No Show, No Dough: Market Makers (07/02)

REPLAY VIDEO
Your next video will start in
Pause
  • Info

  • Comments

  • VIDEO TEXT

July 2 (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)

Billionaire founder of rackspace tomorrow streaming on your phone and a bloomberg.com.

We are waiting for numbers and we have you covered on bloomberg television.

"market makers" starts right now.

Comply or else -- big banks will be able to pay bonuses if they don't meet new capital -- capital rules.

The penny drops at coinstar.

Can a new name to get beyond coin counting and vending machines?

What a croc -- the company behind the clogs attempts a funky makoeover.

Good morning, everybody.

Welcome to "market makers." let's bring you straight to the newsfeed.

The fed has adopted new rules on preventing another global financial meltdown.

If the banks don't comply, they might not be able to pay bonuses.

Regulators agreed to ease requirements for the nascent community and regional banks.

Chrysler has kept the winning streak alive.

The third-largest automaker says sales rose more than eight percent the month of.

These sales have risen 439 months in a row.

Ford sales were up 13% beating analyst beating analyst estimates.

Overall, the auto market is on pace.

We will talk to the industry analyst.

A surprise from disney -- it will keep the ceo on the job 15 month longer than planned.

His contract has been extended to june of 2016. he was expected to give up his title in 2015. disney may not have identified a successor yet.

We will speak with disney.

I want to add something to the auto sales story that you were just reiterating -- general motors has just revealed their sales, up 6.5%. it has been lagging behind ford and the u.s. auto recovery.

Gm is doing something right.

For the first five months, gm, chrysler and ford all posted market share gains, the first time that's happened in 18 years.

We will talk with the ceo of a company that operates more than 20,000 coin counting machines.

Now it is going into high-end coffee kiosks.

We talk with the ceo minutes from now.

I wonder how much they are taking from japan.

Coin counting machines sounds old school.

Maybe it is japanese, not such a bad idea.

Let's go for fruit and sushi also.

We will talk about the real estate recovery.

Home prices you might say they're on a roll nationwide from a year ago.

The biggest increase since 2006. this is according to a data provider.

In nevada, prices rose 26%. we have yet to see what rising interest rates mean for property sales.

In manhattan, apartment sales are up and majority is down.

You know what that means for prices.

With us is the ceo of miller -- the sales reports just released today.

You got through the end of the second quarter which means your data reflects what is going on with interest rates.

Tell us what you see.

We had the most active sales market in manhattan since 2007. more transactions.

The big challenge is something we are seeing across the u.s. is slow inventory.

We had the lowest number of apartments available for sale in the 13 years i've been tracking.

We had an 18% rise in sales for muscle that worked out some inventory.

I think the bigger issue and something is happening nationwide is you have a large number of people that are not necessarily underwater but they don't have have enough equity to trade up.

Tight credit is a key driver.

When someone sells her home, what did they do?

Do they become a buyer or a renter?

They can't buy because they don't qualify, they don't do anything and wait for prices to rise.

That is what we're seeing nationwide.

I wonder how much you see people who would be selling taking their houses of the market to rent it out because of the high yield?

To a certain extent, you see some of that.

The rental market is very strong.

It continues to be strong for the last year and a half.

That is not the driver of the market.

It really is owner occupancy of the second home, international, the high of the market as well.

A lot of high wage earners, domestic purchases with a lot of money looking for a second home driving the market.

We have been talking for at least a couple of years already about the strength of the luxury market.

The top 10% of apartment condo sales in manhattan and how they just seem to be going gangbusters.

Will that continue?

I think it does, but the high-end of the market was not quite as robust as the balance of the market.

If you read about nec all the new projects coming out of the market, is a very strong market.

That is the only location that inventory is coming into the market.

All the projects that are being built are targeted for that top 10%. what about the other 90%? there's not a lot of product coming in and that means tight pressure on prices going forward.

I wonder how much much of a role real estate investment trusts are boosting the housing market?

They are coming in with all cash, no contingency offers, trumping a lot of other offers.

Will be higher rates hurt their appetite?

What is made them competitive is they are paying cash and they are -- what is surprising is they are enjoying the rental stream that they are getting.

They're not not in any hurry to sell off.

I think because they were early adopters and they got in at a very low price, i think they have a tremendous advantage over the mom and pop that are coming in now.

You are not seeing that in new york city.

You don't have -- we have a very low -- especially in manhattan, a nominal concentration of the stress real estate.

We were unscathed by the whole foreclosure crisis.

Given interest rates--- rising, given the fed will be pulling back on stimulus and there are open questions about the strength of the economy, how much further does the new york city market have to run in your opinion?

It has a ways to go.

I think with the rising interest rates will do -- i think this'll apply nationally as well because i think it tempers the growth of prices.

If you look at nationally with the 12 plus percent year-over- year gain, it is a function of tight supply, pure and simple.

I think anything that takes the edge off of that growth means a longer term recovery.

You mentioned international buyers.

I want to ask about the role of chinese buyers.

The broker told me they are looking to buy entire buildings to get a three percent yield which does not sound like a lot.

It is more like a place to park their cash.

How does that distort the housing market?

I don't think it distorts it.

We have time frames were would have tremendous influx of foreign investment.

We had in 2007 into the visits six with the irish coming in.

That is a periodic thing.

A lot of what is being purchased are rental buildings versus luxury condominiums from china from the investors looking for some sort of yield.

How do the prospects in the new york city commercial market compare with what we see in residential markets?

A big real estate developer in town was saying the other day that prices overshot themselves given the demand for rental space.

The office market is still pretty weak.

The challenge in the commercial market is lycos apply.

You have a lot of capital -- free capital, very low-cost capital burning a hole in peoples pockets.

. when you have that situation with low supply and people eager to invest and make a return, you have a pocket in price.

What about new construction across the nation?

I think they -- we have seen them sort of sees the opportunity to take advantage of low inventory on existing homes.

That has been tremendous.

They are still very cautious.

I think you're more wearing than we give them credit for.

Sentiment is up but it is still not that strong.

What about hudson yard?

We see time warner appears to ink a deal to move the headquarters overlooking central park over to the west side of manhattan on the shore of the hudson river, this undeveloped massive package of land.

Is that the deal that they need to get the hudson yard up and running?

I think they are clearly a anchor tenant that will draw in -- eyeballs to the project.

It gives them a name and a track record in terms of related time warner relationship.

It was very successful before.

It is logical.

We have seen this progression westward towards that project in terms of development over the last decade.

I think this is an important step for that area.

Doesn't say anything about the viability of the hudson yard or the attractiveness to make this deal happen?

They had to agree to buy the time warner center.

I think that is an important point for them because they time warner center is already a marquee location.

I don't think they will have many location -- problems finding someone to occupy it.

Brooklyn or queens or the bronx?

We are seeing the same pattern, an uptick in activity.

Inventory at low levels.

We are seeing upward price pressure.

What is interesting by the metro area, we are not seeing runaway price appreciation.

We are seeing modest growth.

Oh m former distressed sale locations like las vegas, miami, etc.. what about areas that seem to be the most hurt by the financial crisis and recovered slowly?

What happens, they are in the long-term going to probably see more interest as prices rise.

What it means is, their stock is more volatile as you go further out on the market falls.

They fall harder.

When the market rises, they come back.

Nice to see this morning, jonathan miller president and ceo of miller samuel.

We have a lot coming up.

A showdown in egypt.

President morsi rejects an ultimatum.

We have got coming up.

A company changing its name and a strategy.

We will speak with the ceo of the red box parent.

On bloomberg television, streaming on your tablet, your phone, and bloomberg.com.

? and and morsi said it cause confusion in a complex national environment.

As you can imagine, it has angered a lot of his muslim brotherhood supporters.

The top official said today that the military coup would only happen over our dead body.

The military is not: is a to -- calling this a coup.

They are trying to get the presidency to talk to each other to respond to the demand of the people on the street.

What is clear is that at some point in the next 24 hours short of something being done by president morsi, the military will take action.

It is unclear as to what kind of action that will be.

We hear that the foreign minister quit.

Who is left with him now?

That is absolutely right.

Several of his top ministers have stepped down and resigned as was his potential spokesman who was just on tv defending him.

There had been rumors earlier that the prime minister had stepped down, but those turned out to be not true.

Some of the people who were closest to him, especially those among the muslim brotherhood are still with him.

It has a sinking ship feeling.

We will see how many stick around the next 24 hours.

You just mentioned the fact that the military is not talking about the end of an ultimatum as a coup.

Whether we describe it as something else, if that is what the military tries to do, could it be done in a bloodless way?

The military is not calling it a coup.

They did say it is an ultimatum.

They said if he does not speak with protesters, they will come in and take over.

They said they would intervene and put into place some sort of roadmap, a half.

It is not clear what that means.

Does it mean that they take control?

If your member just over a year ago before morsi came into office, there were to miss rations against the military.

No one wants the military in charge.

Not the protesters on the street.

The ideal situation for the protesters is that the military come in and put forward a referendum or reelection that would make more seats that down.

The way they phrased it in that statement yesterday makes it very unclear.

There is a lot left to be seen.

We thank you for joining us as tens of thousands take to the streets in cairo.

Our next guest has worlds of experience in egypt.

She is the deputy director of the center for the middle east.

We welcome her from washington.

Thank you for joining us this morning.

Mohamed morsi has been in power for a year.

Are his policies to blame for the economy or was he dealt an impossible hand?

I think that his government has not handled well but you can't blame him.

I think he inherited a very tricky mess and it has been handled badly.

What might have been solved, matters that could have been solved almost a year ago has been getting worse and worse.

How does the rest of the arab world is us and themselves for the potential unraveling here?

The rest of the arab world still looks to egypt and what happens in egypt matters very much.

I think everyone will want to know.

Egypt held -- handles matters different from tunisia.

The other arab countries have money sunk in egypt.

There are other kingdoms that are interested in how the democracy plays out.

Everybody is keeping a close eye on what's happening in egypt.

What do you think will happen if this ultimatum and -- ends with no sense that morsi is prepared to back down?

Anyone who tells you they know precisely what is happening is not really telling the truth.

We really cannot tell.

There will be no solution without -- the only solution is a political one.

There will have to be a copper mines.

The problem is, after 18 years of being on the outside looking in, the muslim brotherhood now has power.

It does not want to give it up.

They have spent the last several months canvassing other islamist groups on the extremist side.

I think there's a great deal of worry that there might be a fair amount of violence if they do not compromise.

What would a compromise in tail?

-- entail?

What moore sees that down and wouldn't be realistic and would take his place?

It is not a matter of who can take his place.

Mohamed morsy is part of the muslim brotherhood and that is a huge and well organized affair.

The problem is, what does the muslim brotherhood tell its supporters?

It would take an enormous amount of courage for them to do it.

If they step up and say you have this amount of time -- if the army gives an ultimatum, then matters are extremely serious.

They have already said that they will back the army solution, which means the brotherhood has lost another institution and they are pretty much on their own.

Thank you for joining us, the deputy director for the middle east council.

Will be back in a couple of minutes on "market makers." ? we did get headlines this morning on the u.s. car sales up 12 .9%. analysts were looking for a gain) there, 13% after a 25% jump in the month of may because of price cuts.

Shaping up to be a better than expected june for auto makers.

Gm coming out ahead extrication.

For has been on a tear.

The final numbers come out at 5 p.m.. will be back with more in a few minutes.

? a few minutes ago, we were talking about the real estate recovery.

Up in the great white north, housing has been booming.

The result according to a new report, some of my fellow countrymen are highly indebted.

Scarlet has that story for us in this mornings off the charts.

A canadian version of off the charts just for you.

This is data from the firm that shows households with debts of at least 200 50% of gross income, that means you owe more than 3.5 times your gross salary, reached a record 13.5% last year in 2012. most of that debt is related to real estate.

We know in the first quarter that has come down.

When we say highly indebted, that is a term that the bank of canada user.

They identify the threshold of which someone is highly indebted.

The bank of canada said household and balances are the biggest domestic risk to the financial system.

And looks as it has doubled in the past 10 years.

Yes, the rising housing market.

Lots of accusations that banks have been overly permissive when it comes to grant for mortgages and allowing people to run up credit card debt.

This is in a country that was hailed for the strength of its banking system.

And for being conservative.

People think there is a real estate bubble that is about to blow in canada, especially in the condominium market.

I can tell you there are more claims in toronto that i have ever seen.

A record number, something like 160 buildings under development.

Will a change in name lead to a change in strategy?

We will talk with the ceo of formerly known coinstar.

? you may never have heard of coinstar and that is ok because that -- it has a new identity.

It will now be known as outer wall.

It reflects its expansion beyond the coin counting business.

It owns the red box movie rental business and exploring ventures into cough even the machines and a recycling kiosk.

The ceo is with us.

Does this rebranding of your company signal that the coin counting business is a lot less of your business than it once was, that it perhaps could be spun out into something else and that you could focus on this other more modern sounding businesses?

The outer wall brand encompasses what we have been doing for 22 years, which is pushing out the outer wall of retail and bringing in great products and services to customers and converting what is 12 square feet into the most profitable for our partners.

We continue to innovate our coinstar business by bringing paypal on where you can load your coins.

Or our red box business where we continue to innovate by bringing on red box instant.

We mentioned our ruby business as well.

We announced today that we expect to close the third quarter.

We think outer wall encompasses that umbrella brand and good continues to innovate in the market place.

We were talking about kiosks and vending machines and how japan leads the way in selling every thing you can think of and vending machines whether it is sushi or paying for haircuts, alcohol.

Talk to me about if there's anything that cannot be sold sold through kiosks orbiting machines.

-- or vending machines.

When we look at the automated retail space in the u.s. alone, our sweet spot is look at $16 billion across the sectors that we're looking in.

When he brought in that out from the overall total market, around 85 billion dollars.

We believe there is a lot of opportunity for us and that automated retail space in the areas that we are focusing and core brand is red box have been leveraging that.

Where b, our coffee business will leverage that.

Our new acquisition also.

We think there's a lot of opportunity.

We build a two-rate relationship with our consumer -- to wait relationship through e-mail -- two-way relationship.

27 million people have signed up to get weekly updates for red box.

We are a combination of leveraging physical footprint, very small as well as using as using new technology to interact with our customers.

Where do electronic payments fit in your business?

It is a very competitive industry.

Increasingly at the retail level and many companies like square, for example, like to have a squeeze of relationships.

Is that something that you're willing to entertain to make sure your devices are -- we are looking at different payment off -- options.

When you look at it like a coin star machine have a new partnership with paypal, that is really about allowing people who don't typically have access to the web merchants to be able to do that by loading up a paypal account and being able to then stand on the web.

We always are focused on bringing new products and services in ways that our customers want.

We stay focused around that across a number of different sectors.

Red box is the last standing physical dvd renter.

There is a large short decision -- position that dvds will be obsolete or declines are medically soon.

How are they wrong?

-- dramatically soon.

There were an increase of over one million credit card transactions.

This is something consumers will continue to want.

We augment that with our new streaming service, red box instant, where you can get four dvd rentals a month, we think we are continuing to push those consumer offerings to where they are great value and something that they want and continue to innovate and evolve our red box business.

Would like to thank you for being here.

The ceo of outer wall, the parent company of coinstar and also red box.

Better enjoy those fourth of july hamburgers.

They are likely to be the most expensive you have ever had.

That is coming up next on market makers.

? and off to the super markets to burgers for the fourth of july, you are in for some sticker shock.

Beef prices hit a record high a few weeks ago back when grocers typically stop up -- stock up on me for the summer -- meat for the summer.

What do you like to eat on fourth of july?

Hamburgers.

This might hurt because we are looking for record prices for those burgers and hotdogs.

It could be an extensive cookout for you.

Wholesale beef prices are over two dollars a pound.

That is the highest on record at the end of may.

Supermarkets typically buy most of their meat about six to eight weeks ahead of the july 4 holiday.

It could be be pricey meat you're going to be buying on thursday.

Here is why.

Last year's drought led to a record high corn prices.

Increasing feed prices for farmers.

That has forced them to take drastic steps like -- the herd to save money.

It can take six to nine months to breed a cal for slaughter.

It could make prices go up.

-- a cow for slaughter.

That is the story on cattle prices.

What about higgs -- pigs?

They both have seen rallies.

About 7% in just a few weeks.

The good news is when you go into a grocery store, food processing and services make up the bulk of what you pay.

Over 50% of each dollar that you spend.

Farming input is about 11.6%. some good news there on the inflationary part.

We are talking about a better housing recovery.

Hot dog sales fell last year.

This supply crunch will and as costs come down.

Farmers typically breed in late summer.

Any indication of last year's demand, get ready to shell out because u.s. retailers sold 310 million pounds of beef last july.

In mark and could eat -- americans could eat 150 million hot dogs.

What about shaking -- chick en?

Be chicken prices do not have the same kind of reaction like pork.

People are abandoning burgers and hotdogs.

How about just a roast chicken?

Thank you very much.

It sounds like you will have a chicken rotisserie for the fourth of july.

Let's talk about crocs.

They are getting a makeover.

The ceo wants to attract new customers and double sales in five years.

International expansion is a part of his plan.

Deirdre bolton joins us with more.

Love them or hate them, if you're really bored, you can go on youtube and see somebody talking about them.

You will notice there is a whole new range of options.

The company is trying a marketing push to become a lifestyle brand.

Take a look at this video -- you will notice 300 new styles.

There you go.

There is me shopping, surprise.

The spring catalog looks like a j. crew catalog.

We checked out the . -- new line.

You have the sandals and boat shoes.

There is a shift away from the clogged image -- clog image.

I spoke with the ceo and how he is working to attract new customers.

Here is what he told me.

Three years ago, more haters and people that would not consider the brand as footwear that they would purchase.

Today, much more neutral and far less haters when it comes to the products.

We moved the branded replays were more people would consider buying them today.

We are not just a clog anymore.

Clogs still make up half of the company's sales.

They are popular with the medical community and the restaurant community.

They are hoping the new style will push the company further along than that $1 billion sales market last year.

70% of sales are non-us and a big chunk of that comes from asia.

What are they doing differently in asia that they are not doing in the u.s.? it is a two to 92 st rategy.

That market is completely different than the u.s. consumer.

We do sell in terms of age groups.

We are truly a family brand in the asian market place.

We flip sales faster and a faster retailer in those markets.

I think the asian consumer looks at us as a casual lifestyle brand more than they do in the u.s. it has paid off.

Sales in asia have grown faster over the last three years than in europe and the u.s.. they are planning to open 90 locations around the world and half of those are in asia.

Here is the row question -- here are shoes and would you wear these?

I was looking at them earlier and what is on the holes on the side, i decided against it.

I guess that is part of the company charm or part of its look?

Erik schatzker, what do you think?

Does it require that much consideration?

[laughter] part of the problem with the originals as they are easy to knock off.

I am this believable of the asian sales numbers.

I am amazed sales in asia are that high.

These are the very least seem less easy to knock off.

In theory, even though it seems like you're not that impressed with the style, they are trying to be more stylish.

Who are they targeting in the u.s.? i should be a hand model.

[laughter] this is is qvc moment.

The target customer -- i am with my kids and he said actually my dream is to have a go in there with your kids and buy them.

Actually, that you would walk out and the target customer would walk out with the shoes.

Are analysts convinced by this transformation or by this overall effort?

There is a lot of wait and see.

The catalog looks really good and they have snazzy styles.

Are we going to get fur-line d boat shoes?

He said if i could carry those in your round, i would.

People wear them as slippers.

When you are shoveling your driveway, you need to be wearing crocs.

Our thanks to deirdre bolton.

Do you wear crocs?

I do.

Thank you so much.

E quality between the sexes.

Infidelity -- is there progress?

I am eager to answer the question will come back.

? a great tuesday morning in midtown manhattan.

It is a quiet day on the streets out there and the markets ahead of the fourth of july holiday on thursday.

A lot of people are out of town.

The weather forecast suggests things are looking up.

You can have your roast chicken the fourth of july that we were talking about earlier.

I am in for stephanie ruhle this morning.

Here is a story that stephanie can appreciate.

Women and making money.

This next part may surprise us all.

American women make less money than men.

They can write less wealth.

-- accumulate less wealth.

Eight study says they are catching up to men.

Cheating on their spouses.

Cheating rose 40% elastic at -- decades.

The number of men who said they have had extramarital affairs remained steady at 21%. all of this is according to the research center general social survey.

15% of people admit to cheating on their spouse.

They were probably doing it before but did not say anything about it.

As long as he will remain, they are willing to share.

In the meantime, here is a good one for you.

In japan, a different kind of men versus women story.

Over there, it is the ladies of the house who hold the purse strings.

They are making it tough on their husbands.

The average monthly allowance for husbands, $386. the lowest in three decades.

Less than half of what it was in 1990. right around the time the japanese market crashed.

Some japanese husbands are looking forward -- at the very least, they might get more money.

She runs a tight ship in the household.

She is all about stimulating the economy.

Much more of "market makers" coming up in two minutes.

Zynga is no longer the top game maker on facebook.

? live from bloomberg headquarters in new york, this is "market makers." the big three are all going gangbusters.

A ford, chrysler, and gm had big sales gains in june.

The disney ceo decides to stick around for a while and now bob eiger could be walking into a wild west ambush.

"the lone ranger"movie could be a big flop about can an xbox impress facebook gameers?

Good tuesday morning to you.

Time for the news to feed.

18 states are now investigating american airlines proposed merger with u.s. airways three attorneys general are concerned the merger will be to hire fares and less service.

The state of texas is leading the way an american airlines is headquartered in dallas.

If u.s. regulators have agreed a new capital standards and at preventing another global financial crisis.

It doubles the minimum ratio for capital assets.

Vague reclassified derivatives and mortgage based securities as more risky but requirements will be eased for smaller regional and community banks.

The board of capital one financial has okayed a $1 billion share buyback plan.

Capital one first has to sell its best by private label credit card to citigroup.

Once that sale is completed, can buy back shares for next march.

In just a few minutes, the fight over high-frequency trading.

Battle lines have been drawn and we will talk to the man in the middle, the chief executive of both kcg, the company once known as gekko.

Also porter bibb will be joining us to talk about bob eiger and a big deal in media.

Tribune is betting big on local tv.

The sentiment seems to be a double or get gobbled up.

Let's talk about car sales.

Automakers are reported new sales numbers this morning but the big three have already come out.

Ford, gm, and chrysler beat estimates for the month of june.

The reason for optimism around detroit we will examine.

How long has it been since we've seen this kind of sales growth?

You have to go back to december of 2007 to get above 12 million units.

This is a big deal.

It is the resurgence of the american auto industry and it speaks to the turnaround in this economy.

Maybe ben bernanke is right that this economy has turned a corner.

Hot cars of the second-biggest purchase behind homes.

Ford comes in with a sales increase of 13%, better than the 12% that was estimated.

Trucks accounted for 20% and announced a deal where they will announce a $100 million in trying to create new engines for trucks that are eco-friendlygm is up 6.5% and was only expected up 2%. you can think cadillac.

Chevrolet sales are also up at gm.

They announced a deal with honda where they can try to pioneer a new fuel cell.

The big three are trying to make gains on the ego front and chrysler is up 8.2% in line with expectations and trucks are up 24% 39 consecutive months.

What a turnaround we have seen in detroit.

They are also hiring and putting more americans back to work.

Thank you.

You can catch adam on "street smart." let's bring in a man who lives and breathes cards, the founder of carlab that helps manufacturers and suppliers plan and design new cars.

And great to see you again and good morning.

These sales numbers look pretty good even for general motors.

What are the biggest 3 -- let's talk about manufacturer by the manufacturer -- what are they doing right to get these numbers this high?

The story is what we expected.

It is not what they're doing but it is what they've always done.

As the economy recovers, all trucks are selling well.

Each of the big three's trucks, the ram, the f series and the eldorado were up over 20% and year-over-year numbers look the same.

They are getting buoyed trucks and chrysler is strong with jeeps.

On the chrysler fiat side, the portfolio looks good.

General motors has a big up in cadillac.

Unfortunately, the midsize cars like the malibu are performing poorly.

Ford is doing strong of a car's overall.

Lookson the hybrid side, they're cutting into toyota's market share.

I am not in touch with the typical american car buyer.

What is it that is driving americans to buy cement trucks?

24 percent signed year over year, it does not seem like a sustainable.

Talk to us about this trend.

Trucks are very much tied to the economy.

The old saying is that they are tied to housing starts.

In the end, these are purchases of tools.

Tools that to be replaced.

A lot of this is pent-up demand for trucks that could not be quenched in 2008, 2009, 2010, 2011 when the self-employed folks kept their old truck and have to replace the now.

For the big three, long-term debt to find a way to make profit in more than just the trucks.

I think ford and chrysler during that the general motors is probably in danger.

2011 whenthe recovery looks good for them but they need a more balanced portfolio on the car side.

For ford, the car's side looks good and lincoln remains a big problem, down about 9%. put into context what detroit is doing right?

Are the big tree finally competitive with toyota and honda?

I think the big three are competitive.

Toyota recovery looks good for has its own witnesses.

It is struggling to keep camry sales up.

Honda has struggled with the civic.

If we look at the sales gains of the big three, 13%-18% and honda at 12%, we see the total market is lifting and that is bringing up almost every automaker in the market.

Are the big three more competitive?

Probably not at this point, they are probably on equal footing.

The strength and weaknesses of vary by model or by segment.

The biggest significant wins of the big three is probably general motors and the car side of the big three looked like they can go toe to toe with toyota and honda.

The brand that is up the most in u.s. sales year over year is the tiny underdog subaru at 22%. they like them in cortlandt.

That is just a little bit northeast of view.

Can you give us a forecast for the second half?

What do you hear from your clients?

I think all of the car makers see unabated growth for the rest of the year.

That has been slow to come for some as their portfolios have recovered.

Cars are six-year lead time in development and this recession began for the car industry in 2007 so their products that were put on hold or killed and more just -- we are just starting to see those products come back.

Everyone is pretty bullish going for the rest of the year.

Frankly, so few cars sold for so long during this recession that probably most automakers can expect sales increases for the next two or three years and they would have to mess up to have anything other than growth.

When will we get to 60 million?

I think we're very likely to see that next year, 16 million.

Thank you for joining us.

The parent company of the chicago tribune bets on its future and it does not involve a printing press.

We have that story in a moment.

+, i.t. batista has had some trouble but now he has had a rough patch.

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

. ? bob iger sticking with his little longer but was scheduled to step down in april, 2015 but has decided he will take until mid-2016. porter bibb has been and may differ over 30 years.

This sounds like it is good news for disney shareholders.

Does this tell us that iger does not have the next project to work with our disney does not have a deep bench?

The underlying reason why he sought an extension is because he announced last week that he was not going to seek to run for governor of california which he probably wanted but he is 62 years old and he will now step down in 2016 and he has done such a fantastic job that the shareholders should be very happy and applauding the fact he is reported he has increased shareholder return during his tenure in five years as ceo by 76% disney scraped its all-time high a couple of months ago and it is going gangbusters.

One thing that could sully his tenure a little bit is a bad performance by "the lone ranger." there is bad word of mouth, i will take headline out of "the lone ranger." one of the crooks that goes up against johnnie depp says those two guys don't know how to stay desperate i think that is the story with bob iger.

He goes from strength to strength and lost $100 million in a runoff on "john carter"last year and they will probably lose the same on "the lone ranger," but their plans are in the work to make it a theme park sensation.

The merchandising is terrific.

If there is negative word-of- mouth and erik not see it but that -- does that mean the same thing to audiences in china and russia?

They have no idea who the lone ranger is that neither do i.. they are more than 50% of the box office.

The box office is only part of the revenue stream.

Getting "the lone ranger"into the theme parks the way the pixar movies have become major theme park attractions, they are already selling in the stores.

They have lone ranger white hats and masks, $15 per mask.

It occurred to me that if i ger 6 around, what does that do for those waiting in the wings?

There has to be some inpatient senior executives at his new film they have a shot at being the next ceo who will have to wait.

There are at least two competent contenders for the top spot.

The guy who's running the theme parks , mr.

Rosulo, both of them are extremely competent and would be seamless.

Tom stags is the theme park guide.

There is an absence of capable succession.

Iger is increasing revenues almost every year and increasing the operating margins of the company.

Competent and would be seamless.

He's got a media company that is second to none in the world.

Shareholders will be happy but is there a risk that one of those two contenders and perhaps somebody else might leave and join another media company?

They could but they've got two years to plan for succession.

I don't think that will be a serious problem.

When it comes to disney and expanding to media companies in general, the formula that iger has set upon is content creation and distribution power.

The deals we have seen in the last few months from other companies making acquisitions like tribune buying local tv, they are trying to mimic the disney formula by exactly, he has revolutionized the disney film studios which used to be animation and a few family- friendly funds.

He bought marvel, he bought lucas films with star wars coming out in 2016. and pixar which has revolutionized animation.

Look what he did last weekend last"monsters university." is a blockbuster and even the "the long-range her" and that at $1 billion, how can you tell jerry bruckheimer and gore verbinski that they cannot do something big want to do.

I wonder if we can extend our conversation to television.

Disney has -- as a tv business.

There is this idea that newspaper companies like the tribune and gannett are trying desperately to move into television.

Are they doing this at the top of the market?

No, tv is coming out of a very depressed five-year perifd.

The local television stations were way below their value before 2008 and now they're starting to come back.

Big is better than being small and consolidation will happen.

It is just about completed in the television industry.

It is about re transmission- , revenues they get from the cable companies.

When you are big and control the 40-odd stations the way tribune does, you can tell the table nso's - the average tribune subscriber rate they were getting was 20 cents or so.

It will be 40-50 cents when they start to negotiate.

When it comes to making it a better and more profitable business, is that there that the negotiating who level trace the financial leverage?

In the business of local television, it is not the same cost opportunity as on a national basis.

It is not like radio where you can put a computer in instead of a disk jockey on the air and broadcast on 1000 stations across the country.

That is the value of local television.

The other shoe that tribune will drop is they have a venture called tribune digital ventures and they will move a lot of that local television content to the web and start creating a significant new advertising revenue stream.

Does this turn up the pressure on tribune to get rid of their newspapers?

They have already started that process.

They have hired evercore -- have not found a buyer yet and it is not clear whether they can sell all the newspaper business.

The control owner of tribune wants to maximize the benefits and the sale of the paper.

They have to sell because they have a pending quarter of a million dollar tax liability and they don't have the cash to do that.

They need to sell those papers.

The focus at tribune has been all about television.

That brought peter lagorean to be ceo and he was the former head of fox so he will get a good deal because they are now the largest fox affiliate in the country.

Thank you for your perspective.

Maybe eike batista should look on the bright side.

He has lost the vast majority of his fortune over the past year but he is still a billionaire for now.

We will tell you why, next on "market makers." ? you are watching "market makers." we admit we have done lots of stories on eike batista.

He is the guy who passed carlos slim.

He said he would be the world's richest person.

Those days are long gone and so is most of his fortune.

Alix steel has today's latin america report.

Battista's oil company warned it might shut down its only producing crude oil well.

That leaves it with just one oil field and that is still under development.

The shares are down 29%, trading at 19 cents on the dollar which is a record low.

Investors are getting fed up with battista's company and shares have fallen 90% in the last year.

Ogx has fallen and so has eike batista's fortune.

His network has dropped $30 billion.

It is ranked 250 million yester day so what does he do next?

There is speculation that ogx is headed for the largest debt restructuring.

His holding company is almost the combined market value of its unit.

Thank you.

We're back in two minutes.

? live from bloomberg headquarters in new york, this is "market makers." friend or foe?

It depends on where you stand in the raging debate over high- frequency trading.

Proponents say it has made stocks easier to buy and sell by adding liquidity and cutting costs for investors.

Critics say it has compromised the fundamental fairness of the equity market giving big and technological savvy investors 8 -- an unfair edge.

Sitting in the middle of this is daniel, who created the merchant -- merger of gekko an dknight capital.

Good to see you.

Let's call your business high-frequency trading even though you do more.

It used to be a great business acumen used to make tons of money in your profits were down 90% last year.

Why is this a terrible business now?

I look at high frequency trading as a traditional intermediary business where we provide liquidity.

At getco we have made markets around the world and the 2008- 2009 was tremendous and that environment has changed.

From the bottom line, at getco, to grow our business we had to expand beyond high-frequency trading.

In the last 18 months, we have been investing in businesses and building and new products to get closer to clients.

These investments make the knight merger that more attractive.

Yes, we were involved in high- frequency trading as a primary part of getco, but for the new firm, that's not what we are about?

. we provide technological solutions to clients.

We have about 650 broker-dealer clients and then some institutional clients.

We offer algorithm it solutions and offer opportunities to interact with bonds and hot spots.

We are about enabling plans to invest their money more cheaply and efficiently.

What do you think people missed in the merger between the two companies.

Our clients are very excited about it.

People should look at what we are putting together, not what we had.

The knight a group management team sold off some assets.

At kcg we are selling the reverse mortgage business and putting together the best of two firms that embrace technology and are focused on client service.

What happens to your traditional business?

It was once profitable but requires massive technology and the margins keep getting compressed.

It is like an arms race.

What do you do about that?

Do you keep throwing money into a business or profitability is shrinking?

And the traditional business of un exchange market-making, we will always be a player.

We get that edit by investing in technology and we take what we learn and take the technology we have and create client tools and opportunities.

We think we can share these over multiple businesses and get a good return for shareholders.

Zero latency is the holy grail but that is not a dead-end strategy?

It is not all the growl of our business.

We invest in technology in different ways to bring in -- we invest in technology to make us smarter and faster but we do it in order to leverage for our clients.

Zero latency is not what we are all about them there 13 different exchanges in the u.s. if you could start with a blank slate and design a new market that would be good for everybody, and move past all these criticisms about hst and algorithms back, what would it look like?

U.s. equity market is the worst of all markets in some ways but it is better than all the others.

Take the u.s. bond market.

There is fragmentation and a lack of transparency.

The u.s. market -- equity market thrives on competition.

The cost of executing has come down over the last 5-10 years.

It is complicated and different but -- it is definitely not perfect.

Absolutely, but i would take over any equity market and the bond market.

What would it look like if you re is in that?

The right equity market has to have competition among exchanges.

There should be innovation and competition on price of execution.

I think transparency is very important to price discovery for investors.

Those will be two fundamental tenets of any market i would design.

To their need to be more banks or brokerages or players involved?

Not necessarily, i think some banks and other firms are revisiting their commitment to certain business lines because they have their own regulatory and capital issues.

I think it will be other firms stepping up to the plate weather in equities or products like interest rate swaps and credit default swaps.

Competition is clearly a good thing.

There is competition in your business but it seems as though consolidation makes it fewer players.

How will that affect your business?

I think consolidation will only happen to the extent it makes economic sense.

There are some consolidation in intermediaries, people who provide the markets but is not very high.

If you have smart people, you can put together business and have an impact on the market.

I don't think there's an issue of firms falling out of the market and what about regulation?

They are often criticized for the unintended consequences of regulation.

With what has happened with high-speed trading in particular, one of those unintended consequences?

I think the regulation of the market structure in the u.s. has had tremendous of -- tremendous positive impact.

People have been using computers to trade well before these regulations.

Particular, one of those unintended consequences?

At kcg we want a well-regulated market.

We want a market that is fair for all participants.

What to expect from the new acc chair person mary white.

What would be the one regulation you cannot live without?

I don't think there's any regulation that is essential to our business nor do i think any regulatory changes a massive impact on our business.

We have many different approaches to enabling clients to trade.

If they trade happens, 11 impact on some of our business but in other business where we have invested in exchanges, it would have a different impact.

The most important thinkg let's be nuanced about it and understand the problem we're trying to solve and then implement the regulations.

It got a challenge a heavy to take these two businesses and turn them into something more than 2 +2. what kind of cost synergies can you achieve and how many people will you have to let go?

Our focus right now is making sure that this transition is seamless and we are a stable firm for our client for that is the primary goal to make sure our clients are comfortable with kcg.

Our merger is different and this is my 10th merger.

Many mergers in the financial sector will have two people covered a client and you'll have to decide which person to keep.

Getco did not have a lot of people covering clients' but knight had a lot of coverage.

Over time, we will make our processes more efficient and certain roles will be consolidated.

Costs synergy is not the real root of the value of the merger.

Cost is what typically drives a customer to a service provider.

That is the first thing the customer looks for, the cheapest cost.

If cost is not picky, how can cost not be the key?

It can be the key to the customer but cost synergies are not the key to this merger.

If you want to provide services at low costs and remain profitable, that's where you have to do it.

Absolutely but our cost structure can be less than our competitors primarily because we leverage technology everywhere.

We only have 1400 people right now going into this merger.

If we have offices in singapore and london, chicago, new york entry all over the world with 4000 people.

Where else you expect to open up?

We are well-positioned now geographically.

We thank you for joining us.

Daniel coleman, the ceo of kcg, product of the merger between getco and knight capital.

Dominick chu is here to tell us about the options market and constellation.

Its earnings release this morning was a pretty mixed bag.

In the quarter that ended march 31, sales were up over last quarter to higher sales volumes and the acquisition of the mark west line brand in 2012 because the products sold also rose but by higher prices and higher corporate expenses.

This crunch profits which fell about 26%. the numbers released today do not include the constellation $5.3 billion purchase of the modelo beer business and the key metric to look at going forward.

That deal gives constellation u.s. control over such brands as krona and modelo close on june 7. traders are bullish on the modelo acquisition.

Of the 300,000 total options contracts outstanding on constellation, approximately 60% are bullish call options the most actively traded contract is the in the money, july, $50 call which has fallen in value.

These options are falling in value and modelo shares have fallen by about 50% 8 will be less likely by expiration that it will be worth something.

Keep an eye on the constellation options.

All of that action may necessarily indicate a direction.

You might have to dig deeper.

Thank you very much.

That 3.8% drop in constellation is the biggest in three months.

Dominick chu will be back with more options in the next hour.

When we come back, the xbox executive who will try to put the zing back in zynga.

It will not be a bedon mattrick.

Also, the private equity firm that is doubling down in grocery stores.

? this is "market makers." and a likely bidder has emerged for asrris teeter, cerberus typically buys distressed companies and it has been in a supermarket buying spree.

Cristina alesci has more.

I want to know more about harris teeter.

I have never been to 1. there biggest concentration is probably in north carolina were that population happens to be growing.

They are also capitalizing on a larger trend which is the move to fresher foods and more organic selections and better customer service of the company has been doing quite well.

If you look at its operating margin versus its peers, you can see that it has been doing a whole lot better than most of the supermarkets in the rival range.

It is a pretty high multiple.

Not to mention that the shares are up about 40% this year because of speculation that the company may be sold them up this does not sound like the kind of company cerberus would buy.

Cerberus has been all over supermarkets but more on the distressed and of things.

They have gone after underperforming assets.

What are they thinking?

They are thinking this is a one off kind of transaction.

They will not go in and buy premium brands.

If they combined it with their other super value stores, they could get more leverage with suppliers not to mention the growth story we mentioned and let's not forget that harris teeter may not be in the perfect situation.

It is not like cerberus is getting a premium premium brand.

It could be buying a good name but harris teeter has some competition now.

One of the biggest supermarket players out there called publix was rumored to be a potential bidder in this process.

It is opening up a store in north carolina right in the backyard of harris teeter and nobody in the supermarket business wants to compete with publix.

This puts harris teeter in a bind and maybe cerberus is thinking it is not quite distressed but we're not necessarily competing with the strategics on this one.

Cerberus is, by virtue of the supermarket business, a strategic buyer as opposed to a financial buyer.

Exactly.

Does that explain why harris teeter is up for sale?

Publix encroaching?

Yes, based on the analysts, publix is a feared major competitor and a run a very good business not to mention the fact that harris teeter does not have the number of stores.

It has 200 stores and has to sell or expand and expanding is kind of hard these days because margins are compressed.

That is the story of harris teeter.

It could end up in the hands of cerberus.

Thank you.

When we come back, investors really like the idea of a new ceo and shares are up 7% today.

Don mattrick is the new man and as to turn this gaming company around at zynga.

? the zynga ceo mark pincus is stepping aside hoping that the man to help the xbox become the top consol and the world can save the struggling game maker.

Don mattrick will succeed mark think is next week but he will remain on as chairman.

What does he bring to the table?

Can he turn it around?

We will bring in cory johnson.

It sounds like don mattrick is a handpicked successor to mark pincus?

He is a different kind of operator.

You probably could not find more people with long-term experience in the gaming industry.

Zynga has issues.

Cityville has been a disaster as have many of not find more people their game s. zynga does not have the ability to create new heads.

Mark pincus had success selling stock to wall street and his own shares and enriching himself before and after the company went public, public shareholders have taken it on the chin.

The company has not been able to turn a profit and has not been able to create new hits.

Don mattrick is a great success at xbox.

I talked to him a couple of weeks ago.

I had an inkling there was a job change in the future.

I thought he would be moving up and microsoft.

I asked him what the world might learn from the success of the xbox.

We are really pleased with the growth we have posted over the last few years we like working with other parts of the company, microsoft research, when desperate teamwork and collaboration is the theme that i think you'll see unfold in the future.

It will all pitted against the devices and services strategy of giving people the best experience they can possibly imagine on our devices.

Lots of teamwork.

On the one hand, gaming is gaming but xbox is it is in a different market than zynga.

What do people say are his chances to figure out what is wrong with the zynga?

And fixing it on the basis of this experience in a totally different part of the market?

First of all, the gaming people talk about the experience of playing a game.

Many people look and a game like tetris and wish they had invented it.

In don mattrick, he was at electronic arts and was there for the founding of some of the biggest titles ever and some weird ones like sims and need for speed.

These were either well- treaded areas or new things.

Xbox live is a tremendous online success and don mattrick started that and that will be the model for zynga.

Cory johnson, our west coast editor at large.

Don't miss "bloomberg west." "market makers,"will be back in two minutes.

? so, normally sara eisen fills in for stephanie ruhle.

She was here yesterday.

She is not here today.

Where in the world is sara eisen?

She is in bologna, italy, meeting with people like sarah,. crexendo and, on a -- again, on assignment.

We discovered it is not all work, but here she is catching up on the nsa leak story.

They are talking about edward snowden and what the president will do next.

We'll be back in just two minutes.

Keep it right here.

?

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

Advertisement

BTV Channel Finder

Channel_finder_loader

ZIP is required for U.S. locations

Bloomberg Television in   change