Transcripts For BLOOMBERG Market Makers 20140219

Realtors and builders are building up for the spring home buying season. Will warmer weather offset the recent drop in sales . We will find out. I amme to Market Makers, Stephanie Ruhle. I am matt miller in for Erik Schatzker. He is in a much drier place. There is a lot going on today. Top business stories, another turn in the crisis in the ukraine. In day after 25 people died violence, the western ukrainian region has declared independence from the central government. They want closer ties to the west. The president has been meshing the country closer to Vladimir Putin and russia. The leader of poland says we could see the opening days of the civil war. The owner of jerod and kay and kay jared andlers to buy zale, 3500will operate retailers, all of the jewelers in the whole world may be owned by them. May cost 500,000 people their jobs, but raising the minimum wage will raise people out of poverty. The of obama and the democrats want to raise the rage wage by . 10 per hour and republican say we have a reporter on the ground , helmets strong helmut st the correspondent on the ground in the ukraine. How safe is one Walking Around the streets of kiev . That is a good question. It is quite bizarre. We are less than an hour away from independence square. Quiet. Suspiciously but you really have to walk towards the square, and if you get onto the main road, then you can see the first barricade. Smoke from the black the fires burning on the square. We had reporting of joe biden saying, deescalate. And now the Natural National security adviser says that this is unacceptable and the president may make a statement on this. We have heard from the polish Prime Minister who says we could see the first days of the civil war. Do you get that feeling from people on the streets, are they talking in civil war terms . Walked up so, when i to the square earlier today and talked to a couple of people, they told me that this is a oneway street for us. It is the win this or end and everyone on the square has already accumulated at the present time and there is really no turning back. The latest information is that the Ukraine Security service says that they have started a nationwide antiterrorist operation. Protesters seize guns and ammunition in raids on military bases. The developments are developing things are developing very rapidly. Protesters are also seizing and it doesuildings seem like the country is splitting. Forthere pockets of support klitsko . H and support for russian and western ties . Yes, that is exactly right. The ukraine has always been a divided country. When you go to the eastern parts of the country, people, by majority, will speak russian, and they have very strong business ties. With russia. And you go to the western part of the country near poland, people feel much more strongly associated with western europe, and this is what you can see now, by this region effectively saying, no, we wont take orders anukovych. Om y we are seeing violence in the street and the country splitting apart at the seams. Any reaction from countries like poland and the United States . Vladimirstatement from putin, and reaction from russia . Made ai think he has point of keeping quiet, we know from his spokesman in moscow that he had a telephone kovychsation with yanu last night but the official line is theyre not giving him any advice, we are just listening. We are staying out of this and the European Union should stay the same. They should do the same. Thank you very much for that. There. H stromm on the ground in Eastern Europe. I started working with him 15 years ago in frankfurt. But this is most important story that we will cover. I want to turn the focus to the finance world. Bill ackman he had a tough night. Blockbuster earnings report, profits were up 10 with a doubling of sales in china and the company also boosted their sales. Sanford joins us from atlanta. Break it down for us. What did they report . Basically, they boosted their forecast a good bit for the next year, they say that china will continue to do well, latin theycan will do well, and are piling on more reasons for thestors to think fundamental sales of the company will be strong. To bethere a reason suspect because latin america is doing so well . Venezuela is up Something Like 90 . Does this make sense to you, the countrys economy is in free fall and herbalife, a diet supplement company, would be up that much . They have raised questions about latin american businesses and growth. If you look at mexico, the amount of nutrition clubs are especially higher than anywhere else in the world. He has raise questions about that. Questions about the growth there, as well. Here in the United States and 60 of the business, it is herbalifes own count. Richard says he is suspicious, they may be taking advantage of less sophisticated americans and immigrants who are less likely to speak at what may have been taken advantage of. Thatf those are questions may be reasons why the stock is holding back, when you have groups like the Latino Advocacy group that has been raising more questions about the hispanic market. What questions has bill ackman raised about china . He questioned the Business Practices there and said the numbers might look good but what they are doing there is a legal activity. At the end ofscan september, china was concerned about some of their Business Practices and perhaps distributors were playing outside of the rules in china, which are very different than you find here in the United States. Perhapsany said that distributors did not understand the rules and were doing some things inadvertently and they would try to crack down on that. But the folks who believe that right, they say that this is something to watch and now there are questions about whether or not the Chinese Government will bring in new rules for mlms. China is going to be the new frontier for mlms like newskin, people are watching closely to see what comes of that. Last november when i sat down with bill, he was talking about andge soros and carl icahn this market has shrunk quite a bit at this point. You have some of the smaller players that took their profits and moved on. Sorosis still there, trimmed his stake at the end of the year when the stock was up 60 , it was up significantly since he purchased it. They are thinking that maybe he is taking some profits off the table. He is still invested in the stock but with china and the hispanic question, some people are still trying to figure out what exactly to make of this stock, especially given the fact that you had nothing from regulators in the United States. Bill ackmans case is based on regulatory action bringing the company down. If you can sleep tonight with a regulatory short on, you are a braver man than i. Back, stocks to the dive last month in housing, bad weather is getting the blame. We will have more on that in a moment. It is the winter. It is cold out. It is snowing. That happened when i was a kid. Another billionaire putting his money where his mouth is, and this time the issue is bad weather. Climate change and Global Cooling that we are seeing. His is Market Makers streaming on your iphone and tablet and on the net as well, you can watch this as well on bloomberg tv. First, bloomberg. Welcome back. I am Stephanie Ruhle, joined by matt miller. The weather maybe stopping the housing recovery in its tracks, at least temporarily. U. S. Housing stocks fell 16 in january, the biggest drop in three years, this may be the result of the coldest winter in years. Estimates showed a sharp decline. Jerry joins us now, he runs the National Association of homebuilders and he joins us from washington. Is the reason we saw this simply because of the weather, people are out there ready to build but it is just because of the weather that they are stuck at home. The evidence of that is in the numbers if you analyze more deeply you can see that the midwest, housing stocks were down 60 and in the far west, where this is not as dramatic and it is very dry out there, stocks are actually up out there. In one fully functional of the worst winters in years. I can understand why stocks are down, if it snows this much, it is hard to get into the ground and get to the site. But why is confidence down for the buyers later in the year, eight months out . Dont we still expect people will need houses regardless of how much that it snowed in january . People sittinge in their houses they look at the various different factors and they get a little bit nervous. There are issues out there, no question. We saw the storm that devastated and showed how fractured it was during the downturn, realtors are having a hard time eating appraisals and that is something that each state has to look at independently. There is a serious problem not only do a lot of people leave the industry during the downturn but now the whole debate over immigration has the industry, which is largely reliant on immigrant labor, wondering if we can even get the workforce in place for the demand. And you have a very serious problem with the capital system. The availability of Capital Capital to builders is an issue. I find it ironic that the newly legalized Marijuana Industry had regulation for their capital flow in less than a year and the area hasor housing an waiting for five years. Evidently we need this more than we need homes. They are scrambling to it work done in the next couple of months. Once things warm and they can get on the ground, will they have to pay the laborers overtime to get those projects finished in the next month or so . Builders have to be careful so they can meet their margins. Most builders are in this as a business. They will try to meet their contract deadlines and get the job done, but whether or not they will pay over time is a function of each contract that they may or may not have. They will not sacrifice for that hold on, is it fair to say that across the board, builders are not going to sacrifice quality . There are a ton of builders out there who cut corners. Builders are not going to cut corners to the point that customers are dissatisfied. How do you know that . I have met a lot of bad contractors in my life, that is a rough statement. This is a statement i believe as the son of a builder, who has represented them a long time. I am not saying this is optimistic, it does not make Financial Sense to cut back on the quality because then the owner comes back and you have to fix that. It costs money and damages the reputation of what are legitimately Small Business people who work in their towns and their communities for their entire lifetimes and they can afford a bad reputation. I dont think that this is too broad. A iwatch of that show where man goes in and fixes all the mistake builders have made. Let me ask you about the price. If you have issues getting the workers to the site, issues getting financing even before that, with the demand rise in relation to the supply, and have iseffect on this, which still 35 below the peak in 2006 . That is something we are monitoring closely because i believe in the next two or three years when prices are back to equilibrium, the next bubble in be parting crisis will of the artificially inflated demand and this is a real issue we have to monitor closely. Yesterday,s al the debt is at a record 1. 0 18. Will this affect young people possibility to buy new homes . This market is reliable on solid credit, and if buyers coming to the market, with this on their books it will impact and could delay entry into the home buying market. Lookingsomething we are into. Seeing that the country is struggling with unemployment and underemployment, why is it that we have a tough time finding laborers . Building a home is a series of different skilled laborers together, with framing carpet carpenters and bricklayers those people are not necessarily trained to do all of that. We have several programs that help train people to go into the building trades. Right now there is a real shortage of skilled laborers. Jerry, thank you so much for joining us. The ceo of the National Organization of homebuilders. He only knows good contractors who do great work. Ones he worked with the ones that you work with are not like that. Making the grade, the company that developed the game candy crush prepares for an ipo. Their expectations are seriously high. This is next on Market Makers. Welcome back to Market Makers. Stephanie, guess what. We are approaching 26 past the hour and it is time for bloomberg on the markets. Look at where we are in our into trading. The s p 500 is up by one third of one percent, the dow jones is up by half of one percent, not a bad day for equities. The nasdaq is down, after the big gains that they saw yesterday. I want to talk about a specific name that means a lot to matt miller. He has one of their items. They hit their highest level since 2008 after posting betterthanexpected fourthquarter results. System,r of the gps with their marine segments to offset their floundering automotive and mobile business. Why is the automotive business floundering . No mention of the motorcycle business which is fantastic. I am a fan of the product and we will talk about the motorcycle programs you can use with other projects. I cant wait to talk about it. Naked bikes. Willen we come back matt talk about his favorite thing, motorcycles. I will talk about my favorite thing, billionaire hageman and yours stocks, billionaire tom dyer environmental activist and into his in doozies, techno manager from san francisco, why use building fifth spending 50 million this year to help political candidates. He has been putting his money behind them. Sh as betting on candy cru Risky Business . The company is going public and we will talk to the ceo of the company, grade securities. We will ask him if this is a safe bet. We are streaming on your iphone and tablet and also on the web onbloomberg. Com and we are apple tv, everywhere. We will add to the millions of people on candy crush and we will download it. Get on it. Maybe pay for it with bitcoin. They are free. Our producer spent two dollars yesterday. Alive from bloomberg headquarters in new york, this with erik makers schatzker and Stephanie Ruhle. Another billionaire will spend a huge sum of money in the political debate. This is from the liberal side, about 2. 5s worth billion, he will use 50 million of that for a new super pack that will be for clients who focus on Climate Change. He has spent to fortune as one of the top opponents of the Keystone Pipeline. Covers washington and chief correspondent peter cook joins us from new york. Julie, let me ask you. Microsoft will, give 140 million per year to congressman, ford and gm, 58 million. Will give another 50 million. Can you give an unlimited amount of money to political ties . You can after the post Citizens United era of super you can write a check for however much you like, putting it into a super pac and they can spin than on any political cause or candidate as isg as the super pack i not cordoning with the candidate. Was few years ago, steyer in as a Hedge Fund Manager and a legit guy, how the go from a Hedge Fund Manager to contribute in 50 million in go he has joined the fray and he is late to the party. Lastd a lot of republicans election and a lot of democrats introducing as well and now tom this issue, Climate Change and will contribute his personal wealth towards this issue because he feels so strongly about it. The titans of industry who have given how much this 50 million look like . , we sawis real money what Sheldon Adelson did last year, we saw so many people stepping in to give to the Barack Obama Campaign in 2008 but also Hillary Clinton coming around in 2016. This is real money and in individual giving real money, you cannot do this before in american politics. Citizens united has changed the game and is allowing individuals from both political persuasions to have a direct impact and the question is, is this a good thing and does anyone think about changing it . How can this money be used . Worked against the Keystone Pipeline and thinks it could create environmental problems but he also has backed candidates including a gubernatorial candidate. Money and ang his lot of different ways. He will keep pounding away at keystone, he will take that issue and try to elect candidates who are opposed to keystone and favor other environmental causes like controlling greenhouse gases. We could see him involved in all sorts of different races, from senate races and gubernatorial elections, he has done a little bit of everything to test out what he can do, and it looks like this is the year that we will see a lot of action from him and a lot of different ways. Can you put this in perspective . This is 50 million and that is a real number, but the republicans and tea party guys have given way more. It is difficult for us to know how much of the coke others Koch Brothers have given because they have a Nonprofit Organization who do not have to disclose their donors. They have been involved in politics for many years, setting up a huge apparatus of political giving, and sort of pumping money into politics that way. So while we dont have a total dollar amount that they have given, we do know that they have the experience and the apparatus behind them, and people like tom steyer are new to the party and just dont have the right footing just yet. What about the word apparatus . I was discussing this with my mother and father, they would say, apparatus, what does this have to do with the political system . Doesnt sound like engineering . It sounds ominous. The Koch Brothers are ominous. That is what you get from people who dont agree with what the Koch Brothers are doing and how theyre doing it, and how the conservatives talk about the r situation. They have not been as involved usa,nd you have priorities and the billionaire donor does not get the kind of conspiracy theory, the ominous black eye that the media has given the Koch Brothers. George soros is a good example, and if you give to tom steyer has a super pac, and with the 501c4s and nonprofits, you dont have to disclose your donors and the conspiracy theorists focus on those groups because they dont know what is happening behind the scenes. Julie, do you want to weigh in . Does not haveer the apparatus yet, he has other billionaires out that it can share the apparatus with him. That is what he is doing now, in addition to pledging his own money he is trying to find other wealthy donors who care about the environment to help them out. His goal is 100 million this year, forcing the environment and Climate Change into the debate. 100is not easy but million will go a long way. Said toteyer has candidates who are not with them on Climate Change, i am sorry and he has not ruled out the democrats but there is Mary Landrieu running for reelection in louisiana and one democratic target he may be concerned with al gore. He knows a lot about Climate Change and the internet. Outk you, julie and peter, of san francisco, tom steyer. Reportandy crushs card. Does the company who makes this game make the grade . We will have more, you are watching bloomberg television. Welcome back to Market Makers, im Stephanie Ruhle joined by matt miller. On makers of candy crush helping investors having a sweet tooth. King digital file for an ipo with the fundraising target set at 500 million. Does not look very promising with the gaming fad, the popularity of angry birds farmville following they grade securities by measuring risk and they give the company a high grade. The president joins us to crush is thecandy only successful game in this cadre of products. What is so great about it . Are people going to get sick of candy crush . Investors have to look at two things, the history of the Company Beyond candy crush and the fact this has been incredibly well. The company has been around for well over 10 years, they have been quite profitable and efficient, and the Financial Health rating is measuring efficiency. A company like zynga is not as effective. The cash flows and sang with 700 million last year. Surely they have not had a cash flow like that before candy crush. They havent, but what they have been able to do and they wont after. They will do a lot with the money from the ipo. They will have to win the lottery. This is like winning the lottery, with 500 million. The company has invested with the capital and cash flow and invested this in properties, the biggest by a long shot. 20122014,nue of 1000 in revenue, 1000 in ebay and their close up to 7000 and profits. These are huge numbers and they have been able to go through the phase of massive Growth Without having to dramatically escalate their process. Efficientlye this and this is a company if you look back over the last five years, they have been profitable all but one year. But they have not created another successful game. Those numbers convince me that we will see a huge straw after the huge gain. Maintainis does not that kind of growth. They had done a good job to ring the bell and go home. We are not giving the assessment saying they will have another candy crush. The efficiency with which this company is run both extremely well for the their ability to whether the next phase. A company like they are, they have a lot of flexibility to withstand whatever happens. Great success coming down the pike or moderate success coming down the pike, the tapering of candy crush or Something Like that. Unice they handle that, based only another big success besides candy crush. They have moderate games and have done ok but not great. But one thing from the ipo is these acquisitions. They are buying other properties that hopefully will sustain and help grow their portfolio. A company with only one year of profitability over the last five. When they came out with the ipo we rated them as 19. This company has significantly less flexibility and they have not been able to weather the storm. 96. Hey were 19, candy is lastng will candy crush with sustainability before they need something new . That is a big question and nobody knows the answer. There is a lot of momentum in people playing the game and they have a Good Business model to get people to spend a little bit have a time a little bit at a time to create a huge cash flow on a daily basis. Why question is how you know the shareholders will the company will treat shareholders like current owners. They had 800 million in cash generated, 500 million went to their owners. This is a great dividend but is this what we are likely to see if they do it again . Management has the inclination, they have biggests, apax is the one. You have the institutional players who will be contributing to that dividend, but what you want to see with investors in the ipo is a company that understands that providing returns, creating returns is the key to a longterm viability and what king has demonstrated is returns on sales of assets and capital, they are prepared to dividend to their shareholders properly. And at least this is a better place to start than investing in a company that has never had history doing any of those. Profile,know about the who are the owners and what is just motivation to not cash out . Once they do the ipo, they will be significantly rich. You wonder how someone changes with that kind of wealth but the ceo is one of the cofounders and has been around for quite some time, the company is close to 13 years old. You have to anticipate there is vested interest in the longterm. James, thank you so much for joining us. The ceo of rapid ratings. An 86. Candy crush grade. Ter got a low someone has a crush. Next, millenials in the workplace. The first 10 years are the hardest, especially for women. We will have someone who helps young women grow their careers. Next on Market Makers. Welcome back to Market Makers, i am Stephanie Ruhle. In the past decade we have seen a new generation of women join the workforce. They are called generation y or millenials. They tend to be technologically savvy and lead the way for leaving the women for the first 10 years of their careers, caroline joins us. Well congratulations on your success. What is your Business Model . Thank you so much for having me. I am thrilled to be here. What we are doing is solving the fundamental disconnect in the market. We really believe that based on talent, women do not have access to all of the resources that they need to be truly successful. Fastestgrowing network of millenial women, we offer access to all of the resources that they need, from Job Opportunities to advice and other resources so they can be excellent at their job, and we give them mentors who can help them succeed. The way to change how Corporate America is built, when i look at the law profession, 50 of people will come out of law school are women, but when you look at the law profession this is all about the hours. When women have children, they need to put in 120 hours per week and many women opt out and say i dont want to do that anymore. Do we need to change the way that Investment Banking and law work . There is a disconnect between the labor side of the workforce, and the demand. Is there isrience the opportunity for companies and other institutions to transform the way that they recruit and retain and engage the millenial talent, to be more successful. We are closing that loopy. We know our members extremely well and we understand what the success factors are for them in the workforce. We work with those Innovative Companies to make sure that they are working for success. What you just mentioned is not good for the company. Other companies changing the conversation and doing invest right now . There are companies we believe are doing a great job and companies out there in the workforce, facebook and google are doing a great job, we see companies that are Technology Startups that are conscious of are, they do a great job really think about how we really engage, from the very first beginning and the touch point, you dont see that exit this or that leak in the pipeline after graduation. Askingis generation y for. I said, i do not want to work for the man, is there a man who will give me a job . Of this is very different she just said, you are very old and we are very different than you. They are in better looking and better shape, i get it. First mediae generation, online all the time. We have led with technology and this is going to change the way that we work. This is the way that we think about our jobs, more access to information and we expect a faster impact, for companies to help us understand what milestones we will hit. Listing on expectations in the workforce. But weey our members and have seen recently two or three weeks ago is the most important talentfor generation y is the culture of the company they are working at. We have seen the shift towards the purpose, and the companies they are working on, there is now this elevated desire for your own professional potential, a company that is having a wonderful impact on the world. Organizations like these are supporting women and helping them get to the next level, fighting education and Career Opportunities. Is there an unspoken ugly truth nobody is talking about. If you get to work with a Great Company and you work your tail off for 1015 years, blink your eye and you are 41 years old. Women are most fertile in their late teens and early 20s. Is this a consequence of not having great Career Opportunities . We believe in integration. We bring this into the plethora of things we have discussed with the community but at the local level, and online. What we have found is it is very important for women to think about the integrated career. Is 1 from theng beginning so they can make sure the way they are directing their energy at work is aligned with what they want to do and it makes them proud, and also finding a place for their families in an integrated way. It is all about integration and not about balance. Caroline, congratulations. For anyone in the bloomberg newsroom who is complaining, i am sorry. This is all about integration. Hse, from levo integration. I want to give you the latest theures from kiev and ukraine, the fires are burning again. This is about 6 p. M. In kiev, exactly seven hours ahead of new york as far as time is concerned. Being burnedires in the area between the protesters and government. In Eastern Europe they have told us that the protesters in kiev bring in people from outside regions. The main protesters in the capital city but it we should be clear that the Western Province has seceded, and terms of how they are talking from the government, and 4 government buildings in different regions have been taken over by protesters. The polish Prime Minister says we may see the first days of a civil war in the ukraine. We are back in 2. Live from bloomberg World Headquarters in new york, this is Market Makers with Erik Schatzker and Stephanie Ruhle. Sparkling assailed sparkling sales buying up zales and we will tell you whats behind the deal and how will affect the diamond business. Ad agency mdc has his pulse his fingers on the pulse of big brands. He will tell us what trends in the advertising business say about the economy. Hasbro is hosting a Birthday Party for the real American Hero g. I. Joe. We will drop by to see what you for thehe action figure big 50. It is 11 00 right here in new york city and it i am with my own personal g. I. Joe. Except g. I. Joe has real hair. Im filling in for Erik Schatzker who has fantastic hair and is out on assignment right now. Time now for the top business stories from around the world lets get started in the u. K. A surprise jump in unemployment in the fourth quarter. The british jobless rate rose by one percent to 7. 2. Reinforcing the case for the bank of england to keep its benchmark Interest Rate at a record low. Tesla motors report earnings after the bell and analysts will be looking for details about a possible new battery factory for the electric car. It has been called a gig of factory. Said ito elon musk would be comparable to all the lithiumion that reproduction in the entire world in one single factory. Tesla keeps buyers on waiting lists partially because i cant get enough of the batteries. General motors is stepping up efforts to come up with a pickup truck made mostly of aluminum according to the wall street journal yuriko they say gm is locking and contracts with aluminum producers. Pickupveiled a f1 50 with a body made almost exclusively of aluminum. That is a huge, huge deal. Ford has come out with this revolutionary pickup truck that weighs 700 pounds less than its predecessor and now gm wants to do the same thing. One week from today, i am going to go to dearborn and film the building of my own new f1 50. Im pretty excited. We have breaking news from washington not about cars, but a decision about something that affects every single user of the internet. The fcc just decided not to appeal a court ruling throwing out its Net Neutrality rules. If you can understand what i just said, good for you. If not, im going to bring in chief washington correspondent, peter cook. This is a big decision, especially from the new chairman of the fcc. Hes trying to go back to the drawing board on the fccs Net Neutrality rules. These are the rules put in place in 2010 effectively barring Internet Service providers from discriminating against certain content. For example, they could not slow down youtube or netflix because it was congesting their network. That was the argument you have to treat everyone fairly. That was challenged by verizon and in federal court, they threw out the rules and said the fcc did not get it right this time. It also said in the same ruling that you have the Legal Authority to do it, you just got just did not cite the correct Legal Authority here. To wheeler is going effectively go back to his fellow commissioners and say lets try this again and write these rules a second time. But in the meantime, lets keep this open internet up loach open internet approach. Hes going to take another bite at this apple with a new set of rules after getting Public Comment from people all over the country. This is important because it affects not only the Internet Service providers but those content providers as well. Anyone out there who likes watching house of cards over netflix, this is a big decision, perhaps one of the biggest decisions of his short tenure. It is interesting you use the word discriminate. Really what it is is verizon wants to say netflix uses 95 of verizons and whip. Netflixcannot charge anymore than it charges any other provider or Company Using that bandwidth. Even if they want to use all the products, they dont have to pay out a price. You make the point verizon and others have made we have to manage our traffic as efficiently as possible so everyone can use it as much as possible. That is the argument verizon has made in the past. Depending on the new rules, this is likely headed back to court, depending on how these rules shake out. There are a couple of subplots to this and new avenues for tom wheeler to explore in terms of broadband rules, so lots of chapters to write in the story. It is a big decision and one eagerly awaited in the industry. Thank you very much. This is basically like if we went to an allyoucaneat buffet, but i went and ate the entire essay and theres nothing left for you. What i still only pay 10. It doesnt seem fair. We go now to the founder and ndc partners. They work with over 1500 clients, including budweiser and samsung, said clearly this guy was at the super bowl. We talk about advertising giants all the time. How does that change the landscape for you . Rex i think it created opportunity. Scale has never brought greater creative at your culture for the creative talent to produce better work. What we have seen is theres a huge opportunity for recruitment of talent and lots of clients concerned about how this will benefit them. Onlyu could pick up not market share in the form of clients, but also talent . Absolutely. Is it ok for americans to say youoes it put pressure on to acquire someone, that you could be an acquisition target, it do you feel like you could go that route . I think we go the exact opposite way. If you think about the evolution of advertising, it was really in and creative people who had a work and dedication to do that drove success for clients. Firms got bigger because they did great work. It was a byproduct of accidents byproduct of excellence. If you look at our most successful agencies, one of them has grown 20 fold in five years will stop does that have anything to do with the fact they are a west coast advertiser . Tech has been a big success. The work theyve done for google and samsung and carls junior, Financial Success in our industry is a byproduct of the work we do and changing the growth of clients in business. We are in a very low gdp growth environment. Clients are under pressure, more activist shareholders than ever before. Stock prices are not in mood not moving in this environment. The critical demand for Marketing Innovation is greater than it has been before. To cut through the clutter and figure out how to get consumers to take action. Let me take you back from your clients to the border. You are in an incredibly acquisitive environment. M a is huge in your industry, even if you dont want to get bought, arent people knocking at your door . Dont you have bigger competitors coming and say we want to buy your business, especially something growing like that . Speculate on those kinds of things but there is a world of consolidation, that every asset is worth more at some time that it would be as a standalone enterprise. Ultimately, thats something we will inevitably face but we have so much wonderful growth potential. Our stock price is up 13 fold in five years. Are in joining a robust opportunity for organic growth and realizing Significant Shareholder value. But ultimately, we run a Public Company and its up for shareholders to decide what they want to do. Own 30 of thewe company but control is in the marketplace. What we focus on principally is the best talent doing the best work with the most impact for clients. On thestay focused mission, Everything Else takes care of itself. Do you run the risk of getting this intermediated . Millenials and teens are connecting directly with brandon deciding what we want. No longer are we being marketed to and told this is the coolest thing will stop what does that mean to you . Rex 65 of our business is social media 55 . We have been the thought leader in that industry and put half a billion dollars of investment over 10 years to be in the forefront of that conversation because youre right. At the end of the day, you learn as much from your bare from your brand detractors as your brand evangelists and the consumer wants to control the conversation in terms of marketing and global geopolitics. Invested hugely in that and will continue to do so because social media, mobile, experiential marketing, those are the growth areas of the future. Has it gotten harder because now the consumer doesnt just say maybe i like that Super Bowl Ad realtime via twitter, they can say i hate what you are doing. There is a discrimination between quality and trash all quality and trash. Quality messages are getting through. The blah are acting on it and its driving tremendous impact. Is one of our spots. Puppies, clydesdales and trucks. Dirty 5 Million People were tweeting about it. It wasn youtube and incredible. It had a huge impact. If that woman had a bikini on, it would have been 45 million. Theres a lot of science that went into the messaging and they intentionally wanted to stay away from the traditional stereotypical view of what budweiser advertising was about bikinis and young people, but this had unbelievable impact. It makes me want a beer. Or a truck. The chairman and ceo of mdc partners is with us. We will enjoy that budweiser ad during commercials will stop someone else has been in uniform for half a century and still isnt a general. Toy he classic boys g. I. Joe. I guess girls can play with g. I. Joe also. Yes, we can. Welcome back to Market Makers. Im Stephanie Ruhle. G. I. Joe is turning 50 years old this month. Turning 5060 no years old. We headed down to hasbro headquarters to talk to the vp of boys marketing. I started out i asking him who g. I. Joe needs to be today. In the g. I. In the early days, g. I. Joe didnt even have a name. It was a 12 inch fully poseable man of action a boy could imprint any personality they wanted on them. It was easy to see why g. I. Joe was so successful in 1964 because every boy had a Family Member that either served in world war ii or korea. ,t was just an everyday thing so those heroes influenced the way a kids played. Parents want wings right now not everybody feels great about u. S. Action. Thats where the g. I. Joe versus cobra story has changed over time. While it was born in the 1980s against the backdrop of maybe the soviet bloc enemy being this nebulous, large scale global enemy, today, its very much a the hundredsed by of issues of comic books that come out to introduce new characters and themes. It is very much about a group of real American Heroes fighting the evil forces of cobra. Thats the story that propels g. I. Joe. Less so a factor of the external forces in the world around us. Is a point in history where it was not so popular to talk about military and joe had to e add take a turn adventure joe. It was a very successful repositioning of g. I. Joe. In the 1960s, g. I. Joe launches a military line but hasbro knew they had to change. The Adventure Team was originally a successful but it had tons of innovated innovative features like real hair and kung fu grip. These things have become cultural touchstone. , guys have said kung fu grip or rubbing someones life like hair. These were fun but equally important in showcasing newness and freshness which has been emblematic of g. I. Joe for the last 50 years. How do you balance the social pressure mattel just came out with their 50th edition of barbie. The Sports Illustrated barbie. Theres a huge backlash because people say thats not the right ideal for a woman. Is g. I. Joe the right ideal for a man . That is a complicated question. We focus on g. I. Joes storytelling. A core team of heroes we have cultivated that are relevant to the dads of today. The core of the line today is thatdads grew up with 1982 relaunch of g. I. Joe, the real American Hero. Allows those dads to not only have something that reminds them of their childhood but also connect and share with their kids. Where is the innovation and g. I. Joe right now . What i think innovative product, i think transformers things like skyland are giants that are on my computer. Where is joe enervating where is joe innovating . Rex we are taking the iconic library of g. I. Joe versus cobra characters and live ring them in cool, new, constructible forms. Has some line that buzz and excitement. Its a new way to express that core intellectual property and we will have new versions coming out at toys r us. What are you doing to embrace technology . G. I. Joe we produce today is very different from the joe we produce in the past. Articulated. Re that means kids can do a lot more storytelling with the figures. They can create their own mini movies or photo stories with them. They are actors that can propel the narrative. We see g. I. Joe content out there that is user generated and our product line helps to fill that. Forhe other side, we Look Technology answers that we might put forward in the next g. I. Joe film. Joe . W about producing is a 3d printer in the future . I would not rule out anything. G. I. Joe is a timeless idea and any technology that exists or has yet to be existed, g. I. Joe will lay a relevant will lay a relevant part. Its a tricky 1 g. I. Joe totes a gun at a time when we are trying to take them play out of what our kids do entirely. You were involved in relaunching barbie. That was tricky. Barbie is bikini and we are trying to say to women that its not all about looking smoking hot. Those are the challenges on both the social and political challenges. You talk about that but on the other hand, if you look at activisions success and other gaming companies, the very violent games are the most popular. There is a balancing act that happens in the marketplace look, stephanie and other northeastern intellectuals are trying to take them play out of what their kids do, but where i grew up, guns are part of a childs life growing up. Thats a good point. What toys you have in your house, a little boy picks up a stick and turns into a gun. Where is the balance . At the end of the day, the balance usually just shifts to what the consumer will purpose what the consumer will purchase. Issue thatolitical exists and obviously if you ask anybody if you feel there should be gun control, should we be restricting guns and that activity in the hands of young kids, people would say yes or sure, but are they going to legislate that to change what toys manufacturers due to create demand and excitement for kids and toys . What do you make of cvss move to stop selling cigarettes . They may socially conscious decision to stop doing it. I applaud them from a social perspective. Im not sure that businesswise its going to be a fruitful move. People do the right thing, ultimately, social consciousness is very important. I do believe youre socially conscious for business, you will do better for your and shareholders. I believe my kids love giant nerf guns. We will have more we come back. Stay tuned. We have been telling you there is a real threat of civil war in the ukraine. One ukrainian region has declared independence today. Government buildings and other regions have been taken over outside kiev will stop you are looking now at live pictures in kiev where protesters are amassed against a wall of burning tires separating them from the Ukrainian Army. The Ukrainian Foreign minister says he does not think there would be a civil war, but he has acknowledged the possibility. The Ukrainian Army is now free to use and against its citizens. The Ukraine Defense ministry has just granted the army power to use weapons on ukrainian protesters. We have a reporter on the ground. Our manager for Eastern Europe is with us on the phone from a location near independence square. Are we seeing pictures there with the burning tires of independent square . X yes. Hi. Let me ask you what this means. Are you expecting any moments any moment for troops to come out and clear the square with live rounds . What is the concern . It is hard to tell. Ring today, it was relatively quiet. Stocking up on supplies, now it is the dark hours of the day and its hard to tell. Latest was the army has been given the authority to shoot on citizens. It seems like the first time of martial law. At the moment, we dont get the troops orsecurity army would move on through the square but it is hard to tell. Give us an idea of your personal safety. As matt and i look at these images, is a grin more super dangerous . How are you feeling . We are pretty close to independence square. When you look outside on the street, you would not be able to tell anything major is going on. If you are a couple of blocks away, it is relatively quiet of the i would say suspiciously quiet, like nobody seems to have come to work in the Office Building where we are. A lot of shops seem to have closed and traffic has really slowed down in the whole metro system is shutdown. Personally, we dont feel threatened, but its a strange atmosphere. How many protesters are gathered there . Has it grown or shrinking . People would assume mainly be out of work. Whats the story . Was peoplee we got kept flooding back onto the square from the early hours of the morning. That has continued throughout the day, so i would estimate that there are a couple of thousand people on the square right now. They really want to hold the ground there. Iat are you hearing know you are in kiev looking out, but what are you hearing about outsiders looking in . President obama is expected to speak on this later. The polish Prime Minister has made comments about a civil war erupting and im not sure what Vladimir Putin has done, but we hear that russian reaction is fairly tame. Russia is officially keeping out of it. Putine for spokesperson told us earlier today that he had a telephone conversation last night and made the point he was not giving him any advice. I find that hard to believe, but there you go. The latest development from the European Union site is we have three Foreign Ministers coming into kiev as early as tonight. Also the German Foreign minister , they have a meeting scheduled tomorrow sometime in the morning trying to reestablish communication lines because it seems like he has not picked up unionone when european leaders try to call them in the past couple of days. Thank you very much for filling us in. Safe there. The pictures we are watching definitely look grim. We will bat we will be back in one moment with our guest and he will tell us why hes betting on activist investing. A very interesting story coming up next on Market Makers. Live from bloomberg World Headquarters in new york, this is Market Makers with Erik Schatzker and Stephanie Ruhle. Welcome back to Market Makers. Im Stephanie Ruhle. We are continuing our conversation with miles. Where not just talking at this point any more about advertising. Advertising to activist investors the ceo of kings dale, how is activist investing and advertising even on the same scale . It is a little different but similar because we are providing Advisory Services. In the case of our business, we are providing Advisory Services to Public Companies to make them a Better Company in the end. We also assist the activist you are will youre working both sides . You have bill ackman, for example and where do you come in . We are in the middle. Day, thed of the company or bill would have to get the support of the shareholders from that company. Pacific,se of canadian huge railroad thats been around for over 150 years, he wanted to make changes to the board of that company. Talk tod to shareholders that help with strategy to make sure he successful. So you choose a side or they choose you, if you are advising the board how to deal with this activist investor, would you say maybe this poison pill is a good idea or you should listen to it or not return its own call . Absolutely. We get to strategic advisors. Things theme of the board could do to appease the activist, whether it is buying back shares or paying a dividend . If the board decides they dont want to do anything because they feel the activist doesnt have a case, how do we launch a campaign to be successful . Mdc getting into a very classic is this . We are in it in a very sick if i can way. You look at sloan communications, franklin says business, we are in the financial pr strategic Shareholder Services business. This allows us to go to the c suite to be able to deal a more , probably theway Fastest Growing area of communication. You are putting out press releases . You are doing all the indications and this gives you more of the full and to end solution. Cracks at the most Strategic Advisory level, there isnt a day you watch this show that carl icahn, barry rosenstein, bill ackman is not active on some company somewhere . The Regulatory Environment is getting more and more difficult. You have a low gdp growth environment and activist shareholders with more capital swinging their rate around looking to prey upon Management Team that employ deployers of capital. Hang on he said prey upon the Management Team. A few are the current ceo of a fortune 500 company, what do you do to prepare yourself for bill ackman are carl icahn knocking on your door . First of all, you need to run company. There are certain things management sometimes neglects to do. Result, they become libraries of the industry. Hold on do we automatically say these companies are not being run properly just because bill ackman or carl icahn knocked on their door . Some might say yahoo did not need a marissa mayer. Some might say the best investment is alibaba . The worst decision in the history of america was not selling to microsoft at whatever the price was at the time. Most Management Teams have been poor allocators of capital. Deworseified their business. They would have been better off in merce in most cases to pay dividends or buy back stock than to make these acquisitions. The point that is the most important is if you are doing a good job and driving superior return, your share price will reflect that. In which case, the activists have no place will stop but if you are not, it makes it easier for them to get a foothold. Typically managers are looking out for managers and not shareholders. Have two go to break but what im taking with rseify. He word dewo very interesting. Fax they call it the three amigos summit president obama is in mexicos president and canadas Prime Minister. A lot of issues on the Table Including trade, education and order security. Lets bring in julianna goleman from washington. Only matt has the ability to make a mexican city sound like its in ohio. Toluca sounds like toledo. Tell us about the three amigos. I do feel like it is sacrilegious to be having this conversation without eric here. We can call of the three amigos or three not so amigos. There is certainly some outstanding tension with Prime Minister harper when it comes to trading issues and the Keystone Pipeline a big thorn right now with the canadians looking to the president to approve this pipeline, but the president is not getting any indication they will be doing that before the midterm election. I think the only issue that theeally relevant is Keystone Pipeline. Everything else is really a red herring. The Keystone Pipeline is critical. Canada needs to have it, its important to the industry help me understand the reasons people are against the Keystone Pipeline. If we dont build the Keystone Pipeline, youre just going to burn even more oil shipping what you get from the tar sands around the world on boats and trains and in trucks. Why not have it . I think there are two issues people are concerned about. Enhancing americans dependency on foreigners for their oil. Not making america more selfsufficient. Second, environmental issues. It should get approved. These are just the reasons, but they are not good reasons. The Environmental Concerns are just building the actual pipeline through the land . That is essentially the argument you heard this week from the canadian ambassador to the u. S. If the president does not improve this, its only going to be for political reasons. You saw the state Department Environmental review that said it would not significantly increase carbon emissions, which has been one of the issues the president said he would consider in making the determination. The white house is not indicating the president is going to tip his hand even private during these meetings. They say they are going through the interagency review process and there is 90 days before the decision gets to the president s desk for him to have the final signoff. Adding anynot indication that they are in any rush to make this decision before the midterm. The context i have in washington the contacts i have in washington believe it will be approved. The president is taking his time. I think if it were not to be improved not to be approved, it would significantly detract from relations between the United States and canada. When you look at the frothy Political Climate as the canadian, how do you compare that to ottawa . Oh, boy. Im not there very often but i both have their own share of dysfunctionality. I dont think the canadian political system is working any more effectively than the american one. I have a little more insight into america because we just partnered with frank once, so he is my political strategy expert. To haveuld not profess great insight. The only thing i can say is from a Business Climate perspective, there is less confidence in washington today with Business Ceos than ever before. Theres less competence they will do anything, let alone do the right thing. Theres less confidence that they are aware of the issues facing the economy and they are not doing anywhere near what is necessary to create jobs, which to us as business leaders, job creation is the most critical issue facing america to stimulate the economy. Is Holding Business leaders from innovating and building . Theres 3 all, trillion of capital outside of america that should be repatriated back. Theres a tax this incentive to bring it back. Nober two, theres understanding of where the government will fall, even on health care. The cost of Health Care Reform is so dramatic that its going to impair the probability of companies to invest in plant equipment and employment. We have to leave it there. A quick break here on Market Makers. That is it for Market Makers today. So much going on, its an exciting time to be doing the news. Come back soon. When Erik Schatzker is here maybe tomorrow if theres a webcam during the commercial breaks, as exciting as the two are, of Market Makers the commercials are even better. Tomorrow, we will be speaking super bowl rings with the maker of super bowl rings, College Rings and even my own High School Ring how much austins. Chuck moody is the ceo. Past theow, it is 56 hour i cant remember what that means. It means we are on the markets. Olivia sterns has more. In are driving stayed straight into derivatives. Equity option costs hitting their highest level in a year relative to treasuries, oil and gold. Im joined by the equity the live equity derivatives. Trategist absolute levels are so small more changes interestingly, i look at the correlation in the market and it has been trending down. This market remains winners and losers. Not just the fact that you are betting equities are the most sensitive Asset Classes the fed tapering . They are, but if you look, overall equity volatility has been coming down since two weeks ago. One stock we are watching is tesla shares, surging to an alltime high yesterday. Above 200 on word that he met dealmaker. S top we have an exclusive interview with elon musk tonight after the earnings. Sewed do turn do tune in for that. What is your take on tesla right now . The stock has gone up quite a bit 400 over the last 12 months. And the short is quite high. The stock valuation is even at most. If you are bearish, one toeresting way to lay it is buy the strike and sell the put for a little less of a credit. Money, but ife elon musk is joining you guys, thats not going to happen. You think the stock is going that up every time happens . I dont know. What is the risk reward . If the stock really does sell off, you have 25 to the upside. For that to happen, the stock needs to be selling off by 10 or 12 . This is a onemonth trade and i think the risk reward amazing. Up over 400 in the last 12 months, less than 20 of analysts have a cell on it. Marriott shares are hitting a 52week high ahead of Companies Earnings which are due out after the bell today. You have a bullish strategy. The fundamentals look really good. Hotel the growth rate seems to be rising and marriott has good policies for shareholders. Last week they announced they gave back about a billion dollars to shareholders. For a 15 billion company to give back a billion dollars to shareholders is a big thing. I think it provides a way to play the stock by the july calls and thats about two dollars and . 30. Thank you for joining us. Were back on the markets in 30 minutes. Lunch money with adam johnson is next. Lunch money welcome to, re ebay and paypal made for each other . Ceo john donahoe thinks they are. , al injection multibilliondollar boost. We will look inside the pros and cons of the economy. In luxury, americas superrich. We will tell you where they live and why. And