ISM Manufacturing: Market Makers (08/01)

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Aug. 1 (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)

Chicken.

That might slow down that beef demand.

Thank you so much.

We will be back again on the markets in about 30 minutes.

For now, s&p surging past 1700. ? "market makers." this is what erik schatzker and stephanie ruhle.

I am sara eisen and for stephanie ruhle.

We will be speaking with one of the co-ceos.

Co-ceo of whole foods, chairman of the cma and runs one of the biggest health insurers, cigna.

And a certain supermodel, entrepreneur.

Turning her body into a brand, making candles and selling them for $100, almost $100, anyway, here in new york city a bergdorf's. breaking economic news, this is a big beach, perhaps consistent with what we saw second quarter, manufacturing gauge coming in at 55.4 for the month of july.

The economists we surveyed were looking for reading of 52. we are seeing expansion.

Ism has gone from a negative rating of 49 in may suggesting a contraction in the u.s. manufacturing economy to a very healthy relatively speaking 55.4. i'm trying to figure out when the last time we saw are reading this i was, and i'm going back, back, back to april 2011 by the looks of it.

I cannot be certain, but it is an ugly since that time that we have had consistent readings of 55 or above.

We are seeing help the stock market rally, which had already begun.

Somebody that might be smiling on the economic feet, -- economic beat.

Beating the drum on the u.s. recovery.

Are you pleased, this better than expected manufacturing number?

Everyone should be pleased with better than expected numbers.

But it hasn't all been better.

What data are you looking at?

55.4 on ism, 200,000 on jobs.

1.7, better than economists were predicting.

But beneath the surface, it is not all positive.

Gdp was soft, but it does seem to be the outlier.

Ism, this number is consistent with 2.5% gdp growth.

And some say the jobs number is consistent.

There is still this yawning disconnect between gross domestic product.

If you look at the second quarter gdp numbers, for example we saw a widening of the trade gap that took about 80 basis points off gdp, something not likely to be repeated in the third quarter.

I think there are more reasons than not dropped amid some.

Home sales starts, retail sales were a bit soft.

There are some signs this is a bumpy kind of -- ultimately what drives the economic outlook is the income slowing to the private sector there.

If employment is expanding, that means it stands to reason incomes are probably expanding as well.

To me, with the slowing, that means more income will get spent.

How closely does the federal reserve watch the ism number?

It is significant, but i think the most important number for the fed is employment.

That's tomorrow.

Remember, they're looking at the accumulated stock in progress in the labor market.

We are on pace to add julian to 2.5 million jobs.

-- chad 2 million to 2.5 million jobs.

Are we set up for that given the jumble of reports we have seen in the last few weeks?

Employment also set a chain reaction.

Manufacturing, employment is up, that means many faction production is up.

If you look at the chainstore sales, it points to an uptick in july.

I think the onus is really on the bears to make their case, not on me to tell you why growth will accelerate.

It is going to accelerate, the question is, how much.

Always great to check in with you.

Better than estimated manufacturing number.

Certainly, it is helping the markets.

Could it be third time lucky for michael dell and silverlake?

Shareholders will be back in round rock, texas this friday were they finally make it the chance to vote on their offer to buy his namesake pc company with his private equity partners.

Cristina alesci is here.

We are trying to figure out, because carl icahn is in the mix, what is next?

It looks like another 11th hour deal to save this thing and not become a huge train wreck with lots of road kill.

Silverlake and michael dell have to decide whether or not they're going to accept this special committees counterproposal, which we discovered yesterday the special committee has agreed to reset the record date in exchange for an extra $.10. where still not sure, have not heard officially from silverlake and michael dell, as to whether that is agreeable to them.

If nothing happens, the 1365 original deal goes to shareholder vote tomorrow and likely dies.

What is amazing about all of this is we have gotten completely distracted talking about record dates and voting rights and not focus on the fact where talking about a 10 centcom -- 10 said bump.

It could be enough to get the shareholders that are on the fence over to the michael dell side.

Is that the prevailing view, $.10 is enough?

There is so much deal fatigue on this.

There've done a wonderful job of making people sick and tired of this deal.

If they have been more efficient, we could have seen even a higher price potentially.

Now we're talking talking about $.10 potentially killing the deal.

What, if anything, could carl icahn do it this point?

He was making noise yesterday about wanting to second the record date immediately -- set the record date immediately.

What might he do between now and tomorrow?

One thing carl icahn has working in his favor, the bylaws dictate annual shareholder meeting has to take place within 13 months of the last shareholder meeting and the last shareholder meeting, right here, was july 10 -- actually, july 13. august 13, you would have to have another shareholder meeting and that is when carl icahn can proposes slate of directors.

If they agree to reset the record date, then they have to reset the vote.

The vote date owns up against a potential shareholders meeting, and carl icahn could very realistically propose his slate then.

Dell shares are well under the offer price, $12.87, but they are rising.

What does that tell us?

There is a large portion of the stock that doesn't believe this deal is going to happen.

There is still a big question mark over the company.

Carl icahn would tell us, don't pay attention, especially don't pay attention to what the company is saying about its results because they have been slashing prices, hoping to get market share in advance.

If we hear michael dell agrees to the terms set forth by the special committee, we should see that arms spread narrow.

Absolutely.

We look forward to that meeting, if it happens.

Another "if." time for our newsfeed.

Top company stories from around the world.

S&p 500 topping the 1700 mark this morning in early trading, staying above that number, the first time it has top that big round psychologically important number.

A big job -- drop in jobless claims.

Macy's is headed back to court and a final attempt to block martha stewart from selling her wares and rival jcpenney stores.

Closing arguments are to get underway today in the new york court room.

Macy's a 2006 agreement makes them exclusive to her products.

College athletes have gotten the go-ahead to sue for using their likenesses in videogames without their permission.

A lower court judge is deciding whether to allow thousands of athletes to file.

When we come back, is appointing earnings from whole foods.

We will talk to the co- ceo and find out what is ahead for the special partial -- specialty grocery chain.

Time is running out for alex rodriguez, facing a massive suspension in the drug program.

Will he try to cut a deal?

That is coming up on "market makers." ? what is the future for whole foods?

Competition is stepping it up.

Whole foods latest earnings reports fell short of analyst estimates.

We will be speaking to the co- ceo in a few minutes.

First, investors initially seem disappointed with the results.

Not so much after taking a closer look.

Take a look at the numbers.

Revenue was a slight miss.

Everyone was focused on same- store sale numbers.

Strong numbers, but forecast or looking for something higher.

That is some disappointment.

The company talked about fourth store -- fourth-quarter same- store sales.

On the call, they said typically average weekly sales during the fourth quarter tend to be the lowest.

They talked about annual same-store sale numbers and that was slightly below previous forecast.

This is a company that the stock is done very well, up about 23% this year read -- this year.

Price-to-earnings is 36. analyst said, it is a company that has high expectations, built even a little bit off in terms of the numbers.

I remember when he went inside the company.

You win into one of the newer stores.

That is key, the expansion, especially in detroit, an unlikely place to find growth right now.

I spent some time in detroit and they're going into these are urban areas, secondary markets.

This is part of the strategy.

They have about 355 stores but they expect to grow that to about 1000 stores . they talked last night on the call about signing 50 new leases over the last 12 months, a development pipeline of about 54 leases.

As they grow, analyst telling me to have a unique distribution network that is already in place, already invested and can support about 1000 stores.

That is unlike you see from some retailers that build out the district -- distribution network.

This is already in place.

It is a great set up.

For more, we want to turn to the co-ceo of the company of whole foods, walter robb joining us from austin, texas.

Thank you for joining us.

It sounds like a big theme, competition.

Especially when it comes to natural and organic foods.

How do you view it?

Crocs competition makes us better.

These players have been around.

You have competed with them for years.

I just think it indicates the market for fresh healthy foods continues to grow, and that is a good thing for us.

If these competitors , which have been around for years, keep taking pages out of your playbook, how does whole foods differentiate itself and remain ahead of what the others are doing effectively in the part of the grocery business that you once owned all to yourselves?

Again, our quality standards, the quality of the products we sell and the customer experience, i argue are second to none.

There's a big delta between our quality standards and some of these other competitors you're mentioning.

Any good retailer will continue to evolve their playbook.

We are not using last year's playbook.

This competition helps us to continue to evolve and improve and makes us better.

Can you be more specific on how you plan to respond, other than growth?

How do you plan to respond ? what are you going to do to you evolve, in your words?

Number one, we will continue to flex on store size.

That gives us the flexibility to go into a number of new markets to go toward our store growth total.

Our square footage growth is accelerating.

Number two, we will continue to raise the bar on standards.

We will go places where others can't go our are not willing to go in terms of the quality that we sell.

Number three, we will evolve the in-store experience.

For example, if you come to our new store in brooklyn this fall, you'll see a 25,000 square-foot greenhouse garden on top of the store, local products you are not seen anywhere else.

You will see an in-store bar and and wine area, in-store whole body expresses not available in other stores.

It will be the specific evolution within the store as well as the growth of the different store formats as well.

Talking about quality, i spent some time with your foragers.

You are out there looking for local suppliers and want to know how the food is raised, you really care about the quality of food.

Your customers play into that and pay for it.

We touched upon in-store experience while in detroit, the online shopping area three at -- area.

Do you have any progress on that front?

Nothing more specific because we are still the ducks paddling, but we have stepped up our online ordering tool for the holiday orders last year and it over $50 million in holiday orders and have significantly improved that and expect to be robust this fall for the holiday season.

Number two, we have retooled our g&a budget in the tech spending, which is already include in our buying.

We invested in our new platform which is where now and putting in place.

That will give us the ability to rotate mobile thomas social am a e-commerce as well as in- store.

It allows us to serve our customers from whatever angle they come at us.

Those steps are being taken right now.

We have a number of things working, but it is the bit premature to share those.

You have been consistent in asking, and i promise you, we will talk about them when the time is right.

Since it is been a must to month since we spoke in detroit, you said it would take about three to four weeks get an idea of how the store is doing.

You guys certainly don't see detroit as a typical.

How is it doing?

Thanks for taking the time to come out there and look at the store.

The store is exceeding our wildest expectations.

8 weeks and, we have a good sense of what it is doing, and it is serving all of the community and doing so successfully.

Things we hoped would work are working.

I couldn't be more pleased.

Particularly at a time when the narrative about the city is so negative, there's a lot positive about that community.

Just curious in general on a broader, national scale, when i think whole foods, i think upscale, higher-priced rosaries.

Are you trying to communicate a different message and change your assessment to target a more middle income consumer?

What unkind to say to you, we have a robust growth prospect ahead for the company.

New orleans is one part of that growth effort.

We can go into different communities and he can learn lots of things that are applicable to other stores as well.

Our growth strategy is more broad-based than that.

Midsize markets, all manner of communities.

We will be going to augusta, georgia, savannah, torture, lincoln, nebraska.

We can grow into a number of new -- go into lincoln, nebraska.

We can grow in a number of areas.

I want to lead the feeling that we are strong, growing, accelerating.

We are betting heavily on a nice future of new stores.

I hear many people complain that organic doesn't mean what it used to mean.

The standard seven water down.

Can you see something after organic?

I think you're seeing the rise of local food, locally grown food.

We do have foragers in every region of the country trying to find these great new local products.

Consumers have shown an interest in wanting to know where their food is far him -- from.

I think you're seeing fun of a renaissance of the artisan food, the sort of foodie traditions.

Popcorn, soda for any sort of products that have been reinvented by entrepreneurs.

I think the interest in food and the quality of food and the sourcing of food goes along with the organic food -- which is still a meaningful standard.

I think all of those things combined -- i'm sorry, we have to leave it there because we have run out of time.

It is an interesting trend, artisan food.

Walter robb, thank you for joining us, co-ceo of whole foods.

When we come back, a new intraday record for the s&p 500, broke 1700 for the very first time.

Stay with us.

? we are approaching 26 minutes past the hour.

Record high for the s&p 500 and the dow, the s&p is above the 1700 mark.

If we close here, that will be the 24th record close for 2013. the dow also higher.

Central banks are in the game still and will keep pumping stimulus from the uk to the ecb.

No new records for exxon today, company shares are down by about 1.6%. this is the world's biggest energy company.

Profit missed estimates by the most since 2002. profit from rossa syncrude, the refining business, down 94% -- from processing crude, the refining business, down 94%. big day for google.

Spending millions on motorola.

The new smartphone out today.

? today, right here in new york city, motorola will unveil the first handset developed since being bought by google.

Sam takes a look at why google dominates the android world is going head-to-head with apple and its own partners.

Two years, 12 point $5 billion ago, google acquired motorola mobility.

-- $12.5 billion ago, google acquired motorola mobility.

Why is google so set on getting into the hardware business?

That is where the money is.

Take a look at mobile profits.

98% are split between apple and samsung.

Google's mobile strategy until now has been based on a kind of complicated bank shot.

We will make this mobile os and give it away to smartphone manufacturers for free because the more smartphones there are, the more mobile online traffic there is, we can make a lot of money on that because we sell more online ads than anyone.

Apple and samsung make their money in a much more old- fashioned way, then make a device for one price and sell it for higher price.

It seems to work.

Samsung profits just for mobile are greater than all of google's profits put together.

These motox is google's first real effort to get in on that action.

No question that is where the money is.

The unveiling is just a few hours away.

Jon erlichman is live at the event.

Two years ago, larry page told us motorola mobility would supercharge the android ecosystem.

Will google be able to deliver on these great expectations?

I think it depends on whose expectations we're talking about.

First of all, when google bought motorola, one of the reasons was for the patents that they have.

There's a continuing patent war between google and apple.

From that perspective, maybe the deal has already made sense.

With this phone, it is about finding the kind of device that can be right up there with the other android phones, but also up there with the iphone in terms of being a hero product, having one product that people think about, don't go shopping in the store looking for the best device, this is the device they want to have.

For google to win with android, you see that with the revenue they're able to generate through their advertising business and services they offer.

It is really important for phone manufacturers, whether motorola or others, to be developing them using the latest android because that plays into the google playbook.

At the same time, it is a dell and -- delicate balancing act.

People at the very least on the outside will perceive motorola is the in-house favorite and samsung may not -- and others, lg for example, may not get the latest and greatest android -- at the same time motorola will.

It is a really important point and i think one thing people should know is there are a lot of former googlers @motorola.

When you go to motorola from google, it is like going to a new company.

Handing in one badge and taking a new one.

That will factor even into the pricing.

We don't know the price of this new motox yet.

They can be very aggressive on price and house.

Their goal is to get fancy devices onto the market and say, this is what phone manufacturers are capable of doing.

If you're not seeing this from htc or others, they need to step up their game.

Motorola is a for-profit business and they have to price it's fun to make money -- price it's a phone to make money.

I think that will be interesting, the pricing of this phone.

I will affect how many are sold because people can be fickle when it comes to price, to.

In terms of those great expectations, google has them for themselves.

Android is already dominant, but how much is riding on the launch of this new phone?

I think if you look at android market share numbers a year from now and they have grown and motorola played a part for that, then they get a check mark for this.

Do we know when it goes on sale?

We don't have that information yet, but the reason to launch right now is obviously important as you get into the holiday season and also before you get the next iphone cycle to come read again, what motorola is trying to do is not just say we have a great phone, it is trying to be in the same conversation as the iphone and the galaxy s4, which i think sold something like 10 million of its units in the first month.

It will be interesting to see how this device sales compared to that, but certainly taking advantage of what might be a quieter period is where they see their opportunity.

Jon erlichman, we will be to wound and eu for coverage -- tuned in to you for coverage for the launch of the motox.

Let's have a look at other media and tech stories.

Taking a closer look at the spinoff proposal by dan loeb, want sony to sell part of its entertainment business and in ipo and improved electronics business.

It raised its full-year forecast because of the weaker japanese yen.

The world's largest reaming subscription service is taking aim at families.

Netflix will offer personalized profile to families sharing one account.

That will let five family members catalog the shows they have watched and personalized recommendations.

We will learn later today whether some of samsung smartphones will be blocked being sold in the u.s. the same day the motox is being unveiled, apple is been saying samsung copied the iphone.

The regulators announce the ruling today.

In a moment we will talk about what is driving u.s. auto sales.

Cars have not been selling this well in 5.5 years.

That conversation next on "market makers." ? you are watching "market makers." in the battle of the big three, gm pulled out ahead today.

All three automakers increased by double-digit percentages, but all three missed analyst estimates.

Gm's sales rose 16% last month we had -- last month.

Good news, bad news.

How do we balance these things?

Oval digit percentage gains, noteworthy, car selling at the fastest pace in five years, yet analysts expected more.

I think following a strong spring, a good start to the summer, certainly a lot of expectations on increasing sales.

We are seeing strong numbers coming in as you mentioned double-digit growth rate, but a little lower than expectations.

Overall, the paces in line with with where we thought it would be, maybe a little weaker in the close of the month in fleece and liked it pretty.

The looks pretty strong this month.

How much of the strong demand we have been seen recently is because consumers need to replace their aging vehicles?

Some more than -- what is the average, more than 10 years old?

10, 11, some say even 12 years old.

Air is no question a lot of what we're seeing is that demand coming back.

We have a very old fleet on the road.

We have been seeing that the last several months, and that will continue to be part of the story for the remainder of the year.

To what degree is automobile second cord or growth?

1.7% is hardly raging growth.

How much faster with sales big growing essay the economy were expanding at a three percent pace?

Clearly there is a disconnect between economic activity overall and how consumers are behaving.

I think a lot of that, we talk about the age of the vehicle, the availability of credit -- consumers are basically saying, regardless of what is going on with the economy, with the government, i need to replace my vehicle.

I think that is driving a lot of the activity we are seeing now, and it resilient consumer is helping to drive i think a stronger expectation for the economy in the second half of the year.

Faster economic growth, would not necessarily then translate into faster auto sales.

I think it would.

If we look at the first half of the year's performance and look at where it would have been if we were in the 3% growth range, no question that would give a further boost to where sales have been.

I think we are looking at the second half getting to that stage where supply may not meet demand if this pace continues to if we see july come in at or near that 16 million unit level, it looks like it will be a little bit below, but as that progresses into the second half, we could get into some constraints in certain vehicle types.

We hear about some of the new technology being put in place.

How much is that appealing and driving this growth to consumers in the show room?

No question technology plays a role.

Whether it is safety, entertainment, fuel economy improvements with changes to the internal combustion engine as well as alternative powertrain technology -- all of that is playing a role in bringing buyers in.

Even if someone has a vehicle that is 2, 3, 4 years old , there still may be an advantage for them and a desire for them to replace the vehicle, even a couple of miles per gallon could be enough to move people into a new vehicle.

There are some concerns chrysler may not be as competitive as it should be in certain segments of the auto business.

How critical is it for them to come out with the new cherokee?

This is a very critical launch for chrysler right now, certainly, a lot of eyes and attention on the industry are on the cherokee.

They need the vehicle on the road, out of the plant right now.

That is really impacting overall performance with chrysler right now.

I think the bottom line will we look across the automakers, this is probably the most competitive environment we have been as an auto industry, where you have the detroit brands wringing out great vehicles, very competitive.

You have pressure from japan from the korean brands as well as the europeans who are china offset some of the losses in europe with sales here.

Arguably, the most competitive market we have seen in a long time.

Thank you for your insight and your time this morning.

Coming up next, is it the end of the road for alex rodriguez?

We could find out later today whether the yankees followed superstar will face a lifetime ban from baseball.

? alex rodriguez, will the yankees slugger ever play professional baseball again?

We may find out later today.

Espn reporting he is negotiating suspension over allegations he used performance-enhancing drugs.

If they can't reach a deal, the third baseman could face a lifetime ban.

As many as nine other players may be hit with 50-can suspensions.

-- 50-game suspensions.

A lot of people are chasing the story.

What do we know?

Our understanding as of right now, nine other players have reached agreements.

It is not a surprise the spotlight is on alex rodriguez.

There is an overwhelming amount of evidence that has been presented to alex, to his attorney, and now it is just a matter of whether alex wants to fight this or take the lumps that baseball is looking to hand out.

Besides being alex rodriguez and the active hitter with the most home runs a major league baseball, what else here is special about a rod or is his situation this clinic in miami, the same as it is for every other player including ryan braun?

It is the same, however, he is one of the biggest names in baseball.

Perhaps alex is getting harsher treatment because baseball will allege he tried to hamper the investigation, lied to the investigators, which perhaps the others did not.

We have been through this before with alex rodriguez where his cousin was the substance abuser.

And he has admitted to using them.

He said he did it a long time ago.

We have heard interesting things who made the parallel from steve cohen and the sec and baseball and alex rodriguez saying they go big game hunting, give notice that we are not tolerating this stuff.

What about the yankees?

$60 million plus still on his contract.

If the numbers were good, they would be scratching inclined to get him back in the lineup.

The yankee see more than content to let alex sit and sit and sit wetherbee in tampa or suspended.

If they don't pay him -- and the suspension would be the remainder of the season and neck season -- that is a nice savings for the yankees.

Let's talk about the yankees and the rest of baseball.

10 players, even if one was your biggest star, a fraction of the league, what degree will it affect the business of the sport?

Viewership and attendance is down for you and the business model is predicated on winning for the yankees and right now they're not in first place.

The pittsburgh pirates happened to be in first place them playing well, but sometimes it is about giving nice family entertainment.

The yankees are revenue payers.

They are not winning.

Derek jeter is back in the lineup, but some of the biggest ours are not on the field and that is being evidenced in the television ratings, which is where they make a lot of money from as well is in the ballpark.

I have spoke with a lot of officials who don't know what the answer is right now.

It is hard to see how this could work out well for the yankees even if they win on the salary side.

That's about the only one right now, the salary side.

Until they start winning and get their stars back on the field, it's tough.

Thank you, covering the business of sports here at bloomberg.

Now the business of tuition, college tuition.

That expense of harvard in ba degree lost some of its shine, about $5,000 worth.

Scarlet fu shows us an "off the charts." newly minted harvard mba's are making less money than last year.

The first chart shows the starting salary for the class of 2013, 100 15,000 dollars.

$5,000 less than last year.

Notably still higher than 2009 and 2010, right after the financial crisis.

I wonder if it is because wall street has been one of the goto destinations for a lot of these ivy league grads and there may no longer be the case as much.

You are correct.

If you are going to finance.

-- fewer are going to finance.

Roughly one quarter of the class are headed for finance.

35% of graduates went to wall street jobs last year.

Where they're going instead, tech and consulting.

More consultants?

Surely not.

I guess it doesn't pay as much.

Not compare to the wall street-type jobs.

85% of the class accepted a job offer three months prior to graduation.

That is not a lot compared to the last 8 years.

15% is still looking for jobs.

The economy on a whole has improved, so maybe people are holding out for the perfect job.

They're still deciding.

It is certainly down in terms of how many people had a job at this time last year.

Always interesting to track the payoff from the harvard mba.

56 minutes past the hour.

It is time for bloomberg television to go "on the markets." here's a look at how markets are trading.

The s&p surging past 1700 for the first time ever this as investors bet banks will keep on printing money and on the backs of better-than-expected data we got out this morning.

U.s. jobless claims fall into a five-year low this morning.

Stronger-than-expected data on u.s. manufacturing.

The isn index coming in at a reading of 55.4. good news for the global economy, better-than-expected data out of china and europe on manufacturing, both those reports helping boost shares in europe and asia.

Alongside his global rally in equities, also watching the greenback, the dollar strengthening against 15 of its 16 peers.

On the flipside, the euro falling against almost all of its 16 peers.

This on the back of the ecb leaving rates unchanged, close to record lows.

Mario draghi telling policymakers they can expect interest rates to stay low in the region for a "extended" period.

A few names were watching, let's start with yelp!

Second quarter climbing on the back of the stronger results.

We are also watching shares in dreamworks, reporting a 75% increase in second-quarter profit.

Surprise, surprise, largely driven by the hit movie "the crude." half it falling for the first time in four years, the drop comes amidst falling prices for crude oil.

Also on the move today, the company reports higher sales last quarter, the largest publicly traded firearms manufacturer, second-quarter sales surged 50%, likely on some consumers fearing some politicians call for tighter gun laws.

We will be back in 30 minutes.

We will be back in a couple of minutes on "market makers." we will be talking about insurance with the ceo of cigna.

It is not enough just to be a supermodel, now you have to have a brand and a business.

We will talk with someone who is doing all of that coming up on "market makers." ? . . live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle.

Bracing for obama care.

Insurance companies get ready for the impact of healthcare reform.

The ceo of cigna tells us what is next getting a bank -- getting a boost from ben bernanke.

Driving volume on a cme.

And life beyond the runway.

Petra nemcova branches out.

We will talk about her home furnishing business.

You are watching "market makers ." i am erik schatzker quicktime sara eisen and four stephanie ruhle.

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Earnings beat estimates.

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The company is the second largest in the homes for rent business after the blackstone group.

Nsa leaker edward snowden has been given asylum in russia for a year.

So says a lawyer.

The lawyer says snowden left the transit zone where he has been living for more than a month.

He held up a copy of the documents given to snowden given by russian authorities.

He is said to be in a safe location that will not be disclosed.

And other top story today, gold loses its luster.

Gold companies are also taking a beating.

Bearish gold, -- derek's gold -- barrick gold reporting a massive loss.

Alex he has been following this story.

This is pretty ugly.

You mentioned that $8.7 billion write-down, also cut of dividend by 75% to $.05. investors were really pressing gold companies to up that dividend and woo investors.

It also abandons its production of 8 million ounces a year by 2016. that is really the lifeblood of gold companies.

It also reduces cap next.

The headline numbers were ugly.

It is interesting to note the stock is holding up quite well.

It is pretty high right now.

I had the same question here what is going on here?

51% this entire year.

Maybe the worst is over here.

There were also a couple of good news here in the quarter.

The company forecasted lower tax cost this year from about 1000 two under 1000 here dead is basically how much it cost them to produce one ounce of gold.

The lower it is, the better their margins get.

It had gotten terribly high over the last couple of years.

Also to cut the dividend, it will have more free cash flow.

If you are not going to be able to produce it for the amount that you want, at least have free cash flow.

It will save save about $600 million a year.

The theory is gold companies need to clean up their house.

The ceo is doing just that.

He told me way back in an e-mail conference infirmary in florida, he wants to sell assets.

My question was, who would buy your assets because everybody is in the same boat.

They have energy assets, nickel assets, -- may be bigger, more diversified commodities companies.

What is interesting to me when i saw this group -- when i say they can't catch a blank -- a break, one goal goes higher, they were under pressure.

What goal goes lower, gets it even longer -- even harder.

Like that one time leverage for the gold price.

There was a while there were really show that on the upside.

The problem is you had other commodity classes rising like energy.

The more money these guys wind up making, the more the big government wants to take a size of their pie.

If you are making as much money, we're going to charge you you higher taxes.

We want a part two.

This had at the same time.

There was a huge push in the industry to provide dividends to return cash to shareholders, to provide the value they weren't getting for the gold price.

They did that, and now look at where we are.

Now we are having a lower gold prices.

You just have to wonder when the industry outlook starts to look up.

What happened after that?

I was at the conference a few months ago, i heard going private was something that was interesting.

Also pe's getting in there and getting some assets that were good.

Both of those would be a pretty far stretch.

Maybe these big guys need to break themselves up.

Then he just enough into -- they need to spin off into multiple companies.

Alix steel, good to have you.

Covering the golden they may -- the pain of the old miners feared eight point $7 billion write-down.

Stunning stuff.

Also at this hour, the jury is delivering in the sec fraud trial against former goldman sachs banker for breese t -- for abrice tourre.

We saw him -- he once called himself a fab, arrive at the courthouse.

What happened yet?

They're awaiting the verdict.

This could be brutal, particularly for criminal case.

This is a civil case.

What is going on with the jury right now?

They have all the evidence in the room.

They have been giving a -- given a verdict sheet.

You have a copy.

I do.

Because it is civil, they determine liability or not liability.

Most of this has to do with the securities act.

Did for restore -- fabrice tourre present factually incorrect information or did he omit?

In two of them, you do not have to determine it intense, sibley negligence.

He did admit that one of the females was "not accurate." su, the jury began deliberations yesterday.

So we are into the second day of deliberations, this is a civil trial.

Can we read anything into it yet ? i talked to the attorneys, they have their own way, reading the tea leaves.

We know in note was sent, we don't know if that means that a verdict is here or there are having some confusion.

Sometimes that helps guide attorneys to generally -- for everyone week of trial, they expect one week -- one day of deliberation.

So it was two weeks in testimony, we are in the second day.

Generally the longer it goes in a civil case, it tends to favor the defense.

We do have a little bit of knowledge that one of the jurors is on a cruise next week.

So we believe they will be at with a verdict.

Somebody needs to be out this time by friday.

There was a view that we will probably have disrupted by tomorrow if not today.

Thank you.

We know everybody down at goldman sachs headquarters glued to the headlines.

We are also watching the nation's biggest health insurance companies have been reporting blockbuster second- quarter earnings earnings.

Unitedhealth group aetna, cigna, all beating estimates.

It seems their stocks -- and have seen their stocks surge here it will be seeking with david cordani, but first, we want to take a look at the industry.

The biggest challenge over the next year, successful invalidation of obama.

Michael mann covers the health insurance companies for bloomberg industries pretty big issue is is getting enough young people to sign up for insurance.

This is going to make all the efforts for this -- these countries -- for these companies.

That is absolutely right.

The most important factor is to have a very diversified pool of anniversaries -- of individuals.

We get a lot of young people that don't have a lot of health illness, they will be a will to offset the people that will come into the pool that have a higher number of health ailments.

Talk about what we have seen a little bit in terms of higher premiums.

Across the united states, anticipation of this law.

In some cases we have seen the premiums have gone up.

In the state of california, i think it isn't dissipated that we would start to see higher rates.

A few other states as well.

What we are seeing as far as the bid that have come in for the exchange programs, and these are these new marketplaces that allow the uninsured to gain access to health insurance at subsidized rates, in many cases, those rates are actually coming in a little bit lower than some people had expected.

It appears to be a bit of a balance.

Michael, what kind of participation uptake are we seeing on the part of insurance companies and the state-by-state exchanges that are being set up?

Good question, erik.

People originally thought that the companies would be a bit more aggressive in their participation, but at this point it has been a bit muted.

The united health will end up going and participating at about four individual exchanges.

Cigna today indicated that they plan to participate in only five.

Really the managed-care industry is taking a wait-and-see attitude about the new exchanges.

Trying trying to assess what the incremental risks might be, who might end up going, participating in it, and trying to figure out what profitability going forward.

What is that mean for healthcare than?

If a managed healthcare company like cigna, for example, are participating in this wait-and- see applet -- wait-and-see attitude, what are the applications?

You have to understand that the health insurance industry is still somewhat fragmented.

Even though many of the publicly traded managed care companies have been muted in their expectations for participation up to now, a lots of not-for- profit health insurance companies have decided to be more aggressive.

Among the publicly traded companies, wellpoint has decided to participate in a number of exchanges.

That really goes back to their legacy as a blue cross and blue shield provider.

Overall, while the expectation was for greater participation for some of the publicly traded companies, it appears that muted response is being offset by not- for-profit health insurance.

Thank you for joining us on this.

It is a timely topic and we will continue the discussion with cigna for the ceo.

Thank you to michael manns of bloomberg industries.

The interview with david cordani of sickness coming up next right here on "market makers." later, speaking with mary duffy of the cme group.

He is concerned about the new roles from his regulator.

All that coming up on "market makers," on bloomberg television, streaming on your phone, your tablet, and at bloomberg.com.

? welcome back to "market makers." i am sara eisen.

The nation's biggest health insurers reporting very healthy earnings of the bear to implement -- as they prepare to have lamented president's healthcare laws.

Six cigna be out -- cigna beat out estimates.

They've had a strong run-up this year.

David cordani is the ceo of cigna.

David, great to see you.

Thank you for joining us here on "market makers." the uncertainties surrounding the implementation of obamacare -- is it showing up anywhere in your business?

To date, i was a broadly know.

Cigna -- about 60% of our company as u.s. health care.

The other 40% is not directly tied to u.s. healthcare.

For the portion of our business that is u.s. healthcare, which is a very important part of portfolio, we focus on employers that value incentive and engagement-based row grants.

Those programs continue to grow in the current environment.

Broadly speaking, 2013 no huge impact from the implementation of the lot so far.

David, you reported earnings earlier this morning ahead of expectations.

You also raised your guidance, which is to say that you told the investment community you expect cigna to do better than you previously thought.

For that matter, for the most part, better than i thought as well.

That is for 2013 care how difficult is it at this point to predict 2014 given the disruption that is coming to the healthcare industry?

You're correct.

. we increase our for your outlook again this quarter.

We increase it after our first quarter results as well.

We recorded about an 8% in revenue this quarter.

Looking to 2014, there is really one large moving point that needs to settle down.

That is for medicare advantage, there is a significant amount of change that was introduced into the medicare advantage program this spring.

Changes in benefits, changes in pricing, competitive behaviors.

That will shake out and become clearer as we go into the fall, and that will give us a good foundation with which to predict 2014. what we did to say to our investors this morning is that we are confident we will abide differentiate earnings in 2014 because of the diversity of our business portfolio both in the u.s. as well as internationally and the performance we've had over the last several years.

I know you are reluctant to provide them or us for that matter with guidance, which is to say put numbers to 2014, but let's ignore medicare advantage for just one second.

How do you feel about the rest of your business heading into next year?

The headline there is we feel good about the rest of our business.

I will give you the headlines -- about 20% of our company is non- us selling direct to individuals in about 12 countries outside the u.s. taking care of the globally mobile population for ex-pat, corporation, and i the o's. a well-positioned performing part of our portfolio.

Group disability and life part of our business, we approach that little differently than our competition appeared we put -- we focus on productivity, return to work programs.

Of that business continues to grow revenue, and the conditions are evolving to grow earnings fared within our u.s. help your business, absent seniors or medicare advantage, demonstrated the ability to continue to grow revenue by delivering very attractive solutions to employers.

We felt about the portfolio, and we have had consistency over the last three years there.

Part of this new health care legislation as this state-by- state insurance exchanges.

Have you make a decision of which states are going to opt in or out of in this law?

Sure, first, historically, cigna had not dissipated in the small employer or under 50 life employer market or the individual primary market.

All of this is a fresh look for us.

We don't have a legacy -- we have a legacy business model to reengineer.

As we look at the markets, we have meaningful share today, we have highly developed collaborative relations, you may call them aaco's. where the state regulations leave us enough flex ability to offer innovative programs and services.

For 2014, we take five states that are very important states to us, and we will pick a subset of cities within the states to offer exchange-based programs for our first entree into the exchanges.

Does the american public know -- do they have an awareness of these state exchanges, and are you convinced that they are going to be able to adopt and adapt to this new reality?

Do physicians know?

And if that uncertainty something for you to worry about?

I think you're broad, and is very important.

If you look at public polling data, it would suggest you that individuals, americans, do not have well-developed or even awareness, or knowledge of exchanges.

There is a lot of new information that needs to be brought to bear to the marketplace.

That is why 2014 is truly an initiation year, a transitional year.

We should view it as a year that there are going to be some choppy activities in it.

The physicians in our collaborative relationships we have very good visibility's with our physician partners of what these changes are, what they are not, and what the opportunities maybe.

In fact, we are using our collaborative accountable care relationships as the bedrock of our network within those five states and those cities.

For cigna, a very good awareness because we are partnered with those physicians, and there is good awareness and activity there.

David, medical care costs have not been growing as fast recently as in previous years.

I want to know whether you think that that trend and healthcare inflation is a single, and if so, what does it mean for you?

Do have to respond by changing your pricing, maybe not increasing your premiums as you would have otherwise?

To brag run comments.

One is cigna, almost 85% -- two background comments.

One is for cigna, almost 85% of ours are passed your.

When there is stability in medical cost, it flows directly and immediately to the employer and the benefit of their employees.

We like that level of alignment and transparency.

The second piece is historically as medical costs have risen each year, somewhere approaching 70% of that medical cost trend or inflation, as you put it, is driven by increased cost for the same units.

Price increase from the delivery system.

That pattern remains.

What is transpiring is the number of units or the number of services utilized is not growing as fast.

So that is decelerating.

We have seen that yet again for this year.

The only piece i would add is for cigna for folio business, we see the utilization of services around prevention, wellness, important diagnostic services, actually going up.

That is a very good thing.

It is good for customers, employers, preventative care delivery.

Craig david, i want to ask you about medicaid because under the new law, about 16 million uninsured will be brought into the government program.

Are you planning to be a main player here, even though the margins are pretty thin?

Traditional medicaid is not a business that have historically been an area we focus.

Over the immediate term horizon, we don't have a strategic edge epic -- objective to be in traditional medicaid.

What we do believe is an attractive business for us is what is called the dual eligible population, individuals who are eligible for both medicare and medicaid and have clinical needs.

That is where our partner sherm -- our partnership models are attractive here and we just won a contract and illinois that serve a dual population there.

Over time, that will present a very attractive opportunity for us, but the more traditional administrative medicaid is not on strategy for us currently.

Thank you for going through some of these important changes.

David cordani joining us, the ceo a cigna.

And in mexico, they're talking about the biggest changes to the industry since the 1930's. we will bring that story to you next on "market makers." in mexico, they're debating a change to the constitution that would allow the state owned oil company to go public.

The national action party called this the most audacious change since back in 1938, and that is when mexico took oil assets from the u.s. and british companies.

The exchange would allow a "small share cell insale in pymex." the question is -- will mexico's president go for it?

The president says he wants to modernize pymex but not privatize it.

From cover girls to come, learned -- to conglomerate, we will be talking to petra nemcova.

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

Three years later, regulators are still turning dodd frank, the biggest financial reform in the generations coming into roles.

This week, limerick or his or -- lawmakers are holding more hearings.

Nela richardson, let's begin with this.

Where do we stand on dodd frank?

Have we made much progress?

You know, dodd frank is now three years old.

Babies have been born and are now starting preschool.

We are only 60% of the way through.

And fact, if you look at the roles that are completed, those in progress and those yet to be finalized, you will see that we still have not -- we still have a long way to go.

40% of those rules have yet to be written, erik.

What is holding it up?

We know that there have been some some opposition from industry, for example third we will be talking a few minutes to the chairman of the cme group, terry dumpy.

-- terry dunfee.

If you run the gamut of the financial services industry, you will not have to look hard to find at least one company that has an ejection to one part of the law.

But what is opening -- has an objection to one part of the law.

Is that what is holding it up?

The lawmaking or the role making machinery, not enough people to to do the role writing?

It is both.

If you look at the 14,000 pages of regulation so far, 8000 of them have been directed toward the derivatives market theater that is the sec and the cftc.

These days, they have been much more active than any other banking regulator because they are trying to regulate 600 33 trillion dollars derivatives market.

This market has never even been seen before, much less regulated, and it is going to take a lot more resources than the cftc and the sec currently have to root out in this market.

We should note that we you have some experience with this because you worked at the cftc as an employee on implementation of the law.

I absolutely did.

I was there when dodd frank was born.

I participated in the birthing of it and the writing of the cost benefit analysis.

I can tell you that resources are a huge factor, not only writing the roles, but implementing dodd frank.

Remember, this is a market that we have never seen before.

We don't have data on prices and volume and how this market response to crisis and market disruption.

In some sense, those regulations were written blindfolded.

Now that the cftc is starting to get data, they now have the ability to analyze the markets, and they are requesting about a 50% increase in the funds and resources from congress to help it do that.

What about the chairman of the cftc?

Do expect he will see the law floor -- stay to see the law through?

Continuing with the baby analysis -- analogy, he is definitely the father of the sack for the cftc.

He was instrumental in really pulling this through.

He has been relentless in getting these roles are written.

He will not be there for the implementation ross the.

The question i have is will this act leave some of the momentum as it deals with budget concerns and still more pushback from the industry on regulating this market.

Nell a, thank you very much.

Nela, the way very much.

Coming up, we can certainly ask terry duffy about this question.

Seamy reporting earnings got a boost because of questions about the fed's policy and higher trading volumes.

Terry duffy coming up on "market makers." this is "market makers." i am sara eisen.

A bernanke bomb.

The world's largest futures exchange operator posting a jump in palm -- profits.

Terry duffy is the chairman of cme group.

He is with us right now from chicago.

Terry, charities -- currencies and metal trading were hot.

Do you attribute this to the fed and will continue?

I think you saw a big trade in the metals because it was us as a significant move over the last several months fair to gold from roughly $1900 an oun ce down to under $1300 an ounce.

It was a lot of participation the name metals marketed all the conversation about the fed in the second quarter about what rates are going to do do or not do, obviously cme group, one of our biggest asset classes as interest rates for the euro dollar conflict.

Our treasuries, there is a terminus amount of activity.

As you know, anytime you you get extreme highs or lows, interest rates, the policy look like it is going to chance, you will get a lot of activity going on in this marketplace is feared that is exact we what we saw.

I figure you are the last guy who wants to see ben bernanke announced the end of -- or a big ounce -- or announce the beginning of tapering.

How much longer can this last?

As long as nobody knows when the tapering begins, we see the same increase, speculative activity that we have seen in the past few months?

I think we will see a lot more activity if the tapering goes -- if they continue to taper the market.

I'm not quite sure what the fed is going to do, but interest rates are such an integral part of every business in america and around the world.

They affect oil prices, commodity prices, everything.

Not only in the home market, but all these other products that interest rates are subjected to i think the activity could be -- i'm sorry, go ahead, -- once the genie is out of the bottle, the uncertainty, it is not the end of uncertainty, does it again because we don't know yet, not the wars in iraq, what the fed is going to do next.

Zero from something positive.

-- not to put words in your mouth, what the fed is going to do next.

I don't think the fed had an exit strategy when they got into this trade.

Now the question is how do they get outs, and that is a big problem for them.

This is just my own synopsis -- do they look for when congress is debating the debt ceiling and other issues related, that they have to deal with, do they use that opportunity to move rates around.

I don't know.

They have to look for an opportunity to get more normalized rate of varmints coming back into the united states.

I was just going to ask you about washington.

Are you breaking for another wave of volatility?

I know you are very close to house speaker john boehner.

You have been to washington a number of times recently to testify on some of these regulations.

I spent quite a bit of my time in washington.

I am there once a week when the house and senate is in session.

I think it is very important for us to be there.

I do not know what is going to happen, but we did see a terminus amount of volatility when the -- tremendous amount of a volatility when the last fiscal cliff was announced.

I do not know if the same deals that were cut on the last debt ceiling could be applicable coming forward, sequestra

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

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