Dell Boosts Bid: Market Makers (07/24)

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July 24 (Bloomberg) -- On today's "Market Makers," Erik Schatzker and Stephanie Ruhle use analysis, insights and A-list guests to help set up your daily market trades. (Source: Bloomberg)

Drama and dell.

The company founder boosts his buyout offer and the shareholder vote is postponed again.

Ford is in the fast lane.

The focus and fusion help earnings.

Blackout -- time warner cable is threatening to pull the plug on cbs at the network will back off the demand for higher fees.

Welcome to "market makers." we are in for erik schatzker.

We will get to the dell drama in just a moment.

A look at the biggest stories -- the government may file trading charges this week against steve cohen's sac capital.

The wall street journal says no criminal charges are planned against himself but last week the sec filed administrative action against him accusing him of failing to supervise to managers regarding insider trading charges.

The firm has denied wrongdoing.

Shares of ford are up after a reported earnings that beat estimates.

Ford raised the forecast after announcing plans to hire 3000 salaried workers this year.

Edward snowden may finally get to leave the moscow airport, where he spent the last month.

The russian news service reports in the next few hours he will receive the papers needed to leave the airport transit zone.

No word yet on whether he will stay in russia or actually go elsewhere.

Will continue to monitor that story but we have some breaking news to start this hour.

Home sale data coming out -- it looks like a big beat.

Michael mckee is in the newsroom.

It looks like some good news for the housing market.

Looks can be deceiving.

The number is big, 8.3% increase . it is the highest since march of 2008. that is before we got into the whole lehman brothers induced recession.

However, what we're talking about here is an annual sales rate based on the month of june.

What the commerce department just did the the same time is revised down all of the new home sales figures going back to march.

A net loss of 38,000 over that.

-- timeframe.

The new number, the nets revision plus the gym number number means that annual sales rate really is improving but nowhere near as good as the headline would have you believe.

A little bit of a difficult thing to parse, but don't get too carried away at this point.

It does show the housing recovery is still on track.

Thank you so much.

That might be one reason why we are seeing the stock index near lows.

Breaking news is more in the fight for dell.

Announcing they will sweeten the offer in a last effort to win shareholder support for the deal.

Cristina alesci is outside dell headquarters in round rock, texas, where a scheduled shareholder meeting has been delayed for a second time.

Will this be enough to satisfy investors?

That 10% -- $.10 bob that you're talking about is conditioned on michael dell and a silverlake wanting god to change the voting terms around this deal.

This shows how to spread and dire the situation is.

If the voting terms don't change, they do not have a chance of getting this deal through.

That is because it comes down to those voters that have the shareholders that have not voted throughout this whole ordeal.

Those are working against michael dell and silverlake -- they want them not to count at all.

It is important to keep in mind -- the special committee has not agreed to the voting changes that michael dell and silverlake are requesting for that $.10 bump.

We have no agreement from the other side.

The next milestone will be 6 p.m. tonight.

They raised the offer hoping they will be able to get the support, so what can you tell us about the price, that extra 10 cents?

The extra $.10 makes a difference for some as additional shareholders.

It shows and gives them some cover to go ahead to vote in favor of the $.75 offer.

It does not seem like that is going to change the special committee recommendation.

If the special committee does not sign off on this proposal, it is not going to shareholders for a vote.

It looks like that is where we are heading now.

What silverlake and michael dell has said in a statement is that this new offer expires at 6 p.m. tonight, trying to put a gun into the special committee's head.

That is nothing to be working.

-- does not seem to be working.

It looks like the offer will expire.

Hopefully this vote takes place august 2. if not, there is additional -- there is potential a new deal will be negotiated.

Any word from carl icahn yet?

No word yet, but you can expect we will hear from carl icahn very shortly this morning.

He will obviously -- yesterday, he had harsh words for the special committee.

He said this is not banana republic and you can't keep postponing the vote of the get the outcome that you want.

We will expect to hear from him no doubt today.

Cristina alesci in a windy round rock, texas.

The vote has been postponed again.

The sachar -- saga does not end.

He has been watching this war between michael dell and carl icahn very closely.

He correctly predicted that michael dell would changes offer.

I think the $.10 is not for the shareholders.

It is for the special committee.

As christina said, they need to change the voting requirement.

He cannot get the vote of the majority of unaffiliated shares outstanding.

There is a large percentage of votes but some say 20%, not just abstaining but they're not showing up to vote.

. it is retailers, people that don't know -- on it anymore.

Some etf's don't vote.

Does the special committee have a reason not to go forward?

It does not look very good.

It does not look good to say these are the voting requirement and when you cannot get a -- to say you will change the requirements -- what is the prediction?

I think the vote will not happen next week.

I think it will be sometime in august.

The committee still has to think about whether they are agreeing to dell's proposal.

They might come back and say we will agree but we don't want $13 .75, we want $14. is the special committee working in the best interest of shareholders?

They are trying to get the offer bumped as best they can.

They has the ability decide and they obviously decided and by changing the roles --rules they might be looking towards the best interest of michael dell.

It has always been unusual that he is the founder trying to take the company private, the fact he is working with silverlake.

They have not been very visible on this deal.

This whole drama and the fact that use getting pushed on and on, what does it signal for michael dell?

He wants to buy the company but he does not want to pay for a landslide, so to speak.

He wants to get 51% of stuff he wants to pay just as little he has to to get the votes he needs.

That is what he is trying to do.

Carl icahn believes there is still value left in the pc business and shareholders should get to reap benefit.

This has been a distraction for the business, when you compare a chart of dell's shares versus hp shares.

Hp has outperformed dramatically.

I think this happens all the time.

It could be temporary downfalls, but in the long term, the business is the business.

This is been a huge distraction.

This is what carl icahn would argue.

There are stockholders but i have talked to that are enjoying this very much at hewlett- packard.

Look at the share price of dell, well below the buyout price.

Does that signal this is not going to happen?

There is uncertainty.

The belief is the stock is going to go way down if it does not happen.

I also think if this does not have become it does not mean that carl icahn feels -- there's still a lot that needs to happen.

We heard a best and final proposal for michael dell earlier.

Are we going to get another offer?

The special committee is going to look for that.

I think $.10 is not -- we can call it a bump.

Thank you so much.

You will come back later in the hour about carl icahn and blackmun.

-- bill ackman.

What we have done here, we have crunched the numbers and how big of a beating as taken from from herbalife.

We will talk about that.

President obama heads to the midwest to refocus attention on the economy.

We will hear from republicans on what a speech won't be enough.

This is "market makers" on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.

? this is "market makers." president obama is hitting the road in an effort to refocus the country's attention on the economy and on jobs.

He will be making a speech in illinois where he is hoping to offer new ideas to jumpstart american growth.

Republicans say it is more of the same from the white house.

Peter cook is on the hill with a member of the senate republican leadership.

I am joined by the center -- the senator and thanks for your time.

When you watch the speech today?

I don't know that i will have time but i will be interested in what he has to say.

We heard the speaker set yesterday welcome, i gather there is skepticism about the speech.

There is.

I think the president has said on many occasions that he will pivot to jobs.

I said yesterday that even by the nba standards, this will be traveling based on the number of times he is pivoted to the economy.

We are skeptical that there will be anything new.

We think american people don't have the luxury of being able to pivot.

They have been worried about the unemployment rate.

There are things the president could do that we think would help create jobs.

He can start by improving the keystone pipeline.

This is going to be the same old, same old and a rehash of what we've heard before.

Can the president keep the high ground with regard to the debt ceiling?

I think that is probably true.

My guess is this is going to be designed to give him a rhetorical high ground at least.

The american people are onto this and i think in terms of the things the president is going to talk about, what we would like to see him discusses the impact of his signature law, the healthcare bill, is having on jobs and the economy.

That is having a crushing impact , if you look at people's insurance premiums going up.

People forced into part-time jobs and the number of businesses who say they will end up cutting or not hiring people.

It is having an impact on the economy.

I think the president -- you have signed on with other senators saying you are prepared to basically not have a continuing resolution and not to convey to fund the government if there is funding in therefore admitting obamacare.

-- we think the one issue is opposition to obamacare.

We think it is horrible for the country and have disastrous impacts.

You will see a big increase in a lot of people's premiums.

Republicans expressed that in different ways.

We think that the president has already come out and said the employer mandate will be delayed.

He has a knowledge of the law is not working.

If that is true, why should we fund it?

Good there be a showdown over this?

Know, there are people who are saying we should not be funding obamacare when the president does not believe it is working.

We also think as we get into this debate in the fall, the president will want to have a big tax increase and we will say now, we need to reform our spending and entitlement programs.

We need to get the country on a more sustainable track that way rather than having another tax increase.

Do you think there is a deal on the debt ceiling that could be had?

If the president is when to accept the idea if we do anything with regard to tax reform, it has to be revenue neutral.

If you accept that, we can get something done on tax reform.

We might be a purdue get something done entitlement.

If the president wants to have a deal on spending, it has to be -- if he wants to turn off the sequester, it has to be because we find somewhere else in the budget.

I am not convinced based on what the president has said in meetings that he is willing to go there.

A loan deal today?

I think so.

There has been a consensus formed.

We think the right thing to do is to try and get the loan rate at a reasonable level for all students, not just those were getting subsidized loans.

I think the agreement has been reached between republicans and democrats in the senate and the white house will achieve that.

A pre-buttle to the president's speech.

Thank you very much for your time this morning.

The re-pivot on jobs.

Breaking news on dell -- the committee is said to seek at least a $14 a share bid for the buyout.

This comes just after michael dell and silverlake sweetened the offer to $13.75 a share.

The dell committee also said they did not plan any action today on the proposal.

There was a 6 p.m. deadline but they are open to voting for at least $14. the drama continues.

We are looking at dell shares and they are still lower following that headline.

We will take you to texas to the dell headquarters to check in with cristina alesci for some reaction to this latebreaking headlines.

The committee is said to be open to changes, $40 a share.

We will be right back on "market makers." ? breaking news, the fight for dell.

There is were the special committee now wants $14 a share for the company.

This is just after michael dell and silverlake raise their bid today by $.10. cristina alesci is breaking the story for us outside of the dell headquarters in round, texas.

What is the signal here in terms of the special committee changing its rules and being open, if they present a higher price?

This is the special committee telling michael dell and silverlake that they need to at least bump their bid to $14 in order for the committee to consider the voting changes, the requirements that michael dell and silverlake are asking for.

It is a very significant price because that is the price that carl icahn is suggesting that he do a buyback for.

Carl icahn to bid is not only opposing a buyback but also leaves some shares outstanding.

That is what has been holding up or working against carl icahn, that portion of a company that will continue to be public we traded -- publicly traded.

His opponents say there is too much risk for shareholders if the company will continue to trade because of volatility and because of the fact that the company would have additional debt under carl icahn's proposal -- under michael dell for basel as well but the fact is under carl icahn you would have a publicly traded element to the deal.

Michael dell also wants the committee to change the way they count votes.

How is the committee responding on that front?

What is happening right now is michael dell and silverlake have come to this conclusion that 18% of the shareholders have abstained, which actually works against them.

If you don't vote, it counts as a no vote and that is a huge hurdle to getting this deal approved by shareholders.

What they are saying is we will give you more money, 10 extra cents and this offer, if you allow those abstentions not to work against this.

That is what they going for.

It shows how hard it is to get the shareholder approval they need.

It is usually no problem , so this is very unusual.

What will have an exit the them tonight, there will be a very brief shareholder meeting -- at 6 p.m. and likely another postponement.

If you read a statement that michael dell and silverlake put out, $13.75 is where their holding.

We could see that change.

Great reporting.

Dell shares are near session lows even as this news breaks.

We are looking at stocks near session lows on the s&p and the dow jones.

We come back, we will do for the cbs and time warner cable fight.

The real loser could be the viewer.

Next up.

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

I am sara eisen.

A busy year for facebook.

The company still lagging behind the 2012 ipo price.

The question is, what does facebook need to prove and earnings today?

Senior west coast correspondent, john ehrlichman, has a preview.

Mind blowing things about this book, how many people use it.

At the end of march, more than 1.1 billion people actively using the site each month.

Wedbush securities estimates that may have climbed by 50,000 users in the past month alone.

That may have helped to generate $1.6 billion in the second quarter.

Compare that to google with sales over the same stretch north of 11 billion.

This might be 37% through last year.

The stronger growth through google in stronger growth in its own business 12 months ago.

Most of the revenue comes from advertising.

Facebook has been actively moving -- moving customers.

38 percent of the second quarter advertisement sales were advocated 2 stones and tap -- allocated to funds in tablets.

Keep an eye on instagram.

When it bought the photo-sharing service, 22 million people actively using it each month.

The number has soared to more than 100 million by this spring.

You mentioned that 38 percent.

38 percent of the advertisement sales could come from mobile products and tablets.

That is what everyone is focused on.

Very controlled by facebook.

It really is.

People have been excited because it went from 14% to 23% to 30% and could climb again this quarter.

Even though facebook talk a lot about this number, they have a lot of work -- of control over what the number is as they shift advertiser money.

Not that there is really a problem with that.

It is good for their business.

They want more options taken place.

That boosts the price is for advertisements.

When they talk about it today, remember that they have a lot of control over that number.

For those who bought the shares at the ipo price, $30 and still holding, what is going on there?

Pretty amazing.

You think about the stock would need to rally something like 45% to get back to the level of $38 per share.

That is why a lot of people continue to be sour.

This has not been a spot growth story, a growth story from a business perspective.

The one thing we did not talk about even though the revenue is climbing, keep an eye on costs, because those are skyrocketing from table to the infrastructure they need to continue building the business.

The higher those those, that can affect profit margin.

We will keep an eye on you throughout the coverage of facebook earnings after the bell.

John ehrlichman.

Of course, to an end to bloomberg west here on bloomberg television at 1:00 and 6:00 eastern.

Reporting after the market close today.

Back here in new york, in a battle over retransmission fees.

Both firms negotiating the deadline less than 24 hours from now.

They have to agree on a monthly per subscriber fee for cbs or time warner says it will slap at the hyatt -- highest-rated broadcast in big markets.

David bank is the leading media analyst and joins us this morning for more.

Cbs has never actually pulled its signal in these retransmission negotiations.

Is this time different?

I think it really is.

I think we're entering into an era where these are being revalued.

If you look at the ratings that cbs delivers, investments in programming, 5-10 times more than the average kind of comparable cable network they are currently getting the same rate at.

Spending 5-10 more times.

5-10 more times viewers in the same payment.

I think they have finally had enough and willing to pull the signal.

Who is right?

I think cbs has a great case.

The reality is because of audience level in the program investment, they make a pretty good case.

Typically it is the content that generally wins.

We basically have not seen a single retransmission consent or cable battle with the content has not won.

Talk about the timing.

The nfl season kicks off in september.

Does that give cbs the hand -- upper hand automatically?

If i were cbs, i would prefer this before the before the big kick off.

People do not want a lot of television over the summer.

The argument will be will subscribers miss the content over the summer?

I think it will come up a far less than if it were the new season and the ball.

U.s. open tennis is probably the next big thing to happen.

Take nothing compared to all -- but thing compared to football.

At the end of the day, viewers are getting increased ability to watch tv shows on different platforms come a different devices.

I think when the utility is not increasing anymore and they are paying more, they will start getting more frustrated.

This release speaks to the business model.

Typically we of san espn and other cable networks collecting these fees, not necessarily over the air broadcasters.

That has completely changed.

It really has.

This goes back to the separation of cbs and viacom.

I think the reality is the economics of the business are such that if you do not get subscriber revenues, you cannot keep delivering the quality of programming in sports in scripted and unscripted premium program they have delivered.

A necessity for the business model.

We have a chart.

They do not necessarily move hand in hand.

Certainly the case with cbs.

When they are negotiating these licensing fees, it does the duration of start getting longer as the cost of programming surges and the landscape changes so quickly?

The networks will approach so much that we know the long-term margins have to be.

The distributors are probably going to want to lock in the longer agreements to get visibility.

I think the price will be half -- will have to be higher.

There is a contest 10-year deal.

I am guessing cbs would have asked for more money.

You push for higher dollars of the duration will be long.

Don't how is ari switcho in this up?

-- aereo switching this up?

Is available in the u.s. market.

Will we see this as a business opportunity, maybe with time warner sponsoring the project?

Right.

It gives cable operators leverage.

It does, but does it really?

Can you turn on your television and setback and watch it?

For the most part, probably not.

I think it will get press and the tension and maybe get traction because of it.

Certainly here in new york, but maybe not in the other cities.

Legally it has been tested for more in new york and seemed to be a more acceptable solution.

Thank you.

David bank, media analyst joining us on the retransmission fee battle between cbs and time warner cable.

Moving on to this that predicted the other headlines.

We start with shares of at&t falling after the largest u.s. phone company reported earnings that missed analysts' estimates.

They added more subscribers than analysts had forecast it but costs rose used to sign up customers.

Lg electronic no.

2 tv maker by record smartphone sales that drove earnings.

Air conditioning unit was helped by hot weather and south korea.

Nbc sports will pay a 50% premium to take nascar races away from espn and turner.

This is according to sports business daily.

Coming up, we are waiting to hear from carl icahn on dell.

Herbalife, the get the last laugh?

We crunched the numbers to see if he is right.

That is next on "market makers." ? this is "market makers." bill at man publicly disclose his position on herbalife back in september.

Carl icahn took the other side of the trade.

-- bill ackman.

Is reignited the decade-old feud between them.

Julie hyman has been monitoring the billionaires' bet.

The performance year to date has been pretty stellar.

We've seen a decline in the shares.

In part because nothing has emerged from regulators in terms of jumping on the allegations.

There have been several reports that the federal trade commission is looking into it but nothing concrete has emerged.

He revealed he was short 20 million shares, about a billion dollar bet is what he said in december of last year.

Said he was amassing the position in the prior eight months or so beforehand.

During that time the shares average 48.58 per share.

He has not revealed his exact short price, but that was the average at that point in time.

Carl icahn jumped in.

He came in in the winter, earlier this year.

He took opposite side.

It bought 18 -- bought about 17 shares.

There were options.

We have seen their shares the relatively volatile.

More recently they have taken off more substantially.

Look at the tally between them, the short position was up as much as $450 million at one point as the shares fell.

The value goes up as the shares go down.

Now it is traded at an estimated loss.

We do not know the exact level for which he shared -- shorted.

Icon is up $376 million on the long position.

-- icahn up $376 million on the long position.

He said recently that he likes the guy, like anyone who makes some this much money.

That is where the tally is right now.

Ackman has said in the past he has not covered the short.

He did also denied requests for comment on the present position of the shares and short position.

Carl icahn doing better than good when it comes to returns.

Thank you for keeping score on the billionaire bought gulf.

Joining us, someone who has watched the battery of -- battle royale very carefully.

You have been falling both of these men's careers for a while.

What is the difference between them?

They are very different.

That is something they would both appreciate me saying.

Carl is an unbelievable investor.

He goes with his gut a lot.

Unbelievable instinct.

Known for deep research.

Doing his homework.

Being able to analyze and divest huge amounts of research.

He has been.

For many of the years he was out of the money until regulators acted.

This is all about regulators acting and if that will happen or not.

I will note that bill has been suspiciously quiet during this time.

That leads me to believe he is happy with what is going on with regulators and the latino leadership has been pushing regulators to act.

He has been a little bit more noisy after this last bet.

To come it is not the next big short.

It is long.

He does have a leg to stand on.

Jcpenney, you are right, is not working out.

Howard is up 34%. canadian pacific up 18 per -- 20%. his track record speaks for itself.

He still has a very good track record.

Just look at fedex, which has never been named.

It has just been speculated it is one he is looking at.

The cost of hedging against the kinds falling to a six-year low.

It looks like a potential fit for bill in the letter he sent out raising money.

And i will tell you this bill, it is not the stocky is looking at, there are active is looking at it.

One more question before we let you go.

You had been expecting $14 per share for michael dell to take a public.

The board has identified that as a minimum for which they would accept.

Tell us what you think will happen next.

The special committee is likely to come back with $14, and they did.

I think that is the counter offer.

I think next they will change the date.

It will have a sometime in august.

I think it is going to get done they will have to change the requirements to the unaffiliated shareholder vote.

I think you will hear about it from him.

You are changing the vote in the middle of the game.

It will be very interesting from here on out.

Certainly sounds like the committee is open to changing the rules.

I think they are.

We will see.

All this will be a very interesting month.

Can square specializing in active as investors coming up, the essence of cool.

No longer reserved for preppies and southern gentleman.

The bow tie has made a comeback.

Not just here at bloomberg.

We spend every morning with tom keene and his crazy bow tie.

A bit surprising to learn that he has been at the forefront of a hip, a new trend.

Tracking the resurgence of the bow tie into days off the charts.

I cannot believe it.

They represent 7 percent of the u.s. nec where market some $850 million, up from 4% vs.

Last year.

-- u.s. necktie market.

The interest is there.

We looked at where it is in search activity.

Searches for both ties peaked in december of 2012. -- bow ties.

Maybe because some celebrities have a. justin bieber, ashton kutcher.

In addition to 731 lexington ave.

In addition to tom keene.

South carolina leads the way.

Other southeastern states like alabama, louisiana, and north carolina.

In the southeast they account for almost double the national share.

We have also highlighted there is no interest in both size and the dakotas, why a month -- the dakotas or wyoming.

Who knew, tom keene cutting edge with his bow tie?

I do not think of trendy when i think of him.

It is coming up on 56 past the hour, which means it is time for bloomberg to take you on the markets.

Starting with the big broader indices.

Stocks falling just a bit, little changed with the s&p 500 down to less than 2 points at this hour.

The nasdaq leaving.

A lot of earnings to go through.

That is really what is driving the markets.

Apple shares are higher.

They are higher.

Broadcom falling more than 12%. the maker of cable modems down after forecast revenue that trailed analysts' estimates.

The company has been facing challenges because smartphone sales are slowing down.

Moody's also out with earnings as well.

The company has one of the biggest movers on the s&p 500. net income gained 31% because higher bond issuance raised demand for credit reviews and grades.

Currencies are very interesting today, moving a lot.

Especially when you look at the u.s. dollar versus the japanese yen.

Weaker yen, cross the 100 level.

A weaker yen as it relates to the euro as well.

Feel-good effect in currency with the weaker yen that tends to jive with rising stocks and commodities.

There is your look at bloomberg on the markets.

We will be right back in just two minutes.

When we come back, the industrial city that did not end up like detroit.

What can the rest of nation learn from pittsburg?

Michael dell raising the bid for the company he founded, but it still may not be enough.

We will speak to a top shareholder about which way he will vote next.

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

Showdown in a fabulous trial -- a former goldman sachs employee takes stand to tell the story.

Inside mcdonald's -- we will hear from the ceo pushing new menu items to put the luster back on the golden arches.

What happens when key patents expire for big drugs?

You will hear from the eli lilly ceo.

Welcome back to "market makers ." we have to keep on top of the dell story after they say they are looking for $14 a share.

A new twist in the dell drama.

I'm also looking forward to speaking to the mayor of pittsburgh to see if there are any lessons detroit can take from pittsburgh and its renaissance.

Let's get you to the newsfeed , the biggest business stories from around the globe.

We start with pepsico posting second-quarter profits that beat analyst axminster.

-- analyst estimates.

One investor has opposed pepsico split up its food and beverage units and merge with my believes area the second-biggest automaker in the u.s. reporting earnings that analyst estimates and raised its forecast.

North american sales for ford were driven by the pickup truck.

In china, sales of the ford focus rose almost 70% in the first half of the year.

Pass on the frappuccino and go for the yogurt.

Starbucks will start selling greek yogurt next year.

That means two of the ceos goals of offering healthier products and moving into the grocery business.

You can still get yogurt at starbucks.

But not branded under the starbucks grande.

We are also watching the trial of a former goldman sachs employee set to testify today.

The fec has charged him -- the sec has charged him asking that cost clients of billion dollars.

What can we expect to hear today?

-- legal observers say the entire case could turn on this a former goldman trader is expected to argue he is a scapegoat in bond deal gone bad.

He arrived early this morning something ready to tell his story.

I'm going to testify.

The defense is expected to present a strategy that were trays him as a cog in the wheel of a much larger machine.

The sec claims he misled investors in a deal called abacus.

The sec made strong points yesterday with its star witness.

She testified that goldman did nothing to correct her misperceptions that billionaire john paulson was an investor in abacus when in fact he was actually betting it would fail.

The defense hammered away at schwartz's credibility, suggesting they were well aware that many hedge funds were betting against the mortgage market.

Schwartz answered she did not recall many of the documents.

The jury appearing somewhat confused and struggling to deal with these inside baseball terminologies.

Do we know for sure whether or not he has to testify.

Can he plea the fifth?

This is different from a criminal proceeding or you can plead the fifth.

In a civil file -- in a civil trial, you you are expected to testify.

We do know that he did testify before in front of the senate.

Su keenan, thank you very much.

Downtown at the courthouse where fabrice tourre is expected to testify.

Prosecutors's plan to file charges against steve:'s hedge fund according to person similar with the matter.

Charges could come as early as this week and could put sa see cap a lot of is ms.. there are no plans to file committal middle charges against: himself very -- himself.

The sec found he failed to adequately supervise employees.

Also want to to ban him from the financial industry.

On the heels of all of this news, we are going to bring in a partner at bradley sander deuce bent time as the chief of market intelligence working on cases like this.

Good morning to you.

What is a fabulous fab, as he famously called himself, what's the story he needs to tell?

He needs to tell the jury if he was acting under the standard, ordinary care of someone like him in the industry.

That his sole responsibility was to produce investment opportunities for sophisticated institutions.

But that in no way was he supposed to train him on what he was supposed to invest in or make sure investments were suitable.

Regardless of what his own personal take may have been on the state of the financial industry and housing market in early 2007, that was irrelevant to him putting together this deal.

Goldman sachs is still paying for his defense.

What kind of conflicts is that create?

It should create no conflicts.

He isn't titled to a lawyer and if goldman, a third party wants to pay for it, that's up to them.

A lot of people on the defense bar say this was a big step by goldman to support him in this context.

He will have -- he has had fantastic councils throughout the trial.

I'm curious to hear what he says about his e-mails, the tone he took were he for trade himself as flirtatious and jokey and sounded a bit arrogant.

Is this part of the case?

It is.

Those e-mails will reflect his state of mind, his intent, and i think the sec trial counsel will use those to really program and say you knew that this was an investment that was going to burst.

Why did you take more steps to make sure the institutions we are investing in new of the risks?

He needs to say these were taken way out of context and the most inflammatory e-mail was between me and my girlfriend.

This was me boasting and being flirtatious.

During the day , i work for an investment banking firm.

During the night, i'm the fabulous fab, i put together huge deals on wall street.

But that was all toasting and him playing and flirting with his girlfriend.

In no way should that be part of this case.

We will see if the jury buys that.

In the meantime, i want to get your thoughts on the case against stephen: and sec -- and sa see capital.

-- stephen cohen and sa see capital.

Is it to put him in jail or to get him to admit to wrongdoing?

Is it to put sa see out of is this?

That's a great question.

This is the six or seven case that has been filed against either a portfolio manager or the entity.

What marginal benefits this case will have is yet to be seen, but if the entity is indicted, it will make it impossible for any outside sources to invest with him.

It will do some reputational damage to him, but he would be able to manage family money.

That's a huge chunk of sa see capital funds.

That's what he will be left with.

He will be able to manage the eight lien dollars anyway he wishes, but he will foreclose the opportunity to invest on behalf of anyone else.

Back in march, sa see settled for 616 million dollars some charges leveled by the sec, not admitting or denying anything.

Does that matter here?

It shouldn't matter because if they settled the case without it or denying any culpability , anything that came forth out of that case should be -- should have no part in the criminal case.

How rare is this to charge the company with criminal case question mark we think back to arthur andersen and enron, but are there any other cases?

It is rare and typically when the justice department filed such a case, they will try to negotiate a deferred prosecution agreement or nonprosecution agreement to go forward with the whole environment and try a company for illegal conduct is very rare.

As you solid arthur anderson, it but the company out of business.

If they take the same tack with sa see capital, it will have the same effect.

The government has been looking into insider trading for almost 10 years grade how much longer do we have?

In a criminal case against steve cohen, there's another year to go before the statute runs.

In this case, i understand u.s. attorneys office is considering a conspiracy charge.

That would allow them to bring in older information that would fall outside the statute of limitations.

At least if one of these improper acts occurred in the last five years, they will be able to bring a conspiracy case.

These are completely different cases we have been talking about.

But here are the regulators, whether the they are federal or the securities and exchange commissions trying to go after perpetrators or missteps during the financial crisis.

Is this important psychologically that these two cases are coming together and what signal does that send about the governor -- the government efforts to prosecute those at the heart of the financial crisis?

The sec could potentially face a rogue jury like they faced last year in which the jury sent them back a message in addition to finding no liability, they sent a message that said the sec should consider reviewing your current rules and consider adding rules so you can more effectively go after those individuals who actually caused the financial crisis.

In this situation, the sec 's case for his failing to supervise is a step closer to going after the captain of industry.

But in the fab case, the sec is shooting mid or lower level.

So they could face getting the same type of rogue jury.

Thank you so much for your thoughts and giving us your perspective.

Coming up, the rust belt city that lost its core industry and then came up with a new strategy trade we're not talking about detroit, we are talking about the mayor of pittsburgh and what lessons he can teach detroit.

Another twist in the saga of michael dell's i outbid.

He may have to raise is final and best offer once again.

This is "market makers" on bloomberg television and streaming on your tablet or any windows telephone.

? a decade ago, pittsburgh was on the brink of bankruptcy.

Its credit rating was a junk bond status, business, people and tax dollars were flying out of the city.

Fast forward today and the city is on the mend.

Is this is have moved in, keeping the unemployment rate well below the national average and the city's credit status has risen to an a rating.

How did it hurt -- how did pittsburgh go from bust to boom and can detroit follow?

The mayor oversaw much of the city's renaissance during his last seven years in office.

Do you see any similarities between what you have lived through in pittsburgh and detroit right now?

Good morning and tank you for having me.

Absolutely.

When you consider where pittsburgh was when the steel industry declined and collapsed, which was about 30 years ago, very much similar to what detroit is going through now, albeit not as dramatic then as it is now in detroit.

It's bird's unemployment rate 30 years ago was over 17%. fast forward to today, 30 years later, the transformation we have undergone, a city that has reinvented itself how there is a lot to learn from its burke and certainly look forward to doing what we can to help detroit out of this difficult situation.

What's go over some of those best practices and strategies.

You attracted industries like healthcare to the city.

How do you do that?

That's one of the biggest things about pittsburgh's success story.

We were so reliant on manufacturing and steel in the late 70s and early 80s. that's much different today.

We have a very diverse economy.

We still be manufactured goods year, we have a strong financial sector, strong healthcare and universities that were, which employs more people than any.

We have re-created our economy by using the best and brightest of those universities to create startups and spinoffs from the universities.

We are a great energy hub here in southwestern pennsylvania.

That diversity has allowed us to whether this national recession better than most cities and has allowed us to create jobs.

Pittsburgh is a city known as a steel town.

People were surprised to know there are more people working in pittsburgh today, 1.2 million people working in pittsburgh today, even more than when steele was at its ultimate geek.

You are the youngest mayor in pittsburgh's history.

You became mayor when you were 26 years old.

How much of it has to do with leadership and thinking of the box and come up with novel ideas that someone who has been in the establishment cannot?

I think that's important and detroit has an opportunity to do that area a are literally starting at the bottom.

When you hit rock bottom, you are forced to do things differently and think outside the box.

My advice would be looking at their opportunities.

Is there a way to incentivize young startup companies and people who don't have money or capital world looking for land and space and create a new economy and build it from the ground up.

To try to create opportunities for young people looking for a place to go that one cheap space or land and really think outside the box.

It's not going to be easy.

Pittsburgh has undergone this transformation for 20 or 30 years.

It takes time, but it is proof that it can be done.

What about pensions?

We have seen pension obligations being a drag on state and local governments.

Do you have a defined contribution plan and is it a concern for you?

A great point.

Our city was even within the last 10 years declared financially distressed by the state of pennsylvania.

We made a lot of changes from the government side and reduced our workforce by about 25%. we instituted a no new debt policy where we did not issue debt for five years.

It took a lot of sacrifice and a lot of folks being upset, but we changed the way city government works.

We have a significantly underfunded pension.

It is a challenge going forward, but we recalculated some of the formulas in terms of the way we do things in the way people contribute.

Unfortunately, we don't have a defined contribution plan yet.

The state does not allow us to provide that.

It is one of the things i'm advocating for but the reality is we cannot sustain the current model going forward because our obligations in the out years will be too much for pittsburgh or any city to pay.

It has also been helped by the strength in you diversities like the university of its pirg and carnegie mellon.

The success story that is pittsburgh.

The mayor of pittsburgh, joining us this morning.

Coming up, michael dell is willing to pay more for the company he founded, but it still may not be enough grade the latest on the buyout battle.

? this is "market makers." under hugo chavez , venezuela used to give away oil.

One year, nicaragua sent 19,000 pairs of trousers as a partial payment.

With the new president, those days have ended.

Julie hyman is here with today's latin america report.

You don't know about the great oil for trousers?

There are signs that the new venezuelan president is scaling back the eight billion dollars in annual oil subsidies to the caribbean.

Guatemala says is dropping out of the oil alliance because venezuela doubled interest rate on loans used to pay for the oil.

And it's not that caribbean countries are quick with payments, venezuela that has $27 billion of unpaid oil bills in march.

It may be an end to hugo chavez 's oil socialism.

The country's budget deficit reached record highs and it's tough for consumers to find items like me and toilet paper.

Less oil that gets sent to the caribbean, the morgue that can be sold for actual dollars.

I could help slumping venezuelan bonds.

Their yield more than -- is more than double that of other developed nations.

We are just about 26 past the hour and it's time for bloomberg to take you on the markets.

European markets today ending , let's take you to the action -- the footsie rather -- ready to close up.

The cac, the best performer of the bunch, up 1.1%. germany unexpectedly saw an expansion in manufacturing in july while their services industry accelerated.

Certainly some good news for europe.

Going in the opposite direction, u.s. stocks under a little pressure.

Coming up, another roadblock for michael dell as he tries to take his company private.

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

Welcome back to open market makers." i'm scarlet fu.

The dell saga continues -- michael dell and summerlike all -- upping their offer by $.10 more than their previous bid.

A special committee is said to be seeking at least $14 a share for the buyout.

Joining us for an exclusive interview is the portfolio manager at yakima and asset management, a $25 billion asset firm and they own nearly 15 million shares of dell.

You say you support carl icahn in his bid for dell.

Does the increased did from michael dell and silverlake change what you think?

No, we are long-term shareholders and we have believed for quite some time there is much more value here than the price you are talking about.

What are you expecting carl icahn and southeastern to come out and say?

Fax i think everybody will say something similar, which is it's past time for a vote.

Let's have a vote.

Did michael dell answer over lake -- did michael dell and silverlake reach out to you?

We have not spoken to anybody at dell as of this time to read even at 14 come you're not satisfied.

Is there a number that would win you over in terms of taking this company private?

We always say it's almost all about the price.

There is a price at which we would move, but it's not anywhere near the price they are throwing out of $14. what is it?

We would not disclose that to the public, but there is always a price at which you would be willing to do something.

But we have said for quite some time that we think the company is worth more and we want to continue to be shareholders of the company.

We would like to put the vote to the end and have people focus on customers and business and not just extending a vote.

What part of the company is being undervalued by michael dell and silverlake?

The enterprise portion of the business, the software acquisitions they have done, we think there is significant value.

Valuations, people can shift them all around but the shareholders by the fact you are passing these second opportunities to take a vote on it have a well spoken.

They don't prefer this or postal.

What if michael dell and silverlake at the rules change and that would show support in their favor.

What would you do then?

Rex we -- we are subject to what happens in the voting process.

I don't see it as a rational outcome, that fiduciary, which is tasked to represent shareholders like us, would see that a voting change at this point in the process for a minimal change in price would be representing shareholders fairly.

I think you have seen from shareholders consistently that it's very, very difficult for shareholders to turn down a buyout proposal.

There are very few they get turned down and this one has not passed -- they extended the vote the first time and you are seeing a second extension of the vote.

Clearly the votes aren't there and shareholders should be allowed to keep their positions to see if their valuation methodology proves to be right over the long term.

One chart that i found striking is how the shares have performed your to date compared to hewlett-packard.

Dell certainly got a bump up on the initial bid for michael dell, but since then, hewlett- packard has outperformed dell and is up i 83% this year versus a 28% gain in dell.

What is hp doing right that could be a model for dell?

We are shareholders of hp as well.

It's not lost on us remotely that the value in dell we think has been cap by the proposition , the proposal for the acquisition.

We think hp is just doing what it needs to, which is focused on generating a significant free cash flow and a focus on the businesses that have value and get out of the businesses that don't. it has been business 101. meg whitman has done a good job focusing on their business and generating free cash flow.

One of the challenges dell has had more recently is that management is very distracted by this potential transaction.

It could be argued that management is if you look at the share price.

A portfolio manager firmly against michael dell and silverlake's did for the country -- for the company.

Also not happy about the proposed changes.

At $14, he is a no go.

Coming up, it's not bringing in customers like it used to, so mcdonald's is trying a brand- new strategy.

We will go inside the world's biggest fast food chain and hear from the ceo.

? all day today, eddie liu is talking about inside mcdonald's. in the past half-century, they have grown from a drive-in hamburger shop to a global restaurant powerhouse.

This morning, buddy spoke to the ceo, don thompson, and joins us now from the company's headquarters just outside chicago.

A great conversation with mr.

Thomson.

What did he tell you about why mcdonald's is struggling in the u.s. with sales?

He is saying that mcdonald's is struggling partly because the economy is on a little bit of gentle footing.

Let's it that way.

The jobs have come back, housing has come back, but people are not spending as much money as they once were eating out great in the second quarter, mcdonald's reported that there can't sales in the u.s. were up about one percent, but that was below what wall street analysts forecast.

Mcdonald's has gone to more product innovation.

He talks about the new blueberry pomegranate smoothie and talked about the mcwrap, which i had a chance to make peer -- to make here.

They talked about mcdonald's after midnight.

There have been various dings, but what analysts have said in particular is the economy has to grow in order for sales to grow.

I did ask him about the issues in washington.

One of those issues is the payroll income tax and how much that was going to hit consumers.

We never did a warning.

We basically said we did not know how it was going to play out.

What we see is the informal eating out at a quarry is contracting.

It still to be determined how much they will be hit but it is something he is focused on, and and trying to grow the sales in the u.s.. what i love is how big and giant a footprint it has around the world trade you talk about growth -- did he talk about growth overseas?

Two thirds of the sales and revenue come from overseas.

They had a huge mobile footprint.

One of the markets they are trying to move further ahead in is china.

Local comp sales in china fell six percent.

Here is what he said about the growing competition in that market.

China is going to be a positive market for us great we are not gauging our success in china based on someone else.

We had to base our decision based on how many customers go to mcdonald's. europe is still a market that is struggling for them in places like spain, france thomas so they are continuing to expand cautiously.

Mcdonald's wraps and smoothies?

That's going to take a little adjusting to.

Good to see you.

Make sure you keep watching bloomberg television all day long as we continue our exclusive inside mcdonald's coverage.

I just want a large french fries right now.

And of mcflurry.

Eli lilly raised its earnings this morning.

The stock is rising in today's trading.

Olivia sterns is covering the drugmaker today.

You had a chance to speak with the ceo.

What did he tell you about the company's outlook for the future?

I went to eli lilly headquarters in indianapolis yesterday.

What a nice way to return back to work.

As you know, he had gone into health surgery -- gone into heart surgery in may.

The bottom line here is a 31% increase in net income.

So he joked that the company seems to do well without him area i asked how he managed to deliver these results, beating on the bottom and top lines.

A six percent -- a 6% top line was driven by a number of products that offset some of the residual negative effects of the loss of our patent which occurred in late 2011. our sales performance was led by cymbalta and cialis.

You heard him mention their lock buster drug and that is key to the story of what is going on.

They are set to lose the patent at the end of the year, so that means 2014 will be a trough year for eli lilly.

That is why what's in eli lilly's pipeline matters more than ever.

When we went out there to see what was going on, i had to ask about what's going on in china.

We have heard about the probe into gsa's operations in china and iran -- and i asked if he was shocked by what he heard or is it part of the unfortunate practices in china?

Rex we are watching this very carefully.

We have a substantial presence in china and china is second only to the u.s. in terms of the number of lilly employees were we are present around the world.

Not only sales and marketing, we have a manufacturing organization and we opened a research laboratory.

At this point, what we know is based on what we have read in the press and media reports.

We have not been contacted by the same organization that reportedly has contacted or has been working with the gsk.

He didn't really answer the question, but he says the one global standard for eli lilly anywhere in the world, it is the same here as it is in china.

Everybody is watching what is happening with glaxosmithkline in china.

Coming up congress is talking about reforming a big player in the housing industry and it won't give first-time buyers anything to cheer about.

That's next on "market makers" on bloomberg television.

? carl icahn has just tweeted his response to michael dell and silverlake upping their offer by $.10. here it is -- it rhymes.

All would be swell with dell if michael dell -- if michael and the board didn't fare well.

Mike -- is pretty pithy and clever and sums out -- sums up his addition from the beginning.

Time for michael dell to bid farewell.

We will see how that shakes out and we will keep you posted on the latest owings on.

We're also going to capitol hill down.

We we are going to talk about this new proposal.

The -- cap while planning to reform the fha great it would require the mortgage insurer to hold more cash and raise premiums.

A move that would increase our wedding costs for first-time homebuyers.

We are wondering how this government decision and proposal would impact first-time homebuyers.

It would be a significant impact on premiums.

Premiums translate into borrowing costs.

The national association of realtors have told us that about 30% of homebuyers, they would like to see the number closer to 40%. 80% of fha loans go to new homebuyers, first-time homebuyers.

Any increase in premiums are going to directly affect this group of buyers.

What kind of impact would that have him housing market and and the recovery we have seen so far?

It would have a significant impact.

One of my colleagues is fond of saying demography is destiny.

That is true in the housing market.

Our viability depends on first- time homebuyers getting mortgage credit and traditionally, fha has filled that role.

Any change in the premium fx the pilot -- affects the viability of the housing market in the long term.

Where is the pushback coming from?

The idea of holding onto cash is the same thing.

This is a bipartisan plan in the senate.

The house goes a steps further -- the house goes a step further in reining in the fha.

Most loans made by the fha are much less risky than they were coming out of the financial crisis, yet new homebuyers are being forced to pay for the sins of the past.

There is a question of fairness here great the fha has raised premiums five times since 2009. it's not those who have the mortgages that are paying paying higher premiums, it's first-time buyers who have yet to enter into the housing market that

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

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