The Future of QE: Money Moves (07/10)

REPLAY VIDEO
Your next video will start in
Pause
  • Info

  • Comments

  • VIDEO TEXT

July 10 (Bloomberg) -- "Money Moves" brings insight to investors looking for alternatives Deirdre Bolton talks to the professionals in hedge funds, private equity, venture capital, angel investing and real estate. Find out where they see opportunities. (Source: Bloomberg)

Comfortable and feel safe when they are doing business over the internet, but at the same time, dozens of different systems, different trade regimes when it comes to consumer protection -- that's a problem because a small business with a dozen employees cannot tailor their return policy to every single country.

Ebay says they are hopeful negotiators take into account the growth of internet and the growth of mobile, the ultimate goal being to have a deal into gears.

-- into years.

That does it for this early edition of "bloomberg west." i will hand it over to deirdre bolton in new york and "money moves." we want to start with breaking news.

Headlines crossing on the fed, saying several on the fomc sought qe likely -- qe tapering lightly -- qe tapering likely.

With a little bit more on these headlines, what they mean, how the markets are reacting, we take you out to our newsroom.

Dominic chu is there at his desk with more.

What have you seen?

These are the minutes from the june 18-19 meeting, so the most recent one, and we were looking for some signs or hints about what they were going to say, what the deliberations were during that rate policy meeting.

In this statement, we her much of the same thing we have heard over the past two or three months with regard to that tapering discussion -- we hear much of the same thing.

I want to read you something interesting from this particular statement.

Again, with the record being shown here, they are saying that many members indicated that further improvement in the outlook would be required before it would be appropriate to slow the pace of asset purchases.

In other words, you would need to see much more improvement in the job market before there is going to be any kind of hint of going back on fed purchases of bonds and, of course, putting cash into the system.

We also went on to say that some added they would need to see more evidence that the projected acceleration in economic activity would occur before reducing the pace of asset purchases.

So they are saying job market needs to improve.

Other members say that in addition to the job market improving, they would need to see economic growth start to pick up before they would then consider looking at those purchases.

Also interesting -- several members judge that a reduction in asset purchases would likely soon be warranted.

Those members said cumulative declines in unemployment since september -- the september meeting and ongoing increases in private payrolls have increased their confidence.

There was one notable dissension, and that was, of course, the st.

Louis fed president who said that they should "signal more strongly his willingness to defend its goal of two percent inflation." this statement has not told us anything we have not heard over the past few weeks.

This afternoon, chairman ben bernanke will speak in boston at an economic function, so we will be listening to all kinds of comments about whether or not any more hints come out of that q&a. thank you so much.

Excellent recap there on what is going on.

You do have markets trending higher.

You did have a spike up, for what it's worth, even though really no new news, quite frankly, in these minutes.

You do see the s&p 500, the dow, and the nasdaq all higher across the board.

For a little more context, we will bring in our chief economist, joe bruce willis -- joe brusuelas.

I think he is right on the mark there, and the fed remains dated dependent.

I also think how the tapering will evolve after the start -- you can really see that in the minutes.

You are seeing the fed tried to reassert control to the extent it can in terms of shaping the outlook of markets.

If you look at and read the statement, what you see is not just the employment rate but also the population ratio and the labor force participation rate, which i think is just -- gives forward-looking investors a real sense of what the fed is looking at, and that is what makes the decision so difficult.

They do not want to do it too early, especially with the problems we are seeing in the pace of the school restraint for 2014 still to be decided.

Back when we heard this original sort of release, there were a lot of people saying that the fed would taper sooner than we realize, and we had the markets react to that.

What do today's minutes -- what extra information is there?

Does it confirm that view?

It reiterates the notion that qe infinity was just a fantasy of some in the market.

That was never a plausible scenario.

Most economists who i respect -- we thought it would be a december story.

Looks like it may be a september story, but again, it is based on the evolution of the data, which we still see some mixed data, although things are looking slightly better.

What we really need to see is again, that household deleveraging is largely finished and that the consumer is in condition to push forward the economy and 2014 to give the fed the confidence they need to begin paring back.

That is key right now, and that question has yet to be resolved.

Ben bernanke will be speaking later at 4:00. what can he say?

He is speaking in front of the international bureau of economic research.

This will not be financial journalists asking questions.

This will be professional economists, academic economists, and other professionals.

This is where he tends to shine, where he is at his absolute best.

If he ever intended to reassert control of the dialogue and the narrative, to david b the day, following the fomc minutes, in this forum -- today would be the day, following the fmc minutes -- following the fomc minutes in this forum.

Thank you very much.

Of course, tune in to bloomberg 4:00 p.m. eastern time.

We will bring you chairman ben bernanke live speaking at that economic conference in boston.

He will be taking.

Joe just talking about that.

Of course he will be fielding questions no doubt about these minutes today.

For a little bit more about how the markets are digesting these minutes, we will take you back to the newsroom.

Julie has more from our data center.

It seems like investors wanted to look at the glass half all when it comes to these fed minutes because they read this optimistically to say that the fed is not going to be tapering right now.

It is waiting for more labor market improvement.

That said, take a look first at the direction and in the magnitude of what we have seen in the markets.

Before the minutes came out, just before we stop -- saw stocks lower, and then we saw the s&p 500 showed up after the minutes came out.

However, not a big move.

Only up about three percent -- about .3% at the top of this arrow.

Still not much changed.

As you were talking about, there is not really that much new information here.

People are now turning their attention to those bernanke comments that will becoming a little bit later on.

I want to look at the treasury market as well.

We have seen so much volatility treasuries ever since ben bernanke -- really, actually, since the jobs report at the beginning of may, but heating up once again when ben bernanke spoke.

No change at all in the two-year yield right now.

Now up just a basis point.

We are seeing the two-year yield not much changed either.

Take a look at this on an intraday basis.

You had a directional change, heading a little bit lower compared with where it was earlier in terms of the guilt, but not much change overall.

It seems like folks were getting sort of geared up for this, deirdre, and now that it has happened and they have learned that there is not really anything new in these minutes, they are going to hope that ben bernanke will give a little bit more information in his comments later.

We will see.

Thank you very much.

Julie hyman, in the meantime, giving us the latest on trade from our data center.

From macro issues to a big change for anyone investing in all the big assets securities and exchange commission made it official, voting 4-1 to allow hedge funds, real estate funds to market themselves to potential investors.

We have more from our d.c. bureau.

Phil, the biggest change here we see an apple loose a tennis tournament?

I don't know about that, but you nailed it right on.

This is a big change that hedge funds and their lawyers have been pushing for for more than a year.

The rule was due more than a year ago.

It was a key component of the jobs act.

It allows for runs to advertise to accredited investors for private placement.

The $900 billion private placement market.

This is a big deal and one that a lot of people have been looking for certainty on.

When the law was passed, everyone was really excited about what it might mean, especially for smaller funds in terms of raising capital, but there has been no real kind of continuity.

We now have that with his rulemaking today.

As far as next step goes, now what?

It -- the ban is not officially removed yet.

There's some washington technical stuff that has to take place, has to be printed in the federal register, and then we have to wait for 60 days.

Detractors will be able to comment, and there are plenty of detractors.

Particularly state attorneys who have big issues about fraud, and even an sec commissioner that was also a little concerned about fraud.

That said, end of 60 days, the ban is lifted, and these rules go to place.

What about protections that the commission put in place to try to assuage some of the concerns that some people have said?

That smaller investors, less sophisticated investors are somehow going to be sucked into something they do not understand.

That's right, and this has been at the core of why it has taken so long to finalize this will making.

Commissioner aguilar basically called it reckless and voted against it.

They put in place to primary tenets.

One is verification -- they want strong verification for firms trying to get accredited investors, which might include tax returns or sign-ups for independent brokerages, things along that line.

Another package is they are going to track in detail the kind of advertising that takes place and what kind of fraud comes of it.

Republican commissioners in the sec were not thrilled with this, and they said it would add onerous protections to this that might actually end up harming it.

However, commissioner white said this was key to the passage of this rule, and sure enough, it did clear the way to that.

Thank you very much.

We will have more on the practical implications of hedge funds' ability to advertise after the break.

A lawyer who specializes in the field will be with us.

Plus, we will take you to sun valley, idaho.

The world's tech and media moguls are there as is our jon erlichman.

Later, major league baseball could suspend dozens of players for drug violations later this month, including superstars such as alex rodriguez.

Rick horrow will be with us to tell us more about it.

? welcome back to money moves on bloomberg television, streaming all day long on your tablet, your phone, and at bloomberg.com.

The sec is giving hedge funds and other private placement companies the green light to advertise.

Jay gould runs the investment management practice at a law firm, and he joins us from san francisco.

Glad you could join us.

What is the biggest change that you see with this about?

To we see sports jerseys?

We are trying to find all kinds of places where these company names could pop up.

The veil of uncertainty has been lifted from hedge fund managers so that now they can go out and talk to bloomberg or other news outlets and talk about their funds without fear of being accused of making a public offering or public solicitation.

I know that made lawyers and comply or service, where even if they were interested in doing tv in this case, you are right, there was always this concern that they could be seen to advertise.

The fund managers and portfolio managers asked to go on programs and talk about their products -- they could do that now without fear of being accused later of having violated securities laws.

There are a couple of other things here that are very important.

As your last guest pointed out, these rules will become effective 60 days after publication in the federal register, but most investment on managers -- head -- hedge fund managers rely on a couple of exemptions from the commodity futures trading commission that are inconsistent, and as a fund manager caught -- as a fund manager, you will not really be able to rely upon these rules.

What does that mean?

It means that you are still probably under the old regime for most practical purposes, that you will not be able to go out with your fund and market it generally to the public.

Who falls in that category?

Is it just a question of when you established your hedge fund, or are there other criteria?

No, it is a fairly long and involved story, but a sickly, any fund manager that uses futures -- even in a demented mess amount -- but basically, any fund manager that uses futures, in order to rely on that exemption, you have to not be making a public solicitation or public offering.

So the cftc has said that they are willing to look at that, and the managed funds association has delivered a rule proposal or guidelines to the cftc, but they have not acted yet.

Until they do, most fund managers that rely on a cftc fund manager -- and that is many, many of them -- will not be able to avail themselves of the new rules.

That is something to keep in mind from a practical perspective.

Based on the number of hedge funds out there, would you say that is about half, less than half him a more than half?

I've got to think it is more than half.

Any swap or derivatives that is covered by the cftc rules -- if you engage in one of those, then you need to file for an exemption.

Or example, an interest-rate swap, if you only do that a few times, and there are many reasons why a private private equity fund manager might engage in those types of transactions, if you do that once, you need to file for an exemption.

I want to ask you how many investors -- does this change the number of investors that some hedge funds can have?

We have talked about qualified clients, about $2 million of net worth.

This goes beyond the accredited investor, which has $1 million.

There's also qualified purchasers of $5 million net worth.

Does this change anything for the amount of investors allowed in one particular fund?

No, it does not.

Depending on the exemption on which the fund manager relies, they are still constrained to the number of investors.

The number of investors for what we call super accredited funds, those rules changed when the jobs act was passed back in april of 2012. now what we call a 3c7 fund can have more investors.

We thank you very much for the time, for your insight.

When we come back, titans of media and technology are meeting at the annual conference in sun valley, idaho.

Iac chairman barry diller says his aero service is not a threat to broadcasters.

Will bring you all the details.

? media and tech titans are in sun valley, idaho, for the 31st annual allen and company conference.

Iac chairman barry diller is one of them.

Our correspondent jon erlichman caught up with him earlier.

I know you asked about aero, the online tv service he is continuing to back.

What did he tell you?

I spoke to him a year ago at this particular conference on the same day aero had enjoyed a key legal conference.

We know there have been plenty of victories to the point where it feels like everyone thing everyone wants to ask him about his -- areo.

This is not going to be an end to broadcasting as we know it.

This is simply an alternative for people who say they would like to have the all live television that broadcasters offer, but they do not want to spend $100 or $80 for cable or have never even been on cable.

I think it is a net plus, but it is understandable that the incumbents resisted, because incumbents always resist things.

I think it has been way overblown.

Is the reaction this year different than last year?

No, it is only more because it is just more out there, and also, we are expanding to 22 cities.

Every time we expand to a city, some new person sues us, so we expected that.

On the expansion, where do you think the biggest opportunity -- you were ambitious at this time last year, and you still are.

We really just started.

We will probably be in 20 cities by september or october or something like that.

I know you spoke about "newsweek," to o. what did he say about the potential sale?

He said it is a purchase they potentially should not have made.

The big question is whether or not there is a potential buyer for that business.

Here's what he had to say.

We have a lot of customers, so we will see, fairly soon.

It is interesting that twitter, jack dorsey is here.

Is there talk about the changing nature of the news business?

Oh, my god, everywhere and with everybody.

I've got to go.

I think that is a really interesting point.

You have seen so many new technology companies that in a lot of ways are shaking up the new traditional media but -- that in a lot of ways are shaking up the traditional media business.

All the information we are seeing a technology has forced traditional moguls to think about where they are going -- all the innovation we are seeing in technology have forced traditional moguls to think about where they are going.

We will have more from the conference throughout the day, including former disney ceo michael eisner.

That conversation is coming your way at 6:00 p.m. eastern time we will be back with more on "money moves" right up to this quick rate.

? when we come back, "maxim" magazine is known for its hot covers, but investment is cooling off.

Looks like it may be sold for a minimum price.

Plus, rick hargrove has the latest that major league race ball -- on reports that major league a's ball is getting ready to suspend 20 players.

? lex i'm deirdre bolton.

Welcome back to "money moves," where we turn our attention to alternative assets, places investors are putting their money outside of stocks and bonds.

We turn to adam johnson.

A legal setback for apple.

A federal judge says the company violated antitrust laws by conspiring with book publishers to set prices on books.

A trial is going to be scheduled to determine any damages, and apple says that it will appeal the ruling.

Gap, walmart, and other north american retailers have agreed to establish a $42 million fund to improve safety conditions in bangladesh factories over the next five years.

Retailers have been under pressure to take action after a factory accident in april killed more than 1000 people.

And the suspect in the boston marathon bombing will make his first public court appearance this afternoon.

He's expected to enter a plea on charges of killing four people and injuring 260 others.

Many of the victims will be in the courthouse.

About a dozen supporters of the suspect are also demonstrating outside.

The united states and china have begun a two-day dialogue over relations, policy, and business.

They've agreed to meet to cooperate on capturing carbon dioxide.

White house correspondent hans nichols gives us the latest on this agreement and of the potential disagreements.

That is a good way to put it.

The two countries have agreed to jointly develop new technology to capture carbon dioxide, and other steps -- they did not enumerate all of them -- to combat climate change.

The countries run more than 40% of the world toss coal, so they will also work to lower emissions from heavy-duty vehicles, inc.

Clarice -- increase energy efficient vehicles.

The president, adam, has hinted about some of his climate change actions this summer.

You saw him talk about it in berlin, flesh it out a little bit.

Today, we are given a little more detail about what sort of international cooperation will be.

Good to know they are making progress at least on climate change.

What about the disagreements?

Currency.

This will always be tension between the countries until he remembered -- until the remni mbi is floating on the currency market.

I will encourage china to follow through decisively on important commitments it has made to transition to a more balanced and sustainable pattern of growth.

This transition will be critical to china's success and consequential to the world economy.

One new thing about this meeting is it is -- is all four participants are relatively new in their jobs.

None of them have been in there for more than a few months.

They do not have previous relationships, but some things had changed.

Economic momentum has shifted from four years ago when the u.s. was struggling under the financial crisis, and chinese grossed a mystic product was advancing nine percent a year.

Take a look at it now, china's gdp is forecast to have a 7.6% growth as of this year , that is the july 9 figure, so pretty up- to-date.

Currency has basically been flat the last six month.

It's down just a little bit, which is the right trend.

The u.s. is not pushing this as hard as they have in the past because you have seen the currency depreciated.

On the economic side, one thing worth noting is the fed chairman is also participating, so we will see how he is influencing these conversations about hot money and potential currency wars.

Thank you.

Dutra, that's it from the newsrooms for now.

I will be back with trish at 3:00. looking forward to it.

When we come back, "maxim" magazine is up for sale at a big discount.

We will tell you why it is struggling.

? welcome back to "money moves " on bloomberg television streaming all day long on your tablet, your phone, and bloomberg.com.

"maxim" magazine is the self- described ultimate guy's guide, but at the end of the day it may not be worth much.

It is selling itself or 1/10 of what its owners paid.

It seems like material that would sell easily, so why the steep discount?

This is really challenging the conventional wisdom.

We really see that in the numbers.

We've seen ad revenue go down both on a quarter over quarter basis and on a yearly basis.

Most are medically if you compare the first quarter of this year to the first quarter of last year, there's a 45% decline in ad revenue.

That is huge.

The company has suffered quite a bit of turmoil.

It was bought at the top of the market by a private equity in 2007. the private equity owners gave up on an essentially two years later, defaulted on the debt.

It ended up in the hands of the creditors.

Of course creditors are not going to throw more money at it , so it really has not made that transition to digital that a lot of magazines that have been successful have made.

What are the choices here?

Are there likely buyers?

We did report that there aren't needs in -- that there are bids in the $20 million range.

One buyer we thought might have a chance or was interested seemed like it passed on the opportunity.

American media owns a suite of personal fitness titles and owns "lay boy," so it would fit their brand very well, but it seems like they are not that interested -- fitness titles and owns "playboy." they have not gone as digital as some of their competitors.

"gq pose quote comes to mind, though maybe not an exact competitor -- "gq" comes to mind . there's definitely some room here, and if someone with the stomach comes in and is willing to put money behind it, they can potentially make that transition to digital.

I just have to mention i heard that you have a personal connection to "maxim." i think they named you one of the hottest news women.

Everybody can see me coming here in sweats in the morning with slippers.

You are a very kind colleague.

Thank you very much.

We are going to stay with the media because the tribune company announced today it is going to divide its publishing and broadcast businesses, creating basically two separate companies.

Bloomberg news media reporter edmund lee with me now . there was where they were looking to sell earlier this year.

Earlier this year, they had fielded a bunch of unsolicited inquiries into some of the newspapers they own.

Of course, at the same time, they are also considering spending it out.

Why is that better?

Tax implications.

An outright sale would be a much bigger tax hit -- $100 million on all the papers combined.

Whereas if you spend it off, it is tax-free.

That is probably why that is happening right now.

The larger issue is that the newspaper business is declining.

The television business is gaining, so they would rather focus on the tv business.

Newspapers in general -- i mean, there's all kinds of opinions out there.

Some people say that newspapers are finished.

Just sound the death knoll.

Then you have investors -- well- known investors such as warren buffett -- buying them.

How do these two points of view fit in with what is going on at the tribune -- it in with what is going on at tribune?

Warren buffett is a big believer in smaller community newspapers.

He is a long-term investor, though.

He thinks it is going to come back, but it will not happen this year, next year, or even the year after that.

Unless you are someone like him -- it take someone with money and that's to want to invest in newspapers these days because it is a declining business -- it takes someone with money and got uts to want to invest in newspapers these days.

The bulk of advertising has gone away, and it will take time to come back.

Unless you are someone of the's -- of buffett's stature, there are not too many people interested.

Rupert murdoch has been in the news a lot.

He split off his company into a newspaper group and a tv crew.

Of course, his newspaper group includes other assets as well, but he has expect interest in the "l.a. times," for example.

That could still happen.

Tribune could still end up selling some portion of its newspapers or all of them at the right tires come in at the right price -- if the right buyers come in at the right price.

And the coke brothers -- the coch brothers as well.

There's a lot of interest.

You cannot turn them away entirely, and you want to do your shareholders the excellence -- you want to do your service -- you want to do your shareholders the service of actually evaluating the bid.

We are going to take a break, but when we come back, 20 superstar baseball players could be suspended from action.

There are reports of a major development in the steroid scandal.

After the break, the very latest.

? a week before the all-star game, espn is reporting that major league ace ball is -- baseball is preparing to suspend as many as 20 major-league baseball players for their connection to a clinically to steroid use.

"for -- " sportfolio" host rick tauro joins me for analysis -- rick horrow joins me.

The group of players anecdotally refused to talk.

There may be a common class that decides to resist the suspensions.

When you look at some of these other suppose it suspend -- s upposed suspendees, it's nearly $1 billion of contracts that are in danger.

Very, very interesting week after the all-star game.

Speaking of, what does this mean for a-r od, for example, and his future with the yankees?

With the team use this as an excuse to void his contract?

Since he is not performing very well, i'm not sure whether his bat the makes this a relative argument anymore.

There is certainly a huge contract price someone has got to pick up.

A lot of sponsors . what about baseball's credibility in general?

It seems like the sport had gotten past the steroid era, the barry bonds era, and now it seems like it is back.

The credibility is important, but the average franchise is $740 million.

Their numbers look really, really good.

[inaudible] all right, rick, we are losing the line here.

He was just saying that it is a big distraction ahead of some of the baseball events coming up.

We want to remind you as well watch "sportf olio" for more on the business of sports on wednesdays.

The fed minutes were out earlier.

Green across the board.

The dow, the s&p 500, and the nasdaq, as you can see for yourselves there -- you do in fact have only the nasdaq moving higher.

We do have rick horrow back.

Are you there?

You sound a little tinny, so we will see how we do.

As far as the all-star festivities, how much of a distraction will be started be if they are brought against the players ahead of that?

[inaudible] the bottom line of all of this is that there is a process that has to be followed.

There will be $200 million or $300 million of economic impact in new york.

Plus, as we said, this is a growing, vibrant business.

They decided not to do any suspensions until well into next week.

They want to avoid shining the spotlight of the steroid asterisk on the all-star game.

I'm afraid that cannot happen because the media has other designs.

What is coming up tonight?

We have iconic brands.

Comparing and contrasting big- time brands.

Looking forward to it.

Thank you very much.

"sportfolio," 9:30 p.m. eastern time right here on bloomberg.

When we come back, the sec giving hedge funds and other private companies the green light to advertise.

Bob's buzzword of the day is coming your way.

We are back in just a minute.

? welcome back.

Time for our daily buzz word, one investment term to improve your alt vocabulary.

Bob rice is here.

Bob, we are looking at "form d." we've been speaking all day about this huge change.

80 years on, the sec has given the green light to all kinds of private placement saying, ok, you can advertise." it's an important aspect of the new rule.

Within 15 days of taking the first money in, you are supposed to file this little form with the sec.

I actually have it right here.

It's very simple.

Two or three pages of simple questions.

Frankly, a lot of people kind of forget to file this thing.

Technically, you are supposed to.

Even some hedge funds trip up and do not file this thing.

Has not historically been a big deal, but now, the sec is proposing some changes to that.

How is this relevant to today's about?

They said that as soon as the rules are published in the federal register, they can advertise, but they proposed a rule that would change this formed the requirement.

They said instead of 18 days after the first money that you take in, you have to file the form deed before you launch the offering and then again after you close it.

This is causing some questions to be raised because do not forget, this is not just hedge funds and private equity funds that are out using this new general solicitation opportunity . any private placement, so that includes startups.

So they are saying they have to change this formed the island before hand -- warm -- form d filing before hand.

That looks like sarbanes-oxley for startups.

We have been talking about this vote today.

Seems like it is 60 days away from actually being put into place, but as far as pivoting back to the hedge funds and what a fund can advertise, are the rules or regulations very clear on that?

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

Advertisement

BTV Channel Finder

Channel_finder_loader

ZIP is required for U.S. locations

Bloomberg Television in   change