Marissa Mayer's Marks: Market Makers (07/16)

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July 16 (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)

? marissa meyer's first-year report card, investors love her, but advertisers are not buying in.

Going nuclear in the senate.

Democrats are driving the biggest shakeup in four decades.

Architects of the stars.

Why the biggest face in fashion -- were the biggest in fashion what peter marino designing their store.

Good morning, everybody.

It is tuesday in new york city.

You are watching "market makers" and i am erik schatzker.

I'm sarah eisen in for stephanie ruhle.

Investigators say they are now focusing on an emergency beacon as the possible cause of the last weeks @ dreamliner -- dreamliner fire in london.

The entire fleet of boeing three miners was granted earlier this year after the battery caught fire.

New data shows auto registrations fell 6.3% in june from a year ago.

Consumers are cutting back on the big ticket purchases, pushing the region toward the sixth straight year of falling car sales.

And coca-cola is being hurt as well.

The world's largest beverage company reporting profits -- profits dropped by 4%, precipitously in europe, and flat line in china.

Things look a lot better if you're an investor in yasu the report card for -- in the yahoo!

The report card for birth the meyer is positive -- 4 marissa meyer is positive.

We'll be telling you all you need to know.

Our top story is goldmansachs.

The investment bank's second quarter earnings beating estimates.

Goldman says profits actually doubled from a year earlier.

Scarlet fu has been listening in on a conference call.

And erik, i know you are a pretty provocative view on goldman as well.

The c.f.o. he was talking about appetite fluctuating during the second quarter.

This was the quarter in which he emerging markets fell off a cliff.

Demand dropped off.

There would be a lot of volatility, particularly in the second half of the quarter with the fed talking about tinkering eventually and driving down its stimulus program.

-- tapering eventually and driving down its stimulus program.

They remain vigilant about risks, and possibly this idea that we might be entering a different regime.

People be responding more and more to every single data.

. we have seen that happening already, but at the same time it it feels good to return to normal interest rate environment rather than one dictated . it corrects a great quarter for goldman, right?

I don't know why everyone is calling this a great quarter.

Look at the stock price.

If this is such a great quarter, the stock would not be trading down.

Let's talk about the positives furs.

This has been the first -- the best first half for investment banking for goldmansachs, and that says something.

It is way ahead of j.p. morgan, way ahead of citigroup.

Yet, for the quarter.

What is their traditional strength?

Fixed income trading.

$1.6 billion behind jpmorgan and $1.4 billion behind citigroup.

And slightly higher, but off from the first quarter.

And it gets worse.

Return ability is that 10 current 5%. -- is at 10.5%. look at what is going on in jpmorgan.

They have a much more diversified business, perhaps an argument in favor of complexity.

They're generating a 20% roe.

What about the investing and lending business?

What is interesting is that it is the smallest money-making segment for goldmansachs, but it has the huge dispersions.

There's a big loss in the third quarter of 2011, and as a result, the top finance 18% that quarter.

This past quarter, it was much higher than what analysts were looking for.

There were only looking for $870 million in revenue.

Basically, this is goldmansachs private equity investments by its own investments that it makes on behalf of the fund.

Investment and lending is where the chickens how come home to roost, because if you are an analyst, you can be where investment banking revenue is going to be here, but it is pretty difficult to figure where the lending is going to be.

It is all about how badly the analysts have been estimating goldmansachs's revenue.

For the past seven quarters, they have beat analysts' estimates.

By at least 25%. it is goldman doing great, our the analysts doing poorly?

-- is goldman doing great, or are the analysts doing poorly?

Correct have been ratcheting down these estimates steadily before this number came out -- they have been ratcheting down the debts of its bentley before these numbers came out.

Are they dying down, you have to wonder.

Correct is that the case?

What i'm going to ask them myself.

-- it is not the case?

I'm going to ask them myself.

And in other news this morning, edward snowden is officially asking russia for temporary asylum.

And he has stopped releasing data that could hurt the united states.

We need to wonder at the very least whether this means it's noted will be seeking asylum in russia.

-- whether this means snowden he will be seeking asylum in russia.

Here is what we have, we have snowden and's assurances that he will stop leaking information.

He added, according to the russian lawyer advising him.

The kremlin may want something firmer.

This is verbally, not in writing.

That seems to be a key distinction.

The application for temporary refuge, which is a simpler procedure that asking for the status of a political refugee, should happen soon.

That is, according to the russian lawyer.

Putin's comments yesterday suggested that the arrival of snowden in russia was the fault of the united states, that he was a sort of unwanted gift.

You can see the diplomatic space that he is creating for himself.

He grants him temporary refuge antilla permanent solution can be found it could give him enough time for the united agencies refugee agency to get snowed in new travel documents.

Yesterday, when putin was asked whether he knew where the former nsa systems analysts could go, he answered bluntly.

How do i know?

I like that, and unwanted gift.

Putin's words.

Will we come back, ben bernanke is heading back to capitol -- when we come back, ben bernanke is heading back to capitol hill.

And millions of companies are ignoring a fiber and spain -- threats -- ignoring a cyber espionage threat.

? this is "market makers" and nine sara eisen.

The long march toward the end of quantitative easing takes another step to are as ben bernanke heads to capitol hill to answer questions from congress but almost everybody is hoping they will get more detail on when the tape arena and will start.

Anything new here that we should expect from the fed chairman in terms of the timing of the taper?

A lot in terms of timing, but not the tapir.

Headlines will come out at 8:30 a.m. tomorrow but the committee will give themselves more time to look at it.

It comes out before the markets open.

Everybody will be watching right at 8:30 a.m. that is interesting, but does it tell us anything about what is inside the testimony?

Know, you will not get a lot additional.

Bernanke is likely to repeat what he's already said, maybe with additional language, but the same themes.

Based on the june testimony and what he said last week, the big question for everyone is when he is going to taper.

And he will say that depends on progress in the labor markets and whether inflation comes up toward their target, and whether there are growth indicators of a sustainable recovery.

In congress, one of the most painful part of watching the testimony is seeing some of the questions from congress.

Sometimes they are so out there.

And what would you ask?

What is interesting is that this is risk vs.

Reward rather than bubble verses inflation.

Many will ask whether it is riskier to keep this going rather than to phase it out.

It sounds like he is still of the opinion that q e is working.

That is another question i would ask, is it still working and is it still working to the extent that you would like?

Qe3 really started in december.

If you look at the three quarters before qe3 and the three quarters after, growth has been a lot slower since they have stimulated the economy.

You cannot make the argument that it is necessary.

And retail sales and the consumer?

There are reasons to believe it is declining in efficacy.

Correct do you know what i would ask?

Grex what?

I would ask what he looks at first in the morning, the u.s. dollar or the stock market.

Correct i would bet that he looks at the treasury market.

Of course he does, but the stock market has been major the effective -- affected by quantitative easing.

Yet, but he has to answer the questions of bubbles.

Much awaited testimony from ben bernanke before congress tomorrow morning.

There is a high-stakes showdown in the senate right now.

Majority leader harry reid is threatening to change the rules that combat filibuster by republicans that would keep them from filling key openings in the obama administration.

It could be the biggest change in senate procedure in four decades, and that is why it is called a nuclear option.

Will harry reed pressed the button?

Are we going nuclear, peter?

We do not know at this particular time.

The senate session just dabbled in at 10:00 a.m. eastern time.

He normally announces a plan to the day from the floor, but did not show up.

We're told he will be there shortly.

We have vice-presidential -- vice president biden in the chair.

That tells you the significance of the day.

Seven nominations of for a vote.

If any one of these nominations do not clear, harry reid has threatened to reduce that option to 51 votes.

Maybe we should listen to harry.

Right now for the update.

I spoke with john grosso just a short time ago from wyoming.

Here's what he said.

I do not think anyone knows for sure.

I have been meeting with democrats since early this morning.

The majority would like to avoid this whole nuclear showdown.

And republican leadership is still saying there is an opportunity to avoid this showdown.

Ed markey is the new senator from massachusetts replacing john kerry.

He won the special election.

Richard cordray has been for some time a recess appointment, but they want to put him there permanently.

As you just pointed out, just one of seven test votes.

Who else are democrats during which republicans over?

-- sparring with republicans over?

Gina mccarthy of the epa, it looks like the republicans will allow that to go forward, those two nominations.

The three elections to the national labor relations board these have been challenged in court by republicans already.

Their view is they cannot move forward with these appointments when even a court says they are not put their illegally.

That is a big issue with the national labor relations board nominees.

We could have a deal on richard cordray and others and we could find that out shortly?

That is right.

Then they will move to the less controversial nominees , operas and mccarthy.

-- perez and mccarthy.

The heavy artillery to break the political gridlock.

Thank you.

Coming up, an incredibly shrinking pool of humanities students.

We could he be heading toward a shortage of philosophy majors.

No joke.

? this is "market makers" and i'm sarah eisen.

Volatility with an unpaid student loans as college students of ditching the humanities.

Scarlet fu joins us with a so- called decline in the humanities.

Students would rather major in something less lofty, a bit more practical, like the stehn disciplines because of the current economic environment.

We have a chart that illustrates the humanities.

These are the bachelor of arts degrees in and which, like which, philosophy . it bottomed out in the early 1980's and picked up again in nearly 90 -- 1990's. but this is love -- misleading because it only starts in the late 1960's, the glory days for the humanities.

If you bring up a chart that goes all the way back, it is a different story.

All of these studies peaked in the late 1960's. we are not that much further down that where we were before.

Any reason as to why?

I mentioned the jobless rate, student loans, but it is more than just that.

One reason is because women have started studying more vocational studies, including engineering and science.

You are seeing an equalization taking place.

The student body has changed tremendously since the 1940's, and even since the 1960's. and that is the hot either one now -- that is a hot one now?

Independent studies.

If you talk to recorder, they will just say they want to hire someone who can think.

That leads to the study of humanities.

Tell yourself that.

It worked so far, right?

It got me here.

If you talk to c.e.o.'s, and we do, they will say they want people who can come in and solve problems.

We are in an era where everything is quantifiable the humanities -- where everything is quantifiable, but the humanities are not necessarily quantifiable.

Computer programming, technology, that is where all is.

The knowledge economy.

And off the chart declining humanities majors.

It is time for us to head to on the markets.

Let's give you a snapshot of what is happening today.

Earlier, you saw the s&p 500 trading higher, and it is possible that it is down only less than at 10th of a 1%. if it closes higher, this will be the first time since 2004 that we have had nine straight higher closes.

Right now, we are at 8, which is pretty remarkable.

We will see some earnings later on in the programming.

We will see if it continues.

Gold is up for a second day in a row.

We are seeing a weaker dollar today.

It has been very vulnerable as the fed talks about tapering.

When we come back, shares of yahoo have soared since marissa meyer took over a year ago, but there is one member who has not jump on that bandwagon.

You'll find out who it is.

And when the names -- the big names in fashion want a new store, he is the guy they go to.

We will introduce you to him next.

? breaking news out of washington happening right now.

Let's go back to peter cook on capitol hill.

It sounds as though the senate may have averted the nuclear option.

We just heard majority leader harry reid say on the floor that we may have a way forward to deal with this big fight over nominations.

They're still dotting the "i's" and crossing the "t's" in dealing with the president picks for his administration.

The caucus lunch is today.

He credited senator john mccain with brokering this compromise.

We do not have all the details as to what concessions democrats have made.

It may be the consumer protection bureau or the national labor relations board.

But there is a deal apparently in the works.

All but said and done, according to harry reid.

They have to run it past their respective caucuses, but it does look like a showdown for the moment has been averted.

I'm sure we will be hearing from you in a few short minutes.

In the meantime, another story we are following closely today, yahoo!

And marissa meyer.

He might call her mrs.

Fix it over at yahoo!

This -- just how different is yahoo!

Than the one she inherited?

Let's go to jail and ehrlichman, following yahoo!

From l.a. this morning.

-- let's go to jail when ehrlichman, following yahoo!

From l.a. this morning.

She decided to bring a product managers and talk more about some of the different initiatives we have seen from this company.

Maybe she had that option because the stock performance has been great.

But you can look back at the last year and get a sense of where she's trying to get this company.

70 acquisitions, and absolute terror on the m&a front.

A lot of them are small, but they're trying to bring in talent on a bigger scale.

And tumbler is one of their big products.

They're getting rid of big product that did not make sense.

Yahoo!

Has a lot of stuff that they're pretty good at, but nothing we are hitting home runs on.

What do we do?

It raises the question of what kind of home runs they will be hitting and marissa meyer's second year.

A big part of that performance is tied to asian assets, and as the berkeley alibaba.

A lot of the credit might go to a group, -- and specifically alibaba.

A lot of the credit might go to a group and not just marissa meyer.

Revenue could end up being worse this fiscal year than last fiscal year.

She has talked about doing a better job in search.

In the next 12 months and expect that to be a key priority for her.

Better ways to find -- to make certain relevant and finding money in that.

In have news for you, facebook and google are doing a pretty good job of taking dollars away from yahoo!

Jon erlichman, thank you.

And we will take a closer look at meyer's acquisition strategy.

It has mostly been about start- ups.

Yahoo!

Made much bigger debt with its purchase of tumbler.

Here's where she said in me about this purchase.

In terms of a larger acquisition and why now, this is obviously an exception.

You only do an acquisition of this size and scale if you find an exceptional company , and yahoo!

Is that -- and tumbler is that.

Ronald josie covers the internet industry for securities out of washington.

Looking at tumbler as indicative of yahoo!'s bob forde, what does it -- path forward, what does this add to -- whose business?

Eni -- 2 yahoo!'s business?

What we have seen from our view is that it brings the number user base, 300 million users that are largely incremental.

You're not having to monetize these millionaire more blogged that are out there.

-- million or more blogs that are out there.

Paul sweeney, there was a lot of skepticism when we saw the price tag on this deal, especially since tumbled as not make a whole lot of money.

Are you optimistic?

It remains to be seen.

She has bought 17 companies since taking over and tumbler is the biggest.

I did what yasu is looking for from tumbler is to beef up their social media jobs, number one, and number to come by to give them some presence on the mobile front.

Yahoo!

Has lagged behind google and facebook, and that is one area where they have to get better.

Because those were the users and advertisers are going.

Let's forget about tumbler for one second and thing about the other 16 acquisitions that have been much smaller.

What do they say about yahoo!? the covered was bare and acquisitions are the only way to draw in the kind of people that once worked for yahoo!, but now work for printed -- for competitors?

I think marissa meyer came from google, which is obviously a very product central -- centered place.

A lot of it mean acquiring engineering talent, acquiring product and bring in in-house.

I think it was quicker and faster to go out and buy the products, by the engineering talent rather than developing it in house.

But the question is whether it shows its results in advertising.

How long does this entire process takes before we can see on to compete with the will and facebook docked -- before we can see yahoo!

Compete with google and facebook?

It will be some time.

Yahoo!

Is all over the map, but they are focused on new products.

It to the extent that we can see it engagements are growing -- and mind you, yahoo!

Had a very busy home page.

If you can see engagement growing, then you can see a path toward you what you said earlier where we can detraction -- traction cumming.

De you think -- do you think the hon eamon might be over for marissa at this point?

-- the honeymoon might be over for marissa at this point?

Rex to carefully for yahoo!, they do have alibaba.

-- thankfully, yahoo!

Does have ali baba.

I think marissa meyer has a little bit of time to figure this out.

Investors are mostly focused on how to monetize alibaba.

After what happens it's yet to be seen.

We need to see better operations, but i think that is this an area where mostly investors are focused on asian assets and monetizing them.

Thanks to our bureau on yahoo!

-- duo on yahoo!. but also take a look at some of the other top stories today.

Spotify is ramping up its global fight against pandora.

It is in an number of asian countries had already in hong kong.

They have 24 million active users.

Pandora said it has 70 million.

And $2 billion spent to get a bigger share of the mobile market.

Baidu has agreed to buy the app store 91 wireless.

Correct and the ceo of russia because the biggest company wants what may be the world's most expensive tablet computer.

Gas from is -- gas from wants $3.7 million in at the tablet.

Coming up, a corporate battle against the enemy within.

We will talk to the cyber security firm who says companies are overlooking a giant threat.

? you are watching "market makers" and i am erik schatzker.

What is the real lesson to learn from nsa leaker at snowden?

You probably think it has to do with government surveillance.

Our next guest says we are missing an obvious lesson.

It is the enemy within that poses the greatest threat.

What are you getting at?

When we talk about security and surveillance, most of the time you are talking about hacking, but that is not what you were talking about.

It is a form of attacking.

Most of the government and ceo's are focused on keeping the bad guys out.

A lot of money is sent out -- spent on that.

The problem is, like with the nsa, the enemy is within.

And people have differing opinions on him as to whether he's a hero or a villain.

We can leave that aside for a second, but the reality is that you have a lot of sensitive information inside and the most sensitive is known by people in the company.

Whether he got it legitimately or found vulnerabilities that allowed him to get it is still not known.

Do your clients not get this?

It is kind of like your 2000 -- the year 2000. people want to do it once and be done.

You've got to keep those things current.

Not just every day or every year.

You have to make sure your employees are not doing bad things.

What is an example of this kind of thing?

And i understand there are certain names and such that you cannot divulged.

Give me an example of something you have been working on recently that it leased exposes the problem.

You can take a number of industries.

In europe, and insider diligent trading off the corporate network.

And put bad trading positions in and costs -- cost the company billions.

You can go to a more recent example where employees have gone into certain systems that they were not supposed to and leaked critical information on military or state department issues.

But what is a bigger risk for a company?

-- what is a bigger risk for a company?

You have a land line or the computer hookup to the wall and a corporate network, or wireless?

It seems like wireless is a new frontier.

So many people -- we have been doing a global road show for the last few months and most people think the laptop and desktop is more secure than mobil.

-- mobile.

The reality is the opposite.

The mobile platform is more secure.

Your contacts, pictures, that stuff is completely open.

It is no different than your password.

However, the applications themselves are encrypted and protected and it is a more secure device than your laptop or desktop ever will be.

But the outside and inside guys are exploiting the vulnerabilities in the operating systems, whether it is microsoft laptops or desktops . we have heard of vulnerabilities in windows, for example of what about location tracking?

Looking at the government, or hikers for that matter, getting access to people's files -- or hackers for that matter, getting access to people's files.

But right after that, what worries people is that knowing where i am.

Some are actually just talking to get your location, knock you off on the corporate side.

It i can tell you that if you have an identity theft, that is a big deal on your credit score.

A lot of small businesses do not know what to do.

My first thing when i go to talk to them is, use an ipad for financial transactions and do not serve.

Do not let other employees have access to that either peace.

Some of the largest banks in the world, of the largest defense and telecom companies, if you had to identify one thing that all of your clients want more than anything else these days in terms of help, services, products, what is it?

They want to understand where the weaknesses are and how they strengthen their digital identities, so that they know exactly who was in the system and what they're doing.

It goes back to the first statement.

It absolutely does.

Knowing how to protect yourself.

That is correct.

Thank you.

When we come back, who do fashion designers go to when they want their stores to look as amazing as their clothing?

He will meet this guy next.

? ever wonder what tricks of a dream -- and brands are using to sell out the premium?

Meet the daddy of luxury, peter marino.

He has become the go to designer for fashion boutiques around the world.

We find out why.

It cracked crystal art works, golden walls, and a three-story venetian glass sculpture, just a few of the design elements used to lure in customers to than the new flagship chanel's store.

It is very much a marketing approach the idea.

When you are in chanel, you know.

You do not need a sign.

He is the luxury retailer's architect of choice.

Half of 40 designs are high-end stores for brands like chanel, dior, and louis vuitton.

To correct i -- i really look at the product and i surround it by the product.

I design it around the product.

He is not just an architect.

He is a sensualist.

Peter had a remarkable command to create sumptuous environment that sell luxury goods.

Those sumptuous environment do not come cheap.

The vast majority of his projects are $10 million or more.

This store alone has 25 commissioned works of art.

You do have to keep easy circulation, easy flow.

No dents.

Open floor plans and dramatic lighting, and easy cash registers.

He moves customers from the silk and cashmere straight through to the checkout.

We no longer we hold the customer in the store, the more likely we are to get money out of them.

It does not feel like a store, and it is part of what i -- the success of what i do with the customer.

It's gorgeous, i wish my home looked like it.

It what an interesting character.

There's some interesting architecture there, but pretty easy to be distracted by his outfit.

It is interesting, because he had such good taste good and yes.

By you do not like his outfit.

He is a unique character, that is clear.

Hang on a second.

There is breaking news.

Dell was scheduled to put a buyout to a shareholder vote on thursday.

Now they're saying they may delay.

The special committee of the board has been in charge of the process the whole way long.

You have to be getting very concerned by carl icahn has a very persuasive argument, and that michael dell's $13.65 per share buyout with silver lake could be in jeopardy.

In the very least, they can buy themselves a little additional time and decide what to do before shareholders are forced to decide on thursday.

I wonder if they gave that to other shareholders.

They are constantly taking the temperature of the market to figure out who is behind it and who is not.

That is really big news.

We and everybody else, you ought to imagine, are gearing up for the dell vote on thursday.

This has been a drumbeat for weeks.

Carl icahn just recently sweetened the pot, if you could call it that, saying that he would throw in a warrant, such that it dell shares ever topped $20 -- and we are a long way from their right now -- we are a long way from there right now.

It would give additional equity, making his offer that much more attractive.

We do not know if they have gone in favor of carl ikon's offer, or if they have just gone away from the deal with michael dell.

Either carl icahn is getting into your head or you aren't deciding that it -- or you have decided that it is worth more than $13.65 per share.

We'll be back.

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

Breaking news on.

The board may delay this thursday's vote.

Don't let the numbers for you.

Earnings double.

Today's report raises red flags.

How sex and drugs have rocked and rolled china.

You are watching "market makers." i'm erik schatzker.

We want to update you on the breaking news.

We just learned the board of dell may delay a vote of the takeover.

It is a bloomberg exclusive.

Cristina alesci has been following the story since it broke into an array.

The dell drama does not go away.

The bottom line is -- the special committee will decide the day of the vote.

That is how confusing this entire process has been.

Remember, shareholders have until the day of the vote to actually change their vote.

That means they could be voting no today and yes on thursday.

It is a really compensated that is what the special committee cannot make a call until the morning of the vote where they feel they will have a bit -- better view.

The dell site has been talking about how their transactions can be executed faster than carl icahn.

Now they are willing to delay the vote to get shareholders to come over to their side.

That is a touch of irony.

At the very least, this tells us support for dell's buyout offer is anything but rocksolid.

That is right.

A wild card -- shareholders who do not vote counts as a no vote.

There is also another element that can throw things off.

You can get a simple majority.

Michael dell cannot vote.

If you just look at it on a pure numerical basis, carl icahn has the upper hand here because remember, he has support of about 20% of the shareholder vote.

He estimate up another 22%. you take dell out and there are only 75% of the shares and play.

Is there a consideration -- does this tell you about which way the momentum is leaning?

It is hard to tell from the vote counts that are coming in.

They can change their minds.

An interesting player.

They are a well respected firm that does not throw around its reputation lightly.

People are paying so much attention to this.

Anything but once a mental -- coincidental.

We learned this today that their considering delaying the vote on thursday.

Court that is r -- that is right.

Michael dell will tell shareholders that silverlake is entitled to a breakup fee if the company assigns another deal within a year.

That is a big drain on the company's finances.

It is very much out there that there is $450 million at stake.

We have with us the executive vice president and a chief research officer.

He is with us from outside of boston.

You have heard us talking about this breaking news on the possibility that there will be a delay of the shareholders vote on thursday to some point in the future.

What does that say to you?

It says they want to take more time to weigh their options.

I think they definitely -- it opens up the possibility that they want to do some more selling to existing shareholders to try to tell their story.

I think it opens up possibilities that the michael dell team could raise their offer.

How likely do you think that is at this point?

It seems like the shares are trading below the offer price.

Can we take anything away from that?

What i take away from that is that there is a lot of uncertainty around the carl icahn deal.

There is speculation within the carl icahn deal.

Investors are trying to figure out how to play this.

I think as you guys know, the market hates uncertainty.

That is playing out in the stock price going forward.

I think that is the question that investors need to be asking themselves.

Introducing more uncertainty into the dell story going to be good long-term?

I would say it is not.

One thing we have been hearing is there are 20% of the stockholders that would rather take the deal on the table than risk the stop -- stock dropping further.

There are a lot of different numbers out there.

I think there is an element of that at play.

That element gets higher as we get closer to thursday's before your breaking news.

People are saying i want to be done with this and i want to move forward.

What do you think of the proposal?

I think they're optimistic.

I think what you see here is and the question you have to ask yourself -- going forward under the carl icahn plan, will the company be better decisions to grow?

-- positioned to grow?

There could be management turmoil and public scrutiny of the markets.

I don't think it will be able to fix the software business.

I think it takes away flexibility.

What about the psychological dynamics at play?

This is a law of the jungle type scenario.

Michael dell and silverlake, if they were to delay this vote because they are working hand in glove with the board look like a wounded animals.

If they are wooded animals, you know what carl icahn is going to do.

Those are your words, not mine.

I think there are a number of ways to skin this or you don't --spin this.

I think that carl icahn has come back late in the game with what he is putting forth as a better offer.

I think it is plausible for michael dell and for his team to be able to say let's sharpen our pencils and take a closer look at this and see if there's a way we can get a better valuation.

That does not change what i am talking about a few minutes ago.

Look at hewlett-packard.

Have they been able to execute with their plans?

I would say absolutely not.

I don't see how uncertainty is a good thing going forward.

It all comes down to the fundamental business.

Thanks for checking it -- joining us on this breaking news.

When we come back, we will talk about goldman sachs.

The company doubled earnings.

Investors are not terribly pleased.

Should be -- they be concerned?

We will talk about china.

Sales soared for one of the biggest drugmakers last year.

Police say it is all because of sex and bribery.

Don't miss that story coming up on "market makers" on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.

? this is "market makers." the goldman sachs earnings call ended a few moments ago.

The watch world of the call is comfortable.

I took that line from an analyst.

The leverage ratio, to cope and operate in times of stress.

It measures the amount of equity may have to hold.

The bank was very comfortable with where they stood on the leverage ratio but he did not disclose a specific number.

They try to get a nuance of how high and how low.

They said when we have real confidence in the exact numbers then we will share it with you.

We will go with pretty comfortable or very comfortable.

Citigroup has indicated the ratio average reached five percent in june.

Wells fargo said it exceeded both the minimums.

U.s. relators have proposed a minimum of that regulators have proposed five percent.

Jpmorgan is below those at 4.7%. another thing i want to point out, the fixed income currencies.

It was a record number for goldman sachs.

At the same time, the actual increase trailed that of its peers.

The fixed revenue was 12%. it trailed j.p. morgan's 70% and citigroup's 18%. -- j.p. morgan's 17%. what was the tone of the call?

The reason i ask is because we have seen it goldman sachs stock lose more and more.

It is only down a couple of bucks.

Nonetheless, it seems as though people were losing more confidence over the course of the call instead of gaining it.

It sounded like they wanted to get more certainty around the leverage ratio.

Goldman sachs would not budge on that.

They were cautiously optimistic about the economy.

They kept coming back to the phrase that we are cautious yet optimistic.

We don't want to get too far ahead of ourselves in predicting anything specific because a lot can change between now and the end of the year.

We will drill deeper and deeper into goldman's business right now.

Michael moore covers wall street and the goldman sachs here at bloomberg.

We have not seen morgan stanley and make america and merrill lynch yet.

-- bank of america.

Compare goldman sachs and tell us where you think the firm is going?

The majority of the revenues comes from investment banking.

It is not a major lender.

The leverage ratio is fine.

Ultimately, it is activity levels in trading and banking.

The backlogs for investment banking runs flat with the first quarter.

Most of the -- most has been driven by underwriting.

Next year with mergers and acquisitions.

Who is doing the better job running the business?

Is it goldman sachs, citigroup or jamie dimon?

When you look at jpmorgan, it does fine.

Goldman sachs is the market leader in terms of advertisements for equities.

They do very well in underwriting.

When you look at what changes businesses, this was not a great quarter for goldman.

Last year, the numbers were weak.

You also have quality of earnings issues with a low tax rate.

The opportunity is on risk- taking moving from debt to equity.

That plays into goldman.

That sets them up for trouble.

Michael moore, you covered this on bloomberg news.

What is interesting is of the underperformance in trading.

Fixed income was light compared to what analysts were expecting.

Equity made up for it and was better than expected.

Investment banking was better but the fixed income number was not quite what people were expecting.

Ken pointed out that goldman is not a commercial bank.

As we go to a higher interest rate environment, could that hurt to goldman given the fact it is not a big balance sheet and cannot offer the extension that commercial banks can and win more of the business where access to credit is really important?

Right.

That is a big thing on the call.

There were a lot of questions about the interest rate environment.

Goldman has made strides in its underwriting business.

They have paid -- the big question is, is that going to dry up as interest rates move higher and companies are not as desirous of issuing bonds.

We saw some other warnings about mortgage revenue with higher interest rates.

You were talking about fixed income trading.

Goldman is much more committed in commodity trading.

That might have hurt them in the overall fixed line.

As it relates to mortgages, the five-year opportunity for goldman is when the federal government moves to get out of the mortgage business and you see a tremendous securitiza tion.

That's what goldman sachs does in a big way.

It helps all the investment firms.

People may be under the impression this is a good quarter for goldman because it beat estimates by so much.

How is it that analysts like yourselves consistently underestimate goldman's earnings?

Five of those quarters, goldman has bp estimates on the street -- goldman has beat the estimates.

Lower tax rates.

When you are looking at investment banking in the capital markets, it is looking at the trend for two to three quarters.

You cannot nitpick with anyone quarter.

Goldman looks good dir ectionally.

Second quarter, not as much.

Thank you for joining us.

Coming up, two americans made big bets on a brazilian billionaire.

One that burns and the other one not so much.

We will tell you that story next.

? america's best known many measures -- managers.

Strategies have diverged.

Like rod has bailed -- bla ckrock has bailed on batista.

Pimco went all in through march.

The firm cap to buying bonds.

Pimco increased holdings to % 576 million.

Prices on bonds have fallen at the end of march t oo a record low.

His empire is crumbling.

His personal fortune has fallen by $30 billion.

Investors are bracing for what could be the biggest ever corporate default in latin america.

Credit suisse estimates $13 million by the end of this year.

He has some answers to give.

It is 26 past the hour.

Time to get on the markets.

The focus has to be europe.

We are part -- minutes away from the market close.

In the red, the ftse 100. they are all sing the kleins.

Nothing major but european stocks are falling.

-- they are all seeing declines.

Auto sales.

A dire reminder.

We saw a 17-year low.

Going in the complete opposite direction than u.s>. auto sales.

I want to point out the euro because it is not down today.

It has been strengthening all day long.

131.34. it has been a strong few weeks and the euro is stronger going into ben bernanke's testimony.

The focus will be on tapering talk.

That has been boosting the dollar.

The faster the fed papers bond purchases, the more it is a sign of the strength of the u.s. economy?

That all bodes well for the u.s. dollar.

Quantitative easing weakens the dollar.

Especially now that interest rates will stay low for a long time -- it is getting interesting again.

We will have more on the markets later this hour.

Be sure to tune in.

Coming up, the big drugmaker caught up in a big scandal.

Sex, bribery and hundreds of millions of dollars.

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

Is america finally going to get the tax overhaul it means?

-- it needs?

Congressmen are leading the push for tax reform.

There is an effort to rally support for the tax plan.

Neil richardson is an analyst -- let's start with what they are talking about.

What kinds of things are on the table here?

There's a lot of agreement between these two chambers, which is nice to see for once.

One of the things that is the impetus for a corporate tax overhaul is that $2 trillion are overseas.

The tax plan to help bring that money back to the united states so it can be used for u.s. investment.

That is key and the cornerstone of any tax plan that will move forward this year.

Just allowing companies to bring back overseas profits does not amount to a tax system overhaul.

It is just solving a very serious problem but just one.

What about other discussions around eliminating tax breaks , some industries like energy get massive tax breaks.

Are republicans willing to give those away?

It looks like they may be.

Both chambers are doing this experiment.

They're both saying let's imagine the world with a clean slate.

We have news that they want to rip up the script.

Which loopholes the we want to keep and which ones do we want to toss out?

One common agreement point is that they both want the corporate tax to be lower and they want this to be revenue neutral overall.

That means there'll be winners and losers in the industry's and we will have to see how all these dimensions play out over the course of the next two months.

Another one has been overseas earnings.

Companies like apple.

It is not alone.

Other technologies have somewhat cash overseas that they are not bringing back because of tax policies.

Any discussion about changing that?

Yes, that is the whole crux of the debates how to get that money back.

Again, the tension is how to pay for it.

Any change in how the u.s. tax overseas earnings -- it will cost some firms who are domestic players more than international players.

The key losers in this discussion will be manufacturers who have most of their operations in the united states.

Getting them on board will be humongous for how this thing evolves.

Also, there are in the house -- some in the house who want to bring in the individual side of the tax equation.

If we open the door to reforming off of the individual tax code, which is very likely to be up for discussion, this is a pandora's box.

Things become much more difficult and complex in terms of getting an agreement that everyone commits other side with.

Thank you very much.

Good to see you.

We will talk about another overseas company.

Sex, bribery, and price fixing.

These are some of the serious allegations facing glaxosmithkline in china.

What exactly are they being accused of?

Some very wild allegations.

They have been raking it in, and china.

20% last year, four times faster than emerging markets.

Police say they have in paying out bribes even sometimes in the form of sexual favors.

The allegations are that executives use travel agencies as conduits to receive these bribes.

They say some executives took sexual favors and other drugmakers transferred money to the agency.

They say bribes went to government officials, hospitals, doctors, allegedly nearly half $1 billion.

For chinese executives are being detained.

The cost of the bribes gets passed on to the price of the drugs.

In these businesses, i think the operation costs involved in the medicine are higher.

Everything needs a cost, such as holding a meeting or conference.

The cost should be included into the medicine prize.

-- price.

In response to these allegations, they say they are deeply concerned and are reviewing all third-party agency relationships.

They said they will cooperate with the chinese authorities.

Glaxo is not the only company that has been caught up in this regulatory dragnet in china.

There are currently four multinational drugmakers who are facing the authorities.

These companies are seeking legal advice.

A couple of weeks ago you had a man -- medical executive on the phone who was being held hostage in china.

We are seeing broadly and effort by regulators to try to crack down on corruption.

I was speaking to jeff jonas and he thinks this is an attempt by the administration with new leadership in place to be shown as taking a tough stance on corruption and also an attempt to lower prices.

He says the chinese prefer local ownership and manufacturing.

Is going to be a part of the bigger push from the government.

. olivia sterns, thanks for bring up the story in china.

It is crazy stuff.

We will take a look at something else.

Last night's home run derby.

That is next here on "market makers." you're watching "market makers" on bloomberg television, streaming on your tablet, your phone, and bloomberg.com.

? breaking news out out of washington.

Negotiations to prevent democrats from exercising a nuclear option in the senate appeared to be producing results.

Let's take you to peter cook.

We have a deal.

Harry reid announced a short time ago that they have a way forward in dealing with these nominations.

It has caused so much of this agreement in the u.s. senate.

The first evidence of just happen on the floor.

The highly controversial nomination for the project -- protection bureau -- he has run as an acting director.

The agency cleared an obstacle, 71-29. a concrete demonstration of a deal.

Avoiding a larger fight over senate rules that could have bottled up the senate.

This means he is in the job permanently.

This is someone who is already moved on mortgage rules and auto lenders.

He has the full backing of the congress behind him.

It lifts a cloud.

It means the larger fight over the president's nominee appears to be avoided.

They have cleared that hurdle.

The vote could happen as soon as today, perhaps tomorrow.

It looks like he will be the head of this agency.

This is a significant development.

Peter cook, thanks for the update.

We will move on and take about baseball.

Right here in new york city last night.

Major league baseball today.

You will not have to be there to enjoy all the thrills.

Baseball is out to make the game and interactive experience for fans watching at home.

Rick horrow is an expert on the business of sports.

The business is getting more technologically savvy.

We saw it last night.

The final vote that put him in the all-star game.

They had nearly 80 million digital votes.

It is amazing.

The app which is the top application, 1.5 billion accesses.

That is why they are the most profitable entity of all of these revenue sources for major league baseball.

This kid, the cuban defector who sided with the oakland a's, it is incredible what he did.

I could not begin to ponder swinging like that.

Take a look at that highlight.

It is incredible.

It is all over twitter.

The place was full and jumping.

The ratings were great.

The all-star game had been lackluster previously.

Some of the ratings have been lackluster as well.

This is an exciting season.

There seems to be fan momentum.

I am wondering how because the more we learn about the game, the more we learn, it seems, player after player was on the juice.

The investigation in florida has involved some very big names.

Not just a rod.

That is precisely the issue.

Everybody is thinking the more powerful you are and more homeruns you kids kids, you have to be on the juice.

That is the way it was with mark mcgwire.

After tonight, everybody is talking about the investigation.

This is a celebration?

It is a celebration until the third out tonight.

Baseball is doing very well as a business because of television contracts.

We have the first induction at the end of july with no living active players and that did.

It would've been roger clemens and everybody is not eligible.

Baseball has to have -- it is such a shame.

Another surprise, the pittsburgh pirates all the sudden doing very well.

They are a surprise.

56 and 37. it is the first time since 1992 that they may have a winning record.

Are they doing better than the reds?

They are a game behind them but they are doing ok.

The highlights are not a big deal.

I don't know who pulled that one out, but that is ok.

They are playing well but not enough people are going to games in pittsburgh.

On the business of sports and surprises of the season.

I am going to the british open to cover golf right after this weekend.

I think that is great.

I would rather watch a baseball.

Rick horrow, always good to see you.

For more on the business of sports every wednesday at 9:30 p.m. eastern right here on bloomberg television.

Coming up, retail therapy.

We will show you how a fashion label jump started in a few days all by mobile.

That is next on "market makers." ? this is "market makers." a retailers dream.

Watch and app and see expose of sales growth in a week.

That is what happened to urban outfitters.

It is already bringing in 10% of online sales.

How are they doing it?

The director of e-commerce and marketing at free people.

The story piqued our interest.

What is attracting so much attention in a short time frame?

There was a lot of demand.

We have a strong customer base that is when asking for this for a while.

I think they were excited to get in their hands full stop that was part of it.

The other thing we're trying to do was create a fantastic shopping experience experience.

I've got to give a lot of kudos to our design and creative teams for making something that is beautiful.

The other goal was to allow our customers to engage with the social committee.

You can take pictures of yourself and upload them directly to the product detail pages.

You can share those with your friends.

We have a nice social community that is built into the app.

When you say demand, does that mean all the people who download this app that have started using it were existing customers of yours or did you have a sense of how many of those people were new to free people?

We are tracking those numbers daily.

What we are seeing is that the majority of returning customers.

There is a nice mix of new customers as well.

I think the marketing efforts that we are doing are helping to bring in new eyeballs and new customers.

It is only available on the iphone and the ipod touch?

That is for it.

It is -- it will work on the ipad.

Those are things were talking about internally.

Our ipad experience goes ridley to our site.

That is a terrific experience as it stands.

The android is something we are considering and looking into.

One of the reasons we made an app in the first place place was to allow our customers to access that functionality of cameras.

To be able to take pictures.

Also to be able to use the scanner that is built into the camera.

Why did it take so long?

I'm sure you're happy about the results but why did it take so long to get this app developed?

Do you find it is hard to get corporate parents in this day and age of social media?

The dollars necessary for the kind of software development required?

Yeah, i think there needs to be a business case for it.

That was a thing we needed to prove out before we got started.

In our case, we knew our customer is a very social customer and already using lots of apps.

We wanted to participate in that field and have something for them as well.

In terms of the duration, i won't say it was a superfast project.

It took some time.

We are happy with the duration with which we were able to launch it.

Do they spend more money on the app than they do on the website?

We are seeing a slightly elevated makes.

It is only been three weeks since we have been out.

We are waiting to see how the trends and normalize over a longer.

Of time.

-- over a long time frame.

More engaged shoppers are using the app.

Thanks for joining us.

He is the head of e-commerce of free people.

Next, exchange traded funds have been red-hot.

? that is going to do it for "market makers." tomorrow, ben bernanke on capitol hill.

You want to hear what he has to say and so do we.

Join us tomorrow.

Now, let's take you to julie hyman.

The market wants to know what ben bernanke has to say.

Investors will watch the testimony closely.

As always, economic data is out.

What does this mean for what the fed is going to do next?

In today's case, with consumer prices rising the most in four months getting closer to the fed inflation target.

Does that leave the door open for tapering?

It could put pressure on stocks.

Earnings from coca-cola, that stock earnings fell short of estimates.

The prophet is falling overall.

Volume around the globe is lower.

Also, the currency markets.

We are seeing a pullback in in the dollar versus the japanese yen and versus the euro.

People are trying to game out what the fed will do next.

People are selling the dollar.

Options -- we're looking at the correlation between options and etf's. joining me is an etf specialist to talk with me about the world of etf.

We saw a dip in june but your research shows it came roaring back in july.

We are only midway through the month.

That is right.

They are very hot, $23 billion of new cash into july.

That is less than 10 trading days.

If the month ended now, that would be about the 10th best month ever.

This is on the heels of june were there was a 12 billion of outflows.

Part of the reason you these inflows are two reasons.

U.s. equity etf's are continuing to rake in money.

The second reason, fixed income etf's , the bleeding has stopped.

That was a big part of june.

A lot of those flows came out of those etf's. u.s. equity etf's are leading the way.

It is interesting that we have seen that reversal.

Also, if you look at year to date, your research shows $95 billion is what we have seen.

Where does that put us through the year?

$95 billion... a few billion a head of where we were last year.

Laster, we took in $188 billion.

We are on pace to break last year's record.

They continue to be on a record breaking pace.

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

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