Transcripts For BLOOMBERG Market Makers 20140121

The successes you have, we have had a one where the productivity has doubled, that gives you a believe to keep trying. With the private money, you have the luxury that you can experiment and see what works. If it does not work, you can move on. You can do a lot of things with private money. My daughter works with a group in their interest is low education and that sort of in. Did not have private money, we have the old masters. It is the private moneys that through history have been willing to try new things and have an instinct that something will work. They cannot prove it but are willing to make that bet. Are good personal friends. You will be heading off to africa. Bill, you have been to africa. Umerous times what advice do you have four m . What do you think he should see their . There . Getting down to see the projects is exciting. Good seeingll feel the death rate is the is down. The citiesthe people need a lot of help. Drawn and more and more of our philanthropy help these companies. Per dr. People there are places with no roads. If you need an operation, you just die. We have been training people to do appendectomy is, relatively simple operations. With a little help working, we will not cure everything and be able to do open heart surgery. But you can make a few things which can make an enormous difference. What do you hope to see and accomplish their . Organization i am participating in is a group of cities that focus on climate change. They all have the same problems and may have to educate and protect and improve the health of people. All through africa and latin america. Asia and europe and america. We all have similar problems. Some of them involve different diseases. You do not have to go very far from white with that right where we are sitting. Just look at the terrible tragedy taking place in haiti. The world pledged all this money and they are still there with diseases i thought were eradicated. And not having the ability to be in charge of their own destiny and feed their families. We have to get together and do things about it. Many people watching the interview are big and myers of your work. I am curious who you admire. We learn from each other. We are both early members of the pledge for a lot of threat philanthropists who share mistakes. Are people like george soros, who has done very innovative work. Maybe the most amazing are the people out in the field whos been big parts of their life in africa taking these tools we held back. You have to separate peoples political interest from the willingness to help. There are some, soros is clearly a liberal. The Koch Brothers are very conservative. Moneyave given enormous to hospitals. You say, give them credit for that. Yes. You do not have to agree with every everybody does. All deserve credit. An awful lot of people. A lot of people are not millionaires and they write small text or give their time small checks or give their time. They try to improve the health of everybody and they deserve an enormous amount of credit. Tos maybe that needs and what youre talking about with misperceptions. Some people feel their lives have not improved. How can they care about the problems youre talking about . The question is, are you willing to spend less than one percent on saving lives for a few thousand dollars per life. The european governments tend to be twice as generation on these eight issues as the United States. A good example, the u. K. Making increases. It is a political decision. And a lack cynicism of understanding that good things are happening out there, the voters will not be willing. Recently, in the budget polio got an extra 50 million per year. Some progress made on something where we have very clear targets. Case, by 2018, completely eradicating the disease. It is very selfserving. If you cure a disease elsewhere, youre not likely to catch the disease. A world where diseases can spread very easily, we want stability around the world, it is selfserving because our safety depends on a world that does not start wars and there is a compassionate part of this. We have an obligation to stop genocide. Come back to right where we start with the interview. Things are better. We can make a difference. You will not cure everything overnight or ever. To sit back and say, it is hopeless, that is not true. The better educated people do not overpopulate the world. A lot of poor people have a lot of kids because they do not think they will survive and there will not be a breadwinner down the road to take care of them. Everybody is healthier, it leads to a more rational world and lets us deal with real problems. People know you and know your work as a philanthropist, but they also know you as the founder of microsoft and you are still the chairman of that company. On a dayed are you today basis with microsoft . The board is doing important work right now. The foundation is the biggest part of my time. Help asrttime work to a board member. A how involved are you with search for the new chief executive. The board is working on that. Nothing new to say. It is a good lord. Do you feel a sense of urgency at all . Yes. You always feel that way. You want to pick the best person. They will move at the right pace. We have the fortune of having the mayor come back to this company. We are very happy to have them back. Has that ever hit your vision in to future of ever going back microsoft fulltime . Class my fulltime work will be the foundation for the rest of my life. Do it in depth. I will not change that. Out parttime. In the 12 years you have been in office, technology has changed radically. Ears are following the footsteps of the gates. Give me your take on the state of technology. Technology is a tool. The bases has really not change. Education and business and philanthropy is still about people looking each other in the eye and listening to each other and you have to be very careful not to think technology will do everything for you. Ethics matter. Competency. The education of our kids is the most important thing. Enormous changes in the job prospects for people at every level. Some will not lead us down the very severe problems. Nevertheless, the first and most important thing is every kid getting a good education. World, theys of the understand that. America, we do not seem to. To be in a top 10 and now we are lucky to be in the top 30. Does not bode well for our future. Get away from the partisan stuff if start devoting resources were going to have a future. Training our young people, particularly in computer science, that there is not enough training there. Yes. We think it is incredibly important, education. Create been willing to controversy, saying lets help futures be better and try out new approaches. Prettytus quo is unsatisfactory. Technology will help to the motivated learner. How do you create motivation broadly echo is mostly a human doblem helping the teacher it as best as possible. What you think, about the Technology Industry now and how you see them . The rate of innovation is faster than than ever. Understanding speech and vision. Screenshigh resolution that will be on your wall. Weree in a fantastic time finding and understanding information will get a lot better. It leads to productivity. We can assimilate things so new Product Design and innovation can go faster. We see it in biology, understanding complex systems and what drugs should be tried out. Im a great believer that whether it is helping the poorest or helping the Global Technology can solve a lot of. Let me go back and look at a few years ago. Has been done. Ng in the next two or three years, we will improve technology more in theat was done beginning of inventing electricity today. Is nosruption, there industry that will not have to adjust and change. Some will do it successfully and some will not. Some people will have better jobs and someone have to find ways to make sure they are included. It is not just an american problem. It is a problem around the world. Particularly where an awful lot is taking place. Cheaper and better products. Find better ways to get everyone involved. Thank you for joining us. You forll gates, thank sitting with us on this rare but exclusive interview. Stay with Bloomberg Television throughout the day to see more. Theecial Market Makers with bank of america ceo starting right now. Live from the World Economic forum, this is ace a shill edition of Market Makers. Good morning. Good afternoon. You are watching Market Makers. Take a moment. You just got a chance to watch Mike Bloomberg and bill gates. Here we are in switzerland, about to take you on an extraordinary ride with Extraordinary People eric look where we are and look who we have got with us. The ceo of bank of america with us. You make this track every year. Thank you for joining us. People need to understand why it is important for one to be here. What do people like you need to accomplish . Come to learn. If you think about the range of topics we talked about, the range of information from all the different participants, we have to learn what is going on in up to their country and industry. It is important. The other thing uniquely for banking, the chance of all institutions across the world to withogether in a room policymakers and others and have a dialog. The dialog has changed over the last years. That is important. The third is seeing how client was interesting to clients. Lisa together with other bank ceos and say, but they were my stock is trading, or will you think about the other conversation being had over and over, the income inequality. Bankers are the least popular guys in the room. Class that is the dichotomy in the room. E have an obligation in the United States, we engage in everything we do, our Small Business lending is up 25 year overyear. Our mortgage lending was up. Our credit cards are up here we are trying to participate, but the economy has to grow in fundamental ways. You have both of those issues. And liquidity. Everyone of us has work to do. On the other hand, we talk a lot about the role in the fundamental economies and how we help growth and how we support the exchange and other information. And all of that progress your bank has made and that other banks have made, you just need to look at the income statement of the Balance Sheet to see it. Why do people like the president of the new york fed still say respectike bankers lack ms sphase this perception problem, the trust issue the banks continue to have . In our company, we focus on everythingo correctly the right way for the right reasons. We started on a journey i talked about many times. To startive years ago, to simplify the company. If you sit down and say, what is the purpose of the financial institution, it is to help our clients live their lives. Weve done everything we can. As we continue the compliance and risk infrastructure we have been building on an investing in heavily, you will not find those types of a repeat. We are in the process of heating one of the things you have to do is what the regulators do and what prosecutors do. Of thet the worst mortgage litigation and settlement is behind the v. A. Do you still feel the same way . Yes. Because we were deep into this early on, fannie mae and freddie mac, we settled down with a private label mitigation. We did that 2. 5 years ago. There is a lot to be done. Still uncertainties. We deal with those as they,. What we were able to and had to to clean theart Company Currently did a lot of work and it cost us a lot of money. Some of the numbers and talk about, we have spent. What inning where we end. Was late and diamond is paying, i will pay it. What inning are you in . If you asked me that question a couple years ago the want to just say you look at fundamental cases and what we settled and closed off, we have done a lot of work. But it cost a lot of money. We bill the best capital ratios in the u. S. Industry. The changes over seven percent last quarter. More importantly during all that, and that is the thing that is sometimes hard to keep people focused on, is the underlying is this making progress. Whether it is the market share of cards, we have been driving that. Now, a couple years ago, we talked about a backpack and carry all the weight. Later, weght gets should sprint ahead. Before we talk about other businesses, people see numbers like 17 billion. Brian will have to write a 17 billion check. That is a big checkbook. When you saw jamie dimon have to write it 13 billion check, would you say oh, or, i know what that feels like . The similarities between companies have to be sorted out by casebycase. Been working this and we have a lot of experience. You have to take it apart case bycase and brick by brick. Risk, look at the putback you talked a lot about that. He largely settled out substantial parts of that. We understand your mass shooting messaging clients. How are you paying them money while at the same time doing Small Business lending and that is what we are focusing on. How do you satisfy the big dogs . You look at our talent and capabilities, we have very different businesses and conversations. We always own the businesses. Nothing new. What is whether it is financial or Investment Bankers, we have maintained the talent for growth. It is what we get paid to do. There is nothing that makes people feel better about the work they are doing then a stock price moving in the right direction. A great run in 2013 but your bank so trades at a discount relative to other banks. To correct theke valuation disparity e is it humbly a matter of returning more capital to shareholders . Class if you look in 2012, we had 100 plus returns. Mrs. On a big market cap. Large amounts of movement. When the street without people estimate, it is getting to the orange sp. Earn back to the normalized earnings level we talked about. Each year, we put more things behind us. Discount comehe down. A lot of it has come down but you will see it come out as we make the earnings number more what were supposed to learn. Would side of the bank . Which side of the bank . A businesslike massmarket consumer, general retail business, that is tougher. You look at Investment Banking fees, the last quarter was one of a record high levels. Recordrevenues and profit margins. We look across all businesses. There is always ends and flows. The trading business is more muted. You look at the consumer businesses, they have been doubling their income. How tough will it be to the tapering of quantitative easing . I challenge or opportunity . It is an opportunity, but we saw a pretty substantial move in rates. Some will talk about that, to go , it is a doubling of race since late last summer. People are anticipating what the , but our job is to be in the middle and help people find liquidity. In the Fourth Quarter, we made money on every trading day effort to were three. You go back and that has been true. It is a client business. You have got proprietary trading. Activity, that is what you see in flows. Patriots didgland not win but bank of america did. Thank you for taking time out just as things are getting roller here. Thank you. Some have said is not just bankers here. So many other thought leaders, scientists and technologists. There may be a time when they can tell the American Banking story again. People want to hope so. It is tough. Because you have got the trust issue we have talked about. Do you think these issues we will hear about tomorrow, from paul singer, talking about the rights for gays and lesbians the is, howca, the question much of a role do all the participants want to play in that conversation and how well does it reflect on them at the end of the day . Does the conversation turned the channel for americans to realize it is the banks that feel the economy and banks that and getSmall Businesses the engine going. You have ceos and corporations doing well. We need the rest of america to do well. Bankat is not a matter of alone can solve. We will dart that conversation. Be back with you in just a few. You do that. To todays Global Outlook in new york. Fourthquarter sales beat analyst estimates today. Bey also warned 2014 could hurt by slowing growth in the emerging markets. Revenue. Ny gets paul coleman also warned that demand in developed countries like the u. S. Is stagnating. Homan said he is still bullish on those countries but sees and improving Consumer Market in the u. S. There is a lot of expiration and consumers are trading up. You get significant amounts of people entering the middle class every year and that feels out growth in emerging markets. Organization is a trend that requires exchange. Andumers have to downsize that changes that behavior. We have different strategies for different regions. Shares are trading higher in london by one point one percent. We are approaching 26 minutes past the hour and it is time to go on the markets. U. S. Stocks are starting this week with gains. The s p 500 advancing for the first time in three days. Raising its Global Growth forecast to 3. 7 up from an earlier prediction, given back in october. The Industrial Zone is lagging a bit behind. Ae nasdaq is holding up by third of one percent. Much more coming up. We will be heading back but we will also talk about washington wanting a piece of bitcoin. That is coming up. Keep it right here on Bloomberg Television. Live from the World Economic , switzerland, this is a special edition of Market Makers. Welcome back. It is not just eric and i, we have a whole team of program does reporters, producers, and our own tom keene is here with us. You just arrived from zurich. How many times have you been here . Five or six times. What you have to look for ward to . Profound,e is doing everyone is transformational. If you do not say word with four syllables, you are not important. Everyone is going to go narrow. Everybody is thinking strategically, and i would suggest that maybe a tactical , when are wedavos going to do about risk of not etc. Why is narrow better than broad . Would they leave the World Economic forum this year with a commitment to doing something, rather than just say we agree on what the problem is . Big thinkers, big talkers. Technological progress. Angelo hasd come over, and swung back to what are you going to do . That is why they are doing it like brianpeople moynihan. Former bankial by a of america employee, called f or the love of money, talking about the gross overpayment on wall street, and why does that make sense anymore. I think that is going to be the theme here, not just the takeaway. Push against it. I would think that the compensation battle, new york is winning it right now rated right now. Rld in the continental world, they are talking about caps on london. People to make money tg want to make money. It is ok to make money if you do a social improvement, and pay your taxes. Are they giving 10 of their income away . Quietly they are. Im highly dubious. The problem that this place has is a problem that Charles Schwab articulated to me yesterday. On the other one hand he has his hand outstripped outstretched asking corporate sponsors for hundreds of millions of dollars. The same time using those of you who are giving me all of the joe about start doing some good. Dough, start doing some good. You nailed it on the head. Going back to the evolution of davos, at the end of the day, you can do both very those that cant bring do both. It. E fat cats can do can the fat cats get the chubby gittins kittens to do it . Chubby kittens . Can we get the greater community, the people who still pay one percent, to give away the dollars, because people hate bankers. I agree that the wall street divide is still great. But there is a dialog as rumored cover as we recover, where bb they will talk. We are getting along that path that they described. We are nowhere near where we need to be. He is here to talk about social change. Some people here, hopefully most, maybe all can agree on a few things. Singer, all of the getting together tomorrow to raise awareness for the plight of gains and lesbians worldwide. There has been a lot of progress in america, but look at what is going on in sochi. They want to lift the middle finger at russia and say, this is ridiculous. With the unrest mtf, this could be the back story as we get to friday. Keiv. Only the davos understand the significance. This white badge means that tonkin is as important as eating figures tom keene is as important as he thinks he is. The saw a huge ad, all touchyfeely, that could be s int aside by protest russia, and hereby by mr. Dan loeb and mr. Singer. Just this morning we heard reported that he is taking a stake in active chemical. Really . Indeed. The ceo is here. Cans this a time when a ceo say that an activist investor that has done a lot of things right, i could sit with them and say what can we do to improve . Side ofhat he is on one the mountain and i am on the other . This is a significant shift, where ceos are paying the exorbitant fee to come here. To me that would not be unimaginable. If youre the ceo of the dow chemical, you might say this i is gunning to get me knocked out. What do you do in that situation . Year. Has been a slow a stormy year. If you look back far enough, stock prices have not wedged. Theres been a lot of volatility between now and then, but stock is nowhere it was i cannot remember the exact date. This is not the bad for the World Economic forum, this is the badge to get into the piano bars. All you need is your boat w tie. Now getting involved in dow chemical does not mean it ,s going to push out management it is made based it just means a difference in the stock price. She has become a media celebrity like matt damon. Instagram video of two helicopters just above the tv studio, one was not a man one wasmie dimon matt damon, and one was jamie dimon. People know tom is the host of bloomberg surveillance, but he is really an instagram aficionado. Its funny. Onyou should follow him twitter, instagram, facebook, whatever you like. We will be covering inside davos all week. You and your chubby kittens. From switzerland, later this week, the uranium president is going to be right here in davos for the first time in his 10 years. Is to drum up investment in iran. They have been crushed by academic sanctions led by the United States, supported by the united nations. Our middle east editor is with us. Give us the view from the middle east . What are they thinking when they see him going to the World Economic forum, and what to the gauge is his chances . What probability do they give them to what he would call success . Here in israel you will not find a huge number of people wishing him a lot of good luck with that mission to davos. Beenu say, a ron has crushed economically by sanctions. They know they have agreed to freeze the most sensitive part of the uranium reduction, as a temporary and reversible sanctions load is lifted. Precious metals, restrictions on those will be lifted immediately. But what will other business will they be queuing up to get into iran wants those sanctions are lifted . According to a Bloomberg Global poll, less than one third of Business Leaders recommend that iran will be a viable place to invest in. To davos, hegoes may have a bit of a tough sell on his hands. Perhaps, at the same time that rouhani will be here, or perhaps just ahead of his visit, his foreign minister is going to be across the country at lake geneva trying to let me correct myself, im not clear if the iranians are going to take place in this. Peace talks or not, but they are syrian pay stocks east talks that will be digging place at lake nguyegeneva. Is there room for some cognitive dissonance . What are the expectations heading into that meeting . They are low at the moment. Iran was at the last minute invited by the United States nations, and then uninvited. Iran is not at those peace talks. There are meant to be held at geneva, but there is a big watch industry shindig about which is important to switzerland, 10 of the economy. The peace talks are archly starting out in a nearby town. We have the first facetoface meeting between but share al assad and theer al opposition heads. More than 2 million refugees have been created by having to flee syria as a result of that civil war. The very fact that the u opposition and assad are talking is progress. Whether they will be able to reach any form of agreement, there is doubt about that. Thank you. Stephanie, elliott mentioned that theres not a whole lot of support for rouhani here. The israeli Prime Ministers also going to be here, it will create some interesting possibilities. There is so much security i do not think they will run into each other walking up and down. I think they would only meet if their limousines have a collision. Talk about the restraint and , it reallyf davos speaks to the importance of this week. All of these people coming together, there has to be some common goal. We will bee back, speaking about regulating bitcoin, washington wants a piece of the virtual currency. Youre watching a very special edition of Market Makers, live from davos, switzerland. Welcome back to Market Makers. Were here at the World Economic forum in davos. Towill take you for a moment washington dc because it is not just matt miller anymore, our Nations Capital is coming down with a case of bitcoin fever. Regulators and lawmakers have been looking at whether there need to be rules to regulate the digital currency. The cofounder of one of those bitpay is withed our peter cook. Thank you. Good to see you. Think you for the time. Let me ask you first about your business and how it has grown. You all are very involved. How many transactions were you involved with last year, and how your business is going in the last three years . We get about 100 million worth of bitcoin transaction. In 2012 we get about 3 million. How many of them were in the United States . We have now surpassed 20,000 merchants, 25 of those are in the United States for 25 or in europe, and then the rest are scattered around the world. Right is coming to bitpay now to process these transactions . To goes the most ispelling use for Bitcoin International transactions. They see the highest rate of credit card fraud, and we saw the target a in the news recently. A camry they can eliminate that fraud problem. E merchant into that cost eat that cost. That is the most compelling segment of the industry. Is the target story an opportunity for bitcoin . I went through a thought exercise a few years ago about how do you solve the credit card fraud problem . I concluded that you would end up reinventing bitcoin. I do think bitcoin has a lot of there is a lot of things to talk about. Theres also a lot to talk some in terms of risks, washington do not understand at all that well and think it could be a threat. They look at the opportunity for people to use bitcoin for nefarious purposes. What you think about regulation coming down the pipe . I think theyre taking the wait and see approach. Lets see where the problems are before you rush out and try to introduce new regulations. In the long term, would you will need to do is not regulated bitcoin itself, but how people use it and how Companies Use it. You might start to apply some of the regulations that use he applied to the breaking industry that you apply to the banking industry. Good. Larity would be very are you optimistic right now . Do you think washington is taking the right approach . Thus far, yes. What about the volatility question . We saw what happened with china and the value of bitcoin afterword after they were concerned about the banks. What should we take away . Bitcoin is very volatile committed and it will be so pretty much for the foreseeable future. One thing he provides his feet away to it provides is to take away that from the local merchants. They can set their prices in dollars and get settled in dollars, and never have to hold bitcoin or touch it and it is just a secure payment method. The foreseeable future . No big threat out there right now. An optimistic outlook for bitcoin and bitpay for now. Back to davos. Thank you. It is warming d. C. , i am freezing here. Mped to be here. A warning conversation coming up. Serra and john students key will be here together. It is approaching 56 minutes past the hour, so it is time for bloomberg to go on the markets. We keeping our eyes on shares of dow chemical, rising to the 2007. T since theyre calling for a stock buyback is enough business to create rising. Fourthquarter profits beat analyst estimates, and johnson a demandingiting new drugs, but it is down a few points. That is why the dow industrials down a few points as well. 1. 3 , and ibm is poised to sell its server business. We will be back in a moment in davos. Them alive from the World Economic forum in doubles, switzerland in. Close, switzerland. Switzerland. Here we are. I am stephanie ruhle. I am erik schatzker. Monahan, the ceo of bank of america was sitting here. The turn of the worlds topperforming hedge fund managers. Great to see you again. Do you think we put brian holt Brian Monahan in the hot seat . This man put them in the hot seat. One of the things we talked to brian about was this idea that thinkers come here to do something. He said they come here to learn. You are investing financials. Your main fund was up 60 last year. If anyone knows of the bankers need to do it is you. Places is one of the few where it is a real economy and real industry and together government and regulators can sit down and speak to gather with ash and speak together about financial institutes. Here you have every ceo of industrials, making everything from steel to chemical to prep to chemical to transportation. They are represented by government officials. What i think is unique is ultimately a bank is nothing else but intermediate team. Mediating to Fund Economic growth. Ermediating to Fund Economic growth. Theive years after financial crisis, how important is trust . The surveys continue to show the banks are the least trusted industry in the world. Take the bank of america for example. The old bank of america, compared to the new bank of america, is a completely different institution. Are becoming the everymans bank. A beautiful thing for investors and society at large. There are two different models. That is the old way of doing banking. Management used to teach used to take packages. Finally, the returns are lower. We need to dwell on this for just a moment. This is from an investors point of view. It is a beautiful thing. Look at the s p 500. You are an apple, you are a google. Suddenly you have it priced at 15 times. You can have less earnings. This happens for Morgan Stanley. Morgan stanley has a five percent today. If valuation are tangible. Made profits profit out of fixed income trading. From Morgan Stanley. You wanted to be a rich man. If you were to start your career today, would you knock on Morgan Stanleys door . , of course. Institution, morgan ownley has 50 of their earnings come out of Asset Management and brokerage. The remaining 40 comes out of the advisory and running into the business, which is often into mediating growth off of global firms. Business, principal which is less in real hedge funds. People are taking risks on opposition inflation and credit market. There is a consequence of taking risk down. Theres less revenue to pay people. It is Morgan Stanley and the Investment Bank or Goldman Sachs. Taken thatll compensation ratio down to about 35 of revenue. How much lower can it go . On every metric they tend to be one of the most leveraged banks today. , what a bank does is it is like shrinking. What is happening is people inside the institution will do have to be paid less because of the revenue line is shrinking. Profitable in the new regulatory environment. Regulation and financials can only go one way. The Morgan Stanley lawyer will get paid 2. 5 times more. The financial industry is becoming a utility. Tariffs will be lower, it will be less money. It will be more stable, which means peopleat will have to be paid less. Tried tells this is the golden age of wall street. What is it from your perspective . My will tell you this, industrial views whether it blackstone or anything capital has an advantage. Probably invest between 100 and 120. That is the big difference. The reason that is so many people is because they gear under business. They gear it up 15 times. What happens is our business is somehow are simpler and more stable. That is why you are thinking why you are seeing banks retreating. They are focusing back. They will probably be less profitable but earnings will be higher. Dividends,able, paid and just become normal. I just want to be sure we get that right, no funky business. Is there still too much Monkey Business . We will know the answer i september or october. European banks this year have a quality review. It is done not by local regulators. It is an effort to bring europe together. You need to have certainty of the quality of the books. Lets walk through the banks. On the subject of Deutsche Bank, he is under a lot of pressure. Will they survive until september . A quarter does not say much. Bankey issue is deutsche has been reinvested over the last six to 12 months. Clearly something went wrong. Task forhe real there are lots of european banks. We shall see. At the end of the day we need to wake. Gonenational bank has through the institution. You will see foreign banks dashzing youll see a that will be interesting. We will probably get the reality and will have an answer. Are you longrun Deutsche Bank . We are not. Break laste go to week you were not long on Goldman Sachs group how about today . We are not. No goldman, no dont think. No Deutsche Bank. In europe, if we like the institution we are long. E are long on bnp in the u. S. , the one we own our blackstone, and you mentioned two things we need to talk about when we come back. He is staying here. Joining us in just a moment, judge six and ski just doesnt ski from blackstone. Studzinski from blackstone. You are interested and enthusiastic about it for different reasons. John the, you have prude to be a great prediction maker. Your crystal ball is almost flawless in its capacity. That quantitative easing in japan was going to get the japanese to start taking risk, behaving differently, doing different things. They did the deal with sprint. Do we see it all played out or is there much more to come . You have an economy that is basically plateaued in terms of population. Government that is providing funding to corporations, up to one percent. And you have a lot of companies that are very confident. It is what i call competitive and mende. They want to not only compete with the americans but they want to be the dominant investor in asia. Can they be . The Trading Companies are interesting. There are four or five Trading Companies. They are focused on energy, infrastructure, and certain aspects of telecommunications. They are very communicative. I would not underestimate them. I would also think they are being very disciplined about how they go about it. Value have been in japan recently, have you seen a transformation in the way the japanese think . Total transformation. Off to meeting with the ceos of Financial Institutions was equal to despair. Andcan make up any numbers eight it is worse due to deflation. Basically every time you are behind. The average dollar yen for the last 30 years is 1. 30. No more, no less. This is providing a massive stimulus inside japan to invest domestically and outside. I met the chairman of different institutions. The first time i will tell all my employees that we are raising salary by 1. 5 . The guy was basically crying. It means a massive change. It is one of the top four largest banks. And they have not raised salaries in 21 years . Doesnt that sound crazy . They peaked. If you look at the long growth, law month long growth has low for the past 20 years. The Prime Minister has asked the Large International company to raise salary by 23 . I think it is a fascinating exercise with the help of Monetary Policy and structural reform. Event. Is a global why is it important for people to Pay Attention what is happening in japan . One of theill biggest economies on the world in the world. They have a track record for investing in north america. They are americas closest ally. Aboutake a longterm view we talk about employment and investment. The japanese are very discreet. They are going they are not going to stand up and lecture you about their strategy. To some extent they have had a lot more confidence evolving in the last two or three years. They are going to try to catch up those 10 in the last two or three years. , telecommunications, where they want to reestablish their brand as a global player. You believe theres an Economic Impact . I believe theres a sense of confidence. You have to be confident to be a good investor. You have to be fearless about certain things. I think the japanese and certain parts of europe are going to be very tactical about how they we invest capital, particularly outside of japan. How are you investing in japan . We think the curve can only stephen Going Forward. Can only stephen Going Forward can only steepen Going Forward. The costs are going down because economy is picking up. These companies own seven times earnings. We think they can still double. Megabanksmost of the and the capital life insurance. Is inspiring Japanese Companies to do all kinds of interesting things. The quantitative easing experiment in the United States is beginning to come to an end. Easing is good for dealmaking japan. Does the end of quantitative easing mean it is bad for dealmaking in america . From a japanese perspective or an American Perspective . From a numbers perspective. Volume was globally flat in north america. This year it is going to be up quite a lot. Your friends, the activists, are big catalysts. Of buildup focus, technology, i heard you talking about trust earlier. The industry that has the highest trust factor among investors and consumers is technology. They have boards that are more and more competent. They have to do acquisitions both from an offense of and defense of point of view. That is just the beginning of a much bigger wave of and mende cap of and mende activity. Later you said we are going to hear mario draghi speak. Witho you look at the two . The copy ought that you love all with the caveat that you love all italians. Libby put it this way, let me put it this way, when the financial crisis hit, americans devalued the dollar. The dollar went down. Is in orderppened to escape terminal velocity, they put gas on it. They ended up buying 50 of over a 10 year treasury. Astonishing. The patient is in Good Condition and is about to recover. That is how we see and mende. Cnn day see m a. Mario draghi had 27 of them. Achieve achieved almost the same results without handing a single year that without spending a single euro. Without spending a single euro. I want to get your answer on that when we come back from commercial break. Johnston did johnston said sky. John studzink coming up, winning the war against poverty. We are going to share some of that interview between our own Mike Bloomberg and bill gates. Of extraordinary philanthropist. Extraordinary philanthropist. We are approaching 26 minutes past the hour, that means it is time for bloomberg to go on the markets. We have seen the rally, or if there was much of a rally, though out on u. S. Stocks. The nasdaq hasnt changed but the s p 500 has turned lower, losing 2 10 of a percent. L industrials is moving almost three quarters of one percent. Dow industrials moving almost three quarters of one percent. Verizon shares are falling. The company just concluded its Conference Call and Fourth Quarter results. Even though half it beat analyst estimates, the story is subscribers are slowing down from the record. The company says it is studying options at competition from the likes of tmobile. Detail on theore verizon agreement to buy intel. Bloomberg has learned that verizon will pay less than 208 million to buy that business. People withrding to knowledge of the matter. We will continue to monitor shares and the overall markets on this tuesday morning. We will head back to eric and stephanie in. Close, switzerland. That is coming up next in. Close switzerland in d avos, swizterland. Live from the World Economic forum in doubles, switzerland in davos, switzerland. We are live in davos switzerland. Us is senior managing director of the blackstone john, johnston said ski studzinsky. 2013ear ago you told me would be the year of the activists. It would be pretty hard to dispute that assertion. It turned out to be a prediction. Lets talk about activism and how it has changed the game for investors, changed the game for financial markets, and more importantly, changed the game for companies and boards of directors. That is a long discussion. Years ago activists started to enter the scene. Two or three years ago they still were seen as cops and anders, privates cops robbers, pirates, the elephant in the room. The last two years has seen extraordinary transformation. Activists are now accepted as a standalone correct proper and really asked really classy asset class. Do you think what went on over the last year, you would clap you would characterize that as classy echo i am not talking about soap operas and the way the media likes to embellish this into the wall a house ofvalent of cards new jersey. Im thinking more about the fact that these activists spend 12 months doing thoughtful research. They think carefully about what they do. This is not some whim or they are throwing capital. It is really longterm investing. Now we have reached the point, as this has become a very established asset class, you can almost start grouping the activists into different types of activist behavior. There are some that are driven by Balance Sheet flaws or misuse of capital. Some are very focused on governance, some are focused on something as simple as undervaluation. Are focused on competent management. Are they encroaching on your business . , theyre putting real capital to risk and they are actually taking very strong views about how companies should be restructured. I know you have talked about the big headlines. They develop an investment thesis. It is normally very critical. The company pays attention to them. Them, isntignores very nice, then it is a whole series of other things that could happen. Who belongs in those buckets . It is hard to generalize but there are people who are very there are some activists that are very focused. He will say the stock is undervalued and the way the value to get up is to look at your Balance Sheet. I think he is in a class by himself. If you look at the number of and m a activists dan loeb is a very thoughtful activists. And confident. When he actually has to step up to the plate he doesnt. If looks at a business very carefully, looks for undervaluation, or looks for mismanagement. Then he goes forward. If you look at what is happening now with microsoft or what is these arewith apple, sometimes simple fixes were people are looking at a Balance Sheet. There are other activists that look for transformation. If you look at what bill ackman did with canadian pacific, i was about having a silver oldest in terms of having a new chief executive in place. In some cases it is interesting. A lot of activists are either going to change the management or do Something Else with respect to the Balance Sheet that will enhance value. There are a number of them. Rigorous year of activist activity. You called dan loeb thoughtful. Did you think it was thoughtful, not accidental, to find out this morning he is involved with chemical. Here we are in davos, switzerland. Is also here . Dow chemical. Is that part of a thoughtful strategy echo strategy . I would think that is considered until. That is coincidence all. L. Coincidencta i know enough about how astute dan is. He would probably have a conversation before this has been made public. I am not going to let you get away with saying the 2014 is going to be the same as 2013. Be . It going to think 2014 you are going to find , theres going to be a lot for theres going to be a lot more technology. You will see a year were there will be fairly large changes in the ownership of the media space. You have a lot of napoleons. You have a lot of concentrated media assets in three or four people. I think it will be a fairly restrict fairly aggressive restructuring. Sizes is important in media. These Companies Benefit from larger Balance Sheets. Allow themnce sheets to be more flexible. Many of them have strong leadership at the top. Apart from technology and activism, i think big scale media consolidation, similar to what you are starting to see with time warner cable, is likely to is there such a large leadership that there wont be smart mergers . Leadership is an interesting word. Conviction,an mean passion, it can mean the need to be in control, it can mean a number of things. Now. Can go home this is so exciting for me to be here. Thoughtful activism. . Ow can you get more thoughtful , thank you, john. Thank you very much. Is a global head of blackstone advisory partners. We are still here in davos skuta and in davos, switzerland. It is going to be the hottest wheels here in davos. There are a lot hotter rides out here. Makerswatching market special edition, davos. Welcome back to Market Makers. Coming to you live from davos, switzerland. The most expensive wheels here have a top speed of 12 miles per hour. Do not let that confuse you. Driving them are dangerous and it requires great skill. Hans nichols reports on what this sweet ride is. Them a high in the mountains in theavos high mountains above davos, after the skiers and snowboarders take peace bashers reclaim the mountain. More than half a Million Dollars each, these its groomed the slopes until they are smooth again. We go for 18 hours. You work all night . , all night. All night. You make it nice for them in the morning . Thats right. Sometimes it is 6 00 in the morning. A piece basher party. Preparee track monsters piste. Es of snow covered you go down the hill . Sometimes it stops. You have to make sure you dont tip over. Do you ever get lonely . You are up pure 16 hours a night. You go out you go out and take some snow interface in this some snow in your face and keep going. No schnapps . No alcohol. You thought it was going to be a chopper, maybe a for rory, no dice. That thing is here to make the slopes better. Not every big name in the industry is here in davos. Bill gates and our own Mike Bloomberg from bloomberg World Headquarters this morning in new york city to talk philanthropy. We will have the start of that exclusive conversation next. I am live in doubles, switzerland. Lets talk about bill gates, he is an entrepreneur, he knows that. He is a technology visionary. He also happens to be one of the greatest if not the greatest philanthropist. His foundation is saying by 2035 there will be almost no poor nations left in the world. Liu sat down with bill gates and Majority Shareholder of bloomberg lp, former new york city mayor michael bloomberg, our boss, to find out why key to so optimistic about the progress made fighting Global Property fighting global poverty. Think it is actually dangerous people are focusing on the bad and not seeing the progress we have made. It means they dont look at the best practices, it makes them less generous. We are raising poor countries done one is more to be if you dontre see that youre not going to participate in what we need to do. You say there will be no coronation by the time we reached 2035 . , almost none. A landlocked countries in africa, north korea doesnt change the government. It will be less than 10. When i was born almost all countries were poor. Now we are down to about a quarter of them. It we can makeon it really exceptional. Year aboutted last 100 million to the bill Gates Foundation to the fight to eradicate polio from this world. Do you share the same optimism . Not be in more agreement. Advocates sell them on to acknowledge success. They always have more to do, raise more money, be more important. I have always wanted to know this from you, you have had such a hughes a huge arsenal. How you pick the causes that you get behind . Inequity is help poor children dont get to grow up and achieve their potential. Simplythey die or they do not have enough food that their brain develops. Most of the money is going to that cause. There are things like new vaccines that will help the kids help those kids. The prediction is we can get t down to 1. 6 and match when you were mayor you had certain metrics by which you can measure the success. Not everything is going to work quickly so you have to have some patients. In thedo something scientific world and it turns out to be a failure, that in some senses a success because you do not have to go down that path again. You are labeled a failure. That is not the case. Knowing what you are doing, measuring it, and there are a lot of people around trying to apply metrics and in some cases you cant and in some cases you have to do it on faith. I am willing to make that bet. Wait a little while, give it the old college try. Dont walk away from it to quickly. Lot of different scientists so even if one approach fails, if it is an important problem we have three our we have had new seas were the farming product activity has doubled. You get to go out to the countries and actually meet the people who are growing more rights than they ever did before. Than they ever did before. You can watch the full on lunchion coming up money right here on Bloomberg Television. Watchis extraordinary to that conversation happened here in new york. George soros is known as one of the most extraordinary philanthropists in the world. Moneywait until all your compound. Give it when you are young when you can be active, just like we are seeing bill gates and Mike Bloomberg do. Hopefully this is going to be not just inspiration but really action for others. People like bloomberg, people like gates are inspirational. You will hill you will hear from lots of philanthropists. Tomorrow talking human rights and gay activism. Market makers from davos, switzerland. That is going to do it for Market Makers here today in davos, switzerland. Manyu are going to meet so great people tonight. Tomorrow we are going to share a whole parade of extraordinary ceos. Imax will have the ceo of and david rubenstein. All of them here tomorrow. Thank you for joining us tonight. It is still daylight, only 12 p. M. In new york. It is time for bloomberg to take you on the markets. You are about to be joined by a olivia sterns. It is time for todays options insights. Lulu lemon has been getting a down beating in the stock market. Allen not meant joins us now men the forum alan not Alan Knuckman joining us. The pants werent for everybody. They have had some issues with the product themselves. There are some extra transparent pants. Why do you think the stock is going to turn around . A lot of these issues were selfinflicted. I am looking for a rebound. Important point. It is the midpoint of the last five years. 40 is a lot to lean on. We are looking to hold on that. Im looking to buy an option and have some staying power and wait for a bit of a turnover. I am looking at this as a discount. Is down 25 . R if you are so bullish on the stock why not make a shorter term that . Moreu always want to have time than you need. Im looking at an option that has five months at a time. That 40 call is going to cost about nine dollars or so. Is going to act like a stock. Leaning on the 40 level, which is very important. Is 60. Ide target they will get the leverage the options offer. You are ultimately paying for that game that again, right . Why not take a little bit more risk . The beauty of this position is because of the volatility, the options tend to hold their value. If the stock goes nowhere, lets say does not go up or down, if i sit on this for about three months than i am only going to be out about two dollars worth of time value. It is a relatively less risky strategy to go after at this point. Was a remember, there dead stock a couple of weeks ago. Amber crombie, nobody would touch it. Amber crombie, nobody would touch it. Ambercrombie, nobody wants to touch it. Just three months ago, lululemon stock was at 80. One analyst at isi cut his rating from a strong buy to a neutral. He cut it down to notches. Down 2 notches. I think a lot of times analysts downgrade afterward. Levels, because a lot of people have given up and you are also seeing alleged divergence, meeting meaning the stock made new lows but volatility did not make new high. That is the sign of a bottom in a bigger picture. Thank you so much for joining us for the june calls for lululemon. In the meantime, lunch money is up next. Welcome to lunch money. I am adam johnson. Man, bills richest gates, he has committed his wealth and his life to solving the worlds biggest problems. The billionaire founder and chairman of microsoft together with his wife has tackled extreme poverty and poor health in developing countries to the failure of americas education system. Today bill gates joins michael bloomberg, majority owner of bloomberg lp for a conversation with betty liu. We are going to bring you the best of that interview which took placeus