Transcripts For BLOOMBERG In The Loop With Betty Liu 20140410

As the drugstore posted earnings that Beat Estimates and also beat projections. In washington, a new report from Network Security firm a Network Security firm shows that have been hit by hackers stealing their information from citigroup to target to neiman marcus. We have more on the impact of these data breaches. I bring in a former defense yang and bloombergs are we any safer than we were in the past . Of thisig the focus report is marginally improved. This is from old cases, from the hundreds of clients, and this is before we actually learned of theheartbleed bug, this is leak in Security Systems that were meant to protect us from cyber threats, like hear tbleed. But the findings in the mandiant report show the landscape of the threat and the threat challenges and have been made all the more evident by heartbleed. Overall, companies are discovering this faster than before, it took them two weeks less than in 2012. Hackers were still hanging out 229 daysks of victims, last year before they were discovered. Organizations are still having a hard time detecting when they have been compromised. In 2013, only one third of companies discovered they had been breached on their own. One thing that has has not changed, Financial Services are still the top industry targeted although media and entertainment also picked up as well. The big issue is that the list of targets has increased and the Playing Field has grown. These threats are not only just about finances, but trying to get financial data. There is also a political motive behind this as well. Acktivism ash it is called, those looking for global influence, often using philsishing links and malware. The sick the Syrian Free Syrian Army influenced many infiltrated Many Industries. Groups like these try to make their messages heard on websites times as wew the new york saw last your. Laura, put all of this in context for us. Can you hear me . So, but all of this in context for us. It was just a little bit we are just a little bit safer, how do we make ourselves even more safe . One major finding we saw earlier is we see this variety of actor. It is not just the chinese see them goant to after the locomotives and their own agendas. Think about these network compromises, and do something about it from the a placee side, set up where you have your information assets and one of your core proprietary pieces of information, and that if it was that if it was to be exposed, thatwould not be something would really challenge business posture. But our mostst businesses unprepared . Are mostnk but businesses unprepared . I think that what we saw from the amount of industries targeted is that nobody is really safe. Are these businesses safe from these defending against these threats . That is missing the point, the point is, how will you respond when the inevitable breach happens. D, tell me about heartblee this gaping hole in Security Software that has just been discovered. What exactly is going on here . It is hard to underestimate how big that this is and how large of a Security Risk that this is. This is almost this compromises almost two thirds of websites, that we take for granted as secure. When you see the padlock on the url line, you think you are secure. This poses a bold ability for all the sites that are operating and i think the most frustrating part is that the onus is on the website to tell the owners tell the users when you are able to change her password. And how do you fix this . It will take a lot of infrastructure to clean this up across the 67 of the internet that works on ossl. It will take some time. As a consumer, are you able to find out if there is a flaw in the website you are using . You have to rely on them to say to say that they have updated this, there is a large amount of medication on the website side of this. Thank you for joining us. Yang inlant and yang washington. Staying on the theme of cyber security, i want to turn to my guest host, who started a new kind of Digital Media company ist combines content he lerer, you have a website devoted to all things male, you have jack threads and you were an early investor in the huffington post, which your dad, ken lerer, cofounded. I would have brought my glasses to tell you i was a customer as well. When you hear of Something Like were you affected by this . All of our sites are affected by this. I did not know that this existed until i got an email from our head of security about one hour after the news had broken that we had fixed the issue. And so he jumped right on it, he founded before much of the news broke. Hehow did he get how was aware of this . That is a good question. His job is to be aware of this stuff, but he was doing his job. He wrote a note to the business informing everyone that this had been an issue for us. As you said, 67 of the internet is affected. We address this immediately but i would say for as much as 200 of the companys affected host of them would be affected. How do you fix this, you make it sound pretty easy. The fix is pretty easy. Ssl,is an issue with open what he ultimately do is you upgrade to the newest version of ssl and you go and change a bunch of Corporate Passwords and it requires internal infrastructure for quick changes, but i dont think that this is particularly hard for the business. The issue is that the breach has been opened for two years, or something to that effect. Did you ever see anything funny . We never saw anything funny and the businesses at the most risk are the really Big Companies that are always getting targeted on a regular basis. Like walmart or target. People with massive amounts of Customer Data that are businesses that are always under the gun. Those are the guys that people go after first. Relatively smaller businesses are not the businesses that hackers go after. Have you been the subject of a hack attack . We have been we have seen malicious things happening, but we have never actually been hacked and had information taken. We monitor this stuff very closely. But we have seen malicious attacks coming in. What does this look like, to the ley person . For us, it is not for the layperson, it does not look like anything but for us, it looks like some overseas server where we are getting a kind of traffic coming in and a lot of weird things happening, tons and tons of fraudulent credit cards being run at once, things of that nature. And we are monitoring the stuff at all times and saying, something screwed up is happening. What do you call your subscribers what do you tell your subscribers . We have not told them anything. Anybody this as fast as has fixed this. Is this the first time youre hearing this . Right now. Thrillist has fixed this. Sitting here right now, it is clear that we should do some messaging today, but this is something that we are very proud of that we fixed faster than just about anyone else. I think that we should. The worry for consumers is, you said this is an easy fix, but for consumers, they say, you fixed that this time, but what about next time . It is not just your users, it is users on walmart and amazon and target. How big of a concern is that . It isuess that i am glad a broader issue than just a specific issue. It could be very damaging to your branch if you have the problem and others dont. The issue that target had around the holidays, if you look at the data, it look like their business was affected during the holidays because of that breach. I think that this is a broad, sweeping thing, and it may set ecommerce back by one day or two, that the end of the day, the way that the world is moving, people want to shop online and they will continue to shop online, you may think twice today or tomorrow but i think out of sight, out of mind. The moment can be there. I dont know that this will suddenly mean that people stop shopping online. Hour, i me through the know you will. Ben lerer, the cofounder and ceo of thrillist. Next, the ceo of twitter, 130,000,paid just with no bonus or stock awards. Twitter raise almost 2 billion in the ipo. You dont need to feel sorry for him, in 2012 he was paid over 11 million in salary and he has 37 million in stock and options for previous years. It is common for ceos to take small salaries if they are already wealthy. Mark zuckerberg is only paid one dollar, and Warren Buffett is paid 100 per year. Next, aol just entered original content, should big players like amazon and yahoo be paying attention . He doesnt beat the rap, hiphop star loses a court case that will cost him Million Dollars millions of dollars. That is next. Companies from amazon and yahoo are doubling down on original Digital Content and aol, while still a small player, is not sitting back. The just commissioned their first fulllength show series, called connected to run on their website. Ben lerer, the thrillist ceo. Ron, tell us how this is going to work and how you will make money off of this . For havinghank you me and i really appreciate it. I think that aol in general is having a germanys growth in online video. Acquisitions of ahead for the infrastructure perspective, we are already number one in the United States. So it is clear that our Business Model around Digital Content is for advertising. And we actually do think that we can find a way to merge content and home. Get the eyeballs to stay on, and then sell to them. Hang on, we have some breaking news on ebay. Reports anrce agreement with carl icahn, before the shareholders meeting. He has been pushing two separate paypal from ebay, and add two nominees to the board. Ebay will add an independent director, david dortmund, as williss proposal to separate the businesses. Erik schatzker will be thinking with the ceo of ebay, john donahoe, to talk about the settlement with carl icahn. That interview will be coming up in just a few moments, we will bring that to you as soon as john donahoe is with us. Back to you guys. You have been critical of the way that these companies have made money. Including Companies Like aol. I love aol. Please stop. I have this opportunity i believe there is the opportunity online to take it vantage of the situations, if you look, for example, at television or radio or print, the transaction does not actually happen in that medium. People are not actually purchasing products with premium content. Online you have this unique opportunity where ecommerce can sort of come together and you can read about a product and ultimately purchase it in the same environment and it provides an opportunity for many businesses to build a new revenue stream of commerce. What would that work in television, ran . We are experimenting a lot with interactive advertising. I dont think there is a lot of competition between what he is saying and what they can find on what they can have online. We have a lot of players and personalized advertising online. I agree that there are a lot of benefits from what those folks can get, you can go through advertising as well but you just need to use our data, which is much deeper than any other medium, to help the right measures. Targeting the right ads. Are the viewers watching connected . One thing about aol is that we are a much more open system than anyone else, that you have mentioned before. We have distribution and we have distributed our content to 14 connected devices, hundreds of apps and thousands of websites across the web. The audience is going to watch watch this well just and aol, they may watch this in roku. Who is the young male audience . We believe we will get young and young male and female audiences, that is the plan of the show. Longform show. A 30 minutes or more . 30 minutes, 30 episodes in the interesting thing about this, this is an israeli show that i watch as a consumer. You are israeli . This is this is a reality show . This is a docudrama that i believe will bring it back to where it should be. Is narrative of this show about people around new york city we will shoot in new york city. I will do it. These are five women . It started as five women. I will still do that. You said 30 minutes . 20 episodes, 30 minutes each. Did you sell this to an advertiser . Last year we sold a bunch of shows up front, with nine of the 16 shows last year. We are actually doing the roadshow right now, the ipo. We have 29 businesses in 10 days. It is very close to the up front in that perspective. We have interests and our new front on the 29th, and we can share more about what i think is interesting about the longform, is that Companies Use to take Digital Content for snappable content, i believe that we are a company that is developing our tradition for large screens. We started with smartphones and veryops, which are snappable, and the big screen allows us to go deeper. Rvnevo. Ha from aol. Ben lerer of thrillist stays with us. We will be back in a couple of minutes on in the loop. First, bloomberg. You are watching in the loop tv elevision and apple and it is time for the bloomberg big number, 16 million. 0hat is how much rappers 5 cent owes. The rapper, named curtis jackson, was asked to pay 12 million as well 4 million as well as 12 million 12 million in damages. He went to them with a design when the partnership crumbled three years ago. It is 26 minutes after the hour and Bloomberg Television is on the market. Equity shares are little bit lower, after two days of rebounds in just a few moments we will get jobless claims numbers and we will bring those to you as soon as they cross. We are on the markets again in 30 minutes. Lets look at the Bloomberg Top headlines this morning. Breaking news out on ebay. Fight betweenroxy ebay and carl icahn before the shareholders meeting. Toy will add an independent the board of directors and carl icahn will withdraw his nominee as williss proposal to separate the businesses. Bloombergs Erik Schatzker will ink to ebay ceo john donahoe a few moments, that is coming up in just a few minutes. In the loop right here o right here on in the loop. Riteaid has announced the acquisition of the ready clinic, rediclinic in houston, and his chosens successor this has been a deathlike experience. This made him question his own abilities after an article played him as a tyrant who drove away his successor. This will it this issue will hit newsstands tomorrow. Am i really such a jerk . Do we ask ourselves that question . Ben lerer is back with us, he is not a jerk. His website targets yahoo mail customers my next guest oversaw grammar magazines most profitable run and now he worked at t raveler. Not trying to take you to against each other, you are traditional, older media and he is newer media, trying to disrupt your media. Cant we all get along . Only knows under nurse under no circumstances. I established this because it worked. And our point of differentiation is that we can compete against folks in digital, that are digital only, but to be complementary. Traveler is a thriving magazine and website. When people say that print is dying, how does that make you feel . When people say that print is dying, i would say that reports of our death are quite premature. Print had a great year in 2013 and in the luxury segment of the market, it was up and increased growth, and in the luxury segment, and traveler is bucking all trends. We are up 11 in ad page growth. You have to look at different segments of the market, news versus luxury goods versus music and fashion. And what do you say to that, ben . I think that it is deteriorating but there will be outliers, i think over time it is inevitable that this will shrink, as ad dollars continue to go online, where it is just simply more trackable, and it is just easier to really confirm that you are getting the rli as an advertiser. I do think there is a place for print, the best place for print will be and it has been and will continue to be, but i think you guys, how you billed for the digital audience, how do you do . His whats we dont think of that is transitioning to an audience, we think of this as reaching the consumer wherever they want to be reached. When you are sitting in the airplane, what do they have in the bag. They have the ipad, phone, and a stack of magazines. That is because i cant get wifi in the airplane. Keep buying. We know lean in leaned back media. When you are leaning back and enjoying yourself, thinking about your fantasy of travel or fashion or beauty, magazines play such an important role. When you are searching for something, you are leaning in and looking for something in the transaction. They will Work Together, we will not work competing. We will provide our own website, and we are actually reformatting that this august, we are going to provide an opportunity for readers to stay with us through the entire journey, when they are fantasizing about travel and booking travel. Ben would say that he is losing his audience by not so selling directly to them. I dont think he is necessarily losing his audience, but when you look at a millenial, they demand instant gratification and the idea that you can be inspired and read about amazing experiences and products and not be able to have that right there, i think that not being able to click it . There is a gap there and i think that you are starting to bridge the gap. A bunch of folks are. This content comment is very early. I think that we are further ahead from most whether ahead than most folks but we have a lot of work to do, you can create inspiration and get young people involved. Are people actually clicking through and buying . You get a little bit of the psychology of the consumer. And the quick rates on digital click rates on digital, the click rates are not they are relatively low. You have to get ahead of what does the person want to do, and where you build the demand. Advertising dollars follow brand building. After the crash of 2008 and 2009, many market goals pulled many marketers pulled away and said this is all digital. Ridesee that you can only on the fumes of your brand for so long. The thing about Luxury Brands rmani, they area not big digital or television players but we know these brands. Why . Because print allow them to create their image and that is what we can do really well. But you are not getting the Louis Vuitton on your website. We are not getting Louis Vuitton, but we are getting ca rite and bill is right. Those brands are not yet comfortable online and they are dipping their toe in there, but they have a certain way of interacting with consumers that they have gotten very comfortable with over an extended period of time. You will see that shifts continue to happen but some of these brands, the european brands have leadership that has a specific thought process and how they interact with consumers, and they are not particularly openminded. Do you know why . The perception. We have to Work Together to change this, because the web is about the least expensive, deal searching, and these are companies and brands that dont want their brand associated with the lowest price deal. Print allows you to create that messaging a beautiful format. Bill, great to see you. Bill wackerman. That was not so bad. And ben lerer, staying with me. From thrillist group. We have jobless numbers. Mike mckee, give us the numbers. The market has completely turned around, the equity view jobless claims fell to 300,000 last week, the lowest since may 2007. Continuing claims that the number of people getting overall jobless claims are the lowest since 2008, both before the recession started and we have recouped all of the ground. The question is, are there special factors involved . The Labor Department says no, but there is the seasonal adjustment, at the end of march in the beginning of april, you usually have teachers so itll be interesting to see if this continues. It was interesting to note that we had a bigger rise in import prices than expected, a six percent rise and it was not petroleum as it usually is. Largely food prices. But export petroleum is still at 10 , petroleum only adding a 10th of one percent this time. Maybe the expectation for higher inflation as we go forward might be realized. We will have to see how that plays out in the cpi. Thank you so much. Editor mike mckeen. As we mentioned, ebay ceo john donahoe tells us how he reset is deal with activist investor carl icahn. Stay in the loop for that interview. From gucci luxury designer penault has some of the biggest brands, he spoke to bloomberg about what kind of customers he is interesting and right interested in right now. With the Economic Growth of the world, the key markets are young people, very much affected by brands, very much affected by the health issue, from sports, with the young generation and those markets, because of their fastgrowing base, are generating more numbers of rich people on the side. I am back with my guest host, blen lerer, an investment in parker and owns jacks threads. You are only talking about retail and selling retail, but you are also investing in some kerthese retailers, with par being one of the more wellknown ones. Is this Company Going to get bought . Not that i know of. They have a very Aggressive Growth plan for a bunch of four more stores, and as we were talking about during the break, that is the first i have heard of. Amazon, probably. I dont think that will happen for many reasons. I think that they have a Bright Future with plenty of money in the bank, and they are they have a great strategy and they are poised for growth. I dont think this is a sensible time for them to sell. What would be a sensible exit strategy for a company like this . I feel that they are building a business to run for a very long time. They have been very meticulous about the brand and have been very thoughtful about how they have structured the business, and those guys are playing to run for a very long time. I read an article, you and your dad were called the king of Venture Capital new york, the mafia. Neww York Magazine York Magazine did a story that made us look like thugs. I dont know. First of all, that is quite a reputation to live up to. Where are you investing . At lerer partners with jordan cooper, each of us have a different ring to focus on. I like the intersection of content and commerce. You are doing those kind of deals. I work with businesses that work with those kind of companies, businesses i have met with as a client or customer and ultimately realize their profit offers were very unique and they were helping me grow, and they can help other Companies Like me. What are you most proud of . I think that i am most proud of my relationship with my family. No. [laughter] have they done well so far, i dont know. But of your companys companies . If i mentioned one company i would get 100 emails from other companies. I think what i am most proud of, is the kind of philosophy we have around investment. We are not investing in companies because we are seed stage investors. We are investment people. You sit across the table from someone and you fall in love with them and realize they will walk through walls to be successful. But you are so young and building your own company. What it buys are you giving them . We are a little bit further down the road and we have been building for eight years, we have seen good stuff and bad stuff, and i think that for an early stage investor, the help that you need is not just the substantive, go to market strategy. This is also the emotional support. When you start a business it is so hard, and being someone who can build my own that she was building my own company, i can offer a different kind of support where i understand what they are going through and understand the torment of being an entrepreneur. The ups and downs. Stay with me for a moment. Thrillist. Er of stay with me a bit longer, because ebay ceo john donahoe and how he got in i got to an agreement with carl icahn. That is next. Breaking news out early in the hour. Activist investor carl i cahns fight with e3babay is over. On the get a director board as well as well is confidential access to investors and executives and in return he has withdrawn his demand for a spin off of ebays paypal unit. Worked on theoe steel and joins Erik Schatzker right now from san francisco. John donahoe with me from san francisco. Good to see you this morning and thank you for spinning time with us on Bloomberg Television. Wanted aow, carl icahn paypal spin off into seats on the board, he gets and one seat on the board. No doubt you want to categorize this as a victory for ebay shareholders. Why give carl icahn anything at all . What carl icahn has done is seen the potential and opportunity in our company. And so he is really becoming a longterm shareholder. This is a winwin. And dave dorman is coming on as an independent director, this is an independent director that i respect and carl respects. This is a good addition to the board and this is one that will continue to allow us to ask you on the enormous opportunities in front of us. Until didnt you hold out the annual meeting and give shareholders a chance to decide for themselves . The shareholders do not want some distracting battle, they want me and the Leadership Team focused on executing in the market. And this is what we now can do. And so, this is a clear winwin for shareholders, and so this is a clear win for the company. Let me clarify one point. Were you unable to execute with the distraction we are talking about with the battle with carl icahn . We were executing just fine but this allows us to quiet all of the distracting noise and focus on the opportunities in front of us. It is relatively straightforward , the opportunity to do this and this is a clear win. Want, theat we investors want and what we as a company want and so we move ahead. The enormous opportunity that paypal has for a note or Digital Payments and the opportunity that ebay has capitalize on the local commerce opportunity in front of us. We have been driving strong growth and we will continue to focus on strong growth with another strong, longterm shareholder in carl. Tummy more about the confidentiality agreement. What are you giving to carl icahn that other shareholders would not get . As is relatively straightforward. The directors and i will share any confidential information with carl, and when we do so this will make him an insider. Limited by the restrictions that any insider would have, it would be longerterm with the organizations. It is relatively straightforward and we get together with carl, and we listen to him as i would any large shareholder. I think that this is going to be a winwin. Any larger shareholders, blackrock, for example, wellington or fidelity came by with the same request you would give in to them . Absolutely, these are our shareholders. If they want to get confidential information and abide by the restrictions that come with that, we would be happy to provide it. In this case, this is what carl wants to do. And so this is what we have done. You know that many people see carl icahn as a bully. For those folks who feel that way, what is the value of hening the fox in the house . I dont think that this is the fox in the hen house. I have had conversations with him throughout this process and in all those conversations he has been respectful and thoughtful in the oneonone conversation. This is oneonone but nasty and accusatory in public . I have not negotiated with carl icahn so i dont know if that is how he rolls. All that i know is in my direct conversations he has been thoughtful, and what has happened in this case is jimmy lee, the Vice President of jpmorgan called me last week and he was meeting with carl on unrelated topic and he said, i think you should spend more time together. We did over the weekend. We talked repeatedly on the phone and we focused on not separation, we focused on the fundamentals of paypals business, we focused on the enormous opportunities there in front of the company and once we did that we had strong, Common Ground and we will continue that dialogue going forward. Jimmy lee, was he part of those discussions or was this you and carl icahn, one on one . He started this and he is a trusted advisor to carl and me and he told us to spend more time together and that is what we did. John, this is an issue i want to raise with you. People look at the agreement that you reached with carl icahn, and they might look at it this way. All that an investor needs now, to get a seat, or at least an independent board seat, and confidential access at one of americas most respected companies, and i dont think that you could deny that ebay is one of americas most respected companies, with a market cap of 70 billion, is a loudmouth, a twitter feed, a website and less than one percent of the shares. Outstanding shares. This is two percent of the outstanding shares. He started with 0. 82 . Look, what we have done is added a highly respected independent director, who meets the criteria of the board. A chief executive of at t where guide thegluck turnaround and he is widely respected for his integrity and his independence. He is an independent board member whose qualifications match the board and we will welcome him to the board room. Dave will be part of the dialogue and i look forward to working with him. I have known him for years and he will be an outstanding board member. Our board and the management will now be focused on what all shareholders want, including coral, which is capitalizing on the enormous opportunities in front of us. There is a mobile commerce and a mobile payment revolution happening right now. Leader, and paypal is the leader in mobile payments. Growing ours on business and expanding globally and that is the best way to drive sustainable value for shareholders. What happens when the next activist, with just two percent of the outstanding shares, shows up and tries to hold you hostage . What will you give him . Nobody is holding anyone hostage. Throughout the process i have been focused on what i believe. Which is the opportunity in front of us, believing that ebay and paypal are better together. We have been quite clear about why this is the case and the synergy is strong and getting stronger, and ultimately, i think that the facts won the day in this case, and i think that this is a winwin for the company and a winwin for ebay shareholders. Your statement that ebay continues to a valuator teach alternatives. If this is not going to be a spinoff of paypal, what might this be . We have been evaluating the alternatives and the board does this regularly every year. We are going to be capitalizing on just what i have been talking about. The enormous opportunity in the marketplace, a fundamental change in how consumers shop and pay, largely enabled by mobile technologies. Ebay and paypal together have been capitalizing on this mobile commerce revolution. Together, we will focus on growing the Global Payments paypal did 27 billion in mobile and they are the clear leader, we will continue to double down the braintree acquisition and investments like taking paypal offline, and we will continue to grow the global ebay business, which had 22 billion. We will do what we have been doing, driving innovation and execution which delivers growth, which is the best way to drive shareholder value. Millions of ebay shareholders wish you well. Thank you so much for joining us here on Bloomberg Television. John donahoe, the president and ceo of ebay. Lets bring you some final thoughts with ben lerer, the ceo of thrillist who has been listening to this conversation. Does he make good arguments on mobile payments . They are the leader in mobile payments. Catching up with others or leading . I think that paypal is an enormous platform, we recently made them a selection for our mobile customers and within a matter of weeks it with from zero percent to 15 of all transactions. Just impressed he is up this early on the west coast. It looks like he may have been up all night, coming into the offices. But it makes sense to you, paypal staying with ebay. Thank you so much for being with us. Thrillist ceo of media group and ventures. Bloomberg television is on the markets. S p futures they are coming back from losses and all of them are unchanged as we go to the bell. Onwill be back in 2 minutes in the loop. We are 30 minutes away from the opening bell. Here is what we are working on. Futures indicate stocks will be slightly lower at the open, after rising yesterday. Last year, jpmorgan had to pay more than 20 billion in legal settlements. Ebay has reached a deal with activist carl icon to end a proxy fight carl icahn to end a proxy fight. Thanks to some brokering from jpmorgans jimmy lee. He may have been needed in negotiating peace between bill gross and Mohamed Elerian. Mohamed elerian announced his departure in january, a surprise, and gross suddenly found his company wrapped in public scrutiny. Sheila, who followed a bill gross around for a day where they are based. What was it like . Was there a lot of tension . Electric an environment. He has seven monitors, most of them bloomberg monitors am aware he is watching all of his bond prices. And he showed me his 450 billion dollars worth of portfolios, which he has his 450 billion worth of portfolios, which he has on paper. And i sat in on a famous Investment Committee meeting. This is the intellectual heart of the company. The top people debate economic ideas. I watched a number of managers prevent present their strategies for growth to their colleagues. It was fascinating. He confessed quite a bit to you. He was very open. As you explain, he has gone through some turmoil and hed recently. Heated turmoil and recently. Mohamed left. Without him, he found himself adrift in trying to find a new way to structure the company that would work. While all this is going on, a number of news articles came out casting bill gross in a harsh light, and he cast those he took those really hard. He has been looking at his behavior, looking at the way the company is run, and seems to be trying to learn from this. Did he agree . Krejci took some issue with heng called autocratic took some issue with being called autocratic. He is not warm and fuzzy at the office. He is struggling with something that i think a lot of leaders face, which is you need to run the company, motivate people, incentivize them to work really with and balance that out this desire to be liked and to get along. That is something he is trying to reconcile right now in a really interesting way. Does he feel bad about Mohamed Elerian . He seems very sad about it. Vulnerableed by how he was about it. He said he begged him to stay. Mohamed told him he wasnt the person to run the company and lead it into the future. This has left a hole. Maybe he is feeling bad because some investors are leaving his fund. Thats another problem. It has pointed to the business issues. Performance has slipped a little bit. There is a lot of pressure on him right now. Elah, thank you so much. You can read the entire story in the latest business week businessweek, available now. Moving and shaking this hour, jpmorgans ceo, jamie diamond jamie dimon. He says banks will end up the winners. Clients such as hedge funds, low income borrowers, or and borrowers, and municipalities will have to pay higher interest fees. He said because of the shadow Banking System it could create a whole new problem. The u. S. Has spent over 1 billion stockpiling antiviral drugs to prevent any for church any future flu outbreak hit after h1n1 hit in 2009. Research shows those drugs have not been shown to prevent a pandemic and may cause more harm than good. Bloombergs Olivia Sterns joins us with that story. It is a pretty startling conclusion, that drugs like tamiflu, these antiviral drugs, billiondollar drugs for dont do like roche, anything to stop a pandemic, which is the reason governments, including the u. S. , have been spending billions of dollars to stockpile them. It is not the first time the group has made this claim. It is a nonprofit group, but the study was funded by the u. K. Government. This is the first time they had all the data they wanted to make the conclusion. They went through 170,000 pages worth of clinical data. The conclusion is the same, that drugs like tamiflu ohfer deuce the amount of people that end up in the hospital with the flu the tamiflu dont reduce amount of people that end up in the hospital with the flu. According to one author, there is no credible way these drugs pandemic. Ent a money spent on stockpiling them has basically been thrown down the drain. Companies that we reached out to our sticking behind the drug, saying they are ineffective they are ineffective and the labels warned they are offective and the labels warn couldffects, that they be doing more harm than good. That pointed to one study showed that tamiflu could reduce the risk of death by about 19 . But that study was funded by roche, so that discredited a little bit. The issue from the people behind the report is with the regulators. They spend all the money without having a science to back it up. Coming up, a look at a hope willr that they catch on in urban settings. Frozen and its success on and off the big screen. Only first we first saw toyotas concept car at the auto show. Toyota invited members of congress and our own Phil Mattingly to take it out for a test drive for a Little Market research. Part motorcycle, part golf cart, part futuristic pod mobile , it was enough to pull a handful of u. S. Lawmakers away from the business of legislating for a test drive. Toyota has a big plant in my district and i wanted to see what it can do. There is some potential opportunity for it, especially in urban settings. I was fascinated by it. I test drove it today. It was fun. Powered by a lithiumion battery, giving it about 30 miles per charge. It tops out at about 28 miles per hour. It is not yet approved for u. S. Roads, but toyota is pitching it as a perfect car for city dwellers. These are fitting into a Transportation Network where they can be shared with users between users and play a role in Mass Transportation such as trains or buses to hims. Or bus systems. Why washington . You might as well show it off to the nations decisionmaking decisionmakers. Lean,s active lien which counters Center Circle force when the vehicle turns counters centrifugal force when the vehicle turns. Is there a market in the United States . How did the show go over . Way more exciting. Usually when you have fast objects coming at you, it is not in the form of an automobile. Very cool, phil. You look pretty snazzy in that. Explain what is going on here. How much is this the company trying to get the favor of lawmakers . Are they trying to impress them . They are is that there is that. Everything happening in washington between companies and lawmakers is generally trying to curry favor in one way or another. It is kind of a fun way to do it. A meeting up greet. Lawmakers get to have a good time with it. They walked four or five blocks to do this. For toyotas purposes, should there be regulatory issues, should they decide to take it to the u. S. Market, you have a couple of lawmakers who have seen it, like the technology. Toyota fromway is bringing this stateside . They are not saying whether they are or are not. They have a project going on in tokyo where they have people testing the car on roads. France is next in the next month or two. When i talked to toyota executives, toyota lobbyists, and they are interested in. Eeing what they could do here they need to figure out where they would put it. Is this a city model with a car share . Maybe a college campus. In that looking direction. We are showing you in it. Did you have any balance issues . Everything happens from the backside. It is the back wheel that is doing all the turning here you are a little tentative when you get in. I was shocked how quickly you acclimate. When you are turning, the backside swings out. I did not take out any lawmakers when i was making any turns to mud because i think that would ban me from any toyota exhibits making any turns, because i think that would ban me from any toyota exhibits ever again. Donahoe told us about settling the beef that carl icahn had with ebay. And another ceo is giving himself two years to make big changes at library. That blackberry. At blackberry. Here is a look at the top tech stories. Facebook announced it is removing instant mobile messaging services from its app. Uses will be required to the messenger app to send and receive communications on mobile devices. Charter communications is Still Deciding whether to compete for Time Warner Cable after two months of getting booted out by comcast. They are eager to to acquire 3 million subscribers that time warner could divest. John chen giving himself two years to overhaul blackberry and offset declining handsets. He is stepping up blackberrys reliance on business customers. Icahns proxy fight with ebay has finally come to an end. The billionaire actor activist investor has agreed to add david dorman as an independent director. Makers market Erik Schatzker. It is very interesting. This heated up over just three months. Has accumulated 2 of the stock. A proxy fight with carl icahn isnt over until he sells all his stock and goes away, and thats not whats happening here. He remains an ebay shareholder. John donahoe, the ceo of ebay, is characterizing this as a win for shareholders, not as i characterized it to him, the fox coming into the hen house, because carl icahn has won the right they have created a new independent board room in the seat at ebay, which will be filled by david dorman, former chairman of motorola, who oversaw that companys breakup. Lets go to an excerpt of my interview with john donahoe so you can hear from your hear for yourself how he wants people to see this. Has done is icahn seeing the potential and opportunity in our company, so he is becoming a longterm shareholder, which i think is a winwin. Dave dorman is coming on as an independent director, an independent director i respect and an independent director carl respects. I think that is a good addition to our board and one that i think will continue to allow us to execute on the enormous opportunities in front of us. They always do this. After a big fight, they are all friends. Sitting around the campfire, singing songs. Of course. Jimmy lee had an interesting role. The vice chairman of j. P. Morgan brokering the deal between the two. Lets rewind the clock for a moment. Icahn built his position in the early part of 2014. He went public around january 22, calling for ebay to spin off paypal, its payment unit that many of us are familiar with, and also to name two people to the board. This is where it became a proxy battle. He published a number of letters criticizing ebay management. He was very harsh in a letter against marc andreessen. You could not describe it as anything else but an attack. It didnt look like it was going to get resolved until ebays annual meeting next month. Only anahoe told me was few days ago, jimmy lee, the jpmorgan, among the most powerful bankers on wall street jimmy lee put him up to this discussion. He said, listen, you guys have far more in common than you think you do. You should both sit down, hash this out. Icahn spend he and a lot of time together. And where are we today . Im going to say the proxy fight is over. Donahoe characterizes this as an agreement. Icahn characterizes this as a detente. They are not the same thing. Welcome back. You are in the loop. Im betty liu. It is 26 minutes past the hour, which means Bloomberg News is on the markets. We look about flat here. We look pretty much flat here. We had a big rally yesterday fueled by the fed minutes, so we did get a pop on the futures markets after we got those weekly jobless claims showing that jobless claims fell last 000, the lowest level in nearly seven years, so that should be helping sentiment. One thing to keep an i out an eye out, the treasury budgets and is due out at 2 00 p. M. , which is expected to show that the u. S. Has once again paired its again pared its debt. Olivia joins me and scarlet fu. Tesla. They will start selling their luxury sedan in china this month. They are heading to the the ceo is heading over to deliver the first car in what could be teslas biggest market. Preliminary firstquarter results that were below previous estimates. A weak side cycle. Merumber eight is marke ck. The drugmakers hepatitis c pill position it to provide a blockbuster treatment. They are racing to put a hefty treatment with few side effects on store shelves. Costco reporting march samestore sales that beat wall street estimates. Company sales rose 5 from a year ago, the strongest growth coming from the u. S. Theumber six is walmart, Worlds Largest retailer making a push into organic, saying it will carry wild oats organic food starting this month. They were quick to announce that wild oats will save 20 five percent when compared to National Brand organic products save 25 when compared to National Brand organic products. Number five is bed bath and beyond bed bath beyond. General motors, the Company Fighting a request for a park it order fo rthe for the more vehicles dueion for a recall. And Family Dollar is hosting posted and Family Dollar sted gains of they may slow new store expansion. Number two is right is rite aid. They forecast that sales this year could top the consensus. They said they would acquire retail clinic. No financial terms were disclosed. Number one is allied bank is ally bank, which priced its ipo at any five dollars per share after the bell last night. Shares will be trading today 25 per share after the bell last night. Shares will be trading today. I want to bring in the chief fund that manages over 25 million. The glass is halffull when it comes to the spending power of consumers. They focus on biotech and energy. You say there is an Energy Renaissance going on. There is. It is remarkable that, 10 years ago, we were concerned about where we were going to fight oil, and we were looking everywhere but our own backyard. And today we are one of the fastestgrowing producers of oil. We are looking at potentially being an oil exporter. Fact. Et exporter, in it is all this renaissance in fracking shale. Where does your overall optimism come from. Weve had so many people say the market is looking frosty, expected correction. It is reasonable to expect a correction, but it is also a great buying opportunity. There have been several buying opportunities, really one every year since the financial crisis, and this time should be no different. I think the economic background in the u. S. And in europe and the rest of the world is actually improving. And the background therefore is very good for equities. You were speaking about the Energy Renaissance. I know scarlet fu was looking further into why some investors might be cautious on energy stocks. The bears point out that any ness would west texas intermediate projected to fall only 5 this year. Sliding oil is seen below an average of 90 per barrel. Ex prices may discourage cap capex. What about those risks . Those risks are part of the result of the success of the u. S. Oil production. There are Many Industries in the u. S. That benefit from lower energy costs, and of course there is one big client, the american consumer. On the net, for the economy, Lower Energy Prices in the u. S. Lower gas prices. Relative to the rest of the world is a huge boon to consumers and to industry. In health care, you really like the biotech area. Littlehas been looking a closer at biotech possibly being a bubble. There has been a lot of talk recently about whether biotech stocks are in a bubble. I will let you judge for yourself. In the white is the run up on the s p. Last year, the biotech index up 74 . You are seeing a correction in the past couple of weeks. They look pretty expensive if you look at the pricetoearnings ratios. Is amazon territory. I point this out because this is a hot stock. Investors asking not only if the stocks have run up too far, too fast, but if the drugs are too expensive. Drug outs a new hep c that is 84,000. Has the u. S. Government gotten involved to ask how they justify that price tagged. One of the reasons you have seen all of the run on biotech stocks is because they have all this pricing power. It is a great point. They are only as good as their es if theyeir p can justify the growth. Exactly. P es. es are trailing we see a multiyear, high growth pattern for many of the names youre talking about. Are some ofgilead our top holdings. If you look at the forward earnings growth, in some sense, these stocks are much more reasonable. Some would argue they are not christ much differently than some of the big pharma names they are not priced much differently than some of the big pharma names. We believe, for example, gileads lead drug is going to take the dominant share in the marketplace. What about the Regulatory Risk that olivia just mentioned . It is natural. It is the cost of these therapies. We have looked at that carefully. You have to measure the cost of the current therapy against the costs and benefits of not treating people, or the old therapies. In the 80,000 range, 90,000 range, our nile assist our somewhatis this is less than some current therapies. It is a reasonable price for the benefit it delivers to the patient. Drug prices are continuing to get more expensive . Itis a varied landscape is a varied landscape. For the newest therapies, these drugs are priced so that the farm pharma and Biotech Companies make a return. Many of these drugs have taken eight years to 10 years to develop. And that is the name of the game for these drug companies. They know that going in there. There are three big names that you like amazon, google, and facebook. Are those your Biggest Holdings . Those are the Biggest Holdings in the internet space. Why . Each dominates a unique acts but unique aspect of consumer interaction with the internet. Facebook is a social media. It is offering an extremely attractive platform for advertisers. Again consumers, but also businesses. It is search, but also android androidt for also and smart phone platform. Google can connect to information for anything. And amazon will sell you whatever they can. It is almost like you cannot go wrong if you go with those big three giants of internet. Investors. Undamental we look at the big trends. Currently clearly internet commerce is a high growth trend. You saw the results of bed bath beyond. Are you going to buy the same things you can buy in your bathrobe with coffee in three c licks . And have it delivered to your house. I agree. I dont even know when was the last time i went to a bed bath beyond. Dan chung, thank you for joining us. Merchandise is flying off the shelves. We will tell you how this movie has translated into big bucks for disney in all aspects. Stay in the loop. Well, one of his knees films has something to celebrate. We are talking about one of disneys films has something to celebrate. We are talking about the animated film, frozen. Merchandise flying off shelves. S sold outss elsa dres in Stores Across the country. An original being sold on ebay for 1600. The insanity over frozens forhandise means big bucks disney. What is it about this movie . I know. Im the father of two little girls. The insanity has taken over my home. They thought they had a hit with this film. Im not sure disney knew this was going to be a billiondollar franchise, but when that happens , there is a mad rush on merchandise. Rate data be talking about ebay great day to be talking about ebay. There are two stories on the dress. Ive become an expert. There is the very specific elsa dress you can get on the ebay at the disney store, which is now being sold for big bucks on ebay. And then there are the ones sold at walmart or toys r us. Even those ones are hard to get. Consumerto explain the products business for disney, which generated more than 3. 5 billion last year for disney. The stores themselves make up more than 1 3 of the revenue. The lions share comes from licensing deals the lions share comes from licensing deals. We are talking about aliens and billions of disney things out there about billions and billions of disney things out there. Some ending up in your own house, im getting the feeling. Fortunately or unfortunately, i dont know. These retailers have to get it right. What is the big danger . It is so tough. If you are talking about introducing a new film, you never know. Even with the established franchises, it doesnt always go how you would have thought. Superheroes are a great example. Take ironman. Take iron man. They may have ended up with too many toys on the shelves. That happens with captain america, spiderman. Stuff has done well. Not Everything Else has done well. I think that is one reason disney chooses to be a licensor. You are taking some risk off the table and leaving some money on the table, but you get more steady business from that. Jon erlichman, our bloomberg senior west coast correspondent. The latest inall tech and media every day at 1 00 and 6 00 eastern time on bloomberg. Searchers racing against time to find the lost Malaysian Airlines flight thre370. More when we come back. Time now for the global outlook. Searchers are racing against time, the waning life of the black box, to find down to malaysian flight 370. Plane has detected signals, but still no wreckage has been found. Bloomberg washington correspondent megan hughes joins us now with more. Tell us the next step as the batteries are dying down. The next step will be underwater robots, but we are not there yet. They need to try to continue to narrow the search area before they bring those robots in. At 58,000 area is square kilometers, 14 aircraft, 13 ships on the hunt. The latest you mentioned, this australian search plane, heard a possible signal. Authorities are working to verify that. It is the same area where the other ship had success this week. Theyinger locator believe they have picked up for blacks from the planes boxes, the same Technology Used to find air france wreckage. That company is located in maryland and has contracted with the u. S. Navy. It picked up the sound twice this week. It was to believe it was believed to be sound from the boxe data and flight recorders. The reason they believe it was is theck boxes frequency. It is outside the range of human hearing. It has a oncepersecond tempo. The clock is ticking. Thse pings do seem to be getting these pings do seem to be getting weaker. They are down to just a matter of minutes. The plane disappeared march 8. These black boxes are only required to ping for 30 days. We are well past that. Time is key. How tough will it be to get that wreckage . That is why they need to narrow the area down before they start sending in these underwater robots. , 800u go underwater meters, that is about the length of the tallest building in the world, the burj khalifa in dubai. Double that and you are in giant squid habitat. Go down another thousand meters, that is where this has been heard. Meters, that is the depth the submersible robot can operate. About the depth of the ocean floor. The ocean floor has been described to me as muck. There is a possibility that the plane, even once they get down ther, could be under down there, could be under some muck. This could still take some time. Megannk you so much, hughes, our washington correspondent. A milan court is hearing arguments from lawyers for primer former Prime Minister silvio berlusconi. I want to bring in our rome bureau chief. What are his options . Right now, one of the things, as you said, he could either end up on house arrest or serving community service. There is lots of speculation on what could happen. There are two options that seem to be more likely. Either the court will suggest that he serve with the elderly, that is one of the options we are hearing about naturally, these are all speculation right now. Or one of the things we have heard is that he might propose to serve helping the disabled. He wants to be a motivational coach for the disabled. We will have to see what happens during the hearing today. When is the court expected to rule on this . Tothey have about five days 10 days to decide. At that point, they will propose something. The thing with italian justice it is very slow. I know it is very hard for people to understand sometimes, but slowly but surely it gets there. It may take some time before we know. This is something that he has to decide with the social workers. To court will take time decide exactly what will happen. 10 you imagine if that happened, him being ordered to sweep the streets can you imagine if that happened, him being ordered to sweep the streets . How much is this an Election Campaign . If he gets house arrest, because there is a chance that might happen, that might have a very big impact. It wouldnt be total house arrest you he might be allowed out occasionally it wouldnt be total house arrest. He might be allowed out occasionally. He is still the head of his party. He cannot run for elections personally. And he knew the service, he would be going just once a week. Favor,d turn it in his showing how wonderful and compassionate he is. Or it might turn against him. To see how it works out for him. Thank you so much. Up for today on in the loop. Coming up on market makers, tom keene will be interviewing Christine Lagarde at 11 00 a. M. Eastern time on Bloomberg Television. On the markets is next. It is 56 past the hour, which means Bloomberg Television is on the markets. Lets get you caught up on where stocks are trading right now. Equities are moving a bit lower right now. The s p off by 4 points. The nasdaq once again the biggest laggard among the main benchmark indexes, getting dragged down by some high we have been hearing about socalled momentum stocks. Ise Reagan Mike Regan here to explain why we are hearing so much about them. We are seeing big drops in names like google and facebook. Explain what high beta stocks are and what youre hearing is the reason behind this selloff. Beta is simply a way to measure the volatility of a stock. Everyone is happy about the market, all other things being equal, if the s p 500 rises 1 , a high beta stocks will rise 2 . Facebook has a beta of over 2. Twiceds to rise or fall as much as the overall market. For some reason in late february, early march, these high beta stocks have really led the rally over the last few years. Investors have started abandoning them in late february, early march. There are a lot of theories on why. The fed is the top suspect here at prospect for higher Interest Rates suspect. The prospect for higher Interest Rates might be causing them to unload some of these stocks. Even just general concern about things like ukraine and the geopolitics and whether the softness weve seen in the economy in the First Quarter is weatherrelated or is actually sign of a slowdown all these things are contributing to the theories on what happened. All the normal market concerns. No specific trigger. They are higher volatility. We should expect to see bigger yoyo moves. Why should we care going into earnings season . It is almost like their beta is put on steroids. A lot of them are small companies. Facebook is the real elephant in the room, 150 billion market cap company. Which is among2, the top five in the s p 500 if you look at their earnings coming up, you can look at the options on them and glean out what the implied move will be after one of their earnings reports, and it is a big move, about a 9 to 10 move. You cannot say if it is going to be up or down, but facebook has had some tremendous moves after earnings reports. It has risen as much as 30 and falling as much as 12 . If you are a traitor, you have to love these stocks up or down. It is a if you are a trader, you have to love these stocks, up or down. What is going on with expedia . Thate s p 500 companies, has the highest implied move up for its earnings release, 12 . You cannot say up or down, but as far as what stocks are bound to move the most, the options are showing up expedia is a possibility. Iseveryone wants to know, this the beginning of a big correction or is this normal volatility . Iswhat is interesting, it more of her rotation. As the high beta stocks have been selling off, the low beta stocks like utilities everyone has rotated into them. Upanddsafe, not as own stocks. Hersheys has one of the lowest betas. Market makers is next. Headquarters in new york, this with erikmakers schatzker and stephanie ruhle. Twoweek for comfort . Is what Christine Lagarde, the imf leader, called the global economy. Merger mania. One of the biggest names in tech investment, blackstones ivan drama. Dragma. From generall motors goes public, and the ceo will tell me what happens when he finally gets out from under government support. You are