spectrum.
That spectrum has some issues.
It has some interference with broadcasters, there have not been a lot of buyers for it.
They only get $1.25 on top of the deals for cash.
Why is at&t doing this?
We know they wanted to buy t- mobile but this is hardly t- mobile.
I am not sure why they are paying this much money.
It could complicate their abilities to buy dish, which is a much more valuable asset for them in the future.
All of dish?
Collects it is valuable not only because of the spectrum but because of the battle they have.
It could take the capacity away from movers and allow them to do more things area what about the whole pre-paid phone business?
Is that something at&t wants?
Collects it is only 5 million customers.
They probably could use a couple million dollars and extracted those customers with better rate plans.
Where there alternatives to at&t? collects there is a short -- aids shortage of spectrum.
Verizon came in and bought all the spectrum from the cable companies.
There is just not a lot of spectrum ( who else is there left?
Collects there is dish.
And there is u.s. cellular.
You are talking about small slivers of spectrum.
At&t need to spectrum in new york city and san francisco and places where are actually using the product.
There have been a lot of deals, softbank buying one, metro pcs and t-mobile combining.
It looks like we are down to four major carriers here.
Does that mean our cell phone bills are going to go up?
They have already gone up because the government prevented at&t from biting t- mobile.
They may be more consolidation.
The government may allow t- mobile to emerge.
I think right now these guys are going to be perceived as challengers.
The government wants competition in the market.
The strength of at&t and verizon has only gone up since you had the sec under obama and jenna ken nitkowski and office.
They want for guys.
I think they will prevent t- mobile and sprint from urging.
If at some point these guys -- something goes horribly wrong, maybe they will be able to clean each other up.
Can those to compete right now with at&t and verizon hackel -- and verizon?
They are offering some new aggressive upgrade lands.
They are going to come out with a phase three of that program.
Sprint is going to build out this clear wire spectrum.
They will try their best.
The challenge though is that you have at&t and verizon that have such a large share of subscribers and profits.
Is the most interesting thing going on right now the conversation that the lawyers of t-mobile and at&t are having with the sec over when and under what terms they might be able to consolidate further?
It is a big left and have.
We are getting a new commissioner.
The real issue is the doj.
They were a problem during the at&t and t-mobile transaction.
There are people that think at&t may not be able to survive the leaps and this person is perceived as an aggressive and.
We will see how that plays out area if you could provide we did reject the most militant -- the next multimillion dollar transaction, what will it be?
At&t should be buying dish.
If there is a scarcity of spectrum then maybe verizon needs to take a look at buying dish.
All of these operators use more mobile video and there is a limited amount of spectrum.
Dish has a very strong asset, not only in the spectrum it has but also the satellite to deliver pay-tv service.
Is the spectrum with the broadcasters or is there any valuable spectrum the government could auction?
There was a bankruptcy court hearing in which they are trying to block the spectrum.
There are little pieces here and there.
The government loses all the spectrum.
They do not typically get that spectrum away easily.
It is good to see you.
You very much.
He is in media technology analyst.
When we come back, big banks without limits.
We will dig into the new calls for a glass-steagall act.
A bipartisan group of senators, led by elizabeth warren and john mccain, introduced a bill last week that would bring back glass- steagall, the depression era law that split up commercial and investment banks.
Key parts were repealed in the late 1990s and some say that is why banks have become too big to fail today.
Neil richardson has more on this from washington.
Let us begin by laying out the argument for bringing glass- steagall back.
Last summer i met over 30 congressional officers to brief staffers on this precise issue.
Or some in congress glass- steagall has the benefit of reducing to date to fail banks by separating deposits from the investment activities.
It also curtails the activities that banks can do, which makes them much easier to control and much easier to regulate as well.
There are some cons, there are no free lunches the glass- steagall cons are just as important as their benefits.
What are some of the cons?
One of the biggest arguments is that glass-steagall would go back to pushing these investment activities into the shadow banking sector, which is much less regulated than the sector we have today.
It also prohibits engstrom offering multinational clients the full range of painting services that they need to compete on a global scale.
No one knows what the social cost would be of having banks break up into smaller pieces and service these multinational conglomerates.
One of the political talking points when it comes to these issues is what would have prevented -- is what it have prevented the financial crisis?
Does that question matter and would it have gone a long way to help prevent some of the damage of the crisis?
It would not have affected the sea is to shoot that were involved in the financial crisis.
If you look at bank posits since the financial crisis what you will see is they have grown to the top four banks by over 80%. that is jpmorgan, citigroup, and wells fargo.
What is the next crisis going to look like and what do we want our banks to be able to do as a result?
Do we want to make them smaller, which would require more capital requirements, or do we want to curtail their activity am the which would be something like glass-steagall -- like glass- steagall.
The argument over diversification, many people say on the one hand that banks need to be diverse of five because the riskiest thing they can do is make a loan and if all your banks do is make loans than the economy goes belly up.
The banks are going to be bankrupt on the basis of their loans as opposed to some of the geographic product diversification.
There are other people who say diversification equals complexity.
The more complex a bank is the harder it is to regulate.
They are both right.
We have seen this game before.
Foreign banks are not necessarily safer banks.
We saw that in the savings and loans crisis of the early 80s. savings and loans went bust because they've made all of these risky loans did not have the deposits to back it up to at the end of the day you have to look at regulation in context.
We are at risk of regulation overload between dodd frank and glass-steagall on the table.
We have to be very specific about what kind of regulations we want and what will support our economy.
To that point, clearly john mccain is a powerful ally for elizabeth warren.
You know how washington works, is there going to be any traction, especially with the banking lobbyist so powerful and fighting so hard against this?
We cannot estimate the power of moral persuasion.
That is key to regulators here in washington.
What that could do is get banks behind holding more capital, building the kind of fortress balance sheet that we saw during the jamie dimon and jpmorgan trading episode, backing up risky trade with a lot of equity.
If we can get thing to be behind regulators on that front then maybe there is some rule -- some room to play with other regulations coming down the pike.
Washington is all about bargaining and compromise.
The banks say they are behind the regulators there but sometimes it is the actions we have to judge them by.
Good to see you, neil richardson on market makers.
This one probably will not be a favorite at the award shows next year.
That will not bother the producers of "sharknado." that is next on market makers.
You probably did not see "sharknado," but it was tough to avoid hearing about it.
The movie about a tornado that blows killer sharks into los angeles got 1.4 million viewers.
That is not great for sci-fi, but it blew up on twitter, getting close to 5000 tweets per minute.
Asylum is the production company that made the movie.
They are joining us from studio city, california.
A tornado with sharks, take me through the pitch meeting of how you came up with such a concept.
We were actually developing this concept, which we were calling "shark storm" at the time.
They said they were working on the exact same idea but they were calling it sharknado.
We knew this was a film that had been made.
It is like the other movies that have come out out of this production company, zombie hamsters, we have others.
Mega shark versus crocasaurus.
What is the common thread behind these movies?
You should understand exactly what the movie is by the title alone.
You do not need to hear anything else and you know what you are going to see.
It is a level of outrageousness you do not see anywhere else.
The major studios are not going to be making a film called "mega shark versus giant octopus year ago you guys to sit around dreaming about the craziest films you could come up with, and then write the nuttiest script?
Like most of the major studios, our ideas come from someone else read in the case of many of our big giant creature movies it is our japanese buyers that come to us.
A couple of years ago at a film market our japanese buyer came to us and said, "could you make a movie about a giant shark fighting a giant octopus?" that, up until now , was probably our most popular film.
How much do these movies cost to make?
We have different levels of budgets.
The sharknado module -- sharknado budget was high.
Talk about the actors.
Tara reid is going to be on bloomberg television later.
What we going for with the actors?
The most important thing, a lot of people talk about this, they talk about the campiness of the film.
I am a firm believer that you can not try for cap intentionally it has to come naturally.
We look for actors who are going to sell the part.
They have to believe there are sharks falling out of the sky and attacking them.
What is all the buzzwords to you -- all the buzz worth to you jack -- worth to you?
Are there any residuals there for them?
There will always be residuals for actors, so they do not have anything to worry about.
As far as we are concerned, already there has been a great effect.
The day after the premiere last week we received an order from a major retailer who originally was not going to take the film and he ended up ordering three times the number of dvds that they normally ordered.
It already has a huge financial impact.
Is there going to be a sequel ? we will have to see but we are talking about it.
As you may be aware there is a new york city newspaper that was talking about the possibility of a hurricane coming to new york, may be sharknado to 2 will be a shark - cain.
Everybody is talking about the second screen and television.
I do not think anybody knows what the overall effect is going to be.
The ratings were about average for a sci-fi film.
A couple of things of note are that the demographics were actually a lot lower or younger then the channel usually sees.
I know the network is happy about that.
In terms of overall business, it is hard to say.
We do not know what is going to happen as more people are using twitter and social media to talk about films.
We have already seen an ancillary effect and it is going to get just acre.
How could a business is making bad movies?
How much do you make?
Last year we made $16 million in revenue.
That is tiny by comparison to any studio.
What is unique about asylum is we never lost money on a film.
The reason is we never make a film until we have a good idea of where we are going to get the money back.
It certainly has been a hit on social media.
Thank you for joining us.
We are inside with tara reid later on bloomberg television.
Thanks for watching.
Tomorrow, earnings from goldman sachs, is it still the gold standard on wall street?
We will know at 10 a.m.. here is julie hyman.
It is 56 past the hour, time for bloomberg to take you on the markets with stocks.
We are seeing not much changes in stocks.
A range down market.
Right now we are in the green but in terms of what is pushing us around today, half of what is estimated by economists.
Citigroup is beating estimates as well