Transcripts For BLOOMBERG Market Makers 20131206

We have a lot to talk about. As we wrap up this week. We had so many days apart that we lost our group. We need to get our synchronization back. We will start with the news feed. This is the top is the stories around the world. Eddie lambert is spinning off lands end. He has been selling off sears shares. End has been called the jewel in their crown. It does not make much money. They made 1. 6 billion last year. Another struggling retailer, j. C. Penney says the sec has asked for information about its finances. Septemberrk sales in and is attempting to turn around shareholders. By 30 eighthares percent. And it is the latest escalation and holiday shopping. Kohls Department Stores will keep their stores open for 100 hours straight from december 20 until christmas eve. They operate almost 1200 stores nationwide. I hope you are not there. Hopefully you will be wrapped up by then. We have a report on jobs. According to the jobs report out a few minutes ago, unemployment dropped to a fiveyear low. It dropped to 3 10 of one percent to seven percent. Michael mckee has been going through the report. You are always the man with the real deal. When number were you expecting . I had to 20, so i was pretty close. What were you thinking . We are all within the realm of reality here. I have to start off you asked what number i was looking at. I was wrong. I said at 8 00 that i did not nk the report would not matter all that much. We knew it would go down. It went down by so much with such a big increase in the Labor Force Participation rate you have to take it seriously. If you look at three digits, take the number out to three digits, it did not just go down. It went down to 7. 02 . That would take almost nothing for us to get into the sixes in the december report. So, we could start the year with unemployment below seven percent. June, ben bernanke said we expected to be finished with tapering. It definitely brings forward the idea of a fed taper. I am for it i do not think there is time for it in december. If this number signals that we are closer to a taper, one would think that the market would not hike up. It is always difficult to determine what is going on. Maybe what you have is the ideal situation. That officials have said they are looking for this. The market believes that the economy is ready to take over for them. Instead of propping up earnings with the stimulus, you get more people spending more money. It is a smooth handoff. That may to say, but be what is behind the thinking today. It is hard to tell what is going on in the bond market. Maybe some shortselling. You are not seeing a big pop in Interest Rates. You may see it the same way that your pricing the economy. Does it surprise you that volumes are low . Usually we see a big push. Could it be that it is december and people are wrapped up for the year . That is certainly possible. You do not want to take a chance. We are up for the year. Nothing has been more volatile than the unemployment report. Maybe people did not make huge bets this time. They are all looking to get out of town on friday. I am not looking to get out of town. We have two hours of great tv to do. Michael mckee, hank you for joining us. We want to turn our attention to the labor department. They say 3. 6 million workers were paid at or below the minimum wage of seven dollars 7. 25 last year. President obama is calling for a hike to about 10 per hour. That is what he calls a broad growth agenda. Airport workers and fast food workers and to nurse assistants and retail salespeople who work their tails off. They are still living at or are above poverty. That is why it is well past the time to raise a minimum wage that in real terms right now is lower fast food workers in 100 cities across the country made a strike yesterday. They earn about nine dollars per hour. They want the minimum increased to 15 per hour. I want to bring in Columbia University professor who focuses on labor inequality issues. I want to start with you. Restaurant workers are calling for 15 per hour. Dont they run the risk that mcdonalds or wendys will cut the workforce . That is the myth. We have plenty of studies recently that show there are negligible employment effects when you raise the minimum wage. When you think about it, take the current employees 7. 25 per hour. A big mac is three dollars. They could actually buy more big macs with the money. It would benefit mcdonalds as a company. They would not be working full time. All americans should work hard. Youre still living in poverty at the minimum wage. It is some economics. They are the consumers as well as the employees. They would consume more and create more demand for the very product that they sell. I think that makes a lot of sense. It certainly will hurt my margins. We probably would see an increase in demand. There is no question that labor for restaurants is about one third of the cost. If youre going to increase wages, you will see some impact on margins. Offsettingbe some piece of it. The balance between those remains to be seen. What about the other components . Productivity and pricing. Topf you are thinking about line, you certainly have quantity that people buy. You have the pricing. What we have seen historically is that it is more about commodities, as opposed to wages. When we have seen and put prices go up, there is a balance. The consumer absorbs some of that. Consumers companies absorbs some of that. What were talking about is where that tradeoff is. Is it hard to lower margins . That is the argument. Costco makes a lot of money and they say that they that people are not as inclined to leave. The training cost goes down. Retention costs go down. What were talking about its efficiency wage. They pay more than the market so that they keep people. If everyones wage goes up, we will have less of that argument. You still have the turnover that does happen at low wages. Said, i think we are also talking about the customer base. For some of them, they are by and march the same as the worker base. That is the opportunity, potentially. There is a recent study that says that lowwage industries the companies that pay a higher minimum wage experience lower turnover. They get some cost savings. And, if the price is passed to the customer, those ferry workers will actually buy more goods act into the business. It is Good Business as well is good for the workers. You do not think you cover these restaurants. Startedalds tomorrow paying their employees 15 per hour would you have a buy on them . Lets look at this from the standpoint of what we see when Commodity Prices rise. Everybody has the same cost increase. What you are really talking about is relative performance between them. Again, it does not help the top line. When you see some inflation, that is good for the restaurant. They can have some of that past price passed through. Theemains to be seen what next benefit or cost will be. The margins would go down. Mention aboutuld wendys and mcdonalds is that they are franchised. It is their franchisee to bear most of these cost. The companies themselves might not have as much of an impact. It is good for top and that is good for restaurants. Is there a danger in confusing the impact . People obsess over the impact on employment. From a restaurant point of view, it is not really so much about the restaurant company. They do not care really about the impact that has a national employment. They just care whether they make money or not. They can pass those costs onto consumers. They can past the cost onto mcdonalds consumers . They spent their lives with the dollar menu. They cannot suddenly offer and 11 big mac. People go because of the value meal. The people that go there are the people that work there. They are the minimum wage workers of the world. If they got a raise, they could purchase more burgers. It would benefit the workers and also the companies. Another the lit layer and that is the taxpayers. Study shows that fast food workers actually rely on public benefits. Come out oft taxpayer dollars, they would not have a problem with that. Because we subsidize the cost of low wages, it actually hurts all of us. Does that mean that we are effectively subsidizing the bottom line of the Fast Food Companies as well . Thehen i think about different companies, they have different customer bases. Low income a very customer base, you probably would say mcdonalds trader joes can pay their employees more. Theytle, starbucks pay higher wages because their customers can pay more. It depends which company we are talking about. There is some insulation versus franchised and company operated. I think that when we think about the dynamics, you have to think about it as company specific. Like i said, i think in the end you probably stay the company does not absorb it all. Probably be a combination of price increases and lower margins. Thank you very much for joining us. You specialize in labor and equality issues. A professor at Columbia University. And our analyst on restaurants. Willen we come back, we speak on the legacy of nelson mandela. He changed more than a country, he changed culture. Today, we remember the life and the legacy of nelson mandela. He became a symbol of revolution and triumph over racial segregation. With us to talk about the contributions and achievements of his greatest south africas greatest son is the director of the Africa Division of the human rights watch. Good to be here. When we think about the contributions that he made to the world, is there concern that we could see this reversed in some way. He is such a symbol. What happens to that symbol now that he is no longer here . I would like to say that this is a tremendous loss. For the whole world. He was obviously such a great leader. Millions across the world will mourn his loss. It is also a time to be reminded of the great legacy he has left us. Ands such a High Standard challenged that he has set for the next generation. Indeed, for leaders in general. What could happen to his Political Party . Many people vote with that party simply because he is a member. Could they be in risk that they will lose support now that he is not there . It is difficult to say. It is true that south africa today is not the south africa he hoped it would become. It has made significant strides, but it remains to face some serious challenges. Both in protection of political and social, as well as rights. South africa continues to face challenges in respecting and protecting rights for its citizens. Given how much he achieved, why is that the case . It is a difficult question. I think that the next generation haveaders will have failed to live up to the standards that he said. They really have to continue to be inspired and live up to the challenge. What is the biggest obstacle . Is a corruption . South africa faces a very competent challenge. Corruption is one of them. It is also political commitment to deal with the problems domestic and internationally. In terms of promoting human rights, it goes beyond the borders. The next generation of leaders have a huge task to live up to that biggest, highest standard. The struggle for freedom and equality. When you think about political will and commitment, there is no greater symbol the nelson mandela. Without him, what does that mean . Who could be the next force . I am sure and i believe that we will continue to have great leaders. Nelson mandela has very difficult shoes to fill. South africa continues to produce leaders who could live up to those standards. It is a good example of democracy. It continues to face a serious challenge and is expected to rise to those challenges. Just how much progress can a country like south africa make when whites on average make six times more than blacks in the country . They have better access to education, medical care, housing. The list goes on. That is the very depressing reality. Inequality, poverty, lack of access for all south africans. That is still there. That is why it is a deeply disturbing conflict that they face. The new generation of leaders will address this. Is the government doing anything about this in your mind . Has madevernment efforts, but they have not lived up to the expectations. Lots of talk and no action . Of talk, but lot not sufficient political will or commitment to address the challenges head on. What is the missing link . What needs to happen . There requires political will and commitment and action. Talk about what is practical. If theres one thing that the government could do, where should they focus their effort . When you think of political will. There is not someone greater than nelson mandela. It makes one feel listless that that symbol is not here. There has to be an action plan. It is true. He is not there, but his legacy will continue to live. It should continue to inspire and challenge a new generation of leaders. Corruptionies have and to deal with attacks. Treatmenting with the of my country. Theres police brutality. There are challenges we see on a daytoday basis. Leaders like to see taking some concrete actions on those problems. These are problems for you to take some action to change it. It always seems impossible until it gets done. Things can get significantly better. Thank you so much for joining us. Theel is the director of African Division of human rights watch. When we come back, at t gives in to pressure from a small arrival. You can now get mobilephone Service Without a contract. We will explain. We continue after the break. We are approaching 26 after the hour. Time for a quick check on the markets. The s p 500 is having its best day in almost a month. Is the taper of good thing . Apparently so. It looks like we might get that sooner than we thought. We will be back in two minutes. Live from bloomberg headquarters in new york, this is market makers, with Erik Schatzker and stephanie ruhle. Welcome back. And washington, budget negotiators will work for the weekend trying to cut a deal to avoid an new Government Shutdown in new year. They avoiding tough issues, but in even in narrow agreement is coming under fire. Peter cook has more on the state of play. More gridlock or finally some dealmaking . How legitimate is it . You are particularly fatigued over this. Dealmaking, but is small dealmaking. Negotiators are getting close. Patty murray and paul ryan are on the path to a deal. They still have differences here. The bigger question is, can whatever agreement these to come up with pass muster with their collective colleagues . They will be at it this weekend and communicating with their staffs. The deadline is next friday, december 13. The real deadline is january 15. That is when the government runs out of money. ,he key component of the deal is that spending levels will replace the automatic spending cuts. Other areas and some new revenue would not involve any tax increases or major entitlement reforms. None of those bigticket items. Even the smaller deal is proving to be a challenge right now. It just seems like every thought that we have had on this set says that we have to have entitlement reform. If those issues are not on the table, what is the point of this . The only point is to provide some certainty in the short term. There is a case that we made here, a lot of people are skeptical of. If they can reach the smaller deal in one or two years, maybe that gives a comfort zone or some opportunity to strike a larger deal. They will not cut a grand bargain. Certainly with the election coming up, no way they wont mess with entitlements. If that is the case, then a anll deal loan may be option. At least something they could build off of. How do you think the tea party will build on this . They will not like some things in this. There are some things in here that not everyone likes. There talking about an aviation can security fee. That is one issue. It, but ao not like lot of conservatives and democrats think that is not the right way to approach it. They are talking about tightening entitlement programs. Democrats, particularly locally, do not like that. They are also talking about the democrats wanting to extend unemployment benefits. That will be about 25 million. Nancy pelosi said this would be a deal killer. She backed off of that a little bit. With this jobs report, there will be questions. Is it necessary to extend those again . That just makes me wonder, how much hard work has to be done on the democratic side . The easy conclusion to jump to is that paul ryan has to get the tea party on board. Patty murray has her work cut out for her. She does. It is notable that paul ryan met with the Study Committee yesterday. Heed to bring with him will get most of the republican congress. Democrats here are not happy about some aspects. Federal workers are at big issue. Unemployment is a big issue. Will they get those votes. At the end of the day, the sense i get is that they will get a deal. It could be announced next week. Thank you so much for joining us. Peter cook, our chief washington correspondent. Back, at t jumps on the no contract bandwagon. All you need is to own your own mobilephone. That is next. You are watching bloomberg tv. We are streaming live on your phone, tablet, and bloomberg. Com. You are watching market makers. A new ceo takes over at Time Warner Cable next month. He has worked his way up to chief operating officer. Decision may be to sell Time Warner Cable and find his way out of a job. Unless his current job doesnt first. Rob gave us the next lucid interview this week. He comes to us from San Francisco this morning. He does not strike me as the worlds most modest man. He thinks he is the right guy for this job. There is no doubt about that. He came right out and told me, i do not mean to be in modest, but i am the guy for this situation. For those who have not been following this, time warner has been a speculative target for charter communications. They are the fourth largest u. S. Cable company. In recent weeks, because charter has been out there with their bid to acquire Time Warner Cable, comcast the largest company, and cox, the Third Largest company, has said lets take a look at this. Time warner has a roach to both of those companies. There was mutual interest. Definitely charter is the most aggressive, but it is a us willon where rob marc probably be juggling potential buyers. He has a background in an and eight. M a. Guy toks he is the right get maximum value for Time Warner Cable if you decide to sell. That brings me to the question. What signal is he trying to send by saying things like i am the perfect guy to manage the m a component out there . Is he saying i am the guy to get the right price or that this company is on the table and you have to negotiate with me . One thing he is not saying is that this company is not for sale. He easily could say that. The fact that he is not saying that means that it is for sale. The idea is that you have to negotiate and i will get the highest price pop possible. Market, nod and at premium for the deal, at market price rob is saying that will not cut it. Youll have to offer premium to get this deal done. What makes this a curious situation is that Time Warner Cables stock has gone up so much in the past few months that a lot of the premium is it makes it more difficult when the stock is trading higher. It is around 130 per share. It is not attractive anymore. The things that he told you struck me. None more than this. A direct quote if i want another job, i will get one. I have no doubt and it will be a good one. What message is he trying to send their . Had notdea is that he come out and said anything about whether he is dead set on running this company. It is an odd situation for him. He himself called it weird. He is taking over on january 1. Even if he did not want to, the company is up for sale. Turners trying to buy it, either in a friendly way or hostile way. Will noting that he let his own vision as a ceo stand in the way. Do not think that for one second, because it is my time, it will maximize it will stop me from maximizing value. If the deal comes along that i find attractive, do not worry about me. He gets a 50 million plus payout package. He will be ok. I was going to say, not going to be too painful for him if that happens. Thank you very much. A great interview with the incoming ceo. That is down San Francisco. A 50 million payout package. He does not need to worry about his cell phone bills. At t is taking on tmobile with a new contract free pricing plan. It is designed to save customers money on their monthly bill. The question is, what is behind this Pricing Strategy . Im going to bring in john butler. He is an analyst here at bloomberg. It makes meat this, think, are we entering into a mobile price war . We are. 2014 is the year where the gloves come off. Particularly, we sell bank buying sprint. They have a history in japan of winning a from large incumbents. They do aggressive pricing. Tmobile kind of beat them to the punch. Plan, 2. 5k at their gigabits per month. You bring your own phone to the plan and you pay 60 per month. At t just went from 95 to 80. The elephant blanks. I am not sure if linked hard enough. That they dol here not want to be subsidizing new phones . There is something inappropriate one. Subsidizing the phones has been very hard on carrier margins. They would like to see the subsidies go away. We have seen the advent of these new plants where you can finance your phone over a twoyear. Period. You can say i won a monthto month contract. There are a lot of different options. The characters are getting away from that subsidy model very slowlyo my but surely. Are they doing it to attract a demographic . It seems like a spring move. It is kind of a sprint move. They have been aggressive in price. The type of company that does customer that they are attracting away from at t has single, possibly unemployed, unmarried not on a family plan. The gains by tmobile have been tremendous. It really has rattled at t. I want to talk about apple. They had struck a deal with china mobile. What is your take on that . That is the report. Nothing is official. If it is true, it is big for apple. Why . They have lost so much share in china. Their upgrades recently have been meaningless to the chinese. The chinese have an older, three g data network. Apple has been upgrading to and it is nots compelling enough for people to step up and say more pay more. We have seen more vendors in that we have never heard of, come in and win a lot of share from apple. This could be a big deal. China mobile is the largest mobile carrier in the world. It could give them a great lay and run in. Apple wins again. Thank you so much for joining us. Our own Senior Analyst at Bloomberg Industries. When we come back, secrets of the allstar money managers. We have the next steps for next year. That is next. Stay with us. All come back. Have gotten a stronger than expected jobs report this morning, but as long as wages do not pick up, the economy is stuck in second year. Revisit the to golden age of the 1950s. Even Eric Schatzker was not born yet. Our own scarlet fu is here to highlight some of the most iconic brands. Keene . The research . Tom he left that era. Marketing reached a new fever pitch. A couple of the companies are still around. Dunkin donuts is among them. That is very much a northeast coast grand. It is only making its foray into california now. Dunkin donuts is there, sonic the burger and shake place. It was around in the 50s . Itsnd Guitar Center made start. Trader joes . It was actually called pronto markets originally. Switched gears to make it more affordable. He stopped he stopped the room with these shirts. What has really become the most iconic brands . A lot of brands have really a vault. Like the Williams Sonoma story. It was begun by a Building Contractor named chuck williams. He went to paris and discovered omelette pans that you could not find the united states. He opened his own store in california. It sounds really highend. I love my vita mix. Eric loves his. You love your souffle pan. Now withre struggling the other retailers. They have fallen victim to show rimming. Rimming. Rooming. Other retailers are selling the same things for cheaper. Thank you so much. A walk down memory lane. Meantime, the stock market is on a tear in 2013. The bull run continues today. Will it continue next year . If it does not, where the will investors put their money . They reveal the best bets for making big toe in the latest edition of the magazine. Julie hyman is here with more. Lets start with john burbank. Big beard we have to talk about why we want to know why he thinks. He has a 19 annual average. So, he had a valuation. He thinks that tec has been underappreciated. He lives in San Francisco. Certainly some areas of text do not suffer from being underappreciated. He thinks that internet firms in the u. S. He thinks that china, because of protect japan because of the peculiarities of the culture. He says that health care is trickier. There will be advantages from obamacare. There will the hospital payouts that could be a risk. He also likes gold. He tends to come back to gold. The price could rally 20 to 30 in 2014. Still stuck. Another guy from fidelity they do not talk very often. He manages a biotech firm over there. He is looking down. He says to beware of the bubble. I am into that headshot there. He says there is a risk of a bubble. He says to target drugs. A lot of them are targeted to a specific population. People do not have a choice. The drug will treat a particular illness. It is not something that people can rip off. He talks about writing the innovators. Also, profits from generics. That is the other big theme. You know me. I am a fixed income junkie. Eric likes to call me credit girl. I am a bond girl. To get you a need superhero costume. One big font manager. To someone who used to manage the bond fund. Back a fewage going years or so. She says that there is no fixed income sector. Just illustrating the challenges in fixed income right now. If there is an area, she likes telecom. There has been a lot of consolidation there. She likes investment rates. They are just so tight at this point. You might like them, but if you are managing insurance money, you might like those sec theres. You might like the names, but where will i get returns . That is why she says there is no table by. She also says, no suppress, stay away from treasuries. If anyone isnow talking about filing its treasuries. Thank you very much. Three picks if you well. Lets look at what is happening right now. We are approaching 56 past the hour. It is time for on the markets. We will give you a snapshot is what is happening with the broad indices. Stocks are having their best day in months. They are up 8 10 of a percent. Same thing with the dow. People are very encouraged by the job numbers. That is totally counterintuitive. Every piece of data that we have seen has caused the market to go down. Investors jump to the conclusion. Said wouldt the taper faster. I do not want to talk to anyone. I want to go by individual names. Sears is actually rising. The division i like most lands end. Eddie lampert has not had a good year. Back in a few minutes. We will be talking about the ebay that you have never seen before. We will talk about how they became a technological giant. Click the big pension fund that is not been shy the big pension fund that is not done shy. A link to the new town, Connecticut School shooting. And disrupting the weight loss industry with an app that does a lot more than count calories. Click from bubble to bust to boom. Any commerce giant has seen it all in silicon valley. We will show you ebay by the numbers. Makerswatching market everybody. It is 11 00 on a friday here in new york city. In just a few minutes we will break down the world of fitness. Until then, we got to get to the newsfeed, the top business stories from around the world. We have not seen unemployment is low in five years. The economy has 2003000 jobs added last month. 200 thousand three the economy has 200,000 jobs added last month. More than estimated. And hedge funds are headed for year for the s p 500 since 2005. Bloomberg crunched the numbers and found the average hedge fund return just over seven percent through the end of october. That is 22 Percentage Points less than the s p 500 returns. It is the fifth year in a row hedge funds have underperformed. And dont forget, they charged two and 20. And shinzo abe has increased tensions with china over the controversial air zone. They stepped out for in exclusive shinzo abe stepped out for an exclusive interview. Because there are issues, all the more i think there is a need to have a meeting by the heads of state. I always keep my door open for a dialogue and i hope china will adopt the same dance. That is my hope. Vice president joe biden, who is traveling in asia this week, urged japan and china to set up Crisis Management mitigation. Lands and has been called the jewel in sears crown, but it has been a hidden one. Buried deep inside the retailing mess that lost 1. 6 billion last year. And searsfund manager ceo adam lambert is giving the crown jewels away. Lampert, julie, he had to disclose the numbers. Not so much of a jewel. That can be used to describe sears, but landon is not is worse than it might be thought. Overall, going back to 2008 compared to 2012, a little bit of a decline. From 1. 66 billion in 2008 to 1. 09 billion last year. Not too bad. But if you look at the net income, or even dock, the insured gets a lot worse. Ebitda, the picture gets a lot worse. A Bloomberg Industries retail analyst says it likely has to do with promotion in, something we have seen. Too much promotion in . Too much. The interesting thing about this spinoff is that they would spin off these businesses to get some cash and help liquidity. They are not getting cash. Because these businesses are not strong enough. No, what they are doing is the people who on who own sears shares currently will get lands end shares. There are no sails, no cash proceeds. Eddie lampert will own 40 of lands end, just like they own 40 of sears. But presumably, the shareholders will be more happy with that been selling lands end. If you sell that, it generates 200 million that goes into sears. And its a blackhole. At least this is transparent. Theyre going to spin off his business and concentrate on the core business. With what . That is the problem. You have craftsmen and the auto business, which sears has also said it is considering spinning off. That is the crux of the problem. There have been estimates in terms of the auto business. Your next guest, i believe, had said it was worth up to about 600 million. At the core business, no one can seem to figure it out. 27 straight quarters of same store sales declines. Astonishing declines. Everyone says there is value in the real estate, but what is the value and what is lampert going to do with the . With it . In ourso want to bring guest from california, Mary Ross Gilbert, joining us from imperial capital. She recommends sears as an underperformed and has the lowest price target on the street of 19. Welcome. One of the issues could be too many promotions. Isnt this a problem that so many retailers face cap at this point, we are addicted to promotions. Many of us simply do not do our shopping into we get them. How do you deal with that as a retailer . That is right. When you look at their results or recently, they have been impacted by promotional activity. That is what we saw last year and even in the Previous Year with lands end. And to a certain extent, year to date. The revenues in the first half of the year that they reported in this filing, the store sales were down 11 . But 82 of the business is e commerce catalog. That is a relative metric. The key in looking at lands end today, there are two key points. One is, if you look at the financial results, now that we see them, they are significantly less than what most investors or analysts would have estimated. Our most recent estimate, which we think is very aggressive was seeing that the revenues were over 2 billion and may have over 200 ebitda million. Revenues at one point, as you pointed out. 1. 56 billion. Is that a problem when you have a company like sears and there is so much ok city opacity when it comes to businesses like lands end . Why is it doing so much worse than people thought . Isnt that a problem . It is, in that some ways as much disclosure as there is, it is still very much like a black box. Yes, youre right. You have to come up with that estimate and youre not sure what those numbers are going to be. A previous estimate in a report published a year ago, we were closer to what the numbers are today. We had 150 million of even dock but the point is the valuation on the stock prices we are using, we are using one point 7 billion. If you look at where the margins are and a moderate performance of this company, you would say it should not trade more than seven times or eight times ebitda. So you are saying it is really worth less than 1 billion. We are talking about what the course of action should have been for lands end. Would it have been better as a spinoff . Or should have Eddie Lampert sold it, assuming he could have found a buyer . Thehis more transparent cap more transparent . I think they may have tried to sell the business. We do not know. But there appears to be an attempt to sell the business and they may not have been getting the price they wanted. Who would be the kind of candidate to buy them . First of all, you have private equity, and then you have strategic. Those that have been doing a good job of taking them in and growing them. It comes down to price, though. You had given a an estimate of 660 million in prices for the auto. Is that called into question as well . Should sears be able to sell that business . It is hard to say. Once again, we dont really have those numbers. One other key point you mentioned earlier is the fact that this is being spun off to shareholders and there is no cash coming into sears. The final capitalization has not been determined. They may decide to raise debt ahead of the spinoff as a way to bring cash into sears. This is something they did with sears hometown. The amount of cash they brought in through sears through debt was about 100 million dollars. Here, they raised about up to 300 million. I would not want to see them raise more than that because you dont want this company saddled with debt as a standalone entity. Lets get back to the idea of the core business. The company said, we are spinning this tough off to concentrate on the core business. What is sears core business . Who is the core customer . And how after all this time is lanford going to improve that business . Is it possible . It certainly doesnt look that way when you look at the financial performance. Once you strip out lands end and any other potential spinoffs, including sears auto center, and the other entity that has not been mentioned in the last order or press release, that is, they talked earlier in the year about monetizing their protection agreement business. Now we have heard nothing. Right, the warranty business. Because that has not been discussed, maybe they determine they could not sell it, or they could not get the price they wanted and he did not make sense. The point is that what you have left, they are very unprofitable. What we think happened, though, is that they sort of alluded to this. They may be closing some sears stores, maybe after the fourth quarter, and focus on the e Commerce Platform with the smaller stores. That is something we may be looking forward to in early 2014. Thank you very much. That is Mary Ross Gilbert of imperial capital. When we come back, inside ebay all day long here on bloomberg. You will see the ecommerce giant like you have never seen it before. And it is friday, everybody. Is. She she is an entrepreneur. Graduated from high school. Oh, i got it. Class ofht 1982. That is all our producers are providing us. Because it tweet it, howard he have it. There are so few extort very woman in the business, it is there are so few extraordinary women in the business, it is easy to spot who that is. It is time now for some bloomberg west top tech and media headlines. Apple is making it easier for you to stop shop inside technologyes, designed to send you messages about products and events tailored to where you are inside the store. Of course, you have to give apple permission to track you. Spotify lands to offer free service for mobile devices, going head to head with pandora and itunes radio. Will allowvice spotify to attract more listeners, who eventually might become paying customers. Genetic Testing Company 23 and me is giving up the fight for now. It is complying with the fda order to stop selling Health Related genetic sequencing kits they are being evaluated by regulators. They have not the fda says they have not demonstrated that the technology is backed by sound science. It says it will still provide ancestry related information and raw genetic a that without interpretation. All day today bloomberg west is taking you inside ebay. It has survived and thrived through the dotcom bubble and the aftermath. Just how big is the Business Today . Emily chang has the numbers behind ebay. Ebay, the global ecommerce and Payment Company with more in 331,000 employees countries around the world, driving three different businesses. There is the online marketplace, where 124 million active users buy, sell, or bid on more than 500 million items. In the u. S. Alone, a flatscreen screen tv is sold every six minutes. Sunglasses, a pair every 18 seconds. 300 62 pieces of clothing, shoes, or accessories are sold just on mobile devices. Then there is pay paul paypal. Payments 129 million times last quarter, more than the population of the u. S. , south america, and australia combined. Finally, ebay enterprise, helping technology through touch screen walls and mobile payments through mode more than 500 of the biggest brands among likely buy, mattel, and sony. All of it adding up to more than 14 billion in revenue for ebay last year. And emily is at ebay headquarters in san jose. Right now, i am one of those ebay chums that still thinks its an auction site. When you sit down with the ceo today, is that what youre going to talk about . The people like me who think you just go there to bid on stuff . X we are going to talk about that. A lot of people we are going to talk about that. A lot of people are just like you. Ebay wants to be thought of as much more than that, and in fact, they are much more. They have doubled the number of customers on their site. They have 70 merchandise at a fixed price. And 30 is auctioned off will stop auctioned off. 75 are new items. There is a huge perception problem. Ebay wants to be seen, more like amazon and that respect. They are a company that you can go to and just by just about any and by just about anything you want. It is not just online, but also offline commerce. We have to go to where the shoppers are and where they want to be. One of the interesting, more innovative things they are doing is connected glass. They are putting, basically, web windows in the front of storefronts. In the windows of stores like toms to the shoe store, and sony. You can just surf around and at the store is closed, you can still buy something from that store. It is an early stages. That is something ebay is doing to capture shoppers, wherever they are, online or offline. You will be talking to the guy, marcus, who runs paypal. It faces a lot of competitive challenges. Kulig google wallet, for example wants to compete. There are all kinds of Payment Solutions and digital wallet Type Solutions that offer real alternatives to a market that paypal had pretty much locked up just a few years ago. And paypal still has that market locked up. It is by far the king. But it is an incredibly lands incredibly competitive landscape. We will be talking with david marcus on everything they are doing to try to capture the majority of the market. They just made a huge acquisition of braintree, 800 million. And i also want to mention ebay now. I have to say, it is incredible knowingly get the Better Weather out here on the west coast. Today, 35 degrees. And i think it is 48 degrees where you are in new york. I will order a pair of gloves and they will order deliver it to me here on the set within an hour. This is the same Day Delivery Service through ebay. But not by drone. No, but we will see what kinds of surprises ebay has in store for us today. Thank you so much. Keeping the promise, that is what a giant pension fund wants a private equity firm to do. It all has to do with guns and a tragedy at an Elementary School almost a year ago in connecticut. We will have that for you next. Welcome back. The president of venezuela has sent troops into the streets and clamped down on the press. There was a heavy military and Police Presence this week. His Voting Machines were sent to polling places. He is not up for reelection, but the opposition called a referendum on his leadership. In recent weeks, he has used the military to enforce price cuts and sees an irish phone company says was overcharging. Opponents say it wont hide the reality that venezuela is coping with blackouts, violence, and the fastest inflation in the world. That is todays latin america report. Approaching 26 past the hour. It is time for bloomberg to take you on the markets. Why dont you started off . It is the christmas season. Im going to look at the green. Individual stocks has something to do with the jobs numbers we saw earlier this morning. Jobless rate falling to seven percent. Lookingff legally even possibly even looking at something then month with fed tapering. With fed tapering. Down has been down, but today it is up three percent. The forecast for 2014 is where they have disappointed. It has minimized down side potentially leaving room for upside. It found that a lot of analyst speak to me. Yesterday, ericsson destined suggestedlard eric he had Dollar General for my christmas gift. They were downgraded by sterne agee. Shares are still up nearly 10 since june. The codehink they sell im hoping for, but i still think you should check them out. Driving ame back, wedge between Cerberus Capital and one of its big investors. That story next right here on market makers. It is friday. Time to play the europe again. She is an entrepreneur that graduated from high school in trials, South Carolina in 1982. That is all we are telling you. It has been almost a year since the connecticut Elementary School massacre. Following the newtown tragedy, private equity firm Cerberus Capital management said it would sell its gun making division, which makes the rifle used to sell kill 26 people that day. So far, no sale. Investment officer for the California Teachers Union billion 26 million invested with cerberus. We have talked about this before. It has to do with the type of Corporate Governance that calpers exercises over its investments. Are you troubled thus far that we have not seen a sale of the gun making division of server is as intended . Good morning. I would say that we are deeply disappointed. Cerberus has made an honest effort and tried, but it has been a tough year for them and it is difficult always to sell a company. In this environment, even harder. Hang on. Clearly, cerberus has some obligations to investors like callisters. And it has many other partners who are counting on cerberus to generate an adequate return on its investments. But if it comes out and said, we are going to sell this thing, it sounds as though they are going to get rid of it, which is to say not necessarily selling it at the best price. Have a simply not been able to find a buyer at any price . Or are they trying to maximize the return and get out of this . Which to me, in the scam and the environment, might make it a bit of a tough sale. It a bit ofght make a tough sale in this environment. You hit the head on the nail. I have lots of investors. They are trying to do the right thing, which is to liquidate the company, but they have to do it for the right price and find the right buyer. They have found some people very interested in the company. But in this industry, this is a fairly big company. Tois not an easy company liquidate. What if they cannot sell . Will you pull out your money . Cerberus, i think they will be able to sell it. Obviously, the environment, it has been a brutal year. Government regulation for half the year took some time away. We will look at all of our options. We have been in regular dialogue with cerberus. When i was in your studio last month, i met with them face to face. I will meet with them face to face again in a couple of weeks. Are you putting a deadline on it . No, you know, in private equity, you cannot have a hard deadline. We recognize the economy is variable. Wes company has baggage and have to take this into consideration. Sooner would always be read or better than later, but we must engage. We have not lost our resolve. A lot of others in america have changed their point of view on this issue. We have not lost our resolve that they ought to liquidate the company. The Freedom Group may have some baggage, specifically in connection with the newtown slayings. But every gunmaker kind of has the same baggage. Im having trouble finding understanding why cerberus has not been able to find a buyer. Doubled was an almost last year. The stock is up for smith and wesson almost doubled last year. The. Bash the stock is up 40 this year. Im not an industry expert, but this company is bigger than smith wesson and others. It is a fairly big company. And it is an interesting private equity target. It has been a complex area. I think, within this industry there are not that many strategic buyers. You have to look at financial buyers, and then hopefully maybe a defense contractor or somebody larger to step in. Do with those big gains, are you willing to put principle over profit . Ive had that question from some other people. This company is going to be worth what it is when they sell it. Whilee to recognize that public Companies Might have gone up in value, private companies, to us, the value has not changed. We do not know what it is until they sell the company. But it raises tough questions for investors like you am a to 70s point. Stephanies to point. When do you say to cerberus, just get rid of it. I dont care what you get for it . Say to cerberus, just get rid of it, i dont care what you get for it . To many teachers, so we have to look for it to perform. We will be encouraging them to sell it. We will look at all our options. Cerberus knows that. We are evaluating all of our investments with them. But they cover a lot of other partners that have very different points of view. There are a lot of split points of view on this issue. It is highly emotional for people. With what you have heard from cerberus, the company has tried to sell it. The firm has not responded to us. That. Wanted to establish we will be taking a short break. We will be back with the chief Investment Officer at callisters calstrs. Welcome back. Im stephanie ruhle. We are back with the chief Investment Officer with the california state teachers retirement system. It has 175 billion under management. Earlier this morning, we got the job number and it has me thinking about information we get from the fed and how important it is. It was back in may at a public press conference ben bernanke laid out a roadmap, and basically said we get to seven percent unemployment, we will be done tapering. Here we are at seven percent and we have not even begun. As an investor, have you given up on information you get from the fed and you simply do not believe it anymore . No, stephanie, i still believe in the fed. But then is retiring and now we have to listen to janet yellen. As i told you in the studio, i think they need to start tapering, at least, and this number helps confirm that. The market is very worried about it. Downuld be nice to drop it just to 75 billion or 70 billion. Just at least to start the process. Chris, just because you tapering has to happen, and because you told us you are reluctant at the very least, or careful about how you will allocate money next year, what happens if we do not get the taper . What will you do to your portfolio . I presume if it doesnt happen and stocks continue to rise, we are looking at one big risky situation. I pushback on that view that stocks will continue to rise. Unless we get a pe expansion. Corporate earnings are pretty much maxed out. Companies have squeezed as much as they can. I think we will run into two easy money for too long. Easy money for too long. When he to get back to normal Interest Rates and a normal Federal Reserve where they have the full toolkit. I know you are not a traitor, exactly, but an investor. But ander per se, investor. Many are concerned about triggering a decline because investors jumped at what is on the table. One would have to jump to that conclusion today. For once, good news is actually good news. Afterthink the market, being sold off for a few days and being weak, it lacks the structure of the unemployment number, lax consumer sentiment. Things are not as dour as people thought. We have a basis of a good economy. That is what people have been saying for two years. Doesnt really need to have this five percent selloff that people are predicting. It could happen, but i think the market will just trade in a range for the next couple of weeks. And you are not seeing any bubbles brewing . I have to tell you, stephanie, im concerned that eric will go to Dollar General for your gift. Me, too. But i am worried about this lose money. The fed needs to come back so they can taper and it back to a normal Interest Rate environment. That shoulda market trade with a positive tone next year, but not up 30 . Before we let you go, it a big decision in detroit this last week. The city will be under bankruptcy protection. What are the implications for an organization like calstrs . A lot of it has to do with pension benefits, and you run pension money in california, not in michigan. Thanks for correcting that, yes. It is something on the periphery, something everyone will be watching. Going to take years after this goes through detroit, and in michigan. Ultimately, this will probably go up to the supreme court. Counties, es, keep in mind, cities dont have a provision for bankruptcy. Complex issue, but something employers and employees need to understand. What their legal rights are and what they need to understand. Theres about 600 million invested in cerberus. The size of the entire portfolio is about 21 billion. Im sorry about that, chris. Again for joining us. Thank you. Merry christmas to you if we do not catch up to you before the 25th. When we come back, you do not need a personal trainer to tell you, no pain, no gain. Now your smart phone can do all of that. Welcome back. Im stephanie ruhle. Disrupting the 50 billion weight loss industry. Guest ishat our next doing. How echo it is easy as it is easy how . It is as easy as cooking a few buttons on your smart phone. We are joined by the cofounder and coceo of the mobile app. Noom. Everyone in the newsroom is wearing something related to fitness. You have a different app. What is so special . What do you do . Makes weight loss apps that are easy to use and fun. We focus on our come outcome, and we do that by creating coaching. Having motivation and guidance for your workout and diet. Are much better outcomes. We are doing it across the ios and android. Forms. We are bringing the android platforms. We are bringing the elements together. Is Weight Watchers your competitor . It seems as if Weight Watchers owns this space. But i dont think of Weight Watchers as tech. Weight watchers is our biggest competitor. The only have about five percent of this 60 billion market. It is a really fragmented market. We think it is perfect for disruption. Because technology has not been playing a big part of it, in contrast to other things like fitness. Segment has not been disrupted yet. The basic version of your app is free, right . Like that is right. That is right. But this is different than other fitness apps out there. They ask you to sign up for a onetime fee, one dollar 90 nine cents, 5. 99. What is more expensive and do you offer people to join a group, much like Weight Watchers, but it is a virtual group. What do you do . We offer people to join a group, much like Weight Watchers, but it is a virtual group. Areother people supporting you and there is coaching built into the system. The group is providing the Motivational Foundation for you to follow the program we are providing. But my fitness has that. I have my other friends on their postop we shame one another as to how many steps we are taking. If it is weight loss, many other conditions can benefit from more anonymous groups. Much like Weight Watchers, where you do not necessarily become friends. It is the conference of weight loss plan supplemented by the group. It is very much like Weight Watchers. Weight watchers has a program you are following, and with people you are doing it together with. What are the prices . There is the free tier, and nintendo is a month. And then 10 a month. 10 a month is not insignificant. That is 120 a year. Yelp is free, and it is user supported. And it is supported by a user network for stop user network. People get better results with our program. How much would you pay to lose 10 pounds . What are you measuring that against . How do you know they get better results when they pay for a program versus getting it for free e we have done testing and we have seen that financial commitment helps keep you going. It is kind of like buying a very expensive treadmill where you will go and go. If you think about it, just for the price of a few coffees you are getting a full, compress the plan. How laborintensive is your business . We are launching the app every week. We Just Launched the iphone app yesterday. Theres a ton of development work, and we feel like we are just getting started. There are a lot of things to spend money on. And when you pay, you go. When you pay and you dont go, you feel guilty. Good luck. Congratulations. New years resolution, if you have a weight loss resolution, call this guy. Thank you very much. It is friday. It is time to play the yearbook game. Here she is, an entrepreneur who graduated from high school from charleston, South Carolina in 1982. Who is she . The need to wrap up with our friday yearbook game. I know who this entrepreneur is, class of 1982. From South Carolina and now the coowner of 85 broad. It is the one and only missed sallie krawcheck. I guess the same. I get credit. There are not enough extraordinary women in finance. Entrepreneur, which in theory is a much bigger pool, right . Yes, but the amount of guys that are a little bit overweight in their 60s with white hair, there is an infinite amount. Give props to chris gomez who tweeted us with the right answer. Way to go. That is it for market market makers. Tune in monday, because we will be talking to the guy running the new american airlines. Of american and us airways. Im going to blackrock. Youll hear from the Ceo Larry Fink and the other firms top executives the other top executives and money managers. On thefor now, heading market. Scarlet fu has more. But for us, we are saying adios. Have a great weekend. Largest farms equipment manufacturer has been underperforming all this year. It has seen its first drop in annual earnings in 2009. Our guest, alan nachman, seizes us an opportunity to buy. How are you playing this one now . Are positioned for the longterm. This is a stock that has been a dog. Between 80trading 86 for almost six months now. To get someing upside momentum. That nearterm target of that six dollar range up to 92. The way am looking to play it within in the money call for june. It is going to cost less than theto break even on its and stock substitution strategy is about 1. 50 offer more we are right now. We are using the same power of having an in the money option, with less risk. John deere announced an 8 billion stock buyback on december 4. The stock did not get back past that 92 level. Excuse me, 86 level. Why would it do that now . It did come back and said that channel. Over a time frame, im looking for it to do that. The stock is only at 53 as opposed to the s p. I would rather be buying a laggard. If you look at caterpillar, they are very dependent upon farming income and what is happening out of china as far as the Global Growth story. China has come back. It is up off its lows. And farm prices have come down to low levels, but we are coming into a time of year where people start looking toward next year. What will green prices be next year . There is more upside. Theres always price shop potential. A whole crop could have a major impact on the farming community. And the wealth effect that the farmers feel when prices are high. Why june . Why not sooner or later . The breakeven auction ended up being a couple dollars higher. I want to break even about a dollar 50 away from where we are right now. 1. 50 away from where we are right now. Again, with an option, you risk half of what you weigh in. Either the market is going the other way or you are running out of time as it loses half of its premium. Taking theoes option down below five, or if the stock goes below 80 again. June 50 call of 10 or less. We are back on the market in 30 minutes. A stock market is gaining today after a betterthanexpected jobs report. We will check in with lunch money up next with adam johnson. Money. Go to lunch i am adam johnson. Nelson mandela is a name recognized all over the world and will likely written in the history books for generations. A Freedom Fighter who emerged to revolutionize a country in south africa. As you know, he died last night. He was 95 years old. A free man taking his first steps. From prisoner to president , Nelson Mandelas 1990 release from