Sweetening the Dell Deal: Market Makers (07/12)

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July 12 (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)

We went finding out about actual purchases in the wfc.

Thank you, adam.

Next week , reg raburn joins us to mark the occasion.

How's the federal taper, all of that.

"market makers ," starter now.

Carl icahn says he is going to sweeten the pot, will michael dell take the bait?

And what if he doesn't? why we may never get away from internet trafficking.

Mehmet or where you click on your browser, marketers are going to follow you anyway.

Imagine this, john lennon's car goes on the market today.

You could own it.

Good morning everybody, happy friday.

You are watching market makers.

I am sara eisen, denver stephanie ruhle.

We're going to dig deep for this new offer for dell from carl icahn.

We will get right back to that, but first we want to talk about the newsfeed.

Jpmorgan reporting by higher percentage of profit.

Netflix saying they might renew a new season of "arrested development." they're trying to turn into a web-based network like hbo.

We'll hear more from john and mr.

Grazer later in the hour.

From moscow, the news agency says nsa leaker edward snowden has asked for asylum from russia.

He is at a moscow and forward he has been living for about three weeks now.

President clinton says the government's position has not changed.

-- p utin says the government's position has not changed.

Larry summers wants to get back in the game.

The former treasury secretary has been telling obama's wall street supporters that he does want to be the next head chairman.

We'll have all of those stories coming up for you.

We do not know all the relationships in the story.

This is the one we have been waiting for.

Carl icahn stirring the pot again.

He made good on the thomas he made last year -- promise he made last year.

He said he would sweeten the shares for dell, and he did.

Almost up to $18 a share.

It looks a whole lot better than the $13 a share offered by the private equity firm in the running.

Our deal reporter and trish weigh-in.

It is all about getting dealt to respond, isn't it?

Greg there's an opportunity to do more.

There are three different things that can happen between now and july 18. investors have a choice.

"no on the deal, the gevo yes on the deal, when they can vote to exercise their appraisal rights, or they have a 60 day window where they could continue to do that or just eventually go with the $13.55. what he is doing here is putting a little more pressure on michael dell and silverlake to sweeten their deal.

To make sure that shareholders feel like they're getting the best.

Is what icon is putting on the table -- is what carl icahn is putting on the table realistic?

Does dell have the potential to get to that high of a percentage in the shares in the stocks?

It implies that dell's stock is going to be valued at $20 a share, and this is fundamentally the most challenged company.

Why?

Why would michael dell want to buy this?

Why would silverlake want to get involved?

This is a decaying industry that has no shot, so why go into this?

The beauty of the dell business money -- mo del is the great distribution the -- distribution service area.

They can get out of customer service, it will be messy.

Are they getting too good a deal?

I think they are paying up.

Greg seo been been working the funds on this, what do you hear as to whether or not michael dell will raise his bid?

They're saying there is more value, and that my -- michael dell and silverlake could put some more money on the table.

The problem for shareholders is really that they do not feel very safe about turning down michael dell's deal because the carl icahn proposal creates a publicly traded stub that is a question in valuation.

For shareholders, they would rather have seen an increase in the percentage that carl icahn is taking out.

He is still taking out 70% of the shareholders under michael dell.

What this offering is basically another deal on the table.

It is another reason for people to vote no come up or to say they want to exercise their appraisal rights.

If they exercise their appraisal rights, that means the fee -- that one single judge gets to decide everything.

If you're michael dell, you like those odds.

They think the state -- shareholders will say we think we are worth $16, we do not want to go to their.

If this is just a stalling tactic by carl icahn, the other option is that they could go with him and vote against michael dell and silverlake's offer, but the board is trying to explain to the shareholders about why it is not that greater deal.

It gives full control of the boards and its nominees to the carl icahn group.

You have considered these possibilities, and shareholders really want more money, but if the routes to get more money is to put your full faith and trust a carl icahn, what is the likelihood that -- let's put it this way, what is the likelihood he could find somebody capable of running this company and generating the kind of value he says is not being offered to shareholders?

I think is very difficult.

I think if you look at it among the investors are only going to get the opportunity to go into appraisal if they actually vote for the deal.

That is a very good point.

That is something to point out in the committee.

Shareholders seeking up -- appraisal will create a termination of the merger agreement.

I do not think that carl icahn thinks he is going to get a favorable judge when -- w in, given the history there.

This is not the first time carl icahn and angry shareholders have taken their case to delaware.

But this is a different case.

Completely different case.

Greeks -- you think this is not the best option?

The shareholder advisory group.

Are like on had a very interesting response, we have that clip.

I do respect them.

They are not analysts, and they do not claim to be.

They are just reading the 0 -- drinking the kool-aid that dell gives them.

I think they'll will be able to take advantage of that.

He has a point, he has been doing that for many years, and he has a lot more wins than losses.

What do you say response to that?

I think carl icahn has a nominal track record and i think he is trying to get a little bit more money out of the silverlake party.

But i think he is unlikely to get any more out of it, and that the shareholder should take the other deal.

They say they are committed to bringing in management far superior to michael dell, in a recent statement.

What do you think?

He said he is looking at several candidates, and he cannot go public with those names yet.

What others knew about the ceos in similar remedies?

-- but others knew about the potential ceos in similar companies.

That shareholder vote is happening on the 18th.

We'll be there, and it will be a rather dramatic vote.

What carl icahn is doing very successfully here is to inject some uncertainty whether or not the dell/silverlake deal can close in the timeframe they say it can close.

As a very very crucial point here because at the end of the day the shareholders wanted their value, and carl icahn is inserting some uncertainty.

Take you all.

-- thanks you all.

Quick a lot more to talk about "market makers." the next frontier for smartphones.

Coming up, bloomberg television, streaming on your iphone, ipad, and a bloomberg.com.

? this is "market makers," i am sara eisen.

There are job openings coming , specifically the chairman of the fed.

And larry summers is indicating he would be the man for the job.

We go to our correspondent, the man with the information.

There's no beans by a done deal --there is no means a done deal.

We know that the white house is starting the process, and that larry summers has indicated his interest.

At the same time, he he has been very judicious intending to his relationships on capitol hill with the very senators who may be voting on his election.

They are concerned about how you get the 50 votes or 60 votes.

Republicans are already signaling that they plan to use this hiring as a means to limit the president's plans and policies.

This is going to be a big fight.

Larry may be reaching out to some senators , and my colleagues do not know if he can make it through.

Corrects -- we know that this is the president's decision, but are there going to be any advisor helping them -- any advisors helping him with it?

Until we get a final list, if there ever is a final list in a memo sent to the president, it will be buried difficult to handicap very i anticipate it is going on in the press.

You can make pros and cons arguments for all of them, but they're not spending a great deal of time with it.

There is a recognition inside the white house that the president's appointment for the fed chairman will be the most important he makes in his presidency.

What is happening out there in the global economy, the potential for risk, they recognize the seriousness of this appointment.

While the fed chairman may need the most important nomination for the president to make, he has another job to fill, the department of homeland security.

The current part of homeland security secretary will be residing, she will become the president of the uc's distant -- uc system.

It is an interesting choice, we will have more on that developing story later.

A few jobs to fill, so he had better get busy.

Thank you.

Let's go back to larry summers, because as we ask who will take over for ben bernanke, our nest -- n ext guest says he will now.

-- know.

He was a former student of summer's at harvard.

Why is larry summers the right guy to run the fed?

We are talking about people like gelid -- janet yellin, and others, what makes him the front-runner?

They are all great candidates.

He is very strong minded, and clear.

When he says something, whether you agree or disagree, you believe he has a good rationale.

His whole attitude, his whole persona, how good he is due dealing with people -- this is an important job, and it deals with a lot of people.

The decision-making is collective there at the fed.

The chairman is very boring, and larry summers would adapt to that.

-- is very important, and larry summers would adapt to that.

He does not care about the rank, he cares about what people have to say.

Larry summers does have a reputation of being hardcharging at the very least, and confident, and many other adjectives.

How does that play in?

Everyone has a big deal here in washington.

Larry is no exception, with good reason.

He can be deferential as well.

From the side of republicans, he is very goal oriented.

He is 70 who fundamentally believes in the market -- some one who fundamentally believes in the market.

He is someone who strikes me as a person who would thrive in that sort of environment.

If he is the loudest and most forceful voice of all, perhaps people will listen to him, in the same way that ben bernanke would like people to listen to him.

It is definitely a big platform.

It would be interesting to see what people would go back to.

For nike has shied away from fiscal policy, and that has a lot to say about the adjustments.

Thank you for being with us here on "market makers." a key endorsement for the professor.

John lennon's ferreri is on the auction block.

You don't want to miss that, we will tell you just how much coming up here on "market makers ." live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle.

I am erik schatzker, you are watching "market makers perko is the publishing industry doomed -- is the publishing industry doomed?

It looks that way.

But amazon wins in a court case over apple.

It is time to ask a publisher about this.

President of oxford university press which puts out around 3000 books a year.

You do not think the publicly -- the publishing industry is doomed, but why?

The publishing industry is been doomed as long as i've been in publishing around 25 years.

It is an industry that is in a state of perpetual crisis for 100 years whether it is the contraction of bookstores or consolidation of the publisher level.

I would actually contend that it is a remarkably resilient industry able to whether a number of storms.

If we had this conversation 10 years or 15 years ago, i was suggest that publishers are in as good as position as ever.

We hear about some a different threats, what are the biggest threats?

It is the proverbial innovators dilemma.

The primary format is still print yet we are starting to go route -- about our digital arms.

Much like netflix when they were building up their warehouses, but they were aware people were not be sending little red able to the mail.

Can publishers make as much on e-books hasbro books?

-- on e-books as published books?

Entire university press industry -- they are mission led in all about getting the word out.

I like the idea of selling more books for less money.

What about the consolidation that we have seen in the industry and how is that lead to new opportunities and more firepower?

When people talk and worry about consolidation, i would argue is the emphasis on the editorial component.

The number of books that are offered and i think that when you have consolidation with good organizations are looking for is efficiency.

Often times in the back office and in the way that they are distributing their wares.

I think that is been proven time and again.

I think the seven both of the publisher level and at the retail level -- has happened both in the publisher level and at the retail level.

All online book selling means we can reach our market in a great many places in a way that we were not able to.

Before you're even talking about e-books, digital hunting meant that publishers run taking that enormous risk with print runs.

You said a moment ago that the hope is that you would sell more books for less money, how much less?

Give us a snapshot.

Relative to where was 25 years ago, how much less are you getting per book?

Again, it ranges on the type of book.

There are highly specialized work that publishers publish that are $100 even in e-book form.

As low as three dollars or four dollars to the neighborhood of $12 and $20. in europe or to sell books for less money, is there an editorial focus for you or a genre that you more books on strategically?

One thing i am always struck by is how the internet organizer -- organizes us into community where university presses are benefiting by the academy of higher education are hiring essentially tribal disciplines.

We are realizing our efficiency to the internet in a more effective way.

You don't do it agent the same way, you don't pay writers the same way, and if so how?

I would actually argue that the business is not changed that much.

People have been saying this is been our demise for years.

We have moves from a industry that is all that manufacturing.

And people those of our service is valuable and if not we will go away.

Oxford and are fellowship bashar readership is online.

We've seen this in the newspaper business, can you draw any lessons from these other industries?

Advertising dollars is the first conclusion i would draw.

We have actually learned that this is an evolutionary process and we are moving more towards a digital model but we have made a successful transition.

To sarah's point, if it is not from newspapers, how about music like the itunes store or netflix.

Can you draw lessons from those business models?

I think the lessons are that we need to have the linear models were remade physical books, and now we are in a much more fragmented environment.

Are people going to want books by chapters?

Will they want chunks of content?

The number of business models that are presented by president -- by publishers is just staggering.

How do you decide?

That is the part where we are constantly kind of figure out, which business model will last and what is something that will be a fly-by-night idea?

There are many that i like.

One that you could tell us about so that is something we can know about.

Around the notion of lending books, i think that is one of the things we're thing about exploit.

Even that is in its early days.

We are thinking about exploring it.

Thank you for joining us.

A great conversation with the future of publishing.

Coming up on "market makers ," maybe this is what radioshack needs to do, higher terrace hilton as a spokes -- higher paris hilton is a spoke person.

? this is "market makers," i am sara eisen.

When was the last time you were in a radioshack?

Electronics retailer is looking for an advisor to help fix its finances.

Julie hyman has been following up on the stock which fell as much as 22% yesterday.

It did recover a little bit by the end of the day, but they came out this morning and said at the end of the last quarter we had $820 million in liquidity.

They also said like many companies we have discussions with investment banks from time to time to a bus evaluate ways to further strengthen our balance sheet and manage it efficiently.

This is routine.

Debtwire reported yesterday that they're looking for pitches to work on its finances.

But analysts say that in less last quarter was really terrible, the balance sheet is not their biggest problem.

Eight of the last nine quarters they've seen the climbing sales, they posted -- declining sales and they are projected to keep losing.

It enterprise value down 90% of the past 10 years.

What is the problem here, as we've seen similar problems for best buy that they've turned it around?

It is more of a relevant issue for radioshack.

They gave consumers in a place to buy electronics in the 1990's. but now target and other retailers are in that business in a offering competition.

I talked to someone who said he was trying to figure out where to buy a new mobile phone, his mother wanted a new verizon phone and he suggested why don't you go to radioshack?

And she said there is a radioshack radioshack just of the street, that is where i buy your father's hearing aid batteries.

That is the audience we are talking about that they might have a little issue.

It is a problem it speaks to the relevance, and the declining sales.

We have heard the word bigots he mentioned in the context of the company, what you hear their -- we've heard the word bankruptcy mentioned in the context of the company.

If they are burning through cash, they're not burning through it at a quick enough rate for to happen right now.

It is a still further out.

What is the deal with paris hilton will she work with radioshack?

Pardon me for saying so, but if relevance is what you're looking for i'm not sure paris hilton is who you're looking for.

Perez hilton captured this image of paris shopping and buying some stuff at a radioshack on the west coast.

But she doesn't do with them or anything?

Not that we know of.

Maybe she's shopping for a hearing aid.

Lehigh men, our senior markets course on it.

-- julie hyman.

Eric, was last time you were at a radioshack?

Ivo question for you, if you are trying to escape all the people following you online, we are talking about do not track rules and why they're winning next on "market makers." ? this is "market makers," i and erik schatzker.

Tonight is the deadline for the add into treason do not track program.

So will we find -- will we finally see those annoying internet cookies go way?

I suspect not.

Either eric, good morning.

The group that is considering this is the word -- worldwide web consortium.

They are charged with coming up with a do not track standard for the private sector.

They are considering a plan that includes a compromise from the advertising industry that would allow some targeting advertising, but not retain eight do not -- a history of users movements across the web.

Some privacy advocates say this is not enough.

They will weigh in on whether they like the plan and in the consortium will offer an opinion . this is been a two-year process.

J rockefeller has called out this as dragging its feet.

This in july deadline is just the latest.

Why is it been so difficult for the industry to come up with something that everyone agrees with?

The stakeholders that we are talking about, advertising on one-handed privacy on the others.

Advertising groups a tracking is necessary to get the right ads to the right people.

There are thousands of jobs at stake in the supply chain and they argue about innovation and how tech companies make money and innovate.

They say is not just that that privacy advocates that are opposing them, but browsers actually have too much power in making some of these decisions as well.

So are the browser companies trying to be the peacemakers?

In the absence of a standard, a lot of the big browsers support safari firefox and even -- and even chrome are offering some the different form of do not track features.

Take a listen.

Some of these browser developers are catering to an increasing concern about online privacy.

I think it is great that consumers have the option of blocking services or platforms or sites.

But here's the catch.

He said the rousers that offer the do not track signal, but websites can choose to ignore it.

Just the signal itself does not mean much.

Mozilla is planning to go a step further locking all third party cookies and you can imagine a lot of advertisers do not like that.

Thank you for the latest on the do not track situation.

Coming up, how would you like vegas baby on a long and winding road?

John lennon's for our is up for auction, we will show you next on "market makers." ? this is "market makers." emerging markets i china and india are the holy grail for the smart phone wars.

In this morning's office charts, not necessarily emerging markets?

Maybe they should look a little bit closer in north america.

Our chart is from q research centers.

You can see that for the younger people, anyone between the 18 years old and 29 years old who makes less than $30,000 a year, 77%. the look at what happens when you reveal the wealthier consumers.

Young people with money report 90% saw -- smartphone usage.

That is opportunity.

Bigger buttons, easier to use the software, devoted boomer martin -- marketing campaigns.

Dcd evidence -- do you see any evidence -- there was a smartphone for baby boomers, i know for instance my terence -- my parents have the time on hands and they go to the apple store to learn how to use a computer.

They are interested in the technology.

My parents under 42%. they never have the new models.

They need bigger buttons.

And hearing it that actually work for once.

Speaking of past generations, john lennon's first set of wheels goes on auction today.

It is a true classic as you see in just a minute.

Selling millions of records, how does john lennon endorser brand?

Luxury carmakers flooded his driveway with the latest models.

Lennon picked this blue ferrari, and now it is up for auction.

The cost john lennon around $10,000 and it could go as much as 330,000 now.

A psychedelic rolls- royce drew millions of dollars in 1985. could this piece of memorabilia be a bargain?

I know i would take the for re: over the roles -- i would take the ferrari.

Did you drive a ferrari?

I do not drive on, but i did sit in one and i will have a lot more for you.

I interviewed the chairman.

But to this, is a big part of the business, the resale value and the collectors items.

Clearly you are paying for the john lennon name, but ferrari over the years has been next ordinary investment.

I could see scarlet fu in the backseat -- the backseat of a roles.

Don't trust me to drive.

Maybe i will be the driver.

Coming up, we will take a look at jpmorgan and wells fargo who both beat analyst estimates.

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

From blockbuster movies to attempting -- attention grabbing television, brian grazer is teaming up with netflix.

Larry summers might be the next fed chairman.

He certainly has the horsepower, but will his personality sink his chances.

A parking garage where you don't have to tip the attendant.

A robot.

You are watching "market makers " on this friday.

I'm erik schatzker.

I'm sara eisen, in for stephanie ruhle.

From bloomberg news, billionaire investor carl icahn has sweetened his offer for dell.

Now offering shareholders a chance to own a bigger state in the personal computer maker.

It is seen as an attempt to force michael dell to boost his own buyout offer for the company he founded.

Shares of h&r block rose five percent in the first hour of trading.

The biggest tax preparer in the u.s. had agreed to sell its bank assets to bancorp.

Aol ceo tim armstrong says content is king once again, trying to turn the former dial- up internet provider into a digital publisher, telling bloomberg's betty liu there is real movement when it comes to the combination of traditional media and traditional companies like aol.

If the glass-steagall act is going to make a comeback, we will show you the lawmaker responsible.

Senator elizabeth warren of massachusetts.

We will hear from her in a few minutes.

If you are a fan of "arrested development" and you found yourself gobbling up episodes on netflix, you are not alone.

The binge viewing era is underway.

Jon erlichman is in sun valley covering the company conference.

This has to be a big theme, and you found some binge viewers at the conference, we hear.

Yeah, you know, people know marc andreessen as a very well known venture capitalist, and companies like hp.

This has obviously become commonplace.

The people are gobbling up shows, but it is changing the way productions work.

We had a chance to speak on bloomberg west with brian grazer, the producer, and he talked about how this binge viewing trend is changing production schedules.

We are able to lay out the architecture of the way you are going to shoot the show, so you get jason bateman, all these different stars, and you can slap them in and out come and you normally would not be able to do that on regular television.

But this way you are able to get theoretically better actors, and in our case the greatest actors, to work on it tv series they would not ordinarily be able to do.

Grazer is working on a second season of "arrested development," and he said they want to get enough cash together to pump out as many shows as possible.

I know you have also been working on the latest details , and it seems like the business of netflix may be in a more dominant position than hulu?

When you think about the platforms that hulu has versus, say, amazon -- and we are talking about video here -- versus netflix, netflix would get the lions share of headlines right now.

Netflix takes the biggest risks, the biggest risks on original content or bringing in shows like "arrested development," is because of the price tag.

This ceo, who we spoke to last night, has been fairly ambitious in going down this road.

Stockmarket investors did not always enjoy that, but they seem to like it more now.

He took a stroll last night -- i saw him here with mark zuckerberg -- he is big on having more integration between netflix and facebook, has spent a lot of time on the facebook board.

You do have these equally impressive platforms, and it is a story of who can come up with the best content to make their name shine brighter, whether hulu or amazon or netflix or anybody else.

Thanks for the coverage, senior west coast correspondent jon erlichman.

Much more from him throughout the day on bloomberg television.

If it seems like the momentum is building for larry summers to become the next fed chairman, you can give some credit to summers himself.

He is putting pressure on the president, the way any smart fared chairman -- any smart fed chairman would.

Going to where the money is.

Tell us what you found.

The difference between putting pressure on wall street donors and indicating to wall street donors that he is interested in the job, my reporting goes up the latter, that he is interested, not actively lobbying for the job.

Now i am hearing about three potential problems about larry -- one big concern is confirm ability.

Can he get through the senate?

Senate republicans have clearly indicated they will litigate the president and bernanke's economic policies, whoever the next nominee is.

Then we get to the second issue, the ability to build consensus.

There are some questions about how good of a consensus builder he has been, based on his tenure at the nec and the white house.

And you look at clarity, transparency, something that ben bernanke has made a point of working towards, even republicans will say that larry summers, if nothing else, is very clear.

Summers is an outstanding economist, very strong minded, but he is very clear.

If he says something, i might agree or disagree, but i would believe he has a rationale behind what he believes in.

The obama administration is at the beginning of this process.

Other names we are hearing about -- janet yellin, roger ferguson.

He was treasury secretary under the clinton administrator, -- under the clinton administration, then nec director.

He tends to go with the person he knows best and is most familiar with, and if nothing else, presiden barack obama is familiar with larry summers.

You say that there is a difference between putting pressure on obama's supporters and indicating that he would like to be the next fed chairman, but isn't it kind of a distinction with a difference?

Larry summers is not dumb enough to put pressure on people.

I'm rarely signaling that he would like to be, might that be enough?

With all these jobs, we have been through two transitions.

The obama administration -- the more you appear to want a job, that lowers your chances.

So dr.

Summers is well aware of that dynamic.

While i am not uncertain -- my reporting only takes me to him expressing an interest.

He may be doing what you are suggesting, which is lobbying, being a little more aggressive.

What i am wondering is if there is a difference between the two.

Just expressing interest might be enough.

You don't have to go any further to put pressure on people.

If you asked me would you love to come to my lovely home in the hamptons, that interests me.

That is a difference between saying it is time i go to your house in the hamptons for a weekend, i would like to visit.

It is too bad i don't have a house in the hamptons.

The president has another job to fill as well, with homeland secretary janet napolitano leaving as well.

What about this?

This is a surprise.

Napolitano is at homeland security, a crucial agency.

A lot of the edward snowden stuff is running through her.

The tsarnaev brothers ran through her.

There was some talk two years ago that she could be on the supreme court.

Whether or not this bolsters your chance to be on the supreme court, heading out to california, is uncertain.

If she is going to california, it seems like a long-term commitment to be there, as a president of the university system out there, and that it would take her off the shortlist of of potential supreme court nominees if president obama has a vacancy.

Go do that, hans.

Let's move on and talk about banks.

Jpmorgan and wells fargo kicked off earnings this morning, and investors are pleased with the results.

You can see the bank stocks rising.

A leading analyst at credit suisse covers both jpmorgan and wells fargo, and jpmorgan happens to be one of his topics in the financial sector.

What about these bank earnings look good?

There is at least one bad thing in both reports, and that is the net interest margin continues to shrink.

Banks are not making as much money as most people would like in the lending business.

From the jpmorgan perspective, you had capital markets better than expected, and i think jpmorgan said they thought it would increase in the third quarter from what would be a lower level in q2, and attract less than expected.

That is a consistent pressure, but they seem to be dealing with it.

To what degree is the interest rate on bonds increase going to translate into more meaningful lending profits for the banks, and how quickly?

The bigger impact would be when short rates rise versus long rates.

They will not be that much.

Jpmorgan said it would give them $900 million of net income over the course of the next 12 months, although it seems to hurt them in the current quarter.

What can you tell us about trading?

Trading stocks and bonds as the interest rates start to rise as well, another part of the business that it affects.

I think a lot of people were preparing for a very weak quarter on the backs of what was a good april and may, but a weakening in june.

A lack of seeing any kind of blowups in june at jpmorgan gave people comfort.

The company also said july looked reasonably good because capital markets activity did continue.

Jpmorgan is still making an awful lot of money, $6.5 billion per quarter.

One thing did stand out, which is the loss in the treasury and chief investment office, and of course this is a part of the business that we became intimately familiar with a year ago.

This chart i am showing everybody is not exactly correct.

They lost a lot more money in the second quarter of 2012. the loss in 2013, and a forecast of losses to come.

What is going on there?

The biggest change from the second quarter to the first is they lumped in a 600 million dollars litigation litigation charge into that unit.

But i think the cio has reduced its risk, and you are talking about an environment in which higher-yielding assets are going away and being replaced with lower ones.

Does this demonstrate more clearly that if you are not doing the kinds of things that the cio was once doing, which made it profitable, it is going to be a drag on the bank, so long as we are in this kind of interest rate environment?

Yes, whether that is a separate unit or within the bank, it is a drag on the company either way.

We saw mortgages , a big theme for both banks, jpmorgan and wells fargo, that is set to be a headwind as refinancing starts to drop in mortgage rates rise.

How much of a threat is that to these banks?

For wells fargo, that was 13% of revenue.

It was high for jpmorgan.

You can see that down over the back half of the year.

Some of that will be cushioned by better results on the servicing side, but it is a headwind and it is not unknown.

It seems as though wells fargo is making good progress on the one thing that all of these banks have promised investors thomas expense reductions.

I noticed curious increases in expenses -- maybe not so curious, but i am showing everybody here where ap morgan is making some progress.

Marketing, what they are paying to lease office space.

You mentioned legal costs.

This other line, up 19%, suggests there was something that the banks cannot control.

-- that banks cannot control.

That is less than it was in 2012, probably less than 2013- 2014, but it is a high number is of regulatory costs.

The other thing that strikes me, the loan-two-deposit ratio, only 60%. not long ago it was 80%. when will it be attractive for jpmorgan to take these deposits that continue to flood into the bank and make more loans?

Because loan profits are sliding.

There is a faster growth and that it in bank deposits, at least from the consumer side.

Secondly, banks are making as many good loads as they can, talking about creasing pricing standards competition.

You will not see that loan growth accelerated most categories.

One exception might be credit cards, where they highlighted after 15 quarters of declining that that finally is seeing some modest growth.

We will have to see if rates keep rising, and maybe we will finally see that turnaround.

Moshe orenbuch, good to have you here on "market makers." senator elizabeth warren wants to go back to the future and reinstall the old wall between commercial banks and investment tagging.

Last eagle is next.

-- glass-steagall is next.

? this is "market makers." massachusetts senator elizabeth warren, if she has her way, those big bank earnings will look a lot different.

She is proposing to restore the glass-steagall wall between commercial and investment banking.

She has powerful senate allies by her side, including senator john mccain.

Either cook spoke to senator warren this morning.

What did she tell you?

She said her messages banking should be boring and she wants to go back to the future as you said.

She said this would protect taxpayers, remove risk from the financial system.

It would be a nightmare for the biggest banks, which would harm their profits and harm the economy.

They argue it would not have prevented the financial crisis.

The big large megabanks you would like to break up, they survive the crisis most successfully.

The investment banks had the biggest problems.

The ones we bailed out where the big financial institutions.

The scary part is they are 30% bigger than they were when we bailed them out.

What this is about is to say, look, it will take a lot of tools to get rid of too big to fail.

One of them all to be if you want to do high-stakes gambling, good on you, but you don't get access to savings accounts and checking accounts.

When you do that, it makes you really big and the intertwining makes it more likely you will get bailed out by the u.s. taxpayer.

Your critics suggest this is more about politics than policy.

This is going back in time, no chance this will stand a chance of passing in the usa.

Do you see who i am fighting with on this?

I am standing shoulder to shoulder with john mccain.

We have angus king, an independent from maine, senator cantwell from washington.

You have a democrat, a republican, from -- and an independent.

Someone who wants to take high- risk gambles should be able to get access to your savings account to do it?

Uh-uh.

Even with cosponsorship, this legislation faces an uphill fight.

Her presence on this bill does raise the stakes substantially.

Banks will have to challenge this, and it raises the chances that something beyond dodd frank could be put in place.

This is how she got elected.

Peter cook, our chief washington correspondent, speaking with senator elizabeth warren.

Back on "market makers." ? in mexico, it is a battle of the brewers.

Julie hyman is here with today's latin america report.

It is a fight of heavyweights in mexico.

In one corner, anheuser-busch, it closed at billion dollars takeover of mexico -- a $20 million takeover of corona.

They control 98% of mexico's be a market, and mexico wants to make sure there is competition when it comes to beer.

So now in bed and heineken have agreed to cap exclusive deals with small retailers.

Only 20% of small mom-and-pop grocery stores can be exclusive.

It says it does not go far enough to open up the beer market.

98% is a huge market share, obviously.

Yes, only two shy of omar but -- of a monopoly.

Coming up, who do you trust more when it comes to your car?

A parking attendant with a lead foot or a robot?

The parking garage of the future, next on "market makers ." live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle.

Come on, let's go.

What is going to happen?

It's in the garage.

Stolen, scratched, breathed on wrong.

You have nothing to worry about.

I'm a professional.

A professional what?

[starts car] we all remember that classic scene from "ferris bueller's day off." thanks to a new technology from a company called boomerang systems, we may be close to the end of the human valet.

Take a look.

I am the president of boomerang systems.

We are an innovator in automated parking, which is a business that uses machinery to more efficiently parked cars.

We are unique in that we have pioneered the concept of using automatic guided vehicles to park cars.

These are robots that are free to drive independent of a rack system.

They follow a wire guidance system in the floor.

We call the legacy systems the rack and rail systems.

That system has some inherent weaknesses, and the system was developed to a dress those in adequacy's. because theagv's are not on a rail or track, they can move around anywhere in the garage, pick a car up from the back or the sides.

It changes the dynamics of automated parking.

You don't have to worry about door dings or worry about anyone hitting your car.

The first major project in limitation is the six-story high rise.

We will accommodate 480 parking spaces.

They thought they were going to need 10 floors to park their core -- park their cars, and we were able to park them in five.

You can create -- in the same way that the backhoe took jobs away from people digging ditches, it will take the valet jobs, but it will create operator jobs.

If these automated parking garage systems seem futuristic, they are not.

They are here now, and so is the director of automotion parking systems.

It has been commissioned to build another automated garage in brooklyn.

Good to see you.

So agv's is the technology.

What do you use?

We use the rack and rail system that has been used in manufacturing plants and automated material handling systems for the past 30 years, applying them to cars and parking.

We take conventional parking and cut the space in half.

But you are also cutting jobs of auto attendance, aren't you?

Rather than driving the cars, they are managing the facilities.

There is still the need for staffing, but they have different responsibilities.

Given that space is the big saving, is it more sensible for cities like new york, where there is not just high demand but high-cost real estate, more so than a city where there seems to be a lot of space?

Absolutely.

The urban areas, new york city in particular, are among the first users of this technology.

We were rewarded -- we were awarded by this city of new york to build a parking garage underneath the park in downtown brooklyn, which is part of a centerpiece of a $2.5 billion downtown revitalization of the plan.

What does a 700-car garage cost?

It costs between, for the equipment, probably $2500 of space.

How does that compare to a regular garage?

It would cost $90,000 to build because of the amount of depth they would have to dig in a shallower space.

Does automotion build it, operated, and own it?

We build it and operate it, but we do not own it.

You can get a lot more space and limit your land cost and limit how much property you would have to buy to build and to own.

And your profitability goes up because of the operating cost savings, so we have several savings over valet garages, limiting the amount of people that you have to turn over.

What is it like in automated garage?

Typically you will get to similar profitability levels.

You are able to build much more valuable spaces.

What if there is a malfunction?

We have a full-service maintenance team that has remote access to everything we do and everything we build and can immediately fix any issues.

Is it better for the environment?

One of the reasons new york city awarded us the major product that is the centerpiece to this revitalization is the fact that there is a park sitting above the parking system.

Trying to figure out how to ventilate all the fumes in a conventional garage where from -- where cars are driving into our spot -- into a park space is less than ideal.

The cause of the elimination of the driving process, we have eliminated the pollution associated with it, which allows you to have a nice park for the kids to play in without getting sprayed with diesel fumes.

When something does go wrong, what kinds of things go wrong?

Occasionally we will have issues where a pallet does not get pushed back in.

Nothing major.

We have parked almost 300,000 cars in our facilities and we fill up every day.

We have successful operations all over the place, and we have been able to have an expertise and an experience of success that has allowed new york city to be comfortable to rely on the size of facility.

People are very interested about this.

"what if there is a major power outage and flooding like hurricane sandy?" in those situations there is a waterproof vault area.

You can see what we're looking at here -- this facility made it through the flood without any issues.

We have generators that have allowed access to vehicles.

We are much better prepared for a situation like that than the conventional garages, where many cars got washed away in soho and places like that.

Thank you very much.

We are going to turn to options because first jpmorgan, now wells fargo reporting earnings.

Citigroup reports tomorrow.

Will it be a hat trick for financials?

Dominic chu offers a read on what the traders are expecting.

We have seen trading activity pick up since 8:00 a.m. some bullish sentiments, boosting city profits by four percent over the past four weeks, and they are expected to rise 16% from the same time last year.

Yesterday options were higher than over the past month.

About 65% of contracts were traded and bullish, and they have traded faster than bearish put options.

One analyst thinks all these banks doing well this quarter is pretty much the norm and there is no reason to have a bad report.

Traders have been encouraged by the strong estimated earnings, in jpmorgan and wells fargo.

Wells fargo shares are emerging.

Keep an i on the earnings.

That is the options update.

Dom will be back with two trades in the next hour of "lunch money." parents trying to fix problems with student loan rates have run into another roadblock.

? students are stuck in limbo.

If the senate does not act fast, college students looking to lock in loans for the coming school year may pay a 6.8% interest rate, double last year's rate.

We are joined by an analyst of bloomberg government.

We all know our country has a massive student debt problem.

This interest rate problem just exacerbates it, doesn't it?

It certainly does, but it is somewhat of a red herring.

It does not get to the heart of the matter, which is that student loan debt has tripled in the last nine years.

It is now nearly $1 trillion.

What this deal would like to do is to set the rate at which students borrow closer to the rate that governments can borrow so they are paying less on that principle overall.

At that principle is so large, it is the only component of nonmortgage debt that has increased since the great recession of 2008. this proposal is to tie the stafford loan rate to the treasury.

What about in the future when the rates start to rise?

The rates never go up 2.54 for an undergraduate, slightly higher for a graduate degree.

But let's remember that these students, recent graduates, their unemployment rates are well over what the average is for the rest of america.

What we are basically doing as an economy is saddling new student graduates with debt, and we are not providing job opportunities.

That is a really dangerous cocktail for the economy, whose strength really relies on young people finding good jobs after they graduate.

With job opportunities, we know the unemployment rate is 7.6%, but it has been coming down and that seems to be at least one of the big reasons, certainly the congressionally mandated reason, for the fed's extraordinary monetary stimulus.

The fed is trying desperately to create job opportunities.

7.6% for the general population, but much higher for recent graduates.

What that means is when you combine that with astronomical student loan debt, it means these students are basically stalled them selves.

They cannot go out and buy homes.

They lack access to other types of consumer credit like student loans or credit card -- or automobile loans or credit card loans, so they are locked out of the credit market and their job opportunities only amplify their dire economic situations when there are no jobs available for them in this particular time.

What about rising to wish and cost?

What is the correlation with student loans?

That is a big part of the problem.

The high acceptability of financial aid as done two things . it has increased access, which is a wonderful thing so people -- so more people can go to college.

But it is part of the reason the student loan debt is so high.

But it has also allowed universities and colleges to increase the price of tuition for everybody.

Land-grant colleges have gone from being state-funded to merely state located, and students have to pick up the cost of those high rates of tuition.

Is there any suggestion of an alternative?

You point out that student loans have hit $1 trillion, and extra ordinary number.

While the efforts to reduce the rates will help, it is not going to reduce the amount of passable -- the amount of principal.

It would be a great step forward.

In certain professions like medicine or teaching, those programs exist.

We have a stem shortage in science and mathematics, and we talked about that this week.

At the end of the day, this is a problem that states and the government have to fix at the university level.

The cost of going to colleges too hi,, and we need to wish and on that front as well, not just the interest rate front.

Thanks for bringing that to our attention today.

This student loan weight is the big one.

When we come back, we will sort out the winners and losers from the shakeup at microsoft.

Where does the consumer fit in?

That is next.

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

Microsoft's new management structure is the company's latest effort to come up with products consumers might actually like.

Will it work?

Cori, you have been looking into this since the company made the announcement yesterday.

What do you think?

Microsoft's management structure has always been a difficult one.

Build games ran the company -- bill gates ran the company with an iron fist, but then they got 90,000 employees, disparate -- think about it, that is the size of burbank or albany.

It is a massive place.

Reshuffling the deck chairs at the top of the organization, having fewer of them, it might help.

It will affect a lot of people, but fundamentally under steve ballmer's leadership, what we are seeing from this company is that the stock has lost value since the ceo -- and steve ballmer became the ceo.

I thought that the memo that steve sent out to employees was telling.

Let me read just a part of the memo to you.

It will make perfect sense -- or maybe not.

"today's announcement will allow us to -- erik, i don't know what that means.

I don't imagine that microsoft employees know what it means.

It sounds like a pep talk, a rallying cry to the microsoft employees.

We spoke earlier with the notice -- with the notice -- with a noted analyst that has covered the caps off decades.

Have a listen.

Irrespective of the issue of management, can something be done to unlock some of the value that is in this company?

We saw it with ibm.

You increased the dividend, bought back stocks, so i think there is a lot of that that can take place.

Rick sherlund is focused on the cash situation, focused on dividends.

While it sounds like steve ballmer is focused on innovation.

What do you make of that?

Rick knows the company cold.

He was a goldman sachs employee decades ago -- a decade ago covering this.

It has done better than yahoo, but people look at the assets that they have and they say this really should be performing better.

There are so many ways to unlock value here, but under steve ballmer it has not happened.

The company has not gone south during his leadership when a lot of other tech companies have.

All those other big players have gone almost sneakers up and has had significant problems, that has not happened.

They have been famously fighting against each other.

This is a way to put that right.

Aren't sherlund's comments telling in a different way?

Would people talk about unlocking value, they typically do not say that for a company on its way up.

He is talking about a company that has become a value play, financial engineering, being a company that has locked up profits overseas.

That has nothing to do with microsoft half it.

If anything, the only thing it has to do with his microphone off -- is microsoft's cash flow.

This is where running wall street and running investment are -- in terms of running the company, steve ballmer and the smart people at microsoft and the rest of the people from microsoft have really got to focus on getting in front of this wave of massive technological change, mobility, all those things driving the stuff that we talked about him bloomberg west every day.

Cory johnson, always nice to see you here.

People can see you at 1:00 p.m. and 6:00 p.m. eastern time.

And it is enough to make you rush out to a yard sale this weekend.

A search for treasures.

This one made it big.

That is next.

? here is one that may make to take a second look.

If you have any second-hand furniture have around.

This test was sold for the equivalent of $150. now it just sold at an auction for $9.5 million.

For years it was owned by a man who used it as a tv stand.

By coincidence, the museum had been searching for a chest for decades like this, because it was created by a japanese craftsmen.

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

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