Transcripts For BLOOMBERG In The Loop With Betty Liu 20140429

The battle for French Company alstom is heating up. The biggestuld be tugofwar for a french Industrial Company ever. Matt campbell broke the story. Who has the upper hand between siemens and ge . It seems ge is ahead of the curve. Good morning. On the merits, you are right, ge is more advanced. They made a binding offer. It is something that has been in the works for weeks, if not months. Coming up with something that is much more informal and would need more time to become very serious. Now, that said, there is a degree of political pressure in france of in favor of at least seen this siemens offer considered, which would be a socalled european solution, which might be more acceptable to some portions of the government. Over the last 24 hours we have seen the government backing off of its initial support for siemens. They seem to be walking that back. The smart money would be on ge getting this done one way or another but it would be a bumpy ride. Why is the french government backing up is there too much overlap . That is certainly a concern. Big have to be at a concern. Jobless claims are at an alltime high. Ofmens and alstom have a lot operations in common. It could be seen as leading to layoffs. Francois hollande has plans to cash pledged to change pledged to change course and be more business friendly. There are elements in the government that do not want people in the media and elsewhere st. Francis closed for business. Why isquestion is siemens so interested . To come in late in the game, ge is further ahead, why . This is more about ge than it is alstom. Bigger ino much europe is clearly a threat to siemens for equipment for power plants and electric transmission. Siemens views it as a not desirable outcome with their biggest global competitor muscling up on their home turf. Thank you, matt campbell. We will stay with dealnews. Ofzers proposed takeover astrazeneca is a huge deal and has one big caveat. The combined cover me company would be owned by a u. K. Company. Cristina alesci has been looking into the trend of shifting overseas. In version, the sexy word. Explain what companies are doing. It comes down to 2 trillion Capital Companies have parked overseas. If they bring it back here, they will take a massive tax hit. Companies are changing their domicile. Only one. Not the what is going on is they are changing their domicile and taking two companies, one u. S. Company, one in a more favorable tax country like the u. K. Or ireland, combining it under one foreign company, and 20 of that company is owned by foreigners, which means the whole company is treated as if it were based overseas. So, what happens there is they get all of these benefits. You have a company that is 80 owned by the u. S. 20 is owned overseas. Therefore they get better tax rates. What is the government doing about this . I can imagine it is billions of dollars the government is losing. In reality, it will not lower the tax bills right away because they find creative ways to get out of paying taxes as it is. It is about simplifying their structure. Basically, they have to do all of these acrobatics and gymnastics to avoid paying taxes. With this structure, all the money flows up to the parent. It makes it easy to do other deals outside of the United States without worrying about how to repatriate that cash. It simplifies it. One of the big benefits here is the fact that there could be intercompany lending card for example, lending. For example, the european subsidiary could lend the u. S. Subsidiary money, and the dividends for the loan could lower the tax rate for the american company. That is why we have seen so many and so recently. Stay with me for a moment. A special guest, Gregory Rayborn, manager of kobi partners. You have been in everything from telephone companies, casinos, and also pharma. When you look at these tax in version deals, what is so appealing . Asked aside from taxes, one of the interesting things to me about pharma in general is they all tend to move horizontally and vertically, once they go public. The generics end up wanting to be branded. The generics want to be the branded ones want to be generic. It is for growth. Getting growth, they say lets move into this or that. That is why it is also ripe for mna m and a. If you look at intelligence, it is tough from an r d standpoint. What was interesting about the pfizer and astrazeneca deal was both are running out of patent. Issue. T be more of a tax it could be. At the end of the day, pharma is about products, and you either have to buy the product or make the problem product and underperformance on the r d side will drive this. Day, the end of the tax issue is driving a lot of activity, and what im hearing is the Obama Administration has proposed bringing the 20 threshold that we were talking about two 50 , which it make it harder for these inversions to happen. A u. S. Company would have to give up more control. They would have to own more of the parent company. Wouldrse, a u. S. Company be more reluctant to go ahead and see 50 of the control to foreign shareholders. That is putting pressure on companies who think the window is closing. Basically, if this opportunity is not going to be here very long, we might as well try to take advantage of it, and that is what is driving a lot of the big deals we are saying. 50 ou think raising it to do you think changing that to 50 would change behavior . At the end of the day it is about stock value, and what is. Ccretive and not accretive i am not saying it is the absolute, primary driver, but i am saying that what happened here is a big element of how these companies and they can drive value for shareholders, and not only that, think about returning the cash to the parent company. It gives them more flexibility to pay out dividends and return it to shareholders. Sure. You, cristinak alesci. Kobiry rayborn of partners, youre staying with me for the whole hour. Moving and shaking this morning, one of my favorite comedians, Billy Crystal, known as hollywoods biggest fans of the Los Angeles Clippers. He has had tickets all of the losing years. Now there are questions about what will happen with outer Donald Sterling. Should Billy Crystal by the team . Some of the big names talked about the future. Deserve to have a team, but legally i do not think they can do it unless it has to do with money. I do not know what the nbas mandate is, their structure, but if they have the ability to force and owner out, that is what they should do now. What do you feel about sterling . I have heard Magic Johnson is interested with the guggenheim group. I will ask billy. Billy crystal to take over . Maybe he can be there point guard. I love that. Is oneisney ceo bob iger of the biggest players in sports. You mightve heard of the espn empire. We will see what he asked to say about the l. A. Clippers controversy. Brad pitt and Angelina Jolie may be that king and queen of hollywood, but we put the wind their wine to the test. Stay in the loop. Welcome back to in the loop. We have breaking news there are reports of a shooting at a fedex facility in georgia. According to cnn, six victims were shot and one is in surgery. Target, naming bob erodes is the new cio and they have announced a new chip that is safer. Barclays is also announcing a shakeup in its own see suite. Ceo of the americas unit, skip mcgee, is stepping down and joe gold will take his place. Another story we are following closely, newly installed nba commissioner adam silver faces his first big test today at 2 00 p. M. With his statement on the future of the Los Angeles Clippers and their owner Donald Sterling. He is under fire because a recording where he said he did not want his girlfriend bringing black people to games. Everyone from Magic Johnson to disney ceo bob iger is waiting in. I was appalled, frankly. We live in a world where i believe there is no room for racial intolerance, discrimination, or racism, not at all. A public figure or in business, there is no room for it. I am joined by ira and still with me is Gregory Rayborn. Should there be a no tolerance policy . I think everyone agrees there is no room for what Donald Sterling said, those sentiments, but the question is what do you do about it what we will hear is adam silver announcing the max penalty according to the rules, whatever he interprets them to be. What are max penalties . It depends. He can suspend him indefinitely. Depending on the clause he can find him one million or 2 million, not very much money for Donald Sterling, but there is the possibility that nba owners could terminate his ownership. That has never happened before. That far, tootten a suspension, as far as i know. Out, held vote him would no longer be owner and im sure they would have plenty of bidders. You mentioned how to fix a situation like that, in the first thing i thought of is you cannot fix stupid. You really cannot. When it comes to penalties from the league, or whatever they do will likely pal in comparison to what the market is doing to him already. Encouraged to see yesterday that every single sponsor had basically dropped out. Pain they want to bring through a fine will be miniscule compared to the Economic Impact on his team through the loss of these sponsorships, and in those situations, nobody is going to come in. That is losing revenue you cannot replace. It is a huge economic hit. Anheuserbusch was the only one that is the holdout. They are not a team sponsor. Even league sponsors, samsung, adidas data not want their logo around the game. How much money are we talking about . Immediately, it is not that much, as the contracts have been paid out, but going forward, it is a problem and it makes it untenable for him to run the team. Under punishment is labor the other punishment is labor. He will not be able to hire good talent. Are the players going to leave . I do not know about that, but his economics are around. Erchandise sales, sponsorships Merchandise Sales are going to go in the tank. Sponsorships are leading leaving. In terms of what the owners can do and how they make their money, think about a jerry jones or someone like that that is where the money is, the bulk of it, and tickets can also get hit in a situation like this. The remaining question is what can the league due to reach out to sponsors to make sure they do not see another rush to the gates to separate themselves from sterling. Everyone will be looking at what happens today. People trust adam silver. Everyone from the president on down has said he will do the best he can in the situation. This is about sterling. It is not about any player on the clippers or the mba as long as the nba does what it needs to do. What would you tell the nba . O do they have to do the max that they can do. It is difficult in situations. To nfl takes a long time look at owners, as to who can own a team. Ira boudway mentioned earlier, there is no rejection on. I think what has to happen is the economics of the situation have to forsake resolution, and force a resolution, and he has to be forced to sell by economics. I do not think the league can do anything but say we are going to take a hard line. Those economics are going to drive the change. Who would be the buyer, do you think . Plenty of possible buyers. About magicmors johnson. I do not know if he has the 750 billion. There are willing buyers in the seattle group, but i do not think the nba wants to move the clippers to seattle. There are always buyers. The Milwaukee Bucks just went for 750 billion. There are more buyers. Thank you, ira boudway be sure to stick with Bloomberg Television for the News Conference coming up at 2 00 p. M. Eastern time with nba commissioner adam silver. First can watch our full interview with bob iger today on Market Makers. Shares of linkedin almost doubled last year. Huge payday for the ceo. We will talk about it coming up next. First. Bloomberg. You are watching in the loop , live on Bloomberg Television and streaming on your phone, tablet, and on bloomberg. Com. Steel, in for betty liu. It is time for todays bloomberg million, how 49 much linkedin ceo jeff wiener was compensated last year, a 40folder increase over the previous year. It comes at the company gave out sincerst stock awards 2011. Shares of linkedin gained 89 in the last year versus a 30 increase with the snp. They are expected to report firstquarter earnings on thursday. It is 26 minutes past the hour. Bloomberg tv is on the markets. Equity futures are grinding their way higher, capping off two days of gains. Positive earnings are spurring momentum in future stocks. Earnings from mark hoping to riskoff mindset coming out of the russia and ukraine conflict. The job number on friday. Traders are not taking on a lot of positions ahead of those key economic point. Were back with my guest host for the hour, Gregory Rayborn of kobi partners. We are talking tech. I am curious what you make of amazon. There strategy to diversify into so many products is nothing new, but all of a sudden investors seem to care. I am wondering what was the catalyst. There is a rotation going on. You can see the rotation from a lot of the tech stocks. We are getting a price valuation for growth. I think this is certainly the first time in amazon history that people started to thinkolate forward and are we going to see this quarter 10 years from now, five years from now. Is all we are building a huge platform with massive volume that does not make any money . Are we looking at value versus growth now . Absolutely. I think there is a huge move move towards that. I am not a big fan of Balance Sheets or was it three. Wizardry. Last year it was all about samsung beating them, they were not have innovation. I think it has to do with whether apple can come up with a revolutionary product. I do not think it did tracy watch will be revolutionary no matter what it does. If you taken take out the one buyback, which i never heard of, they are miniscule to actual real cash flow. Longterm, and i do not think tim cook has a long runway. I think he has a calendar runway to come up with products that are going to be game changers. I do not know what that is going to be. When you take a look at the amazon versus apple strategy will it be about margins versus units . In amazons case, the story has always been were going to invest, grow, and lock up all of the markets. When you think about all of the companies they put out of as broadly selling and vastly as they do i am a amazon user. My son has to be daniel boone, i have to get a coonskin hat, where my going to go . Amazon. They provide that on the premise that there was going to be cash flow and profitability coming out of the model. At some point that is going to stick. You can peel back the investment so that the money flows out. That shift into value. Thank you. There has been a shooting at a fedex facility in georgia. At least six people were injured and one person is in surgery. Fedex confirmed the shooting without giving more details at the time. They said the primary concern is the safety and wellbeing of team members, first responders, and others affected. Fedex is cooperating with authorities. Former adviser to the u. S. Department of Homeland Security as its chief Information Officer as the retailer is still reeling from a data breach that exploited tens of millions of customers information last year. Bob dethey will start with targn monday. Volkswagen, reporting firstquarter profits beating analyst estimates, 22 , stopped by record sales on Luxury Stores and audi brands. It has been called the next great threat to the American Economy Student Loan Debt has exploded over the last few years. How bad is it . Michael mckee says the real deal is exaggerated. Seriously . We are blowing this out of proportion . If you google Student Loan Debt, you will get 40 million hits on it. Thedeputy secretary of treasury is making her first speech today and she will be talking about Student Loan Debt. We do know that it has exploded over the last decade. Dollarup to over one trillion in outstanding debt. It is the one category of Consumer Debt that is still growing. But that is about all we know about it until this point. 39 million users, divided into the amount of debt, you get an average of 25,000 per person. That is only an average, when you dig into the numbers you find it is not that bad. The new york fed did just that. They found the vast majority of people less than 20,000 on this to debt. In fact, most people a less than 10,000. What you get is a very small amount of people, mostly people who are looking at advanced degrees in things like law and medicine who have piled up a lot of student debt. Then there is the category of the forprofit section, because those colleges have sold that that they cannot take on and afford. The government is looking into that overall crisis. It is a crisis for a few . I am shocked, less than 10,000 does not seem so bad. I can see with a post grad, the med school, the others would drive higher value. The disconnect in the country is the peoples inability to get a job. Even if it is 10,000, if you cannot get a job when you get out the promise of getting my degree and getting a job, that is hard. Or in the case of what we have seen in the u. S. Now is underemployment. Whatever job you thought you were going to college for is not the job you wind up getting. A good point. I am actually wondering, the people who wind up with heavy loans, what does their economic status wind up being . We dont have a lot of data on that, but we do know that the number of defaults are rising. 31 of borrowers are effectively delinquent. You have to use a number like that because what happens is this debt is never discharged. If you file for bankruptcy, you still owe this debt over the long run. A lot of people because of that go back to reapply and have it rolled over. So, the number of people who are actually not paying and are delinquent is going up, probably because people cannot get enough to pay off their debt. The crisis . Ies the other problem is that most of the dead is being financed by the federal government. They took the private sector out of this. Now the treasury sells bonds to the Education Department to lend to students. That is a threat if we have a high default rate to taxpayers. It is one of the few debts that you cannot discharge. Right, the real deal. Mike, thank you so much for sticking with me. Coming up, it is never too early in the morning for ice cream cake, we are going to eat some. Carvell is turning 80. The Company Joins us next with a look at how they are celebrating. Look, fudgy the whale. Americas first retail ice cream franchise, carvell, is turning 80 and is celebrating its new strategy. No report signature ice cream cake, like the one we have here, has plans to add 21 stores and read revamp its brand. The president of carvell joins now. You are relatively new on the job . Are making a lot of changes. What is the biggest one . Celebrating 80 years of serving americas freshest ice cream. The biggest thing is the design of our new ice cream shop, which we just debuted two months ago. That will be the growth prototype for the future. Tell me about the express ice cream shops for a second. Express shops are 100 to 300 square feet and they are ideal for nontraditional locations like airports, travel venues. I am curious, because it sounds like you have got a lot of new initiatives being expressed. How are you dealing with cultural change . There are a lot of companies that have been around for many decades and as an outsider you come in and you want to drive change and initiatives. What works for you . That is such a question for carvell. Franchises in the system 30 years to 60 years. I have spent time with franchise partners, learned what they liked best, we have integrated that into the go forward strategy. The best example is how carvell coined americas freshest ice cream in 1978. We brought that back as our advertising campaign. You have international operations. Of want to streamline, not expand, so tell me about that. The biggest thing we are doing with streamlining is for the full ice cream shops, focusing on the core markets. The new york area, surrounding states, and southern florida, which is where we have a strong brand presence. Because they go into hightraffic locations, they work in any place, nationally. When i am looking at a there is aike that, new path forward. You have worked with hostess, of course. What i try to do is narrow the focus. I find that limited resources are typically not cash. It is management, energy, drive and focus. It is odd to me that you have these 45 International Locations on top of like a 400 core market in new york and florida. Are those 45 ones that you inherited . How do you deal with keeping your focus tight while you have that as an almost distraction . Carvell is part of focus brands. End, cinnabon, carvell, theyre all out there. The International Division manages the business and in many cases are cobrands. Got you. I wanted to ask about the dairy prices. The dairy price index, looking , how do you deal with that . Alwaysdairy market has been volatile. We have been fortunate over the last couple of years it has declined a little bit. We are contracting sugar at the low price. It is forsome point consumers . We had to take a slight price increase and they will take one as well. A letter literally comes down to pennies per serving. Staying with food, copenhagen , one of the best restaurants in the world. A title they have held three times before. What is so great about it . Ingredientsd for an in the new nordic cuisine. Take a listen. Foreign ingredients, like ants, in the nordic cuisine. Take a listen. We go back. Totally astonishing. Ants. He used ants. Of my favorites is chocolate volcano, which as their country crunchy chocolate and vanilla. Ginger ice cream does well in certain markets. To noma . Ou been i have not. I probably need to try that. Have a favorite restaurant in new york. I have favorite restaurants in charleston, south carolina, but if i take one i will anger others. Thank you for all the treats. We look forward to that. You are sticking with me. More food talk ahead. Buffalo wild wings will join us at 3 p. M. Eastern. Streaming on your tablet, your phone, and bloomberg. Com. Months of wrangling among creditors and managers, holding for bankruptcy in delaware, greg rayburn is with us and we are joined now by beth with more on this story. Is one of the biggest bankruptcies ever. This country had company had over 40 billion in debt. What happened . What led to the bankruptcy . In debt, 50 billion in what happened was a case of very bad timing. The leveraged buyout was the biggest one ever done. Within a year the prices had collapsed. One seemed to foresee that the shale and the fracking and the price of gas would have collapsed within months. Did they need to file for bankruptcy . At tro gas prices were weak, but now they are getting much stronger. It is interesting, as a backdrop to this and you will know this from covering restructuring, most of the bankruptcies we have seen in the that areyears are ones very far beyond the pale. One foot out the door in terms of liquidation. For that is because credit is readily available, cash is plentiful, most things get worked out prior to having to go down that path because chapter 11 cannot only be destructive to the business itself but it is extremely expensive. Someone has to foot that bill. When i see a company like this, a real company with real assets that was simply overleveraged for their play on natural gas prices, the fact that they filed means that someone in the structure does not want to take the pay. Have been wrangling. They just start crying. Someone did not want to see it the way the other groups saw it. And they are forced into chapter 11. That just means that they will have much more expensive wrangling going on. Would you agree with that from your reporting . There is definitely separation and credit. The majority of creditors are taking ownership of a big chomp big chunk of the company. They are giving about 23 billion in debt here. It is a situation where the creditors wanted a discount and have reached a prearranged agreement with a number of the creditors in advance of the filing this morning. Who is going to be left with the most money when this is over . Separating the company under an agreement that was hashed out last night. The case of oak tree, apollo, they are taking ownership of the unregulated portion. Existing creditors are going to areregulated utility and putting into billion dollars more in equity to maintain their initiative. All right, some big numbers there. Thank you so much. Thank you for your perspective. Ahead, it is al tough job and someone had to do it. We had to sift through some movie stars. How did they actually stack up . From celebrities like brad pitt to wall street titans, seems like everyone is getting into the wine business. They are not necessarily junk, but they are not all fine vintages, either. We know because we put them to the test. Here, we havesee a lot of wind behind us and we are going to try to drink it tonight. This is a 2010 vintage, one of the great vintages in napa valley and the north coast. Smell, black raspberry, black current. This one is rich, powerful, i could put this in my wine cellar for 20 years. The highestrated wine in my opinion is [indiscernible] style, withedium in an acidity that will prevent the wine from aging. I could smell this all day without drinking it. It is one of the great poured wines. Of the great things here about lassiter is the label, pixar, i guess they know something about cartoons. This one is a real blend. They have done a great job in blending these different grapes, which is what i am looking for. The great things about wine is it is made all over the world. Countries like croatia, which you might not think of, growing grapes and making wine. , a spicy unique wine wine, and ready to drink. Angelina jolie, brad pitt, and wine. That is true. Something that people should know about celebrity wine is they are not just giving their name away. They have to make sure it is good quality. Americans no wine. I love the color of rose. It is refreshing and the best part is, it is inexpensive. The big question islands get asked is which one did you like better . The spot here, i like the francis ford coppola. I like his wine in his movies. Cheers. You a wine lover . Do you have a favorite vintage . I like chardonnays from the rough and chardonnays from the Russian River valley. Specific. Are you sweet over bitter . Or more like ice cream for breakfast like during the break . Different kind a of connoisseur, but i like some wine. Frank, thank you for everything, including your perspective. I enjoyed it. It was good to have you. Approaching 56 minutes past the hour, meaning a Bloomberg Television is on the markets. Futures this morning, the s p is up there by about four points with betterthanexpected earnings trickling in. Customer spending, motions and it is a company that has held onto more subscribers than forecast. Coming up, your morning shave maybe fresh and close now, but how about this afternoon . What is proctor and gamble doing to make a new Razor Technology that could be an industry game changer . Lust, bill ackman is trying his hand at pills . It has to do with a Company Called herbal life. Loop, watching in the live on Bloomberg Television, streaming on your tablet, phone, and bloomberg. Com. We are 30 minutes from the opening bell here in here in the loop. Futures indicate stocks will be higher at the open. Two drugmakers with earnings that beat analyst estimates, herbalife had a surprise investor, bill ackman, bet 1 billion against the company. Firstquarter earnings are higher than expected for the fullyear forecast. Adam, we are moments away from getting a snapshot of the housing market. The caseshiller price index is about to come out. Mike . We continue to see home prices rising into the spring selling season. These are of course february numbers that are up 8 10 of one percent on a monthtomonth basis and on a seasonally adjusted basis. Yearoveryear basis, the 20 city composite of 12. 9 , a bit of a slowdown from the prior month, but we are still seeing doubledigit gains. Let me show you some of the interesting things here, we are still trying to find our way back to where we were at the beginning of the recession. Only at the 2000 four price levels. Some thought we might break into 2005, but it did not work out this time. In terms of the price indexes, one of the price is cheap questions people always have is what is the one that matters . We cannot tell you, there are a lot of different ones. Caseshiller has the largest of the mall. When you look at existing numbers, they do not just come through in the same manner. That may be one reason we are finding people reluctant to put their homes on the market. They are not exactly sure how much they will get for them. Those who are putting their homes on the market find the best luck in las vegas. California, those cities are gainsg the biggest price over the past year. Interesting, las vegas, california. Scarlet fu is looking at the Market Reaction with stocks rising higher. The rise continues, all the features have pared their advance in the lead up to this home price index. We saw some of the gains coming up a little bit. The nasdaq remains a laggard, we are looking at gains for futures and the moment. Looking at the 10 year yield, it is holding pretty steady. No real change their. The dollar remains stronger versus the yen. Investors are focused here on the case schiller numbers that are lagging from february. It is the twoday meeting that begins today. There is no press conference link to the meeting. There should be an announcement that comes out that should be a focus for investors. Thank you so much, scarlet fu. Right, moving and shaking at this hour, bob iger, agreeing to stay on through june of 2016, 15 months longer than expected. All sorts of names have been mentioned as possible successors. , hehe milken conference asked him about the search. We have been developing people, discussing people, talking about a variety of Different Things the ceo of a company should have. They have been observing things closely. I am confident that they will make the right decision longterm and that it will be made on a timely basis for smooth transition. You can see more of that interview with bob iger. You dont want to miss it, 10 a. M. Eastern today on Market Makers. Also moving and shaking this morning, stephanie ruhle, probably she had a lot of coffee, she is in los angeles and had some great interviews yesterday. We listened to the whole thing, telling about the highlights. We were up all night. Influentialmost people from around the world. We had a chance to talk to barry sterling yesterday, ceo and chairman of starwood. It was a booming business for the last few years, especially in the hotels that we have seen go public. He said it has been a bit of a goldilocks, given the huge supply coming to the market. It has been a good goldilocks. For real estate. Companies have gotten much better pricing systems, much better at understanding their own inventory and are able to raise prices faster. Prices are going up now. But it is spotty. I would say that the Corporate Group tom a travel, is nowhere near what it used to be. Alex, that is not going to change. Corporate travel is just not what it used to be. It will not go back. Looking in the financial industry or across wharton 500 companies, expense cutting is a massive priorities. The Corporate Travel coming back for these hotels, which has traditionally been a cash cow. Interesting. Anyway, you are there for two more days. We are going to need to take that four seasons private jack private jet before we can report on it. Fair enough. Who are your big hitters were today . Very big day. We have bob james, we have the head of private Wealth Management firm goldman sachs, and i will be sharing my theusive interview with one, the only, sean penn, talking about the opportunities for recovery in haiti. Thank you are much, stephanie ruhle. Procter and gamble is looking to shake up the shaving market today. They are calling it the dice and razor. I hear the dice and razor and i think about a vacuum cleaner going over someones face. Fair enough, to be fair they are calling we are calling it that, because it has a ball bearing with some kind of technology gliding over the face. Could have a face vacuum. That could be your invention. We will give you credit for that, alix steel. Appropriately it will sell for between 1150 and 1260. What is so revolutionary about this is they are not just adding another blade, the recent trend in laser technology. It will give you a good shape, but they are looking at the architecture itself and trying to improve on that, doing it with the launch in about 40 minutes with omar epps. They have got some hot indie band playing in a nightclub. This market . Im sure one of the issues is that you cannot clothe the market once you reach all the men who are shaving. Not only that, we have seen a decline in demand for razors. Grooming is about 10 of their revenue but 16 of their operating profit. However, we have seen their revenue decline for the first year and five for the grooming segment. We have seen a bit of a market share issue because of the new subscription clubs, like harrys and the dollar shaved club, where you pay a monthly fee and you get the razors monthly. You have also seen declines in the market for razors overall. There are a couple of reasons behind that. First of all, beards are more fashionable now. We can thank brooklyn for what has happened to the beard market. I was talking with an analyst said alsonestine who because we have seen the Unemployment Rate rising, if you dont have a job you are not shaving is often. Also, the aging of the u. S. Population, older men not going into work are not shaving as often, this all affects the markets in razors. Razors are really tied to unemployment in some way. Fascinating. Coming up, one step forward, two steps back, herbal life reports better than estimated earnings but a new documentary threatens to show that the company is a pyramid scheme, as bill ackerman has been arguing. What are they doing to try to avoid the same fate as twitter and facebook when they went public . Stay in the loop your. The great battle over herbalife legitimacy is getting testy yet again. Yesterday they posted earnings above estimates and announced acceleration of cash returns to shareholders in the form of buybacks. This comes at the same time as bill ackman repairs to release a short film attacking their business practices. Joining me for more is ken shea, who covers the food and beverage industry. Looking at these numbers, the Companies Looking at sales growth this year of upwards of 12 . What is really behind this . Are very strong. The 12 sales growth from the First Quarter was driven largely by volume. Which is pretty extraordinary for u. S. Food Company Growing in a low singledigit volume. What was interesting is that net income fell 37 . What is the thorn in their side at this point . That yous the charge cited, the venezuelan evaluation of the currency, a lot of analysts are taking that out because it is more or less a nonrecurring item. To take thating beep of faith, adjusted earnings per share were up and beat estimates. They list of a lot in this report that gave the critics of this organization a lot of ammunition. Especially if you are a shareholder right now. This huge buyback is underway. Step,s their first perhaps, of going private . It is hard to tell that. It could. Base percent share reduction is very unusual. You can understand why, shares are down 30 from their high, the company is just suspending the dividend and prioritizing share buybacks, which you would think a shareholder would want them to do right now. There has been chatter along the privatization lines. Of course, when you have that kind of screwed me from bill ackman, matt levine wrote about this. This much buyback at cash flow, you have to have confidence of more cash in the future, but it is also something that you do if you focus too intensively support the stock in the short term. If you want evidence that it is more of a tugofwar than an earnings story, this release is a good place to find it. What do you think about that . The companies doing what they should be doing, supporting the stock price with share buybacks. There is nothing that unusual about it, given the circumstance. The company is being very transparent that it is a priority. To tell whathard the endgame is. Some catalysts are coming up, though. Bill ackman has an event on friday. Also, the investigations are ongoing. We will see how many shares they buyback in the future. , we have these investigations plus this documentary that you mentioned. What would be the impact of this documentary on, say, Law Enforcement . It is hard to say. I am sure it will be entertaining. They will be bringing some employees in the did not fare so well, finding out they had a tough Time Starting their own business. The key year is that the critics are going to have to prove, at some point, that new members were misled into believing that it is easy to run the business and two, that the company is highly reliant, mostly reliant, on new member revenues to keep sales going. Those are high burdens to prove. Fair enough. Ken, thank you for the perspective on herbalife. Coming up, bank of america makes a big blunder. The secondlargest u. S. Lender had to scrap its capital return plan after inflation. Coming up next. Bank of america has scrap its capital return plan. The secondlargest u. S. Lander u. S. Lenders scrambling to resubmit its stress test with adjusted numbers. Erik schatzker joins me now from the milken conference with more on the blunder. I am curious, what are the people at milken saying about this . Thes you might imagine, people here are kind of stunned that this could happen to a bank like bank of america. Would not say that it is a matter of obsession. There is a lot going on here that has to do with media, with medicine, with technology. It is not like the halls are abuzz with activity about bank of america, but i spoke to the cfo of another major wall street firm who simply could not believe that there would be an in dash and internal controls problem like this at bank of america. Bank of america found an error in the valuation of the securities it inherited part of. He Merrill Lynch acquisition that would be fine if this were 2009. This deal happened almost six years ago and you would think that over the past six years they would have found time to go through everything that they acquired. The truth of the matter appears whichthat they have not, raises concerns and questions about how well the bank is being run and whether it is too complex. If the bank is so complex that people like Brian Moynihan cannot find time to go through these securities, you do have to raise some questions about the business, the scale of the business, the size of the business, and managements ability to Pay Attention to the things it has to focus on. Sort of the too big to manage syndrome. A real black eye for Brian Moynihan. Could you repeat that . Trouble hearing you. A black eye for Brian Moynihan if it is too big to manage. What would the capital plan b . Like something is going on with the audio. I think you are asking me what Brian Moynihan is going to do right now. If that is the fact, mobley will we are talking about in any case, first of all their 4 billion short of capital. They have to immediately scrapped plans to raise the dividend, which was important for Brian Moynihan, a point of pride in something that excitedders were very about. They have to go back and resubmit their capital plan to the fed, which may because the fed does not look kindly on these things, eject the plan to keep the dividend. If that is the case, bank of america may have to offer, as a sacrifice, if you will, the 4 billion buyback program. The situation is simply not good, as was reflected in the stock price yesterday. All right, thank you so much, Market Makers anchor erik schatzker. Traits thattop 10 you dont want to miss, coming up right after the break here on in the loop. Back, i am alix steel. Bloomberg television is on the markets. Scarlet fu has the latest on futures. We are looking at higher gain right now. Users are up by five points, nasdaq futures bouncing back after the caseshiller economist index gained one quarter of one percent. I do have some headlines that just came out saying that they are looking to explore a sale to ,anta fe or Johnson Johnson other Companies Like Valeant Pharmaceuticals international for team ups to try to take over that company. Allergan contacting companies according to people with knowledge of this matter. They are attempted to fend off a hostile sale. An eye on keeping this development as the mourning continues and in the meantime we will be back on the markets in 30 minutes. Thank you so much, scarlet fu. The only top 10 trading you need to know about today, Olivia Sterns joins in. Toon, the oil giant landing start drilling in august. Partnership has come under the u. S. Crutiny after laid sanctions on its ceo. Number nine, goodyear tired, reporting ernest earnings below analyst estimates in north america. Results were inline with expectations and they reaffirmed their targets for 2016. Siemens and General Electric, it could become the biggest tugofwar for a French National company. They are attempting to counter General Electric with access to information according to people familiar with the matter. Number seven is the largest foreign processor, posting lower than estimated firstquarter earnings because of harsh Winter Weather negatively impacting their operations. Also contributed their week results to a lowmargin environment. , number six is Deutsche Bank with profits that fell less than analysts had estimated. Trading revenue exceeded estimates. Number five is merck, the drugmaker reported firstquarter profits at . 88 per share, beating estimates by nine cents. Merck also reiterated its forecast for the year. Gogo, shares, plunging after at t announced plans to bring access to challenge the wifi provider, Offering Service in late 23rd 2014. They control the largest share of the inflight internet, as long as they dont allow phone calls. That would be a nightmare. Company sales rose here in the Fourth Quarter more than expected despite wireless plans for tmobile and at t. Sprint which also raised its forecast for the year boosted its loss in the sixth quarter. Number to his coach, posting a 21 decline in north american samestore sales. Their sales decline was deeper than the rise that analysts were forecasting in the 14 drop in the holiday quarter. Your number one stock to watch this morning is nokia, jumping the most in six months since they said they planned to spend 7 billion on dividends, share buybacks, and debt reductions. They also named their network unit head as the ceo, focusing the country on company on wireless. There is the opening bell. [opening bell] to the principal at douglas lane and associates. That volatility is a buying opportunity for individual growth companies. Thank you so much for being here. The stocks, the ones that got hit and destroyed over the last few weeks, what makes you think there is not something more sinister, deeper here . , you have to separate these the momentum stocks and the growth stocks. We like the ones with underlying fundamentals. Earnings, cash flow, they for wear, things were people buy it because revenue is growing. Companies like google they have 20 on growth in the teens. Lots of cash flow spending on good projects. Those stocks have come back down almost 20 . Is a fair case on google. What do you find, olivia . What we heard was the simple fact that google is struggling with a big shift into mobile devices. The simple truth is that on a smaller device there are less there is less space to display ads. The cost to click overall for smartphones is 35 in the quarter, worrisome for google. Add to that the fact that costs are rising faster than sales . A lot of people consider these kind of moonshine ideas. The big ideas are Titan Aerospace and drone labs. A lot of people wonder when these estimates will pay off. It is a pretty good point. Thatthink the counter to is that volume of clicks is improving as more and more people get to more and more devices. Those are growing tremendously across the world. Google is there. They have got the android system. They are part of the ecosystem. What they lose and cost per click they make up for an actual volume . Right. If you look at search, the dominant play of search, and youtube. They have all of these levers to deploy. When people bought youtube they said what are you guys doing . By itself is worth several million dollars. I agree that there they are also looking at several projects to see where they go. Then again a company like amazon is getting punished. If you look at their Balance Sheet, they are not expensive. At some point the stock will reflect their future earnings. Scarlett, you have been looking into this . Is part of what we call a pocket of concern, like the macro picture and china. Sales there may not be sustainable with property transactions done yearoveryear. In south america they are underperforming and likely to worsen. Here at home we are looking at growth that is flattening with competitors saying that they see demand for passenger cars weakening this year. Pricing as well. Not to mention the recall fiasco. What do you like about it . These things are all already baked into the stock. Of mgm is positive the product cycle, looking forward, with great new products in the pipeline. Is slowly turning as well. Looking at their Balance Sheet again, the dividend, it is almost 3. 5 . There are no cars on the road today that i that they are producing. People will be looking at new cars and saying wow, this is a very different gm. This is not one of those that will turn around and six months, but you will be rewarded. Any sectors that you are avoiding right now . Be very careful of the utilities. Theyre pricing at the 10 year is. You have got to be careful. That is another reason all of this volatility is unsure. Next three years to five years, you might be ok without the dividends. The markets will be depressed and you will not be impressed. Also with the raising of rates down the road. Thank you so much, really appreciate your insight, managing director at douglas c lane associates. Coming up, halligan is set to explore its sales to Johnson Johnson, and alternative to their 46 billion dollar bid. We will talk more about that, when we return. Newsdating you on breaking from a few minutes ago, allergan has contacted Companies Including Johnson Johnson to see if they are interested in making a deal, according to people familiar with the matter. They have received an unsolicited warty 5. 7 billion bid from valiant, who is teaming up with the action through options. It appears the Company Wants to pursue other options. Jeff mccracken joins now for more. The biga lot of pharmaceutical companies, they see themselves as a Science Company at its core. They see valiant as the pirates to come in with companies that have existing drugs and partner with bill acton unsolicited. Valiant has been clear that that is what they will do. They have contacted serious suitors to see if they have any interest in coming in and playing white knight and rescuing allergan. I think it is early, it would be hard to say. J j is an interesting option here. They need to make a serious run at this. I know that from the flat valiant side, it would be worried about j j. A very big Company Supporting the marketplace if they went into it. Stake inave a 10 allergan as well. What is the conversation between the activist investor right now . There is no conversation, they are just basically not responding when they dont reach out. I know there was a recent conversation through back channels, if you will, where they were trying to get them to sit down. So far there has been no dialogue whatsoever. Do, then . N they they can try to speak to the investors about longterm best options. Cutting r d, you will get up piece of the future, which will be of more value to you down the road. They may not be interested, but what are the other options . Can they go out and make purchases . They were looking at another Company Called scheier. There is a buyer out there, german, that has approached them to see if there is an interest in doing a deal. They are looking at a 14 billion and 15 billion deal with merck. Could not have ended that better. Crazy times. Thank you so much, bloomberg news. Jeff mccracken, we appreciate it. As the u. S. Imposes an of sanctions on Vladimir Putins inner circle, there is one name that keeps coming up again and again. We will tell you who and why, coming up next. Stay in the loop. The topis a look at tech stories on our bloomberg radar. The former Network Division head will take the reins of the nearly one hundred 50yearold company. The 46yearold jury will intensify the focus on their equipment as the Company Moves away from their native statement. Apple has updated the macbook air and lower the price, now standing at 899 with a features like faster wifi and 12 hours of battery life. Netflix has agreed to pay verizon in undisclosed amount for faster access on its network. They are taking steps to making its programming is easy to access and watch as hbo. That is all the latest in technology and media, every weekday at 1 p. M. And 6 p. M. Eastern on bloomberg west. Alibaba, beefing up its u. S. Patent holdings, a lot is at stake in the initial public offering. It may be bigger than the 16 billion facebook ipo in 2012. Megan hughes has more. When you look at alibaba buying up patents, what is the strategy here prior to the ipo . Think of it as a defensive move on the chessboard. They clearly become a target for their competitors. It is a vulnerable time, as you know. Executives seem to be aware that these patents can be used as a shield against lawsuits. They have seen some of the obstacles that google, facebook, twitter face, because those companies did not have a war chest of patents before filing. They got hit. What are they doing . Beefing up u. S. Patent holdings. So far they have 100 two, including 20 from ibm last year. They also had applications on the 300 other patents pending, including things like the technology for payment processing, product recommendations, and picture searches. Another boost is that yahoo owns the 24 stake in ali baba, which holds 1500 patents in the United States. One potential predator is off the table. Alibaba seems to be unique in its understanding of western ipo standards and chinese companies, they are one of seven actually filing this year, but this is substantial with a and building u. S. Patent portfolio according to regulatory filings. Is takinge a Company Lessons from other Big Tech Companies and making a play. As to whatious buying patents does in terms of the ipo profitability. Is there a correlation between them . Study, aactually was a french study, a french researcher who found a direct correlation between them and found that every patent drives up ipos for software according to a 2012 study,. 9 . So, a direct correlation. But the questions are looming as the Supreme Court and congress consider how broadly a patent can be to have teeth in court. We have seen the huge increase in the number of patent trolls and frivolous lawsuits over patents considered by some to be too general. On the way the Supreme Court goes or that congress goes, it may be important for them to have more or fewer patents, depending on how that goes. Thank you so much, megan hughes. Alibaba is on the way to an ipo, the largest supplier has canceled a 2 million ipo in hong kong because of slack investor demand. The company had planned to start trading on may 8, according to someone with knowledge of the matter. In another global story today, the u. S. And the European Union are hitting some of russias biggest citizens with sanctions, saying that the country has not upheld the agreement to these tensions in the ukraine. One of the country one of the companies is cogo group. For more on the crackdown, i am joined by rob, who works on our billionaires team in london. Who is this . . Why is theenko u. S. Going after him . A soviet military officer, his story is not atypical for more we see with a lot of these russian wealthy businessmen. He began working in st. Petersburg in the 1970s on nuclear power. As thered government minister of foreign trade, which is where he met Vladimir Putin. Men have known each other since the early 1990s. Founded a judo club that Vladimir Putin is a part of. He is down about 3 billion this year because russians were had by the sanctions. Oddly enough, yesterdays fortune rose. There is a legitimate question about how it will affect the sanctions. My first question is where does that actually come from . A big chunk of a commodities trading operation based in switzerland that he founded with another billionaire partner. So, he has about 5 million in cash after the sale of that. The second largest amount of gas. Roduced after the asked laws smaller assets along with a chemical producer. Him . At is the effect on more importantly, what is the effect on Vladimir Putin . That really does remain to be seen. The Treasury Department claims the Vladimir Putin himself is a part owner or has access to the that this guy sold out of. But the government obviously adamantly denies that. I mean, there has been speculation about Vladimir Putin, his actual wealth, sources have told us that it is probably not on paper anywhere. What with the options be . Is there legal ramifications to subvert these . Way, if there are assets in the west where the accounts can be frozen, if the company is based in luxembourg that involve a part of the eu. If the apples are frozen, he does this access to them. The question then is what will the counterreaction to that be . So much. You we appreciate you shedding light on the u. S. Sanctions on russia. That wraps it up for today. Tomorrow, eddie lew will bring you an exclusive interview with some of the biggest players in as cable industry, as well the ceo of cox communications. A great show tomorrow at 8 a. M. Eastern. It is 56 minutes past the hour, meaning that Bloomberg Television is on the markets. We are 30 minutes into the start of u. S. Trading, just minutes before we get to read on consumer confidence. Right now u. S. Stocks are rising for a second day, the dow industrials gaining 94 points. Had case schiller home price index this morning under what was estimated, lagging. Right out of the bear market right now, it continues to drive a lot of the trading right now because of the momentum selloff. Despite the recent selloff, our next guest says that they are presenting themselves. Joining us is the head of tech Center Equity research at s p capital iq. How are you . Good, thanks. When you look at the recent talk from march 5 and you saw the selloff, is that the correction, the shakeout that people were looking for . Have been ad completion on the correction, although there is a lot of uncertainty related to that at this point. Nonetheless we will obviously take a look at the market through the prism of the s p 500. What you see is since march 5 the s p 500 is down slightly. The Technology Sector is down less than two percent. But some of the internet sub industry is down anywhere between 14 and 20 with individual names that i think a lot of your viewers and listeners are very familiar with , down 20 or more in some cases. Been doing isve actually seeing those declines in stock prices to some extent as opportunities. In the last week or so we have upgraded facebook to buy from hold and pandora as well. We have also seen names that we , like forive on example, twitter, we took that stock up to a hold from a cell. So, we are seeing the declines in these names presenting some opportunities and giving folks the opportunity to perhaps be less negative than they once were. What about amazon . I know you dont cover the stock, per se, but it got hit pretty hard. Investors have become immune to what they do, squeezing their margaret squeezing their margins for a small profit. What does the negative reception tell you about the investors and their willingness and patients with amazon . That is a great case study of where we are in the market right now. Last year was a banner year for amazon shares. That name has been covered by another analyst. A cell opinion on amazon for the last couple of months. Under 300, it is kind of interesting, it is kind of the for investors not being forgiving regarding that cohort. Very quickly, we have seen a lot of dealmaking lately. One dollar trillion announced globally this year, mainly in the pharmaceutical sector. Are we going to see that weing to technology . Have definitely seen a number of highprofile technology deals just this year. Is pending,atsapp oculus, all those deals over 2 billion, we think it dealmaking will continue to be a major theme as Technology Companies has substantial Balance Sheets and are looking for growth opportunities. Thank you so much, Scott Kessler joining us this morning. We are on the markets once again in 30 minutes. Market makers editions is a special of Market Makers, with erik schatzkers and stephanie ruhle. Once again, stephanie and i globale at the milken conference here at the beverly