Transcripts For BLOOMBERG Market Makers 20140409

The problems facing the gaming industry. For every new yorker, wayunicycle could be the solution. Could you see Stephanie Ruhle on that . Not even. Not that i say that this unicycle is not cool but i dont have the coordination for. It looks impossible to fall off of. I cannot drive a car, i cannot maneuver one of those. A lot, what will i carry . The top news story in the of toyotas are told to bring in their vehicles to fix a variety of defects. None of them are linked to death or injury. Among the models being recalled, the camry, corolla and rav4 suv. Greece is returning to the bond market for the first time in almost four years, they plan to sell fiveyear notes tomorrow. Since 2007 greece has used bailouts to stay afloat. The austerity led to plenty of civil unrest. Will she or wont she . Warmer secretary of state and former first Lady Hillary Clinton on speculation that she will run for presidency for the presidency in 2016. She spoke in san francisco. I am thinking about it and i will continue to think about it for a while. [applause] is, the hardtion questions are not, do you want to be president. Can you win . The hard questions are, why . This,uld you want to do and what could you offer that would make a difference . Will she, or when will she announce that she is running for president . I sure think that she is. Does she want to be president . It is hillary clinton. We start in bc, where the Senate Judiciary committee is examining the 40 billion acquisition by comcast of their top rival, Time Warner Cable. How this new cable janet would not theyre looking into how this new cable giant would not hurt consumers. How skeptical are these senators . It depends on who you talk to. That hearing is just getting underway on capitol hill in the next few minutes. You have top lawmakers including Patrick Leahy of vermont, this is the combination of the number one and number two or wants to make sure that the number one and number two Cable Companies combining will not hurt consumers and the companies are making their case for the deal and you have the Top Republican Chuck Grassley of iowa saying that he is more the mystic about the combination of these two countries and how they will not harm consumers. Take a listen to Chuck Grassley. We dont know about the future but you have to have some faith in the free market system in america, that competition will make the difference. The other thing you want to have make a difference is there is a lot of other competition out there where youre developing content as well. This is the case that comcast is making as well. There is a whole host of competition from google and other Cable Companies and all of those Internet Companies as well. That is why the deal will not harm consumers. They want to hear more from Chuck Grassley and less from al franken, who expresses reservations. We will hear from him in a moment, i spoke to him myself. We are looking forward to the answer that question. How does this make and sell something other than political theater . Congress cannot do anything to stop this from going forward. That is for the antitrust regulators at the Justice Department. Ultimately it is only the Justice Department and the fcc that will determine if this is within the publics interest. Those two agencies will decide s, but the doj and the sec they want to see how lawmakers arent handling this, the lawmakers will get a very good sense as to how big a fight that comcast has on its hands. And what are the conditions at the regulators will see on this deal going forward. This could be so onerous that these companies walk away. That is the question and many people think at the end of the day, if they get the approval, could they attack conditions that make it unpalatable to comcast to move forward. Peter, thank you very much. Chief washing correspondent peter cook, who will be talking to al franken later. That is just getting underway at the Senate Judiciary committee. Grwill bring in alan oons, a former Justice Department member who worked on some of the biggest cases of all time, and now with the firm has their hands full trying to convince the department of justice and interest in washington that this is in the best interest of consumers. What is the company need to do to make its case . I think when the merger was initially announced, comcast minimized its significance. They talk about themselves and Time Warner Cable as regional companies, and the merger was going to simply add some more markets to comcasts territory. And by and large, the Financial Community and the antitrust bar looked at this merger, and they said, the department of justice and the fcc looked at Nbc Universals deal two years ago, that was a real game changer. They approved that one with conditions, so what will they do here. So with this merger, as you scratch the surface and go a little deeper, you begin to see some significant problems with it. Like what, for example . For one, it actually matters to people. All will affect or could affect peoples cable bill, it could affect what sort of programming they see online, if they want to cut the cord. So it matters, it matters to people how this one comes down. Found in thelready review of the Nbc Universal merger that comcast has some market power. And i think that if you look at this one, it would add new york, and l. A. , and some other markets to the comcast territory. You have to see that this is a problem. David carr in the New York Times raise york some questions in his article on monday. How would they review this deal reversed, would they try to buy him the mbc universal how would they look at this situation . You raised a good point, which is, if this had been a cable bill, first, with Time Warner Cable and then vertical integration, it would have looked worse on its face than doing it in this order, in the order that comcast has done this. The question i just want to understand the work the word you are i want to understand what you are i want to understand the point you are trying to make. It would not have gone . It would have been more problematic. I dont want to protect what they have done if the agency had come out in reviewing this, but certainly with a much bigger footprint, and a bigger acquiring aotprint, company like Nbc Universal, would look worse on the surface. I think at the end of the day it will not matter what order in which the deals were done. Theyll take a close look at this one and i think that people are being a little optimistic about the prospects for this deal. Peter, are you still there. Question,have a specifically, if there were conditions at the department of deal,e attached to this it would have been with these competition issues, and it would drive comcast away from this deal, could they, for example, force comcast to divest some of the universal properties, simply to get at the issue that we were just talking about . Teachers, we do best as a remedy, is a possible outcome here, and other remedies could include the wholesale access to the last mile, making broadband more independent of comcast, sniffing and positioning in cable, and the issue for me is going to be, first of all, the department of justice, i think well draw a line in the sand. They can permit this merger to what this is to stop comcast in one year or three years from acquiring the other Cable Companies out there. What is the limiting principle . So i think the department of justice will look at this very hard, and the second possibility for smith again to investors or litigation, is the fact that the division, the antitrust Division Found the last merger to be anticompetitive. So if, as common sense suggests, that this was anticompetitive, and this has important territories, it seems to me that the odds are good that they will find this one to be anticompetitive. This puts you in a place where maybe comcast and the department of justice discussed the conditions and how those conversations go to determine what happens. The Current Department of justice, as i am sure a lot of your viewers know doesnt take kindly to halfbaked settlements. Alan, we have to leave it there. Allen is an antitrust attorney with the dyer gorey. Gorey. Uyer and peter cook, our political correspondent. Go over to the live stream at bloomberg. Com. Next, we talk about the ipo pipeline. Are some companies having second thoughts on going public . And remember the duke lacrosse scandal of 2006 . Bill has written a book about this, the price of silence. He will be here to talk about. We are on television we are streaming on bloomberg and apple and on your tv. First, bloomberg. Welcome back to Market Makers, this is Stephanie Ruhle. Another hotel chain has gone public, it was likely to it was la quinta. They start they started trading 25 minutes ago. How are they doing . The company priced their shares at 17 and they open below their listing price. Of it went to a low 15. 38, and it has not traded above the ipo price yet. This is at the low end of the market range. Raising 650 million overall in share sale. A private equity firm that ta has a large stake, 56 of the Common Shares after the listing. This is the third hotel chain that they have taken public over the last year. And hilton, the Biggest Hotel ipo ever, both of those companies have seen their share prices rise since the initial public offering. Scarlet, you and i both know that stephanie could talk about her Favorite Hotel chains all day long but we have to move on and talk about the other companies that have been going public. It has been a great year for ipos, particularly tech companies. Their owners are taking these Companies Public at a sometimes eyepopping valuation. But the nasdaq has pulled back recently and some people are asking if the party is over. Cristina alesci has been talking to some of the top bankers on the streets. We are wondering if the window is closing for the ipos . I dont know if the party is over but the lights may be coming on very soon. What we have seen in the issuance market, is a very high concentration in health care. And if you look at that and say, ok, concentration is bad because you want this across industries, for companies to be able to go public, i think that most Investment Bankers out there are talking about this big concentration and i actually spoke to the head of technology at the Capital Markets at bank of america, jp moriarty. Abouts what he had to say that. If you look at the headlines coming out, they are focused on the activity level compared to 2000 and the natural question is, can they sustain this. And if you look at health care and technology, people tended to say that this cannot be sustainable. Some the hood there are encouraging signs as the market differentiates between companies. There are stories that come out when a company with minimal earnings or revenue gets a huge multiple. The market has been so separating between types of companies and revenue, this is something that was suggested and was quite sustainable. Are investors going to start hiring from the specific sectors, can they push to see these different results in the market . Investors are getting tired of a couple of different things. Remote growtha story really skyrocketed in the public market. Around growthtory is getting a little bit more selective. And moriarty had some thoughts about that as well. We definitely last week got caught in the quarter and rotation, away from growth and towards more value in the market and that certainly affected the outcome for a lot of companies that were on the road to go public. You do have market risks. You are going to be on the road for a couple of weeks and i try to prepare consumers for that. And we saw some volatility in that rotation as the investors went away from the secular growth stories and to the more reasonable price, more valueoriented investments. We remember seeing investors going into that over the last few weeks. More ofat he is saying a function of valuation than these are getting expensive, or perhaps the investors who bought the Growth Stocks last year have not seen enough growth . We have definitely seen a pullback in some of those stocks. Investors are rethinking those valuations. A poster child for this was king digital. The stock basically flopped on the first day, and that had a pretty negative connotation and people were asking, what went wrong here, was this the market or the investor mix . It seemed like a a lot of it seemed like a lot of issues. Moriarty spoke on that as well. So this is the hedge Fund Valuation . I guess that is the issue, we women on the fact that hedge funds bought the deal and this is not the companies fault. This is not the hedge funds fault. But this is the fact that when you get the book together, there are not enough longterm investors in there to really not play on that volatility. What doesargued a longterm investor mean . On the first day to your point and they often do. Up to a certain point. But they are more likely to stay put, if it balances. Like five or 10 . If this goes up 30 . I personally think real money accounts get the benefit of an urban legend that they are the ones who will buy and hold no matter what. I dont think this is the case. You may be right. Look, or is more rotation in a different been in a difficult mutual fund portfolio. The mutual funds dont want to be trading every day and they want to buy and hold for the most part. David einhorn does not want to do this every day, two. These are the issues they saw before and they are not getting it. This goes to real money hands and when they dont, the hedge funds get blamed and i am not sure that they should get lamed. This is not going to be the last word in this debate. Our reporter, cristina alesci. Coming up, why investors may take a second look at fannie and freddie. We will take a look when we come back. Welcome back to Market Makers. I am Stephanie Ruhle with my partner, Erik Schatzker. It is almost 26 minutes past the hour so we are going to take you on the markets. We are looking at alcoa, and the longsuffering aluminum industry. It is forecast that aluminum demand will exceed production and the glut may be over, which was created by chinese output. Alcoa is no longer in the dow first companythe in the s p 500 report earnings. This may be a signal of what lies ahead. Coming up, a new book looking at the scandal that rocked one of the nations most elite universities. Price ofalk about the silence. Eight years later. And are you worried about all of those recalls . One dealer will put your mind at ease. There is no way i could make it around there. You are watching Market Makers, streaming on your phone and on bloomberg. Com and now on apple tv. Stay with us. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and Stephanie Ruhle. You are watching Market Makers on bloomberg television. A lot cover in this hour. Maereddie mac and fannie keep warming up investment giants. Chris, welcome. Fannie mae and freddie mac, if you talk to regulators, they are not feeling great about what hedge funds do, but the lack months of the world are saying, you cannot break the law. Like fannie mae and freddie mac, what is your argument . You have the largest functioning bodies in the u. S. Billage market and like and the other funds that are working on the equity side, we are dead investors. We are focusing on the securitization strategies that are the foundation of what is going on in the legislative process in the Senate Banking committee. Do you feel like youre betting against the government . They can change the rules. We are working with the government. What we are really doing is trying to create solutions. Our strategies are transferring credit risk away from the taxpayer. That is the function that we serve. Use it in a different position than saw the guys at betting on the equities. Had he feel about their argument . There was a taking any changing of the rules, examining the way the process works. The arguments have some merit. That goes back to hank paulson putting fannie mae and freddie mac into conservatorship and crushinging the shareholders in the process. It is not like the government has ripped itself willing to ignore the investors in the interest of the taxpayer. Itself willing to nor the investors in the interest of the taxpayer. You do your homework, you examine what is going on. You have to take into consideration, will the rules change again in the future or is there a National Policy at stake that will rise above . We look at the securities that are being developed and some strategies being developed, around the futures of housing finance, we think these are sustainable. They have a very positive constructive, forwardlooking view in terms of housing policy. Those of the strategies we are most interested in investing in. Where else . We do like to Marshall Real Estate and commercial real estate, there is a similar theme. A very close cousin to what is happening with fannie mae and freddie mac. It is multifamily housing. Insurers of largest multifamily mortgages. Of have a huge transition household that went from singlefamily households into apartments over the last people that could not afford to stay in their homes moved into apartments. If you think about it and look closely at what we have been doing on the debt side, they have been issuing private securities to dead investors for the last seven years which have created a great opportunity and it is a precedent to what is happening on the residential side. Wheres the investment, where the trade . In debt securities. They are close cousins to highyield debt. What is happening is that fannie mae and freddie mac are issuing securities that look like debt instruments, but they are and involving market eve all the market. Evolving market. The price potential has been unprecedented as early movers get a chance to participate. Lets go back to fannie mae and freddie mac. Are the credit trades that you have potentially let me rephrase. Can you make as much money as the Equity Investors might be able to make if things work out in their favor . Have you ever bought a security that has gone up to 124 in less than a year . It sounds like a stock. That is a little bit of what is going on. If you can do your work in our head of the policy shifts and can see what is going on in the markets, there are opportunities like that. Part 21u can go from 24, they are doing a backflip. If this does not work, where does it go . Memo you are back to the fundamentals. That is another case we like. You have to start with a fundamental view. I buy the security of par. It does not work, legislation goes the other way. Endou could and up with up well below par. It depends on two things. Fundamentals and technicals. The fundamental support the case. They are about as good as we have seen in 20 to 25 years. Of thesix years out greatest financial crisis that we have seen since the 1930s. It was triggered by a collapse in the subprime mortgage industry. The fundamentals now are the best they have been in a quartercentury. How is that possible . The borrowers, those of borrowing mortgage debt, the Credit Scores are up 30 to 40 points on average. It is harder to get a mortgage today. To hows an overreaction bad things were precrack of precrisis and did the industry has gone higher. Pressing is ok, but it is a security selection market. Is an active market, but it is probably not it is a sector that we like, but not as much of focus as we are doing. How important is the feds view of ceos. Theyre not getting a break on the rules. How does that affect the market . It will change the composition of investors. They are redrafting rules in terms of who are the qualified artist offense. It will shift supply and demand dynamics. In your favor . Of course. Any time there is a change, there is an opportunity for us. It is a matter of understanding it. Capable ofe are moving towards the opportunity side. Thank you for joining us. A treat for me. You know i love this stuff. , we arewe come back going to be talking about a book about a scandal. The role of sports and a major university. It was written by bill collins, who will be with us in a few minutes. The price of silence. Stay with us. It has been eight years since Duke University was rocked by rape allegations heard around the world. They were indicted, but the charges were dropped 12 months later. The prosecutor was disbarred and the attorney general said the students were victims of a rush to accuse. Duke ended up paying each of the three accused students 20 million. It is the subject of an exhaustive book by william cohan. Is the price of science silence. It is a great book. 600 plus pages and reads like a short story. Why did you decide to write this book . Are a duke alum. I am a duke alum, and a very loyal duke alum. The easiest thing would to have stay in my lane. Everybody expects that from me. I found this so captivating and so caught up as best i could be in the media scrum at the time. First they condemned them and then exonerated them. I said, i want to know what happened. There was never a trial in this case. Were you thinking book . Want to do something a little different than wall street and i want to get into my Michael Lewis stays. This is flash boys for me. To the walluge street community. The duke Lacrosse Network has a beeline to wall street. It is part of the compact. That is part of the promise that is made to these kids. You come to duke, you pay lacrosse, we will get the network working for you to get to wall street. What did you learn . Let me step back. Let me remind viewers that there was never a trial in this case. Roy cooper, the attorney general said these boys were injured innocent in april 2007. Eight years later, i wanted to dispassionately compile everything i could, find out about this case, talk to everybody that would talk to me and put it in the book area and put it in the book. This is the trial that the boys never had. If it would sell like flash boys there are africanamerican young men in the bronx who are wrongly accused of doing things, they do not end up getting 20 million bucks. They do not end up with writers like you telling their story. I am a duke alum. I was interested in the story. The fact that there was never a trial, the difference between what happens to somebody in the bronx is there is a trial. They are found guilty or not. Roy cooper said these kids were innocent. No one declared anybody innocent , as even part of the trial. It is not in the legal dictionary to declare someone innocent. He did it on his own. That was very interesting. Number two, i asked him for an interview. You declared that these interview these kids innocent, he would not interview with me. I asked to see his files, he would not make them available. What is he hiding . I dont know. That is one of the reasons i wanted to write this. Talk to me, not the three indicted. Is keepe of silence tournament keep quiet money. One wanted to talk to me, he is clerking for a federal judge, but his lawyers decided that would not be prudent, based on the terms they were proposing for which i would talk to him. What did you learn . They were not read this. Are they sleaze bags . We will never know what happened in that bathroom. There is no trial, we will never know. This is the closest i can get to a trial. Thelked to crystal mangum, accuser the victim accuser. I talked to bob steele, the former deputy mayor of new york who was chairman of the board of trustees. Nifong, crystal, and bob steele, the consensus is that something happened in the bathroom that no one would be proud of. What did you learn . There are so many reasons this exploded into a scandal in the first place. We could talk about the treatment of athletes at elite universities. We could talk about the over exuberance of prosecutors. What do you think was chie fly responsible . It was a perfect storm. The incredible combustion. We have to talk about the role that the media played in this. The media latched onto this story like a dog with a bone. This was the bridge gate of eight years ago. This was the herbalife of eight years ago. This had it all with everybody rushing to judge them. For those that want to say these are innocent boys, can you help me understand how they got to that place . Why is it normal on a tuesday night for 40 boys to get together and round up a couple of hookers and take off their clothes and a dance . This is so far from normal and out of the extreme. That is the issue. It is normal. You have an email sent by one of the athletes after the party goes home, citing a book american psycho, tomorrow, lets order up some more girls and lets skin them and kill them. Why is that normal . It is not. It is shocking. It is not right. I would not want my kids to do it. It is part of the culture of at at duke they are put up on a pedestal. The bad boy behavior was encouraged. A lot of duke alums shook their heads and said they could believe it might happen. We will not know if it happened. Something happened that no one will be proud of. You would think that after the incident that duke would be reflective and not have this happen again or things like this happen again. Duke start . His this stuff keeps happening again. They had an asian themed party. Nhere is the karen owe list, powerpoint presentation. You said you were a loyal duke alum. Are you a proud duke alum . I am proud of the education i got. I am proud of what duke does and stands for. Ats is not a fine moment duke. That is why i wanted to write about it. I wanted people to understand what happened and why. Maybe we can change the culture. One of the problems is by shedding light by shedding light, one of the problems is underage drinking. There was underage drinking going on at this party. That is not about to stop tomorrow, at duke or anywhere else. Can we be honest about who we are laying blame to . Before the next season starts, usa today with this quote. The behavior, they are blaming it on summer jobs on wall street. There are around 40 and 50yearold men all summer. During that time, they see it for those men, hiring strippers and dancers is acceptable behavior. Why is it fair for him to assume that when these boys have summer internships they are around guys hitting strip clubs every night. How does he know that . Maybe the players told him. Or maybe he heard about it. That is probably not wrong. That is behavior that goes on. Those boys went back bob steele said to me this is legal behavior. One of these boys has an internship at goldman sachs. When he gets back to campus, let me order up a couple of pros and dance. I would not blame the equity Capital Markets desk at lazar for it. I think he probably regrets saying that, but i do not know. He would not talk to me. Dwarfs. E not throwing this is regular behavior that does happen on wall street. It is part of the culture, generally. The idea that they thought it was a good idea to have this party and invite the strippers blows my mind. Emailto send another and say lets do it again tomorrow. Ryan mcfadden did talk to me. I did tell his story in the book. It changed his life. It is a cautionary tale. He thought it was a joke. It was in bad taste. He had a literary reference to a. This changed his life. He has had to change his name, he cannot get the job he hoped to get as a root as a result of this. He works for a housing in connecticut. Do you feel bad for him . I feel a little bad that his whole life was changed as the result of sending an email. I feel bad for the girls to. Too. , author of the price of silence. Buy,is a book you must must read. Congratulations. We have more Market Makers coming up. We are approaching 56 minutes past the hour. It is time for on the markets. U. S. Markets are green across the board. It has been a choppy couple of weeks. When you talk to investors, you are hearing more, take some money off the table and try to ride it out. Three rocky days for the nasdaq, and it is still in negative territory, but the s p 500 is back in the green. Lets talk about facebook for a moment. Facebook up almost 4 . Instagram is more popular than twitter for teens. I know that to be strong. To be true. Market makers back in a moment. Regulators put an end to in trade. Its cofounder is back for round two. It is something different. You learn about it in the next hour. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and Stephanie Ruhle. Toyota hits a pothole. They have announced one of the biggest recalls ever. More than 6 million vehicles. Intrade 2. 0. The site that lets you been on almost anything ran afoul of. Is the casino business out . . Crapping out we are going to ac, baby. I am Stephanie Ruhle. I am Erik Schatzker. Top business stories from around the world. One of the worlds Biggest Candy companies is expanding one of its other businesses, pet food. Mars is buying petfood brands from procter gamble. They already own whiskers cat food. The deadly diseases threatening the Global Supply of bananas according to the united nations. The fungus has spread from bananas in Southeast Asia to the middle east and africa. It has destroyed tens of thousands of acres of banana crops. Sony pictures is close to a deal to acquire the rights to michael boysnew best seller, flash boys. I dont know. Can you make i know the topic is interesting. The title is. A movie about highfrequency trading . It out. Ut geeking i am not sure how that will work. We have to talk about recalls. You have heard about the General Motors recalls. They are not the only one dealing with a major recall. Today it is toyota. Than 6 million vehicles around the world to fix a series of problems. Matt miller is here with more. To make some distinctions between what gm is dealing with and what toyota is dealing with. There are similarities, but i would like to point out that even though it is one of the biggest recalls, it is not close to the biggest recall. Toyota is recalling about 6. 4 million vehicles. Last year, they recalled 7 million vehicles when they had the acceleration problems. They recalled 10 million vehicles. These numbers can get big fast. Youre seeing recalls take off. Especially after toyotas fine and General Motors problems. Doingkers are looking at recalls or making a decision to recall cars faster than they would have in the past. Had 11 million recall so far this year and only 22 million recalls last year. How can it affect our bottom line . About 600 cost million as far as the cost of bringing in the cars and doing the repairs. In your brand loyalty. Costs in Customer Satisfaction that you have to consider. The number could be much larger than that. These recalls are not all as your car shutting off all your driving it. General motors is dealing with a problem that killed people. Totoyota, their problem has do with airbag issues. A showing. About 3. 5 million cars are arected in this recall being recalled because of the driver side airbag. Most of the recalls, windchill wiper motors do not matter that much. Rails of three door models, whether or not you can slide your seat back far enough. They are not all deadly issues, however, the 3. 5 million recalls that affect drivers side air bags are cars to go back to 2004. Rav4, tofrom camry two every toyota i can think of. It is a real issue. Car love that you are the expert. , which isota tacoma on a massive seller in the u. S. , around the world, it is known as as being anary indestructible pickup truck. Armies use it. It has a great reputation. There could be some airbag issues. Do not wreck it. If you have it, do not run into a tree. Matt miller, thank you for giving us the latest. I want to take us back down to d. C. Comcast and time warner are making the case for their proposed merger. Peter cook is tracking the hearing and has the latest. This deal is proving to be a bit of a tough sell. Given the view part on part of senators, they need to represent consumers in the home states. It is clear that comcast executives are on the hot seat. The Top Executive from time warner they are facing tough questions from the committee. We have had questions about whether conservative voices would be lost. The big question has been on the focus of consumers. We have had comcast executives making the case. This is good for consumers, or access to faster broadband, more choices. This is not going to be anticompetitive. Here is david cohen. A challenging transaction. Our company serves separate and distinct geographic areas. We do not compete for customers anywhere. Lead tosaction will not reduction in competition or Consumer Choice in any market. We have also heard from witnesses that said the combined size of the Company Makes it a behemoth in the business. It will control 40 of the National Broadband market. It will also control content. We have heard from content providers that comcast will act as judge and jury in determining the success of their business going forward. A consumer advocate urged the panel to get regulators to say no to this deal. The issue is very simple. If we want more innovative, low priced internet delivered services, this merger must be rejected. No member of this panel said they oppose this deal out right, but they have some tough questions. The questions are being listened to very carefully. Even if there is real skepticism, what could the outcome be . What could we see as the takeaway . Is most important is you get a sense of the kind of conditions that regulators are placing. The pressures that they will face from the lawmakers to reject the deal or to approve the deal. If you get democrats and republicans on this panel, adamantly opposed to this, you will feel intense pressure on the regulators of the fcc and the doj to put strict and harsh conditions on the deal. Conditions that could force the companies to walk away. We do not see that yet. No sense at this hearing it. Thank you for the update. Peter cook. Coming up, we will talk to one of the key lawmakers questioning the deal. To the newest ipo. Excuse me, la quinta made its trading debut this morning. It has been fluctuating between gains and losses. Here, looking at the trading of la quinta. She is also looking at some of the other ipos that have priced this year. Everyone loves saying that quinto. La quinta. Where are they staying tonight . Something tells me not. Deal isquinta interesting in and of itself. It is interesting in what does it say about ipos and what we have seen with ipos . Teen the rocky mess of digital, are we starting to see a little turn in appetite . Mess of king digital, are we starting to see a little turn in appetite . If you look at the numbers and the performance and the big ims health, rice energy, e p and energy, mixed performance since they came out with since they began trading. This tracks companies that have had Public Offerings in the past 12 months and how they do. We have seen a decline for this year, whereas we had seen an increase over the past year. It has been a little bit of a turn, but isnt that different from what we have seen in the Broader Market. Is it that different from what we have seen in the Broader Market . Youre pretty close. Look what happened to last week. It traded at 40. Daysafter the free rough for the nasdaq, it is still at 35 bucks. The sexiness factor is not exactly high with this ipo. Chain. Midprice tyd Hotel Anything that has the word internet involved in it, king digital notwithstanding, there have still been demand for those. Thank you. Long start equity funds are struggling. Even if they like a story, we can see them start to trade because they need to book rockets. If you look at the way the general market is trading. Trade inough market to these days. Coming up, the big business of betting. We are going to talk to the guy who founded the Online Gambling site, intrade. He struck out with regulators, but his new site looks familiar. There are or are there too many casinos in the u. S. . Watching Market Makers. We are streaming on your smart phone, tablet, bloomberg. Com. Welcome back to Market Makers. Is intrade making a comeback . You remember the site that allows users to bet on everything from oscar winners to the next president. Cofounder is back with a new idea. It is called tradesports. Com. Ron bernstein is here to explain how it works. Walk us through it. Bloomberg is very important to me. I am a data junkie an info junkie, a research. This is what we are doing with the prediction markets. Everybody wants an edge. What tradesports. Com does is element of trade out of the gameplay. People can make predictions based on what they think will happen. Lets say i am interested in placing some of these bets. What do i do . Your site, what is required . How much money do i have to put down . Can i bet on winners and losers . There are entry fees from two of dollars. Undreds every contestant get the same steak and all contestants compete against each other. You are trading in a stock market trading game. You buy and sell amongst the contestants in the contest. Over makes the most money in the trading contest is the winner. Overvalued and undervalued. You have chosen the words carefully for a reason. It does not sound that different from a betting line, a vegas betting line on a football game. Is overvaluedland or undervalued, relative to st. Louis. Everybody has opinions. We express those opinions as probabilities. If using the probability of team a is better than 50 to win, then you want to buy stock up until the price of 50 . What is the relationship tradespintrade and orts . Completely separate company, focused on Fantasy Sports in the united states. When you started intrade, i am certain you did not think that regulators would shut you down, but they did. How can you be certain they will not take action against tradesports. It was not in order to shut you down, but it was tantamount at the end of the day, the same thing. , the way the rules changed changed during the development of intrade. In the Fantasy Sports contests, it is terrific. You believe there is no risk that a regulator and some stay there is never no risk. No, no. Name is situation where there is no risk. In your favore that they are not going to. Exempteds. Government Fantasy Sports contests and contests of skill out of betting and wagering legislation. This environment of law allows Fantasy Sports contests where games of skill and skillbased events are the driving factor and completely legal. I miss intrade. I enjoyed, i thought it was a great probability market. The data was amazing. How big was the Addressable Market . Everybody loved the elections on intrade. They were great. The data was terrific. We felt there was some real basis in reality because it was a social processing by wisdom of the crowd. Everybody got a chance to vote. Money was a great motivator for that. It kept everybody real. For us, the problem was that politics, and what we call the super bowl of politics, the president ial elections, once every four years. Sports and sports was always the intention of what became intrade, was really the primary focus. Leaguese Fantasy Sports that are longterm season leagues and a new development in a small and growing market of daily Fantasy Sports. That business takes place up until the game starts. We take over when the game starts until the end of the game. It makes it way more fun. I have not done it yet. When i am home and he is watching football real time, and the game feels like it is 17 hours long, i think this would make it fun. This is a way to lean into the game, noodle all of the statistics, think about things that are going on and participate in real time. It is the second screen, but to become a better fan, you have to be more informed. Participating in these contests makes you a better fan. I just paint my face. Chance, what do you think the odds are that we will see intrade comeback . It has proven to be extremely valuable. The Regulatory Environment is questionable. There is no doubt that there is a thirst for the data. No doubt that people want to be informed. They want to know the power of the crowd. We also believe that the power and the viewpoint of thousands, hundreds of thousands of doables of people is with Internet Technology and should be represented when talk about when we talk about media predictions. Thank you for joining us. Cofounder and ceo of tradesports. Com. More casinos are cashing their chips in. Are there too many casinos in america . We will give you the answers to the question. Stay with us. You are watching Market Makers. Welcome back. I am Stephanie Ruhle. I am joined by Erik Schatzker. We are going to take you on the markets. Lcoa off of its high, but off solidly. Estimatesearnings because analysts got it wrong. It is about the outlook. Alcoa forecasting that aluminum demand will exceed production. Bring on matt miller. , it isrding to alcoa ending. If youre an aluminum investor, that is good news. Back, it sounds like owning a casino is as risky as gambling on one. X live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and Stephanie Ruhle. Welcome back. Im Stephanie Ruhle. And im Erik Schatzker. Here in newa. M. York city. And the chips are down. Were talking gambling in the nations 38 billion dollar gambling industry. That is such a big number. There is worry in the industry that there has simply been too much growth. Too many casinos all across the country. State, myn the garden hometown, has fallen 44 since its peak in 2006. On the las vegas strip, revenue from a from ace peak of 6. 8 billion. Andto mention new jersey perez in mississippi. Hs in mississippi. In the last two years, i feel like we are talking about changes in legislation. A casino in cleveland, ohio. Is there too much supply echo era many factors. There are many factors. One is too much supply, but you also have others coming into the market that are cannibalizing the existing ones. And there has been a structural change in the workforce, and the changes there ares are sucking Discretionary Income out of the economy. Are the trends favorable for the Game Industry . Which is to say, yes, the numbers are down on a five and sixyear basis, but up on a two and threeyear basis . They are better, but within the moreorce itself, you see construction and manufacturing and retail jobs. The problem in the longterm is the hourly wages of the workers is lower and that will affect their Discretionary Income and ability to gamble. Is the Casino Industry cannibalizing itself . It is these bigtime casinos that are opening up shop all over the country. That is a problem and one of the ways the business industry is starting to address that is they are starting to diversify away from their core business of gambling into nightlife, entertainment, shopping, things like that. That business in las vegas is growing. Do we know how many people are willing to travel for gambling . So, what the Addressable Market and lets say, for biggest, for las vegas, and how many people are willing to gamble locally. Do you know what im mean . I do. That is certain a problem for biggest. The thing biggest has going las vegas has going for it is that it is a destination. Other markets, like atlantic a localat is more of market. They rely on local business. And that business is getting sucked away to other local casinos. People in pennsylvania or delaware are no longer going to Atlantic City. What will Atlantic City due to combat that . They will do what las vegas has done, that is, to diversify. Atlantic club closing was a good thing for the market as a whole because there were too many casinos. But will every Casino Center do what las vegas has done and as successfully . How long have Atlantic City casinos existed . Since the 1970s, so a long time. You start to think that if they did not get their groove on yet, it aint going to happen . Thing Atlantic City has is you are on the east coast with a Larger Population and you have the potential to become a hub for conventions and things like that. Theres some investment going into a market for a Second Convention center. That could help their business. Are there any casinos in the country that are doing relatively well . Charles, louisiana, which is a feeder of the oil and gas market. Oil and gas money is going into lake charles. At market is doing pretty well. And there is a new casino opening up their this year. Opening up there this year. Anywhere else . New casinos everywhere. There are 145 in california. And a lot of that is trouble. You are seeing commercial and tribal business. Looking atboard when that map, you see proliferation, and saturation in many markets. Thank you. Brian miller, part of bloomberg industries. And we are continuing our industry Casino Industry cover station with two heavy hitters in just a few minutes, skip ronson and tom allen. Tom balance. You are watching Market Makers on bloomberg television. Im Erik Schatzker with Stephanie Ruhle. We continue our conversation about the gaming industry. Here in new york is tom ballance. And with us from los angeles is skip ronson. Bronson. You heard what our own analysts had to say about gaming industry overcapacity and those kind of issues creating all kinds of problems outside of lake charles places. Ana, of all tell us how you are dealing with it. I think he missed a couple of places, too. Maryland is growing rapidly. New york is doing great. We view that as an opportunity. We dont see ourselves competing for the Atlantic City market. We compete for the midatlantic regional market. By positioning yourself as the destination in the northeast region, youre able to make a good living. Gaming is different than ever before. How so . Is used to be a big event. Today, you can stop on your way home from work in pennsylvania or in maryland. The challenge for the destination markets like Atlantic City is to put out a Value Proposition that works well for people to say, im going to dress up and go somewhere, and im going to have a fullfledged experience. I agree with you wholeheartedly. I think the issue that Atlantic City basis is you are the best house in a bad neighborhood. Getnt to get dressed up and ready to rock n roll and then i step outside and its nasty. Realere are some challenges in Atlantic City. Not just the town, but some assets that are deeply that have goned, down, and really need to step up their game as well. You are in a tough spot. A tough spot, but also a great spot. You dont have to drive through most of Atlantic City to get to borgota. That was a strategic decision. They had a lot of opportunities go to the magic city Atlantic City and they waited for the right one. A i want your opinion on couple of things. The idea that people can stop on the way home in maryland or pennsylvania and gamble instead of having to drive to Atlantic City, and so borgota wants to be upmarket for those who travel a little bit. Are those casinos that you stop in on the way home vulnerable to what you are in, the business of Online Gambling, more so than toms borgota . Ofim still in the business developing landbased gaming facilities. It is truly survival of the fittest. That was an interesting point about Atlantic City, but borgota an interesting job and there are always winners and losers. Samek at casinos in the way you look at real estate opportunities. There is a cycle, demand followed by saturation, followed by colette. There is no question there is a glut of gaming space in america, but is still a growth industry. It just depends on the location. Boston, for example, they will have casino gaming in boston. That is a massive market that will do well. Product,s on the depends on the offering to the consumer. That skit, if places like boston can create something but skip, if places like boston can create something special, what does it do for other areas . Look at new jersey as an example. Roughly 40 of the business used to come from the philadelphia market. When they legalized casino gambling in pennsylvania, that took a huge bite. You talked earlier about brian was talking about the number of indian gaming opportunities in california. A similar situation. ,he driving market to las vegas the mass of it came from southern california. Every business, whether it is retail or casino gaming, the better places will do well and the weaker places wont. There are still opportunities in the casino gaming industry. Tom, from where you sit, what is the cannibalization factor . Are casinoree companies, gaming companies, investing in new local markets because they are being incentivized to do so by local governments at the expense of other Properties Around the nation . When you see new gaming are gaming markets open, you have a choice. You can do to yourself or you can get it done to you. Either you are going to get into that market or someone else will. You need to grow earnings. Not unlike what skip said. You grow earnings by increasing distribution until you reach the point that the distribution saturates and the market stabilizes again. It resets. How long will it take to reset . There will continue to be new development and there will be some good tournament. There are good element opportunities in florida. It is an underserved market. Like skip said, boston is an underserved market. To the degree that these markets are underserved and they become served by brandnew, local development, how does that affect the National Industry . Again, going back to the Atlantic Citys and the vegass, money that would otherwise be spent traveling to a destination . In the aggregate. It comes back to the point that steve wynn as a developer was the first percent to point out the fact that casino gambling and resorts are much more than someone who wants to gamble. It is about entertainment, retail, shopping. These are destinations. If someone just wants to gamble, they dont have to make a long trip anymore. 40 states have casinos. Today, they have figured out a way to get people to go there not just to gamble. Las vegas used to be a place that was famous for bad food and know where to shop. Now it is a culinary capital with some of the greatest retail in america. Then what is the argument for Online Gambling . Are two totally different products. It is like the difference between movie theaters and television. It is a totally different experience. The Online Gaming business is very challenged because of one word, politics. You are involved in a situation where the politicians have to approve something. I was talking to a friend the other day and i said, if you want to open a restaurant, you higher a chef and find a location you hire a chef and find a location and you can open a restaurant. If you want to go in the Online Gaming business, you have to go to the state capital and have them change a controversial law. Any time politics is in the mix, it will slow things down. That is one of the reasons it never happened on the federal level. Now you have Sheldon Adelson of Las Vegas Sands challenging the whole idea of Online Gaming, while there are three states that currently allow it nevada, new jersey, and delaware. The final chapter has yet to be written in the online space come a but there is no question that people want to be able to do things like play poker online. It is just taking a lot longer to get approved than anyone could have protected. Online gambling is legal in new jersey and borgota has an online business. We are very happy with that business. At least to the next question. How much more profitable is gambling than physical . They are different creatures. You reach customers in different ways. In the early days of Online Gaming, the high cost of entry is not capital the way it is with brickandmortar. Singledigitn for millions into the Online Gaming business. Where it is 1 billion to get into the brickandmortar business. But once you get in, it is building liquidity and building your base and advertising costs. I think it is a business that you will see be much more profitable in the second and third year than in the first year, because it is a marketshare grab. But do you and your peers have the capacity to make more and more investment . Because that seems like what you need to do to win here. Again, in the online space, the investment is very small. It is a matter of marketing smart and leveraging the power of the brand. We were filled thrilled with of the borgota came out gate and we took 30 of the share right up front of people that were spending three times what we were on advertising. By building the trust that we build with our customers over 10 years, we were able to get out and make some good revenue. I think the money we will make we will make money this year and continue to make money online. Sheldon adelson is successful. He, as you know, is trying to woo republican president ial candidates. He is talking all the time to people running in midterm elections. He wants to get rid of Online Gambling in america altogether. Will he be successful in any state in particular . Or even find a way to get a ban everywhere . Hes on is no question a crusade to stop Online Gambling. I think the toothpaste is already out of the tube. It will be very difficult to stop this. It on the other hand, i would never bet against someone like him. He is obviously a formidable person. Looking atates are new ways to generate revenue, it is too compelling for a governor to turn away these revenues. And people are already doing it illegally. Much like other topics, marijuana and other subjects that are controversial, the government needs to regulate. They have to legalize, regulate, and tax Online Gaming. Because attacks are coming out of Online Gaming are so enormous. The taxes coming out of Online Gaming are so enormous. It will be difficult to change that throughout america. Gentlemen, thank you both. Skip bronson from los angeles, and tom ballance here with us. Thank you both for joining us. When we come back, well have more on Market Makers for you. Stick around. That is going to be it for what i would like to say is a very special Market Makers. A lot of fun. Tomorrow, the world bank are holding their spring meetings in washington and our own tom keene will bring it to us. For us. Is it it is 56 past the hour, which means bloomberg tv is taking you on the market. I will send you out to the newsroom right now where scarlet fu has more. U. S. Stocks are at their best levels of the day as they read down from three days of losses without two days of gains. This is ahead of the release of the minutes from the Federal Reserve last policy meeting. Joining me now with a look at what kind of options pricing is posting is in equity strategist at baycrest partners. Lets start with the sp y and the queue queue queue. What are the options telling you about everyones position right now . We have seen in the last week a rotation out of high revolution start a stock. Those highresolution place. Yes him and those players that have been sort of ignored. For example, if you look at the about 100here are stocks that made new 52week highs and this month only placed. It is just a very high levels and what we saw last week was a rotation out of the netflix and the angies list of the world into largecap stocks. So, switching out. What about the vix . Because last week, and in fact, earlier this week it posted above 16. Is it going down now . The rotation in the market with the s p 500, for example, means correlation is really low. We have seen some stocks getting sold, but new stocks getting bought the stop and as a result, the overall market in the s p 500 is not fluctuating widely. This tells me that the stock market will remain low and we will continue to see low environment lowball environment. What kind of relationship is there between the start of earnings season we are basically there on friday with j. P. Morgan and wells fargo kicking off the big banks. And that relationship with volatility, is it having an effect on big banks as earnings season is approaching, you will see on big banks . As earnings season is approaching, you will see a move down. You will see it as version in the returns of stocks. As a result, overall doubled the market will be lower. Sure, but people start extrapolating the early levels that they get as they get ahead of themselves. No . They will try, for sure. I dont know. This is a unique time, because we have seen many in the cycle. I dont think there is a specific way to take it vantage. Gotcha. Lets talk about toyota. The company is under pressure this morning because it is recalling more than 6 million vehicles due to a range of safety issues. Is there any kind of option activity on adrs . X im sorry to disappoint, but options activities in the adr is fairly limited. Options are listed and there are plenty of strikes listed, and despite the correction in the stock, options are not implying much volatility going forward. I guess we will have to look at the primary listing there in tokyo. For weekorts results from tomorrow. You have a trade on this oil services company. Tell me about it. Shell is one of the best oil services company. It has lots of exposure outside north america, even though it is facing competition in north america from halliburton and others. But it is growing fairly well. We have seen Earnings Growth up sales ingh teens and the high single digits. I like the stock around 98. The 100 cycle buy for around one four around 1. 50. Think is a much. Thank you so much. Lunch money is next. Welcome to lunch money where we tied together the best stories, interviews, and videos in business news. Im matt miller in for adam johnson. Lets take a look at the menu. We have an ip frenzy. La quinta hits the market. Allied is on deck for my and more ahead next week. And then the world according to biz stone. The leader talks about life in silicon valley. Comcast and Time Warner Cable defend their planned merger in washington. No one really likes the idea. Around the world, pussy riot tells it side of the