Detroit Needs an `Angel': Money Moves (07/19)

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July 19 (Bloomberg) -- "Money Moves" brings insight to investors looking for alternatives Deirdre Bolton talks to the professionals in hedge funds, private equity, venture capital, angel investing and real estate. Find out where they see opportunities. (Source: Bloomberg)

At some point, that will shift and it will not be buying u.s. crude any more, it will be buying heavy canadian crude.

By the end of the year.

Does all this mean?

It means we will see the wti prices fall more.

Barclays thinks the difference will remain wide, about $11 per barrel.

Will gasoline come down?

That's a complicated answer because refiners have to pay more for their ethanol mandate.

Therefore, it will stay high.

We will have to back down to talk more about that.

That is it for "on the market." ? what what money moves, where we focus alternative assets.

A we are going to show you what investors and entrepreneurs are doing, as well as what is going on in hedge funds, private equity, real estate, and more.

Today, filing for bankruptcy, we will hear how angel investors may be able to help the city reinvest in itself or unit and tackling emerging threats to new york city's tech and startup scene.

We are going to cover that with an entrepreneur.

And yahoo's is buying a startup from beijing.

All of that ahead right here on "money moves." we are going to start with detroit, it is the largest american city to seek bankruptcy protection in court.

Those representing tens of thousands of city employees and refineries say that -- with more on what that means to detroit and the country we are going to bring in our economics editor michael mckee.

What are the chances from this point on?

A bankruptcy judge will be appointed to hear the case and then detroit must prove that it is consulted the unions representing the pension ears -- is insolvent.

The unions are presenting the engineers, they say the city did not work hard enough to come up with an agreement with them.

They try to get an injunction to stop the bankruptcy filing.

The issues this, the city owes 11.8 billion dollars to unsecured creditors.

Most of that would go to the retirees.

It has been underfunding its pension plan for years.

The question is can they cut back on the benefits that they are going to get?

A lot of people say this is an issue that could go to the supreme court.

The other issue is the bondholders bought general obligation bonds.

Do they get paid?

Are they treated as unsecured creditors.

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

In an unprecedented size for bankruptcy.

Other cities have had close calls.

You have had new york, cleveland in the 70s, philadelphia in the 90s. what is different about the situation with detroit?

The city argues that it cannot do anything else.

It owes so much money that it has a budget deficit of $375 million.

They predict it will be 1.3 billion by 2017. it could not possibly pay back everything that it owes to its creditors really do not want to reach an agreement.

The city offered $.17 on the dollar and got a flat know from almost everyone.

Some creditors are going to take them to court as well as the pensioners and say you could have negotiated harder, we could have worked out a payment plan.

Detroit has a real problem.

It has no industry and no jobs left, a shrinking tax base.

They do not see in other way out.

Think you as always.

I go mckee with the implications and some of the potential next steps for the city of detroit.

We are going to stay with detroit looking at the economy from a different angle.

Detroit is clearly not silicon valley or new york or boston.

Our next guest us see opportunity there.

He has spent eight years building companies, he is on the white house's list of top 100 entrepreneurs under 30. he is an angel investor.

Glad to have you with us.

I am going to ask you to put on your angel had.

I know you have had companies funded in places such as cleveland, texas, key west.

Is this prove that money always finds good ideas no matter where they are located?

Thank you for having me.

I think we are certain to see that happening.

The funding landscape has changed with angel investing and crowd funding.

We are seeing investments in places like grapevine, texas, cleveland, ohio.

All across the country investors are able to find great businesses anywhere.

Is their tech hope for a city such as detroit?

Are there any angel investors that would think about putting money into a business in that city?


Angel investors are interested in great deals anywhere.

They are great companies with great startups in detroit and a lot of great businesses that call detroit home.

We believe in the startup ecosystem there.

We believe it is going to be very transformative in the neck 10 years.

Based on what?

Is it the fact in the pass there has been -- in the past there has been a lot of engineering know-how?

Where do you see the pockets of strength?

Certainly it has a long history of invention and creativity.

However you are seeing a lot of great start up activity in detroit with dan gilbert, for example, the founder of quicken loans . a lot of great startups are coming out of detroit.

They have a low cost of living.

Their operations are inexpensive.

They are creating jobs . startups in the past 10 years have been responsible for 90% of the new jobs in america.

Jobs attract capital, they pump money into an economy.

We believe that focuses going to be critical to detroit having a successful recovery.

That is your point of view as an angel investor.

As an entrepreneur, can you find tech talent in the midwest?

The cliche is basically everyone that is needed to get your company on the ground -- off the ground is either on the east or west coast.

Talent is always an issue in any city.

In san francisco you have trouble finding talent because there is a sort it there as well.

-- there is a shortage there as well.

Education is key.

Anyplace there is a university.

Where there are jobs that will attract talent so you can create jobs, you will be able to attract that talent and bring in smart and savvy programmers.

We have seen that in austin, d.c., and even las vegas.

Your most recent venture , it is a platform for streaming as a funding process.

What is the most exciting development you are seeing right now?

Over the past four months we have seen $15 million in funding commitments.

Funding commitments for great companies, not just in the tech sector.

All across the nation in cities that you would otherwise not be able to find capital, we had a tech operator brynner in cleveland ohio.

He was able to raise over $1 million on our platform because he was able to tap into investors outside of cleveland ohio.

We thank you very much for the time.

Thank you for having me.

Eric coral joining us there.

The fcc -- the sec is suing steve a: for ailing to supervise to employees and prevent them from alleged insider trading.

More on these headlines.

This is just crossing.

This is big news.

It is the first former -- formal target of the sec.

It has administrative order -- the sec is suing cohan a for to supervise traders, they'll years to supervise managers of the funds, the portfolio managers.

With talk to many legal observers that have pointed out that this is an option that the government has had that if there was a legal trading taking place that there could be low -- the liability for that.

That appears to be the manner the sec is approaching this.

It is an administrative order, not a criminal charge.

I am sure more details will come out on this.

It is a significant change and a significant move for the government against stephen: -- against stephen cohen.

We talked about a superseding indictment that might be coming forward regarding matthew mark,. we have yet to hear what the government is doing in that regard.

We will bring you all of these headlines from myself that you need to know about.

We are going to move back to our focus on big tech.

Yahoo is on a serious buying spree.

The recent purchase is a beijing startup.

It brings acquisitions to almost $.20 marissa mayer took the helm.

-- almost $.20 marissa mayer took the helm.

--a almost 20 since marissa mayer took the helm.

What does this mean to yahoo's larger strategy?

It is a strategic move she is making.

The focus is getting the right employees that can furtyher her strategy.

She spoke about social and mobile, these are areas that they need expertise.

After she has joined, we have heard anecdotally that talent wants to move to yahoo.

This is one of the reason she can acquire that.

This is just part of the trend.

Essentially you just answered my next question.

Is this just more about getting the right kind of talent onboard?

As far as yahoo and how it compares to other acquirers, yahoo is paying top dollar.

It has telegraphed the market that it is willing to spend.

This compares to amazon, which is also an acquirer.

They are looking at the market with a budgetary eye.

How do you think this affects yahoo's future?

I think she is doing what most other tech companies are doing created -- are doing.

What she paid for tumblr is not only the expertise and talent but also the media.

I would put that in a different bucket for most of the other acquisitions that she has made.

She is making these acquisitions.

She is building up her data.

The difference between iaci and other companies, iacia wants to build a business in energy.

Those thing should have a much faster payback vs.

What yahoo is looking for.

We thank you for the time.

We have ab reak t -- a break to take.

When we come back, china, the real estate sector going through a transition.

And a little bit later one of our guests will help us through why diamonds are a girls best friend.

He is bringing elizabeth taylor's necklace and matching set of hearings.

We are going to have more on the markets.

We are back in just two minutes with more.

Welcome back.

We are streaming all day long.

Central bankers and finance ministers from the g 20 are meeting in moscow.

One development, china is scrapping the floor on lending rates offered by the nation's financial institutions with the exception of mortgage rates.

China's government wants to curb speculative homebuying and investment, this is according to a statement from the pboc.

For a take on his investments we bring in honking's -- we bring in -- what these headlines from the g 20, what does this mean for you?

I think what it means is within the context of more general emerging markets.

The bricks have been a sector trade for many people.

We are getting to the point with the rising interest rate environment that people are going to have to pay more attention to a particular credit.

The property developers that have been a barometer have been going up and down with the pacing high yield market.

With this move i think people are going to have to start picking between the proper developer -- it is no longer a sector play we you can come in and be a generalist and come out ok.

I think that is right.

China is a huge country.

They have a lot of different real estate markets, different sex mints -- different segments.

In the same way you cannot buy u.s. property developers do cannot necessarily do it with the chinese.

Each region and city is different and a lot of the lending, whether it is under the table or official, is all done very locally.

Many westerners complain about it.

Without going into much detail you are absolutely right.

You have to make your investment decision going forward in the particular credit.

Looking at ems data, i guess at this point we cannot talk about china as a number urging market.

It is the world's second-biggest economy.

What are you seeing versus high yield and u.s. debt?

Are the positions you are taking on macro pieces?

Clocks we have seen a broad- based selloff that we had a few weeks ago.

We have seen it bounce back in equities and in high yield.

In terms of spread to -- on a spread base , it is still a little wide.

There is an interesting thing, does it touch upon the fact that any investors are not that sophisticated?

I think more broadly it shows that we are entering a new phase where people are going to have to be -- they are going to have to understand particular credits they get into.

I think the catch is that have gotten the inflows going to see outflows.

The outflow data is continuing.

For our opportunities that we are going to start seeing more of the best dr.

-- the best opportunity to come to the surface.

We are not pulling the trigger too quickly yet.

I think we're going to see some credit differentiation in countries like mexico.

We have to come back and talk a little bit more about brazil and other day.

It is hard not to talk about this without talking about brazil and the world cup and olympics.

Thank you very much.

We have a quick break to take.

When we come back one occupant or is telling us about his decision to move his company from to in new york city.

He says that while the local cities, the big apple's, tecra as in impressive more incubators are necessary.

More on his views on what it is going to take the keep the city vibrant.

Thus we are going to bring you more on the math behind online deal provider.

The company went public today, valued at more than $1 million.

We are going to tell you who made the most money from the offering.

More on the breaking news of a hedge fund as a seed capital.

Security and exchange commissions is suing steve colin were say -- steve cohen for preventing -- for failing to prevent insider trading on his watch.

This is huge news.

It is indeed.

Those two employees that he is being accused of failing to supervise both face criminal trials -- of failing to supervise faces a criminal trial.

A comment coming from s.e.c. capital, this administrative order has no merit.

They say he acted appropriately at all times and will fight this charge vigorously.

I am just getting information as it is just coming in, i should point out that cohan has been behind the scenes.

These administrative charges that came out today are indeed the product of what appears to be a lengthy investigation by the sdc.

The division of enforcement is alleging that stephen cohen received highly suspicious information.

We seek to bar him from oversea investment funds.

-- they seek to bar him from overseas investment funds.

The s ec feels that he ignored the red flags and allowed these to portfolio managers to execute the trade.

The s ec says that instead of crude -- instead of -- the sec says that instead of scrutinizing this conduct he warned them.

And he rewarded mark with a $9 million bonus.

This is the latest say it.

That's the latest statement.

Pedis su keenan with the latest on the sec's case against steve cohan, the founder of the hedge fund as a seed capital.

-- the hedge fund sac capito al.

It is time for on the markets, julie hyman has all the details.

As we have seen all day, technology is lagging in a big way.

The s&p 500 has now turned green.

We see the healthcare industrials and energy, some of the groups that have been outperforming today, they have been supporting the s&p 500. treasuries continue to see the yields push lower as 10-year has been setting up for their second highly weekly advance.

We will be back.

This is "money moves," where we focus on alternative investments.

We want to bring you our top headlines this hour.

Adam johnson has this from the newsroom.

We begin with a major development in the middle east.

Israeli and palestinian officials agreed to resume peace talks.

That is according to secretary of state john kerry.

The two groups have agreed to meet in washington in a week.

Negotiations broke up in september 2010. and the trial of rejig is getting more interesting.

The former goldman sachs trader says they will call john paulson to the stand.

He is accused of misleading investors and a mortgage-related investments that paulson profited from.

In shares are soaring following its ipo for retailmenot.

It is backed by jpmorgan, austin ventures, and google.

Coming up on "street smart," it is weekend movie mania.

We are going to look at who could win the box office battle of the summer.

Turbo is taking on contendors like "the conjuring." we will be joined by the president of hollywood box

We look forward to seeing you then.

Thank you very much.

Adam johnson joining us.

We want to bring you more on this breaking news on the hedge fund.

Sac capital.

The security exchange commission suing manager steve cohen form ailing to supervise two employees and prevent insider trading under his watch.

Su keenan is in the newsroom.

I know that sac capital issued a statement.

They are saying that the proceeding that is being presented by the sec has no merit.

Steve cohen acted appropriately at all times and they will i discharge vigorously.

The charges are serious and our formal.

They are what is called an administrative order.

These are civil, not criminal charges.

They do allege that stephen cohen received highly suspicious information that should have caused any reasonable hedge fund manager to investigate.

They say the basis of the trade made by to portfolio managers he should have supervised were suspicious and that he ignored red flags.

The sec is seeking to stop them from overseeing investor funds in addition to the more than $600 million.

This is a significant move.

It does not give us the answer to what the sec is doing in terms of a criminal move.

We are told mar toma is scheduled for a trial area this is civil and it does appear to relate to a 2008 trade or series of trades.

The sec says it was clearly insider information.

A bigger picture, this could be part of the long game.

If steve colin is deciding to be a hedge fund manager or close up and become a family office -- as we have seen a lot of hedge fund managers , this may push them in that direction.

It does complicate things for him.

It will take him of the ability to manage and trade the fund.

Thank you very much, su keenan on the latest with the sdc's case.

It is civil against stephen cohen from the hedge fund sac capital.

We are going to bring in our next guest and focus on tech in new york city.

He says if you measure by job demand, new york city's tech scene is stronger than silicon valley.

He is the founder and ceo and uses location tracking and automatic resumes to connect job seekers with open positions.

Very glad to have you with us.

I know you moved your company from london to york a few years ago.

-- to new york a few years ago.

We did a big reach out.

Mayor bloomberg's policies , the infrastructure and ecosystem, we found it really exciting.

That coupled with -- when we were kids we had an operation in london.

It was perfectly centered between the two.

It had nothing to do with -- we still think of the cliche as being that california is stronger for both but maybe we are wrong.

I think what has happened over the last few years is in 2007 venture funding has increased by 50% in new york.

A lot of other companies have been on the decline.

One of the big things for us is we want to try to help businesses.

We want to be in the center of the business world.

Five or six years ago new york was not one of the top places for tech.

It has become that because of a lot of investments and a lot of creative projects that have happened here in new york has enabled it.

That needs to continue.

That needs to be a constant way of thinking in terms of being able to develop creative technology companies.

There are a lot of people concerned in the new york tech community that the change of mayor is not going to be helpful or as contributory to the tech environment.

Is this something you think about, first of all?

I think about this all the time.

As i said mayor bloomberg has done a tremendous amount of help to get us where we are.

The internet here in new york -- which is spotty.

It it is unbelievable.

Weise -- we put these tablet kiosks in stores.

You would not believe we are in the capital of the business world in new york.

I am looking to see what the candidates are coming to the table with.

We want to hear the tech agenda.

This week we had -- it is extremely exciting.

There is a piece of in the middle of the week and he was positive about what he is going to say.

He is going to set out his agenda, he knows the tech world very well, and he is very interested to see what the other candidates are going to come to the table with.

It was an off-the-cuff comment but it reinforces this idea of a tech-minded person taking the helm.

Those of the people that know what needs to be done.

They understand the challenges entrepreneurs are facing.

It is way to see you.

Come back, please.

Adam lewis joining us there.

He have a quick break take.

When we come back, more on the sdc's case against steve colin of sac capital -- more on the sdc's case against stephen cohen of sac capital.

We are back in two the few minutes.

We are pleased to welcome a special guest right now.

He turns hard assets and rare colored diamonds in one category.

Our next guest has make the market works up the ball, creating a secondary market.

Price ranges to $35 million.

You have brought some amazing eye candy for this friday.

You have brought the earrings and necklace worn by elizabeth taylor.

So happy to be here.

These are magnificent gems.

Tell me about where these came from.

Are these a gift?

Collects certain diamonds have great track records.

Elizabeth taylor's is extremely rare and we have a 95 caret necklace made of diamond and her 22 carat matching earrings.

If you look at how elizabeth taylor's piece has been selling at auction, the estimated prices are one thing but they can go to six times what the estimated price is our.

-- estimated prices are.

Can you make the argument that these are a good investment?

Most people buy them just because they love them or they are a huge fan of elizabeth taylor.

It sounds like from what you're saying they are investment pieces.

Look at a flawless white, which is a perfect diamond.

These are triple excellence in every way.

These diamonds increased by 15% a year.

Clarcor donated in the stock market by 2008 when the stock stock market dropped 50 %. did you see a direct relationship?

We have been talking a lot about alternative assets.

Even hard assets such as metal and jewelry, there have been a lot of different areas that are completely uncorrelated.


The diamonds go up tremendously.

They never fall because there are so few few of them.

You can get a flawless perfect diamond for under 100,000. if you put your money in the bank at one percent or two percent there is no way it would compare to a diamond will do.

On top of that this is a five carat flawless, it will increase by 20% per year.

I have diamonds all the way up to 100 carats that are perfect investment diamonds.

These pink diamonds from the argyle mind.

Argyle mine.

J lo made the pink diamond more mainstream.

This is a four carat.

It is worth $4 million.

The increased by 20% per year.

The minor that produces it is going to close in six years.

We anticipate that the price of these tanks will increase by five to 10 times with today's -- five to 10 times what today's prices are.

This is a yellow diamond, but this is a 14 karat yellow flawless diamond that will increase by 15% to 20% per year.

Because the time it is so large and flawless it has actually doubled in the last four years.

When you get into the five caret and 10 caret flawless diamonds you can invest in yellow flawless is, which is within many people's price range investment level.

A two carat is 45,000 to 50,000. a diamond like this is worth about $600,000 to 600 $50,000. i am asking what your colleagues to help me try on the necklace.

I am shamelessly plugging it in . who are your clients?

Seriously, who are your clients?

Are clients are not necessarily millionaires.

They are everyday men and women that are just hired of the returns they are getting.

You look at the stock market . in combination with other investments, diamonds are an amazing investment, especially derail ones that we are showing because they never decline in value.

On top of that airport.

It i am sold.

It feels very pleasant.


As far as you are saying that it is not just rich clientele, are there categories?

Do you see particular categories of people that seek to out more than others?

By that i mean wall street versus tech versus older money.

We have all that.

My business is really the only diamond investment business there is.

Background was commodities and marketing for many years.

When we look at the the diamond business we knew that it was a great investment.

In 1980 when inflation was very heavy these diamonds went up 500%. there was never a secondary market to resell them.

That was always the problem with the diamond market.

My biggest conjugation to the diamond business is this.

We have created the only real- time live auction that sells our client's diamonds.

It has never happened before.

This is an case i get wade who attached to this.

-- i get way too attached to this.

Thank you for letting us have a little fun.

Harold siegel joining us.

We have a quick break to take.

Expanding your investment vocab with bob's buzzword of the day.

Time for our daily buzz word.

Bob rice is here from tangent capital partners.

We are focused on chapter nine.

When firms go to bankruptcy they go into chapter 11. detroit has a different chapter.

It is specifically for municipalities and there are some similarities.

In both cases you have an automatic stay.

It freezes all the litigation so people cannot sue you anymore.

You have breathing room to work out your debts.

The court gets to enter some orders and at the end, rearrange the capital structure, but there is a big difference in terms of the amount of leverage that the creditors have.

It basically boils down to them having a lot less leverage in a chapter nine.

In theory, there are fewer distress to debt players that are interested.

In theory and practice.

They are just not showing up for this because they do not have the same kind of weapons they had in 11 to force an outcome they really want to see.

For example, you do not have anything about being able to liquidate the assets of the municipality.

You cannot force liquidation.

You cannot put your own blueprint for how the capital structure is going to look after the bankruptcy up to the court.

You can do both of those things in 11. therefore the creditors really drive the vote.

What does this mean as far as municipal plans go?

This is going to be a very interesting question.

What you have in the nine is that the judge has the ability to change basically all of the liabilities and obligations of the newness of howard t here.

-- of the municipality here.

What we are going to see is a tug-of-war.

It is going to be a lot less beneficial for the long because they are facing laborers, not common stockholders.

We are back in a minute.

Lex we want to bring you on the markets.

Our correspondent julie hyman has the details.

Let us take a look at where we stand.

The s&p 500 has turned green.

Not by much.

Really by very slightly.

Just one third of a point.

The s&p 500 eking out a game and the dow industrials is down just 1/10 of a point.

The nasdaq is down the most today.

It has been consistently down three quarters of one percent.

What you have is the grappling between different sectors in today's market.

Technology has been the underperformer because of earnings that have been distant pointing.

It was following -- it was following the most since january.

The flipside of all of that, we have health care and energy.

That is in the balancing act we have seen in the markets today.

For the most part technology is still winning out.

Let us turn to a corollary of healthcare.

Olivia is with me now and you have been looking at this big bull run we have seen in the health care tech stock.

We have seen an incredible run in the biotech stock.

There are some commas and drugs coming out of the pipeline.

We have seen some huge innovations in science.

They are driving blockbuster sales.

That is really behind the stock movement.

Compare the s&p 1500 over the past three years to the biotech sector.

You will see that the biotech sector has returned 160% in the past readers.

It is more than twice the performance of s&p since -- two stocks tend to be volatile.

When they come out with drugs , if it is a positive or negative you to see volatility in the stocks.

You think biotech, you think

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


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