Presidential Pardon: Market Makers (08/05)

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Aug. 5 (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)

Ago when ben bernanke started to sound like he was ready to taper sooner than some investors were prepared for.

What you think could spark a selloff?

What would it take to see volatility go up in the near- term?

I say it goes up to the fed.

We have not gotten any kind of macro shock in recent months.

We have had that in 2011 and 2012. this year we have not seen anything apart from the italian elections, the uncertainty regarding that at the beginning of the year.

There isn't really anything on the horizon apart from that fed activity that would make is overly concerned to start buying insurance.

The semper looks like clear skies for august.

We will be here and about 30 minutes from now.

Stick with bloomberg.

A presidential pardon.

The obama administration is attempting to reshape the patent battlefield.

Lack out.

3 million customers cannot see the nations number one broadcast network.

We will show you why the fight between cbs and time warner cable has turned so nasty.

Shoes shine.

An italian fashion icon joins the boom after going public.

Does that make it a takeover target?

Good morning.

It is a new week.

I am erik schatzker.

I am in for stephanie ruhle.

Thank you for having me.

We are going to have a fun week.

It is an important read of the services that are.

It makes up 70% of the index.

Michael mckee is in the newsroom with the headlines.

This is if you are in favor of a strong u.s. economy.

Aren't we all a healthy surprise?

I do not think we have too many people.

This takes us back to the february high.

What is more important as the numbers underneath it.

A very good headline report.

It is just them by a big increase in the equivalent of production and business.

It rises to 60.4%. new orders jumped from 57 % from 50.8 it will continue to expand.

We are starting to see a rebound in the economy as we go into the third quarter.

The one thing that did come -- did not come off well is employment.

We have seen this before.

Maybe people willould mr down there -- marked down.

If it holds we are going to seize a much better numbers across the economy and into august and september.

For more we have tom joining us from new york.

You predicted a reading of about 53. we have seen this dynamic.

We still have a weaker service hiring.

How does that play out?

We have to keep in mind that this is not necessarily a great indicator of services employment.

From our perspective, the great thing is a gives you a broad sense of what is happening on the services size.

In that regard it is very consistent with our view.

You are in an environment where you are looking at economic activity that is going to accelerate extremely modestly and the second half.

We are looking for about 2.3%. this report is consistent with a review of a modest acceleration.

To what degree do the data we have seen in recent days, gdp, jobs, ism, had this change or supported your view?

It is more or less in line with our thinking at this point.

A big deal was made about the ms.iss on friday's payroll report.

That was a function of lofty education -- expectations.

You have to look at this relative to trend.

The friday report was hollow -- hardly this.

From our perspective you are still looking at a modestly better second half in the first half which is always been our call.

Modestly better seems to be in line than the fed to bring in the fall.

What is your view?

That is exactly right.

This is our long-standing call.

We do think they will try to make this.

Generally speaking we do think that it will end sometime around the middle of next year after starting in october of this year.

Thank you so much.

Our thanks to tom . right now but check on our newsfeed.

-- let's check on our newsfeed.

The terror threat characterized as specific and enormous by members of congress has closed american diplomatic missions and 19 predominantly muslim areas.

The u.s. works to counter a possible qaeda threat.

The decision was made "out of an abundance of caution." a botulism scare is forcing asia to ban exports of dairy.

The company said 38 terms of whey protein was contaminated.

China, russia, and vietnam are among the countries restricting imports.

The bloomberg billionaires teens as they had discovered the second richest man in new england.

Richard: had sales of $22 billion last year, making him the 95th richest person on the planet with a net worth of more than $11 billion.

The billionaire you have never heard of.

The obama administration is deciding to overturn an international trade decision.

This is a major set back for samsung.

We will have a broad income for companies that will be using this to reshape the technology market.

Peter cook has been covering the decision.

This sort of intervening , we do not see that very often.

This is a big win for apple.

This does have wider implications.

Back in june the itc ordered a ban.

They found that they infringed a patent.

Apple argued against saying the dispute centered on a standard essential pattern.

This is that they had agreed to license.

Samson countered.

This was not paying up.

This was warranted.

On saturday michael pearlman sided with apple.

He did not weigh in on the specifics of the case that said a ban near was the wrong remedy.

He said the u.s. has wider concerns and import band may give them undue leverage and licensing.

The message is this administration is prepared to give more latitude to the users of these industry-standard pattern -- patents.

Samsung said it was disappointed.

We also have the south korean ministry of trade also expressing concerns.

The question is what is next.

If they cannot ban a project, where does the war go between apple and samsung?

It just goes on.

Next is an itc decision.

The question as to whether ban samsung products because they violated apple patents.

Samsung can continue to pursue this in court.

It has no direct bearing on that.

We have a separate related issue friday in california -- here in washington regarding a california court's decision.

Friday can be another big day.

If that is that only continuing.

Thank you.

Coming up, cbs and time warner cable at an impasse.

3 million viewers cannot see the top network.

Negotiations are off.

We will tell you why things have gotten so nasty.

To not forget about the item for the fed.

I white house correspondent tells us why the obama administration is desperate to turn down the heat on the decision of who will replace ben bernanke.

? you are watching "market movers"." the gloves are off in the battle between cbs and time warner cable.

They black out other market late friday cutting off 3 million customers from the broadcast network.

They are fighting over the fees they charge time warner cable to broadcast the shows.

Let's bring in allan sherman who covers media.

Where do things stand right now?


Time warner cable says talks are ongoing.

Cbs sort of says talks are ongoing.

There are no negotiations as we know.

We are no closer to a deal now than we were over the weekend.

Time warner cable probably has a little bit of room to negotiate here.

We are in the summer and there are not that many popular programs.

The pga championship is on cbs.

That begins on thursday.

As a starting to be heard in the community.

The calculus is how far can i push before i start losing subscribers?

Cbs is on the other side of that same we are going to blast the airways for you to cancel time warner cable or camp lane -- or complain.

That is what they're trying to do.

Outside of golf there are not that many reasons to watch cbs now than there perhaps other times of the year.

Is that reason why some people are saying this could carry on until september?

That is one reason.

This is a big fight they have to fight your they have to make headroom.

The grammy costs are the number one -- programming costs are the number one cost.

These are growing at 10% or 12% a year.

Three times the rate of inflation.

This is a real economic hardship for these multi channel providers.

They need to get a handle.

Time warmer cable -- warner cable may have more wiggle room.

The video business is a critical part of the time warner cable story and the comcast story.

They have broadband which is their growth business.

A big business is delivering video content into your home.

That business is under threat from a profitability perspective.

50% of the expensive base is programming.

It is going through the roof.

It is more than they can pass along to consumers.

They are feeling the backlash in terms of higher cable bills.

It is part a reason why they have the fight.

Cbs position is that we need to hold back here and eventually perhaps customers will start canceling time warner cable and switch to other services and time warner cable has a lot to lose.

On the other side time warner cable says we need to take a stand because if we do not set the president here -- president -- precedent here otherwise cable bills will get so expensive that we will lose subscriber anyways.

How unusual is the tone?

I am looking at a statement from cbs.

Cbs says it before the deadline on friday we asked time warner to continue negotiating.

They rejected this request and said they would have more leverage if they took us off their service.

They suggest if it is not nasty yet it is on its way there.

It is.

The ceo of cbs says this is war.

We have seen that rhetoric before.

We have seen fox go against other big cable companies and satellite providers.

We have seen this for -- before as retransmission fees are a big driver.

We will see this continuing going forward.

That is an important point.

We started with a directv and viacom.

Two sides battling back and forth and they came to an agreement.

What about the fact that at the very least time warner cable is trying to preserve the status quo?

At the same time you have one of their cable provider saying -- other cable provider saying this is not how our business will be run anyway.

You will be able to get your shows over netflix.

You're fighting a fight that will not be a battle.

Time warner has already said to be a broadband first.

We will continue to see internet pricing get a little more tiered and expensive as the programming costs continue to go up and video margins go down.

Broadband becomes better for the business.

I am afraid we have to end it there.

We have to take a quick commercial break.

Paul sweeney, thank you.

Hollywood heavy hitter george clooney taking his wife and investor.

This is up next.

? who should president obama pick as the next federal reserve chairman.

Everyone is taking sides.

The president has weighed in as well.

Julianna goldman joins me now.

The white house wants to backtrack a little bit here and diffuse the escalation.

You expect this kind of entry into, when it comes to the supreme court nominations.

Not when it comes to the fed chairman.

Officials and top economist are thinking that the white house underestimated how much attention the markets would be paying to this.

When you take a step back, you can trace it back to that interview on june 16 that the president did with charlie rose when he asked whether he would be real pointing ben bernanke.

He has stayed a lot longer than he wanted or was supposed to.

If you wanted to be reappointed you would reappoint him?

Has been an outstanding partner along with the white house and helping us recover much stronger than our european partners.

From what could have been an economic crisis of epic proportions.

There you have the president indicating that he is not going to go ahead and reappoint ben bernanke.

You also look at it interview he did on july 24. he said he wanted a fed chairman who understood the fed to jewel mandate to promote maximum employment and price stability.

Some interpreted that to mean that the president spake was larry summers -- presidents pick was larry summers.

This decision was weeks away.

The president went and met with lawmakers where he threw another name into the mix.

He has interviewed lots of candidates.

He did not stop there.

He went on to defend larry summers and the role he paid -- played and managing the economic crisis in 2009. the president is shining a magnifying glass on his decision-making process.

Who is it worse for?

They are both in the lead.

That is a big question.

People say it really would be worse for larry summers.

If it looks like this'll be a confirmation fight, the more this heat up the more criticism there is.

It could really bolster the argument that the confirmation hearing could be a referendum on the president economic policy.

That does not bode well for larry summers.

If he is nominated, if he does get confirmed, that kind of fight that hurt him when he gets to the helm at the fed.

Naked hurt his stature he needs.

I thinking a lot about this.

In 2011 i asked senator obama a question about the fed and he refused to answer.

In all of these cases, the president could have stopped there.

He did not.

Maybe he wanted to take advise from barack obama.

Thank you so much.

We are approaching 26 past the hour.

It is time for bloomberg to go on the markets.

We're looking at what the dow is doing.

The s&p is just off making up this.

The dow is still off about 40 points.

The nasdaq is just off four points.

If you look at the tours, it is really industries.

I am going to point out about berkshire hathaway.

Berkshire not only beat this, they have been hurting other insurers.

Berkshire is trading close to its all-time high, 290 $2 billion.

It puts than 10 shy of google.

That is pretty impressive.

Coming up, mark zuckerberg is making a major speech today.

Facebook is staking a claim on an issue that has washington at an impasse.

? live from bloomberg world headquarters, this is "market movers" with erik schatzker and stephanie ruhle.

Mark zuckerberg has been pushing immigration reform as a way to increase the number of high skilled workers allowed into the united states.

He will talk to the issue with a group of day laborers.

They will be screening a documentary about undocumented immigrants.

Our guess is with a trade group.

-- guest is with a trade group.

Mark zuckerberg has been looking for a way to influence.

Is this the right form?

I think he has recognized that the key to meaningful reform is to engage in the broader debate about comprehensive reform.

We are all looking to find this after the recess.

It is critical.

The tech industry has lobbied congress for a long time to help get more skilled foreign workers into the u.s. why is this different?

Why will this be a success?

We are at a critical juncture.

Right now our industry alone is producing three more jobs than there are college graduates to take them.

We need to focus on getting highly skilled workers into the united states in order to fill these jobs.

The attentional for economic growth is considerable.

Now is the time to focus.

Participating in the broader debate is the way to get it done.

The passage in the senate is a good sign that shows there is some bipartisan support.

We expected things to come out of the house as well.

Are there any differences between the way you see this issue and the way that the pervert and his charity sees this issue?

There is a pretty broad spectrum of support in the tech industry and the industry general around the idea on pretense of immigration reform.

We are on the same page.

Right now if we get the reform we can see as much as 35% more year-to-year growth in the economy.

Those are significant numbers from immigration reform alone.

It is just a question of finding the right balance.

There is a comprehensive reform bill out of the senate.

House republicans are not seen for pair to take up.

-- do not seem prepared to take up.

What is silicon valley and the tech industry willing to give up and comprehensive reform to get the things you want?

In real issue is a balance between the temporary solution of visas for highly skilled workers for which there are simply not enough to handle the immediate demands of the tech industry.

Balancing that interest with a need to develop a u.s. work force.

If that is the senate a bill includes stem education divisions that will create as much as 5 billion in funding.

We are dealing with both the short-term problem of these jobs today and the long-term of getting graduates in the future.

You seem relatively optimistic.

There are some republicans that would disagree.

It does the tech industry have outline for plan b? i think the best way to accomplish lan a is to focus on plan a. right now plan a is comprehensive immigration.

You have to have a backup plan.

We need to focus right now on the importance this will have to our economy.

My industry a long -- alone has grown to a $54 billion industry in five years there is so much growth potential.

More and more people are coming to recognize that.

The 2/3 vote is an indication that there is bipartisan support.

There will be new negotiations and challenges that come up.

I am confident this has a raised itself to the level of immediacy that we will see results from the house as well and ultimately get something in front of the president.

The question might be how long it ends up taking.

It is good to see you.

Jonathan zuck with us from washington.

We have some other media headlines.

3 million time warner subscribers can watch cbs for a 30 day.

Of the two sides are sparring over reach transmission freezeees.

The blackout will become more noticeable tonight when the air the latest episode of "under the dome." global tablet sales are dropping.

Sales of the devices.

9.7% in the second quarter.

Consumers are delaying purchases until after apple introduces its new version of the market-leading ipad later this year.

Quite a lot of pressure there.

Harvey weinstein could be headed back to miramax.

He is in talks with tom barrick who owns the studio to merge with the weinstein company.

In the 90s you had movies like pulp fiction and clerks.

They left a 2005 after a split with disney who own miramax at the time.

It is the movie star versus the hedge fund a star.

George clooney is attacking damn low -- damn low -- dabn loeb.

George clooney says i've been reading a lot about daniel loeb who describes itself as an activist but knows nothing about our business.

He is the single least qualified person to be making this kind of judgments.

He is dangerous to our industry.

He said it is a business that is only about creating wealth.

If they feel they get bailed out and nobody gets fired.

Those are fighting words.

They are.

You wonder how well he really has to note in order to help it.

Is he supposed to be evil?

-- know in order to help it.

Is he supposed to be evil?

I think it is two guys who do not know much about each other's businesses.

Long-term capital management is iraq's what i can remember.

George clooney seems to have some points.

It takes a while.

He made the point that they left out some of the highly grossing movies and only focused on the negative ones.

That is a fair point.

I should say so.

It all depends on when you start the clock running.

When we come back, terror threats.

The u.s. keeping 19 of its embassies closed for the week after what some lawmakers say is the most specific intelligence about a potential al qaeda attack since 9/11. we will talk to a former official at the department of homeland security after this short break.

? @lee's 19 u.s. embassies in the middle east and south asia will remain close -- at least 19 u.s. embassies in the middle east and south asia will remain closed.

Some are conga the worst threat since 9/11. we will talk to the chief of staff from 2007-2009. now his the -- he is the ceo of the sure top group.

Extending this deadline through the 10th what does that illustrate?

It demonstrates that the threat streams are still credible.

The agencies are likely moving on all direct streams in coordination with our allies in the region.

At this point given that no attack has occurred they're airing on the side of caution by extending it.

The remainder of the moos him -- muslim holiday.

Those that have predicted that it is decimated to the point of not being functional, perhaps declaring the decline to soon, it also indicates what we saw with the decapitation with bin laden.

We are seeing version 2.2 of al qaeda which is a leaderless jihad.

This is more like a cancer where it metastasizes and there are cells throughout the body that have to be attacked individually.

We have to keep checking in to make sure this cancer is in remission.

Does that make al qaeda 2.0 more dangerous than the original version?

It makes it a lot more dangerous.

Just like in the cold or war when our main enemy was the soviets, in this case it is a much more multi-faceted threats.

As you can imagine, it is much more decentralized.

Going back to the analogy of cancer, it makes it more difficult to track.

If we look at the evidence extracted from the compound where bin laden was held up, the computer showed there was a debate going on between the older generation and the younger generation.

The older generation wanted to wait and not attack and do more big attacks like bin laden did.

The younger generation were arguing that we need to get some points on the board.

We have to show that we are still relevant.

What we're seeing now is this administrations concerned that generation 2.0 is prepared to do additional lower-level attacks to demonstrate they are still relevant.

You say they are more dangerous and they violated additional methods like using a cell phone.

It does.

You have to consider that they were doing that intentionally.

I think there is enough evidence to show that that is not the case.

As in any operation there's going to be some breakdown.

It does show that our surveillance programs, particularly ones being debated right now, that shows that the continued use of our tools are brought are being affected to some of the most sensitive, or station of operatives.

How much of this decision to close down these embassies for the time being is a result of benghazi?

If it is, how much is because of security and how much because of politics?

It is precaution and politics.

The professionals that are advising the president are thinking about this from the standpoint of what makes sense for the nation and our citizens.

You cannot remove it from the politics of benghazi.

The unfortunate reality is that our embassies abroad are at risk.

We have not sufficiently funded their protection.

It is good to see the protection in the coming year.

They remain exposed.

Those are like susan rice , unfortunately she was not able to become secretary of state because of benghazi and she is the one leading the discussion, there is no question that that is a scar on this administration that will color their judgment on what needs to be done.

I am sure the president has instructed his team that he did not want another benghazi on his watch.


Thank you.

Still ahead, tough times in europe.

Are not holding back the luxury brands.

How business is booming.

? this is "market movers" akers." we know how the stock market is doing you can predict what people say about the central bank.

Whoever is running the fed is always a he wrote near the top of the market.

The central bank is made up of a hunt of ghost's. -- ghosts.

This is from robert proctor.

Take a look at some of these examples.

Do you member 1999 before bubble burst?

The commit tee to save the world cover?

The committee to save the world.

Not that long after the market dropped.

Even bloomberg got in on it.

We published a headline that said it was time for them to hang up.

Alan greenspan on a couple of different covers.

He is seen as an american hero.

This has become elevated.

The newsweek cover had the world according to greenspan.

It is all very laudatory . what do you think happens there?

I am thinking not so great.

They had another headline similar to who is to blame.

Most recently, ben bernanke was lauded as the hero.

I wonder where it will be in six months?

You i was reading politico this morning.

He referred to a story he had written repricing the time magazine cover from way back when.

Now it is the committee to save the world from larry summers.

We see market sell off.

They were not even in the seat yet.

Janet has been at the fed during this time.

Larry summers is coming in here.

They have been very vocal.

They face a critical role that social mood lay in making decisions.

To what degree do they allow the public perception to influence their views and the choices they make?

My guess is they do.

They are only human.

They are just like baseball players.

Ease is not read any of the press.

Ferragamo is one of the most consistently successful rents in the fashion industry.

It has been that way for 80 years.

What is the formula that has allowed them to stand the test of time?

Sara eisen traveled to the company headquarters.

The wedge, the invisible sandal, and the cage heel.

Iconic styles of have stood the test of time.

Always waiting and bring a new materials.

With consistency maintaining the real value of what it stood for.

A 13th century building on the heart of florence.

A reason pays tribute.

-- and use impatient view.

It is where in 1927 ferragamo began his iconic design thomas many of which are still sold today.

Very contemporary.

The shoes are still make completely by hand.

The family still plays a key role in management even after taking the company public.

Four of the company's 11 board members are ferragamo.

Me know his dream to diversify the product in the market.

One of the key strategies is going global.

We made the difference.

It was starting from 2008. the open 10 stores every year.

The new focus is renovating stores around the globe to keep them relevant and appealing.

It is to increase the size of the source.

It improves the quality of the image.

While still maintaining the integrity.

They are in the luxury world but they are very durable.

There is some practicality in our products.

Our customers have appreciated it.

What woman does not appreciate a closet full of shoes?

[inaudible] sara eisen, it italy.

The wall of shoes is very tempting.

Are you jealous?

I shop on sale only.

I have a bad back so i am wimpy on the heels.

Is too much focus on the women shoes.

They make some great men shoes.

And sometimes that some people prefer.

And you?

I am not a big ferragamo tie guy but i do like the shoes.

It is passing 50 -- approaching 56 past the hour.

We have the tao up about 36 points.

The s&p off 1 point.

The nasdaq actually slipping into positive territory of 3600 and 92. -- 3692. it looks to be some kind of rushed.

The 10 year yield rising to .6%. the commodity markets, not a lot of action.

It does not seem like they want to take any of the crude oil . it is relatively flat at 108. gold had a huge rally on friday following a disappointing jobs number.

We are holding this level now.

This is down about $.45. coming up, we will talk exclusively to an investment banking leader who says today is a big deal.

The transformational deal is over at least for now.

Is a rod out?

The latest on the drug deal.

To stay right here with us on bloomberg and streaming on your tablet.

? . ? change in china.

The world's second-largest economy gets ready to discard its one child policy.

Did to print, "the new york times" sells "-- fit to print, " -- fit to print, "the new york times" owners xcel "the boston globe." and the yankees and baseball.

You are watching "market makers , closed but everyone.

Thank you for having me.

-- "market makers ," everyone.

I am alix steel.

Thank you for having me.

The u.s. is on high alert.

They will extend the closure of consulates throughout the week.

Government officials said they have seen an uptick in communications in the terrorist network indicating the potential for an imminent terror attack.

Alex rodriguez, facing suspension for his role in a performance enhancing drugs scandal.

The punishment, expected to be announced by major league baseball today, cnn has reported that 12 other players will be suspended today without the ability to appeal.

And what is for dinner in the future?

Pretty cool, the world's first artificial beef burger was fried in london.

It cost more than $300,000 to produce.

I kind of want to truck -- want to try this thing.

Scientists are trying to find a way to grow meet in labs as an alternative to livestock, which crimped -- contribute to 1/5 overall greenhouse gas emissions.

Carl icahn over the future of his namesake pc company, it sure feels like m&a is back, but that is not what the numbers show.

Volumes remained at or near the post-crisis average set before 2008. is this the new normal?

The headed the investment bank is here for this bloomberg exclusive.

Nice to see you here this morning.

I would say the data tells us that m&a activity is down 20% since last year.

If you go back historically, you look at the drivers of m&a. even topline growth has been slow over the first half of the s&p and nasdaq.

I have heard lots of explanations as to why it is not active.

Elah prospects in europe, emerging markets, i know you are adding something to the mix, antitrust.

How is that important here?

Collected goes to deal execution risk.

But the boards are telling most ceo's -- what the boards -- it goes to deal execution risk.

Of what the boards are telling ceo's is that debate transaction doesn't go well, if you think about the things that could go against you, confidence is one.

Right now if you look at the ceo's, there is not much for permanent employment.

A lot of them, their outlook is more muted.

That is a factor against them.

We think that antitrust is more of a risk.

Data is double the number of challenges to notify transactions over the past four years.

In something like that scenario, a landscape is not going to change at all.

Don't companies have to readjust expectations?

At some point will we not see a continuation of strong m&a? i agree with that.

We think that this year m&a will pickup for a number of reasons.

As i said, top line growth is very muted, less than 2% for most of the large companies, but what is also happening is there has been a lot of share repurchase with dividends driving a lot of investor satisfaction on the status quo.

If you look, for instance, at the share repurchase volume today, share repurchases in the first half of this year compared to 480 last year, dividends last year was a record.

Where is antitrust most chilling?

What kinds of deals are not getting done?

There was no litigation for a number of years, and right now we saw att global , their large acquisition, h&r block, there was a smaller deal for packaging.

And then you saw a deal that went through, the dollar thrifty deal.

There were some conditions.

There were a lot of conditions.

Is the consumer getting better but companies are still cautious?

It is hard to pick out sectors.

What it does mean is that if you look at obvious synergy, the ftc and the department of justice are taking a hard look at some of these transactions.

Does that mean that the days of the transformational deal are for the moment behind us?

I do not think so.

I think you have to be a lot more careful with industries that have heavy concentrations becoming much more challenging.

The cellular business in the u.s. is an example of where that will be more tricky.

Markets where you have say, three, possibly four dominant players?

That is right.

You think this would be different if we were not living under an obama administration?

No, it is hard to say clearly, but there has been more enforcement over the last five years with more concentration.

How closely does the m&a market look at who will be the next fed chief?

They do not let their perce, but just to the health of the markets generally.

How closely does the m&a market watch the fed?

That is in terms of overall sentiment, i think it does impact.

Rising interest rates on one hand could spur people to act now, given that interest rates are rising, but on the other hand the economic outlook is less certain with people backing away.

If leon black at apollo's says it is time to sell everything not nailed down, but signal does it send it when the smart money calls for the top of the market?

That is one side of the coin.

The other side is -- how are they doing?

A lot of the exits are in how well they are performing.

Aftermarket performance this year is the best that has been since 2006 and investors are feeling better about that.

The stock market performed well with records from -- record funds flowing into equities.

The dynamic sets itself up well as long as the larger deals perform.

Would you say that black and others are not calling it off the market?

Hard to say.

Right now there is a great bid in the equity markets with one important psychological fact, the facebook ipo now trading at its ipo price, which has made people feel better about some of the larger ones.

Getting over the facebook hangover.

Maybe that is the case.

Coming up next, jim is going to tell us why activist investment is good news for investment bankers.

And then we are looking at the state of the news business and why they are paying john henry to take the boston -- "of the boston globe," off its hands.

? ? you are watching "market makers." we are in the middle of a terrific conversation with the global head of investment at credit suites.

Jim, antitrust, objections, what about activism?

I think activism does play a role.

We have seen a number of high- profile transactions where the activists have been involved in taking some transformational moods with respect to their companies.

? we think that has played a role.

There is an argument that activism is for a longer term outlook.

That is a debate that people continue to have.

What we can say is that in the short term and medium term, activists have been successful and looking at the data in the long term, it is more mixed.

Shareholder activism is what we're talking about.

Is it unambiguously good for investment banking?

I do not think that that is the case.

Activists can pop up on various sides of transactions.

There is no linkage between the investment banking business and the activist, but in general we have seen that they can spurn more activity in terms of m&a transactions with financing.

Things like dispositions, for example?

The company activists, like what they're doing with sony, i guess?

Not performing as well as a good, spin it off, sell it, is that the kind of activism that is, generally speaking, good for business?

That part is good, but as approved by various boards, carl icahn is just one example where they looked to disrupt the transaction.

I am curious, are there any sectors or industries that lend themselves more to this activist investor environment?

We have seen at some in some recent sectors, oil and gas is one where we have seen a lot of it, but it really does stand of all sizes of companies in different sectors.

Can you build a practice around this trend?

I do not know what you would call it, a special situations department?

I think you can.

Lawyers are looking for ways to deal with activists.

For instance, we have a specialist with us at credit sweep to use to be at iss.

The big proxy advisory firm?


He is now working for you, trying to -- do what?

Disrupt it, get ahead of it?

Just to give advice on how activists typically work and advice about how things play out.

30% per the first half of the year, the whole industry saw a rise of 1.4%. what can you attribute that to?

For us it is the long-term trends.

We lost a little bit of a share earlier this year, but last year in terms of global these we were no.

3, before that number four, so a lot of that comes down to the mixture of business.

To what degree does geography play a role?

Many people watching our conversation may not recognize the long history that credit suites has here in the united states and throughout the americas, but it is a european bank and we have seen a number of european banks losing share amongst american counterparts.

What do you attribute that to?

First of all, for us we try to look at the business globally and figure out the best return for shareholders.

If you look at economic activity right now, their fees have been down on a trend.

Asia as well.

But america is now 50% of all the fees, globally.

The place you want to focus in terms of making money is the americas and we do have a strong presence here.

In terms of europe, is just about getting the model right.

Apart from doing more business in europe, is there any other reason for them to be a disadvantage relative to u.s. banks?

None whatsoever.

If you look at the ranking for major products, european banks are very competitive.

We really appreciate your time, thank you for coming on "market makers," to jim.

The one child policy in china might be going away.

But 1.3 billion chinese, this change to have world changing implications.

? ? the chinese government is signaling that they may be ready to relax their one child policy.

The 30 year-old policy was intended as a form of population control and estimates are that it may have avoided as many as 400 million births.

The offer of "china inc.," is with us from chicago today.

There are a few countries that could pull a lever as big as this in social and economic policy.

What is driving china to make this decision now?

Two things.

The first is that china cannot do it about causing enormous social change.

If they look at their asian neighbors , it can give people a measure of freedom without upsetting the situation in china.

On a more policy level, china is more afraid of the labor force, the younger labor force is shrinking in china.

They are a long way from having a labour shortage problem.

Manufacturers do crave that workforce pouring into factories.

They would rather have that than in extend the retirement age, which right now is pretty low.

It is not really a labor shortage problem, more of a labor-management problem.

The population between 15 and 24, really declining over the last few years, but as china transitions into an investment driven economy, what does this wind up doing for them?

It does a couple of things.

One, it raises the value of the workforce.

As the population shrinks, families are investing more and more in their children's education.

A family with one child can introduce a worker that is several times more productive than a low-wage worker in pre- market reform china.

Another thing that is happening that is important to understand is that the first generation of urban migrants had their parents to work for them and provide child care and child support.

That group just is not there anymore.

The new grandmothers and grandfathers are already working, so china has to provide a way to offer child support and other social services for children, driving up wages for those who are working right now.

When you seek 15% wages in china, year over year, it is really the result of families having to pay for services that were once provided.

Would a change in the policy make china a more competitive economy worldwide?

No, it would not make it more competitive.

The one child policy has made them more competitive because of this outsized investment.

They have virtually -- they have virtually no university system prior to this.

Now they graduate from families that can afford for education for one child, more than the u.s. and india put together.

Let's say that the estimates are right and the policy prevented 400 million births over the last three decades, let's say full abandonment, of which we are not anticipating, adding 400 million people to the chinese economy, those people buying things would seem to make it at the least bigger than it would be otherwise.

Why does that not translate into influence globally?

I think we have to take apart the 400 million number.

You might get that additional growth, but china wants to urbanize the people over the next decade.

When families urbanized , they did not have three children.

China hopes to be more than 50% urbanized, eventually 80% urbanized.

You will not get that number even with the large and one child policy.

Good to see you, tim fishman.

A brazilian airplane maker is going to sacrifice profit margins to get a bigger share of the u.s. market, the subject of today's latin america report.

The discount is to impact customers and put pressure on pricing to build an order backlog of 366 additional jets.

They have 279 firm orders still , falling 10% last year.

This year the company sold 30 regional jets to united airlines.

Investors have noticed.

Numbers are up 37% this year, the best performer on the brazilian stock index.

We are approaching 26 past the hour.

Time for bloomberg television to go on the markets.

In a few moments we will look at european market data.

What we are seeing today, flaccid downs near 10%, really, it is slightly up to one-tenth of 1%. quickly, hsbc, one of the world's most international banks, the stock is down 5%, you can see why they missed expectations with a slowdown in fast-moving markets.

The billionaire owner of the boston red sox has picked up another of the city's iconic institutions, "the boston globe." we will have more details on what he might do with the paper, next.

A-rod, missing 215 games without pay?

How much will that cost him?

More when "market makers" returns.

? ? welcome back to "market makers." john henry is many things, finance year, team owner, now a newspaper man.

He scooped up the boston globe for a fraction of the money that the times paid for it years ago.

He is the latest to buy a storied newspaper.

From a mountain view, calif., a former newspaper doctor and the author of "12 new trends that will shape the news you get." why would john henry won this?

A hometown paper, he is a home town hero in a way.

The thing is that newspapers tend to attract entrepreneurs with a certain ego, a certain sensitivity around saving in the hometown paper.

"the boston globe" definitely needs it.

Can you see this as anything other than a vanity purchase from a hometown guy?

There is certainly vanity involved, but you can make the financial case that he is buying at this case at the bottom or close enough to the bottom, for people who are in love with distressed assets, this is terribly distressed asset and it may be close to the bottom.

What does he need to do in your opinion to earn a decent return on the money invested in the globe?

Is that possible, even?

It is, but it is at least a three-year to five-year kind of process.

He has gotten into the business big time over the last few months.

He has said that, that profits are coming in to these papers and they will decline over the next three years to five years.

The most difficult part of this transformation that has been going on for 15 years lies in turning these companies mainly from print to digital.

With some investment, patients, and smart management, he could wind up with an asset that is much more valuable than the 70 million he is paying for it.

Looking at these newspapers, loggers, reporters, we're really is the growth?

Digital is where the growth is.

Warren buffett has been purchasing community newspapers with circulation as small as 30,000 or 40,000, but "the boston globe," that has different concerns.

The sooner that all of these newspapers head in a particular direction, the better off they will be.

It is a matter of maintaining costs on those websites and tablets.

Where was warren buffett?

Just $10 million, or do we know if he was swirling around at all?

Yeah , he showed no interest in this.

He may be interested in the wooster paper, it is a far less competitive market.

He does not like competitive markets, does not like competitive newspapers.

The metro papers are in a class by themselves and in the u.s. they have been everything to everyone.

Many of them are reorienting to become local papers.

That is what they need to do because many of us get our national news from bloomberg, "the new york times," "the washington journal," etc.. a change from the globe to a really good regional player is a tough one and they are midway through that process.

I think they will be farther through the process with the ownership of john henry.

With more on just how hard it is, when the times put the glove up for sale they were hoping for more bids with his love of newspapers being well-known.

No interest whatsoever.

I guess my question is, though, what does it mean when big-name investors buy something like this and have no experience in the industry?

A good question.

It does require patients.

This will be three, five, maybe more years in terms of having a turnaround.

Is he willing to lose money as the manages costs?

It is a good question.

He has on other enterprises, not newspapers.

Is there synergy between the globe and the red sox?

I think it is the sports network.

The red sox are very popular, but look at sports as a franchise in boston.

The red sox and beyond.

When you have a new england sports network and the megaphone and you think about the kinds of products, commerce, tickets that you can sell through nesn, you will see a lot more.

In california comcast, which is similar, uses the daily newspaper reporters and columnists on the air all the time, but i do not think that is the case in boston today.

I think we will see synergy in terms of promotion in the ability of, a little known asset here in this sale, to really become a commercial, digital center in boston and i think of john henry is smart, he will continue on that path.

"the boston globe" has started but is not there yet.

Based on the track record they have so far, is it a good thing for billionaires to own newspapers?

How does it feel to the public in boston have this billionaire?

I think it is a positive feeling that someone once said.

But we should note is that a bunch of the sports reporters on a "the boston globe" expressed concern over the weekend that because they cover the red sox, it is important to the community there, but they cover it with independents.

When the sox are not doing well, they say saudi.

I think they are expressing concern about whether or not they can cover it with have been.

Can they?

What's the proper concern.

The billionaire question cuts both budget cuts both ways.

You need a patient billionaire who can give profits out of this and it is better to take your profits over the next few years and invest.

That is what aaron kushner five years ago tried to do in orange county.

That is the model to watch, how do you smartly invest in the newspaper and the asset?

Good conversation, we will have to watch it as it plays out.

When we come back here on "market makers, closed but ever feel like big brother is watching?

Maybe because you are giving out more device on your smartphone tablets.

? ? big brother is watching, but americans do not seem to mind.

Perhaps they offer you a discount?

Keeping you save, massively controversial?

It goes without saying right now.

An analyst with bloomberg government, clearly americans have been trading privacy for convenience for years.

How come they are not so keen on trading privacy for security?

Consumer data is the lifeblood of the digital economy.

More and more privacy to get the goods and services you want, but americans seem to be schizophrenic.

They do not want this public information on profile, but they do not mind trading some of it to get a cash reward.

You can see that consumers are giving more and more of their information every year.

The digital information is growing exponentially.

Do you have a sense of how critical it is for companies like google and apple to track our every movement?


This is the input.

Consumer data.

This is what feeds innovation for an internet company.

The consumer is not only the customer.

They provide the input.

If you want to learn where the technological innovation is coming from, it is coming from us, predicting our every move.

That is the service that google, amazon, and others are relying on.

This is information that can offer a complete profile of an individual.

Is there any way of tracking the economic impact of the innovations, let's say?

Or the product?

That treating our privacy allows google to develop?

We know the europeans have a different attitude, does that mean there is an economic disadvantage in europe relative?

It is a cultural difference more than economic.

These technology companies like apple are all over the world.

We have very different values when it comes to privacy.

In europe, as our analyst will tell you, in europe is all about the right to privacy.

In the united states it all depends on where the data is going.

If it is a movie, a discount, we do not seem to mind so much.

The question is, how can the government make consumers feel protected without feeling like they're being tracked by companies that make them feel uncomfortable?

A good point.

Is there a role for government in regulating what these companies can do?

Absolutely, the government is taking more and more ownership over this issue.

This month we saw the commerce department giving new guidelines to help developers have more transparency of when it comes to consumers downloading that app.

The white house has been challenging the industry to have a more challenging economy.

So that they are very transparent about where this consumer data is going.

They found that when the data was going to good use, for then that means economic value, there were much more likely to give valuable information.

Good to see it today.

Thank you very much.

Turning to sport, how could suspension of a-rod save the yankees more than millions of dollars in taxes?

? ? a suspension for alex rodriguez could come as early as today.

Possibly longer for his role in the latest performance enhancing drug scandal.

What does it mean for baseball?

The yankees?

His career?

The founder and director of sports impact is with us from las vegas.

Let's talk about the latest information we are getting an alex rodriguez.

We were hearing that a decision could come as early as noon, we are now hearing that it may be pushed back, hearing that alex rodriguez may be able to play as he appeals this suspension.

What does it mean for the yankees?

When it comes to what major league baseball might do today, they talked about what he might dubai missing games this year in the 2014 season, meaning he would give up about $34 million.

What is the deterrent?

If you say you have used drugs, you do not get appeal, you could lose your ability, where is the deterrent here?

What i hear where you are coming from, and that is a concern.

There is a lifetime ban rule that has been put in place, but when you look at brian braun, coming off of his suspension, if the players want to put their money where their mouth is, if they say look, if we get caught, we will avoid a certain percentage.

Let's look at this situation through your eyes and your eyes only.

Through the eyes of someone who understands and teaches about sports from the standpoint of economics, is it better or worse for baseball to have alex rodriguez suspended and playing while appealing the suspension?

I think the impact on big -- on baseball is less severe.

From the yankee perspective next year, there is this discussion of whether he will be able to come back and play for the team, they still owe him $95 million to $100 million of this contract.

It will create a firestorm and i believe that what will happen is that at some point there will be a settlement that they arrive at with a buyout between now and the beginning of the 2015 season.

From what you know and see, to what degree does anyone outside new york really care about what happens to him at this point?

People but definitely suffering from a-rod the teeth.

It is clear that most people want to be done with this guy.

But i think that this has actually been a positive thing for baseball from the standpoint that these individuals, not just him, but apparently a dozen or so players are going to be suspended, there are fewer people using performance enhancing drugs today than 10 or 15 years ago.

We are having a great baseball season and are talking about the drugs involved with alex rodriguez still.

So true.

Investors are betting against gold?

We go on the markets when we return.

? ? tomorrow we are talking more about the future of the newspaper business with the former ceo of night ritter newspapers.

It eventually merged back in 2006. he will tell us when he would do with the boston globe" and maybe what john henry -- do with "the boston globe" to and maybe what john henrik should do.

Let's take a look at how the markets are trading.

All the benchmarks are edging lower.

The dow jones is down the most.

Off just a little bit more than two points.

August, better than expected readings on the ism index showing service is expanding at the fastest rate in months.

Let's start with tyson foods, one of the biggest movers on the s&p. shares are up over 4% right now.

The company is down about 5% after it was downgraded by analysts at barclays.

Time for our options update, our next guest says to stop digging for gold.

She is the chief market strategist at trading advantage.

Today you wrote that gold's push above 1300 last a month signaled a technical bottom.

According to your analysis, why is this level a base price?

This is the breakout from last monday when it rocketed higher.

It traded between 1190 and 1260, 1270. very close to getting there, it then backed off.

1300 has been a pivot.

It went below during the session, closing above and unchanged on friday.

It was nice to see, technically.

The key component was the dollar.

Making new highs here, dole did not make new lows, a positive sign in the big picture.

Nearly 23% year to date, are you bullish at this level?

How do you play the options?

I like gold, but there is a better value play for a better return.

The miners, the gold miners, they have really suffered disproportionately, down 45%. double the losses here , i think it could have a faster rally with this market stabilizing.

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


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