Transcripts For BLOOMBERG Market Makers 20140303

Paying attention to. The to talk about in ukraine. There are military vehicles on the border. The dow down more than 100 points. Breaking economic news. Heres michael with the latest on the manufacturing economy. Otherwise youd would be seeing a big rally. The isn number comes in with a big rise. The forecast had been to go to 52. 3 where we want to be. We are about a point ahead of where we wanted to be. Newport is rose significantly. 54. 5 from 54. 2. The production number to come in a little bit weak on the month. 48. 2 falls below the expansion number. The other number is unchanged. Manufacturing was not too bad. We do not get a clue as to where we are going with that. Higher thanoint what you expected any month when the weather was so bad it has to give people some hope that we do see a lot of weather impact on the economy. Thank you very much. The a point out, it would market moving piece of data. There is so much else going on. Other side ofthe the world. We need to get to the crisis in crimea. John kerry is headed to the capital of kiev to meet with the new Prime Minister. I went to bring in julianna from a snowyng us washington, d. C. I imagine the white house had a busy weekend. Is d. C. Surprised by putins aggressiveness . Respondare working to in handle and control this to the extent they can. Seen, the options available to the u. S. Are pretty limited. Saying over the weekend they are essentially dealing with a leader in valid america and Vladimir Putin who is dealing with a 20th leadingmindset while rusher to be part of the 21stcentury economy. That is the challenge they are dealing with. Y areare not saying ther going to be changing the calculus. What they are working on is speaking with a united voice out of the international communities, g7. The weekend the u. S. And other g7 nations are expending suspending preparations for the g8 in sochi. There working him putting together sanctions to punish russia and working on putting on an aid package for ukraine which john kerry will be discussing. What about the redline factor . The president came into criticism over the redline he drew over syria. Putin crossed and the americans responded with nothing. He has promised consequences. What if they do not amount to a whole lot . The eu is boxed in. They rely on the russians. You have the u. S. Warning of the consequences of once russia is isolated. At the same time, over the weekend, even as all the g7 was saying they were prepping this, they said we are not looking to expel russia from the g8 right now. The options are pretty limited here. Gop criticism of obama is saying he is being week, encouraging this type of aggressive behavior. What is out of the white house . Republicans are saying is that this is what happens when you try to Work Together with russia, as we saw in september coming up with this agreement to remove serious syrias chemical weapons. When you talked tough with bush did not prevent russia from invading georgia. [inaudible] atin is doing this from position of weakness. If you look at the events over the past few months, you have the ukrainian people rejecting the Ukrainian Governments push to align itself with russia. Guy essentially having to flee the palace in the middle of the night. Up nk you for giving me for giving us the update. Financial markets have been reacting to the developments over the weekend. It has been something of a global selloff. It is concentrated in europe. You can see here it is playing out right here in america as well, with the dow down 123 points. Was down 11 x today. There is a bit of a sympathy trade but not anywhere near the magnitude of decline we have seen in Eastern Europe and certainly not in russia. In u. S. Were invested companies and treasuries. They are feeling positive. You can see the flight right here. And crude oil have a both rally did today. Gold is having something of a good year after a disastrous 2013. Indies. Howard is watching the markets very carefully. He joins us now for a bloomberg exclusive. Well done. Were a man inu st. Petersburg. I know it was a social visit but here you are now focusing on russia from a business perspective. What is your take . Europe is so dependent on their commodities. A commoditybased economy. They are exporting commodities. Those who need them cannot talk big and do nothing. The fact is why is the stock market down there . The International Investment community will not put the money there. Investing to go into russia. We are not going to be able to cut them off. It is nonsense. Is this the price we pay for globalization . It seems to be predicated on this idea that everybody will play by the same rules. All of a sudden the russians decide to play by different set of rules and theres nothing we can do. You can hurt them in small ways. Basically what will happen is that the businesspeople of going to be afraid to put their money in russia. You will see their stock market decline. That has a longterm negative. Putin care . No. Why should they be afraid for their money to work in russia. Nothing has changed overnight in the russian business community. Things have certainly changed n ukraine. I think it is a lack of clarity. The same concerns about rule of law existed two wheels ago two weeks ago. Think people really full themselves. They really do. They think six months of calm and the rule of law is fine and it breaks down and people realize i may not get my money out. They worry about it. Those who are intrepid and jump into anything, they will still be there. Those on the fence, we know which way the fences going right now. If you talk about it posted bought the fence. Pulls people off the fence. We know how people play the market. They are shallow. They read headlines. Do you think they will not want to be invested in the region . Tothey will either be afraid put money and or the will take the money out. You will see the stockmarket perform horribly for the next two months. Lets get a sense of what is going on in ukraine right now. Peter is live from kiev, managing director at dragon capital. Tell us what it is like. What is the mood and climate . What are you hearing from the crimea . Thanks for inviting me on this show. It is always good to be there. What i can say about ukraine and the kiev in particular is the situation and he is kiev is quite calm. It is not business as usual but it has scaled back in terms of intensity compared to what we had a week or so ago. News from the rest of the country is quite volatile. We are hearing some news that there is some sort of standoff between different groups in the east of the country. And obviously you have crimea which is an entirely different ballgame altogether. It is quite volatile and contrasted whether you when you look at different parts of the country. That is what i can say right now. Vladimir putin is fully aware of the u. S. And the western perspective here . Hes using this as a chance for them to take back territory that was mistakenly given away before. There is definitely elements of that. One thing that one has to understand about the russian president is that he fundamentally does not believe in nonzerosum games. He believes in balance of power. It is the very essence of a zerosum game. You win and you lose. There are no nonzerosum games in his mind. You have to consider that on the back of the events, for good or bad, he did really feel betrayed by the counterparts. That is also something to integrate if you want to deal and to discuss with the russian president. Right now theres really no other options. For one about this second. Say you are an investment bank. You think things are going to be great in kiev. Youre going to see be whole west come in and invest behind this democratic push and you have russians come in over the top. Isnt that going to prevent people from coming to the rescue of kiev from the west . Arent they going to stall and weight . What is your view . Are therethink we yet. Where we are right now is we have the imf in town that is discussing with the authorities on a package. We need to have some sort of an understanding of the backstop provided to the ukraine ensuring that it does not slide any further, ensuring that ukraine is carrying the obligation. The actual Business Environment further to that point is an entirely different story right now. The emergency right now is to have a program by the imf and other geopolitical standpoint to have some sort of a dialogue toh russia on the best way get out of this crisis. Dragon capital was one of a number that signed an International Appeal to the investment community. Theask that you use all of means to your disposal to promote a peaceful resolution to the conflict it goes on. How much can this accomplish . How much can your partners do to influence [inaudible] putins actions . Whether with respect to they can do by having a sort of mature into a discussion with the russian president. We wrote that letter. We signed it together with the in orderestment banks to mark a point and say that anybody can act at its own local level. I believe that the 11 drop in sx today is a political argument being sent to russia saying this has a cost. Do not agree with any military intervention, there are a few tools at the disposal of funds and entities around the world to highlight the cost of the current operation. Did you get any response to that letter . We did have a few responses. We did talk to Global Investors around the world and in the u. S. Nd europe and even in russia they did react to that letter. An immense amount of support from our clients a broad. Abroad. Ukraine is an awfully difficult position. We thank you for taking the time to discuss the situation. A great response. He should be on your show. What is better than that . I love the way you think so much that i want you to stay with us. After the break you will be speaking to the man himself, ick talking real estate and the next big thing in cancer. How much did the bad weather have on automobile sales . Bloomberg Television Streaming on your tablet, bloomberg. Com, and all live onis streaming demand and on apple tv. Thee are back with a ceo of partners. He is making news this morning. What is the story . We bought this relative value company, it fixed income fund of funds. We know all of the hedge funds in managed money. We figured we would be really good at cooking which ones would be good to invest and which ones are best at aching feet as projects at the moment at the markets. What is the cheapest thing out there for this kind of risk . It killed in the last two years. Why invest now . Reason fund to fund would not do well is the people really do not understand what to pick here at they are just good at raising money, not picking assets. Kate they are just good at raising money, not picking assets. They are just using the managers as ways to get direction onto which asset class of they are supposed to be in. Driving to the smarts rather than who can raise the money. Will this team in california work with the cantor tearm . Team . You will have all of the connectivity. They are going to the doing analysis against the funds. Where does he have that connectivity . Are the brokers going to say i love them all . The bcg loves everybody. That is their job. Primary dealer. We are a traitor of mortgages. All of them. Trader a mortgages. All of them. Knowing where to buy helps you say that is how im going to take care of clients. I will make sure they are in the cheapest section of the market and doing it with the smartest way with the people who are winners. You know the smart ones from the ones who are just going with the pack. About yours this say strategy that you employ across your Business Empire between bcg and cantor . Been mostlyhas about real estate. The brokerage site has been a bcgst of ecgs part of business. We have two companies. One is a mortgage company. We do not lose money when it goes down. We like it when it is busy. We do not like fridays in the summers. Kind of warring. He made a big push into commercial real estate. We Just Announced the acquisition of cornish and carry. The best Silicon Valley firm. They did apple. They did hewitt packard. They do everybody when they begin. Then they would hand it off to somebody else who wants to move google to new york. Are part of our network. When these new Companies Come out, theyre coming to newmarket new york. Now you can handle them more appropriately. Frank newmarket grabbed grub frank . It took me like 12 seconds. It is perfect for twitter handle. White is that business belong inside bcg with the year why does that business belong inside bcg . I do not see the cross polymerization. It would be like you guys doing this. Look at this. These are proxies for your interdealer broker business. For five years they have looked at the stock price. We used to do stock and bonds. You are brokering oil. It is really a big business. It is doing fine. Business. He same it is a brokerage business. What happened once we did energy and we broker oil and we hang up the phone. We went into the shipping brokerage business. What is the difference . Service and brokerage. You are not taking the risk, youre helping clients achieve their goals. You hire smart oh. We do huge amounts of analytics on real estate. Nobody else does. Mostly people say the real estate lead 45. Instead of saying find to this kind of space at 31. 90. Bgc cantorlass at and you jam and every piece of real estate. How do you decide which wants to buy . The same way you should be analyzing what real estate to invest in. What should you rent . That is why we are doing spectacularly well. Big bcg is. Ow it is a public company. About 450 billion dollars. How is cantor these days . We only had a billion 500 million in capital. Morganlook at what stanley has, it keeps us nice and safe on the sidelines. We are owing to do things that ouran outperform with brains. Take the managers and let them use in the platform they want. Is getting in that business. How are you going to get in there . We are smart and fast. We will help you find and buy what ever you want. We have never hurt anyone. We have never hurt anyone. That is a big thing in this business. A lot of people have bought all sorts of stuff. That was my favorite. If you went to a stake restaurant would you order the subprime . Cans abide bonds so people take it back. You talk slow fridays in the summer. If you talk to anyone on the street, it feels like a slow summer day every day. Stanley has got nothing to do then what does it broker do . These days. Rind you have 10 year notes or 1. 5 . It is just low Interest Rates. The real estate business is up 30 last quarter. Revenues were up 23 last quarter. We paid big dividends. We have invested smartly in the right place. Low Interest Rates great for real estate and not as much fun for stocks or bonds. , it is alwaysick great to have you. Thank you. It is great seeing you. Thank you so much. Before we go, lets take a quick look at these markets are down just a bit. It looks like theyre down 1 . Nasdaq. Dow, and we doubt we would see a bigger decline with russia doing what it is. To. 8 . Tim. 8 . Vladimir putin buildings 10. 8 Vladimir Putin begins in zerosum games. Live from bloomberg headquarters, this is Market Makers with Erik Schatzker and stephanie ruhle. President obama said friday night there will be costs for Vladimir Putin if russia intervene militarily in ukraine. Threat. Smissed that what will obama do to respond to live up to his right . Peter cook has more on that story. What are the options . Usianna goldman was telling they are limited. Lets go through the limited options. They are not great options. He does have a few options. First of all, no military response. Nobody at the white house is suggesting the u. S. Will step in militarily. There is an appetite or that. The strategy at this point, highlight the risks and the cost of Vladimir Putin by doing this. Show support by including financial support. You have john kerry going to kia. Show symbolic should go for the u. S. Since some diplomatic way to save face. A senior u. S. Official making the case that it is putin who has miscalculated. The russian economy is vulnerable. We have seen the drop in the ruble. There is essential for more risk to come. The u. S. Has arty stopped g8 reparations and canceled other russian talks over the next few weeks. John kerry warned there will be more pain and less putin backs down. He will lose all of the glow that came out of the olympics. His 60 billion dollar extravaganza. He will not have a sochi g8. He may not even remain in if this continues. American business may pull back. There may be a further temple of the ruble. If there is a huge price to pay. Lets talk about the other next steps that could be out there if the u. S. Wants to implement the levers. Russianeezes for officials deemed responsible. Perhaps kick them out of the world trade organization. Freeze access to u. S. Banks. Businesses cannot do businesses and russia. We are a long ways away from that. Some of the things america can do on its own. Some require international cooperation. What are you hearing about the steps america can and will take on its own . As you said, a lot depends on europe. They are much more tied to russia in terms of the economy. The energy link is critical. Every step of the way the United States need russia. They are not likely to be taken in the short term. What is important as getting the europeans to buy into this. The notion of adjusting Vladimir Putins central concern. He is worried about russian interests. And russian speakers protecting their rights. If you can get international ultimatelyn their, that is something that could allow him to reach a new deal with the new Ukrainian Government without a shot higher at. The white house says the door is still open to that. It is obvious he has not ac it yet. Peter cook with the latest from d. C. Get into the actions facing the obama administration. I want to bring in the author of fragile empire. He is in our london bureau. He serves as a National Security advisor in the bush administration. He is a bloomberg contributing editor. Why isnt he afraid of the west . Howets be clear about russian corruption works. At the center is moscow. And in britain is not in moscow. Havens anditish tax property all over the european union. It works like this. Are amounts of money checked it out of the russian budget. Here to beought secured. Over the past 10 years, putin has watched how this is desperate for money in an area of low growth. This has convinced and that europe will do absolutely nothing to kill the oligarch golden goose that feeds it. He is absolutely confident the europeans will not impose banking or visa restrictions or do anything to close down their profit will tax havens. Think it was a saving alliance. It has the morality of a hedge fund. Make money or move it offshore. It sounds like he is saying that Vladimir Putin is the ultimate mob boss. Do you agree . With some parts of what he said. He does certainly run the mob liken certainly a way. The basic point he has judged the west is unlikely to respond in ways that really hurt him is correct. The judgment is formed over a variety of teams. One aspect maybe corruption. He is also had a few experiences like georgia in the summer of 2008. He did a miniature version of what he just did in crimea and got absolutely no response. Calculation is correct. If the west cannot respond effectively to this in the ukraine, what is to stop them from going further . Believes the west failed to impose any financial sanctions after the georgia war that were meaningful. London, paris, and berlin are desperate for cash. Putin goes in the west. We have been hearing whatading the west with objective . Reports out of moscow that people have been meeting with crimean insiders and putin suggests he is dealing with a week western elite w eak western elite. Vladimir putin is all about finding where the red lines are, finding where the box to action the blocks to action are. This huge response is not more russia thrown out of the g8. There are definitely no red lines inside for Vladimir Putin. Put simply, is this his way to have a chance of getting a territory back that was given away years ago and shouldnt have . I dont think so. I think he is worried about a number of other aims. What is the direction that ukraine will grow . It is an important country for russia. It was heading closer to closer with russia and nato membership. He has them and let the lane you and estonia. Accept this. I cannot let these things go that far. You think he is doing the right thing . We will agree to this. I do not think this is a master stroke. The loss of yummy code which yanukovych was a major loss for Vladimir Putin. It did not go his way. He had a back couple of weeks there during the olympics. This is how he has responded. Whether it is a rational response or not, time will tell. The west has very little leverage and is not strong here. If Vladimir Putin really wants to use his power in an old 19thcentury sort of way, theres no one ready to stop them. Do you wanted to weigh in . An empireot just builder. He is also 21st century cynic. Andas been seeing protests questioning about what is this role for . He is continuing the corruption. Popularityr a huge boost from nationalists if he could restore crimea to russia. It is about popularity of home. Protest in russia over the past couple of years. They sort of flair up in the go when somebody flexes his muscles in moscow. To what degree is Vladimir Putin afraid of anything right now . Me like his grip on power is pretty secure. That is not foremost in his worries. Theres something on this corruption point. The oligarchs have enriched themselves immensely since the collapse of the soviet union. The european economies have assisted in that. They provide some of the lifestyle. There is something to that. The elite in russia really have gotten very rich over the last 20 years in ways that are ostentatious but on belief. A desire to perpetuate that is a factor. If you are in how bridge they have become, how powerful Vladimir Putin is and how he is not afraid of the west, does this make you more powerful than ever . His great danger is that they only bounces at the 110 dollars a barrel. More than 50 g rackley from the budget. They are on benefits. Or rublel price collapse, he would see his budget explode and would be unable to pay for all of these other sectors of society. He has a lot of economic threat down the road. There have been a lot of nerves in moscow today about how far will he go. How has he miscalculated . Body bags ofif Russian Troops are coming back . What happens if the west does have the curried to impose bans on russian oligarchs incorporations. Will they decide putin has become a threat to the longterm perspective . Prosperity . They hope they will move in that direction. We will have to leave it there. Both you both for giving educated and expert and bold and get see gutsy calls. Thank you both. Coming up well be talking about something else. In america, chryslers winning streak is almost four years long. They have grown sales for 47 months in a row. Welcome back. Sells decline last month as snow storms pounded the u. S. To joke about it but nobody is buying cars. You are. You got your brandnew raptor. What i did was pretty illustrative of the trend for last month. While you did have car sales arguablyard and gm, sales were down at chrysler as well but you had trekked sales up, all wheel drive vehicles up. Game. Er has a it was betterthanexpected overall. Sales of chrysler branded beagles are down 1 . Vehicles were down 1 . People are going out. You will not go out and buy a mazda miata. Do they make them anymore . I think they still do. Have you ever had one . No. Grandhey do by is deep raptor. S or a f450 a negative. Is not the margins are massive there. They make a heck of a lot bigger margin. , isntep sales are 47 that effectively stealing sales from quarters . I am on a heck of a role. The same is true of jeep sales. They have been amazing, beyond doubledigit. Almost every month they are 30 or 40 growth. They have been kicking but. Butt. Cherokee was kind of a weird design and some people like it. The wranglers are popular cars. It doesnt mean i will ever say honey, i need the all wheel drive vehicle. It would not be on my list. All right. Matt miller. Our own resident automobile expert giving as the latest. Will meet him back, the companies that sold the show at the oscars last night. That is next up at Market Makers. Welcome back. The real winners of last Nights Academy awards and not take home the statue. They did hit solid gold. Twitter and samsung stole the spotlight with the help of a starstudded menagerie. The famous selfie. Erlichman estate of the late in the lay and joins us. Cory johnson is here with us in new york. Lets talk about this for a minute. Samsung and twitter were all over the oscars last night. Apple kickingnd themselves . There you go. Ellen degeneres taking this famous selfie. My time to get retweeted how many times did he get retweeted . 2. 6 million. What does that mean business wise . Twitter is pitching itself. Lot about the advertising platform as it will work with television. Television loves twitter. Sports events is the only thing i will watch live. People are like tweeting event like the oscar. It means they cannot fast forward. The partnership between twitter, i not the way ellen did that on the show was so much less word hashtag at thes grammys. I think twitter love to that going on. It fits into the paradigm the way it goes. What is in it for us . Just to build on that point, ellen is pretty good at making it less awkward. The reality is twitter and abc and the oscars are very real partners. There were twitter executives at the oscars. Half dozenat least a twitter people who are dedicated to this broadcasting making sure it goes right. Fred tweeted out a picture of the pieces. They are partners in a program called amplify. The futurehat in they will be sharing some of the revenue that comes in both via twitter and television. They do not want to scare the Television Broadcasters but they are very much aggressively trying to reach these deals. They got one together with abc just before the oscars. Ands that to say samsung twitter are both paying to be there . They are paying for this exposure . Allen could have said im going to insta this picture but she did not. That is true. The Partnership Twitter and abc have, it used for examples samsung. Relationship, it was not said that she would go out and do that. Ofsung is throwing a bunch money out there. Theyre hoping for the best. We do not know the specifics of what those through her head. They walk away in a great position. Always spend a lot of money. If not assigned it looks tacky. This time it looks amazing for them. Involvedf the things with the Academy Awards are fake. I know it is shocking. Im not just talking about the plastic surgery. Some of that was downright scary. Tweetingage ellen was on an iphone. She was using an iphone and a Samsung Phone . Is it that twitter would feel like it needs to partner it is thescars when de facto platform of choice. They only added a million u. S. Users in the quarter in which they went public. They need to add a lot more users. The advertisers are looking at this. This is the female super bowl. This is where the big money is eating spent with a somewhat different audience. Twitter wants to be on the mind of all the advertisers who are watching this. Last night it twitter solidify the importance of Second Screen viewing . Oscarsged watching the for me. It did it for millions of others. This is what they are going for. It puts a little pressure on face looked which is more of a closed network. Twitter was always this open network here they immediately went to journalists and celebrities and said this is a great place for you to brag about what you are doing. Facebook has had to do a lot of similar things here and outlay in terms of hiring people, trying to get the word out. It is tough. We are going to have our own selfies. We will be back with more Market Makers in two. Live from bloomberg World Headquarters in new york, this this errorakers chapter in stephanie role. President obama warns russia against intervening in the ukraine. What can the u. S. Really do to stop Vladimir Putin . Mickey drexler made j. Crew am a shop. Just before the iconic brand was due to file for Public Offering come and he has an amazing offer himself. Look at the potential deal. Selfie of the stars. Will find out how the Second Screen is taking the award show to the next level. Andme to Market Makers i am stephanie role. What a contrast to what is going on here. A crisis developing in Eastern Europe. That is where we will start the newsfeed. Market fallout from the developing crisis and the ukraine. U. S. Stocks down almost of percent today if you measure them by the dow. S p 500 down a little bit less. Most markets in the red. Particularly in Eastern Europe. This was very concentrated. Downussian benchmark around 11 . The biggest owner of casinos is selling them to an affiliate. Caesars will sell three in vegas and another one in orleans. To restructure more than 24 billion dollars of debt. American express trying to bodman broaden the Customer Base by no fee Customer Credit card. The new card will carry no Interest Rate for the first 15 months. 1322 afterwards. U. S. And european officials making it clear, no one is going to war over the ukraine. Far less in crime era crime era. Ma. Rime Michael Mckee looking at these dwindling set of options. You with ink Russian Defense economy on exports quite economy. 27 of gdp its exports. And also a big eel for the eu. The biggest trading partners on both sides. The list that who russia exports and imports from, the eu. It is at the top, way ahead of anyone else. Anything they do to russia, the russians can do to them. That is why you see relook ends to really commit to Something Like this. The United States plays almost no role, no trade or russian relations that matter. The other issue, that exports of gas. They now have a northern pipeline. They can go around if they cut that off. The europeans do not want to lose them. A longerterm issue because they have a mild winter they have very mild stocks. If this were to go on for a long time, it would be a problem for europe and russia. We solve the benchmark index go down. To what degree did those developments exact a price on russia . They are exacting a price. This hurts the banks. They could be in big trouble. The Russian Central Bank raised Interest Rates seven percent to try to contain the fallout. The problem is that we do not know if Vladimir Putin cares. Went bankrupt in 1998 and defaulted on the debt. It is also working the other ways the other way because anyone in Eastern Europe also seized shares go down. A lot of banks in france and germany and holland saying share price losses because they have exposure. And no leverage. What would motivate the west and europe to take action against russia . The problem is, it will take economicave just sanctions. They will have to put politics into it. They need russia. It is a key vote for dealing with problems like our ron iran and syria. The only thing that could really influence them is if it starts to spread to the other former soviet republics like belorussia or georgia or romania. Then you might see more action. At this point most analysts say probably not going to happen. Stay with us. Russias military intervention in the ukraine also has potential to impact u. S. Companies from derailing energy explorations. Deal. To bring in alex digging into the numbers. What companies could get hurt . Mass of companies that have a presence in russia, but it is small. True. Russia is 11 billion market to the u. S. , 2 billion and aircraft sales. One billion in cars. The second way to look at it is the u. S. Companies are operating russia. And there is risk. Beer companies, Chocolate Companies and snack companies. Overall the packaged food market is small, two hundred billion dollars. That grows three percent per year come at 10 of the world total. Not a lot of high income per capita. Pepsi quite at risk. 19 of the salty snack sales. They are the largest food and beverage producer in russia. 40 production units. Do you think this is affecting whether or not russians by soda chip and smokes . Also the ukraine as well. Speaking to an analyst who said it really depends on the consumer. Are they going to go out to eat . We do not know the answer. The real risk is sanctions. If the state department imposes sanctions on the been some of the American Companies could get hurt. Could see a reverse. They could put them on american commodities. Lex will they be able to operate, very different of the trade sanctions that you cannot import your product. A lot of these Companies Source locally. Not like they will run out of before commodities. Also, mcdonalds, 413 stores in russia. 35,000 locations worldwide. Europe is a perl best huge revenue driver for them. Talking u. K. , germany, france. No one seems very concerned about the comp trees exposure countries exposure. Cut them off, because he does not need civil unrest to go with the other problems he is causing. He will cause enough problems with the economy as it is. Interest rates going up. Direct foreign investment. Will we see chevron and bp continue to invest money or will the scare them off . They are ready have plenty of reasons to be scared off. He said most of the time theyre not interested to begin with. They will not be scared by something that might have a couple months impact. Thank you both for giving us an update. Alex deal in Michael Mckee. Hitting an update from key of getting an update from kiev right now. Ryan chilcote there right now. We had an update last hour telling us what he has been hearing. I know youre been on the ground doing reporting. , thefectively crimea peninsula and the south of the country is under russian control. That is the bottom line. There are about 6000 troops right now cooperating with the militia. They have surrounded the carini and up peninsula basis. President the russian got permission from the parliament to deploy forces to the ukraine. However, they appeared before it some toived, leading wonder if the real appointment is yet to come . We just do not know. I spoke to the ukrainian Prime Minister a short time ago. He said russians are refusing bilateral negotiations and they think this is a longtime problem. They are mobilizing their military. I do not think they have any intention of really challenging. He russian army in crimea no shots have been fired yet. Obviously, we have a standoff. From Vladimir Putins , if the west cannot respond with economic sanctions of subs since im a can he more or less do whatever he wants s. Ngon i think there may be some truth to that. The only thing he might be willing to discuss with officials is the return of the theed president back into office of the presidency here in ukraine. To finish out his term until december and put the original. Eal he was going to stay around until december and that is when they would have early elections. It was only after he fled basically that same day that the opposition decided they would take power now and have the elections in may. The powershat if that be now in ukraine were prepared to allow them to come back, then there might be about. Ng to talk absolutely no indication whatsoever they would be willing to do that. I think you are right, he thinks what is there to talk about . Clearly no one sees it away i do. Expectation that russia will maintain a semipermanent military presence even if it does not go ahead and fully annex a part of the ukraine or try to negotiate some kind of dividing line in the the rest ofe ukraine becomes the west and the east the comes another russian state. These are some of the ideas being tossed around. I have no idea which are credible and which are not. I do not know the answer to that. Havedea that you would part of the ukraine not recognized by the federal government and under control it appears as though we have lost ryan chilcote. We managed to get area Important Information out of him. Withchilcote on the phone us. Just to bring you up to speed. Ukraine has formally asked the United Nations Security Council for a meeting today to discuss the deterioration of the situation in the ukraine. That news broke moments ago. The situation only growing more serious. More to cover when we return after the commercial break. Oming up, pinterest certainly was not an overnight sensation. An exclusive interview. A Japanese Company may take aim at j. Crew. That is coming up here on Market Makers. Streaming on your smart phone, tablets, and bloomberg. Com. If you missed the interviews, catch them on demand on apple tv. Market makers. Looks like newsweek coming back from the dead. The new owners are bringing the print edition back this friday. Seven thousand copies will be printed. Compare that with the peak circulation of three point 3 million. The cost is 7. 99. The secret service is helping fierce look for possible Security Breach in the Computer Network according to people familiar with the situation. System tothrough the see if there are traces of hacking. Shoppers in Neiman Marcus was a victim. Big hitgenerate was a on twitter last night. Posted by selfie taken with some of hollywoods biggest stars. Some saypopular twitter temporarily crashed. Not really sure. I was on twitter the whole time. Talking about another name the tech world loves, pinterest. One of the hottest startups around. At nearlyy was valued 4 billion back then. Ceo and cofounder Ben Silverman had his doubts on whether the company would ever become a success. I think every entrepreneur says that at one point or another. And the leaching sat down in a rare and exclusive interview. A emily chang sat down with rare and exclusive interview. Ben silverman is a guy who almost never does interviews. Not part of his strategy, justice personality. Such an interesting story. He started five Different Companies that all sailed in quick succession before finally founding pinterest. Even in the early days, no one used it. Take a listen to what he had to say about the early days and the road to where he is now. A long road i think most things in life that are worthwhile take a while. My parents are doctors and both of my sisters are doctors. That is minimum and eight year commitment often 12. Thathas always been has always been in the back of my mind when i think about how long inc. Should take. If you are having fun and feel like youre learning and what you want, i think now is a great time to try it. Was there a moment with pinterest where you said i need to know now i should not give up . There were times where you get a little bit discouraged, is for me what was helpful having people around me that i trusted and they cared about me first and the company second. That was folks like my girlfriend then and now my wife. My cofounder. Mentors and friends. Now you are managing hundreds of employees. You have come such a long way. What is your vision for what it will become . It is a visual discovery tool. A way people can get inspiration and plan things for their future. Like instagram and facebook and twitter, i love it but i wonder how they make money . That is a very good question because they make basically no money right now. Not wantmitted we did to talk about the business side of the story. They have not actually started charging charging advertisers. Board. S up on the pen has is a company that raised 564 Million Dollars to date. Three point 8 billion dollar valuation. Silverman has said he does not think theyre worth that much but think they are making a bet on the future and think they , 21 ofat some point the u. S. Online a adult users. They have the traffic, appeared to have the engagement, but once they turn the revenue function on, that is when we will see what kind of the business this can be. I have to be in new york rat. Why do we get these tech guys a past . If we were in new york, they would have to be accountable for how they are making money. Why in general do the tech superstars not have to talk about it and justify it . I did ask him, so i tried. Not you. These guys do not seem to make money and did not answer for it. They want to talk about the product. The reality is, they do not make money. That is why they do not want to talk about it. Somethingce they have to show, he will be more open about it. He has an pretty straightforward thing we do not make money today but we will in the future. We have talked to people who afford for him. Incredibly High Expectations and standards. That is probably why at this point they have not turned the revenue stream on. He does not want to do it until it is absolutely perfect and we are still waiting. I love pinterest, dont you . And lovepinterest halley gave a shout out to his congratulations. Great interview. Not somuted response muted anymore. U. S. Stocks headed south. We will bring you uptodate with the market check when we come back. Approaching 26 minutes past the hour. Time for on the markets. Bringing you up to speed what is happening in u. S. Markets. The client have accelerated. The s p 500 almost awful full percent. Something of a riskoff trade. Stock selling off. In bonds gaining incurred oil gaming as well. Deeply in the red about two percent, little more than two percent. Here you see microsoft. Microsoft the story. 500osoft leading the s p down, in part you might imagine because of concerns over an executive performance over the new ceo. He has but a former advisor to hillary clinton, mark penn, and the role of chief strategy officer. Mark bates leaving. Another executive leaving. Back in two minutes. Live, from bloomberg headquarters in new york, this the airt makers chapter in stephanie role. Welcome back. A lot of talk about retail. The golden boy of retail. I want to bring in christina a less cheap. Everyone talks about Mickey Drexler and how bad he is. How valuable he is. Clearly more valuable since he is being eyed by a chinese retailer. The private equity owns j crew. They want to sell. They want to take money off the table. They want to go public. Over the course of the discussions, a very Interested Party emerged. Because they know they want to get out, they have decided to enter into formal talks. Deal. Way away from a it makes a lot of sense. They want to expand. Impression. They think j. Crew can help them get there. Makes a lot of sense. When i see him as the golden boy, you cannot find someone. Can he name his price . What is really unique about seendeal is when we have Companies Come to the u. S. To buy growth, they are normally willing to pay for it. Seen his son pay a huge premium for sprint. Case, we know the president of fast food retailing is quite disciplined when it comes to price. At the end of the day tpg and Leonard Green say we can go to the public market. The ipo market has been on a rampage. We can get a 5 billion valuation. Much of the strategy seems to be about expansion and the United States. I do not know how many stores they have had across the country am a but there are at least two in new york city. I am a fan. As i am j. Crew, which brings me to the question, to what degree is the expansion predicated on eating into j. Crew and the business . It is a different brand. Someone was comparing recent ipo to j. Crew. They are completely different. Owning j brands and theory. These are higher and france. Higher end brands. It is a different product. Or. Rew is far preppy i think j. Crew cashmere fuzzes up just as bad. Sound like a personal experience. Cap ctually closer to gap. You know they have been have banana republic. Crew has been that the aspirational level at this point. They say kashmir is from italy. Considered almost a style star more than anyone else out there. Why would mickey ipo on his own . That is what they are saying out there, the other side wants to go public. What is really fascinating about this is a fast retailing ceo is a huge fan of Mickey Drexler. Price, how pay the will you work with the japanese owner . How will a personality like Mickey Drexler work with this guy . The assumption is you would need to stay. I think that its kind of a basic western. Is the expectation that Leonard Green would be prepared to sell the fast retailing, because when you sell you get your money back at once. Maybe they would be prepared to take a discount compared to what the public arc of value could be just to exit fully. The question is to what discounts . Returning capital to investors have never been more important. It takes a lot of time to exit the investment. They may have another factor out there that could push them toward a private sale. The price has to be right. Giving it to investors so they can get it in the new fund. Exactly. Private equity buy and sell. They always win at the carnival. Christina alessi joining us with the latest on j. Crew. President obama warning russia not to violate the ukraines sovereignty. What can he do to back it up . In a moment, we will ask al hunt. By now you present book probably no president obama is in a pickle when it comes to ukraine. He can talk tough all he wants but taking action will not be easy. Al hunt with us from washington. Walk us through what is going on in president obamas mind. How important is ukraine and how willing will he be to take action if he cannot get support muchthe eu, which is in a more difficult position . He needs help from the eu. The action he can take is not putting troops in the ground. It is to kick the russians out of the g8 and impose very tough economic sanctions. In the modern world we have learned sanctions can fight. Exhibit a would be iran. I think he has to do that. In many respects there is a lot more say than the United States for the eu. How important is it to show leadership for the president s . , a greatersus russia story going back to the cold war. A sense of how far he is willing to go. I think you have a much better idea of that and we do here. I think the narrative gets twisted sometimes. It is the united faith in europe ursus what putin is trying to do their. We could use russian help, not that they will necessarily get it, but i could argue this is much worse for Vladimir Putin. Realuld get himself into a mess. Remember afghanistan and america going into iraq. We do not know how far he is going to go. Russia is not an economic power. If they have problems with supply and energy, this could really drive the country here . Is in control Vladimir Putin is the guy with his hand on the bowels that opens up the gas supply to europe. If he decides to crank that shut, i am trying to understand the point that this could go very wrong for Vladimir Putin. Isnt he going to be the one to force the europeans into a decision of weakness . Who need the european monday . And europe are not vacationing in russia. It is the aligarh in russia that have investments in vacation homes in europe. If he cuts off the energy supply, where does russia get money . Not a strong country economically. I want to go in what Lindsey Graham said over the weekend and get a sense for you from you if it will evolve into politics. Every time the president goes into onto National Television utin,hreatens vladimir progra everyones eyes roll. Has a point onam syria. What would senator graham do . Does he want to put american troops there . I think not. Therefore i think the rhetoric is easy. What you can do is harder. It almost all evolves around the nomadic and economic actions. Where do you think we stand here . Is this for show . Does he have any leverage . What will we say five years from now . Limited leverage. The complication is that is a proeuropean government such as it is. A terribly inept government that is great chaos there. To find outt have is how far Vladimir Putin will go. Ea orhe stop with crime play out across ukraine . A terrible situation. Destabilizing. I do not think this is a big win for Vladimir Putin. Lex we love the analysis and fresh perspective. Else we love . At that sweater. I wore it just for you. When we come back, talking about another superstar. Right. Oscar buzz got it a lot of the favorites one. We will talk winners, losers and what is to come. This is Market Makers on bloomberg tv. We will be with joined by the hollywood reporter. Welcome back. The champagne has been tossed. Theere with some of highlights is rebekah ford at the Academy Awards last night in with us now from los angeles. We love to talk about the importance of social media, but how important was it really from up business perspective . Social media was a big importance last night. A selfie, which became ethic and a huge thing on twitter. Moment ever. Eeted it really brought down the house online. Social media was a huge part of this. Choosing a host like ellen, you knew she was going to play it safe. Could the academy rely on twitter for the unsafe, naughty tweets . I think it was a smart move. We know of len a solid host and wellknown well loved but not a risk taker. To bring twitter into the play, it helps make it edgier from what it could have been. Is the Academy Awards do well, which is to say they rate highly and generate tweets come at who benefits from that . Films willthe definitely benefit. Has as a slaves chance to make money. The actresses and actors to one have a very promising career ahead of them. The big end of it to the Film Industry in general. Does anyone make money out of it . I think we will see some of the winning films will make money moving forward. Probably getsn a big boost in the musical performers probably have more fans. People like pink had a great performance. People will tune in to see them more and buy their albums and follow the music. Historically, how much followup business do the winning films didnt . None of us have seen Dallas Buyers Club and both want to see it in part because of the clips we saw during the Academy Awards. I do not know how many other people are in the boat. I think it is films like Dallas Buyers Club that was not a huge hit in the box office. They were critically acclaimed and those are the films that will benefit from this. Now people know about them and want to see them. They did well in cities like l. A. In new york but now the general public more interested in seeing them. From a revenue perspective, how important is the red carpet 23o you extend programming hours. It starts at 6 00. When the awards do not even start until just after it 00. How much more advertisement dollars does that bring into e network or abc . It is a big deal for e or designers of the gowns. To get your down or jewelry on a. Ig star these women are wearing hundreds of thousands of dollars, millions worth of 10,000 that cost between and 25,000. Are the designers selling the addresses to everyday buyers after the show. Go it is not that theryday buyers highfashion brands that want to be seen on the carpet that is their super bowl. Lex what is the Economic Impact for them to go if i am tucci , will i sell if i am gucci will isolate dress based on the fact that amy adams wore my dress on the red carpet . I think you are selling to a particular group of people. It is not for the everyday person but a very highprofile moment for the fashion designers, and that is why they become a huge preshow moment for a lot of people. Thank you for joining us. Rebecca ford with the hollywood reporter. We will be back in two minutes. That is going to do it for this monday. S on you saw the selfie from the oscars. This one of the things we will the of out tomorrow with founder of the audience. He put a soundtrack to a during the show. This man knows how to network, build and create social media madness around rems. We will have him all hourlong. 6 asked our means bloomberg tv is taking you on the markets. Diving straight into derivatives with the options insight. Jim stuber joins me in studio for his insight into the options world. The Options Market in the red after tensions rise between the ukraine and russia. How are you seeing this layout . This is on the other side of escalation. We did not see significant hedging activity. The real action happening in etfs like rfx. The largest trade is an opening seller of 21 strike put. They are expressing the view that there is limited downside. They will get long in the stock about 10 lower. They are pocketing 2 million in premium to express that view. We are estimating that seeing that similar in the Options Market. Not going to escalate significantly. We did see the biggest selloff in five years and russian equities today. That is where the Options Market is now. Whether it is complacency or not, we will see. We will look at six options as well. The most actively traded blind is in march 16 strike calls and the closing seller. You do not see significant long. They are taking advantage of a lift in volatility to look profits rather than putting on new long profits. Expressing the view that alongside volatility will occur. The vix at 21. That is a pretty significant move. What do you see long route in the volatility . Not much. Most people express them in the second month. All march or april. Series to play around with. Keeping the positions very close. If and when this does fade, volatility will decline pretty sharply. Would you buy at this price . I like what the market is expressing. The selling of books. Admittedly we did not know how this will play out. This decline is an opportunity to sell volatility and put on long positions. It was incredible to see russia raised the benchmark Interest Rate most since 1998. The main rate going up to seven percent. I would have thought that wouldve caused a bigger spike in volatility. Lex the vix has moved up a little bit. Some markets are expressing that. Certainly currency markets are expressing more volatility than equities. Specifically u. S. Equity investors are much are more scared than you might anticipate. Walked me through why youre bullish on the stock. Lex we are looking at specifically a trade in april expiration. We want to buy 26 point 30 call spreads. Onetoone puts for about . 40. Theyink it is very likely beat on revenue. Operating expenses worse than anticipated. The consensus is for six cents. Earnings beat that as well. Cost is . 46 but the payoff could be 81. Exactly. 30 call. Elling at on the downside, getting longish of the stash should it go down. Alternatively the longer exposure. Thank you. We will be back on the market in 30 minutes. Welcome to lunch money, where we tie together the best stories, interviews, and video of business news. Lets take a look first off at the menu. Motors, carmakers wiping the snow off the windshield after a chilly february. Wall street, bruce makes his case on fannie and freddie, saying that there is no debate necessary. Wants out, neil cash kari once in. They have their reasons. Social,