Merger Mania: Market Makers (07/29)

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July 29 (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)

. . iconic companies in the world of advertising and retail combined.

And the pharmaceutical world gets a billion dollar deal.

The clock is ticking a cable blackout looms for cvs as it works to resolve a dispute with time warner cable.

Bmw is taking on tesla in the electric car market.

Welcome to "market makers" and i'm sarah eisen.

Guess who is here?

A special guest.

Tom keene is here.

We will be speaking to the ceo's of army, and a publicist.

. omnicom and publicist.

We just got pending home sales for june.

It is a good indicator.

It sets up the weak economic data.

You've got to have a good economy to keep advertising going.

But animal spirit?

-- animal spirits?

And as we talked this morning, there's a lot more to talk about here is correct three mergers, one creating the world's largest ad agency that tom was talking about, another with two retail icons, and a third one that will have a big impact in the pharmaceutical sector.

Julie hyman is on luxury retailer.

Cristina alesci is on the advertising business megadeal.

And libya stearns is the the -- olivia stearns is on the drug companies.

Let's start with the marriage of two companies, one that is very well known here in the u.s., fax the cabinet, and another that is not as well- known, hudson bay.

It is one of the oldest corporations in north america, starting as a fur trader at -- as a fur trader.

This merger for two $0.4 billion, -- $2.4 billion, $2.9 billion including debt will potentially increase the sales per square foot.

This energy could boost these numbers.

If you look at the facts verses some of its competitors -- look at the facts that the avenue versus some of its competitors, sales do lag.

Also, it could be interesting to see what hudson's bay does with saks fifth avenue.

It says it will evaluate alternatives from a property portfolio, potentially creating a real estate investment.

I have seen you on the floor of the stocks that babylonish apartment.

I'm sorry, you cannot have lord and taylor and stocks that avenue.

They're two different stores, aren't they?

When you're talking about synergies, it is likely back office synergies that we're talking about.

And keep in mind, this is not necessarily a deal that will 100% happen.

Sak s will be looking for other suitors.

I totally agree with that.

A lot more interest sakjs because of its floor in new york city.

Cristina alesci, the busiest day of the year for her, no question.

Martin soros was all fired up about this merger.

We will talk to mr.

Levy, mr.

Rent.

Here is that a merger of equals?

As you know, there really is no such thing at -- as a merger of equals.

Martin soros have talked about that he is knocked off his perch as the number one ad agency.

This merger create a behemoth ad agency of $23 billion.

They're all lovey and kitty and all that before the arctic triumph.

-- before the arctic tramped.

There is a question of whether these cultures can come together.

And don't forget you have a co- c.e.o. arrangement for the first 30 months at least.

That will always present complications.

We will have to see how it goes.

And let's not forget, all traditional ad agencies are under pressure right now from the likes of google, which is using more data, more analytics . the advertising has become less of an art and more of a science.

Do you buy that?

The things that we remember about the advertising business, whether it is marketing of shoes at saks or something on tv is the phraseology.

But still matters, but now?

It does, but google is changing that.

Google is figuring out how to target people and they're looking at analysts and these large advertising companies are trying to figure out how they get the data to compete.

May i suggest that 5% of 130,000 people resonates -- resumes go out today?

Absolutely, and obviously, this deal presents a perfect entry place in the conversation to talk about further consolidation.

Who is next?

I'm asking you.

Who is next?

Publicis could very well be taken over.

Thank you very much.

Let's go to sarah eisen right now.

She looked at further transactions.

Maurice levy, john wren will be with us.

We count on you for the tough questions.

And i'm out here in the newsroom with a look at the biotech industry.

Bolivia has been looking at the -- olivia has been looking at a deal that seems to be more about taxes than those specific drugs.

On the one hand, we have a company that makes over-the- counter medicines and generics.

Right now, they're paying corporate taxes in the 30% range.

And we have the biotech irish giant and they're paying 12.5% taxes.

And we have seen this strategy before with another company also based in ireland.

Perrigo is falling.

How much will they pay?

$15 in stocks.

It is an 11% premium against the closing on friday.

It is also a dollar more than they -- then the road to the offer to pay for elan.

Correct there is -- and also wanted to ask you about the news on pfizer.

Some big news on pfizer in the past hour.

It looks like they may be laying the brought -- lange the ground for the bigger break up that we have all been dissipating -- been anticipating.

They sold their infant health business last year.

Earlier this year, based on of their animal health unit.

-- they spun off their animal health unit.

Continuing to slim down what is the world's biggest drug company.

Thank you.

The action is heating up on it pharmaceuticals to retail to advertising.

Coming up, the real madmen shake up the advertising business.

We will talk to madison avenue's best known trade publication.

And larry summers may have overplayed his hand.

It is all coming up on bloomberg television.

? a blockbuster deal in the advertising business.

Publicist's merging with omnicom to create the world's largest advertising company with $23 billion in revenue let's bring in the editor of the industry publication "advertising age." it must be a busy day for you.

Does this merger makes sense to you?

We were not the price to see consolidation in the ad agency's base.

This particular deal is a bit surprising.

It is a strange blending of very different cultures and very different philosophies and strategies.

What about the troops backed out of 100,000 employees, they have to have up to 3000 creative people, rainmakers, etc.

It do they get their resumes its per step today?

It will be very interesting to see what happened?

I'm sure where you're seeing is all about the sharks circling around these companies right now, not only employees, but clients.

You mentioned other partnerships.

What are they?

If you look at what he publicis has done, it has been very much an acquirer.

Omnicom, meanwhile, has focused on more organic growth in digital.

They have not even marketed any agency brands as digital, really only as agencies.

The french take immense pride in publicis.

How can you be optimistic?

These are two different cultures, two different companies and day today if those that are an atlantic ocean apart.

They have talked about how this is a merger of equals.

I think that is a merger of -- that is a misnomer.

There is no such thing.

These are two egos at the top of an industry that is filled with senior leaders with egos.

It will be interesting to see which cultural be dominant.

If i had to pay -- place a bet, it would be on publicis.

On the french culture there.

Precisely.

How you deal with conflicts of interest?

Conflicts have changed in the past decade or so.

Clients do seem much more comfortable.

You do see a lot of potential client conflicts within the same holding company.

I think that is driven by consolidation.

Clients have gotten more comfortable with this.

This will not be easy to navigate some of these conflicts.

I see coke and pepsi as some of the bigger ones.

Over 130,000 employees with a combined revenue of $23 billion.

It is bigger necessarily better in this industry?

Do they get more leverage or pricing power?

Interesting question.

It is hard to discount scale, but scale is not everything.

Gm, ford said, consolidated its media globally with a smaller player.

Scale is not everything.

It does not necessarily magically create the kind of infrastructure necessary for, let's say, oracle, ibm.

The gossip of the moment, coke and pepsi are going to be under the same roof.

That is the logical.

That particular conflict is the one i'm most interested to watch.

I think those are the the two most competitive marketers in the world.

But you do see a lot of major auto brands under the same roof.

Each of these holding companies have separate agency brands.

They have claimed they have very significant firewalls in place.

And it will be a challenge.

You have some people like martin sorrell and other independent agencies circling st., we are ready to pick up anyone that is not happy with this.

Correct and that is where shares are on the move as well.

Great to get an update with you.

And for more on the ad merger, looking forward to this, tom, we will be speaking with maurice levy and john wren.

And coming up as well, the former secretary of the treasury.

He may be close to obama, but that does not necessarily mean he has the inside track.

That is next.

? it is the top job in the world of economics, the chairman of the federal reserve.

The white house says president obama will not decide on a replacement for ben bernanke and a double fault.

The choices appear to be former treasury secretary larry summers and the former vice chair, janet yellen.

Hans nichols has the inside scoop in washington on what is going into the decision.

What do you know about the gossip on the relationship with larry summers?

It is a remarkable relationship between president obama and larry summers.

There was a going away party for larry summers here in the west wing.

He gave him a pair of this -- of suspenders.

It's an inside joke that larry has a hard time putting himself together every morning.

His pants are sagging, food might be troubling outside of is now.

It gets to the intent of the fact that he kind of irritated, but he has an endearing qualities.

Summers called rahm emanuel on his vacation in 2009. we know we talked to place between larry summers and rahm emanuel.

He asked for a number of things.

He asked for a seat at the cabinet table.

Golf with president obama.

He wanted the president's personal e-mail address.

And he wanted an invitation to the staff meeting first thing in the morning and a chauffeured car and personal protection.

Here is what he ended up getting.

He does end up playing golf with the president, he's in the cabinet.

He does have the ability to email president obama and he gets invited to the 7:30 a.m. meetings, but rarely makes it on time.

He does not get a chauffeured car or secret service protection.

That is the determination that a secret service makes.

We're going to let you come to our fourth 30 a.m. bloomberg surveillance meeting.

It -- it is a funny joke that he never made it to the 7:30 a.m. meetings.

The president joked about it at his going away party saying that he called it the 8:15 a.m. meeting.

How big is this lobby effort?

The more important question is, when you enter it plain, you turn right or left?

There are a great deal of people inside the white house that have a lot of affection for larry summers.

But there were many cannonade st., vote for janet yellen.

And then you have people like house speaker nancy pelosi talking about how great it would be.

Inside the white house, they're all larry proteges.

Gene sperling, rind ease, to some extent, tim geithner.

They're all very close to larry and they understand lares faults, like the president.

There is so much appreciation for what larry summers did during the economic crisis.

2009, the u.s., and 2010 in europe, the the support for what he did.

The crux -- there are certainly people making the argument that there needs to be someone new in there.

There have to be other people besides these two.

Correct they expect a third name to emerge sometime this summer.

I do not know where we will hear of that name, but they will start to come down on this and say that the president will not make a decision until september or october.

They are buying time to give a third candidate plenty of time.

Hans nichols, thank you very much.

It is time for bloomberg to go on the markets.

Equities are a little bit like this morning.

The dollar is a little bit weaker than it was.

I look in every market.

The currencies are the most important market of the world.

Coming up, it may be a blackout.

? new york city looking south.

There it is.

Welcome back to "market makers" and i'm tom keene.

With me in sara eisen.

Everyone associated with this show is off today.

We do not know why.

We're looking at a deal over retransmission fees.

At 5:00 p.m. today, with time warner cable, you will not get cbs on channel two.

Paul sweeney is a bloomberg analyst.

George clarke is a partner at a law firm.

Georgia has represented a number of players and lost -- george has represent a number of players in los angeles.

It is cbs goes away, everybody goes mental.

It jeff zucker wants to go take over channel two because it is a cool slot.

What is happening at these meetings?

Is it arguing?

Is that a quiet event?

These are professionals but it is all the time.

They have a series of these negotiations that tend to come up midsummer or at the end of the year.

It right now, they're trying to close in money gap and they may be arguing about rights.

My sense there is not a lot of anger.

There are many telephone calls going on between the people at the table and those calling the shots.

Cracks are the complex or simple negotiation?

The dax -- are they complex or simple negotiations?

They are complex.

Prices will go up per subscriber.

How much?

We are talking about cents in some ways.

It is a per subscriber fee that can very tense and, and 30¢, and if you multiplied that across a million subscribers over the course of time, it is a lot of money.

How far apart are the two sides?

Tom may not be able to watch big brother tonight.

I think they are very far apart.

Just a few years ago, the broadcasters did not get a penny from the cable distributors.

Now they're coming back and saying, you are paying espn $5.50 per subscriber and my audience is just as big, if not bigger.

Why do i not get any?

Cracks because you can put a big antenna -- because you can put a big antenna on your television.

90% of a country gets their programming from a distributor.

The broadcasters of the world have a real argument.

They bring a very big argument -- audience.

On the flip side, the number one challenge is managing programming costs for cable.

Programming costs are going up here four times the rate of inflation.

It is a tough business model for them.

Does that mean that the cbs's of the world has an argument?

-- have an argument?

Correct i think in the end, it is their content.

It is essential for them to have that content available.

They're under a lot of pressure in terms of alternate distribution means.

What about aereo?

People who are employed, right?

At this point, it is a tiny factor in terms of actual economics.

A very small number of subscribers.

But it is part of the future movie out there in terms of different ways to get your content.

The bottom line is that we are still on cable and i want to be on channel two.

To me, that is a no-brainer.

When there were not so many channels, it was a huge deal to have 10 channels.

Sure, but come on, channel two, it is easy.

But with new user interfaces, it is swiping a screen and clicking icon on the screen as opposed to standing up and turning on channel to about.

Correct -- my channel changer with a pair of pliers.

When was the last time you watched tv?

From the consumer's point of view, there are aware of this.

It is getting pretty nasty.

Who do consumers side with?

I can tell you are like my shows, but i don't like my cable bill.

It is important to keep in mind that not only is this cds, but also showtime.

They have very compelling programming and very loyal viewers.

I think there's a lot of pressure on time warner cable to get this deal done.

It is a lot more pressure.

It for cbs, it is money on the bottom line that disappears if there is no deal.

For time warner, it is more of a strategic position.

Where will we be in five years?

Would be watching netflix?

I think that it will still be the dominant station that people turn to, but it will be a very wide range of access to programming.

George, thank you.

We greatly appreciate it.

It is an annual topic.

But this time feels a little bit different because of technology.

I agree.

I don't know when it will shift.

Big brother tonight, we will have an update.

Coming up, we speak with the ceo's of the two firms, omnicom and publicis.

? bmw unveiled its new electric vehicle this morning.

It is more than just a new car.

It is a pet project of the company's ceo.

We spoke to him ahead of the car's debut.

He asked him what would make the project a success.

We would like to have a product available for the next 10, 20 years, because we need such a project -- products.

You need them in the year 2020 and even more in the year 2025. and you have to start to develop those products.

How much did you think you will sell?

It is to relate to mention a figure.

We will do this next year.

But we are absolutely convinced it will be a success, because it will be an ultimate driving machine.

How do you hope to compete with the likes of tesla and prius?

You will be surprised.

The success of tesla is encouraging for us, because it means the market for electric vehicles is growing.

And if you see the growth market in the year 2012, it is around 93,000 vehicles.

And that is much more in 2013. it is promising for us.

The crux how do you think business is going to help -- how do you think business is going to help bmw's stay as a luxury car maker?

We are a company that has always been able to look forward, to look into the future.

You have to do such a project.

Yes, it is a price step, but if you are not able to go into such a direction, then nothing will be available for the year 2020, as i said, and in the year 2025. in the development cycle in the car industry, for a new car, that is about seven years.

If i look into the future, [indiscernible] you think there is a good market for electric vehicles?

Absolutely.

It is a lightweight construction.

That is very important for the range of the car.

We have a lot of customers . i mean ws facebook, as you can imagine.

At the moment, we have about 1.2 million facebook fans.

And more than 90,000 people would like to do a test drive of the bmw i3. what is the most important thing for you about the car when you are driving it?

It is like a sports car.

It accelerate really well.

I was driving the car over the weekend class weekend, and i had the car of a competitor behind me and was always driving left and driving right and he tried to overtake me.

And then i celebrated, and he was gone.

Joining as now the -- and he joining us now.

We hear about these features people what with the car.

People are saying that they are not assured that they will be able to get to where they want to be.

Bmw is offering and s u b of your own if you need to go on a long family trip, or something like that.

And they will have roadside assistance in case you run out of charge.

Do you think people will want an electric bmw?

What is the equivalent right now?

There not being two -- they are not being too specific right now.

Portend out -- $10,000 marking given electric car.

Correct something -- correct something like that.

They're building a car using carbon fiber and the structure is much lighter.

It is a lot cheaper than a tesla.

Greg is.

And they think it -- it is.

And they think they can build on that here in the states.

I3 is what it is called.

You're not a car guy.

Does it go as fast as the be have -- as the test by?

And has a good amount of torque.

Coming up , how the theo's of the biggest ad agencies planned to make the mergers work.

? collects the blockbuster deal has been the talk of the morning.

Publicis is merging with omnicom to create the world's largest advertising company.

Let's go to the new york stock exchange where both join us live.

Congratulations to you both.

Mr.

wren, our first question to you.

You have coke and pepsi under one roof.

How do you manage that sort of conflict of interest?

First, we are months and months away from having finished the transaction because of all of the regulatory approvals we have to get.

And our plan, each of us separately, will sit down with our major clients and discuss their needs, our need, and whether we can develop a meaningful solution to any issues that they have.

We have plenty of time to do that and we will do that.

Mr.

levy, good morning and congratulations on this transaction.

Publicis had a special place in the french mind.

Have you spoken about the protection, almost a cultural protection of the french interests?

Publicis is smaller.

How will you protect the uniquely french keel of publicis?

I have personally spoken to a lot of officials in france, and what i can tell you is that the reception has been overwhelmingly positive.

Publicis has a great reaction, which will create a world champion.

And they love the idea that we are part of it.

I do not anticipate any major discrepancy.

Correct i am curious about the cost cutting.

Mr.

wren, how can you achieve $500 million in synergies without any layoffs?

It is quite possible.

Just through the pure strength and complementary nature of both organizations will generate efficiencies that should be very reasonable to achieve, given that the size of the companies and how much is spent.

It is not that big of a number.

John, which your track record and building up of on nikon, you have been very active with the omnicom university.

You have 5000 or 6000 people, i would imagine, dusting off their resumes.

How will you keep those best candidates during these next few months of synergy?

How do you keep the good people?

I don't know if politics has to do with anything.

Our people and maurice's people trust us.

We are doing this to create a new paradigm within our industry, to create opportunities, not to cut people back or limit people's careers, but to create ads that were not there before.

If i could just add one word on that -- please.

Because the reaction that we have had on both sides has been overwhelmingly positive, from all people.

And they love the idea of cross opportunities with our companies.

Exactly.

When you look at the real portfolios for each, the average energy is there to enhance all of their careers.

-- the opportunity is there to enhance all of their careers.

Maurice is a veteran of the people business, as am i.. we know how important added to each of our organizations.

We spoke to martin sorrell earlier this morning on bloomberg television.

He was very complimentary of both of your management.

But at the same time, he said this is a large transaction with its dreaded word "synergy" and all of this.

Have you decided where the c.f.o. is going to sit here, new york or paris?

Or in the netherlands out of the way?

In an e-mail that he sent to me, he described the c.f.o. position.

I would be surprised if norway had nothing to say, because i would be thinking about what is wrong with our operation.

Sarah, jump in here.

I thought martin sorrell was going to send them his -- a free basket, myself.

It is not exactly a merger of equals.

It is a merger of on =, because publicis represents 37% of the combined revenue, but has 50% of the value of the combined company.

When you look at the net income levels of each and the equity values of each, they are 50-50. we approached this from the very start as a merger of equals in order to accomplish the objectives we wanted to accomplish.

And we were able to do that.

And all valuation metrics done by investment bankers and everyone else took into consideration how much money the shareholders were entitled to.

It turns out the stars or perfectly aligned and it does come out to 50-50. john, let me give you the last word here.

This is critically important.

The idea of google, google, google tomaghi "the new york times" featured this in their article this morning.

Are you going to be digital companies, or will there always be a place for a dawn draper type?

I don't want the romance to go away here.

Did you do this deal because of google and big data and all of that?

Know, the dawn draper -- don draper types are not going away.

Google is sometimes competitive with us and sometimes not.

Most of the time it is collaborative.

We want to make sure we give our people the tools so that the dawn draper of the future knows whom to write a spot for.

Everything has to be the the combined.

We will have more science, more technology, and even more and more and more creative work.

What is your outlook for the consolidation in the advertising industry and will this combined company look to do more deals?

When you look at the reaction of the stock market this morning, i think that many should send us baskets of fruit because it shows that the market is believing in further consolidation and they believe that something is going to happen.

And thanks for joining us on this big announcement.

Both joining us, maurice levy and john wren, from the new york stock exchange.

Thank you, gentlemen, and congratulations on the merger.

Lots of synergy.

They are standing together on the new york stock exchange.

Tom and i have synergy and will be back with "market makers" in just two minutes.

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

Is it an mna renaissance?

Many are wondering whether dealmaking is back.

And how car sharing is changing the face of the rental business.

And baseball's big drug investigation.

Will it be a homerun or a strikeout for for the national pastime?

Welcome to market makers, i am sara eisen.

Im tom keene.

We are in for erik schatzker and stephanie ruhle.

They are using their vacation days.

We need to get to the newsfeed.

A look at merger monday.

The blockbuster deal to create the world's biggest advertising agency has been in the works for six months.

Publicists started talking in.

Close.

The combined firm will replace the bpp is the world's largest ad firm.

And canada's oldest company is buying sacks.

The price is $2.4 billion.

The deal may lead to the creation of a real estate investment trust.

And it sounds like the sequel to one of the best-known jewel heist movies ever, a real-life bandit walking into the carlton intercontinental hotel in france, taking off with an estimated $53 million in jewels and chimes -- tools and diamonds.

It was the setting for a 1955 our hitchcock to will robbery film, "to catch a thief." mergers and acquisitions and jewelry going out.

With major deals announced today it feels as though merger mania is back.

Merger activity this year is a little bit light.

On 2013 we are on track for a subpar performance.

Our mergers and acquisition team leader a bloomberg news has pulled an all weekender, nonstop from friday afternoon.

It has a 2005 feel to it.

The interesting thing is we have had a lot of mondays like this, a lot of merger mondays a couple of months you may recall -- that came on a monday the same monday that -- the came on the same monday that a multibillion-dollar deal was announced for life technology.

We have had these big explosive deals that we pay attention to.

But we haven't had the steady flow of $1 billion or $2 billion deals.

This is a strategic idea, not so much -- there are typically companies that are the least this -- they are typically companies that are not the least bit desperate.

If you feel like you need a lifeline that lifeline does not have to be a buyer.

It can be viewed debt markets.

You can raise whatever you need to raise to pay off r&d, payback shareholders, whatever you need to do.

You and i follow this trailing on a one-year or two- year, people come out with this word synergy.

I circle it every time i see it.

"hope," "synergy," "paradigm," these are bad words.

What does this word mean to you?

I mean it -- it means job cuts.

People will lose jobs.

It is usually hr areas . do you do a deal just for synergies?

There has to be a strategic advantage.

Is that an advantage at the top line of the income statement or is it down in earnings?

It is usually down in earnings.

Given how cheaply you can borrow, you can always always be creative.

You have to have something more than just that.

We need to build up -- i need to build up operations and emerging markets.

Or i am a european company and i am too dependent on europe.

Lloyd blankfein was so unhappy.

The big boys were not in this deal this morning?

Clocks there were very few deals were you did not see goldman sachs and j.p. morgan.

All boxed out.

Ken mullis is an older ubi guy who started six years ago.

He started in $6 billion deals.

He is the only advisor to omnicom.

Jeff mccracken.

Ken mullis has a home run deal today.

The flurry of activity continues.

The dow shareholder meeting has arguments -- has already been rescheduled twice.

Another vote is scheduled for this week and michael dell has told bloomberg that his current offer is in fact and final offer.

Joining me is cristina alesci who is back-and-forth from austin texas.

Why is michael dell speaking out now?

He is doing what he has been doing all month long, paint a very bleak sure of the company without him.

He is saying shareholders do not approve of this merger and you have an -- you have face certain -- a proxy fight between carl icahn and michael dell.

What he is trying to message here is that is not going to be good for shareholders because it will generate continued uncertainty.

He is going on this large explanation about how into why he thinks the voting requirements around the deal will no longer fair.

Which is interesting.

He previously agreed to them.

From the outside it looks like you are in just -- it looks like just because you are losing -- how much are you willing to pay e is only willing to pay $.10, which carl icahn thinks it's ridiculous.

If you think about the rule change he is asking for, pretty genetic.

You are talking about under the previous agreement, you need a majority of shareholders to vote in favor of this deal.

What michael dell do in this deal is that people who not football should not count.

That shrinks the people who are eligible to vote and makes the hurdle much easier to clear for michael dell.

Will the special committee allow it?

That could be seen as they open shareholder protection.

They are not going to do that unless michael dell pays up.

Are we going to see a deal on friday gekko -- on friday?

Clocks that is a great question.

In all probability we will not.

It has indicated that it is not going to agree to a voting change.

Without the voting change he has no hope of ceiling this deal.

The record date may change.

That has opened up the field to a completely different shareholder base.

It may move the needle but there is a lot of uncertainty.

How many months are we running?

We are running eight months.

It is incredible.

Our deals reporter, cristina alesci, following tell from the beginning.

Herbalife has been the center of a very public battle between billionaire, activist, investor carl icahn and bill ackman.

We told you last week that icons along the is making money.

Julie has been following the drama.

Will it comment on the battle of billionaires?

It has commented in the past when it has come out with these earnings numbers.

They are keeping a relatively low profile.

The last big news we got from it the resignation of its auditor over insider trading situations by any individual work there.

It hired a new on is her.

Handlers -- analyst and investors are looking for news on that time.

It is one of the issues of the center of bill ackman's case against herbalife.

He says it is a permanent -- a pyramid scheme.

He says people who are buying from the company are not actually using the products, just selling it down the line.

Herbalife has said they are going to name -- and rename -- rename some of their sections.

We talked to tom graves over at s&p and he says that kind of thing should help the company.

We think the blurring between distributor and customer is something people will critically be focused on.

It will give some confidence that herbalife's customer base and customer demand is healthier than otherwise people have feared.

We have been following the stocks for a lot -- for a long time.

Will herbalife buy back more shares?

This has been the talk for quite some time.

Company did issue a buy back program that was suspended when the key gmb resigned.

It is a billion-dollar buyback program.

$800 million left in that program.

They may be satisfied with the games who have already seen -- it is how much more they would squeeze ackman by doing a further bike back.

-- fight back.

I will be watching for those results after the bell.

Herbalife is up more than two percent.

The entire car rental industry may be disrupted by a new group of competitors.

More on that industry in a moment.

And the vice president joseph biden talks about china's slowdown and what it means to united states.

We have an exclusive interview with him over the weekend.

This is "market makers" on your television.

Did you know that each year americans rent 50 million cars to the tune of $11 billion.

That is a huge industry and one of the a guest players in rental cars has stocks up.

With us is a senior research analyst.

We got news from hertz, profit is up 31%. these companies are certainly enjoying their newfound dominance.

Do you think this will continue?

Thank you for having me on.

I think it could . the big three players, hertz, avis, and enterprise, they control 90% of the rental markets.

Whether this leads to less competition, i doubt it leads to less competition.

What it means is you now have three sophisticated players that could control what happens in pricing with volumes.

As an investor you probably would have just more confidence and sustainability of the shared price.

It sounds like it is destroyed up only of the rental car market.

Certainly great for shareholders, not necessarily for consumers.

I would say there are still eight national brands that are out there that have to be controlled by three people instead of four.

From my perspective you have all of the options and price point to ever had as a consumer.

What you have as a shareholder is an investment in a company that now probably has more rational and sophisticated players working with it.

I like the idea of rational players.

We have much better revenue growth on top of the income statement you and these have been dogs decades.

What has changed and what is the belief in the persistency of the stock performance we have seen in the last year?

I think you hit on it.

We go back to the sophistication that has been developed over the years by these companies, whether it be fleet management systems, just add better understanding of customer behavior.

As shareholders you would have to have more confidence in -- confidence.

There was a massive jargon in alert.

I got a car from san antonio to little rock.

It is a question of whether you have a car in your fleet or not.

During the winter you get a lot of demand down in florida.

So you want to have more fleet then you would normally have in florida.

It is the ability to manage -- serenades the hummer h one when she rents a car in manhattan.

What i do need is zip car, car sharing.

How is this model disrupted the industry.

I do not know that it has disrupted it more than it brought some more discipline to the industry.

Effectively what car sharing does is it allows you to manage your fleet to meet demand when it is at its peak.

Your peak demand is on the weekends for traditional rental car companies.

Your peak is actually in the middle of the week for enterprise, hertz, and avis.

That just improves the utilization, the efficiency of your fleet.

It improves your ability to learn money.

-- to earn money.

Thank you so much.

Research analyst.

When was the last time you rented a car?

I do not have a drivers license.

I am a true manhattan.

You have heard this before, israelis and palestinians.

They are sitting down to talk peace.

We will tell you why this week's talk in washington may be different.

It is time for us to take you through the big international stories of the day.

One of the big geopolitical risk that investors have an eye on, the israeli palestinian conflict.

Negotiators will meet in washington today.

This is the first serious discussion in three years.

We are joined from washington with a keen focus on these international it choose.

-- international issues.

What is going to be different today?

The key thing is the two sides have agreed to start talking again.

As you mentioned that they have not spoken in three years.

Even to have an agreement to restart talks is a big deal.

The talks have been off-again on-again for 20 years now.

This is a problem that john kerry, the secretary of state, has referred to as the granddaddy of crisis.

He believes that other fires are burning in egypt and syria but he can actually get something done here in the middle east.

Over 18 years of direct experience, a former ambassador to israel, educated in australia, we have seen the story before, haven't we?

Clocks martin and served in senior positions in bill clinton's administration.

He is twice accredited to coming to the verge of an israel palestinian heel.

His critics are saying this will be a chance for him to redeem himself.

What is difference now is we have a secretary of state who has put his own political capital and prestige on the line with his back and forth shuttle diplomacy over the last several months.

I would argue he is going where hillary clinton did not go, putting himself in the middle of these peace talks.

That must be a risky strategy.

It is one he is unable to take.

Political trajectories might be on the rise.

Not break any news on national television but john kerry has done that movie.

It did not work out.

What has changed in the palestinian and israeli dialogue say between israel and the gaza strip?

We can have any given secretary of state fire around all they want.

What is the internal biological we need to know about as these talks start?

I think the key that allows the talks to restart is the agreement by israel on sunday, to release 100 four palestinian prisoners.

Who had been held for 20 years or more, people who have killed israelis, including children and women.

The issue now is they did that as a good-faith gesture.

They have not agreed to stop settlements.

There are a couple of issues that have not changed.

One thing that may have changed is we may forever lose the possibility to have a two state solution.

I do not think anyone wants to let that go.

I do not think israel want to become a state of -- there are arguments on both sides to get a deal once and for all.

It has also been contacted by the ship -- by the reshaping of the middle east and the arab spring.

Good to see you, as always area while we are on the international stage we are going to talk about latin america.

There is a real boom in real estate in south america.

Home prices have sailed, setting records in places like rio de janeiro, sandy otto chili.

Argentina is being left out.

Since the president in post tougher currency controls two years ago, some market has tanked.

Home sales plunged 30% in the first five months.

The biggest declines the 2009 financial crisis.

It would have to buy dollars on the black market at 60% more than the official rate.

It is a beautiful day here from our world headquarters.

A lot of delivery trucks with boxes and boxes of amazon deliveries on a gorgeous monday.

Good morning everyone, erik schatzker and stephanie ruhle are out.

Myself are in.

Amazon is going on a hiring spree.

The internet retailing giant plans to add more than 5000 full times -- full-time jobs to its warehouses.

All of those employees will come for the on week on merger.

The president will visit a amazon warehouse in chattanooga, tennessee.

For more on their growing workforce we will speak to editor-at-large, cory johnson, who recently visited and survived visiting a fulfillment center.

They call it a fulfillment center.

It is meant to be fulfilling.

What do they need to know about a fulfillment center, what was a surprise?

The most interesting thing they've run their center is how an automated they are.

They have a system called pick and stow where the worker comes in on trucks, they unpack stuff, the scan it and put a coat on it, and stick it in any available shelf route these massive distribution centers.

You are looking at one right there just outside of phoenix.

Then people walk around with shopping carts and little laser guns when they look for in item.

You may have 50 shades of grey tucked into some blank cds.

I know you do as well.

What is interesting about this is the employee a lot of people at very basic levels.

If the omnicom workers have to go work there, they are in for for a very working class job.

How much do they pay?

Above minimum wage.

It is certainly an entry-level job.

Clocks are these full-time jobs?

Are these bed -- are these people benefited with their low pay?

Or is amazon doing a part-time play here?

They will do both.

They do a lot of seasonal hiring.

You have to take this into context of what amazon does in general.

Amazon has gone not just on a hiring spree.

Their unemployment figures have ramped up significantly over the last couple of years.

That is not just hiring for distribution centers.

This is also hiring for employees.

They are really ramping up their scale and they are trying to get closer and closer to consumers of major cities.

They agreed to take a hit on sales taxes.

They have now decided that if they move distribution centers closer to where people are they are going to be able to do second day and even same-day delivery.

They realize that is part of what they are building.

It is at considerable cost.

Their capital expenditures have gone through the roof.

They are spending in three months time what they used to spend in a given year.

They used to be in the hundreds of millions every year and now in the billions every corner.

That has an x -- that has a significant impact on the company.

Why is everybody buzzing about the fact that was -- that bob was field is stepping down as chief of technology at apple?

He was one of the highest- paid guys and all of technology.

He made $8.5 million last year.

He was a guy who left apple treated it was a lot of fighting within apple and the different this is -- after the different editions.

He came back after a two-month retire at -- two-month retirement because they thought he was the only person who could fix her problems.

Thank you so much.

Bloomberg west, 6 p.m. eastern time.

Look for his brilliance on technology throughout the day.

Coming up, joe biden has been flying the flag in asia and trying to boost boost u.s. influence in india and singapore.

The vice president sat down with bloomberg television for a -- for an exclusive interview.

I am sara eisen here with tom keene.

Many americans live from paycheck to paycheck.

Payday loans have grown in popularity.

An analyst at bloomberg government provides insight on how government decisions impact business.

We know congress is taking a look at this.

Explain what a payday loan is.

A payday loan is a quick way for someone to get a small amount of cash with minimum qualifications.

We have seen payday loans have become more important as people have been struggling to pay their bills.

About 58% of payday consumers have problems paying their bills every month.

This is a way to get emergency funds when they need it.

What is the problem with it?

Why is congress looking into it?

Looks there are some problems -- there are some problems because the interest rate is so high on these loans.

Typically consumers pay between $10 and $20 for every $100 that they borrow.

That annual interest rate is above 300%. the question is when does this product becomes something consumers demand and become predatory on the part?

This is what congress look at last week, targeted towards seniors.

It could be discussed broadly for the payday lending consumers as a whole area who gives out these loans?

Is at a banking issue, is it a too big to fail issue?

For a long time the payday lending industry has not been regulated.

There is a new twist that cfp b b is regulating the non-bank industry.

This could come under new regulations that limit or curtail their ability to make these loans.

On the bankside, only six banks even up roach offering a -- even approach offering a product similar to payday lending.

They include wells fargo and u.s. bank.

This is called deposit advances.

This way consumers can borrow from their deposit and it is secured by their next paycheck or by a social security payment.

You have gotten my attention.

Are they charging people 28% to get an advance on their social security check?

In many cases they are charging much more than that.

This is why congress has their ears open.

This is why c fpb is taking a look at the issue.

This is why the occ is coming out with guidance for the six banks on how to do this in a way that doesn't trap consumers in a get cycle.

Wouldn't it be ideal if the consumer was just made aware of the information, make sure they know the risks i know what happen if they cannot pay it back.

Consumer education will go a long way to understanding the terms.

The industry will say that these terms are crystal clear and that the c fpb and other regulators are being a bit paternalistic.

What we have to understand is that this country has never been very good at offering low income credit access.

We saw that in the subprime crisis, when we try to expand mortgage loans to people who could not afford it.

We are starting to see it in the small loan market.

It's a something that the government and the industry needs to work together to solve.

Very interesting.

Thank you for bringing it to our attention.

The hazards of payday loans.

Now we need to go to a bloomberg exclusive interview with the vice president.

He wrapped up a six-day tour of india and singapore.

The tour was to strengthen the presence and influence of america in the region.

Look at miramar.

-- spoke to him about the pivot of asia and how the united states school operating.

We see a china that is made up of competition and cooperation.

And healthy competition.

We are prepared and anxious to compete with china in the economic forum.

We also believe that there is many areas of cool operation.

For example, on the environment, china, like many countries, concluded the you not have much to do with the environment.

Now with one million people dying of pollution and -- lucian in china per year they are going to commit $3 billion to improve the environment.

They agreed the hydrochloric carbons are the most impacted upon mobile warming.

-- global warming.

There are many areas of cooperation.

There is nothing inevitable about the conflict.

China may abandon its postwar -- is that something you would be comfortable with?

I have been meeting with the japanese leadership.

I have not heard anyone say they are going to ban and -- banned the conditions of the constitution.

The question is what constitutes as effect of capability?

It is in no one's interest to see the increased militarization of any country in the region.

Rational action taken by each of the countries in the region to maintain their self and self- interest is totally inappropriate.

We look at this as an emerging cooperation.

One of the reasons why the region has been able to succeed so well for so long is the stability and security of the united states presence is provided.

We are a pacific power.

We are not going anywhere.

An exclusive conversation with joe biden, the vice president.

It is interesting he said the chinese slowdown will not the rail the u.s. economy recovered.

A brief three percent hard landing.

In the article dr.

Rhodes says, not going to happen.

Some people say give way but the barclays three percent ending is a call for vice president biden.

Speaking of debate, cleaning up baseball, the drug investigation has many wondering whether this will be just another black eye for the sport.

That is next.

Let us turn to baseball.

Erik schatzker and stephanie ruhle are at yankee stadium for a doubleheader.

The question with all of this drug stuff is what about baseball's reputational and -- reputation?

He is the founder of a sports marketing firm and with us from los angeles, i was taken by a article this morning about a silent cooperstown.

Will there be permanent damage in this drug about as we saw with mcgwire, canseco, and others?

I do not think it is going to be as significant.

When you go back to that era in the 90s and into the 2000s when jose canseco was juiced.

-- was juiced, you are talking about 50 players using some kind of steroids.

Major league baseball has done a commendable job of instituting a harsher policy where there is a 50 game suspension for one use and a 100 games for a second use.

Era still some use in the sport but i believe it is considerably less.

Let us bring it to the present.

Scarlet fu attended a yankees game this weekend.

She said there was no marketing or branding of a rod to be found.

-- of a-rod to be found.

Are the yankees tried to get out in front of what is presumed to be a suspension?

If i were them, sure.

Alex rodriguez, after being caught in a lie, his name and marketability is marred to begin with.

The yankees would below -- the yankees would love to be rid of him.

They would be willing to pay the money and get him off the team.

He has done disrepair to the yankee branch.

What is baseball trying to do?

Are they being too aggressive and trying to rebrand the entire sport?

Collects very good question.

I do not think so.

Certainly break -- certainly baseball needs to be assertive.

They have dealt with this firestorm and horrors show there in barry bonds and mark mcgwire era.

They want to make sure nothing approaches that.

I give this challenge to the major league baseball association.

If they want to go back 15 years ago , go back and collect -- and eight -- hit these players.

Cerro wore black because her cincinnati reds struck out 20 p bowl over -- 20 people over the weekend.

How does that happen?

Collects i do not have much sympathy for sarah -- collects i do not have much sympathy for sarah.

The reds are bitter rivals.

Sorry, sarah.

Thank you so much.

A set of reds pitchers struck out 20 batters.

Are they number one?

They are number one in the heart.

It is august and we are waiting for the red sox to -- they are right on cue.

They are number three in their division.

A critical point.

Before we go to lunch, we are going to see what is happening with options and exchange traded funds.

Bloomberg will go inside the market.

That is next.

Shelley go to lunch now we go -- shall we go to lunch now?

We shall.

Tomorrow on market makers, will residential real estate stay on a roll?

More housing data is out and we will speak to the ceo of century 21 real estate.

It is 56 past the hour, it is time for bloomberg to go on the markets.

It has been a pretty rough day for the markets.

Around the lows of the session, we have had fewer people sign contracts to previously owned homes.

It is still close to its high level from may.

Maybe the high rise in mortgage costs is not winning that much on housing demand.

The s&p got hit again after that dow said manufacturing activity came in light for the month as well.

We're seeing bs and p down eight points.

A quick look at currencies, the yen is hitting a one-month high.

In commodities we are seeing natural gas hit its lowest level.

It is not as hot out there.

Oil trading rate -- oil trading right around 104. some of the day's biggest movers , it was a race to buy crt capital.

And one name you see in the red, parent joe.

-- perrigo.

Now it is time for today's options update.

Joining us to discuss options trade -- options trends is our etf analyst.

You have been looking at the option moves, what is your criteria?

We are looking back two weeks.

We are looking at call option open interest.

Is up 20%. one of the etf's we saw a big jump in was the spider etf, kicker -- kicker xlk.

This etf has taken in $1.2 billion in july.

It is another sign that they are bullish on tech.

One reason for this is the fate of this etf is really tied to apple.

It is 13% in waiting and apple is up 13% since the end of june.

That is why you see some investor confidence into the tech center.

I used to be -- i used to see the etf movement.

Let us talk about the regional and national banks.

What about the etf's? crocs -- this is ticker kbe.

In addition to seeing "in the

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

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