Obamacare Redux: Market Makers (07/03)

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July 3 (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)

Alan krueger will be our guest.

? we are about half an hour into trading.

A boom for ball -- small business and a setback for it the president.

Standoff in egypt.

The military ultimatum is about to expire.

So far, president morsi has not budged.

Who needs a record label anymore?

How jay-z's album is changing the face of the music business.

Good morning, everybody, it is the wednesday before july 4. you are watching "market makers." we have some breaking news.

If you did not have a reason to sell already, the isn nonmanufacturing coming in at 52.2. economists were looking for 54. just a reminder of what this is about, it is about nonmanufacturing, the u.s. services economy, by far much bigger than the manufacturing economy.

The number we got a few days ago that came ahead of expectations is more closely watched than this number.

Nevertheless, this is the lowest since january 2010. and so many mixed signals we are getting on the strength or not of the u.s. economy.

It is nice to see a little bump, emphasizing little, in manufacturing.

Services suggesting a disappointment.

There have been trade balance or deficit, rather, larger than expected.

Also a suggestion things are not humming along as fast as expected.

We will talk about manufacturing along with the set up for the jobs report on friday.

What does it mean for investors?

Briefly, markets are pretty much flat.

Let's jump in and get you the market makers newsfeed from bloomberg news.

A couple of promising reports two days before the official june jobs figures are released, americans filing claims for a employment benefits last week and adp employer services as companies added 188 thousand jobs in june, higher than economists estimates.

From bloomberg.com, new york state investigating walmart and home depot over fees charged workers for prepaid cards used as paychecks.

Others involved include time warner and the parent of red lobster and olive garden.

The use of these cards is growing.

4.6 million last year.

Yahoo ceo is at it again, bought a mobile tool for crating videos on iphones.

There is a report yahoo paid as much as $50 million for it.

Yahoo has acquired at least 15 companies since she took over last year, many dealing with mobile apps.

Deadline day for egypt.

The clock is ticking . the military set a 48 hour deadline for morsi to respond to popular demand a step down or at least do something to change the nature of the regime in europe.

That ultimatum, which we brought you 48 hours ago right here on "market makers" is set to expire more or less within the hour.

It is not clear if there is an absolutely firm deadline at 11:00 a.m. eastern time, which would be 5:00 p.m. in cairo.

You can see the popular unrest -- or at least there is a lot of the ministrations going on there -- demonstrations going on there.

They hope to see something happen.

What is going to happen next?

Where it -- will there be military intervention?

Who could replace the home and morsi ? fascinating range of possibilities in egypt.

The u.s. has stood on the sidelines waiting to see what happens before committing.

We will keep you posted on the developments.

On a lighter note, you don't have to be a fan of hip-hop to be fascinated by the new jay-z album.

It is giving him a chance to show his chops as a musician and businessman.

Can he get a platinum record before he sells a single cd?

It depends on who you ask.

Billboard will be here to explain.

A lot of change the music industry.

Today's top story, the obama administration is pumping the brakes on a key part of the affordable care act.

Companies with 50 or more full- time employees were supposed to offer health coverage or face a fine starting in january 2014, but the date has been kicked back a year.

Hans nichols is live at the white house.

First off, why this decision and why now e it is a question of flexibility.

Valerie.

And others are talking about how they listen to the business committed he which were concerned, upset, so they listened and gave another reprieve.

The fine is $2000. each business potentially could be incurring the $2000 fine, but the issue was would businesses in the say 60-employee range, would they it down to 50 or take full-time workers and reduce their hours so they could avoid that $2000 penalty?

The white house is talking about flexibility.

Here is what valerie jarrett said in our discussion.

We have heard you, we need the time to get this right, and we are listening area and -- listening.

It is still unclear, just what happens to the individual mandate, individuals that may have been covered by their companies and now the companies no longer need to cover them, will they still be forced to get that insurance mandate on january 1, 2014? i have a question about the preparedness of business.

The jarrett, suggests, in her words, the administration is paying attention, there is an open dialogue with the business community, and understands businesses are not prepared.

Reading some of the coverage, i cut the since businesses are not prepared because many were hoping the supreme court challenge to obamacare, which was unsuccessful, was good to be successful and the fact it wasn't isn't -- is the reason they're not prepared.

The business committees talk and the white house talked through all of this, you have to filter it and almost think like coaches working a referee.

A lot of complaints does incredible to me.

The supreme court decision came down last summer.

They had a year to process.

You can say they were banking on romney to win, but that has been six months free at the idea that the business community was not prepared does not quite seem to wash.

They want to get rid of it entirely, but what they have is a year reprieve.

At the end of the day, there will be a reckoning if the white house with the mandate for employees.

It still has me wondering if there is no foundation in fact for the business community's complaints, why is the administration backing down?

They argue there are technical problems, not fundamental problems.

If you think the challenges of implementing this part of the affordable care act are technical, the administration argument passes the smell test.

If you think there are fundamental problems with forcing businesses to provide health insurance for every company with employees over 50, then it becomes a question of delay and will be businesses ultimately defeat this provision?

You can make the argument it has been pushed back since midterm elections, but it still leaves it on the table for 2016. does the obama administration want to leave it for the next administration?

Unless we give them a heavy dose of truth serum, we will never know the answer.

Either way, the problem is not going away.

Thank you, hans nichols, for that update from washington.

When we come back, the whole world is watching in egypt.

The deadline is about to expire for the army's ultimatum.

What will the military do?

No one has ever released an album quite like this, the newest from jay-z and the music business may never be the same.

This is "market makers." ? it was about a year ago our next guest predicted the s&p 500 would plunge to 800. clearly, he was wrong for you but he did say so long as financial markets were hooked on financial heroin, it was was difficult but not impossible to predict when any of these diagnostic indications would come true.

Now that ben bernanke is talking about the end of quantitative easing, it is time to bring back bob.

Great to see you.

Is your crystal ball getting any clearer?

In some ways yes, and in some ways no.

What is more clear, around changes, with the fed, funny things happen.

I discussed on your program before i think ben bernanke was going to leave in january of next year.

I'm beginning to appreciate perhaps some of those risks, so i think tapering is at the forefront of everyone's mind.

More generally, the idea that central bankers can do whatever it takes in general i think is being put under the spotlight.

I think in some ways the outlook for volatility is much more clear.

The ultimate question, people who make predictions and perhaps even invest on the basis of what they perceived to be fundamentals have been proven wrong.

In some cases, have lost money in the past little while.

Will we see these fundamentals start to roll the market again?

If the fed begins to taper in the third quarter or perhaps the fourth quarter, are the fundamentals going to matter again in a way they have not seemed to matter for many people for at least two years?

I think the fundamentals always matter.

It is sort of an oxymoron.

People who have invested on the back of fundamentals have lost money for you and that surely cannot be a good thing.

Putting that to the side, fundamentals may not matter for much of the time in terms of where the market may want to get to, but they do mean -- they do snap back.

On the fed, i think the point is, if mr.

Krugman, for example, was in charge, he would probably say the loose policy should be the regime we live in until maybe, hopefully, fundamentals start to justify and validate where the market gets too, i think mainstream economists would say you force a collapse and start again.

I think whoever is in charge of the fed is dammed if they do and dammed if they don't. he may as well start the process now and see how the market reacts.

I think fundamentals do matter and always matter, but i think if the market gets may be reminded about them only ever so often, i think are headed -- fed will taper because it is getting fearful of creating these bubbles you say.

If that is the case, why doesn't the federal reserve with all its emphasis on transparencies simply say that?

Instead we get a lot of double talk.

Central bankers, i thought double talk was their job three at that is pretty normal.

I think what the fed and other central bankers are struggling with, how do they get the market , which is different from the real economy as we have discussed, get them off this idea that central banks puts are there forever.

In other words, how do we start to price risk from a price capital appropriately and allocated appropriately?

I think in the context of the fed, and it may sound straight, i don't think the fed cares about which treasury yields and value make it to, but of course they do care about where mover rates are in the real economy.

I think the balancing trick we have to work out.

Likewise in europe.

It is up to mr.

Draghi to respond.

He probably cannot respond this out of the election with anything meaningful.

I do see a nonlinear breakout in spain and portugal, perhaps which is happening now.

I think it is a tricky act.

Face it, where we have been living with qe for five years, this has been a great big experiment.

We should expect fallout on the way out.

You saying in your research, when the rubber hits the road, u.s. stocks is measured by the s&p 500. it dropped 25% to 50%, so your 800 target is still there at the bottom end of the range.

Let's go back to the fundamentals.

I am wondering if you agree with many people who say the fed liquidity liquidity injection has really inflated multiples, so the market trading at almost 16 times earnings is largely due to the fed.

What is the right level for it to trade at?

Surely, it is not a times earning.

-- it is not a times earnings.

We know the pe's constantly move up and down.

We can identify ranges.

The markets tend to see bottoms in pe's somewhere in single digits.

That is in evolving process.

I think where it is driven by the fed's ability to crush the rate market and fill agility and as a result, hugely distort -- volatility and as a result from a hugely distorted.

It will probably be worse than that because markets often overshoot.

Let's not forget the ability and willingness of the financial sector, the banks, providers, to invest as we go through the process of significant portfolio reallocations, that will be tricky.

And still have the kind of balance sheets they used to have -- banks do not have the kind of balance sheets they used to have.

Good to see you, bob.

Global head of technical asset allocation from london.

We're still waiting for word from egypt.

The deadline is less than an hour away and so far president morsi shows no signs of giving in.

What will the military do next?

We will keep you covered right here on "market makers." ? the biggest change in american healthcare policy since the 1960s is going to come a little bit late.

The administration has rolled back by a year a key provision of obamacare.

I call it that because the president says he is ok calling it that.

With us now, peter or zag.

You have had a lot to say about healthcare.

I am curious to know what the administration's decision on this particular matter says about the commitment to healthcare reform and ultimately the impact on the economy, which i suspect what you might have in mind.

First, with the legislation passed, most people thought it did a lot on coverage and not much on cost.

Since then, the news on cost has been quite encouraging.

The implementation on the coverage piece has been a little more challenging in this -- and this delay illustrates that.

We should not lose sight of the fact the cost of things is turning out better-than- expected.

For example, medicaid was only up 3.3% in nominal terms.

Hang on.

The improvements made on the costs i don't really have anything to do with healthcare legislation, do they?

I don't know that is true.

There's a big art of it for the economic slowdown.

4 million medicaid -- the care beneficiaries, a big chunk, about 10% of medicare beneficiaries, and the hospitals and doctors are not being paid on a fee-for-service basis for that but being paid basically a fixed amount.

He completely changes the financial incentive.

It is a reflect certain -- reflection of a variety of things, but a change in the payment system the affordable care act certainly is encouraging.

Peter, some economists have written this delay will help the economy giving it a bit of a short-term boost in terms of jobs.

Is that enough for people to say that this could spell the doom of obama's healthcare reform overall?

Know, the bottom line on the announcement is, the impact is mostly symbolic.

Let's look at a couple of dimensions.

First, what is the impact on employment?

There may be some minimal impact in terms of encouraging employment, especially her low and moderate wage workers.

I would be shocked if this were even in the 10th and not hundreds of thousands in terms of job creation.

The deficit.

There's maybe a four $4 billion or $5 billion affect on the budget deficit.

It is not nothing, but it is not massive free at -- massive.

In terms of those getting coverage, i don't think the number will be quite important in terms of delay.

Most employers would not be affected by the penalties.

Is there any sense waving this penalty for larger employers and at the same time keeping the individual mandate in place?

I think there is some sense, and that is why i think we should not make too much of this.

I think this is a sound acknowledgment to giving employers a little more time makes sense.

I don't think it should be taken as meaning the whole thing is off track.

Thank you, peter, good to hear from you.

Peter ortzag, contributor at bloomberg news.

Big news on the health care law implementation.

Coming up, is calling the shots on his new album from start to finish that should have record labels worried.

? in the saga that is the fight over dell's future of the computer company's founder finds himself in a tight spot.

Haeckel dell may have to sweeten his bid, but -- michael dell may have to sweeten his bid, but that could compromise the backing of his partners.

Let's start with you.

Take me inside michael dell's head right now.

He is under pressure.

Ahead of the july 18 vote, shareholders voting on whether to appeal -- approved the deal.

He is under pressure to increase the price.

I learned yesterday that the special comedy of the board has encouraged him to do so, and now he has a further reason to do that.

I have learned isf, the advisory firm, is inclined to tell shareholders to vote against it.

In its current form are you in its current form.

We don't know that for sure, but it appears inclined to do it.

Shareholders will vote against it, unless michael dell increases the price.

Or silverlake helps to increase the price free at what is their position?

That is the issue.

If isf recommends against the deal on the table, it is a real stain on the committees record.

They have gone out of their way to say that pushed michael dell and silverlake to the absolute break -- brink.

From michael dell standpoint, he got himself in bed with silverlake and now he is in a bind.

Even if he wants to increase the price, it could completely blow up silverlake's model.

It is going to put him in a bit of a difficult spot because he may end up losing a partner.

We're still not sure what the legal right silverlake has to walk away if this deal is renegotiated at a higher price.

We will have to see how that plays out.

Is there any chance that dell -- first of all, dell does not face the same constraints as silverlake area did he is inviting some of his own investors to join them here, but they're not under the same obligations that silverlake is.

Could he sweeten the bid himself?

Yes, he can use his own capital and he did that already.

We have learned from the proxy file a while back the board negotiated with him on silverlake six price increases before announcing the deal and the last one he rolled over his own shares of $13 36. the lbo is $13.65. i want to make sure that viewers understand and shareholders understand what is at stake for you and on july 18 shareholders are voting on the lbo.

The carl icahn proposal is not on the table that they.

You can get in on that only if the shareholders vote the lbo down and in a proxy fight, carl icahn wins control of the board.

But do you want to throw your lot in with carl icahn?

Carl icahn's role in this is keeping everyone honest.

When you have a deal -- i know this sounds funny, but when you have a deal, two parties privately negotiating with one another and the price of the asset goes up between signing and closing, there is a purchase price adjustment.

With michael dell and silverlake, cash on the balance sheet has been accruing.

There has been no adjustment.

Carl icahn is saying, there is still cash on the table and he is saying to put it -- give it to the shareholders.

Do you get the sense we will see movement somewhere?

Everything can change.

My person says there's not much chance for a price increase, but i feel there is always a chance.

Let's not forget, if he gets voted down, the stock will tank.

And not forget, the carl icahn has never said how he would turn her the company, who would run the company.

These are things for shareholders and iss to keep in mind.

Thank you so much.

We're going to turn now now to the music business because jay-z's new album drops sunday.

One million samsung users will get a taste tomorrow 72 hours before everyone else, for free area did -- for free.

Doesn't make it platinum before even one cd is released?

This is a branding deal that jay-z has struck with samsung.

Tell us a little bit about your decision.

Fundamentally, we will count any of his actual sales and any other sales.

Through the app?

This is part of a $30 million branding deal, as you said.

Samsung says they're going to give away one million apps for no charge, so technically, there is nothing for sale.

Billboard has been about counting consumer transactions.

General popularity.

If you purchase an album, it means you wanted to spend some money.

If someone gives it to you -- there are some other logistics.

Samsung is based in korea giving out these apps globally.

We just learned about this a few days before it was going to market.

We consider the billboard the rules of play and we do not want to change that made game.

We need to send out a potential rule change, get some feedback.

And we may do that.

We will look at this closely and considerate -- consider it.

He changes how the albums get sold.

Is this a path forward for other artists?

It is a path forward.

Jay-z gets credit for this.

It is a way to pay for the album, which i think is brilliant.

Keep in mind, there is only a small handful of artists out there that a major corporation will spend $5 million or $30 million with to create an endorsement relationship and distribute an album like this.

For most artists, this is not a way forward.

But there are a lot of smaller companies and smaller artists who may see this as the future.

It is the future.

If you go back 10 years, album sales are literally a little less than half they were.

If you are a big album artist, big star, you're looking at a loss of $5 million, $690, $7 million in royalty rates based on the decline.

This is the way he is found to make up for that lost revenue.

Is this the beginning of the end of the record label?

A shift.

A shift into the new newsweek business.

Most labels are figuring out how to follow that shift.

Universal music group is getting a taste here.

Jay-z called it new rules and tweeted saying if one million records get sold and billboard does not reported, did it happen?

We were thrilled because jay- z tweets like six times a year.

One last question, he'll, if billboard does not count this, should the recording industry of association of america, they're going to decide whether this was signed in, gold, etc.

Why should customers count if you aren't? customer gold and platinum based on shipments.

We see this as a shipment.

If amazon or walmart or best buy decides to order 500,000 copies of an album one way, the raa will certify that.

Thank you for talking to us about jay-z's latest album dropping on sunday.

We will stay with music and tell you about the place where the cd is still king.

? digital downloads and streaming pose a mortal threat to the music industry amount which is why record companies are struggling -- scrambling to find new ways to make money.

In japan, they have found a solution.

Cds and other forms of physical media accounting for the majority of music sales in japan , 80% of all music revenue.

Bloomberg business wrote about it in an issue that comes out tonight.

Let's talk about this for a second or yet 80% of all music revenue in japan still comes from cds.

What does that compare to in america?

About 34% in the u.s. while the u.s. is a bracing digitization, we have gone to buying vinyl in a way in cds has gone away, but over in japan they like the physical touch of having connection to a piece of music for you and that means picking up a cd and viewing it.

Smart marketing that ties in the consumer into the whole experience of having something with the group.

They put in tickets that allow you to meet the person, also put in things that will allow you to go codes go online and vote for people just like "american idol." there is a level of engagement that surpasses a virtual music delivery system.

What do you think?

The japanese love packaging.

You cannot even buy a trinket in japan without having it neatly wrapped and handed to you.

I think there's something cultural and having the album art, cd art.

Even in america, when you give people a reason to buy the cd, they will.

For whatever reason, the labels have let that go more or less.

When you see artists put out chromium packaging, giving people a extra, fans will pay a lot for it.

How strong is that cultural attachment?

Is it just postponing the inevitable that the japanese would end up digitizing music?

Eventually, more will embrace digitization everywhere.

But the idea with the engagement with your consumer will put this off, we have artie seen that in the u.s. with country music, where there is a lot more engagement with the consumers, something like fanfare at the country music association convention recently read -- recently.

You get in there and shake hands, me people, take a picture.

Let's say the rolling stones are not doing that.

Japan repeated the mistakes the american market made a few years before which is the major labels formed a conglomerate and basically had a little bit of a monopoly-like experience in selling digital music and overpriced it and bungled it a little bit.

I think the japanese market is still coming out of that.

It took years in u.s. for the digitization to recover.

This is a fascinating conversation.

Thank you, gentlemen three at -- gentlemen.

Coming up on "market makers," the timing cannot be better, gas prices are tumbling tumbling as we head into the fourth of july weekend.

? there is something unusual about the summers driving season because as you drive to your july 4 grill out, gasoline prices are actually falling.

Alix steel is here with the focus.

How low are we talking?

This is the longest drop in prices so far this year.

Prices are down five percent since may 21, down to $3.47 a gallon.

Rising inventory is the reason.

Highest level since 1992. we saw a drawdown last week, and we are seeing a spike in gasoline future prices, but there is still a tremendous oversupply in the market.

Increased energy self- sufficiency is really leading to the supply and products.

We could see even more relief at the pump.

Our suppliers making more product?

That is part of the story.

Capacity jumping over three percent from last year.

Last week, two percent run rate.

The big name was bp that started 265,000 barrel a day in indiana, the largest in the midwest.

The midwest has gas prices among the lowest in the country.

The gulf coast is home to about 45% of u.s. refining capacity and that is been hit with a massive oversupply.

As long as margins are good, refiners will keep working.

Demand really has not kept up, following in the past month.

Part of that, switch to alternative energy.

It keeps churning.

What about the oversupply in the u.s.? exporting products?

The u.s. is allowed to export product, just not as crude oil.

Valero exported about 87,000 barrels a day of gasoline in the first quarter, mostly south america and mexico, but that was up seven percent from last year.

The question is, how long will we see the cheaper pump prices?

We are seeing crude oil above $100 a barrel.

Some think it could be anywhere from 30-day 260-day lag which is quite a long lag because he says there's so so much supply we have to work off.

That is a longer lifetime than usual.

Usually it is a couple of days, but it is not a complete science.

Interesting, given that oil prices at least overnight and this morning have been rising because all of the concerns over egypt and whether the suez canal could see some disruption from the tensions there.

Part of the story of why we have seen it rise has not been because we have not been getting oil out of cushion by pipeline and rail, so it is really been the increase refiner demand story that results in more product.

It is a cyclical catch-22. but it is good news for us.

Where are you headed?

New hampshire.

Are you driving?

No.

alix steel will be back in the next hour with our latin america report.

Coming up, the case of pendants, bracelets and earrings.

Tiffany's was robbed and it was an inside job.

? this is cairo where it is a must 5:00 in the afternoon.

The crowds have gathered, waiting to find out what happens next.

The egyptian military, almost 48 hours ago david ultimatum to -- gave an ultimatum to president morsi.

He has refused to step down.

The associated press reporting yes told the military not to pick sides as the deadline approaches.

The deadline is somewhere around 5:00 p.m. local time, 11:00 a.m. eastern time here in new york city.

It does not appear to be firm, so we're not sure if something is going to happen five minutes from now or four minutes from now, for that matter.

The leader has been rejecting opponents to mansi resigned and has been doing so pretty consistently over the last couple of days.

The question is, what happens next?

Does the military layout a plan as they have suggested they would?

Doesn't mean the military is in power until someone has been appointed?

Who might that someone be?

One thing that morsi himself cannot ignore and we cannot ignore, look at all of the people out there.

Tens of thousands of people, hundreds of thousands of people filling the streets of cairo -- gathering momentum.

Absolutely.

Demanding their rights they believe they earned in the egyptian revolution are fulfilled.

We will be keeping an i on that on "market makers." we will be back with more "market makers." ? . . from bloomberg world headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle.

A setback for president obama's health care overhaul.

Small business gets a break, but what about everybody else?

Deadline hour in egypt.

In the showdown between president mohamed morsi in the military, will someone blink first?

Ask the rebirth of american manufacturing or not?

One expert says don't believe the hype and the numbers back him up.

You are watching "market makers ." let's get you straight to the newsfeed from bloomberg news.

Several key economic figures.

Fewer americans filing for unemployment benefits, signs that employers are holding off on firing.

Trade deficit rose because imports were higher, sign the the economy is overcoming higher taxes and government cutbacks.

After the biggest jump in 26 years, mortgage rates have gone back down.

The average rate for a 30 year fixed mortgage is below 4.4%. apple may be looking to be putting fashion in its products.

It has hired a former yves saint laurent designer to work on special products for tim cook.

He is no stranger to that world because he worked for apple in europe during the 1990s. u.s. auto sales were in the fast lane last month.

The prius helped toyota keep up its hot streak.

Now they are getting ready for its next act, a hydrogen powered car.

We'll talk to toyota u.s. sales chief coming up.

How do retailers figure out what shoppers really want?

We will talk with a marketing consultant to does just that for some of the august names in the business, all coming up in the next hour.

Right now, we are going to talk about the obama administration's decision to delay the so-called employer mandate provision of the president's signature healthcare reform law.

What does this mean for small business?

Joining us to discuss it is a big plus, who served as senior advisor in the obama white house -- is david ploufe.

You know how important healthcare reform is to the president.

How difficult is it -- how difficult was it for him to make this decision?

I think you knew there would be some short- term turbulence and opponents of the law are going to pounce on everything and say the whole thing won't work.

But in the scheme of things, you want to get it right.

This is a fairly small part of the law and enough businesses expressed concern that the smart thing to do is step back again even though you will get racism in the short term to make sure it works right in the long-term.

If you are judging things throughout washington will interpret it, you would not delay it.

But if you are thinking of what is the right thing to do for businesses and let the law get executed, they made the right decision.

But it's going to be the source of great controversy.

There is a lot of people speculating about what this will mean for the fall.

Fall is not far from now, so we will know soon enough.

David is the expert on the politics, but he's trying to put it in nonpolitical terms.

You're an economist, is the administration the right thing?

I think nar.

A are not ready for it.

As david said, it's better to do it right than sloppily and postpone it a little.

As an economist, i would hope they would postpone it again.

I don't like this provision.

I think it's another unfunded mandate to finance something that should be more openly financed.

Businesses should just compete and leave social insurance to institutions suited to handle it.

The exchanges are exactly that.

Are you suggesting a complete rethink of how americans are covered?

Yes.

I would like this provision ideally abolished.

That would mean more people would buy insurance that would require more public funding.

For the economy as a whole, that would be a good move.

I think we should relieve employers from the burden of providing social insurance.

That not their job.

They should make widgets and sell them to compete.

Less anybody interpret the remarks to say he does not like obamacare, -- is there any chance that exploring the mandate will result in a change such that the administration comes around and encourages or at least forces more people to exchanges as opposed to having health care through large employers?

This is where political reality steps in.

A.b. if you are designing the healthcare system from scratch,, that is what you would do.

We have a situation now where over 90% of employers have health care for their employees.

I think obamacare was designed with that fact at its core.

I think you're unlikely to see a move to more government-funded healthcare, but you are beginning to see people say this means a bunch of employers will drop coverage in the fall.

My sense is that you are not going to do that.

Most employers are good and most of them offer healthcare to their employees, so i don't think you you will see a wholesale shift.

But if you are designing the american healthcare system from scratch, you would probably look at different options.

In congress, this is hard enough to pass.

Passing something that is a single payer would fall short in the house.

That would put it off until after the midterm elections.

How much momentum does the health care law lose because of this?

The reality is the president cares more about getting the health care law passed then the next u.s. election.

We are seeing more and more people enjoy preventive care.

Younger people are staying on their parents plan.

The professor talked about you are going to have individuals be able to join the exchanges this fall.

You are seeing most of them having experience on a positive one.

Until the realities of healthcare are seen and things like death panels and being able to not see their own doctor, some of these mythologies are pierced, you are going to have some of this out there.

This is tough politics.

The healthcare system is something people people experience personally.

Everyone wants to improve it but it's going to take several years.

The one thing i am positive of is that people don't want to relitigate this.

They don't want to have congress go through some bloody battle.

They don't think congress is focused enough as it is.

It's a hard decision, you knew you were going to get a lot of grief for it, but it's the right decision.

If you didn't have confidence was going to be executed well, it's better to take the grief in the short term.

There will be bumps along the road anytime you try to implement something this scale and size, you will find something that needs to be changed.

You have to be willing to be flexible, but in this current political dynamic, any time you shift, you will get criticized.

One of the questions being raised today is whether it's fair to put off valdez for employers employers while maintaining the individual mandate at the same time.

We spoke with peter or zagged who spent a lot of time studying the economics of healthcare -- we spoke with peter orzag.

Is that fair?

It is fair so that they don't become freeloaders when they are sick and when they are poor, we help them with subsidies.

But it seems a bad business to force business to make decisions that are not in the interest of the business.

If employers want to give healthcare to the employees, that's a good business decision for them.

But those that don't often have very low-wage workers and i don't think they should be forced to do that.

We should take care of those employees through the exchanges.

I'm not for abolishing employment provided insurance.

I would leave that to a business decision of the employer.

As the white house tries to overcome the take-up, what have we learned from other healthcare mandates, such as one in massachusetts that the federal government can apply to this effort?

It has worked in massachusetts so far.

This bill will actually create some problems for massachusetts.

That's why they are asking for a waiver.

The massachusetts has worked.

The swift system , it has exchanges and it has worked for a long time very, very well.

We should look to switzerland how to do it but the swiss do not mandate employers to offer social insurance.

To me, that seems to be a crazy idea.

There is some concern that the exchanges will not be ready on the day they are supposed to open, october 1. does that suggest that the administration is going to have to postpone that part of the legislation to allow these exchanges to be fully functioning so that people can avail themselves of the individual mandate?

I hope not.

They should be ready.

I know it is complicated to do, but it is a federal exchange . for the most part, we will be ready to do it great will it be perfect?

No.

the medicare modernization act started in 2006 and the first year was not good either.

People were upset, it was too complicated, and now it works very well.

We have to be a little patient.

These things don't always work perfectly the first time, even for private business.

These are sweeping changes in the and on that note, i think you and david make the same point.

It is going to take some time with bumps in the road.

Thank you.

Coming up, toyota is going to unveil it latest hot wheels at the dam powered by hydrogen.

We will speak with the head of toyota u.s. sales coming up.

Are you counting on factories to lead the economy back?

We will talk to an economist who says you may be waiting a long while.

You are watching "market makers " streaming live on your tablet and that [indiscernible] -- and at bloomberg.com . ? you are watching "market makers yuriko -- market makers ." this is live video of crowds jamming into the square in cairo.

The deadline set by the military has come and gone and president mohamed morsi is still.

Budging.

In a statement released in the past half hour he says he has no -- he is of course egypt's first emphatically collected resident.

In the past two minutes, we received word from our colleagues in cairo that moment morsi has proposed or at least extended what appears to be something of an olive branch to the military, proposing early harlem entry elections and power-sharing.

Of what sort is not clear.

He is not budging, not suggesting he's going to step down.

Clearly that is not the case.

I guess he is budging.

He's not saying he's going to resign.

I was looking and he says there's no constitutional mechanism by which he can be ousted.

If he falls, it's going to be through violence.

The problem is we don't know what the military wants.

The military issued his ultimatum saying he has to offer a roadmap.

Early elections, perhaps months from now and some kind of power- sharing agreement between now and then.

We will keep you posted on these latest elements in egypt.

Turning to the u.s. economy, the u.s. trade deficit unexpectedly widened as imports climbed to the highest level on record.

That's good news for the economic recovery, but it doesn't necessarily help claims that the u.s. is seeing a manufacturing renaissance, at least not if you ask our guest.

He's a research fellow at the industry council and joins us from washington.

You wrote yesterday that the repeated claims that the u.s. is under the verge of our renaissance have been undermined again.

Can you explain what that means?

The only manufacturing renaissance out there is one that exist in the imaginations of president obama and a series of manufacturing cheerleaders who either don't know about the most authoritative data we have or who don't want to know about it.

We just got another reality check that shows not only the manufacturing trade deficit rose in march from its levels in april, but it is running ahead of last year's pace which happened to be an all-time record.

That doesn't tell me u.s. manufacturing is becoming more competitive, it tells me and should tell everyone else that it's becoming less competitive.

That is not a renaissance.

What are the most authoritative data and what do they show?

There is no shortage of them.

We have seen u.s. manufacturing that has generated a very impressive cyclical comeback back from a deep recessionary dive.

Five years after the lehman brothers generated the financial crisis, u.s. manufacturing has not returned to the manufacturing levels it had at the end of 2007. we have manufacturing trade deficits that record highs and a rebound that has about stalled out.

Even when we talk about manufacturing job creation, which didn't once again enjoy a nice ounce back from a very deep recessionary dive, it has only been a third of the pace of overall u.s. job creation.

What is the best prescription for this?

The president is intent on re-creating this economy that depends on building and creating rather than consuming.

Lots of domestic reforms are obviously needed on the tax front.

But all of those domestic reforms can be easily arbitrage by multinational companies due to a trade policy that keeps exposing domestic manufacturing too often very cheap and government-subsidized competition.

Unless that changes are medically, there will not be a renaissance in our lifetimes.

You can read his column at bloomberg.com.

Speaking of manufacturing, mexico, the manufacturing boom and the auto industry.

Railroads are cashing in.

Mexico has become a big auto exporter and railroads, including one control by warren buffett, reaping the benefits.

Alix steel has the latin america report.

You can call a detroit south of the border.

It's estimated by 2017, mexico will produce 4 million cars and light trucks a year, 35% above last year's high.

Most of those are bound for the u.s. and almost all are transported by trade -- transported by train.

It's estimated that transport will rise by 10% in the next three years.

Union pacific handles 90% of the autos, and burlington northern is increasing its auto business both in the u.s. and mexico.

And there is plenty of business to go around -- to go around.

The ford factory is running around the clock, expanding its capacity.

Nissan, honda and mazda are also opening plants in central mexico.

Last month, how we broke ground for a factory that will start building suvs in 2016. a manufacturing boom there.

You say.

Ahead.

That is today latin america report from alix steel.

Coming up, what is driving a toyota sales?

We will ask their u.s. sales chief, next.

We'll be talking about a hydrogen powered car.

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

What's next for toyota?

The world's largest carmaker says u.s. deliveries were up almost 10% last month as americans by new cars and trucks at the fastest pace since 2007. for the answer, we are turning to the sales manager from toyota who joins us from torrance, california.

It's great toyota is able to offer zero interest loans to keep sales rolling.

But that can't get along forever.

What's next?

We are very bullish.

The industry is in the fourth year of a great recovery and its leading the economic recovery this year.

Halfway through the year, the industry sold about 800,000 units after it grew 1.7 million last year.

The june sales were the first month of an annualized 16 million sales pace for the first time since 2007. the industry is very robust and is trying to pick up the whole economy and carrying it with it great we are optimistic.

We had a great start to the year and had almost a million sales through the first half of the year.

We are very optimistic for the second half and for momentum to continue.

A rising tide does not always lift all boats.

I want to know what toyota is going to do to keep buyers from coming to cars use on their own merits as opposed to cheaper financing, which is a great short-term strategy and one that toyota is uniquely positioned to offer by virtue of its great credit rating.

But you know as well as i know that the big three are making the test cars they've made in a quarter century and are competitive again all the sudden.

People are buying fords and chrysler's and gm's instead of toyotas or they might be able -- they might be buying more if they weren't able to get your cars at such attractive terms.

I think product is driving the recovery in the industry.

We recently launched the brand- new avalon and rav4. we have a new tundra, new corolla and the new highlander.

We expect our products will continue to drive our success and our business.

That will not be driven by low rate financing for the things you're talking about.

We have had some great success with camry this year, is the top-selling car in america.

200-7000 vehicles through the first half of the year.

We recently sold our 10 millionth camry in the u.s.. that is significant.

That's a competitive segment and we had to stay competitive with our consumer offers.

I noticed you highlighted a lot of trucks and suvs , especially with sales of those vehicles booming of late.

With ford set to boost production of the fusion, doesn't that make things more competitive for the camry?

A very competitive segment, but that helps.

It brings people into the market.

Camry was just recognized as the top midsize car by jd powers and it was recognized as the most american car.

With those 10 million sales, 6.4 million are still on the road.

We have great heritage with the car.

It helped identify the brand and should stay very strong for the foreseeable future.

What about the competition from nissan?

Nissan makes a lot of its cars overseas in japan and benefiting from the weakness of the yen.

Price is important, wages are not rising quickly.

We are still stuck with a a seven percent unemployment rate.

How does toyota respond given you can't take advantage of the yen the way nissan can because so many of your cars are made in america?

I think that is part of our strength.

70% of what we sell here is built in north america.

That gives us a very stable base when the end fluctuates to have such a big footprint of reduction here in the u.s. that somewhat insulates us from when the yen goes up or the yen goes down, it allows us to give stable vehicles and pricing to our consumers here.

Stable pricing means high pricing relative to lower prices from nissan.

Act can't be attractive to a per perspective car buyer.

Not necessarily.

We remain very competitive in the segments we compete in and we make adjustments for marketing programs and incentive offers where we need to.

We will make sure we keep our deals competitive in the marketplace and deliver great value to our consumers in the segments we are in.

I want to talk about future plans, and keating -- including the fuel cell model you introduced at the tokyo show in november.

Is the american driver ready for a fuel-cell car?

I think there is work to be done as a electric vehicles are making progress.

There is a process that has to go down and an infrastructure that has to be put in place, so there is a lot of work to be done between now and 2015. but there is a great chance that it could be a successful vehicle down the road as we execute the infrastructure and go through the education process that's going to be necessary.

Nobody thought the pre-is was going to be the runaway success it has become.

-- nobody thought the prius was going to be the runaway success it has become.

Toyota was at the forefront of hybrids.

We sold almost 2 million here in the u.s. and nearly -- and that took us over a decade to do.

I think if all of those things can fall into place and the pricing can be competitive, we think it has a rate chance for success down the road.

How do you price a car like this?

What are the comps?

County decide do you decide what to sell it for?

That is a little far out from here.

There is a little work that needs to be done and we are not ready to talk about that just yet.

The precious metals needed, elon musk from tesla has slammed fuel-cell vehicles calling them subpar compared with lithium-ion.

What does ye -- what does elon musk get wrong?

I think he is probably trying to protect his investment in electric vehicles.

He's trying to make a market and we and the other manufacturers will do the same for fuel cells as they are developed.

One last question before we go.

If you look at the automotive world, toyota is still on top, the world's largest automaker.

Who is giving you the toughest run for your money these days?

We try to stay focused on our consumer.

We are still the number one retail brand in the u.s. and we are busy launching our new products trying to deliver value into the market.

Obviously, everyone coming out of the recession is stronger in the marketplace, but i think that's great for the american consumer because they will have a lot of great options.

Toyota continues to deliver in each segment and we have great new products and great value for consumers.

It's going to be a great summer for consumers to come out and purchase vehicles because of the new products on the market and the affordability of interest rates and great leases that are out there for the next couple of months.

Let's not forget about declining gasoline prices either.

The general manager of the toyota division here in america.

Options traders are betting on a continued rebound in consumer spending.

One indication is trading options of america's biggest retailer, macy's. what are macy's options signaling right now?

What we are seeing is a simple case of old versus bear.

Bearish options are changing hands at the lowest ratio to bullish options in years.

The number of outstanding call options almost tripled since january 18. macy's stock has climbed to four percent this year and is sitting near its all-time high.

A number of different factors in macy's and the macroeconomy are contributed to this bullish sentiment for the stock.

For macy's, it boils down to two factors -- its size and its profitability.

Macy's size enables it to have national brand recognition.

Macy's profits are estimated to drop -- to jump 14% this year.

Consumer confidence held there a six-year high.

Consumer confidence is a key driver for spending which directly affects the performance of a retail-related stock.

Household purchases rebounded from an april decline.

Finally, retail sales rose more than forecast last month.

All in all, number of factors are showing that in the short term,, macy's could be seeing some upside.

Keep an eye on those macy's shares and options.

Thank you, dom chu.

He will be back for a special edition during "street smart yuriko -- "street smart." you are watching bloomberg television, streaming on your tablet, on your phone and on bloomberg.com.

? neiman marcus has 230 seven thousand followers on instagram.

It's a lot of buzz for the luxury retailer, but does neiman marcus translate those likes into dollars?

That's where the ceo and founder of curly comes in.

He provides analysis of image- based social media.

Tell us how your clients like neiman marcus use interest and instagram -- use pinterest and instagram.

The way we are communicating online has changed.

We communicate with pictures rather than words.

Even on facebook and tumblr and snap cap, they are becoming these rising networks.

Brands have to understand this language.

The first thing brands like neiman marcus and the gap are doing is getting in tune with what is it people are speaking about when they speak in this language.

Are they just active on the sites themselves?

Listening alone is boring.

You have to be a good conversationalist.

Our brands use our tools to understand not only what people are saying but to actually participate in those conversations and form good relationships with those fans.

What kind of level of engagement is required before a transaction takes place?

That's all the retailer cares about.

A brand cares about recognition, but they want to drive sales.

What is important about these new social networks is it's the first time we are moving from people and places to things trade on these networks, we are actually talking, not just liking the brands, we are loving the specific products the brand makes.

We love the shirts and the genes that the gap sells.

When you tune into that, you can start to make smart decisions.

How does your company help neiman marcus turn those likes and conversations into a sale?

There are some broad ways that a brand like neiman marcus would use.

One would be visual merchandising.

If i know people really care about this handbag, i can start to use that image in a much smarter way.

I can bring it into the store and showcase it in smart ways or bring it on the website and showcase it in a smart way or bring it into an e-mail campaign.

To leverage that powerfully is a big deal.

Display advertising, taking an image resonating for fans and bringing it into a display ad drives up the click through's. the final way is social engagement.

Being able to put the right things in the social conversation gets people back to your site.

I wonder if social media ever sends false signals?

Retail managers do such a good job of managing their inventories, doesn't this disrupt that and confuse things a bit?

The reality is understanding what people aspire to own is just as important of understanding what they click through to on your site.

We have never had a good way to understand intent before.

Most e-commerce folks understand what's going on on the site, focusing on the transaction). we see intense correlations between what ends up getting sold and how.

How reflective of the tastes and patterns of behavior of the general population is what we see on social media?

237,000 followers on instagram -- it's not going to make or break neiman marcus.

It needs to sell to a larger number than that.

Social media are at times criticized for being an echo chamber.

Is what you see on social media what the rest of the country is like?

I think the bigger criticism of social media is that we get too focused on vanity metrics.

But as statistics would indicate, once the sample size is large enough, it becomes a good roxy for the population as a whole.

What is a good sample size?

I am personally not a statistician and i would like to know what that key test would tell us.

I know we learned about this in business school but it was not my strongest subject.

I've got a great team for that.

I think it's going to vary by brand and product.

You have enough engagement of an individual product to be relevant.

A classic manager.

Thank you very much grade -- thank you very much.

More coming up on "market makers" including this -- apple wants to be a big player in television and they are on the verge of the deal with one of the country's biggest cable operators.

You are watching bloomberg television, streaming on your tablet cost phone and on bloomberg.com.

? allegiances are shifting in a television industry.

Bloomberg has learned apple has signed a deal to stream time warner cable programming over apple tv, that little black brick.

Hockey puck.

The square hockey puck.

Apple has also hired top executives from hulu and yves saint laurent.

Let's talk to cory johnson.

What do they tell us about the long-awaited apple tv, not the lack square hockey puck, the big thing that supposed to hang on your wall.

Leave it to a canadian to tell us about the shape of a hockey puck.

Is this don rickles?

We know that apple has been working on some kind of tv-like device great we don't know if it is the square hockey puck they have on the market right now, which is an interest divide -- interested -- which is an interesting device, which is really a software delivery of a different platform for different kinds of content, whether it's different music on the itunes music store or movie s or the nhl channel.

But now we know they are in negotiations with time warner to do a specific content deal, to release content through an apple tv device directly to users.

That is a big deal to these guys because they want to be offering a tv like device to compete with roque do and the xbox.

-- to compete with roku and the xbox.

How big a revolution is this for apple tv when it is really just kind of keeping up?

We don't know what the deal is yet.

The deal is not done.

We don't know what the ultimate shape of this deal is.

The real question is how different could this be?

Could this be over the top, which is delivering content, not through your cable channel, not just to cable subscribers.

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

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